By Eric Kelderman
[Updated (6/8, 3:35 p.m.) with comment from Stanford University.]
The Supreme Court ruled on Monday against Stanford University in a case that is viewed as a victory for faculty members and private companies involved in technology transfer and research partnerships. The ruling was also a warning to universities to carefully check the language and grammar of the contracts they sign with researchers.
A seven-member majority of the justices decided that neither institutions that receive federal research grants nor the government itself has an automatic right to patents or inventions that may result from federally financed research.
In the case, Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems Inc., et al., No. 09-1159, the university argued that a contract it had signed with a researcher, Mark Holodniy, gave it the rights to an HIV-detection kit developed through work Mr. Holodniy completed during his time consulting at a private company, the Cetus Corporation. Mr. Holodniy signed a later contract with Cetus, which was eventually acquired by Roche Molecular Systems Inc., an arm of the Swiss pharmaceutical giant.
The Supreme Court majority ruled that Stanford's position was an unwarranted expansion of the Bayh-Dole Act, a 1980 law meant to protect the federal government's investment in research it sponsors by allowing institutions to "elect to retain title" to inventions produced in the course of grant-sponsored scientific studies.
Chief Justice John G. Roberts Jr., writing for the majority, said Stanford's interpretation of the Bayh-Dole Act would have given patent rights to a university "even if the invention was conceived before the inventor became an employee, so long as the invention's reduction to practice was supported by federal funding. It also suggests that the school would obtain title were even one dollar of federal funding applied toward an invention's conception or reduction to practice."
In addition, the majority let stand a federal appellate court's decision that Cetus's competing contract with Mr. Holodniy was more relevant than the Stanford contract because it assigned present rights from any inventions by Mr. Holodniy. The Cetus contract stated that Mr. Holodniy "will assign and do[es] hereby assign" to Cetus his "right, title, and interest in ... the ideas, inventions, and improvements" made "as a consequence of [his] access" to Cetus.
By contrast, Stanford's contract said that Mr. Holodniy "agree[d] to assign" to Stanford his "right, title, and interest in" inventions resulting from his employment there, which "amounted to a promise to assign those rights in the future," according to an American Bar Association analysis of the case.
By letting that distinction stand, the Supreme Court has muddied the waters for universities looking for guidance on writing those kinds of contracts, said Douglas Hallward-Driemeier, a lawyer with Ropes & Gray who wrote a brief supporting Stanford on behalf of the Association of American Universities. "There's always a chance when you think that you have the right assignment language that someone comes up with something better," he said.
In a written statement issued as part of a Stanford news release, the university's general counsel, Debra Zumwalt, said Stanford "respectfully disagrees" with the court's decision.
"We are disappointed with the ruling by the Supreme Court in this case," she wrote, "but will move forward to protect the interests of all parties in inventions created with federal funding, including the interests of the federal government and companies that license technology from Stanford."
In a dissenting opinion, Justice Stephen G. Breyer, joined by Justice Ruth Bader Ginsburg, argued that the court should have sent the case back to the federal appellate court because of several unresolved issues that might make a higher court's ruling unnecessary.
In their petition asking the Supreme Court to hear the case, research universities argued that letting the lower-court ruling stand could "cloud universities' title to thousands of federally funded inventions." But David P. Swenson, an intellectual-property specialist and author of a brief supporting Roche, said the decision would not affect a majority of universities that are already writing their contracts with these issues in mind.
Center Will Help
The Obama administration has become so concerned about the slowing pace of new drugs coming out of the pharmaceutical industry that officials have decided to start a billion-dollar government drug development center to help create medicines.
The new effort comes as many large drug makers, unable to find enough new drugs, are paring back research. Promising discoveries in illnesses like depression and Parkinson’s that once would have led to clinical trials are instead going unexplored because companies have neither the will nor the resources to undertake the effort.
The initial financing of the government’s new drug center is relatively small compared with the $45.8 billion that the industry estimates it invested in research in 2009. The cost of bringing a single drug to market can exceed $1 billion, according to some estimates, and drug companies have typically spent twice as much on marketing as on research, a business model that is increasingly suspect.
The National Institutes of Health has traditionally focused on basic research, such as describing the structure of proteins, leaving industry to create drugs using those compounds. But the drug industry’s research productivity has been declining for 15 years, “and it certainly doesn’t show any signs of turning upward,” said Dr. Francis S. Collins, director of the institutes.
The job of the new center, to be called the National Center for Advancing Translational Sciences, is akin to that of a home seller who spruces up properties to attract buyers in a down market. In this case the center will do as much research as it needs to do so that it can attract drug company investment.
That means that in some cases, the center will use one of the institutes’ four new robotic screeners to find chemicals that affect enzymes and might lead to the development of a drug or a cure. In other cases, the center may need to not only discover the right chemicals but also perform animal tests to ensure that they are safe and even start human trials to see if they work. All of that has traditionally been done by drug companies, not the government.
“None of this is intended to be competitive with the private sector,” Dr. Collins said. “The hope would be that any project that reaches the point of commercial appeal would be moved out of the academic support line and into the private sector.”
Whether the government can succeed where private industry has failed is uncertain, officials acknowledge, but they say doing nothing is not an option. The health and human services secretary, Kathleen Sebelius, sent a letter to Congress on Jan. 14 outlining the plan to open the new drug center by October — an unusually rapid turnaround for an idea first released with little fanfare in December.
Creating the center is a signature effort of Dr. Collins, who once directed the agency’s Human Genome Project. Dr. Collins has been predicting for years that gene sequencing will lead to a vast array of new treatments, but years of effort and tens of billions of dollars in financing by drug makers in gene-related research has largely been a bust.
As a result, industry has become far less willing to follow the latest genetic advances with expensive clinical trials. Rather than wait longer, Dr. Collins has decided that the government can start the work itself.
“I am a little frustrated to see how many of the discoveries that do look as though they have therapeutic implications are waiting for the pharmaceutical industry to follow through with them,” he said.
Dr. Collins’s ability to conceive and create such a center in a few short months would have been impossible for most of his predecessors, who had nice offices but little power. But Congress in recent years has invested real budgetary and administrative authority in the director’s office, and Dr. Collins is the first to fully use these new powers.
Under the plan, more than $700 million in research projects already under way at various institutes and centers would be brought together at the new center. But officials hope that the prospect of finding new drugs will lure Congress into increasing the center’s financing well beyond $1 billion.
Hopes of new money may be optimistic. Republicans in the House have promised to cut the kind of discretionary domestic spending that supports the health institutes, and officials are already bracing for significant cuts this year. But Dr. Collins has hinted that he is willing to cannibalize other parts of the health institutes to bring more resources to the new center.
“There are some people that would say this is not the time to do something bold and ambitious because the budget is so tight,” he said. “But we would be irresponsible not to take advantage of scientific opportunity, even if it means tightening in other places.”
For the plan to go into effect by October, the administration must by law get rid of one of the 27 centers and institutes already in existence at the N.I.H. — something that has never been done before. So the administration plans to downgrade the National Center for Research Resources, in part by giving some of its functions to the new drug center.
Researchers and staff members connected to the research resources center have inundated a complaint blog about the coming change. Mark O. Lively, a professor of biochemistry at Wake Forest University and a member of an advisory council to the research resources center, said that he could not understand why the administration was moving so quickly with its plans.
“And the N.I.H. is not likely to be very good at drug discovery, so why are they doing this?” Dr. Lively asked.
But Dr. Garret A. FitzGerald, a professor of medicine and pharmacology at the University of Pennsylvania, said the new center could inspire universities to train a new generation of investigators who could straddle the divide between academia and industry.
“It could be a really good idea,” he said.
Both the need for and the risks of this strategy are clear in mental health. There have been only two major drug discoveries in the field in the past century; lithium for the treatment of bipolar disorder in 1949 and Thorazine for the treatment of psychosis in 1950.
Both discoveries were utter strokes of luck, and almost every major psychiatric drug introduced since has resulted from small changes to Thorazine. Scientists still do not know why any of these drugs actually work, and hundreds of genes have been shown to play roles in mental illness — far too many for focused efforts. So many drug makers have dropped out of the field.
For Dr. Thomas R. Insel, director of the National Institute of Mental Health, the drug industry’s departure from this vital research area shows that the government must do something, although he acknowledges the risk.
“Would we be foolish — we being an agency that has never developed drugs and actually doesn’t know how to do therapeutics that well — to get into this space?” Dr. Insel asked.
But Dr. William Potter, who was once a top researcher at the mental health institute and retired last year as the vice president of translational neuroscience at the giant drug maker Merck, said that far more basic research needed to be done on the causes of mental illness before anyone — industry or government — could successfully create breakthrough drugs.
“We still don’t even understand how lithium works,” Dr. Potter said. “So how do people think we can find drugs systematically for mental illness?”