Conflicts in Patent Prosecution: Avoiding the Ethical Pitfalls Minimizing Risks of Malpractice Liability and Ethics Sanctions

Today’s faculty features:

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WEDNESDAY, SEPTEMBER 18, 2013

Presenting a live 90-minute webinar with interactive Q&A

Dr. Sandra P. Thompson, Shareholder, Buchalter Nemer, Irvine, Calif.

Stephen T. Schreiner, Partner, Goodwin Procter, Washington, D.C.

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Hidden Traps: Subject Matter Conflict of Interest in Patent Law

Sandra Thompson, PhD, JD Buchalter Nemer

Conflict of Interest A conflict of interest is a situation in which

someone in a position of trust, such as a lawyer, has competing professional or personal interests. Such competing interests can make it difficult to fulfill his or her duties impartially.

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Conflict of Interest A conflict of interest exists even if no unethical

or improper act results from it. A conflict of interest can create an appearance of impropriety that can undermine confidence in the person, profession, or court system.

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USPTO Rules § 10.66 Refusing to accept or continue employment if the interests of another client may

impair the independent professional judgment of the practitioner. (a) A practitioner shall decline proffered employment if the exercise of the practitioner's

independent professional judgment in behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment, or if it would be likely to involve the practitioner in representing differing interests, except to the extent permitted under paragraph (c) of this section.

(b) A practitioner shall not continue multiple employment if the exercise of the practitioner's independent professional judgment in behalf of a client will be or is likely to be adversely affected by the practitioner's representation of another client, or if it would be likely to involve the practitioner in representing differing interests, except to the extent permitted under paragraph (c) of this section.

(c) In the situations covered by paragraphs (a) and (b) of this section, a practitioner may represent multiple clients if it is obvious that the practitioner can adequately represent the interest of each and if each consents to the representation after full disclosure of the possible effect of such representation on the exercise of the practitioner's independent professional judgment on behalf of each.

(d) If a practitioner is required to decline employment or to withdraw from employment under a Disciplinary Rule, no partner, or associate, or any other practitioner affiliated with the practitioner or the practitioner's firm, may accept or continue such employment unless otherwise ordered by the Director or Commissioner.

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USPTO Rules § 10.84 Representing a client zealously. (a) A practitioner shall not intentionally: (1) Fail to seek the lawful objectives of a client through reasonable available means permitted by

law and the Disciplinary Rules, except as provided by paragraph (b) of this section. A practitioner does not violate the provisions of this section, however, by acceding to reasonable requests of opposing counsel which do not prejudice the rights of the client, by being punctual in fulfilling all professional commitments, by avoiding offensive tactics, or by treating with courtesy and consideration all persons involved in the legal process.

(2) Fail to carry out a contract of employment entered into with a client for professional services, but a practitioner may withdraw as permitted under §§ 10.40, 10.63, and 10.66.

(3) Prejudice or damage a client during the course of a professional relationship, except as required under this part.

(b) In representation of a client, a practitioner may: (1) Where permissible, exercise professional judgment to waive or fail to assert a right or

position of the client. (2) Refuse to aid or participate in conduct that the practitioner believes to be unlawful, even

though there is some support for an argument that the conduct is legal.

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Model Rules of Prof. Conduct Client-Lawyer Relationship: Rule 1.7 Conflict Of Interest: Current Clients (a) Except as provided in paragraph (b), a lawyer shall not represent a client if the

representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:

(1) the representation of one client will be directly adverse to another client; or (2) there is a significant risk that the representation of one or more clients will be materially

limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.

(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:

(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;

(2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against another

client represented by the lawyer in the same litigation or other proceeding before a tribunal; and (4) each affected client gives informed consent, confirmed in writing.

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Model Rules of Prof. Conduct Client-Lawyer Relationship: Rule 1.10 Imputation Of Conflicts Of Interest: General Rule (a) While lawyers are associated in a firm, none of them shall knowingly represent a client when

any one of them practicing alone would be prohibited from doing so by Rules 1.7 or 1.9, unless (1) the prohibition is based on a personal interest of the disqualified lawyer and does not present

a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm; or

(2) the prohibition is based upon Rule 1.9(a) or (b) and arises out of the disqualified lawyer’s association with a prior firm, and

(i) the disqualified lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom;

(ii) written notice is promptly given to any affected former client to enable the former client to ascertain compliance with the provisions of this Rule, which shall include a description of the screening procedures employed; a statement of the firm's and of the screened lawyer's compliance with these Rules; a statement that review may be available before a tribunal; and an agreement by the firm to respond promptly to any written inquiries or objections by the former client about the screening procedures; and

(iii) certifications of compliance with these Rules and with the screening procedures are provided to the former client by the screened lawyer and by a partner of the firm, at reasonable intervals upon the former client's written request and upon termination of the screening procedures.

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Removing a Conflict Don’t take the client/matter. Conflict waivers from both sides. “Firewall” at firm – does this actually work?

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The Tougher Question What about Subject Matter Conflicts? Are you able to “represent zealously” both clients on

the same subject matter? Are you able to segregate arguments related to each

client’s patent application? What is the perception that your clients have about

your representation?

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Key Questions Who is the client? inventor, parent company, subsidiary, trust What field of intellectual property? Patents – inventors, assignees, joint ownership Trademarks – source of the goods What is the subject matter? Has everyone been counseled in advance of the

representation?

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Subject Matter Conflicts Need to Look for:

Similar/related subject matter Competitors in the marketplace Inventor who worked for one of your clients is out on his

own at a new company.

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What’s The Big Deal? How do we learn chemistry? How do we build our knowledge base? Can we actually turn that knowledge off? Do you have “stock language” or “good definitions” that you

include in certain patent applications? How do you decide when to use that stock language?

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Examples Attorney at Big Law represents Microsoft in litigation

against Apple. Apple executive contacts a friend at Big Law to set

up an estate plan. Conflict?

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Examples Attorney at Big Law represents Microsoft in patent

litigation against Apple. Apple executive contacts a friend at Big Law to work

on patent portfolio. Conflict?

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Examples Attorney represents Conagra for patents on prepared foods

and methods/additives that allow them to be “shelf stable”. Attorney networks at Food Science Convention and meets

someone at Cheesecake Factory who wants to discuss new patent application on method of treating cream cheese so that it is tolerant of temperature ranges.

Conflict?

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A Case Study

Large Firm in Northern California represents Applied Materials and Intel

Large Firm files patent applications for both companies around semiconductor materials.

One patent family for each company discloses and claims inorganic porous dielectric materials.

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A Case Study (cont’d)

Office actions issue in both patent applications. One office action cites patents from Applied Materials against Intel patent application.

How do you act as an effective advocate for Intel without attacking Applied Materials patents?

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A Case Study (cont’d)

Declarations Background Sections of Patent Applications Information Disclosure Statements New Expediting Process

How do you handle these situations as practitioners?

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How Do We Fix It? Small Firm/Small IP Group Mid-Size Firm/1-2 Patent Prosecutors Large Firm/Large Prosecution Group

How do you choose who takes which client? Attorneys who leave firm? Appearance of impropriety Massive Awards Against Law Firms/Increasing Price of

Malpractice Insurance

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Adequate System for Checking? E-mail everyone in the group? Key Word Search/Update Conflicts Checking System

Use series of “Business Code Identifiers” Specify intelligent key words List all inventors and in-house counsel List common competitors

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Thank you!! Sandra Thompson, PhD, Esq. Buchalter Nemer sthompson@buchalter.com (949)224-6282 (direct) (949)224-6203 (fax) www.Buchalter.com

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Malpractice Litigation: Ethical Issues and Conflicts Arising in Patent Prosecution

Stephen T. Schreiner September 18, 2013

©2011 Goodwin Procter LLP

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Why is this important? • 2013 Report from Ames & Gough shows a jump in

both cost and frequency of malpractice claims

• Survey of seven insurance companies that write professional responsibility insurance

• Number of new claims rose significantly from 2011 to 2012

• Claims of $50 million increased by more than 11% from 2011 to 2012

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Outline • Inventor/Assignee Conflicts

• Conflicts Between Lawyers’ and Clients’ Interests

• Avoid Becoming a Cautionary Tale

– Case-Within-A-Case Doctrine and Jurisdiction

– Subject Matter Conflicts

– Last Minute Filings

– Fiduciary Duty to Clients

– Duty of Disclosure

– Executing & Recording Assignments

Inventor/Assignee Conflicts

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Inventor/Assignee Conflicts • Who does the patent attorney represent, the inventor or the assignee?

Does it matter who pays the bill?

– When an employee makes an invention subject to obligation of assignment, the lawyer representing the assignee will generally not have an attorney-client relationship with the inventor. Sun Studs v. Applied Theory Associates, 772 F.2d 1557 (Fed. Cir. 1985).

– But what about the inventor declaration and power of attorney?

• One who grants a power of attorney for benefit of a third person does not automatically create attorney-client relationship between the grantor and the attorney. Restatement (Second) of Agency § 14H (1958).

• “While the power of attorney may have some impact on our analysis of whether an implied attorney-client relationship was formed, it is certain that such a limited power of attorney did not create an express attorney-client relationship.” Int'l Strategies Group, Ltd. v. Greenberg Traurig, LLP, 482 F.3d 1 (1st Cir. Mass. 2007).

– Avoid uncertainty about who is the client by informing inventors and documenting. – Advise client on assignment obligations and make sure proper documentation is in order.

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Inventor/Assignee Conflicts – Courts have held that patent attorney does not have attorney-client

relationship with the inventor. See Sun Studs v. Applied Theory, 772 F.2d 1557 (Fed.Cir. 1985); Univ. of W. Va. Bd. of Trustees v.

Van Voorhies, 33 F.Supp.2d 519 (N.D. W. Va. 1998), aff’d 278 F.3d 1288 (Fed.Cir. 2002); Shannon v. Gordon, 670 N.Y.S.2d 887 (App. Div. 1998), appeal denied, 92 N.Y.2d 819 (1999).

– Factors to consider:

• Was the lawyer was hired by the assignee? • Was the attorney-client retention agreement with the assignee? • Was legal advice rendered to the inventor?

– In some states, facts may support argument that inventor has the subjective belief that attorney-client relationship existed.

See Henry Filters v. Peabody Barnes, 611 N.E.2d 873 (Ohio Ct. App. 1992).

• Risk reduction: Inform inventors and document it.

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Inventor/Assignee Conflicts • Even with “proper” documentation, patent attorney should avoid

inadvertent creation of attorney-client relationship with the inventor.

– Example: Max-Planck-Sgesellschaft zur Foerderung der Wissenschaften e.V. v. Wolf, Greenfield & Sacks, P.C., 736 F.Supp.2d 353 (D. Mass. 2010).

• Attorney sent email communication to inventor stating “note that we represent

Whitehead Institute in the above-identified matter. It is our understanding that you, like the other co-owners, are represented in this matter by independent counsel.”

• Despite this communication, Court found attorney-client relationship existed between patent attorney and inventor because:

• Inventor sought legal advice from Wolf (advice on prosecution questions and

assistance with submission of IDS); • The advice pertained to patent matters within Wolf’s professional competence

(patent matters); and • Wolf provided the inventor the desired advice.

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Patent Practitioner Tips • Define the parties and the relationships

Client(s) and all related parties

Engagement letters and waivers, as necessary

• Establish and maintain clear protocols Duties owed to the entities

Communications with the entities

• Plan for adversity

Actual or potential conflicts between the entities

Revocation of POA

Withdrawal

Conflicts Between Lawyers’ and Clients’ Interests

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Conflicts Between Lawyers’ and Clients’ Interests

– Can you take a contingent interest in a matter before the PTO?

• Old PTO Rules allowed a patent practitioner to take an interest in a “patent.” 37 C.F.R. § 10.64(a)(3) (2002).

• New PTO Rules allows representation “contingent on the outcome . . . except in a matter in which a contingent fee is prohibited by law.” 37 C.F.R. § 11.105(c).

• Lawyer may take an “interest in the patent or patent application” for “a patent case or a proceeding before the Office.” 37 C.F.R. § 11.108(i).

• Transactions with a client must be “fair and reasonable”. See 37 C.F.R. § 11.108(a).

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Choice of Rules – If there is a conflict between PTO Code and state law, does the PTO Code

preempt state law?

– Any state law contrary to allowing practitioners to take ownership interest in a patent in exchange for fees is likely preempted by federal patent laws. See Buechel v. Bain, 766 N.E.2d 914 (N.Y. 2001). Different outcome after Gunn?

– “This part governs solely the practice . . . before the United States Patent and

Trademark Office. Nothing in this part shall be construed to preempt the authority of each State to regulate the practice of law, except to the extent necessary for the United States Patent and Trademark Office to accomplish its Federal objectives.” 37 C.F.R. § 11.1

– Issue may be ameliorated by PTO’s adoption of ABA Model Rules already in

force in most states

Avoid Becoming a Patent Prosecution Cautionary Tale

Case-Within-A-Case Doctrine and Jurisdiction

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Case-Within-A-Case Doctrine

– “Case-within-a-case” doctrine:

• The case-within-a-case doctrine is generally a vehicle of state law.

• In malpractice cases this doctrine may require plaintiff to prove would have been successful in the underlying matter but for the malpractice.

Case-Within-A-Case Doctrine Davis v. Brouse McDowell (Fed. Cir. 2010)

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Davis v. Brouse McDowell – Inventor developed social networking platform for IP enthusiasts; hired

defendant BM to draft domestic and foreign patent applications.

– Attorneys allegedly missed filing dates and filed a poorly drafted specification and claims

– Patent applications were abandoned: client claimed that because invention lacked protection the investors withdrew funding, leaving her unable to operate.

– Client brought malpractice suit against attorneys

– Parties disputed whether the Ohio case-within-a-case doctrine applied to plaintiff’s malpractice claims.

– Summary judgment in favor of defendant: Case-within-a-case doctrine does apply, and that plaintiff failed to establish a genuine issue of material fact as to patentability of her invention.

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Davis v. Brouse McDowell – Case appealed to the Federal Circuit.

– Federal Circuit affirmed that case-within-a-case doctrine applied

under Ohio law; plaintiff had not met burden of showing that she would have obtained a patent because:

• Plaintiff’s expert report contained no affirmative analysis supporting the opinion of patentability,

• Expert did not perform a prior art search,

• Expert did not identify particular claims that could be made for the invention, and

• Expert did not address patentability of the invention under foreign patent law.

Jurisdiction: A New Era Gunn v. Minton (U.S. 2013)

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Gunn v. Minton – Question: whether a state law claim alleging legal malpractice in a

patent case must be brought in federal court. Answer: No.

– There is no “serious federal interest in claiming the advantages thought to be inherent in a federal forum.”

– Practical take-away: Federal courts will not have jurisdiction over patent malpractice cases unless diversity jurisdiction exists. (Note: citizenship of a partnership is the citizenship of its partners.)

– State courts may need to answer substantive questions of patent law to resolve malpractice claims.

• Not binding precedent for future claims. No effect on validity of the patent.

Subject Matter Conflicts

Vaxiion Therapeutics v. Foley & Lardner (Southern District of California)

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Vaxiion Therapeutics v. Foley & Lardner

– Subject matter conflict alleged based on attorneys in firm’s San

Diego and D.C. offices filing applications for separate companies, both claiming “minicell” technologies.

• Counsel did not notify plaintiff of representation of EnGenelC.

• Plaintiff alleged breach of fiduciary duty.

– San Diego attorneys represented Vaxiion, and D.C. attorneys

represented Vaxiion’s competitor EnGenelC.

• PCT application for Vaxiion’s invention was filed four days late, affecting the priority date.

– Attempts were also made to swear behind the Vaxiion disclosure

for EnGenelC’s application.

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Vaxiion Therapeutics v. Foley & Lardner

– Held: Proper cause of action is California breach of fiduciary duty. Unnecessary to show attorneys in San Diego actually communicated client confidences to colleagues in DC.

– Which rules of professional conduct apply?

• California rules, D.C. rules, or the PTO Code of Professional Responsibility?

– Different rules may have different implications . . .

• California rules based on that of an objective observer, or what an attorney subjectively understood (e.g., 3-310(c)(2))

• Then-existing PTO rules based on representation of clients with “different interests” (e.g., 37 C.F.R. 10.66(b))

• D.C. rules based on a “concurrent conflict” that risks the representation being “materially limited” (e.g., RPC 1.7(a)).

• Different rules may affect admissibility of evidence and expert opinion

– Case ultimately settled (confidential terms).

Tethys Bioscience v. Mintz Levin (Northern Dist. of California)

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Tethys Bioscience v. Mintz Levin

– Firm prosecuted patent application for Tethys

– Firm used similar “stock language” in application for other client ATTC

– Similar technologies?

• Tethy’s application directed towards method that identifies biological markers on whether you are likely to develop diabetes.

• ATCC’s application directed towards method that identifies

probability you will develop diabetes.

– Tethys claimed that firm disclosed its confidential intellectual property to other client.

– Tethys alleges breach of the duties of loyalty and confidentiality

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Tethys Bioscience v. Mintz Levin

– Firm did not disclose the representation of ATTC to Tethys,

arguably seeking patents for “competing intellectual property”.

– Firm argues inventions are fundamentally different.

– Case has settled (confidential terms)

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Tethys Bioscience v. Mintz Levin

Take-ways:

– Remember: Patent application information is generally confidential until published

• Open Issue: Is high-level background information in an unpublished patent application confidential?

• Open Issue: What are the risks using of template language in drafting a patent application (e.g., background section, detailed description, etc.)?

– Run subject matter conflict checks

– Get informed written consent from each client where a potential

conflict may exist.

Maling v. Finnegan Henderson (District of Massachusetts)

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Maling v. Finnegan Henderson

– Maling accused firm of simultaneously advising it and a rival on similar patent applications on eyeglasses

– Complaint alleged that client was not advised of the technology conflict

– Firm helped the company secure at least 4 patents related to durable eyeglass frame assembly.

– Case ultimately dismissed pursuant to Gunn for lack of subject matter jurisdiction (and lack of diversity jurisdiction)

– This may raise interesting statute of limitations questions about re-filing a case in state court

Axcess International v. Baker Botts LLP (Northern District of Texas)

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Axcess International v. Baker Botts

– Axcess hired firm in 1998 to draft patent applications for RFID technology.

– Complaint: Unbeknownst to Axcess, BB began representing competitor Savi by pursuing conflicting patents on same inventions.

– Complaint alleges that Axcess informed firm that one of Savi’s press releases described product appearing to infringe Axcess’s patent, but firm did not reveal the conflict.

– Axcess did not know of dual representation of Savi and Axcess until 2009 when Savi accused Axcess of infringing some of its RFID patents.

– Complaint alleges firm did not advise Axcess to file the appropriate

interference papers with respect to particular patents.

– Complaint alleges that patents issued to Savi in the RFID space led to contract with the DoD > $1B and to its specifications incorporated into ISO standards.

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Axcess International v. Baker Botts

– Case dismissed from Federal Court in April 2013 under Gunn – Lessons learned:

• Run subject matter conflicts, especially when clients are

competitors or inventions are in a similar patent space.

– What is a “similar patent space”? – Obviously not “all electronics”, certainly “same invention”,

and unclear for the “RFID space”

• Sticky situations may be avoided with notice to the client and clearance.

Maintain a Practical Workload and Avoid Last Minute Filings

Air Measurement Tech v. Akin Gump (Western District of Texas)

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Air Measurement v. Akin Gump

– Firm hired in 1995 by Air Measurement for patent applications on personal safety system for use by firemen, other emergency personnel.

– AMT sued competitors, who asserted on-sale bar because firm did not file initial patent application within one year of offer for sale; also inequitable conduct charge for firm allegedly failing to disclose two prior art patents.

– AMT settled with the competitors, but sued firm because it was forced to settle the litigations for far less than fair value.

• Law firm is now in the precarious situation of trying to show the patents they had

prosecuted were invalid as obvious, invalid because of the on-sale bar, and invalid because of prior public use.

– Case ended with a jury verdict against firm for $72.3 million, later settled before appeal (confidential terms).

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Air Measurement v. Akin Gump Take-aways:

• Most IP malpractice claims are based on delay and missed deadlines

– Avoid taking on more work than you can handle – Plan to file before the last day to provide margin • Change from first-to-invent to first-to-file and removal of

“grace period” under AIA increases risk.

Fiduciary Duty to Clients

Joyce v. Armstrong Teasdale, LLP (Eastern District of Missouri)

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Joyce v. Armstrong Teasdale – Firm represented Joyce in an individual capacity for a patent application related to

a software firewall.

– Firm also represented TechGuard Security, jointly formed by Joyce and his wife (along with another couple).

• Firm prepared licensing documents for TechGuard that related to an exclusive license to sell firewall software that Joyce had invented.

• While representing both Joyce and TechGuard, firm also prepared investor rights documents and transfer agreements.

• Firm allegedly advised Joyce that it was not necessary to have separate counsel.

– Later, Joyce and wife divorced, with Joyce losing half his rights to the patents.

– Joyce filed suit against firm, alleging breach of the fiduciary duty by acting in conflict with Joyce’s interest in representing TechGuard with respect to the economic exploitation of the firewall technology.

– Case dismissed for failure to prove damages, an element of malpractice under Missouri law.

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– Lessons

• Be wary of representing an individual in addition to a company the individual is involved with.

• Advise the client of the option of seeking alternative counsel and encourage the client to do so in questionable situations.

• Seek a waiver after full disclosure.

Joyce v. Armstrong Teasdale

The Duty of Disclosure

McKesson Information Solutions v. Bridge Medical (Fed. Cir. 2007)

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McKesson v. Bridge Medical

– During the prosecution of a continuation application, a CIP application (from the same parent) was allowed.

– Applications were before different examiners.

– Counsel disclosed the existence of the pending application, but failed to point out a specific rejection (based on the same limitation and the same prior art) and failed to disclose a reference (Baker) used by the examiner in CIP application.

– Federal Circuit affirmed district court’s finding of inequitable conduct for failure to disclose 1) the specific rejection, 2) the Baker reference, and 3) the allowance of claims in CIP application.

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McKesson v. Bridge Medical – Existence of related applications was disclosed, but:

• Federal Circuit found this did not outweigh pattern of intent to

deceive by withholding the specific prosecution events.

• Reliance on Dayco v. Total Containment, Inc., 329 F.3d 1358 (Fed.Cir. 2003), which reversed finding of inequitable conduct on similar fact pattern.

– Consider a system for tracking events in related patent applications to trigger cross-filing IDS’s.

– How far does McKesson duty go?

• Only applications “related” under 35 U.S.C. § 120? • Applications related by subject matter, same client? • Applications related by subject matter, different clients?

Avid Identification Systems v. Crystal Import (Fed. Cir. 2010)

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Avid v. Crystal Import

• Avid is a small start-up company founded by Dr. Stoddard for producing micro-chips to lodge in pets for pet recovery.

• Dr. Stoddard (not a named inventor, did not prepare/prosecute patent application) demonstrated some of Avid’s technology at trade show in April 1990.

• Avid filed a patent application in August 1991.

• Upon assertion of patent, defendant alleged inequitable conduct for Avid’s failure to disclose the trade show demonstrations to the PTO.

• Was there a duty to inform the PTO of the trade show demonstrations under PTO Rule 56?

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Avid v. Crystal Import – PTO Rule 56

– Who owes the duty of candor?

• Individuals associated with the filing or prosecution of a patent application as (1) each named inventor, (2) each attorney or agent that prepares or prosecutes the application, and (3) every other person who is substantively involved in the preparation or prosecution of the application and who is associated with the inventor and assignee. 37 C.F.R. § 1.56(c).

– Did Dr. Stoddard owe a duty of candor?

• Dr. Stoddard was not an inventor or attorney or agent who prepared the application.

• Was he “substantively involved in the preparation or prosecution of

the application”?

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Avid v. Crystal Import

– Court held that because Dr. Stoddard was president of the company, because he communicated with the inventors, and because the functionality of the product was his idea, he had a duty of disclosure under Rule 56.

• Remember to adequately advise clients of the duty of

disclosure under Rule 56. Err on side of disclosure.

– Judge Linn’s dissent argued that Dr. Stoddard was not “substantively involved”.

– The Federal Circuit has put the brakes on the inequitable conduct train in Therasence v. Becton Dickenson re requisite intent to deceive and but-for materiality.

The Importance of Executing and Recording Assignments

Stanford v. Roche (Northern Dist. of California)

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Stanford v. Roche

– Stanford scientists, in partnership with Cetus, developed a method of using PCR to measure HIV virus blood concentration.

– Roche subsequently bought Cetus’s PCR business.

– Stanford offered to license Roche, but the license negotiations stalled. Stanford sued under patents it believed it owned.

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Stanford v. Roche – Agreements involved:

• Inventor had promised to assign instead of executing a

present assignment to Stanford.

• Stanford’s inventions rights policy allowed “all rights to remain with the inventor if possible.”

• Inventor did assignment to Cetus all rights to inventions.

• Inventor then later assigned the invention rights to Stanford.

– Patent ownership can be transferred without recordation at PTO, but when two entities claim ownership, second assignee can have title only if it records first with PTO. 35 U.S.C. § 261.

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Stanford v. Roche – Cetus never recorded the first effective assignment with the PTO.

– Ultimately, Roche’s claim to patent was barred by the statute of

limitations for contract disputes under California law (4 years from the date Roche became aware of the breach).

– But Roche was able to raise a standing defense against Stanford based on Stanford’s lack of ownership of the patent.

• Since Stanford had not acquired rights in the patent, it did not have standing to bring suit against Roche--case was dismissed.

• Stanford would have won if it had written its employee agreement to automatically transfer rights upon creation of the invention.

– Lesson: Execute and record patent assignments in a timely manner.

Thank You

Stephen T. Schreiner Goodwin Procter LLP

901 New York Ave., NW Washington, DC 20001

202.346.4336 sschreiner@goodwinprocter.com