Money for Nothing, Patents for Free?

State tech transfer laws giving universities automatic ownership of employees' inventions represent a threat to pharma partnerships—but the Supreme Court is poised to intervene in industry's favor.
Feb 01, 2012

Since Congress enacted the Bayh-Dole Act in 1980, universities have reaped hundreds of millions of dollars in licensing revenue from inventions arising out of the work of faculty, graduate students, and staff researchers. Accordingly, virtually all U.S. universities now have some kind of technology transfer policy in place under which the universities obtain patent rights to their researchers' work. Typically, universities compel their employees to disclose and assign all patentable inventions developed in the course of employment to the university as a condition of their employment.

John Shaeffer
Some states have taken these efforts a step further, however, by enacting regulations that automatically give state-supported universities ownership rights to employee inventions by operation of law—even if the inventors never signed an assignment agreement. One such Florida regulation provides that inventions developed by University of South Florida employees "in the field or discipline in which the employee is employed" or "by using university support" are the property of USF. A Connecticut law provides that the Connecticut State University System "shall be entitled to own the entire right, title, and interest" to all inventions conceived by its employees, although inventors must be paid a share of any net proceeds. Other states, such as Virginia, have enacted laws that provide that all employees of state-supported higher education institutions are automatically bound to their institutions' IP policies as a condition of employment, whatever those policies may be.

Brianna Dahlberg
Can states really enact such drastic laws? A Supreme Court case decided in June 2011 strongly suggests the answer is no; state laws with automatic vesting provisions are in conflict with federal patent law and thus would be preempted and unenforceable. In Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, the Supreme Court said that it is a "fundamental premise" of our patent system that inventors have an inchoate right to their own inventions, and, while an inventor may assign his rights to others, the chain of ownership must be traceable back to the inventor. In that case, the Supreme Court considered the question of whether the federal Bayh-Dole Act automatically vests title in an inventor's employer by operation of law. It concluded that that interpretation would be inconsistent with the entire scheme of federal patent law, dating back to the first Patent Act of 1790: "It would be noteworthy enough for Congress to supplant one of the fundamental precepts of patent law and deprive inventors of rights in their own inventions ... Had Congress intended such a sea change in intellectual property rights it would have said so clearly—not obliquely," through ambiguous language in the Bayh-Dole Act.

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