Board of Trustees of Leland Stanford Junior Univ. v. Roche Molecular Systems, Inc., 563 U.S. (2011)
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(Slip Opinion) OCTOBER TERM, 2010 NOTE: Where it is feasible, a syllabus (headnote) will be released, as isbeing done in connection with this case, at the time the opinion is issued.The syllabus constitutes no part of the opinion of the Court but has beenprepared by the Reporter of Decisions for the convenience of the reader.See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337. 1
CHIEF JUSTICE ROBERTS delivered the opinion of theCourt. Since 1790, the patent law has operated on the premisethat rights in an invention belong to the inventor. Thequestion here is whether the University and Small Business Patent Procedures Act of 1980-commonly referred toas the Bayh-Dole Act-displaces that norm and automatically vests title to federally funded inventions in federalcontractors. We hold that it does not. IAIn 1985, a small California research company calledCetus began to develop methods for quantifying blood-borne levels of human immunodeficiency virus (HIV), thevirus that causes AIDS. A Nobel Prize winning techniquedeveloped at Cetus-polymerase chain reaction, or PCR-was an integral part of these efforts. PCR allows billionsof copies of DNA sequences to be made from a small initialblood sample. In 1988, Cetus began to collaborate with scientists at 2 BOARD OF TRUSTEES OF LELAND STANFORD JUNIOR
UNIV. v. ROCHE MOLECULAR SYSTEMS, INC.Opinion of the CourtStanford University's Department of Infectious Diseasesto test the efficacy of new AIDS drugs. Dr. Mark Holodniyjoined Stanford as a research fellow in the departmentaround that time. When he did so, he signed a Copyrightand Patent Agreement (CPA) stating that he "agree[d] toassign" to Stanford his "right, title and interest in" inventions resulting from his employment at the University.App. to Pet. for Cert. 118a-119a. At Stanford Holodniy undertook to develop an improvedmethod for quantifying HIV levels in patient blood samples, using PCR. Because Holodniy was largely unfamiliarwith PCR, his supervisor arranged for him to conductresearch at Cetus. As a condition of gaining access toCetus, Holodniy signed a Visitor's Confidentiality Agreement (VCA). That agreement stated that Holodniy "willassign and do[es] hereby assign" to Cetus his "right, titleand interest in each of the ideas, inventions and improvements" made "as a consequence of [his] access" to Cetus.Id., at 122a-124a. For the next nine months, Holodniy conducted researchat Cetus. Working with Cetus employees, Holodniy devised a PCR-based procedure for calculating the amount ofHIV in a patient's blood. That technique allowed doctorsto determine whether a patient was benefiting from HIVtherapy.Holodniy then returned to Stanford where he and otherUniversity employees tested the HIV measurement technique. Over the next few years, Stanford obtained writtenassignments of rights from the Stanford employees involved in refinement of the technique, including Holodniy,and filed several patent applications related to the procedure. Stanford secured three patents to the HIV measurement process.In 1991, Roche Molecular Systems, a company thatspecializes in diagnostic blood screening, acquired Cetus'sPCR-related assets, including all rights Cetus had ob-Opinion of the Court tained through agreements like the VCA signed by Holodniy. After conducting clinical trials on the HIV quantification method developed at Cetus, Roche commercialized theprocedure. Today, Roche's HIV test "kits are used inhospitals and AIDS clinics worldwide." Brief for Respondents 10-11
B
In 1980, Congress passed the Bayh-Dole Act to "promotethe utilization of inventions arising from federally supported research," "promote collaboration between commercial concerns and nonprofit organizations," and "ensurethat the Government obtains sufficient rights in federallysupported inventions." 35 U. S. C. §200. To achieve theseaims, the Act allocates rights in federally funded "subjectinvention[s]" between the Federal Government and federalcontractors ("any person, small business firm, or nonprofitorganization that is a party to a funding agreement").§§201(e), (c), 202(a). The Act defines "subject invention"as "any invention of the contractor conceived or first actually reduced to practice in the performance of work undera funding agreement." §201(e).The Bayh-Dole Act provides that contractors may "electto retain title to any subject invention." §202(a). To beable to retain title, a contractor must fulfill a number ofobligations imposed by the statute. The contractor must"disclose each subject invention to the [relevant] Federalagency within a reasonable time"; it must "make a writtenelection within two years after disclosure" stating thatthe contractor opts to retain title to the invention; and thecontractor must "file a patent application prior to anystatutory bar date." §§202(c)(1)-(3). The "Federal Government may receive title" to a subject invention if acontractor fails to comply with any of these obligations.Ibid. The Government has several rights in federally funded 3 4 BOARD OF TRUSTEES OF LELAND STANFORD JUNIOR
UNIV. v. ROCHE MOLECULAR SYSTEMS, INC.Opinion of the Courtsubject inventions under the Bayh-Dole Act. The agencythat granted the federal funds receives from the contractor"a nonexclusive, nontransferrable, irrevocable, paid-uplicense to practice . . . [the] subject invention." §202(c)(4).The agency also possesses "[m]arch-in rights," whichpermit the agency to grant a license to a responsible thirdparty under certain circumstances, such as when the contractor fails to take "effective steps to achieve practicalapplication" of the invention. §203. The Act further provides that when the contractor does not elect to retain titleto a subject invention, the Government "may consider andafter consultation with the contractor grant requests forretention of rights by the inventor." §202(d).Some of Stanford's research related to the HIV measurement technique was funded by the National Institutesof Health (NIH), thereby subjecting the invention to theBayh-Dole Act. Accordingly, Stanford disclosed the invention, conferred on the Government a nonexclusive,nontransferable, paid-up license to use the patented procedure, and formally notified NIH that it elected to retaintitle to the invention
C
In 2005, the Board of Trustees of Stanford Universityfiled suit against Roche Molecular Systems, Inc., RocheDiagnostics Corporation, and Roche Diagnostics Operations, Inc. (collectively Roche), contending that Roche'sHIV test kits infringed Stanford's patents. As relevanthere, Roche responded by asserting that it was a co-ownerof the HIV quantification procedure, based on Holodniy'sassignment of his rights in the Visitor's ConfidentialityAgreement. As a result, Roche argued, Stanford lackedstanding to sue it for patent infringement. 487 F. Supp.2d 1099, 1111, 1115 (ND Cal. 2007). Stanford claimedthat Holodniy had no rights to assign because the University's HIV research was federally funded, giving the school Opinion of the Court superior rights in the invention under the Bayh-Dole Act.Ibid.1 The District Court held that the "VCA effectively assigned any rights that Holodniy had in the patented invention to Cetus," and thus to Roche. Id., at 1117. Butbecause of the operation of the Bayh-Dole Act, "Holodniyhad no interest to assign." Id., at 1117, 1119. The courtconcluded that the Bayh-Dole Act "provides that the individual inventor may obtain title" to a federally fundedinvention "only after the government and the contractingparty have declined to do so." Id., at 1118. The Court of Appeals for the Federal Circuit disagreed.First, the court concluded that Holodniy's initial agreement with Stanford in the Copyright and Patent Agreement constituted a mere promise to assign rights in thefuture, unlike Holodniy's agreement with Cetus in theVisitor's Confidentiality Agreement, which itself assignedHolodniy's rights in the invention to Cetus. See 583 F. 3d832, 841-842 (2009). Therefore, as a matter of contractlaw, Cetus obtained Holodniy's rights in the HIV quantification technique through the VCA.2 Next, the court explained that the Bayh-Dole Act "does not automaticallyvoid ab initio the inventors' rights in government-fundedinventions" and that the "statutory scheme did not automatically void the patent rights that Cetus received fromHolodniy." Id., at 844-845. The court held that "Rochepossesse[d] an ownership interest in the patents-in-suit" ------ 1 Roche submitted a host of other claims to the District Court, including that it had "shop rights" to the patents and was entitled to a licenseto use the patents. See 583 F. 3d 832, 838 (CA Fed. 2009). None ofthose claims is now before us; we deal only with Roche's claim to co-ownership to rebut Stanford's standing to bring an infringement action. 2 Because the Federal Circuit's interpretation of the relevant assignment agreements is not an issue on which we granted certiorari, wehave no occasion to pass on the validity of the lower court's constructionof those agreements. 5 6 BOARD OF TRUSTEES OF LELAND STANFORD JUNIOR
UNIV. v. ROCHE MOLECULAR SYSTEMS, INC.Opinion of the Courtthat was not extinguished by the Bayh-Dole Act, "depriv[ing] Stanford of standing." Id., at 836-837. TheCourt of Appeals then remanded the case with instructions to dismiss Stanford's infringement claim. Id., at 849. We granted certiorari. 562 U. S. ___ (2010). IIACongress has the authority "[t]o promote the Progress ofScience and useful Arts, by securing . . . to Authors andInventors the exclusive Right to their respective Writingsand Discoveries." U. S. Const. Art. I, §8, cl. 8. The firstCongress put that power to use by enacting the Patent Actof 1790. That Act provided "[t]hat upon the petition of anyperson or persons . . . setting forth, that he, she, or they,hath or have invented or discovered" an invention, a patent could be granted to "such petitioner or petitioners" or"their heirs, administrators or assigns." Act of Apr. 10,1790, §1, 1 Stat. 109-110. Under that law, the first patentwas granted in 1790 to Samuel Hopkins, who had devisedan improved method for making potash, America's firstindustrial chemical. U. S. Patent No. 1 (issued July 31,1790).3 Although much in intellectual property law has changedin the 220 years since the first Patent Act, the basic ideathat inventors have the right to patent their inventionshas not. Under the law in its current form, "[w]hoeverinvents or discovers any new and useful process, machine,manufacture, or composition of matter . . . may obtain apatent therefor." 35 U. S. C. §101. The inventor mustattest that "he believes himself to be the original and firstinventor of the [invention] for which he solicits a patent." ------ 3 The patent was signed by President George Washington, Secretaryof State Thomas Jefferson, and Attorney General Edmund Randolph.See Maxey, Samuel Hopkins, The Holder of the First U. S. Patent: AStudy of Failure, 122 Pa. Magazine of Hist. and Biography 6 (1998). Opinion of the Court §115. In most cases, a patent may be issued only to anapplying inventor, or-because an inventor's interest inhis invention is "assignable in law by an instrument inwriting"-an inventor's assignee. §§151, 152, 261. Our precedents confirm the general rule that rights inan invention belong to the inventor. See, e.g., Gayler v.Wilder, 10 How. 477, 493 (1851) ("the discoverer of a newand useful improvement is vested by law with an inchoateright to its exclusive use, which he may perfect and makeabsolute by proceeding in the manner which the law requires"); Solomons v. United States, 137 U. S. 342, 346(1890) ("whatever invention [an inventor] may thus conceive and perfect is his individual property"); UnitedStates v. Dubilier Condenser Corp., 289 U. S. 178, 188(1933) (an inventor owns "the product of [his] originalthought"). The treatises are to the same effect. See, e.g., 8Chisum on Patents §22.01, p. 22-2 (2011) ("The presumptive owner of the property right in a patentable inventionis the single human inventor").It is equally well established that an inventor can assignhis rights in an invention to a third party. See DubilierCondenser Corp., supra, at 187 ("A patent is property andtitle to it can pass only by assignment"); 8 Chisum onPatents, supra, §22.01, at 22-2 ("The inventor . . . [may]transfer ownership interests by written assignment toanyone"). Thus, although others may acquire an interestin an invention, any such interest-as a general rule-must trace back to the inventor. In accordance with these principles, we have recognizedthat unless there is an agreement to the contrary, anemployer does not have rights in an invention "which isthe original conception of the employee alone." DubilierCondenser Corp., 289 U. S., at 189. Such an invention"remains the property of him who conceived it." Ibid. Inmost circumstances, an inventor must expressly grant hisrights in an invention to his employer if the employer is to 7 8 BOARD OF TRUSTEES OF LELAND STANFORD JUNIOR
UNIV. v. ROCHE MOLECULAR SYSTEMS, INC.Opinion of the Court obtain those rights. See id., at 187 ("The respective rightsand obligations of employer and employee, touching aninvention conceived by the latter, spring from the contractof employment"). B
Stanford and the United States as amicus curiae con-tend that the Bayh-Dole Act reorders the normal priorityof rights in an invention when the invention is conceivedor first reduced to practice with the support of federalfunds. In their view, the Act moves inventors from thefront of the line to the back by vesting title to federallyfunded inventions in the inventor's employer-the federalcontractor. See Brief for Petitioner 26-27; Brief for UnitedStates as Amicus Curiae 6. Congress has in the past divested inventors of theirrights in inventions by providing unambiguously thatinventions created pursuant to specified federal contractsbecome the property of the United States. For example,with respect to certain contracts dealing with nuclearmaterial and atomic energy, Congress provided that titleto such inventions "shall be vested in, and be the propertyof, the [Atomic Energy] Commission." 42 U. S. C. §2182.Congress has also enacted laws requiring that title tocertain inventions made pursuant to contracts with theNational Aeronautics and Space Administration "shall bethe exclusive property of the United States," Pub. L. 111-314, §3, 124 Stat. 3339, 51 U. S. C. §20135(b)(1), and thattitle to certain inventions under contracts with the Department of Energy "shall vest in the United States." 42
U. S. C. §5908.Such language is notably absent from the Bayh-DoleAct. Nowhere in the Act is title expressly vested in contractors or anyone else; nowhere in the Act are inventorsexpressly deprived of their interest in federally fundedinventions. Instead, the Act provides that contractors may Opinion of the Court "elect to retain title to any subject invention." 35 U. S. C.§202(a). A "subject invention" is defined as "any inventionof the contractor conceived or first actually reduced topractice in the performance of work under a fundingagreement." §201(e).Stanford asserts that the phrase "invention of the contractor" in this provision "is naturally read to include allinventions made by the contractor's employees with theaid of federal funding." Brief for Petitioner 32 (footnoteomitted). That reading assumes that Congress subtly setaside two centuries of patent law in a statutory definition.It also renders the phrase "of the contractor" superfluous.If the phrase "of the contractor" were deleted from thedefinition of "subject invention," the definition would cover"any invention . . . conceived or first actually reduced topractice in the performance of work under a fundingagreement." Reading "of the contractor" to mean "allinventions made by the contractor's employees with theaid of federal funding," as Stanford would, adds nothingthat is not already in the definition, since the definitionalready covers inventions made under the funding agreement. That is contrary to our general "reluctan[ce] totreat statutory terms as surplusage." Duncan v. Walker,533 U. S. 167, 174 (2001) (internal quotation marksomitted).Construing the phrase to refer instead to a particularcategory of inventions conceived or reduced to practiceunder a funding agreement-inventions "of the contractor," that is, those owned by or belonging to the contractor-makes the phrase meaningful in the statutorydefinition. And "invention owned by the contractor" or"invention belonging to the contractor" are natural readings of the phrase "invention of the contractor." As wehave explained, "[t]he use of the word 'of' denotes ownership." Poe v. Seaborn, 282 U. S. 101, 109 (1930); see FloresFigueroa v. United States, 556 U. S. ___, ___, ___ 9 10 BOARD OF TRUSTEES OF LELAND STANFORD JUNIOR
UNIV. v. ROCHE MOLECULAR SYSTEMS, INC.Opinion of the Court (2009) (slip op., at 2, 11) (treating the phrase "identification [papers] of another person" as meaning such itemsbelonging to another person (internal quotation marksomitted)); Ellis v. United States, 206 U. S. 246, 259 (1907)(interpreting the phrase "works of the United States" tomean "works belonging to the United States" (internalquotation marks omitted)). That reading follows from a common definition of theword "of." See Webster's Third New International Dictionary 1565 (2002) ("of" can be "used as a function wordindicating a possessive relationship"); New Oxford American Dictionary 1180 (2d ed. 2005) (defining "of" as "indicating an association between two entities, typically one ofbelonging"); Webster's New Twentieth Century Dictionary1241 (2d ed. 1979) (defining "of" as "belonging to").Stanford's reading of the phrase "invention of the contractor" to mean "all inventions made by the contractor'semployees" is plausible enough in the abstract; it is oftenthe case that whatever an employee produces in the courseof his employment belongs to his employer. No one wouldclaim that an autoworker who builds a car while workingin a factory owns that car. But, as noted, patent law hasalways been different: We have rejected the idea that mereemployment is sufficient to vest title to an employee'sinvention in the employer. Against this background, acontractor's invention-an "invention of the contractor"-does not automatically include inventions made by thecontractor's employees.4 ------ 4 The dissent suggests that "we could interpret the Bayh-Dole Act asordinarily assuming, and thereby ordinarily requiring, an assignmentof patent rights by the federally funded employee to the federallyfunded employer." Post, at 8. That suggestion is based in large part onExecutive Order 10096, which "governs Federal Government employeeto-employer patent right assignments." Post, at 9. Lest there be anydoubt, employees of nonfederal entities that have federal fundingcontracts-like Holodniy-are not federal employees. And there is no Opinion of the Court The Bayh-Dole Act's provision stating that contractorsmay "elect to retain title" confirms that the Act does notvest title. 35 U. S. C. §202(a) (emphasis added). Stanfordreaches the opposite conclusion, but only because it reads"retain" to mean "acquire" and "receive." Brief for Petitioner 36 (internal quotation marks omitted). That iscertainly not the common meaning of "retain." "[R]etain"means "to hold or continue to hold in possession or use."Webster's Third, supra, at 1938; see Webster's New Collegiate Dictionary 980 (1980) ("to keep in possession oruse"); American Heritage Dictionary 1109 (1969) ("[t]okeep or hold in one's possession"). You cannot retainsomething unless you already have it. See Alaska v.United States, 545 U. S. 75, 104 (2005) (interpreting thephrase "the United States shall retain title to all property"to mean that "[t]he United States . . . retained title to itsproperty located within Alaska's borders") (emphasisadded). The Bayh-Dole Act does not confer title to federally funded inventions on contractors or authorize contractors to unilaterally take title to those inventions; it simplyassures contractors that they may keep title to whatever itis they already have. Such a provision makes sense in astatute specifying the respective rights and responsibilities of federal contractors and the Government. The Bayh-Dole Act states that it "take[s] precedenceover any other Act which would require a disposition ofrights in subject inventions . . . that is inconsistent with"the Act. 35 U. S. C. §210(a). The United States as amicuscuriae argues that this provision operates to displace thebasic principle, codified in the Patent Act, that an inventorowns the rights to his invention. See Brief for UnitedStates 21. But because the Bayh-Dole Act, including ------equivalent executive order governing invention rights with respect tofederally funded research; that issue is of course addressed by theBayh-Dole Act.11 12 BOARD OF TRUSTEES OF LELAND STANFORD JUNIOR
UNIV. v. ROCHE MOLECULAR SYSTEMS, INC.Opinion of the Court §210(a), applies only to "subject inventions"-"inventionsof the contractor"-it does not displace an inventor's antecedent title to his invention. Only when an inventionbelongs to the contractor does the Bayh-Dole Act come intoplay. The Act's disposition of rights-like much of therest of the Bayh-Dole Act-serves to clarify the order ofpriority of rights between the Federal Government and afederal contractor in a federally funded invention thatalready belongs to the contractor. Nothing more.5 The isolated provisions of the Bayh-Dole Act dealingwith inventors' rights in subject inventions are consistentwith our construction of the Act. Under the Act, a federalagency may "grant requests for retention of rights by theinventor . . . [i]f a contractor does not elect to retain title toa subject invention." §202(d). If an employee inventornever had title to his invention because title vested in thecontractor by operation of law-as Stanford submits-itwould be odd to allow the Government to grant "requestsfor retention of rights by the inventor." By using the word"retention," §202(d) assumes that the inventor had rightsin the subject invention at some point, undermining thenotion that the Act automatically vests title to federallyfunded inventions in federal contractors.6 ------ 5 Far from superseding the Patent Act in such a backhanded way, it isclear that §210(a)'s concern is far narrower. That provision specifies 21different statutory provisions that the Bayh-Dole Act "take[s] precedence over," the vast majority of which deal with the division of ownership in certain inventions between a contractor and the Government.
35 U. S. C. §§210(a)(1)-(21); see, e.g., §§210(a)(19)-(20) (the Bayh-DoleAct takes precedence over "section 6(b) of the Solar Photovoltaic EnergyResearch Development and Demonstration Act" and "section 12 of theNative Latex Commercialization and Economic Development Act"). 6 Stanford contends that it cannot be the case "that the contractor canonly 'retain title' to an invention that it already owns, while an inventormay be considered for 'retention' of title only when he has assigned titleaway." Reply Brief for Petitioner 8. That argument has some force.But there may be situations where an inventor, by the terms of an Opinion of the Court The limited scope of the Act's procedural protectionsalso bolsters our conclusion. The Bayh-Dole Act expresslyconfers on contractors the right to challenge a Government-imposed impediment to retaining title to a subjectinvention. §202(b)(4). As Roche correctly notes, however,"the Act contains not a single procedural protection forthird parties that have neither sought nor received federalfunds," such as cooperating private research institutions.Brief for Respondents 29. Nor does the Bayh-Dole Actallow inventors employed by federal contractors to contesttheir employer's claim to a subject invention. The Act, forexample, does not expressly permit an interested thirdparty or an inventor to challenge a claim that a particularinvention was supported by federal funding. In a world inwhich there is frequent collaboration between privateentities, inventors, and federal contractors, see Brief forPharmaceutical Research and Manufacturers of Americaas Amicus Curiae 22-23, that absence would be deeplytroubling. But the lack of procedures protecting inventorand third-party rights makes perfect sense if the Actapplies only when a federal contractor has already acquired title to an inventor's interest. In that case, there isno need to protect inventor or third-party rights, becausethe only rights at issue are those of the contractor and theGovernment. The Bayh-Dole Act applies to subject inventions "conceived or first actually reduced to practice in the performance of work" "funded in whole or in part by the FederalGovernment." 35 U. S. C. §§201(e), 201(b) (emphasisadded). Under Stanford's construction of the Act, title to ------assignment, has subsidiary rights in an invention to which a contractorhas title, as §202(d) suggests. Compare §202(d) ("retention of rights")with §202(a) ("retain title") (emphasis added). And at the end of theday, it is Stanford's contention that "retain" must be "read as a syno-nym for 'acquire' or 'receive' " that dooms its argument on this point.Brief for Petitioner 37.13 14 BOARD OF TRUSTEES OF LELAND STANFORD JUNIOR
UNIV. v. ROCHE MOLECULAR SYSTEMS, INC.Opinion of the Court one of its employee's inventions could vest in the University even if the invention was conceived before the inventor became a University employee, so long as the invention's reduction to practice was supported by federalfunding. What is more, Stanford's reading suggests thatthe school would obtain title to one of its employee's inventions even if only one dollar of federal funding was appliedtoward the invention's conception or reduction to practice. It would be noteworthy enough for Congress to supplantone of the fundamental precepts of patent law and depriveinventors of rights in their own inventions. To do so undersuch unusual terms would be truly surprising. We areconfident that if Congress had intended such a sea changein intellectual property rights it would have said soclearly-not obliquely through an ambiguous definition of"subject invention" and an idiosyncratic use of the word"retain." Cf. Whitman v. American Trucking Assns., Inc.,531 U. S. 457, 468 (2001) ("Congress . . . does not alterthe fundamental details of a regulatory scheme in vagueterms or ancillary provisions"). Though unnecessary to our conclusion, it is worth notingthat our construction of the Bayh-Dole Act is reflected inthe common practice among parties operating under theAct. Contractors generally institute policies to obtainassignments from their employees. See Brief for Respondents 34; Brief for Pharmaceutical Research and Manufacturers of America as Amicus Curiae 13-18. Agencies thatgrant funds to federal contractors typically expect thosecontractors to obtain assignments. So it is with NIH, theagency that granted the federal funds at issue in this case.In guidance documents made available to contractors, NIHhas made clear that "[b]y law, an inventor has initialownership of an invention " and that contractors shouldtherefore "have in place employee agreements requiringan inventor to 'assign' or give ownership of an invention tothe organization upon acceptance of Federal funds." NIH Opinion of the Court Policies, Procedures, and Forms, A "20-20" View of Invention Reporting to the National Institutes of Health (Sept.22, 1995). Such guidance would be unnecessary if Stan-ford's reading of the statute were correct. Stanford contends that reading the Bayh-Dole Act asnot vesting title to federally funded inventions in federalcontractors "fundamentally undermin[es]" the Act's frame-work and severely threatens its continued "successfulapplication." Brief for Petitioner 45. We do not agree. Asjust noted, universities typically enter into agreementswith their employees requiring the assignment to theuniversity of rights in inventions. With an effective assignment, those inventions-if federally funded-become"subject inventions" under the Act, and the statute as apractical matter works pretty much the way Stanford saysit should. The only significant difference is that it does sowithout violence to the basic principle of patent law thatinventors own their inventions. The judgment of the Court of Appeals for the FederalCircuit is affirmed. It is so ordered. 15 1 SOTOMAYOR, J., concurring
JUSTICE SOTOMAYOR, concurring. I agree with the Court's resolution of this case and withits reasoning. I write separately to note that I shareJUSTICE BREYER's concerns as to the principles adopted bythe Court of Appeals for the Federal Circuit in FilmTecCorp. v. Allied-Signal, Inc., 939 F. 2d 1568 (1991), and theapplication of those principles to agreements that implicate the Bayh-Dole Act. See post, at 6-10 (dissentingopinion). Because Stanford failed to challenge the decisionbelow on these grounds, I agree that the appropriatedisposition is to affirm. Like the dissent, however, I understand the majority opinion to permit consideration ofthese arguments in a future case. See ante, at 5, n. 2. BREYER, J., dissenting 1
BOARD OF TRUSTEES OF THE LELAND STANFORDJUNIOR UNIVERSITY, PETITIONER v. ROCHEMOLECULAR SYSTEMS, INC., ET AL.ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OFAPPEALS FOR THE FEDERAL CIRCUIT[June 6, 2011] JUSTICE BREYER, with whom JUSTICE GINSBURG joins,dissenting. The question presented in this case is: "Whether a federal contractor university's statutoryright under the Bayh-Dole Act, 35 U. S. C. §§200-212,in inventions arising from federally funded researchcan be terminated unilaterally by an individual inventor through a separate agreement purporting to assign the inventor's rights to a third party." Brief forPetitioner i. In my view, the answer to this question is likely no. Butbecause that answer turns on matters that have not beenfully briefed (and are not resolved by the opinion of theCourt), I would return this case to the Federal Circuit forfurther argument
I
The Bayh-Dole Act creates a three-tier system for patentrights ownership applicable to federally funded researchconducted by nonprofit organizations, such as universities,and small businesses. It sets forth conditions that mean
(1) the funded firm; (2) failing that, the United StatesGovernment; and (3) failing that, the employee who made 2 BOARD OF TRUSTEES OF LELAND STANFORD JUNIOR
UNIV. v. ROCHE MOLECULAR SYSTEMS, INC.BREYER, J., dissentingthe invention, will likely obtain (or retain) any resulting patent rights (normally in that just-listed order). 35
U. S. C. §§202-203. The statute applies to "subject invention[s]" defined as "any invention of the contractorconceived or first actually reduced to practice in the performance of work under a funding agreement." §201(e)(emphasis added). Since the "contractor" (e.g., a university or small business) is unlikely to "conceiv[e]" of an ideaor "reduc[e]" it "to practice" other than through its employees, the term "invention of the contractor" must referto the work and ideas of those employees. We all agreethat the term covers those employee inventions that theemployee properly assigns to the contractor, i.e., his orher employer. But does the term "subject invention"also include inventions that the employee fails to assignproperly? II
Congress enacted this statute against a backgroundnorm that often, but not always, denies individual inventors patent rights growing out of research for which thepublic has already paid. This legal norm reflects the factthat patents themselves have both benefits and costs.Patents, for example, help to elicit useful inventions andresearch and to assure public disclosure of technologicaladvances. See, e.g., Mazer v. Stein, 347 U. S. 201, 219(1954); Bilski v. Kappos, 561 U. S. ___, ___ (2010) (slip op.,at 4); id., at ___ (slip op., at 10) (Stevens, J., concurring injudgment). But patents sometimes mean unnecessarilyhigh prices or restricted dissemination; and they sometimes discourage further innovation and competition by requiring costly searches for earlier, related patents or bytying up ideas, which, were they free, would more effectively spur research and development. See, e.g., Laboratory Corp. of America Holdings v. Metabolite Laboratories,Inc., 548 U. S. 124, 128 (2006) (BREYER, J., dissenting BREYER, J., dissenting from dismissal of certiorari as improvidently granted);Heller & Eisenberg, Can Patents Deter Innovation? TheAnticommons in Biomedical Research, 280 Science 698(1998).Thus, Thomas Jefferson wrote of "the difficulty of drawing a line between the things which are worth to the public the embarrassment of an exclusive patent, and thosewhich are not." Letter to Isaac McPherson (Aug. 13,1813), in 6 Writings of Thomas Jefferson 181 (H. Washington ed. 1854). And James Madison favored the patentmonopoly because it amounted to "compensation for" acommunity "benefit." Monopolies. Perpetuities. Corporations. Ecclesiastical Endowments., in J. Madison, Writings756 (J. Rakove ed. 1999). The importance of assuring this community "benefit" isreflected in legal rules that may deny or limit the award ofpatent rights where the public has already paid to producean invention, lest the public bear the potential costs ofpatent protection where there is no offsetting need forsuch protection to elicit that invention. Why should thepublic have to pay twice for the same invention?Legal rules of this kind include an Executive Order thatordinarily gives to the Government "the entire right, titleand interest" to inventions made by Government employees who "conduct or perform research, development work,or both." 37 CFR §501.6 (2010) (codifying, as amended,Exec. Order 10096, 3 CFR 292 (1949-1953 Comp.)). Seealso Heinemann v. United States, 796 F. 2d 451, 455-456(CA Fed. 1986) (holding Executive Order constitutionaland finding "no 'taking' because the invention was not theproperty of Heinemann"). They also include statutes,which, in specific research areas, give the Governmenttitle to inventions made pursuant to Government contracts. See Atomic Energy Act of 1954, §152, 68 Stat. 944(codified as amended at 42 U. S. C. §2182); National Aeronautics and Space Act of 1958, §305, 72 Stat. 435 (codified 3 4 BOARD OF TRUSTEES OF LELAND STANFORD JUNIOR
UNIV. v. ROCHE MOLECULAR SYSTEMS, INC.BREYER, J., dissentingat 42 U. S. C. §2457), repealed by §6, 124 Stat. 3444;Federal Nonnuclear Energy Research and DevelopmentAct of 1974, §9, 88 Stat. 1887 (codified as amended at 42
U. S. C. §5908(a)). And they have included Governmentregulations, established prior to the Bayh-Dole Act's enactment, that work in roughly similar ways. See, e.g., 45CFR §650.4(b) (1977) (National Science Foundation regulations providing that Foundation would "determine thedisposition of the invention [made under the grant] andtitle to and rights under any patent application"); §§8.1(a),
8.2(d) (Department of Health, Education, and Welfareregulations providing that inventions made under department grants "shall be subject to determination" by theagency and that the department may "require that alldomestic rights in the invention shall be assigned to theUnited States").These legal rules provide the basic background againstwhich Congress passed the Bayh-Dole Act. And the Act'sprovisions reflect a related effort to assure that rights toinventions arising out of research for which the public haspaid are distributed and used in ways that further specificimportant public interests. I agree with the majority thatthe Act does not simply take the individual inventors'rights and grant them to the Government. Rather, itassumes that the federal funds' recipient, say a universityor small business, will possess those rights. The Actleaves those rights in the hands of that recipient, notbecause it seeks to make the public pay twice for the sameinvention, but for a special public policy reason. In doingso, it seeks to encourage those institutions to commercialize inventions that otherwise might not realize their potentially beneficial public use. 35 U. S. C. §200. The Acthelps assure that commercialization (while "promot[ing]free competition" and "protect[ing] the public," ibid.) byimposing a set of conditions upon the federal funds recipient, by providing that sometimes the Government will BREYER, J., dissenting take direct control of the patent rights, and by adding thaton occasion the Government will permit the individualinventor to retain those rights. §§202-203.Given this basic statutory objective, I cannot so easilyaccept the majority's conclusion-that the individual inventor can lawfully assign an invention (produced bypublic funds) to a third party, thereby taking that invention out from under the Bayh-Dole Act's restrictions,conditions, and allocation rules. That conclusion, in myview, is inconsistent with the Act's basic purposes. It maysignificantly undercut the Act's ability to achieve its objectives. It allows individual inventors, for whose inventionthe public has paid, to avoid the Act's corresponding restrictions and conditions. And it makes the commercialization and marketing of such an invention more difficult:A potential purchaser of rights from the contractor, say auniversity, will not know if the university itself possessesthe patent right in question or whether, as here, the individual, inadvertently or deliberately, has previously assigned the title to a third party. Moreover, I do not agree that the language to which themajority points-the words "invention of the contractor"and "retain"-requires its result. As the majority concedes, Stanford's alternative reading of the phrase " 'invention of the contractor' " is "plausible enough in theabstract." Ante, at 10. Nor do I agree that the Act's lackof an explicit provision for "an interested third party" toclaim that an invention was not the result of federal funding "bolsters" the majority's interpretation. Ante, at 13.In any event, universities and businesses have worked outways to protect the various participants to research. SeeBrief for Association of American Universities et al. asAmici Curiae 22-24 (hereinafter AAU Brief); App. 118-124 (Materials Transfer Agreement between Cetus andStanford University).Ultimately, the majority rejects Stanford's reading (and 5 6 BOARD OF TRUSTEES OF LELAND STANFORD JUNIOR
UNIV. v. ROCHE MOLECULAR SYSTEMS, INC.BREYER, J., dissentingthe Government's reading) of the Act because it believesthat it is inconsistent with certain background norms ofpatent law, norms that ordinarily provide an individualinventor with full patent rights. Ante, at 10. But in myview, the competing norms governing rights in inventionsfor which the public has already paid, along with theBayh-Dole Act's objectives, suggest a different result
III
There are two different legal routes to what I consideran interpretation more consistent with the statute's objectives. First, we could set aside the Federal Circuit's interpretation of the licensing agreements and its relatedlicensing doctrine. That doctrine governs interpretation oflicensing agreements made before an invention is conceived or reduced to practice. Here, there are two suchagreements. In the earlier agreement-that between Dr.Holodniy and Stanford University-Dr. Holodniy said, "Iagree to assign . . . to Stanford . . . that right, title andinterest in and to . . . such inventions as required by Contracts and Grants." App. to Pet. for Cert. 119a (emphasisadded). In the later agreement-that between Dr. Holodniy and the private research firm Cetus-Dr. Holodniysaid, "I will assign and do hereby assign to Cetus, myright, title, and interest in" here relevant "ideas" and"inventions." Id., at 123a (emphasis added; capitalizationomitted).The Federal Circuit held that the earlier Stanford agree-ment's use of the words "agree to assign," when comparedwith the later Cetus agreement's use of the words "dohereby assign," made all the difference. It concluded that,once the invention came into existence, the latter wordsmeant that the Cetus agreement trumped the earlier,Stanford agreement. 583 F. 3d 832, 841-842 (CA Fed.2009). That, in the Circuit's view, is because the latterwords operated upon the invention automatically, while BREYER, J., dissenting the former did not. Quoting its 1991 opinion in FilmTecCorp. v. Allied-Signal, Inc., 939 F. 2d 1568, 1572, theCircuit declared that " '[o]nce the invention is made and[the] application for [a] patent is filed, . . . legal title to therights accruing thereunder would be in the assignee [i.e.,Cetus] . . . , and the assignor-inventor would have nothingremaining to assign.' " 583 F. 3d, at 842. Given what seem only slight linguistic differences in thecontractual language, this reasoning seems to make toomuch of too little. Dr. Holodniy executed his agreementwith Stanford in 1988. At that time, patent law appearsto have long specified that a present assignment of futureinventions (as in both contracts here) conveyed equitable,but not legal, title. See, e.g., G. Curtis, A Treatise on theLaw of Patents for Useful Inventions §170, p. 155 (3d ed.1867) ("A contract to convey a future invention . . . cannotalone authorize a patent to be taken by the party in whosefavor such a contract was intended to operate"); Comment,Contract Rights as Commercial Security: Present andFuture Intangibles, 67 Yale L. J. 847, 854, n. 27 (1958)("The rule generally applicable grants equitable enforcement to an assignment of an expectancy but demands afurther act, either reduction to possession or further assignment of the right when it comes into existence").Under this rule, both the initial Stanford and laterCetus agreements would have given rise only to equitableinterests in Dr. Holodniy's invention. And as betweenthese two claims in equity, the facts that Stanford's contract came first and that Stanford subsequently obtained apostinvention assignment as well should have meant thatStanford, not Cetus, would receive the rights its contractconveyed.In 1991, however, the Federal Circuit, in FilmTec,adopted the new rule quoted above-a rule that distinguishes between these equitable claims and, in effect, saysthat Cetus must win. The Federal Circuit provided no 7 8 BOARD OF TRUSTEES OF LELAND STANFORD JUNIOR
UNIV. v. ROCHE MOLECULAR SYSTEMS, INC.BREYER, J., dissentingexplanation for what seems a significant change in thelaw. See 939 F. 2d, at 1572. Nor did it give any explanation for that change in its opinion in this case. See 583
F. 3d, at 841-842. The Federal Circuit's FilmTec ruleundercuts the objectives of the Bayh-Dole Act. While thecognoscenti may be able to meet the FilmTec rule in futurecontracts simply by copying the precise words blessed bythe Federal Circuit, the rule nonetheless remains a technical drafting trap for the unwary. See AAU Brief 35-36.But cf. ante, at 15 (assuming ease of obtaining effectiveassignments). It is unclear to me why, where the Bayh-Dole Act is at issue, we should prefer the Federal Circuit'sFilmTec rule to the rule, of apparently much longer vintage, that would treat both agreements in this case ascreating merely equitable rights.At the same time, the Federal Circuit's reasoning bringsabout an interpretation contrary to the intention of theparties to the earlier, Stanford, contract. See App. to Pet.for Cert. 120a (provision in Stanford contract promisingthat Dr. Holodniy "will not enter into any agreementcreating copyright or patent obligations in conflict withthis agreement"). And it runs counter to what may wellhave been the drafters' reasonable expectations of howcourts would interpret the relevant language. Second, we could interpret the Bayh-Dole Act as ordinarily assuming, and thereby ordinarily requiring, anassignment of patent rights by the federally funded employee to the federally funded employer. I concede thatthis interpretation would treat federally funded employeesof contractors (subject to the Act) differently than the lawordinarily treats private sector employees. The Court longago described the latter, private sector principles. InUnited States v. Dubilier Condenser Corp., 289 U. S. 178(1933), the Court explained that a "patent is property, andtitle to it can pass only by assignment." Id., at 187. Itthen described two categories of private sector employee-BREYER, J., dissenting to-employer assignments as follows: First, a person who is "employed to make an invention, who succeeds, during his term of service, in accomplishing that task, isbound to assign to his employer any patent obtained."Ibid. But, second, "if the employment be general, albeit it cover a field oflabor and effort in the performance of which the employee conceived the invention for which he obtained apatent, the contract is not so broadly construed as torequire an assignment of the patent." Ibid. The Court added that, because of "the peculiar nature ofthe act of invention," courts are "reluctan[t] . . . to imply orinfer an agreement by the employee to assign his patent."Id., at 188. And it applied these same principles governing assignment to inventions made by employees of theUnited States. Id., at 189-190. Subsequently, however, the President promulgatedExecutive Order 10096. Courts have since found that thisExecutive Order, not Dubilier, governs Federal Government employee-to-employer patent right assignments.See, e.g., Kaplan v. Corcoran, 545 F. 2d 1073, 1076-1077(CA7 1976); Heinemann, 796 F. 2d, at 455-456; Wright v.United States, 164 F. 3d 267, 269 (CA5 1999); Halas v.United States, 28 Fed. Cl. 354, 364 (1993). The Bayh-DoleAct seeks objectives roughly analogous to the objectives ofthe Executive Order. At least one agency has promulgatedregulations that require Bayh-Dole contractors to insistupon similar assignments. See NIH Policies, Procedures,and Forms, A "20-20" View of Invention Reporting to theNational Institutes of Health (Sept. 22, 1995) (available inthe Clerk of Court's case file) (requiring a Governmentcontractor, such as Stanford University, to "have in placeemployee agreements requiring an inventor to 'assign' or 9 10 BOARD OF TRUSTEES OF LELAND STANFORD JUNIOR
UNIV. v. ROCHE MOLECULAR SYSTEMS, INC.BREYER, J., dissenting give ownership of an invention to the organization uponacceptance of Federal funds," as the Bayh-Dole Act "require[s]"). And an amicus brief, filed by major associations of universities, scientists, medical researchers, andothers, argues that we should interpret the rules governing assignments of the employees at issue here (andconsequently the Act's reference to "inventions of the contractor") in a similar way. AAU Brief 5-14. The District Court in this case adopted roughly thisapproach. 487 F. Supp. 2d 1099, 1118 (ND Cal. 2007)("[A]lthough title still vests in the named inventor, theinventor remains under a legal obligation to assign hisinterest either to the government or the nonprofit contractor unless the inventor acts within the statutory framework to retain title"). And since a university often entersinto a grant agreement with the Government for a researcher's benefit and at his request, see J. Hall, GrantManagement 205 (2010), implying such a presumption infavor of compliance with the grant agreement, and thuswith the Bayh-Dole Act, would ordinarily be equitable
IV
As I have suggested, these views are tentative. That isbecause the parties have not fully argued these matters(though one amicus brief raises the license interpretationquestion, see Brief for Alexander M. Shukh as AmicusCuriae 18-24, and at least one other can be read as supporting something like the equitable presumption I havedescribed, see AAU Brief 5-14). Cf. ante, at 5, n. 2. WhileI do not understand the majority to have foreclosed asimilarly situated party from raising these matters in afuture case, see ibid., I believe them relevant to our effortsto answer the question presented here. Consequently, Iwould vacate the judgment of the Federal Circuit andremand this case to provide the parties with an opportunity to argue these, or related, matters more fully. BREYER, J., dissenting Because the Court decides otherwise, with respect, Idissent. 11
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