Director’s Meeting Legislation and Case Law Update

1. Director’s MeetingLegislation and Case Law Update by Dave Risley July 29, 2011

2. Today’s Topics • Patent Law Reform Act of 2011 • Stanford v. Roche

3. Patent Law Reform Act of 2011(aka “America Invents Act”)

4. History and Current Status • Senate bill (S. 23) introduced 1/25/11 • S. 23 renamed “America Invents Act” 3/2/11 • Amended version of S. 23 adopted by Senate 3/8/11 • House bill (H.R. 1249) introduced 3/30/11 • Amended version of H.R. 1249 adopted by House 6/27/11 • Senate consideration of H.R. 1249 currently on hold

5. Main Changes • First to File • “Personal” Grace Period • Third-Party Submission • Post-Grant Review • Inter Partes Review • USPTO fees

6. First Inventor to File • Currently first to invent • Focus now will be on the “effective filing date” of application • No more complex interference proceedings • Derivation proceedings available within 1 year of publication of claim that is the same as an earlier claim • Derivation actions available between patent owners within 1 year of issuance of alleged derived claim

7. Grace Period • Currently can “swear behind” prior art published less than a year before your filing date if you have prior conception or reduction to practice • New “personal” grace period: disclosure published 1 year or less before effective filing date is not prior art if: • Disclosure by inventor, • Disclosure by another who obtained subject matter from inventor, or • Disclosed subject matter had been previously publicly disclosed by inventor

8. Third-Party Submission • Third party may submit prior art to USPTO relative to a pending application • Prior art must be filed before the earlier of • Notice of allowance, or • 6 months after publication • Third party must describe the relevance of the prior art • Compliant submissions go into patent’s official file

9. Post-Grant Review • Third party can petition USPTO to invalidate claims of a patent within 9 months following issuance • Petitioner must explain with particularity why the claims are invalid and provide supporting evidence • Any ground of invalidity under §282(b)(2) or (3) can be used • USPTO will initiate review if the petitioner shows that it is “more likely than not” that at least one claim is unpatentable • Post-grant review unavailable if petitioner filed/files civil action to challenge the validity of the patent

10. Inter Partes Review • Third party can petition to cancel one or more claims of a patent after the nine-month window for post-grant review or termination of post-grant review • Attack limited to prior art challenges under §102 (novelty) or §103 (obviousness) based on printed publications • Petitioner must explain why the claims are invalid and provide supporting evidence • USPTO will initiate review if there is a “reasonable likelihood” that the petitioner would prevail • Post-grant review unavailable if petitioner filed/files civil action to challenge the validity of the patent

11. USPTO Fees • Congress currently sets USPTO fees and diverts a portion of the collected fees each year to other uses • USPTO fees would no longer be diverted • USPTO would also be given “fee setting authority” subject to Congressional review

12. Stanford v. Roche

13. Underlying Facts • 1985: Cetus develops method known as polymerase chain reaction (PCR) for quantifying levels of HIV in blood • 1988: Cetus begins collaborating with Stanford University • Dr. Holodniy joins Stanford and signs employment agreement stating he “agrees to assign” his rights in his inventions to Stanford • Arrangements are made for Dr. H to conduct research at Cetus • As a condition to gain access to Cetus, Dr. H was required to sign an agreement stating that he “will assign and do[es] hereby assign” his rights in all inventions to Cetus • At Cetus, Dr. H devised a specific PCR-based procedure for measuring HIV levels • Dr. H then returns to Stanford and tested the procedure • Stanford files several patent applications and obtains 3 patents • Roche acquires Cetus’s PCR-related assets and develops HIV test kits, which are now used worldwide

14. Procedural History • Stanford sued Roche contending that Roche’s HIV test kits infringe Stanford’s PCR patents • Roche responded by asserting that it is a co-owner of the patents because Dr. H assigned his rights to Cetus and, therefore, Stanford has no standing to sue • Stanford countered that Dr. H had no right to assign his rights because his research was federally funded and falls under the Bayh-Dole Act • District court agreed with Stanford • Roche appealed • Federal Circuit reversed

15. Basic Principles of Ownership • The basic idea that inventors have the right to ownership of their inventions has been in place for over 220 years • It is also well established that inventors can assign their rights to a third party • Unless there is an agreement to the contrary, an employer does not have rights in an invention conceived by the employee. An employee must expressly grant those rights to his/her employer.

16. Stanford Argument 1 • Stanford: The Bayh-Dole Act automatically vests title to federally funded inventions to the federal contractor (university) • Supreme Court: • Although Congress has divested inventors of their rights in certain limited situations, there is no evidence that Congress intended this in the Bayh-Dole Act • Instead, the Act states that contractors may “elect to retain title to any subject invention” • Here, Stanford did not so elect because the employee contract was a mere promise to assign rights in the future • Automatic vesting could lead to odd results, as when the invention was conceived of before federal funding was received or when only minimal federal funding was received

17. Stanford Argument 2 • Stanford: The phrase “invention of the contractor” in the Bayh-Dole Act extends to all inventions developed under federal funding by the contractor’s employees • Supreme Court: • That interpretation assumes that Congress intended to set aside two centuries of patent law • Although the Act states that contractors may elect to retain title, the Act itself does not automatically vest title • The “of” implies ownership. Therefore, the contractor’s rights under the Act come into play only once the contractor is the owner of the invention

18. Conclusions • University inventors retain the rights to their inventions unless they expressly surrender those rights • The Bayh-Dole Act does not automatically vest title to an invention to the university just because the invention was developed with federal funding

19. Practical Considerations • Critical that all employment contracts (faculty, students, staff) expressly assign the employee’s rights in their inventions to the university • E.g., “I hereby assign” not “I agree to assign” • Consider using similar language for invention disclosure documents • Educate faculty on the dangers of signing a contract without having an expert review it first • Request that faculty consult the TTO ahead of time of any meetings scheduled with an outside entity

20. Questions?

21. Thank you! • Dave Risley • Thomas, Kayden, Horstemeyer & Risley LLP • 400 Interstate North Parkway • Suite 1500 • Atlanta, GA 30339 • (770) 933-9500 • www.tkhr.com