Perspective
Who Owns Federally Funded Research? The Supreme Court and the Bayh–Dole Act
N Engl J Med 2011; 365:1167-1169September 29, 2011
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open through October 5, 2011
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Collaboration between academic researchers and private companies has long been essential to medical innovation and development because it brings together parties with different expertise, data, or technologies. Such cooperative efforts usually begin with a contract that outlines the parties' expectations and ownership of any output. A recent Supreme Court decision shines a bright light on these contracts and addresses the question of whether the public has any formal interest in agreements made involving federally funded research.
The case related to a long-simmering dispute between Stanford University and Roche Molecular Systems regarding ownership of a widely used and profitable diagnostic assay for human immunodeficiency virus (HIV). The dispute dates back to 1988, when a scientist, Mark Holodniy, joined a Stanford University laboratory to measure the effectiveness of HIV treatment. His projects involved two federally funded grants. To aid his university work, in 1989 he visited Cetus, a small privately held biotechnology company that had pioneered polymerase-chain-reaction (PCR) techniques, to learn about using PCR in quantifying HIV levels. Nine months later, Holodniy returned to Stanford to develop the technique with university colleagues — work that led to three patents on processes for HIV measurement that they assigned to Stanford. Meanwhile, Roche Molecular Systems acquired Cetus's PCR-related assets and commercialized the diagnostic assay, which has become central to the care of patients with HIV.
Stanford approached Roche for a share of the proceeds from the assay, but talks broke down and Stanford initiated a patent-infringement lawsuit against Roche. In Holodniy's employment contract with Stanford, he “agree[d] to assign” to Stanford his “right, title and interest in” inventions. However, to gain access to Cetus, he also signed a confidentiality agreement in which he asserted that he “hereby do[es] assign” to Cetus his right to “ideas, inventions and improvements” made during his time there. The District Court found that Holodniy's contract with Cetus had superior rights over the Stanford contract. However, it also found that a federal law — the University and Small Business Patent Procedures (Bayh–Dole) Act of 1980 — superseded both contracts, vesting rights to federally funded work in the institution receiving the funds.
Before Bayh–Dole, the U.S. government was a default owner of intellectual property rights to inventions deriving from the research it funded. Congress passed Bayh–Dole to address the (probably exaggerated1) perception that the government often ended up with the rights to useful inventions that languished without ever being brought to market. The statute permitted universities, businesses, or nonprofit organizations that receive federal funds to retain the title to the inventions their employees developed while using those funds. The government, in turn, was given “march-in” rights to take over the intellectual property if the owner did not take reasonable steps to commercialize an invention or to use that invention to “alleviate health or safety needs.”
Stanford argued that Bayh–Dole created a hierarchy of ownership rights that placed the organization receiving federal funds (in this case the university) at the top, followed by the government, and only then — if the organization and the government did not exercise their rights — the individual inventor. But in its June decision, the Supreme Court disagreed with this interpretation of Bayh–Dole, finding that it does not give universities primary claim to federally funded inventions patented by members of their faculties.2 Rather, writing for a seven-to-two majority, Chief Justice John Roberts noted that since the original Patent Act of 1790, the inventor has always held the primary position. Since Holodniy's contract with Cetus was found to have superior rights over his contract with Stanford, the university's lawsuit was blocked.
The Court's ruling highlights the importance of the intellectual-property–related language in agreements signed by academic scientists. Universities vary in their attention to the research contracts signed by their employees, and disputes over intellectual-property provisions in sponsored research contracts are common.3 If a university's rights to an invention or discovery are only as good as the assignments it has received from its employees, a government-grantee organization must be especially careful to ensure that it actually owns the title to an invention that it might want to license out. In the wake of the Court's ruling, at least one university, the Massachusetts Institute of Technology, has already taken preventive action by changing the wording of the Inventions and Proprietary Information Agreements it asks faculty members to sign.4 Contractual wrangling is likely to increase, impeding collaboration between private companies and universities — an effect that would run directly counter to Bayh–Dole's intention.
The case also threatens to exacerbate some of the more troubling consequences of the original 1980 legislation. Bayh–Dole's supporters argue that it has led to a dramatic increase in patenting activity by federal grantees: universities were issued 264 patents in 1979 and 3278 patents 2005. However, this trend has also been criticized as a socially inefficient privatization of academic research.5 A more complex web of licensing agreements may threaten the open nature of academic inquiry.
Finally, the decision raises questions about how to ensure equitable returns on federal research funding. In the Stanford case, the development of the widely used HIV diagnostic test occurred primarily in the private sector, and the Supreme Court's decision may have been influenced by the tenuous relationship between the federal funding and the product at issue. In many other cases, though, important new drugs and medical technologies are developed in university or nonprofit settings supported by federal funding and are later commercialized with little return to these development sources. In such situations, there is a strong public-policy rationale for giving universities the first rights to the fruits of publicly funded research. This outcome now requires a legislative amendment to Bayh–Dole. To make such an amendment more politically palatable, universities should reexamine and perhaps revamp their licensing practices to ensure that they are indeed acting as stewards of the public good, rather than simply seeking to maximize their own licensing revenues. They can do this, in part, by including access provisions in their licensing agreements to ensure that the products of their research are available to the neediest patients (for example, those in low-income countries) and by ensuring that their research agenda prioritizes the public interest over potential profit.
Disclosure forms provided by the authors are available with the full text of this article at NEJM.org.
This article (10.1056/NEJMp1109168) was published on August 31, 2011, at NEJM.org.
Source Information
From the Division of Pharmacoepidemiology and Pharmacoeconomics (A.S.K.) and the Department of Medicine (A.S.K., R.R.), Brigham and Women's Hospital; Harvard Medical School (A.S.K.); and McKinsey and Co. (R.R.) — all in Boston.
- References
References
1
Eisenberg RS . Public research and private development: patents and technology transfer in government-sponsored research. Va Law Rev 1996;82:1663-1727
CrossRef | Web of Science2
Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., 563 U.S. No. 09-1159 (June 6, 2011). (http://www.supremecourt.gov/opinions/10pdf/09-1159.pdf.)
3
Mello MM ,Clarridge BR ,Studdert DM . Academic medical centers' standards for clinical-trial agreements with industry. N Engl J Med 2005;352:2202-2210
Full Text | Web of Science | Medline4
Hawkinson JA. Stanford loses patent case. The Tech. June 10, 2011. (http://tech.mit.edu/V131/N28/stanfordroche.html.)
5
Sampat BN . Patenting and US academic research in the 20th century: the world before and after Bayh-Dole. Res Policy 2006;35:772-789
CrossRef | Web of Science
