Why IP Assignment Agreements Matter, Part 1

Clients often ask their attorneys why they spend so much time arguing about seemingly trivial differences in contract wording.  Isn’t it just interchangeable generic boilerplate gobbledygook?

And attorneys often reply that slightly different wording in even basic legal agreements can yield radically different real world results.

Stanford University found that out the hard way when the Federal Circuit Court of Appeals in Stanford v. Roche dismissed its $200 million patent infringement lawsuit against Roche Molecular Systems because of sloppy wording in a Stanford researcher’s invention assignment agreement.

Patent rights initially belong to the inventor, which is why all companies engaged in research and development should require employees and independent contractors to sign written agreements assigning all intellectual property rights in their work product immediately upon invention.

Stanford’s agreement stated, “I agree to assign or confirm in writing to Stanford and/or Sponsors that right, title and interest in … such inventions as required by Contracts or Grants.”  Which looks okay at first glance, but if you read it again, you realize that the employee has only agreed to assign ownership of the invention at some time in the future.

Mark Holodniy, one of the researchers on a Stanford project to use polymerase chain reactions (PCR) to measure HIV concentration in blood plasma, signed that agreement.  Holodniy worked with researchers at biotech company Cetus to learn more about PCR, but Cetus required him to sign a non-disclosure agreement that said he, “will assign and do[es] hereby assign to CETUS, [his] right, title and interest in each of the ideas, inventions, and improvements” that he developed, “as a consequence of” his work at Cetus.

Since Holodniy had not yet actually assigned his rights to Stanford via the invention assignment agreement, he wound up assigning them to Cetus via the non-disclosure agreement, which was worded in the present tense.

The PCR hit the fan when Stanford sued Roche (which had acquired Cetus’ PCR business) for infringement of its PCR patents.  The court ruled that Roche could not infringe what it already owned, and threw out the lawsuit.

Takeaway: A lot of folks DIY basic contracts like employment agreements by cutting and pasting poorly drafted templates from the Internet.  A lot of other folks sign non-disclosure and similar basic agreements without a glance at the actual contents.  This case shows why neither is a good idea.

Update, 11/9/10: The Supreme Court has decided to grant certiorari and hear Stanford’s appeal of the decision. We will continue to follow this case of great importance to the university research community.

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