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Stanford v. Roche to be Heard by the Supreme Court

By Jacob Berger

The Supreme Court has recently decided to grant certiorari to Stanford to rehear the case of Stanford v. Roche. Although it may seem that the court is just reviewing one case, it is actually passing judgment on the Bayh-Dole act and its place in the intellectual property field as well. The case is highly controversial and has the ability to drastically alter how universities conduct government-funded research and how the intellectual property involved is managed.

The Stanford v. Roche dispute dates back to the activities of a researcher in the late 1980s who was researching ways of testing the quantity of HIV in blood plasma. The research at Stanford was being conducted under a federal grant. While working on this research, the researcher went to a company owned by Roche and conducted research on a similar topic. He had signed Stanford’s IP agreement which said that he would assign any inventions to them, and he also signed an agreement with the company owned by Roche stating that he assigned any inventions he made in a related field to them.

The wording of the agreements has been important in the decisions of the lower courts. The wording of the agreement with Stanford is viewed as a promise to assign a patent after it is issued. The wording of the agreement with Roche is that any patent is assigned, which means that as soon as it is issued, it is automatically assigned to Roche. The lower courts used this as one reason to find in favor of Roche; however, Stanford could argue that this language is due to the Bayh-Dole Act. This act requires that the universities give the government the ability to exercise rights assigning the patent to the federal government.

Stanford is supported by a growing number of universities that have requested that the Supreme Court agree to hear the case. Requests have been made by universities such as MIT, Harvard, Yale and Johns Hopkins. With such wide-based support amongst institutions of higher learning, some strong arguments are likely to be advanced to the court. The court is expected to rule on this case before the end of this term which ends in June 2011. This decision has the potential to impact IP policies of universities across the country that conduct federally funded research. University technology transfer offices are holding their breath anxiously awaiting the decision in this case.

Ninth Circuit Clarifies Law of Implied Licensing

By Benjamin Bergan

Recently, the U.S. Court of Appeals for the Ninth Circuit held that the "first sale" doctrine and the "essential step" defense do not apply to certain sales of software. When Timothy Vernor purchased several used copies of Autodesk, Inc.’s AutoCAD software at a garage sale and then sold some of the used copies on eBay, Autodesk requested that Vernor stop the auction because Autodesk had sold the original copy pursuant to a software license agreement that restricts the sale of the originally purchased copy. Autodesk requires the purchaser of AutoCAD to agree with the license agreement before installing the program. Therefore, Autodesk asserts that it sells a non-exclusive, non-transferrable license to the software subject to many restrictions, rather than a sale of the copy of the copyrighted software.

Vernor brought a declaratory judgment action in the district court to establish that the resale of AutoCAD on eBay did not infringe Autodesk’s copyright. The district court held that Vernor’s sales did not infringe because of two of the Copyright Act’s affirmative defenses – the fist sale doctrine and the essential step defense. The essential step defense states that infringement does not occur when the owner of a copy of a copyrighted software program creates a copy that is an essential step in the utilization of the program. Further, the first sale doctrine allows the owner of a copy of copyrighted work to sell or dispose of his copy without the copyright owner’s authorization. Here, the district court determined that the first sale doctrine applies whenever the transferee is entitled to keep the copy of the work.

The Ninth Circuit reversed the district court, holding that a software user is a licensee rather than an owner where the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user’s ability to transfer the software; and (3) imposes notable use restrictions. The Ninth Circuit stated that precedent bound it and any unjust results of the decision must be addressed by the legislature. The Ninth Circuit’s decision may have negative effects on libraries, used bookstores, and the secondary software market, including video games.