All about invention rights

In 2011, the Supreme Court provided guidance on the written language that is necessary to accomplish proper assignment of inventions.  In practice, this means that Colorado businesses must pay careful attention to the wording, as well as the timing, of intellectual property (“IP”) assignments from their employees. 

Impact of Stanford v. Roche and the Bayh-Dole Act on Employee Invention Assignments

Stanford University v. Roche Molecular Sys., Inc., 131 S.Ct. 2188 (2011), clarified that rights to a federally funded invention automatically vest in the inventor — not the inventor’s employer —unless the invention is properly assigned to the employer.

The University and Small Business Patent Procedures Act of 1980, also known as the Bayh-Dole Act, is at the heart of the Stanford v. Roche case.  The act permits universities, nonprofits and small businesses to retain ownership in inventions that were created using federal funding.  When an invention is developed and put into the marketplace to serve the public good, the Act also allows those entities to commercialize the invention using exclusive licenses.  Stanford v. Roche was impacted by the effect of intellectual property assignment clauses in employment contracts, which are generally governed by state law. 

Stanford v. Roche involved a dispute regarding ownership of the IP rights in an HIV detection technique that was developed by a research fellow (the “inventor-employee”) during collaboration between Cetus Corporation and Stanford University’s Department of Infectious Diseases.   When Stanford hired the inventor-employee, he was required to sign an agreement in which he “’agree[d] to assign’ to Stanford his ‘right, title, and interest in’ inventions resulting from his employment there.”

Subsequently, the inventor-employee began research at Cetus’ facility and signed another assignment agreement with Cetus as a condition to gaining access to Cetus’ resources.  In the Cetus agreement, the inventor-employee affirmed that he “’will assign and do[es] hereby assign’ to Cetus, his ‘right, title, and interest, in . . . the ideas, inventions, and improvements’ made ‘as a consequence of [his] access’ to Cetus.”   

Stanford patented the HIV detection technique, elected to retain title to the invention, and conferred a license to the U.S. government under Stanford’s interpretation of the Bayh-Dole Act.  Stanford did not, however, commercialize the technique, nor did Stanford allow the technique to enter the marketplace.

In 1991, Roche Molecular Systems, Inc. acquired the rights to Cetus’ research, including the employee-inventor’s work product, and commercialized the procedure making HIV test kits available worldwide.  Stanford brought suit against Roche claiming patent infringement.   The Supreme Court ruled in favor of Roche, and held that Stanford’s agreement in which the employee-inventor “agreed to assign” future inventions was insufficient because it “constituted a mere promise to assign rights in the future.” 

Conversely, Cetus’ assignment language, in which the employee-inventor affirmed that he “will assign and do[es] hereby assign,” was determined to be sufficient.  Accordingly, Roche properly acquired title to the employee-inventor’s work product from Cetus.  The Court held that title vested first in the inventor-employee rather than in Stanford unless and until assigned in a valid, written agreement. 

Colorado Case Law on Employee Invention Assignments  

In general, Colorado courts will look to employment contracts to determine whether invention rights have been assigned by the employee to the employer.  However, an employment contract that lacks an express assignment provision does not necessarily preclude employers from acquiring rights to an invention. 

For example, when an employee creates an invention that is not within the scope of his or her job duties, absent a proper written assignment, the employee retains the rights to that invention.  In this situation, an employer that contributed, e.g., financially, to the development of the invention may be entitled to use the invention without charge or risk of infringing the employee-owned rights.  However, the employer cannot claim ownership of the invention.  

On the other hand, when an employee creates an invention that is within the scope of his or her job duties, even absent an express assignment provision, some Colorado courts have held that the employee has an implied contractual obligation to assign the invention to the employer.

Thus, upon hire, employers should require employees to execute properly worded, present-tense assignment agreements to prove that the employer has received ownership rights in employee inventions.  Such assignments, for example, might read that an employee “hereby assigns to [the employer] all rights, title, and interest in and to” the subject inventions.  The failure to properly do so, as evidenced in Stanford v. Roche, could result in the employer’s forfeiture of those rights.  

The timing of the employee assignment is a further consideration for employers.  Proper assignment language might not be enough if the employer requests assignment from the employee after hire.  Colorado courts have held that employers may still acquire ownership rights to an employee invention subsequent to hire, but the employer may need to convey additional consideration (i.e., exchange something of value) to the employee to ensure that the assignment is secure. 

In some situations, continued employment may (or may not) be sufficient consideration for requiring existing employees to sign an assignment agreement, but here again, the requirements vary.  To secure assignment and avoid potential challenges to ownership, employers should consider giving the employee additional consideration for the assignment, which can be a modest monetary payment or some other means of conveying value to the employee.

Conclusion 

Colorado employers — especially those conducting federally funded research — should take notice of proper assignment procedures necessary to acquire the rights to employee inventions.  The Stanford v. Roche case illustrates the importance of executing proper assignment agreements — upon hire, if possible — that include precise language to prove the employer’s ownership rights.