High Court Rejects Stanford's Bid to Revive Lawsuit with Roche Over AIDS Treatment Patents

From San Jose Mercury News (CA) (June 7, 2011)


June 07--Despite backing from the Obama administration and research centers around the nation, Stanford University on Monday lost its long legal quest to wrest the patent rights to an AIDS test from pharmaceutical giant Roche Holding.

In a 7-2 ruling, the U.S. Supreme Court rejected Stanford's bid to revive a lawsuit against Roche over the patents to the AIDS testing methods, which university officials have insisted were developed by a Stanford scientist decades ago and were crucial to keep patented as the fruit of federally funded research.

The Supreme Court upheld a federal appeals court's prior ruling against Stanford. The justices found that university officials did not have a clear claim to the patents because of a convoluted arrangement between the Stanford researcher, Mark Holodniy, and Cetus, a company involved in the AIDS research at the time whose technology was later acquired by Roche. Holodniy remains a professor at Stanford's medical center, specializing in HIV-related research.

The Supreme Court concluded Stanford's claims would be too broad under a 1980 federal law that distributes patent rights among government, investors and institutions that receive federal money toward research. Hundreds of millions of dollars are poured into such research projects, which in turn generate far more in profits once innovations hit the market.

The ruling is considered a key test of the law going forward and appears to force research institutions

to take extra precautions to preserve their patent rights in the future.

At the same time, most patent experts said the Supreme Court decision is unlikely to have dire consequences for federally funded research programs. Even Chief Justice John Roberts, who wrote the majority opinion, said the 1980 law "works pretty much the way Stanford says it should" when patent agreements are drafted carefully.

"At the end of the day, the Supreme Court decision "... will likely be an interesting decision without much, if any, lasting consequences," observed Gene Quinn, a patent lawyer and founder of the IPWatchdog blog.

Stanford officials nevertheless expressed disappointment in the ruling, which they viewed as a blow to the ability of federally backed research programs to control the rights to new inventions. Debra Zumwalt, Stanford's general counsel, said the university "respectfully disagrees" with the Supreme Court decision.

While there was agreement Holodniy developed the technology behind the AIDS test, the patent feud flowed from a dispute over whether he had the ability to essentially transfer the rights from Stanford during his work for Cetus. The conflict created a collision between the ordinary rights of a research arm such as Stanford's to retain its patent rights and the right of a private company to gain from collaborating with a researcher on a new product.

As a result of the Supreme Court decision, Stanford and Roche share the rights to patents connected to the research. Stanford's legal claims rested on the argument that Roche had no rights to the patent and had infringed its work. The Supreme Court sided with Roche's argument that federal research money did not create an absolute right to such a patent, and that Stanford could not "renege" on the patent deal with Cetus.

The potential royalties from the patent are unknown because Roche's financial information on the testing was sealed in the court battle.

In the ruling, the Supreme Court said Stanford's interpretation of the patent claim would create "surprising" results in the research field. Among other things, the court said Stanford would keep the patent rights, under its argument, even if "only one dollar of federal funding" was applied to the research.

The Obama administration and the Association of American Universities backed Stanford in the Supreme Court case, expressing concern about the impact on research institutions if their patent rights are cast in doubt by similar conflicts.

Justices Stephen Breyer and Ruth Bader Ginsburg dissented, siding with some of Stanford's arguments in the case.

Contact Howard Mintz at 408-286-0236.

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Posted: June 2011


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