Opinion ID: 207967
Heading Depth: 4
Heading Rank: 3

Heading: The Bayh-Dole Act

Text: The district court held in the alternative that the Bayh-Dole Act negated Holodniy’s assignment to Cetus because it empowered Stanford to take complete title to the inventions. Congress passed the Bayh-Dole Act “to promote the utilization of inventions arising from federally supported research or development” and “to ensure that the Government obtains sufficient rights in federally supported inventions.” 35 U.S.C. § 200 (2006). The Act allows the Government to take title to “subject inventions” under certain circumstances, id. §§ 202(a), 202(b), or the “contractor” universities or inventors to retain ownership if the Government does not, id. § 202(d). Stanford contends—and the district court agreed—that Bayh-Dole allowed Stanford a “right of second refusal” to the patents after the Government refrained from exercising its rights. The court acknowledged our holding in Central Admixture Pharmacy Services, Inc. v. Advanced Cardiac Solutions, P.C. that when the Bayh-Dole Act’s provisions are violated, “the government can choose to take action; thus, title to the patent may be voidable. However, it is not void: title remains with the named 2008-1509, -1510 16 inventors or their assignees. Nothing in the statute, regulations, or our caselaw indicates that title is automatically forfeited.” 482 F.3d 1347, 1352-53 (Fed. Cir. 2007). Thus, the Act did not automatically void Holodniy’s assignment to Cetus, and provided the Government with, at most, a discretionary option to his rights. The district court noted, however, that under 35 U.S.C. § 202(d), Holodniy, as an inventor, could keep title to his inventions only “[i]f a contractor does not elect to retain title to a subject invention.” On appeal, Stanford insists that Holodniy’s rights were “contingent” upon his CPA obligations to assign them to Stanford, and that Stanford’s election of title in 1995 gave it all patent rights. Stanford’s Reply Br. 47. We are unconvinced of Stanford’s interpretation of the Bayh-Dole Act in this case. Stanford identifies no authorities or reasons why its election of title under BayhDole had the power to void any prior, otherwise valid assignments of patent rights. Stanford was entitled to claim whatever rights were still available after the Government declined to exercise its option, including the rights of co-inventors Merigan, Katzenstein, and Kozal. However, Holodniy transferred his rights to Cetus more than six years before Stanford formally notified the Government of its election of title. As previously noted, Stanford’s invention rights policy “allow[ed] all rights to remain with the inventor if possible,” J.A. 743, which supports the conclusion that Holodniy still possessed rights at the time he signed the VCA with Cetus. Just as we explained that Bayh-Dole does not automatically void ab initio the inventors’ rights in government-funded inventions, Cent. 2008-1509, -1510 17 Admixture, 482 F.3d at 1352-53, we see no reason why the Act voids prior contractual transfers of rights. 1 The ownership dispute in University of Pittsburgh v. Townsend is instructive. 2007 U.S. Dist. LEXIS 56860 (E.D. Tenn. Aug. 3, 2007), aff’d, 542 F.3d 513 (6th Cir. 2008). There, the University of Pittsburgh sought patent rights from Townsend, the inventor. The University employed Townsend and claimed all rights in his inventions, but Townsend maintained simultaneous ties with a private company, CTI. After inventing a medical scanner, Townsend assigned his rights exclusively to CTI. Critically, the University then formally elected title under the Bayh-Dole Act. Before the district court, the University argued that this election voided Townsend’s earlier assignment. To support this argument, the University cited the Northern District of California’s analysis of Bayh-Dole in the current case between Stanford and Roche. 2007 U.S. Dist. LEXIS 56860, at -61. The Townsend district court rejected this position, noting that “the University’s ostensible exercise of its right to title . . . occurred after Dr. Townsend’s assignment to CTI.” Id. at -61. The University’s Bayh-Dole election did not give it superior title, nor prevent Pennsylvania statutes of limitation from barring the University’s contract and tort claims. The Sixth Circuit noted the University’s use of Bayh-Dole, but nevertheless affirmed the statutes of limitation holding. 542 F.3d at 520 & n.1. This outcome is consistent with our understanding that claiming title under Bayh-Dole does not override prior assignments. 1 We express no opinion as to whether Holodniy’s execution of the VCA violated any provisions of the Bayh-Dole Act, or whether the Act provides the Government or Stanford some other legal recourse to recover Holodniy’s rights. Cf. Cent. Admixture, 482 F.3d at 1353. 2008-1509, -1510 18 Regardless of any state law contractual obligations between an academic and his university, “the primary purpose of the Bayh-Dole Act is to regulate relationships of small business and nonprofit grantees with the Government, not between grantees and the inventors who work for them.” Fenn v. Yale Univ., 393 F. Supp. 2d 133, 141-42 (D. Conn. 2004). Therefore, in this case, the Bayh-Dole statutory scheme did not automatically void the patent rights that Cetus received from Holodniy. 4. California Business and Professions Code § 16600 Under California law, “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” Cal. Bus. & Prof. Code § 16600 (2009). Stanford argues that section 16600 voids the VCA because Holodniy conceived the patented invention after departing Cetus, and the VCA violates public policy if it encompasses inventions conceived after employment terminates. Stanford also contends that once Holodniy’s research was published, it became public information, and that Roche’s interpretation of the VCA would prevent Holodniy from using this information in his later clinical studies. We find no merit in Stanford’s arguments. By the plain language of section 16600, only those contracts that prevent “engaging in a lawful profession, trade or business of any kind” are void. Stanford provides no evidence that the VCA restrained Holodniy from engaging in any profession. Indeed, the record shows that Holodniy freely continued his HIV research at Stanford, publishing articles and using the knowledge he obtained from Cetus to further the science behind the patents-in-suit. Nor does Stanford explain how Holodniy’s assignment of his rights to Cetus prohibited Holodniy from using any public information in his later research. Moreover, California 2008-1509, -1510 19 courts apply section 16600 to employment restrictions on departing employees, not to patent assignments. See Thompson v. Impaxx, Inc., 113 Cal. App. 4th 1425, 1429 (Ct. App. 2003); D’Sa v. Playhut, 85 Cal. App. 4th 927, 934-35 (Ct. App. 2000).