Renee Kaswan, DVM, MS
Founder, IP Advocate, Scientist & Entrepreneur

Like most court rulings, there is something for everyone-good and bad. The recent decision by Judge Richard Linn in Stanford v. Roche was very helpful for all faculty because it exploded the common assertion by universities that they own faculty or student ideas as an automatic consequence of the 1980 Bayh-Dole Act. The judge ruled that the Bayh-Dole Act gave default ownership of federal patent rights to the university, and encouraged universities to seek to acquire the complementary inventors' title to their inventions. But, Bayh-Dole did not, and could not, grant the university what the federal government did not own-the inventors' equity rights to their inventions. Since the formation of our Constitution, statutory common and employment law recognizes that the rights to one's creative works reside first and foremost with the creator. This is why a person can apply for patent protection but a corporation cannot. To transfer the inventors' rights to an employer, or any other party, there must be a contract that ensures due consideration, mutual agreement, good faith, fair dealing and informed mutual consent to modifications.

In the 30 years since Bayh-Dole passed, hundreds of patent attorneys, representing hundreds of universities and institutions, have penned thousands of IP policy claims that attempt to limit the challenges that any student or faculty inventor could use to assert or defend ownership rights over their own creative work. It appears from Judge Linn's ruling, and the subsequent commentary, that those same lawyers will be scrambling to fix the loophole that allowed Roche to beat Stanford. Where Stanford's policy said faculty scientist Mark Holodniy agreed to assign his intellectual property, Roche's contract with Holodniy said, "I agree to assign and hereby assign." This gave the Roche assignment precedence over the Stanford assignment and was the tipping factor in this suit. An interesting survey would be to observe which schools adopt the "hereby assign" language, and how quickly they plug that loophole.

This raises the question of what can and cannot be changed in an employment contract of adhesion. When do faculty and students deserve additional consideration if the university changes their employment contract to the students' and employees' disadvantage? Does the university have to provide written notice of every material change? Do students or faculty have to sign their consent to the change if they are already employed under a contract that is more favorable to them?

For instance, University of California, Davis hired Dr. Douglas Shaw when the UC Davis policy was to split royalties 50:50 with inventors. The state changed the policy to approximately 25:75, but Shaw insisted that he and his lab were still entitled to 50% of royalties paid on the $2 billion dollar annual strawberry industry he created with his hybridization project in California. The California Supreme Court agreed that UC Davis could not modify the contract to Shaw's disadvantage without further compensation and informed consent, so he and his lab still collect 50% of royalty income.

Many university IP policies include adhesion clauses such as "I agree to be bound by the IP Policy as it is revised from time to time." Adhesion contracts are sometimes enforceable, but are many times unenforceable. Courts have found that it is unreasonable to bind someone to contractual terms that were not presented at the time, and indeed not anticipated at the time, that the contract of adhesion was signed, especially in the case of accepting employment or admission to a school.

Another example: California Labor section 2870-72 recognizes an individual's rights to their creative work and limits overreaching requirements that any employer can put upon IP as a condition of employment. Furthermore, it requires that any contract entered after 1980 which contains a provision to require assignment to the employer must also, at the time the agreement is made, provide a written notification to the employee that the agreement does not apply to an invention which qualifies fully under the provisions of section 2870. There are 10 states with similar statutes to protect employee rights. For the students and employees of California and those 10 other states, if the school failed to provide written notice of 2870-2872 at the time of hire or student application, is the IP policy enforceable?

Will Universities have to get present faculty to consent to a new material contract change? And if so, will that present an opportunity to negotiate for faculty and student contractual protections of their equity rights in their own creations?