Stanford v. Roche, the Bayh-Dole Act, and the Possibility of Unintended Consequences

Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems et al. involves a question of whether the Bayh-Dole Act prevents an employee of a university from assigning rights in an invention that arose, at least in part, from federally-funded research.1 The Federal Circuit held that it does not and, applying standard contract principles, found that the Roche defendants had acquired equitable title to inventions arising from federally-funded research as a result of a Stanford employee’s unilateral assignment of the inventions to a Roche predecessor. Stanford petitioned for certiorari, and the Supreme Court granted the petition. Oral argument was held on February 28, 2011, and a decision is expected shortly.

This may be a case of “be careful what you ask for” for Stanford. That is to say, there is a risk that — if Stanford succeeds — its own freedom to contract with respect to federally-funded research could be substantially restricted. Though perhaps counterintuitive, such a result may provide a good example of the law of unintended consequences, i.e., that an intervention in a complex system (e.g., that of the allocation of intellectual property rights arising from federally-funded research) always creates unanticipated and often undesirable outcomes. For better or worse, the Bayh-Dole Act put in place a system that has governed interactions between the Federal Government, contractors, and their inventors for the last thirty years. Stanford’s attempt to overturn the Federal Circuit’s opinion, while potentially beneficial for Stanford in the instant case, may also serve to inject uncertainty into an otherwise relatively stable system with relatively established expectations.

More specifically, in future situations where Stanford may desire to assign rights associated with federally-funded research, such as in the sale of a business or the settlement of an infringement or interference dispute, Stanford may find that uncertainty in the allocation of the rights at issue may make such an assignment agreement difficult to come by. In short, if Stanford is successful, the fact that Bayh-Dole Act may trump the university’s own contractual rights may make industry less confident about entering into agreements with universities and researchers.

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Published In: Business Organization Updates, General Business Updates, Intellectual Property Updates, Labor & Employment Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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