Nyemaster Goode, P.C.

Supreme Court Denies Stanford Ownership of Employee's Invention

by Wendy Marsh

In a 7-2 decision, the Supreme Court ruled on Monday that Stanford University did not legally own an invention made by a former employee, Mark Holodniy, that was subsequently assigned by the employee in a separate agreement to a third party.  The invention at issue was created in part by federally funded research while Mr. Holodniy worked at Stanford.  In his employment agreement with Stanford, Mr. Holodniy "agreed to assign" his "right, title, and interest" in "inventions resulting from his employment at Stanford, which the Court interpreted as a promise to assign those rights in the future.  Mr. Holodniy completed his work on the invention while consulting with another company, to whom he assigned the rights to his invention.

In its claim against Roche, Stanford argued that the contract Mr. Holodniy signed with the university gave Stanford ownership rights in the HIV-detection kit Mr. Holodniy developed through federally-funded research begun at Stanford via a federal statute, the Bayh-Dole Act, which gives universities patent rights to any invention created in part with federal funds.  The Supreme Court determined that Stanford's position was an overly expansive interpretation of the federal statute.  In the Court's opinion, the justices were especially concerned by the fact that Stanford's broad interpretation of the Bayh-Dole Act would give the university patent rights even if the invention was conceived before the inventor was a university employee so long as the invention was conceived or reduced to practice using federal funding.  The majority further determined that the inventor's present assignment to Roche trumped Mr. Holodniy's "promise to assign" his invention in the future to Stanford.  During the parties' oral arguments, Justice Scalia noted that the universities could easily protect themselves in this regard by mandating all their employees to execute ironclad assignments.

The moral of this case is that universities (and probably also non-university employers) should review their current employment contracts to make sure they include a provision requiring employees to automatically assign their inventions to the employer, rather than merely requiring the employees to "agree to assign" their inventions.

A full synopsis of B.T. Leland Stanford Jr. University v. Roche Molecular Systems, Inc., Docket No. 09-1159 is available at The Chronicle of Higher Education.


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