Supreme Court Clarifies Ownership Rights in Federally Funded Inventions Under the Bayh-Dole ActJune 8, 2011

In a 7-2 decision released yesterday, the Supreme Court ruled the University and Small Business Patent Procedures Act of 1980 (“the Bayh-Dole Act”) does not displace the general rule that rights in an invention belong to the inventor, and does not automatically vest title to federally funded inventions in the contractors receiving the federal funds. Chief Justice Roberts, writing for the majority, wrote that the Act does not “reorder[] the normal priority of rights in an invention” through language allowing contractors to retain title to “invention[s] of the contractor.”

The Majority based its opinion on the general rule of patent law that rights in an invention belong to the inventor, a rule confirmed by the Court’s precedent. Although the Court recognized that this general rule can be superseded by congressional act—and in fact has previously been superseded by legislation relating to the Atomic Energy Commission, the Department of Energy, and NASA, for example—it noted that the Bayh-Dole Act contains no language specifically vesting ownership of federally funded inventions with the federal government, or with anyone else, including the contractor. Further, the Court held that language in the Act permitting contractors to “elect to retain title” was not the equivalent of vesting title in those contractors. Thus, the Act does not automatically vest rights in the invention in the contractor by virtue of the fact that the invention was funded (at least in part) by the federal government.

The Court effectively held that the provisions of the Bayh-Dole Act affecting the rights of contractors in federally funded inventions apply only under circumstances where the contractor has already acquired those rights, i.e. upon effective assignment of the rights by the inventor to the contractor. The dissent, written by Justice Breyer and joined by Justice Ginsberg, argue that such a position undermines the purpose of the Act, and runs contrary to the policies behind the Act, by “allow[ing] individual inventors, for whose invention the public has paid, to avoid the Act’s corresponding restrictions.” The Majority addresses this concern by remarking that the issue of inventor’s individual rights is unlikely to become common because the assignments generally included in employment agreements will usually work to vest the rights to the invention in the contractor.

It is worth noting that under the facts of this case—where the inventor signed a separate agreement and assignment with another company after entering into an agreement with, and while still in the employ of, the contractor—the assignment to the contractor turned out to be ineffective. This suggests that there may be other particular circumstances where the contractor may not obtain right in the invention despite the existence of an assignment by the inventor.

This case serves as an important reminder for employers, and especially contractors receiving federal research funds, to make sure that they require proper and effective assignments are executed. The Court reaffirmed that mere employment is insufficient to vest title in an employee’s invention in the employer, and further held that the Bayh-Dole Act does not guarantee otherwise.

For the full opinion, click here.