Board of Trustees of Leland Stanford v. Roche

• Decision Date: 30 September 2009
• Docket Number: No. 2008-1509.,No. 2008-1510.,2008-1509.,2008-1510.
• Citation: 583 F.3d 832
• Parties: BOARD OF TRUSTEES OF the LELAND STANFORD JUNIOR UNIVERSITY, Plaintiff/Counterclaim Defendant-Appellant, and Thomas Merigan and Mark Holodniy, Counterclaim Defendants, v. ROCHE MOLECULAR SYSTEMS, INC., Roche Diagnostics Corporation, Roche Diagnostics Operations, Inc., Defendants/Counterclaimants-Cross Appellants.
• Court: U.S. Court of Appeals — Federal Circuit

583 F.3d 832

BOARD OF TRUSTEES OF the LELAND STANFORD JUNIOR UNIVERSITY, Plaintiff/Counterclaim Defendant-Appellant, and Thomas Merigan and Mark Holodniy, Counterclaim Defendants, v. ROCHE MOLECULAR SYSTEMS, INC., Roche Diagnostics Corporation, Roche Diagnostics Operations, Inc., Defendants/Counterclaimants-Cross Appellants.

No. 2008-1509.

No. 2008-1510.

United States Court of Appeals, Federal Circuit.

September 30, 2009.

Ricardo Rodriguez, Cooley Godward Kronish LLP, of Palo Alto, CA, argued for plaintiff/counterclaim defendant-appellant. With him on the brief were Michelle S. Rhyu, Lori Ploeger and Benjamin G. Damstedt.

Adrian R. Pruetz, Pruetz Law Group LLP, of El Segundo, CA, argued for defendants/counterclaimants-cross appellants. With her on the brief were Erica J. Pruetz and Lauren M. Gibbs. Of counsel on the brief were Brian C. Cannon and Charlie Y. Chou, Quinn Emanuel Urquhart Oliver & Hedges, LLP, of Redwood Shores, CA. Of counsel was Pablo D. Arredondo, of New York, NY.

Before LINN, PROST, and MOORE, Circuit Judges.

LINN, Circuit Judge.

The Board of Trustees of the Leland Stanford Junior University ("Stanford") appeals a final judgment that the asserted claims of U.S. Patents No. 5,968,730 ("'730 patent"), No. 6,503,705 ("'705 patent"), and No. 7,129,041 ("'041 patent") are invalid for obviousness. Bd. of Trs. v. Roche Molecular Sys., Inc., 563 F.Supp.2d 1016 (N.D.Cal.2008) ("Invalidity Opinion"). Roche Molecular Systems, Inc., Roche Diagnostics Corporation, and Roche Diagnostics Operations, Inc. (collectively, "Roche") cross-appeal that part of the district court's judgment relating to Roche's ownership, license, and shop rights to the patents-in-suit. Bd. of Trs. v. Roche Molecular Sys., Inc., 487 F.Supp.2d 1099 (N.D.Cal.2007) ("Contract Opinion").

Because the district court correctly found that Roche's counterclaim for a judgment on its ownership claim was subject to California statutes of limitation, we affirm that part of the district court's ruling. However, because the district court incorrectly declined to consider Roche's affirmative defense based on ownership, and because we conclude as a matter of law that Roche possesses an ownership interest in the patents-in-suit that deprives Stanford of standing, we vacate the district court's judgment of invalidity and remand with instructions to dismiss Stanford's action.

BACKGROUND

The patents-in-suit claim methods for quantifying Human Immunodeficiency Virus ("HIV") — the virus that causes Acquired Immunodeficiency Syndrome ("AIDS") — in human blood samples, and correlating those measurements to the therapeutic effectiveness of antiretroviral drugs. The claimed methods use the polymerase chain reaction ("PCR") to measure ribonucleic acid ("RNA") from HIV in the blood plasma of infected humans who are taking drugs such as zidovudine (AZT). PCR is a biochemical technique that enables measurement of relatively small quantities of nucleic acids by iteratively and exponentially "amplifying" a sample to detectable levels.

All three patents descend from a common parent application and share the same title: "Polymerase Chain Reaction Assays for Monitoring Antiviral Therapy and Making Therapeutic Decisions in the Treatment of Acquired Immunodeficiency Syndrome." Three Stanford researchers — Mark Holodniy, Thomas Merigan, and David Katzenstein — are named inventors of all three patents; a fourth inventor, Michael Kozal, appears on the '705 patent.

The technology related to the patents-in-suit was developed in the late 1980s and early 1990s by researchers at Stanford and Cetus, a company where PCR techniques matured in the early 1980s. The collaborations between Stanford and Cetus included a series of written agreements. In 1988, Holodniy joined Merigan's laboratory at Stanford as a Research Fellow in the Department of Infectious Disease, and signed a "Copyright and Patent Agreement" ("CPA") that obligated Holodniy to assign his inventions to the university. J.A. 741-47. Holodniy had no prior experience with PCR techniques. In February 1989, Holodniy began regular visits to Cetus over several months to learn PCR and to develop a PCR-based assay for HIV. Holodniy signed a "Visitor's Confidentiality Agreement" ("VCA") with Cetus. Id. 1657-58. The VCA stated that Holodniy "will assign and do[es] hereby assign to CETUS, my right, title, and interest in each of the ideas, inventions and improvements" that Holodniy may devise "as a consequence of" his work at Cetus. Id. 1658.

During the same period, Cetus also collaborated with Merigan and Katzenstein to develop a separate HIV treatment. Merigan, Stanford, and Cetus signed multiple "Materials Transfer Agreements" that permitted Stanford to use certain PCR-related materials and information supplied by Cetus. Id. 1653-56. These agreements provided Cetus with licenses to technology that Stanford created as a result of access to Cetus's materials. Id. 1655.

Eventually, Holodniy's research with Cetus produced an assay that used PCR to measure quantitatively the amount of plasma HIV RNA in samples from infected humans. After concluding his visits to Cetus and publishing his findings with Cetus coauthors, Holodniy worked with Merigan, Katzenstein, and others on clinical studies at Stanford that tested the new PCR assay with human patients taking antiretroviral drugs. The researchers determined that HIV RNA, measured through PCR, was a suitable "marker" of drug efficacy. These results formed the basis for the patents-in-suit.

In December 1991, Roche purchased Cetus's "PCR business," including its agreements with Stanford and its researchers, through an "Asset Purchase Agreement." Id. 3122, 3153-54. After this transaction, Roche began manufacturing HIV detection kits employing RNA assays. In May 1992, Stanford filed the patent application to which the patents-in-suit claim priority. The '730 patent issued on October 19, 1999; the '705 patent on January 7, 2003; and the '041 patent on October 31, 2006, after this lawsuit began. Stanford is the named assignee of all three patents.

Stanford received government funding for its HIV research through the National Institutes of Health ("NIH"). On June 24, 1992, Stanford filed an invention disclosure for the HIV RNA assay with the NIH. See id. 5091-93. On November 29, 1994, Stanford confirmed to the Government the grant of a "nonexclusive, nontransferable, irrevocable, paid-up license" under the parent application. Id. 5096. On April 6, 1995, Stanford formally notified the Government that it elected to retain title to the inventions under the Bayh-Dole Act, 35 U.S.C. §§ 200-212. J.A. 5095. All three patents-in-suit contain the notation: "This invention was made with Government support under contracts AI27762-04 and AI27766-07 awarded by the National Institutes of Health. The Government has certain rights in this invention." E.g., '730 patent col.1 ll.11-15.

On April 6, 2000, Luis Mejia, a Senior Licensing Associate at Stanford, offered a slide presentation at Roche that asserted Stanford's ownership of the HIV RNA assay invention and offered Roche an exclusive license to all patents descending from the parent application. J.A. 1201-18; Contract Op. at 1110. E-mail correspondence shows that as late as spring of 2004, Mejia and his Roche counterpart were negotiating possible license terms and contesting Roche's ownership rights in the patents. See Contract Op. at 1113.

Stanford filed suit against Roche in the Northern District of California on October 14, 2005, alleging that Roche's HIV detection kits infringe its patents. Roche answered and counterclaimed against Stanford, Merigan, and Holodniy, asserting, inter alia, that Stanford lacked standing to maintain the cause of action against Roche, that Roche possesses ownership, license, and/or shop rights to the patents through Roche's acquisition of Cetus's PCR assets, and that the asserted patent claims were invalid. Roche pleaded its ownership theory in three forms: as a declaratory judgment counterclaim, an affirmative defense, and a challenge to Stanford's standing to sue for infringement. Roche's First Am. Compl. 6-7, 13, 24.

The parties cross-moved for summary judgment on Roche's rights in the patents. Under Rule 8(c) of the Federal Rules of Civil Procedure, the district court construed Roche's pleading as a counterclaim but not an affirmative defense, reasoning that "Roche's claims of ownership of the patents and that Stanford lacks standing as the non-exclusive owner of the patents seek to expand Roche's current rights, and are properly viewed as counterclaims subject to the applicable statute of limitations." Contract Op. at 1112. The district court denied Roche's motion in full and granted Stanford's motion in part, finding that (1) Roche's ownership claims were barred by California statutes of limitation, laches, and the Bayh-Dole Act; (2) Roche's license claims failed because Stanford never consented to Roche's acquisition of Cetus's patent licenses; and (3) Roche lacked shop rights to the patents. Id. at 1124. Roche petitioned this court for a writ of mandamus to vacate the district court's ruling. We denied Roche's petition. In re Roche Molecular Sys., Inc., 516 F.3d 1003 (Fed.Cir.2008).

After briefing and a Markman hearing, the district court then construed several claim terms. Bd. of Trs. v. Roche Molecular Sys., Inc., 528 F.Supp.2d 967 (N.D.Cal. 2007). Roche then moved for summary judgment that the asserted claims were invalid. The district court granted the motion, holding all asserted claims obvious. Invalidity Op. at 1049.

Stanford appeals the judgment of invalidity and the district court's claim construction of "about 30 cycles"; Roche cross-appeals the judgment as to the parties' respective rights in the patents. We have jurisdiction under 28 U.S.C. § 1295(a)(1) (2006).

DISCUSSION

I. Propriety of Cross-Appeal

As a threshold matter, Stanford challenges the propriety of Roche's...