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Think You Own Your Employee’s Inventions? Think Again, Says U.S. Supreme Court

The U.S. Supreme Court recently issued a decision in a case which involved the question of whether an employee inventor or his employer owned the patent rights for inventions developed during the inventor’s employment. (See Stanford Univ. v. Roche Molecular Sys., Inc., No. 09-1159.)  Despite the existence of an agreement to assign all right, title and interest in the inventions developed to the employer, the Court held that the language of the contract was not precise enough to prevent the inventor from actually assigning his rights to another company. 

In 1985, a small research company called Cetus began to develop methods for quantifying blood-borne levels of human immunodeficiency virus (HIV), the virus that causes AIDS. A Nobel Prize winning technique developed at Cetus known as PCR was an integral part of these efforts.  In 1988, Cetus began to collaborate with scientists at Stanford University. Dr. Mark Holodniy joined Stanford as a research fellow around that time. When he did so, he signed an agreement stating that he “agree[d] to assign” to Stanford his “right, title and interest in” inventions resulting from his employment there. 

Holodniy’s supervisor arranged for him to conduct research at Cetus to learn about PCR. As a condition of gaining access to Cetus, Holodniy was required to sign an agreement stating that he “will assign and do[es] hereby assign” to Cetus his “right, title and interest in . . . the ideas, inventions, and improvements” made “as a consequence of [his] access” to Cetus. Working with Cetus employees, Holodniy devised a PCR-based procedure for measuring the amount of HIV in a patient’s blood. 

Upon returning to Stanford, he and other Stanford employees tested the procedure. Stanford secured three patents to the measurement process. Roche Molecular Systems later acquired Cetus’s PCR-related assets. After conducting clinical trials on the HIV quantification method developed at Cetus, Roche commercialized the procedure. Today, its HIV test kits are used worldwide.  Stanford sued Roche claiming an infringement on its patent rights.  The Supreme Court disagreed. 

While the assignment language in both agreements signed by Dr. Holodniy seem almost identical, the Court focused on the difference between the contract language “agree to assign” and “will assign and do hereby assign” as being the deciding factor. The Court interpreted “agree to assign” as a promise to assign rights in the future, but held that “will assign and do hereby assign” was a present assignment of Holodniy's future rights. For that reason, the Court concluded that Holodniy's agreement with Cetus gave them (and later Roche), co-ownership of Holodniy's newly-developed procedure. 

This case emphasizes the fact that employers must be extremely precise with their invention assignment language in their employment agreements.   Should you need assistance in reviewing your current agreements or drafting new ones in light of this new decision, please feel free to contact us.

 

Excerpted from the August 2011 edition of "Employment Law Matters".  To see the entire newsletter, please click here.