Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc.

United States Court of Appeals for the Federal Circuit
Revised: October 1, 2009
2008-1509, -1510
BOARD OF TRUSTEES OF THE LELAND STANFORD JUNIOR UNIVERSITY,
Plaintiff/Counterclaim Defendant-
Appellant,
and
THOMAS MERIGAN and MARK HOLODNIY,
Counterclaim Defendants,
v.
ROCHE MOLECULAR SYSTEMS, INC.,
ROCHE DIAGNOSTICS CORPORATION,
ROCHE DIAGNOSTICS OPERATIONS, INC.,
Defendants/Counterclaimants-
Cross Appellants.
Ricardo Rodriguez, Cooley Godward Kronish LLP, of Palo Alto, California,
argued for plaintiff/counterclaim defendant-appellant. With him on the brief were
Michelle S. Rhyu, Lori Ploeger and Benjamin G. Damstedt.
Adrian R. Pruetz, Pruetz Law Group LLP, of El Segundo, California, argued for
defendants/counterclaimants-cross appellants. With her on the brief were Erica J.
Pruetz and Lauren M. Gibbs. Of counsel on the brief were Brian C. Cannon and Charlie
Y. Chou, Quinn Emanuel Urquhart Oliver & Hedges, LLP, of Redwood Shores,
California. Of counsel was Pablo D. Arredondo, of New York, New York.
Appealed from: United States District Court for the Northern District of California
Judge Marilyn H. Patel
United States Court of Appeals for the Federal Circuit
2008-1509, -1510
BOARD OF TRUSTEES OF THE LELAND STANFORD JUNIOR UNIVERSITY,
Plaintiff/Counterclaim Defendant-
Appellant,
and
THOMAS MERIGAN and MARK HOLODNIY,
Counterclaim Defendants,
v.
ROCHE MOLECULAR SYSTEMS, INC.,
ROCHE DIAGNOSTICS CORPORATION,
ROCHE DIAGNOSTICS OPERATIONS, INC.,
Defendants/Counterclaimants-
Cross Appellants.
Appeals from the United States District Court for the Northern District of California in
case no. 05-CV-04158, Judge Marilyn H. Patel.
__________________________
DECIDED: September 30, 2009
__________________________
Before LINN, PROST, and MOORE, Circuit Judges.
LINN, Circuit Judge.
The Board of Trustees of the Leland Stanford Junior University (“Stanford”)
appeals a final judgment that the asserted claims of U.S. Patents No. 5,968,730 (“’730
patent”), No. 6,503,705 (“’705 patent”), and No. 7,129,041 (“’041 patent”) are invalid for
obviousness. Bd. of Trs. v. Roche Molecular Sys., Inc., 563 F. Supp. 2d 1016 (N.D.
Cal. 2008) (“Invalidity Opinion”). Roche Molecular Systems, Inc., Roche Diagnostics
Corporation, and Roche Diagnostics Operations, Inc. (collectively, “Roche”) cross-
appeal that part of the district court’s judgment relating to Roche’s ownership, license,
and shop rights to the patents-in-suit. Bd. of Trs. v. Roche Molecular Sys., Inc., 487 F.
Supp. 2d 1099 (N.D. Cal. 2007) (“Contract Opinion”).
Because the district court correctly found that Roche’s counterclaim for a
judgment on its ownership claim was subject to California statutes of limitation, we
affirm that part of the district court’s ruling. However, because the district court
incorrectly declined to consider Roche’s affirmative defense based on ownership, and
because we conclude as a matter of law that Roche possesses an ownership interest in
the patents-in-suit that deprives Stanford of standing, we vacate the district court’s
judgment of invalidity and remand with instructions to dismiss Stanford’s action.
BACKGROUND
The patents-in-suit claim methods for quantifying Human Immunodeficiency Virus
(“HIV”)—the virus that causes Acquired Immunodeficiency Syndrome (“AIDS”)—in
human blood samples, and correlating those measurements to the therapeutic
effectiveness of antiretroviral drugs. The claimed methods use the polymerase chain
reaction (“PCR”) to measure ribonucleic acid (“RNA”) from HIV in the blood plasma of
infected humans who are taking drugs such as zidovudine (AZT). PCR is a biochemical
technique that enables measurement of relatively small quantities of nucleic acids by
iteratively and exponentially “amplifying” a sample to detectable levels.
All three patents descend from a common parent application and share the same
title: “Polymerase Chain Reaction Assays for Monitoring Antiviral Therapy and Making
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Therapeutic Decisions in the Treatment of Acquired Immunodeficiency Syndrome.”
Three Stanford researchers—Mark Holodniy, Thomas Merigan, and David
Katzenstein—are named inventors of all three patents; a fourth inventor, Michael Kozal,
appears on the ’705 patent.
The technology related to the patents-in-suit was developed in the late 1980s
and early 1990s by researchers at Stanford and Cetus, a company where PCR
techniques matured in the early 1980s. The collaborations between Stanford and Cetus
included a series of written agreements. In 1988, Holodniy joined Merigan’s laboratory
at Stanford as a Research Fellow in the Department of Infectious Disease, and signed a
“Copyright and Patent Agreement” (“CPA”) that obligated Holodniy to assign his
inventions to the university. J.A. 741-47. Holodniy had no prior experience with PCR
techniques. In February 1989, Holodniy began regular visits to Cetus over several
months to learn PCR and to develop a PCR-based assay for HIV. Holodniy signed a
“Visitor’s Confidentiality Agreement” (“VCA”) with Cetus. Id. 1657-58. The VCA stated
that Holodniy “will assign and do[es] hereby assign to CETUS, my right, title, and
interest in each of the ideas, inventions and improvements” that Holodniy may devise
“as a consequence of” his work at Cetus. Id. 1658.
During the same period, Cetus also collaborated with Merigan and Katzenstein to
develop a separate HIV treatment. Merigan, Stanford, and Cetus signed multiple
“Materials Transfer Agreements” that permitted Stanford to use certain PCR-related
materials and information supplied by Cetus. Id. 1653-56. These agreements provided
Cetus with licenses to technology that Stanford created as a result of access to Cetus’s
materials. Id. 1655.
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Eventually, Holodniy’s research with Cetus produced an assay that used PCR to
measure quantitatively the amount of plasma HIV RNA in samples from infected
humans. After concluding his visits to Cetus and publishing his findings with Cetus co-
authors, Holodniy worked with Merigan, Katzenstein, and others on clinical studies at
Stanford that tested the new PCR assay with human patients taking antiretroviral drugs.
The researchers determined that HIV RNA, measured through PCR, was a suitable
“marker” of drug efficacy. These results formed the basis for the patents-in-suit.
In December 1991, Roche purchased Cetus’s “PCR business,” including its
agreements with Stanford and its researchers, through an “Asset Purchase Agreement.”
Id. 3122, 3153-54. After this transaction, Roche began manufacturing HIV detection kits
employing RNA assays. In May 1992, Stanford filed the patent application to which the
patents-in-suit claim priority. The ’730 patent issued on October 19, 1999; the ’705
patent on January 7, 2003; and the ’041 patent on October 31, 2006, after this lawsuit
began. Stanford is the named assignee of all three patents.
Stanford received government funding for its HIV research through the National
Institutes of Health (“NIH”). On June 24, 1992, Stanford filed an invention disclosure for
the HIV RNA assay with the NIH. See id. 5091-93. On November 29, 1994, Stanford
confirmed to the Government the grant of a “nonexclusive, nontransferable, irrevocable,
paid-up license” under the parent application. Id. 5096. On April 6, 1995, Stanford
formally notified the Government that it elected to retain title to the inventions under the
Bayh-Dole Act, 35 U.S.C. §§ 200-212. J.A. 5095. All three patents-in-suit contain the
notation: “This invention was made with Government support under contracts AI27762-
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04 and AI27766-07 awarded by the National Institutes of Health. The Government has
certain rights in this invention.” E.g., ’730 patent col.1 ll.11-15.
On April 6, 2000, Luis Mejia, a Senior Licensing Associate at Stanford, offered a
slide presentation at Roche that asserted Stanford’s ownership of the HIV RNA assay
invention and offered Roche an exclusive license to all patents descending from the
parent application. J.A. 1201-18; Contract Op. at 1110. E-mail correspondence shows
that as late as spring of 2004, Mejia and his Roche counterpart were negotiating
possible license terms and contesting Roche’s ownership rights in the patents. See
Contract Op. at 1113.
Stanford filed suit against Roche in the Northern District of California on October
14, 2005, alleging that Roche’s HIV detection kits infringe its patents. Roche answered
and counterclaimed against Stanford, Merigan, and Holodniy, asserting, inter alia, that
Stanford lacked standing to maintain the cause of action against Roche, that Roche
possesses ownership, license, and/or shop rights to the patents through Roche’s
acquisition of Cetus’s PCR assets, and that the asserted patent claims were invalid.
Roche pleaded its ownership theory in three forms: as a declaratory judgment
counterclaim, an affirmative defense, and a challenge to Stanford’s standing to sue for
infringement. Roche’s First Am. Compl. 6-7, 13, 24.
The parties cross-moved for summary judgment on Roche’s rights in the patents.
Under Rule 8(c) of the Federal Rules of Civil Procedure, the district court construed
Roche’s pleading as a counterclaim but not an affirmative defense, reasoning that
“Roche’s claims of ownership of the patents and that Stanford lacks standing as the
non-exclusive owner of the patents seek to expand Roche’s current rights, and are
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properly viewed as counterclaims subject to the applicable statute of limitations.”
Contract Op. at 1112. The district court denied Roche’s motion in full and granted
Stanford’s motion in part, finding that (1) Roche’s ownership claims were barred by
California statutes of limitation, laches, and the Bayh-Dole Act; (2) Roche’s license
claims failed because Stanford never consented to Roche’s acquisition of Cetus’s
patent licenses; and (3) Roche lacked shop rights to the patents. Id. at 1124. Roche
petitioned this court for a writ of mandamus to vacate the district court’s ruling. We
denied Roche’s petition. In re Roche Molecular Sys., Inc., 516 F.3d 1003 (Fed. Cir.
2008).
After briefing and a Markman hearing, the district court then construed several
claim terms. Bd. of Trs. v. Roche Molecular Sys., Inc., 528 F. Supp. 2d 967 (N.D. Cal.
2007). Roche then moved for summary judgment that the asserted claims were invalid.
The district court granted the motion, holding all asserted claims obvious. Invalidity Op.
at 1049.
Stanford appeals the judgment of invalidity and the district court’s claim
construction of “about 30 cycles”; Roche cross-appeals the judgment as to the parties’
respective rights in the patents. We have jurisdiction under 28 U.S.C. § 1295(a)(1)
(2006).
DISCUSSION
I. Propriety of Cross-Appeal
As a threshold matter, Stanford challenges the propriety of Roche’s cross-
appeal. Stanford argues that “the scope of [Roche’s] cross-appeal includes only
ownership” because Roche’s license arguments “do not seek to modify the scope of the
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judgment below and, therefore, are not the proper subject of a cross-appeal.”
Stanford’s Reply Br. 40. Stanford’s characterization is incorrect. Although Roche
mistakenly characterizes its ownership and license arguments as “alternative grounds”
for affirmance, Roche’s Principal Br. 2, 35, those arguments are not bases for
invalidating the asserted claims. The district court’s summary judgment of invalidity,
which Stanford appeals, applies only to the asserted claims of the three patents-in-suit.
Invalidity Op. at 1021. Roche’s ownership and license arguments would establish
Roche’s rights to the patents as a whole, not only to specific claims. “It is . . .
appropriate to file a cross-appeal when a party seeks to enlarge its own rights under the
judgment or to lessen the rights of its adversary under the judgment. Thus, a party
must file a cross-appeal when acceptance of the argument it wishes to advance would
result in a reversal or modification of the judgment rather than an affirmance.” Bailey v.
Dart Container Corp., 292 F.3d 1360, 1362 (Fed. Cir. 2002) (citations omitted); see also
Rivero v. City & County of San Francisco, 316 F.3d 857, 862 (9th Cir. 2002). Here,
Roche’s arguments would expand its rights under the judgment and, thus, are properly
the subject of a cross-appeal.
II. The Parties’ Patent Rights
Before the district court, Roche sought both to defeat Stanford’s suit based on
Stanford’s alleged defective title and to obtain a judgment that it owned Holodniy’s
interest in the patents. The district court determined that the applicable California
statutes of limitation and the doctrine of laches foreclosed Roche’s counterclaim for a
judgment of ownership, and that such determination was fatal to Roche’s ownership and
standing defenses. While we agree with the district court that the statutes of limitation
2008-1509, -1510 7
preclude Roche from obtaining a judgment of ownership, we do not agree that such
determination prevents Roche from asserting Stanford’s lack of ownership of Holodniy’s
interest as a defense and a challenge to Stanford’s standing to maintain its action
against Roche.
“This court reviews the district court’s grant or denial of summary judgment under
the law of the regional circuit.” MicroStrategy Inc. v. Business Objects, S.A., 429 F.3d
1344, 1349 (Fed. Cir. 2005). The Ninth Circuit “review[s] the district court’s grant of
summary judgment de novo, determining whether, viewing all evidence in the light most
favorable to the nonmoving party, there are any genuine issues of material fact and
whether the district court correctly applied the relevant substantive law.” Kraus v.
Presidio Trust Facilities Div., 572 F.3d 1039, 1043-44 (9th Cir. 2009).
Rule 8(c)(2) provides: “If a party mistakenly designates a defense as a
counterclaim, or a counterclaim as a defense, the court must, if justice requires, treat
the pleading as though it were correctly designated, and may impose terms for doing
so.” The Federal Circuit “defers to the law of the regional circuits on matters of
procedural law that do not implicate issues of patent law.” Duro-Last, Inc. v. Custom
Seal, Inc., 321 F.3d 1098, 1106 (Fed. Cir. 2003). In the Ninth Circuit, “a district court’s
decision[] with regard to the treatment of affirmative defenses is reviewed for an abuse
of discretion.” 389 Orange St. Partners v. Arnold, 179 F.3d 656, 664 (9th Cir. 1999).
We conclude that the district court abused its discretion by striking Roche’s
affirmative defense and refusing to adjudicate it on the merits. Rule 8(c)(2) generally
applies if a party “mistakenly designates” its arguments. There is no indication that
Roche erred when it pleaded ownership as both a declaratory judgment counterclaim
2008-1509, -1510 8
and an affirmative defense, nor any reason why Roche could not have pleaded both to
preserve its arguments. Cf. Dubied Mach. Co. v. Vt. Knitting Co., 739 F. Supp. 867,
871 n.3 (S.D.N.Y. 1990) (“It is permissible to label a response to a plaintiff’s cause of
action as both an affirmative defense and as a counterclaim.”). The phrase “if justice
requires” is not well defined. 389 Orange St., 179 F.3d at 664. But Rule 8(c)(2)
generally favors defendants by construing responsive pleadings liberally to maximize
the defendant’s available legal theories. See Caldera v. Northrop Worldwide Aircraft
Servs., 192 F.3d 962, 970 (Fed. Cir. 1999). Moreover, Rule 8(d)(2) permits a party to
“set out two or more statements of a claim or defense alternatively or hypothetically.” If
a party pleads alternative statements, “the pleading is sufficient if any one of them is
sufficient.” Id.; see also MB Fin. Group, Inc. v. U.S. Postal Serv., 545 F.3d 814, 819
(9th Cir. 2008). Therefore, the district court was obligated to consider Roche’s
counterclaim and defenses.
Under California law, “a defense may be raised at any time, even if the matter
alleged would be barred by a statute of limitations if asserted as the basis for affirmative
relief.” Styne v. Stevens, 26 Cal. 4th 42, 51 (2001). The Supreme Court has repeatedly
followed this distinction. Beach v. Ocwen Fed. Bank, 523 U.S. 410, 415-16 (1998) (“As
we have said before, the object of a statute of limitation in keeping stale litigation out of
the courts would be distorted if the statute were applied to bar an otherwise legitimate
defense to a timely lawsuit . . . .”) (quotation omitted); United States v. W. Pac. R.R.
Co., 352 U.S. 59, 72 (1956) (“To use the statute of limitations to cut off the
consideration of a particular defense in the case is quite foreign to the policy of
preventing the commencement of stale litigation . . . . If this litigation is not stale, then
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no issue in it can be deemed stale.”). Under these principles, the statutes of limitation
do not preclude Roche’s defense of ownership.
Stanford’s assertion of laches and equitable estoppel also fail. Under California
law, laches does not bar affirmative defenses. See Styne, 26 Cal. 4th at 52 (“[N]either
the limitation of the statute nor the doctrine of laches will operate to bar the defense of
the invalidity of the agreement upon the ground of fraud.”) (citation omitted). Stanford
has also not shown that Roche made any misrepresentations or concealed any facts
about ownership needed for a valid claim of equitable estoppel. Simmons v. Ghaderi,
44 Cal. 4th 570, 584-85 (2008) (citations omitted).
Finally, and critically here, Roche asserted its ownership interest as a bar to
Stanford’s standing. It is well settled that questions of standing can be raised at any
time and are not foreclosed by, or subject to, statutes of limitation. See Pandrol USA,
LP v. Airboss Ry. Prods., 320 F.3d 1354, 1367 (Fed. Cir. 2003) (noting that “defendants’
waiver of the defense of lack of patent ownership did not waive the defendants’ ability to
challenge the plaintiffs’ standing to sue . . . at any stage of the litigation”).
A. Chain of Title
1. The Agreements
“[T]he question of who owns the patent rights and on what terms typically is a
question exclusively for state courts.” Jim Arnold Corp. v. Hydrotech Sys., 109 F.3d
1567, 1572 (Fed. Cir. 1997); see also MyMail, Ltd. v. Am. Online, Inc., 476 F.3d 1372,
1376 (Fed. Cir. 2007). However, this rule has exceptions: the question of whether
contractual language effects a present assignment of patent rights, or an agreement to
assign rights in the future, is resolved by Federal Circuit law. “Although state law
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governs the interpretation of contracts generally, the question of whether a patent
assignment clause creates an automatic assignment or merely an obligation to assign is
intimately bound up with the question of standing in patent cases. We have accordingly
treated it as a matter of federal law.” DDB Techs., L.L.C. v. MLB Advanced Media, L.P.,
517 F.3d 1284, 1290 (Fed. Cir. 2008) (citations omitted).
Holodniy signed multiple contracts defining his obligations to assign his invention
rights. First, upon joining Stanford, Holodniy executed the CPA with Stanford on June
28, 1988. J.A. 741. Holodniy signed as a “Fellow” in the Department of Infectious
Disease. In the CPA, Holodniy acknowledges that Stanford enters into “Contracts or
Grants” with third parties, such as the Government, and that he may “conceive or first
actually reduce to practice” various inventions. Paragraph 2 of the CPA then recites: “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.” Id. (emphasis
added).
We have held that the contract language “agree to assign” reflects a mere
promise to assign rights in the future, not an immediate transfer of expectant interests.
IpVenture, Inc. v. Prostar Computer, Inc., 503 F.3d 1324, 1327 (Fed. Cir. 2007)
(interpreting “agree to assign” as “an agreement to assign,” requiring a subsequent
written instrument); see also Arachnid, Inc. v. Merit Indus., Inc., 939 F.2d 1574, 1580-81
(Fed. Cir. 1991) (holding that “will be assigned” does not create “a present assignment
of an expectant interest”). Therefore, in the CPA, Holodniy agreed only to assign his
invention rights to Stanford at an undetermined time. Additionally, Stanford’s
contemporary Administrative Guide to “Inventions, Patents, and Licensing” states:
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“Unlike industry and many other universities, Stanford’s invention rights policy allows all
rights to remain with the inventor if possible.” J.A. 743. While Stanford might have
gained certain equitable rights against Holodniy, see Arachnid, 939 F.3d at 1581 (“[A]n
agreement to assign . . . may vest the promisee with equitable rights.”), Stanford did not
immediately gain title to Holodniy’s inventions as a result of the CPA, nor at the time the
inventions were created.
Next, when initiating his visits to Cetus, Holodniy signed the VCA on February
14, 1989. Paragraph 3 of the VCA recites: “I will assign and do hereby assign to
CETUS, my right, title, and interest in each of the ideas, inventions and improvements.”
J.A. 1658 (emphasis added). In contrast to the CPA, the VCA’s language of “do hereby
assign” effected a present assignment of Holodniy’s future inventions to Cetus. E.g.,
Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1253 (Fed. Cir. 2000) (interpreting “shall
belong” as a present assignment); FilmTec Corp. v. Allied-Signal, Inc., 939 F.2d 1568,
1572-73 (Fed. Cir. 1991). Therefore, Cetus immediately gained equitable title to
Holodniy’s inventions.
“Once the invention is made and an application for patent is filed, however, legal
title to the rights accruing thereunder would be in the assignee . . . , and the assignor-
inventor would have nothing remaining to assign.” FilmTec, 939 F.2d at 1572.
“Ordinarily, no further act would be required once an invention came into being; the
transfer of title would occur by operation of law.” Id. at 1573. Stanford filed the parent
application to the patents-in-suit, Serial No. 07/883,327, on May 14, 1992, and there
can be no dispute that Holodniy conceived his contribution to the invention by that date.
Therefore, Cetus’s equitable title converted to legal title no later than the parent
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application’s filing date. Holodniy executed an assignment of his rights in the parent
application to Stanford on May 4, 1995. J.A. 5070-71. However, because Cetus’s legal
title vested first, Holodniy no longer retained his rights, negating his subsequent
assignment to Stanford during patent prosecution.
Stanford contends that there is a genuine factual dispute about whether the
patents arose “as a consequence of” Holodniy’s access to Cetus’s facilities or
information, as the VCA requires. We agree with the district court that “[t]his contention
merits little discussion.” Contract Op. at 1120. Stanford’s various arguments boil down
to assertions that the patented inventions were developed from nonconfidential
information, or were conceived and reduced to practice after Holodniy ended his visits
to Cetus. However, Holodniy testified that the collaboration provided him with “technical
advice . . . from some of the Cetus scientists,” J.A. 4509, information about PCR
assays, id. 4514, and “the necessary reagents for the PCR reaction,” id. 4523. Stanford
also admitted in the parties’ Joint Statement of Undisputed Facts that Holodniy received
a PCR protocol, equipment for HIV RNA extraction, and access to equipment to perform
reverse transcription of HIV RNA. J.A. 4790. It is undisputed that Holodniy took this
information and material from Cetus and used them to develop the PCR assay for HIV
RNA, and thus developed the inventions “as a consequence” of his access to Cetus.
Even if Holodniy conceived and reduced to practice after departing Cetus, it was no
later than May 14, 1992, and his research was directly related to the collaboration with
Cetus. Thus, the chain of title to Holodniy’s rights leads to Roche, leaving Stanford with
defective title to the rights of all the inventors.
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2. Bona Fide Purchaser
To overcome its defective chain of title, Stanford argues that it was a bona fide
purchaser under 35 U.S.C § 261 (2006). Section 261 provides: “An assignment, grant
or conveyance shall be void as against any subsequent purchaser or mortgagee for a
valuable consideration, without notice, unless it is recorded in the Patent and
Trademark Office within three months from its date or prior to the date of such
subsequent purchase or mortgage.” “Generally, a bona fide purchaser is one who
purchases legal title to property in good faith for valuable consideration, without notice
of any other claim of interest in the property.” Rhone-Poulenc Agro, S.A. v. DeKalb
Genetics Corp., 284 F.3d 1323, 1329 (Fed. Cir. 2002) (collecting cases).
Stanford contends that it purchased Holodniy’s rights through his 1995
assignment of the parent application for “good and valuable consideration,” J.A. 5070,
that Cetus and Roche never recorded their interests with the Patent and Trademark
Office, and that Stanford received no notice of Holodniy’s countervailing assignment to
Cetus. However, Stanford’s argument fails because there can be no genuine dispute
that Stanford had at least constructive or inquiry notice of the VCA.
While “the bona fide purchaser defense to patent infringement is a matter of
federal law,” the doctrine draws upon common law principles. Rhone-Poulenc, 284
F.3d at 1328-30. “Notice” under § 261 can include constructive or inquiry notice, in
addition to actual notice. See FilmTec, 939 F.2d at 1574 (noting that either actual or
inquiry notice might defeat a bona fide purchaser defense). Therefore, Stanford’s claim
that it remained ignorant of the VCA until shortly before the current litigation is
inconsequential. The CPA established an employment relationship between Holodniy
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and Stanford, and Holodniy’s PCR work at Cetus related directly to his infectious
disease research at the university. J.A. 741. Moreover, Merigan, Holodniy’s supervisor
at Stanford, directed Holodniy to work with Cetus and himself executed Materials
Transfer Agreements with Cetus that allocated intellectual property rights. See id.
4504-05. An organization can be charged with notice of its employees’ assignments.
See FilmTec, 939 F.2d at 1574 (noting that where a company founder signed away his
patent rights, the company “may well be deemed to have had actual notice of an
assignment”); see also Santillan v. Roman Catholic Bishop of Fresno, 163 Cal. App. 4th
4, 11 (Ct. App. 2008) (“For this purpose, there is no difference between constructive and
actual notice. The rule applies to employees, who are agents of their employer.”)
(citations omitted); 3 Witkin Summary of California Law of Agency § 150 (“[A]
corporation may be charged with notice of matters known to its employees.”). The fact
that Holodniy promised in the CPA to “not enter into any agreement creating copyright
or patent obligations in conflict with this agreement” does not prevent imputation of
notice to Stanford. See Restatement (Third) of Agency § 5.04 cmt. b (2006)
(“Ordinarily, an agent’s failure to disclose a material fact to a principal does not defeat
imputation, nor does the fact that the agent’s action otherwise constitutes a breach of a
duty owed the principal.”).
Stanford claims that Holodniy signed the VCA on his own behalf, not Stanford’s.
Although the VCA states that Holodniy was “[a]cting as a consultant and an
independent contractor,” the context of the VCA reveals that this refers to Holodniy’s
status as a consultant to Cetus, not Stanford. The VCA specified a limited time period
for Holodniy’s visits, restricted him from “perform[ing] consulting services” for other
2008-1509, -1510 15
companies, and listed his address as “Stanford University Medical Center, Division of
Infectious Disease.” J.A. 1657-58. Stanford also argues that there was no evidence
that Holodniy “had authority to act as Stanford’s agent in assigning patent rights.”
Stanford’s Reply Br. 50. This contention misses the mark—Holodniy signed away his
individual rights as an inventor, not Stanford’s, while performing work for Stanford after
promising to assign his rights to the university. Stanford identifies no other disputed
facts that could establish its bona fide purchaser status, and thus cannot prevail on this
theory.
3. The Bayh-Dole Act
The district court held in the alternative that the Bayh-Dole Act negated
Holodniy’s assignment to Cetus because it empowered Stanford to take complete title to
the inventions. Congress passed the Bayh-Dole Act “to promote the utilization of
inventions arising from federally supported research or development” and “to ensure
that the Government obtains sufficient rights in federally supported inventions.” 35
U.S.C. § 200 (2006). The Act allows the Government to take title to “subject inventions”
under certain circumstances, id. §§ 202(a), 202(b), or the “contractor” universities or
inventors to retain ownership if the Government does not, id. § 202(d).
Stanford contends—and the district court agreed—that Bayh-Dole allowed
Stanford a “right of second refusal” to the patents after the Government refrained from
exercising its rights. The court acknowledged our holding in Central Admixture
Pharmacy Services, Inc. v. Advanced Cardiac Solutions, P.C. that when the Bayh-Dole
Act’s provisions are violated, “the government can choose to take action; thus, title to
the patent may be voidable. However, it is not void: title remains with the named
2008-1509, -1510 16
inventors or their assignees. Nothing in the statute, regulations, or our caselaw
indicates that title is automatically forfeited.” 482 F.3d 1347, 1352-53 (Fed. Cir. 2007).
Thus, the Act did not automatically void Holodniy’s assignment to Cetus, and provided
the Government with, at most, a discretionary option to his rights. The district court
noted, however, that under 35 U.S.C. § 202(d), Holodniy, as an inventor, could keep
title to his inventions only “[i]f a contractor does not elect to retain title to a subject
invention.” On appeal, Stanford insists that Holodniy’s rights were “contingent” upon his
CPA obligations to assign them to Stanford, and that Stanford’s election of title in 1995
gave it all patent rights. Stanford’s Reply Br. 47.
We are unconvinced of Stanford’s interpretation of the Bayh-Dole Act in this
case. Stanford identifies no authorities or reasons why its election of title under Bayh-
Dole had the power to void any prior, otherwise valid assignments of patent rights.
Stanford was entitled to claim whatever rights were still available after the Government
declined to exercise its option, including the rights of co-inventors Merigan, Katzenstein,
and Kozal. However, Holodniy transferred his rights to Cetus more than six years
before Stanford formally notified the Government of its election of title. As previously
noted, Stanford’s invention rights policy “allow[ed] all rights to remain with the inventor if
possible,” J.A. 743, which supports the conclusion that Holodniy still possessed rights at
the time he signed the VCA with Cetus. Just as we explained that Bayh-Dole does not
automatically void ab initio the inventors’ rights in government-funded inventions, Cent.
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Admixture, 482 F.3d at 1352-53, we see no reason why the Act voids prior contractual
transfers of rights. 1
The ownership dispute in University of Pittsburgh v. Townsend is instructive.
2007 U.S. Dist. LEXIS 56860 (E.D. Tenn. Aug. 3, 2007), aff’d, 542 F.3d 513 (6th Cir.
2008). There, the University of Pittsburgh sought patent rights from Townsend, the
inventor. The University employed Townsend and claimed all rights in his inventions,
but Townsend maintained simultaneous ties with a private company, CTI. After
inventing a medical scanner, Townsend assigned his rights exclusively to CTI.
Critically, the University then formally elected title under the Bayh-Dole Act. Before the
district court, the University argued that this election voided Townsend’s earlier
assignment. To support this argument, the University cited the Northern District of
California’s analysis of Bayh-Dole in the current case between Stanford and Roche.
2007 U.S. Dist. LEXIS 56860, at *59-61. The Townsend district court rejected this
position, noting that “the University’s ostensible exercise of its right to title . . . occurred
after Dr. Townsend’s assignment to CTI.” Id. at *60-61. The University’s Bayh-Dole
election did not give it superior title, nor prevent Pennsylvania statutes of limitation from
barring the University’s contract and tort claims. The Sixth Circuit noted the University’s
use of Bayh-Dole, but nevertheless affirmed the statutes of limitation holding. 542 F.3d
at 520 & n.1. This outcome is consistent with our understanding that claiming title under
Bayh-Dole does not override prior assignments.
1
We express no opinion as to whether Holodniy’s execution of the VCA
violated any provisions of the Bayh-Dole Act, or whether the Act provides the
Government or Stanford some other legal recourse to recover Holodniy’s rights. Cf.
Cent. Admixture, 482 F.3d at 1353.
2008-1509, -1510 18
Regardless of any state law contractual obligations between an academic and
his university, “the primary purpose of the Bayh-Dole Act is to regulate relationships of
small business and nonprofit grantees with the Government, not between grantees and
the inventors who work for them.” Fenn v. Yale Univ., 393 F. Supp. 2d 133, 141-42 (D.
Conn. 2004). Therefore, in this case, the Bayh-Dole statutory scheme did not
automatically void the patent rights that Cetus received from Holodniy.
4. California Business and Professions Code § 16600
Under California law, “every contract by which anyone is restrained from
engaging in a lawful profession, trade, or business of any kind is to that extent void.”
Cal. Bus. & Prof. Code § 16600 (2009). Stanford argues that section 16600 voids the
VCA because Holodniy conceived the patented invention after departing Cetus, and the
VCA violates public policy if it encompasses inventions conceived after employment
terminates. Stanford also contends that once Holodniy’s research was published, it
became public information, and that Roche’s interpretation of the VCA would prevent
Holodniy from using this information in his later clinical studies.
We find no merit in Stanford’s arguments. By the plain language of section
16600, only those contracts that prevent “engaging in a lawful profession, trade or
business of any kind” are void. Stanford provides no evidence that the VCA restrained
Holodniy from engaging in any profession. Indeed, the record shows that Holodniy
freely continued his HIV research at Stanford, publishing articles and using the
knowledge he obtained from Cetus to further the science behind the patents-in-suit.
Nor does Stanford explain how Holodniy’s assignment of his rights to Cetus prohibited
Holodniy from using any public information in his later research. Moreover, California
2008-1509, -1510 19
courts apply section 16600 to employment restrictions on departing employees, not to
patent assignments. See Thompson v. Impaxx, Inc., 113 Cal. App. 4th 1425, 1429 (Ct.
App. 2003); D’Sa v. Playhut, 85 Cal. App. 4th 927, 934-35 (Ct. App. 2000).
B. Statutes of Limitation
Roche’s counterclaim requests a declaratory judgment of ownership of the
patents, which is generally a matter of state law. The district court had supplemental
jurisdiction over this claim under 28 U.S.C. § 1367 (2006). While the district court
expressed some doubt as to which statutes of limitation apply to state claims in federal
court under supplemental jurisdiction, Contract Op. at 1112, other circuits have noted—
and the parties here do not dispute—that state statutes of limitation apply. See Bouton
v. BMW of N. Am., 29 F.3d 103, 110 (3d Cir. 1994) (“The Rules of Decision Act
arguably is also the source of authority for applying state statute of limitations to state
law claims brought under supplemental jurisdiction.”); see also James William Moore et.
al, Moore’s Manual: Federal Practice and Procedure § 11.64[5] (2009) (“[W]hen the
court has supplemental jurisdiction over a state-law claim, the state statute of limitations
and related principles of tolling and relation back apply to the actions.”).
Under California law, “the period of limitations applicable to ordinary actions at
law and suits in equity should be applied in like manner to actions for declaratory relief.”
Maguire v. Hibernia Sav. & Loan Soc., 23 Cal. 2d 719, 734 (1944). The parties
identified two relevant statutes of limitation, both imposing a four-year deadline.
California Code of Civil Procedure § 337(1) (2009) provides that “[a]n action upon any
contract, obligation or liability founded upon an instrument in writing” must be brought
within four years. While there is no contract between Roche and Stanford, Roche’s
2008-1509, -1510 20
claim to Holodniy’s patent rights is based on a written agreement, the VCA.
Alternatively, California Code of Civil Procedure § 343 (2009) applies a residuary four-
year limitation period to all causes of action that do not fall under specific statutes of
limitation. 2 Under either statute, Roche’s claim is subject to a four-year limitation
period.
In California, “[i]t is elementary that a statute of limitations does not begin to run
until the cause of action accrues. Equally basic is that a cause of action does not
accrue ‘until the party owning it is entitled to begin and prosecute an action thereon,’
that is, not until ‘the last element essential to the cause of action’ occurs.” Spear v. Cal.
State Auto. Ass’n, 2 Cal. 4th 1035, 1040 (1992) (citations omitted). “A contract cause of
action does not accrue until the contract has been breached.” Id. at 1042. For a
declaratory judgment action, the limitations period begins when the corresponding claim
for damages or injunction accrues. Howard Jarvis Taxpayers Ass’n v. City of La Habra,
25 Cal. 4th 809, 821 (2001). However, the “discovery rule” mitigates the accrual of
claims. “The discovery rule ‘postpones accrual of a cause of action until the plaintiff
discovers, or has reason to discover, the cause of action,’” E-Fab, Inc. v. Accountants,
Inc. Servs., 153 Cal. App. 4th 1308, 1318 (Ct. App. 2007) (citation omitted), and “the
statute of limitations begins to run when the plaintiff has reason to suspect an injury and
some wrongful cause,” Fox v. Ethicon Endo-Surgery, Inc., 35 Cal. 4th 797, 803 (2005).
“While resolution of the statute of limitations issue is normally a question of fact, where
the uncontradicted facts established through discovery are susceptible of only one
2
Additionally, § 338(c) applies a three-year limitation to actions “for taking,
detaining, or injuring any goods or chattels, including actions for the specific recovery of
personal property.” While patents have the attributes of personal property, 35 U.S.C.
§ 261, Stanford does not argue on appeal that § 338(c) applies.
2008-1509, -1510 21
legitimate inference, summary judgment is proper.” Jolly v. Eli Lilly & Co., 44 Cal. 3d
1103, 1112 (1988).
The district court correctly concluded, based on Stanford’s undisputed evidence,
that Roche’s claim accrued no later than April 2000. On April 6, 2000, Luis Mejia, a
Stanford employee, conducted a slide presentation at Roche that asserted Stanford’s
ownership of the HIV RNA assay invention and offered Roche a license to all relevant
patents. J.A. 1201-18; Contract Op. at 1110. Mejia’s presentation occurred more than
four years before Stanford filed its complaint on October 14, 2005. See Sidney v.
Superior Court, 198 Cal. App. 3d 710, 714-15 (Ct. App. 1988) (noting that “a statute of
limitations is suspended by the filing of the original complaint” (citation omitted)).
Mejia’s slide presentation begins with Stanford’s offer to license the invention entitled
“PCR Assays for Monitoring Antiviral Therapy and Making Therapeutic Decisions in the
Treatment of AIDS,” which is the title common to all three patents-in-suit. J.A. 1201.
The presentation then describes Holodniy’s contribution to the conception of the
invention, and notes that the ’730 patent issued in 1999. Most importantly, the
presentation states that “[c]ontinuations based on the same application ‘family’ remain
pending” and offers Roche a license that “would include rights to patents that may issue
based on pending applications from the same patent ‘family.’” Id. 1210, 1216(emphases added). Therefore, Mejia’s slides put Roche on notice that Stanford claimed
ownership of Holodniy’s work, that Stanford had patented the invention related to the
Holodniy-Cetus collaboration, that Stanford continued to file related patent applications,
and that Stanford expected Roche to take a license to current and future patents.
These statements directly contradicted Roche’s claim that it owns all of Holodniy’s rights
2008-1509, -1510 22
to any “ideas, inventions and improvements thereof” under the VCA. Id. 1658. Thus,
Roche’s ownership claim accrued upon receipt of the Mejia presentation.
Roche does not dispute the contents of the presentation, but argues that a cause
of action for patent ownership cannot accrue until each patent issues. The Mejia
presentation occurred before the filing dates of the applications for the ’705 and ’041
patents (February 13, 2001 and December 16, 2002, respectively). Roche cites Stark v.
Advanced Magnetics, Inc., where this court stated that because “each patent is a
separate chose in action,” laches for an inventorship correction claim does not run until
each patent issues. 29 F.3d 1570, 1576 (Fed. Cir. 1994). However, Stark relied on the
facts that, at the time the case was decided, pending patent applications were secret,
and the party challenging inventorship lacked actual knowledge of the applications. Id.Here, however, Roche had explicit notice that Stanford intended to secure additional
patents to the same subject matter. Roche also had other constructive notice of the
related patents because the application resulting in the ’705 patent, No. 09/782,971,
was published on August 30, 2001, more than four years before Stanford filed suit.
Moreover, the case that Stark cites for the proposition that each patent is a separate
action, Meyers v. Brooks Shoe, Inc., 912 F.2d 1459 (Fed. Cir. 1990), discusses laches
for a patentee to bring an infringement suit. This is logical because “suit can not be
brought for infringement of a patent that has not issued.” Amgen, Inc. v. Genetics Inst.,
98 F.3d 1328, 1332 (Fed. Cir. 1996). However, Meyers does not say that if an alleged
co-owner claims ownership of an invention, and knows that a related patent application
is forthcoming, its cause of action under state law does not accrue until patent issuance.
2008-1509, -1510 23
Cf. FilmTec, 939 F.2d at 1572-73 (noting that legal title can transfer “[o]nce the
invention is made and an application for patent is filed”).
Roche also claims that our holding in DDB Technologies., L.L.C. v. MLB
Advanced Media, L.P. precludes application of state statutes of limitation to patent
ownership claims. 517 F.3d 1284 (Fed. Cir. 2008). In DDB, we determined that an
inventor’s contract with an employer was an “automatic assignment” of future patent
rights. Because the assignment was automatic, the plaintiff’s statute of limitations,
waiver, and estoppel challenges to the patent assignment had “no merit.” Id. at 1290.
However, we affirmed this result only because the district court held that Texas law
prevents an assignor from urging estoppel or waiver against an assignee. See DDB
Techs., L.L.C. v. MLB Advanced Media, L.P., 465 F. Supp. 2d 657, 669 (W.D. Tex.
2006); see also Univ. of Tex. Med. Branch v. Allan, 777 S.W.2d 450, 453 (Ct. App. Tex.
1989). In the present case, Roche has not identified, nor can we find, any similar rule
under California law. We thus conclude that Roche’s counterclaim for a judgment of
ownership of the ’730, ’705, and ’430 patents is time-barred by statutes of limitation, and
the district court correctly dismissed Roche’s claim for a judgment of ownership on that
ground. We need not reach the district court’s conclusion that laches also applies to
Roche’s counterclaim.
C. Stanford’s Standing
Notwithstanding the running of the statutes of limitation against Roche’s claim for
a judgment of ownership, Stanford’s inability to establish that it possessed Holodniy’s
interest in the patents-in-suit defeats its right to assert its cause of action against Roche.
It is well settled that “all co-owners normally must join as plaintiffs in an infringement
2008-1509, -1510 24
suit.” Int’l Nutrition Co. v. Horphag Research Ltd., 257 F.3d 1324, 1331 (Fed. Cir. 2001)
(finding lack of standing where defendant co-owner did not voluntarily join); see also Isr.
Bio-Eng’g Project v. Amgen Inc., 475 F.3d 1256, 1264-65 (Fed. Cir. 2007) (“Absent the
voluntary joinder of all co-owners of a patent, a co-owner acting alone will lack
standing.”); Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1467 (Fed. Cir. 1998)
(“An action for infringement must join as plaintiffs all co-owners.”). Roche asserted its
ownership claim not only as a counterclaim seeking a judgment of ownership of
Holodniy’s interests, but also as an affirmative defense and a challenge to Stanford’s
standing to assert claims of infringement against Roche. While Roche’s failure to timely
seek a judgment of ownership defeats its counterclaim, it does not alter the fact that
Stanford cannot establish ownership of Holodniy’s interest and lacks standing to assert
its claims of infringement against Roche. Thus, the district court lacked jurisdiction over
Stanford’s infringement claim and should not have addressed the validity of the patents.
See Morrow v. Microsoft Corp., 499 F.3d 1332, 1344 (Fed. Cir. 2007). The district
court’s grant of summary judgment of invalidity is therefore vacated, and the case is
remanded with instructions to dismiss Stanford’s claim for lack of standing.
CONCLUSION
For the foregoing reasons, we affirm the district court’s dismissal of Roche’s
ownership counterclaim, vacate the judgment that the asserted patent claims were
invalid for obviousness, and remand with instructions to dismiss Stanford’s claim.
AFFIRMED-IN-PART, VACATED-IN-PART, AND REMANDED
COSTS
Each party shall bear its own costs.
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