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

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

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

4. 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. 5 Main Changes First to File “Personal” Grace Period Third-Party Submission Post-Grant Review Inter Partes Review USPTO fees

6. 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. 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. 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. 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. 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. 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. 12 Stanford v. Roche

13. 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. 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. 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. 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. 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. 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. 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. 20 Questions?

21. 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