Guide to Bayh-Dole by the Layers, 5

Fifth Layer: practice

On to the next layer of Bayh-Dole, actual practice. We will restrict our discussion here to university practice, but things are much the same for other nonprofits. Small business practice has its own peculiarities, including the oddness of the SBIR/STTR IP agreements, but we will not work through those issues here.

It’s one thing to read the law and follow through the implementing regulations to the patent rights clauses. It’s another thing to assume that universities and other contractors actually comply with the patent rights clauses. The reality is that much of the time they don’t. Whatever is happening under Bayh-Dole does not result from contractors complying with the patent rights clauses. Something else is happening. And that something is not Bayh-Dole or its patent rights clauses.

We have worked through the statute, the implementing regulations, the various patent rights clauses, and how those clauses end up in federal funding agreements surrounded by other requirements on intangible assets. Now let’s look at another characteristic of Bayh-Dole that’s essential to any account of how the law operates or its outcomes.

Bayh-Dole operates through patent rights clauses placed in federal contracts. The enforcement of “Bayh-Dole” really involves the enforcement of the patent rights clauses in the federal contracts. But Bayh-Dole provides no provisions for enforcement. Federal agencies are not tasked with enforcement, nor is the Secretary of Commerce. As a GAO report from 1998 repeatedly observed, Bayh-Dole is not enforced: Continue reading

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Guide to Bayh-Dole by the Layers, 4

Fourth layer: Funding agreements

We have looked at Bayh-Dole the statute, the implementing regulations, and the standard patent rights clauses. These are all apparatus that are disconnected from contractors and inventors–just laws and regulations and templates. The apparatus gets connected to contractors by means of funding agreements. It is to funding agreements that patent rights clauses attach, creating obligations for contractors such as universities and establishing rights in inventions for federal agencies.

Funding agreements are an important layer of Bayh-Dole as it is the funding agreement that establishes the scope of the definition of subject invention. This scope is subject of much goofiness on the part of university administrators, so it is worth considering in some detail how this scope is defined. Like most everything about Bayh-Dole, the scope of a funding agreement is not presented in a straightforward manner. We will have to work through it to show the structure.

Funding agreements to nonprofits are established by 2 CFR 200. These agreements are often called “grants” or “awards.” 2 CFR part 200 refers to the funded party as a “non-Federal entity” or “awardee” or “recipient.” Besides the desire for bureaucratic generality, the usage stems from the idea that federal awards to universities were considered subvention–grants-in-aid–rather than procurement, in which deliverables were specified. In turn, 2 CFR 200.315(c) incorporates the whole of 37 CFR part 401 by reference into each funding agreement. Continue reading

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Guide to Bayh-Dole by the Layers, 3

Third layer: Patent rights clauses, continued

We are still working through Bayh-Dole’s third layer, the patent rights clauses. We finish up the discussion of the (f)(2) written agreement requirement with another look at subject invention reporting and assignment, the parallels to the (f)(2) requirement in the subcontracting requirement at (g), and the result: the inventor patent rights clause at 37 CFR 401.9 is in fact the primary patent rights clause required by Bayh-Dole. This is true even with the 2018 NIST rule change that requires organizations hosting federally supported research to require inventors to assign their inventions to the host organization. We finish with a look at the special requirements of the nonprofit patent rights clause.

The apparatus of the contracting section of Bayh-Dole is directed entirely at subject inventions. The US Supreme Court made it clear that an invention must be a subject invention to be within the scope of the law:

But because the Bayh-Dole Act, including §210(a), applies only to “subject inventions”—“inventions of the contractor”—it does not displace an inventor’s antecedent title to his invention.

As the Supreme Court also ruled, an invention is not a subject invention until it is owned by the contractor. The result: inventors have no obligation to disclose their inventions under Bayh-Dole, unless a contractor complies with the (f)(2) written agreement requirement. Continue reading

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Guide to Bayh-Dole by the Layers, 2

Second Layer: Regulations

Third Layer: Patent rights clauses

The second layer of Bayh-Dole involves the implementing regulations. We will consider only those that have to do with the contracting section, 202-204. These regulations are found at 37 CFR part 401.

We can differentiate four parts to these regulations. The first part works to establish the scope of the patent rights clauses. The scope is established by an express discussion–an invention is subject to the patent rights clause when it is made in “the planned and committed activities of a government-funded project” or “diminish[es] or distract[s]” from that those activities. The definition of funding agreement in Bayh-Dole (201(e)) makes clear that the government funding for a government-funded project may be just “in part.” Put another way, a project in which the federal government provides at least some of the funding. The implementing regulations make clear that separate accounting for funds does not matter, nor does the chronological sequence of funding. Whether money is mixed or kept separate, whether the federal funds come before or after or simultaneous with other efforts or funding does not matter. What matters is whether the federal government has supported a project in which an invention has been made.

The implementing regulations then set out four default patent rights clauses. Continue reading

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Guide to Bayh-Dole by the Layers, 1

A helpful way to look at Bayh-Dole is as a set of layers of law, regulation, contracting, enforcement, and outcomes. There are at least eight such layers, not counting the historical situation and the legislative context. Let’s work through these layers.

First Layer: Statute

Let’s start with the statute.

Bayh-Dole is part of federal patent law. Bayh-Dole is not part of federal procurement law, where it ought to be, at least for research and development contracting. The statute layer may be divided into four parts: policy, housekeeping, contracting, and federal ownership.

Policy and objective

1. Bayh-Dole the statute provides a statement of “policy and objective” (35 USC 200) which along with definitions (section 201) establishes the scope of the law and shapes the property right in patents on inventions made with federal support. The fundamental policy of Bayh-Dole is that the patent system is to be used to promote the utilization of inventions arising from federally supported research or development.

Patents on inventions made with federal support are not ordinary patents. Or, another way, the patent property rights on inventions within the scope of Bayh-Dole are not ordinary patent property rights.

Bayh-Dole’s policy restricts the use of the patent system. In its broadest expression, the patent system offers inventors a basic exchange: publish a complete account of your invention in return for exclusive rights to that invention for a limited time. There is no requirement for ordinary patents that inventors use their inventions, or let anyone else use their inventions. For ordinary patents, as well, there is no requirement that inventors must attempt to make money, or must enforce their patent rights, or even defend their patents.

By contrast, Bayh-Dole’s policy to use the patent system to promote the use of inventions introduces a working requirement into federal patent law for inventions covered by Bayh-Dole. These inventions carry a working requirement, a public covenant that runs with any patent property right covering any such invention.

In addition to using the patent system to promote the use of inventions arising in projects receiving federal support, Bayh-Dole’s policy also establishes three other elements of its public covenant. The patent system is to be used to promote free competition and enterprise; is to promote United States industry and labor in the manufacturing of products based on inventions made with federal support; and is to provide the federal government with the rights that it needs and to protect the public from nonuse and unreasonable use of these inventions. These four elements are called out expressly in the federal acquisition regulations restatement of policy (see FAR 27.302(a) for a list of six elements to the statement of policy and objective and FAR 27.304-1 for the list of four as above). Continue reading

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The Faster Cures FAQ on Bayh-Dole, 5

We are working through the Faster Cures FAQ on Bayh-Dole. This is the last bit.

7. What have the impacts of Bayh-Dole been?

Bayh-Dole has both passionate supporters and detractors. Advocates argue that it has brought the results of federally funded research out of the laboratory and into the clinic. Critics say it has increased the time and cost of research because it “has negatively affected the practice and norms of science, created “anticommons” problems, contributed to patent hold-ups, and led to unnecessary increases in consumer prices.”xiv

Supporters and detractors are not the issue. The supporters mostly misrepresent the law and make a bungle of the patent rights clauses and ignore compliance and make a virtue out of things that Bayh-Dole does not authorize. Detractors mostly complain about the supporters’ claims, but accept the supporters’ representation of Bayh-Dole. So it’s a love and bitch fest over a shared misrepresentation of the law and wholesale non-compliance with Bayh-Dole’s patent rights clauses. Whatever is happening, it is not Bayh-Dole. 

The issue is that there is almost no public evidence that shows that Bayh-Dole has met its stated objectives. Bayh-Dole has no objective to ramp up university bureaucracies. Nothing about creating hoards of patents to prevent broad public access to inventions. Nothing about substituting measures of activity and statements of hopeful intent in place of outcomes. Nothing about conflating Bayh-Dole related work with all university inventions (where Bayh-Dole patents are about 40% of the total university hoard).

The critics recited here are mostly academics. We don’t hear from industry, from inventors, from university faculty. We don’t see actual evidence. The proponents are patent attorneys, and university patent administrators, and university lobbying fronts, and biotech lobbying groups determined to keep the patent monopoly pipeline open to the pharmaceutical industry and to expand the pipeline if possible to other industries and so expand the potential opposition to any change in public policy. There are no public data to support a positive assessment of Bayh-Dole. Bayh-Dole does not require federal agencies to collect data. The GAO reported in 1998 that federal agencies don’t do anything with the data they do collect. And Bayh-Dole purports to exclude all such reported data from FOIA disclosure.

The Association of University Technology Managers (AUTM) reports that in 1979, one year before Bayh-Dole was passed, only 30 universities had a technology transfer office; by 2013, data released by AUTM indicate that more than 200 U.S. institutions with tech transfer offices responded to its annual survey.

This is most strange. Continue reading

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Pissed at NIST, short form

Supreme Court: Bayh-Dole applies only to subject inventions. Subject inventions are ones owned by a contractor. Congress did not intend a sea-change in initial invention ownership. Bayh-Dole does not apply to inventions made in projects with federal support until contractors own them. There’s no vesting. There’s no special right under Bayh-Dole for a contractor to acquire title. Bayh-Dole deals only with the priority of title between a contractor and a federal agency after the contractor has acquired title. Nothing more.

NIST: Now, suddenly, inventors must be made to agree to assign subject inventions to the contractor.

Research Enterprise: Total hash!

Subject inventions are *only* those inventions already owned by the contractor. NIST makes an empty requirement. There’s no authority under Bayh-Dole to make inventors assign inventions to make those inventions “subject” inventions. Thus, the revised rule states that inventors must agree to assign to contractors inventions that the contractors already own. Big whoop.

But bet on it–NIST and university patent administrators and their legal advisors will insist that the new rule requires universities to require inventors to assign inventions made with federal support to their university–even though Bayh-Dole does not provide any authority for NIST to make this requirement, and even though the wording itself makes a hash of the requirement. Faux Bayh-Dole. Continue reading

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NIST makes Bayh-Dole a vesting statute

NIST has issued its final rule on Bayh-Dole and disregards the Supreme Court on the ownership of subject inventions. The Supreme Court was clear that Bayh-Dole’s definition of subject invention means that an invention must be “owned by the contractor” to be a subject invention and that Bayh-Dole does not apply to any invention that is not a subject invention:

But because the Bayh-Dole Act, including §210(a), applies only to “subject inventions”—“inventions of the contractor”—it does not displace an inventor’s antecedent title to his invention. Only when an invention belongs to the contractor does the Bayh-Dole Act come into play. 

Here’s NIST’s revision to (f)(2) of the standard patent rights clause:

to assign to the contractor the entire right, title and interest in and to each subject invention made under contract

It’s really a nonsense change. Think about it. A subject invention is one owned by a contractor. Thus, inventors are now required make a written agreement “to protect the government’s interest” to assign to contractors the inventions the contractors already own.  Continue reading

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The Faster Cures FAQ on Bayh-Dole, 4

We are working through the Faster Cures FAQ on Bayh-Dole.

5. What are march-in rights, and what does Bayh-Dole say about them? Has the government ever exercised its march-in rights?

Bayh-Dole requires federal agencies to include a right to “march-in” and require a contractor to grant licenses in cases of nonuse, unreasonable use, or non-compliant licensing. Final question: No. The government has never used march-in, despite rampant nonuse and unreasonable use of subject inventions. Ho-hum for the public!

“March-in rights” refer to the rights granted under Bayh-Dole that allow the federal funding agency to grant additional licenses to a “responsible applicant” if the agency determines that one of four triggering circumstances has occurred.viii

There are no “rights” “granted” under Bayh-Dole. Bayh-Dole dictates default patent rights clauses. One clause permits a federal agency to require a contractor to grant additional licenses, and if the contractor cannot or will not do so, then the agency may do so. The granting of rights is not restricted to a single “applicant”: “responsible applicant or applicants.” Continue reading

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The Faster Cures FAQ on Bayh-Dole, 3

We are working through the Faster Cures FAQ on Bayh-Dole.

4. What requirements does Bayh-Dole place on universities?

None. Bayh-Dole applies to federal agencies, not to universities. It’s only loose chatter to say that Bayh-Dole requires universities to do anything. Bayh-Dole authorizes federal agencies to license exclusively inventions owned by the government. Bayh-Dole requires federal agencies to use a standard patent rights clause in their contracting for research or development unless they can justify an exception. Bayh-Dole places limits on the property rights in patents on inventions arising in federally supported (in whole or in part) research or development projects. Nothing about universities. No requirements. The bit in 35 USC 200 that mentions universities is to call out universities as part of nonprofits generally in a statement of policy and purpose. Not requirement. The core gesture of permitting a contractor to retain title to a subject invention becomes effective only after a university has taken action to (i) acquire the invention or (ii) join the inventors as parties to the funding agreement. A university does not have to acquire any invention. But even here, retaining title is not a requirement. It is at best an opportunity, an option, a voluntary choice. No requirements under Bayh-Dole for universities.

The implementing regulations of the Bayh-Dole Act outline the requirements for inventions arising from federally funded research projects.

Federal agencies must use the standard patent rights clauses established by the Secretary of Commerce unless they can justify an exception. There is nothing particularly uniform about the exceptions other than the procedure for excepting–and that federal agencies generally don’t bother to find any exceptions (there are instances, but not much recently). There are presently four such patent rights clauses–one for naval nuclear propulsion and weapons; one for small businesses; one for nonprofits; and one for inventors. Federal agencies may tailor these clauses, and may use entirely different clauses so long as they follow Bayh-Dole’s requirements to do so. The patent rights clause in each funding agreement–however it reads–establishes a university’s obligations for that funding agreement.  Continue reading

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