The Supreme Court today, for the first time, interpreted the Bayh-Dole Act, a federal statute regulating ownership of patents arising from federally funded research, and gave it a narrower scope than many had traditionally understood it to have.

The Supreme Court’s decision in Board of Trustees of Leland Stanford Junior University v. Roche Molecular Systems, Inc. No. 09-1159, rejected the arguments of Stanford University and the United States that the Bayh-Dole Act vested title to federally funded inventions with the eligible federal contractor (e.g., universities, non-profit organizations, or small businesses). The Supreme Court instead held that the Bayh-Dole Act permits contractors only to retain title to patents that they already possessed through other means, such as assignment provisions in employment contracts with the inventors.

Although the Court concluded that any threat that its decision posed to the effectiveness of the Bayh-Dole Act could be avoided by contractual arrangements between the federal contractors and their employee-inventors, the Court’s decision could raise significant questions about the ownership rights for innumerable inventions made prior to the Court’s decision. The Court’s decision also will affect the possibilities of commercializing federally funded inventions, requiring those who seek to purchase rights from contractors to evaluate the rights held by the contractor vis-a-vis the inventor and any third parties with whom the inventor has contracted.