Supreme Court Rules On College and Business Cases

Jun 6, 2011

The U.S. Supreme Court is now heading down the stretch toward the end of its current term, with major decisions still outstanding, and 27 cases overall yet to be decided. On Monday, the justices issued a variety of opinions of particular interest to the business community, and left intact a California policy that gives illegal aliens in-state college tuition benefits.

Patent ownership

In a patent case with ramifications for universities and corporations, the court ruled in favor of pharmaceutical giant Roche and against Stanford University. At issue in the case was who would reap the financial benefits from the development of a technology that is used in HIV/AIDS test kits sold all around the world by Roche.

The technology was developed by researcher Mark Holodniy at Stanford, using funds from a grant awarded to Stanford by the National Institutes of Health. The university claimed that under an agreement Holodniy signed with the university and under a federal law governing patents developed with federal money, the university was entitled to full ownership of the patent. Roche countered that when Holodniy was on loan to the company for nine months, he signed an agreement that trumped the university's rights and therefore, that Roche owned the patent on the discovery that Holodniy later developed at Stanford, using some of the information he had access to at Roche.

By a 7-to-2 vote, the Supreme Court sided with Roche, meaning that the pharmaceutical company will reap all the financial benefits of the discovery made on the Stanford campus. Writing for the court majority, Chief Justice John Roberts suggested that universities can avoid such problems in the future by writing tighter contracts for their researchers.

Nonetheless, the decision is a major victory for companies like Roche, Pfizer, Intel, and others that collaborate with universities on research with an eye toward marketing future discoveries.

Securities fraud case

In another business case, the high court ruled that investors in Halliburton may pursue a class action suit against the company for allegedly making false statements in filings with the Securities and Exchange Commission.

The lawsuit charges that Halliburton deliberately made false statements in its public filings from 1999 to 2001 in order to inflate the price of the company stock. Specifically, the investors allege that the company misrepresented its potential liability in asbestos litigation, among other things. The investors claim that those false statements painted a falsely rosy picture of the company's financial health, causing people to buy the stock, and that when the company corrected its statements more than two years later, the stock price fell, causing investors to lose money.

Halliburton argued that the investors should not be certified as a class because not all its members showed that they relied upon the false statements. But the Supreme Court unanimously rejected that argument.

College tuition

The Court's action in a third case did not involve a ruling on the merits of a case. Rather, the court refused to entertain a challenge to a California law that grants reduced in-state tuition to illegal immigrants who graduate from California high schools.

The Court declined to hear the challenge, leaving in place similar laws in 11 other states.

Those challenging the law contended that it violated a little known provision in federal law that bars states from giving "any post-secondary school benefit" to an illegal alien. But the California Supreme Court ruled the California policy on in-state tuition benefits is keyed not to immigration status, but to whether a student attends a California high school for three years and graduates.

Overall, only about 1 per cent of the total college student population, benefits from this provision of California law, according to the state. And most of those attend community colleges where tuition is tiny compared to tuition at four-year colleges.

The state also says that at the University of California's ten campuses, only 600 students who are believed to be illegal aliens benefited from the policy last year. That number is less than a third of the 2,019 students who got the reduced tuition benefit. The others were U.S. citizens, some of whom may have graduated from California high schools, then left the state, and returned for college, or citizens of another state who graduated from a high school in California.

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