Supreme Court limits patent rights of university research
By Robert Barnes,
What was true in 1790, the Supreme Court ruled Monday, is true still: An inventor owns his invention.
Chief Justice John G. Roberts Jr. said that a 1980 federal statute allocating patent rights involving federally funded research did not change that basic tenet. And so Stanford University does not fully own patents that led to the development of a widely used human immunodeficiency virus (HIV) test, the court ruled in a 7 to 2 decision.
Stanford researchers had worked with a private company on a technique to measure the amount of HIV in a person’s blood, which led to a test kit marketed by Roche Molecular Systems.
The case was closely watched by universities, private research and development companies and the federal government, which often jointly conduct research.
The case was one of two business rulings from the court Monday, both written by Roberts. The other removed an obstacle so that a group of investors can move forward with a class-action lawsuit claiming that deceitful actions by Halliburton resulted in a decline in stock prices.
The Stanford case involved a university researcher, Mark Holodniy, and a California biotech company called Cetus. In the 1980s, the company developed a technique — polymerase chain reaction, or PCR — that allowed billions of copies of DNA sequences to be made from a small sample of blood.
When Holodniy went to work at Stanford, he signed an agreement giving the university “right, title and interest in” inventions that came from his research. School officials arranged for him to conduct research at Cetus. But he had to sign an agreement there allowing Cetus the right to inventions made “as a consequence” of his access to the company’s PCR techniques.
Holodniy returned to Stanford, which had received money from the National Institutues of Health for the research, to fine-tune the research with colleagues. The university secured three patents to the blood-quantifying techniques.
Meanwhile, Roche acquired Cetus and its rights and developed a test kit that is used worldwide.
Stanford sued, citing the federal Bayh-Dole Act, governing inventions that result from federal funding. It contended that because of the law, Holodniy could not assign his interests to Cetus.
But Roberts said Stanford was reading the law to be far broader than Congress intended.
“Although much in intellectual property law has changed in the 220 years since the first Patent Act, the basic idea that inventors have the right to patent their inventions has not,” Roberts wrote.
He added: “We are confident that if Congress had intended such a sea change in intellectual property rights it would have said so clearly.”
Justice Stephen G. Breyer dissented, joined by Justice Ruth Bader Ginsburg. The case is Board of Trustees of Stanford University v. Roche Molecular Systems.
The Halliburton case involved a group of investors who want to sue on behalf of all who bought company common stock between June 3, 1999, and Dec. 7, 2001.
They say the company deliberately made false statements to inflate the value of its stock: about the scope of its potential liability in asbestos litigation; the expected revenue from construction contracts; and benefits from a merger with another company.
When “corrective statements” were issued, the stock price dropped and the investors lost money.
The issue before the court was not the merits of the case, but whether the investors could proceed as a class-action suit.
The U.S. Court of Appeals for the 5th Circuit said they could not. It said that to obtain class certification, the investors were required to prove “loss causation, i.e., that the corrected truth of the former fasehoods actually caused the stock price to fall and result in the losses.”
The court unanimously said that was wrong, and the case should proceed to see if investors can prove their allegations.
“Loss causation addresses a matter different from whether an investor relied on a misrepresentation, presumptively or otherwise, when buying or selling a stock,” Roberts wrote. He noted that other federal circuit courts do not require securities fraud plaintiffs to prove loss causation in order to obtain class certification.
The case is Erica P. John Fund v. Halliburton.