Stanford v. Roche: The Importance of Precise Contract Drafting

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The Supreme Court's recent decision in Stanford v. Roche draws attention to the pitfalls of imprecise contract language. The Supreme Court affirmed the ruling of the Court of Appeals for the Federal Circuit, which hung on the difference between competing assignment clauses, holding that Stanford University (“Stanford”) did not possess exclusive rights to a technique for HIV testing developed by one of Stanford's research fellows.

The Competing Agreements

The assignment language of two separate agreements signed by Dr. Mark Holodniy motivated the Court of Appeals' decision. The first was a Copyright and Patent Agreement which Holodniy signed with Stanford that contained an assignment clause whereby Holodniy “agree[d] to assign” to Stanford his “right, title, and interest in” any inventions developed while at Stanford. At Stanford’s request, and to further his research, Holodniy began visiting Cetus Corporation (“Cetus”) [later acquired by Roche Molecular Systems (“Roche”)], where he signed a Visitor's Confidentiality Agreement that contained the following assignment provision: “I will assign and do hereby assign” to Cetus the “right, title and interest in” any technology designed while with the company.

The Patent Infringement Suit

While working on site at Cetus, Holodniy developed a procedure for measuring the amount of HIV in a patient's blood. Roche later commercialized the procedure by incorporating it into HIV test kits. On that basis, Stanford sued Roche for patent infringement in the District Court for the Northern District of California (the “District Court”). Stanford argued that Holodniy had no authority to assign his patent rights to Cetus under the federal Bayh-Dole Act, which, among other things, grants universities and other federal contractors exclusive rights to inventions generated by federally-funded research. Although the District Court ruled in Stanford’s favor, the Court of Appeals reversed. Subject to certain obligations, the Court of Appeals held that the Bayh-Dole Act did not automatically void Holodniy’s assignment of patent rights to Cetus, which made interpretation of the underlying, competing contractual assignment language relevant.

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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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