When an Assignment Is Not an Assignment and Other Issues in Patent Due Diligence

August 24, 2011Articles Bloomberg Law Reports

In a blow to Stanford University, the U.S. Supreme Court in Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc. held that the Bayh-Dole Act does not “automatically vest title to federally funded inventions in federal contractors.”Consequently, Roche Molecular Systems was determined to be a co-owner of Stanford technology and could not be sued for patent infringement. The decision serves as a warning to any company seeking to license in or purchase intellectual property assets to conduct a thorough investigation to confirm that ownership of the assets in question is fully vested in the party seeking to convey the rights. To do otherwise is to risk paying too much for an asset with a cloud over its title.

This is seen as a no brainer when one is approached by an individual offering to sell the Brooklyn Bridge. But the caution applies as well to transactions loaded with Nobel Prize level technology and assets that include intellectual property rights to the technology. Legal principles taught in first year law school property courses must not be overlooked. Without a thorough due diligence investigation, one can end up paying too much for an impaired asset or, like Stanford, find out that your intended customer is a co-owner of your property.

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