There is no government use license in Bayh-Dole

I saw another search here at Research Enterprise for “government use license.”

There is no government use license in Bayh-Dole. That’s a sloppy myth created by university licensing officers who repeat nonsense. The license in Bayh-Dole (35 USC 202(c)(4)) is “to practice or have practiced.” That’s as broad as all substantial rights in any subject invention. Practice means to make, use, and sell. Practice was expressly defined that way in executive branch patent policy on which Bayh-Dole is based. The government license permits anyone–government or not–to make and use any subject invention and sell products incorporating or based on that invention “for or on behalf of” the United States–the federal government, state governments, municipal governments.

“Government use” license is just sloppy talk, a sign of sloppy thinking–or a sign of a concerted effort to defraud the government of the benefit of the Bayh-Dole bargain.

And, while we are at it, there is no “government purpose” license in Bayh-Dole either. The license is “to practice and have practiced for or on behalf of the United States.” That’s the scope. Practice = make, use, and sell. “For or on behalf of” oddly is not “by.” It’s the “federal agency” that has “the right” under the license. What’s the difference between “for” and “on behalf of”? Continue reading

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Bayh-Dole Government License–9: Recommendations

Our webinar ends with “Recommendations” for licensing agreements. Given what we have worked through, we are in a good position to assess the strength of these recommendations. Here’s the first recommendation:

It’s implied, but never stated, that rights the licensor here reserves are those necessary to grant the government its license under Bayh-Dole, and that a contractor cannot then obligate to others these rights, and so must be made express in any grant of an exclusive license. The government license really doesn’t matter when other licensing is non-exclusive–non-exclusive licenses don’t require statements of reserved rights with regard to other non-exclusive licenses. The sample language then assumes–but doesn’t bother to come out and say it–that the license involved is exclusive (involve exclusive rights to one or more of the substantial rights in the subject invention, and if all substantial rights, then the exclusive license is also assigns the subject invention). Continue reading

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Bayh-Dole Government License–8: Foreign Licenses

Okay. I’ve had about enough of this webinar on Bayh-Dole’s government license. It’s not that the advice provided is unexpected–it is entirely conventional wisdom, from the description of the NIST Green Paper on government use rights to how to deal with discounts for the government’s purchase of products produced under a royalty-bearing license to how to mitigate the effects of the government license to using patents to create bean-counting metrics. It’s just that repeatedly, this expectable, conventional advice is wrong. It gets Bayh-Dole wrong, it conflates sales and licensing, it ignores Bayh-Dole’s objectives. And the big point is that it does these things without batting an eye–it is entirely normal to get Bayh-Dole wrong, to conflate licenses and sales, to ignore Bayh-Dole’s objectives. Sigh. Diligent people repeating what they have heard and what sounds good, and making perfect sense if you don’t stop to think about the consequences of their words in practice. That’s the nature of conventional wisdom in matters of Bayh-Dole.

Let’s look at one more issue raised by the webinar, that of how the Bayh-Dole government license deals with foreign licenses. The Bayh-Dole government license stipulates that the federal agency shall have a non-exclusive license to practice and have practiced for or on behalf of the United States each subject invention throughout the world. Right there, embedded in the government license is a worldwide scope. Anywhere in the world that a federal contractor acquires a patent right (or any ownership claim, really) in any invention within the scope of federal government-funded work, the Bay-Dole government license provides that the federal agency can practice or authorize the practice of the subject invention “for or on behalf of the United States.” Continue reading

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Bayh-Dole Government License–7: Software

The webinar then turns to government license in the context of software. Here things get confused again. Bayh-Dole states as policy–not merely rationale–that the patent system is to be used to promote the utilization of inventions arising from federally supported research or development (35 USC 200). Bayh-Dole furthermore establishes a standard for utilization by defining practical application as the utilization of a subject invention such that the benefits of that use are available to the public on reasonable terms (35 USC 201(f)). If a subject invention fails practical application, through nonuse or a failure to take effective steps or not likely to take effective steps, then the federal agency has the right to march-in and compel licensing or do the licensing itself (35 USC 203(a)(1)).

The default, then, is that if a contractor fails timely to take effective steps, the subject invention should be licensed non-exclusively. Only in special cases could the federal government march-in and require an exclusive license (for which, see the requirements on federal exclusive licenses). Again: if you elect to retain title to a subject invention–one you have acquired–then you must achieve timely practical application or license the invention non-exclusively. Continue reading

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Bayh-Dole Government License–6: Patenting Costs and Exclusivity

We are still following a webinar panel discussion of the government license to practice and have practiced in Bayh-Dole. The discussion gives us an opportunity to see the gulf between Bayh-Dole’s policy and objectives, and the scope of its government license, and what is presented as conventional wisdom to the university licensing community.

According to the panel, Bayh-Dole’s government license is ambiguous and confusing. This is largely transference–attributing to Bayh-Dole something that is rather more centered in the professionals’ minds rather than in the law. That’s not to say that Bayh-Dole doesn’t have massive defects, as we might expect of any Frankenstein monster made out of the dead body parts of past government policy–just that the government license to practice and have practiced is not one of them. It’s about as clear and direct as anything could be.

What may be difficult for the unprepared, poorly trained mind to grasp is just how broad the government license is. Make, use, and sell, for any subject invention. And have made, have used, have sold. For anything conceived or first tested as part of a project receiving at least some federal funding, even if work on the invention itself was done without federal dollars–separate accounting and chronology are not determining factors. Extended to any party to the funding agreement including those added by assignment, substitution of parties, or subcontract. That’s really broad, and entirely consistent with public access to key developments made in projects that have been pitched to receive federal support. Continue reading

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Bayh-Dole Government License–5: Impact Beans

We are working through a recent “webinar” on the Bayh-Dole government license to practice and have practiced. In part, the webinar provides the opportunity to set some things right about Bayh-Dole and to resist the machinations of NIST to try to rewrite Bayh-Dole through regulatory shenanigans and therefore somehow preserve a patent monopoly pipeline from federal funding to pharma that feeds a minor parasitic patent licensing industry that has managed to persuade university administrators that gambling with patents is a sure way to a “new source of revenue” to save universities from their financial troubles. The webinar also provides an opportunity to show how the conventional reasoning–and the panel is very conventional–runs against Bayh-Dole and even against their own stated interests in recovering patenting costs and collecting beans of impact.

In a scenario in which the federal government presents as the only purchaser of product made under a patent on a subject invention, a webinar panelist justifies patenting in order to

“demonstrate that we are having impact”

There can be no licensing strategy with regard to the federal government. Or, licensing is not a good way to try to track impact for the federal government. Licensing in such a circumstance involves getting first in the way of impact (patenting) and then getting out of the way as expeditiously as possible (licensing). The absurdity of it all lies in trying to make this process of obstruction and removal of obstruction happen as efficiently as possible, and when it doesn’t, complaining about how complicated and expensive it is and that it is companies’ faults for not helping expeditiously to remove the obstruction. This is what NIST means in its Green Paper by “unleashing innovation.” The aim is to make obstruction and removal of obstruction more efficient. Bizarre? Yes. Another reason NIST should be relieved of its delegation to have anything to do with Bayh-Dole. Continue reading

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Bayh-Dole Government License–4: Licensing Despite the Government License

We are working through a recent “webinar” panel discussion on Bayh-Dole’s government license. The panelists get the government license wrong in material ways and then concern themselves with scenarios in which the government license as they represent it appears to get in the way of their money-making licensing hopes. They scheme about how they can make money anyway or abandon the invention because they don’t think they can make money. Sounds dire–and it is in its way, since the panelists ignore Bayh-Dole’s statement of policy and objectives–but there are moments of hope.

As you listen to the webinar (if you do), notice how the panelists discuss Bayh-Dole. They work from a number of crucial misrepresentations of the law.  They are far from conforming Bayh-Dole practice, even though they recite what most anyone who listens to university licensing folks would accept as typical practices. The panel appears to have no idea how far they are from compliant Bayh-Dole. It’s like they have accepted normalized breach of Bayh-Dole, while devoting a whole webinar to Bayh-Dole practice. Other than that, everything is nominal. Continue reading

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Bayh-Dole Government License–3: Sales and Have Made Paths

We are working through a recent webinar discussion of Bayh-Dole’s government license. First we reviewed the government license–it is “to practice and have practiced.” “Practice” has a long history of meaning “make, use, and sell” in the policy statements from which Bayh-Dole was derived. The webinar, however, opens with an account of the government license derived from NIST’s recent Green Paper, that works hard to ignore the language of Bayh-Dole and calls the license a “government use” license, as if the expectation was that the government should have only a limited right to use inventions arising in work it supports, and that this limitation may be imposed by NIST regulations rather than by Congressional amendment of the law.

The webinar discussion then turns to how the government “exercises” or “exerts” (weird word–not reflecting experience–what were they thinking?) its rights under its license. Here’s the question:

“What’s the practical way in which you might see that? Normally what we would see is that  if a license would have a five percent royalty rate on it, that when this is being implemented and it is for government use, they don’t pay that five percent royalty.”

Yes, the government license is royalty-free. But the example given, circulating like a bad joke in university licensing offices, is deeply confused. The government license is to rights, not to products. If the government buys product, it doesn’t pay a royalty. No one includes royalties in their sales price. If they do, then they are trying to make the government pay *the seller’s* royalties. The government license does not involve sales to the government. Sales exhaust patent rights. The government’s license is to practice–if the government makes, uses, or sells, it owes no royalty. This does not have to do with government purchase. If the government authorizes a making, using, and selling on its behalf, then the company doing the authorized work does not owe a royalty. The government would never see the charge. Continue reading

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Bayh-Dole Government License–2: Misrepresenting the Government License

We have been through the Bayh-Dole government license at 35 USC 202(c)(4) and have reviewed its sources in executive branch patent policy from 1963 to 1975. Bayh-Dole was drafted in 1978-79, so the connection to the definitions and usage in executive branch patent policies is relevant, given that’s where Latker picks out Bayh-Dole’s wording, Dr. Frankenstein style.

Now let’s turn to our webinar by Fuentek on the government license in Bayh-Dole. Our first slide opens with the paragraph from the standard patent rights clause at 37 CFR 401.14. There we see the “license to practice and have practiced for or on behalf of the United States throughout the world.” But then the slide switches from the regulations to Bayh-Dole the statute–35 USC 202. The slide is titled “Government Rights Regulations”–the proper citation is 37 CFR 401.3:

Each funding agreement awarded to a contractor (except those subject to 35 U.S.C. 212) shall contain the clause found in § 401.14 with such modifications and tailoring as authorized or required elsewhere in this part. However, a funding agreement may contain alternative provisions – . . . .

What’s the difference? The regulations allow for modifications and tailoring, while 35 USC 202(c) just states:

Each funding agreement with a small business firm or nonprofit organization shall contain appropriate provisions to effectuate the following:

If there’s one lesson from all of this, it is to follow the regulatory pathway to the patents rights clause that pertains to each specific federal funding agreement that one is working with. Continue reading

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Bayh-Dole Government License–1: Practice or Have Practiced

NIST published a Green Paper that evidences its confusion with various aspects of Bayh-Dole. One of these areas of confusion involves the government license that Bayh-Dole requires in all federal research contracts, and in particular in the standard patent rights clause for nonprofits and small business contractors. At the 2020 AUTM national conference, Fuentek hosted a session on the topic of the government license and has posted a “webinar” of their session, “Government Use of Federally Funded IP: Not as Simple as You Think.” The session is worth the listen because it gives a good insight into the level of thinking taking place in university and government settings with regard to Bayh-Dole, the use of the patent system, and the quality of licensing. The webinar is presently here. And the slides are here. The NIST Green Paper is here.

Let’s start by looking at Bayh-Dole and get clear on things. It’s not that difficult. The government license is to make, use, and sell, and have others do so as well for the government. The license operates without formalities whenever a contractor elects to retain title. The license extends to any federal agreements with other countries if the funding agreement so provides. Continue reading

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