Undisclosed subject inventions made in development and commercialization contracts

A note on subject inventions not disclosed under Bayh-Dole–and a place for auditors to romp and play as auditors are wont to do, if auditors were ever to romp and play with regard to anything consequential in Bayh-Dole. What follows then is a sort of fantasy because no one ever audits Bayh-Dole for anything consequential!

Under Bayh-Dole, any party to a federal “funding agreement” (a “contractor”) may extend at will the funding agreement to add additional parties to the funding agreement. See the definition of funding agreement at 35 USC 201(b).

New parties to a funding agreement may be added by “any assignment, substitution of parties, or subcontract of any type.” For instance, the (f)(2) agreement requirement in the standard patent rights clause in effect requires institutional contractors to make specified potential inventor employees parties to the funding agreement via the patent rights clause. More so, and expressly, Bayh-Dole requires assignees of nonprofit-owned subject inventions to accept the nonprofit patent rights clause–and therefore those assignees become parties to the funding agreement, and therefore contractors. See 35 USC 202(c)(7)(A).

An exclusive license to all substantial rights in an invention conveys ownership of the invention–is an assignment. There are a number of court decisions, some looking directly at university licensing practices. Most–almost all–university-granted exclusive licenses to inventions are assignments. That means that inventions made in development work by a company that has accepted assignment of a subject invention from a nonprofit, when those inventions are acquired by the company, are also subject inventions. Those inventions are just as “made under contract” or “made in performance of . . . work funded in whole or in part by the Federal government.”

How a contractor manages the scope of any federally supported project therefore has significant consequences for a determination of what work is “under contract.” A university contractor does not have to assign any subject invention to a company as part of “commercialization” efforts. That’s a university’s choice. And when it does assign, the company becomes another party to the funding agreement and any inventions made in the development work, when acquired by the company, have the same requirements as if they were made by the university itself. They are nonprofit subject inventionsContinue reading

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Bayh-Dole’s Ruby Slippers

This is a story about 35 USC 201(b), 35 USC 202(a), 37 CFR 401.9, and 37 CFR 401.14(f)(2) and (g)(1). These provisions of Bayh-Dole, implementing regulations, and standard patent rights clause, when read together, create ruby slippers.

The story requires the usual build up by way of documentation. If you can’t stand the tension, scroll down to the stars.

Here’s the (f)(2) requirement, for each funding agreement (broken up into readable units):

The contractor agrees to require,

That is, the institutional contractor agrees to require–meaning, under the funding agreement containing the standard patent rights clause, the institutional contractor must take a positive action to require, and therefore cannot require anything else–

by written agreement,

That is, the requirement is a written agreement–not merely a policy statement, not something general–and the written agreement establishes the responsibilities of individuals who may invent when they do invent:

its employees, other than clerical and nontechnical employees,

That is, not all employees, but rather only those for which it would be proper for the government to expect an invention deliverable–a clerical or nontechnical employee could not reasonably invent within the scope of his or her employment for the purposes of the federal contract, so no deliverable for them.

And now the delegations:

to disclose promptly in writing to personnel identified as responsible for the administration of patent matters and in a format suggested by the contractor each subject invention made under contract

Only an inventor can disclose an invention–it’s what the inventor has conceived. An institution can only guess on what the inventor has done until the inventor has documented the invention.  Continue reading

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More Impractical Advice About NIST’s Changes to Bayh-Dole’s Regulations

NIST–can’t live with them, but law firms sure can.

Here’s another law firm popping off about NIST’s recent revisions to Bayh-Dole’s implementing regulations and standard patent rights clause. Keep in mind that NIST’s chief counsel is already on record not understanding the law or the Supreme Court’s decision in Stanford v Roche. Keep in mind as well that I have yet to meet a law firm willing to offer free advice to faculty about how to beat back predatory administrators. Every law firm that publishes free advice about Bayh-Dole seems to want a contract with a university administration or already has one. (See this “Success Story”–probably this.) Thus, law firms are motivated to write stuff like “Practical Advice Regarding Changes to Bayh-Dole Act Obligations”:

Another aspect of the regulation changes is that Contractors must now ensure an employee is under a written obligation to presently assign any Subject Inventions for the entirety of the funding agreement period.

With all due respect, this is bungled nonsense. Here’s the NIST requirement, inserted into the (f)(2) requirement of the standard patent rights clause–and having no statutory antecedent in Bayh-Dole:

The contractor agrees to require, by written agreement, its employees, other than clerical and nontechnical employees, to disclose promptly in writing to personnel identified as responsible for the administration of patent matters and in a format suggested by the contractor each subject invention made under contract in order that the contractor can comply with the disclosure provisions of paragraph (c) of this clause, to assign to the contractor the entire right, title and interest in and to each subject invention made under contract, and to execute all papers necessary to file patent applications on subject inventions and to establish the government’s rights in the subject inventions.

Let’s count the screwups. 1) There is no present assignment. It is an agreement that requires assignment, not a present assignment of all future inventions. NIST might have wanted folks to add a present assignment, but NIST did not put that wording into the revised patent rights clause requirement. Even if they had–it would be a present assignment to a future invention that was already one owned by the contractor–it has to be this way. See below.  Continue reading

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Illusions of Bayh-Dole: “manufactured substantially” 4

Previous articles in the series are here, here, and here.

There’s a simple point to make about Bayh-Dole’s section 204 requirement that exclusive licenses to use or sell products based on a subject invention in the United States include an agreement by the licensee that those products will be manufactured substantially in the United States. The section 204 requirement does not apply the making, using, and selling of a subject invention by the owner of the invention. Any for-profit company, then, owning a subject invention, is exempt from what is put forth as the foundational requirement of Bayh-Dole, the very essence of what Sen. Bayh claimed that the law was all about, restoring American technology leadership. For that leadership, one would think, Americans would not be licensing their research inventions to the rest of the world for their happy use without somehow having products based on those inventions made in America.

In this sense, Bayh-Dole ought to be a law that expects American companies to make products based on subject inventions in the United States and export those products to the rest of the world–not to take out patent positions globally, license to foreign companies to manufacture products, import those foreign manufactured products, and sell those foreign manufactured products in America. But Bayh-Dole is not that law. It is a law that makes a meaningless flourish about United States industry and labor and goes off and does something else.

And here’s the simple point. Since section 204 is specific to exclusive licensees to use or to sell in the United States, it does not apply to owners of subject inventions. That means that when a university assigns a subject invention under the heading of granting an exclusive patent license, the assignee has no obligation under section 204 for its own exploitation of the invention. As numerous courts have held, an exclusive license to the substantial rights in an invention constitutes an assignment. It doesn’t matter that the written document is labeled “exclusive license.” One can license a patent exclusively and in doing so assign the underlying invention if the “license” conveys the exclusive rights to make, use, and sell. With that transfer of ownership comes the right to enforce the patent, which only the owner of an invention may do. Nearly every university patent license that’s exclusive is also an assignment of the invention on which the patent (or patents) is based.

See the result? When universities exclusively license patents on subject inventions, they assign the subject inventions. The “licensees” of the patents are “assignees” of the subject inventions. They do not hold exclusive licenses to use or sell product based on a subject invention–they hold ownership of the subject invention. They are assignees. They can manufacture wherever they want. Section 204 does not apply so long as they do not grant exclusive licenses to use or to sell in the United States. Continue reading

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Ten Year Note

Ten years ago, on September 4, 2008, I started the Research Enterprise blog. My idea was to use the blog to document what I had learned about university-based technology transfer over 15 years of licensing practice, and to describe ways to do a better job at helping researchers, entrepreneurs, professionals, and companies get on with working with what they make, create, author, discover, realize, collect, produce, develop, improve, and invent.

Since that first post, I’ve written over 1,300 articles. I have looked at the history of university technology transfer, at the development of university patent policies, the nature of federal research funding, methods of managing intangible assets in a research setting, the dismal monster called the Bayh-Dole Act, and the nature of innovation. Among the most popular articles are these:

Bayh-Dole Guide

A guide to the Bayh-Dole Act. Not like the crazy COGR guide or the mealy-mouthed AUTM descriptions. Not like the misrepresentations of Bayh-Dole offered up by many university technology transfer offices. In the next revision of the Guide, I think I will finally have got all the pieces in place. Core: Bayh-Dole replaced the IPA program. In that, Bayh-Dole was nothing new. Anyone who says university practice with regard to federally funded inventions suddenly changed is full of it. Bayh-Dole was created by the NIH to restore a patent monopoly pipeline from federal funding to the pharma industry, laundered through universities by patent brokers such as those at WARF. Everything else is just fluff to obscure the agenda.

In particular, the public interest apparatus in Bayh-Dole is designed not operate. The public interest apparatus has never operated–not in Bayh-Dole, not in the IPA program, not in the Kennedy patent policy dating from 1963. The public interest apparatus, too, is just fluff. Anyone thinking that the NIH will act on an apparatus that the NIH designed not to operate fails to understand the situation. Finally, Bayh-Dole has been a dismal failure on its own stated objectives. The proxy data put forward by AUTM and advocates of Bayh-Dole is often fake and always intended to mislead. Academics accepting AUTM metrics as generally valid are barking up a tree with no squirrels. Continue reading

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Exceptional Circumstances in Bayh-Dole, 10

We have been circling around the central problem of “exceptional circumstances” in Bayh-Dole. The law works to allow organizations to make decisions about patent monopolies that preempt other statutes–ones that “require a disposition of rights inconsistent” with Bayh-Dole’s arbitrary preemption of all public purposes in favor of what nonfederal invention owners decide–with the expectation in practice that these nonfederal invention owners will have wrested ownership away from individual inventors in the name of the public good (or in the name of the law). Bayh-Dole’s arbitrary premise is that the default public good must be whatever organizations that gain ownership of inventions do.

These organizations’ decisions can be all over the place–from self-interest to non-interest, seeking profit or declining any financial interest, competent to incompetent, sharing to monopolist. Nothing about the organizations’ decisions, once they come to own any invention made in a project deemed worthy of public support, is uniform–or even reported. Bayh-Dole associates this arbitrary default with a list of policy objectives that on the face of it have nothing to do with whether an inventor, an organization, the federal government, or no one owns any patentable invention. One has to supply a weird logic for each, with absolutely no indication that any organization’s patent administrators–or the companies they deal with–will accept or follow that same weird logic. There is absolutely no connection between allowing organizations to gain ownership of inventions made with federal support and the policy and objective stated by Bayh-Dole. Whatever private ownership of patent monopolies might do, the only difference between having bureaucrats own and inventors own is that inventor ownership is established federal law and public policy, and bureaucrats owning is not.

Again: the standing policy that Bayh-Dole preempts is that the federal government should own inventions made with its funding except when the contractor is a company with an established commercial position in a non-governmental market. The federal government can relax its claims for specific contracts and on a case-by-case basis once an invention has been made and reported. The standard of review is what will best serve the public interest. When the federal government takes ownership, it is expected to dedicate the invention to the public–not use the patent system, or if it does use the patent system, to license in the US royalty-free, nonexclusively. That is, don’t play favorites. Don’t exploit monopolies for money. Don’t encourage others to do so on behalf of the federal government. Don’t set up to sue citizens for practicing what citizens have supported. If contractors and investigators don’t like this deal, then don’t seek out federal support for projects.  Continue reading

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Who Owns Digital Learning Resources?–6

Let’s come back around to Hal Plotkin’s question–who owns digital learning resources? Plotkin wants the answer to be: certainly not the university bureaucrats aiming to “commercialize” everything and therefore putting everything behind a paywall. That makes sense. Bureaucrats don’t have a great track record when they appropriate research results–and haven’t since 1968 when the NIH revived its Institutional Patent Agreement program, and haven’t under Bayh-Dole, which replaced the IPA program after it was shut down for being ineffective. But the alternative to “not university bureaucrats” is not the Department of Education requiring everyone to license openly final versions of digital learning resources.

The best roles for federal regulations pertaining to rights in grant deliverables (data, compounds, software, protocols, documentation, inventions, methods, know-how, whatever) made with federal support is

(i) to prevent administrators, speculators, corporations, and governments from forcing their bureaucratic thumbs into every new thing, and

(ii) to limit the incentives for those who do work with federal grants to bounce from one federal grant to the next, dropping the development and support of each thing created in order to gain the benefit of the next year’s federal funding.

For (i)–prevent university administrators from asserting ownership or control over work prepared by faculty, students, and staff unless the university administrators proposed the funded work and assigned the personnel and sought the grant. Limit the ability for companies to buy up all the rights to such works as well–they might get an exclusive right to sell a particular version of the work, but not a right to exclude all others from working with each work.

For (ii)–include what people have done to make prior federally supported work available in any review of proposals for further government funding. If more federal funding is easier to get than continuing to work on whatever was funded last year that was so very important that it beat out nine other applications, then the federal agencies are taming the bears and feeding them from cars, creating their own versions of Yogi Bear–more interested in navigating the federal funding landscape for picnic baskets than being faculty working on what they would otherwise work on. Continue reading

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Who Owns Digital Learning Resources?–5

There’s a basic problem with federal grant support for research. I don’t know if the Department of Education has avoided this problem, but I will put it out there. If a federal agency supports both research and maintenance of contract deliverables, then over time the agency has to shift resources from research to maintenance or decide what things to stop maintaining. No one writes press releases about how this year’s grants include support for the good work done in 1995 or 2006 to keep things up to date and ensure people are properly trained, stuff is widely accessible, and the like. “Fund and abandon” is a general practice.

Look at from a university faculty member’s perspective. If next year’s grants are for more new work, then the authors of this year’s final versions of work have to decide between staying with the unfunded maintenance of those works or applying for grants to do new things, publishable things. University faculty don’t generally get promoted for maintaining stuff. They get promoted for publishing discoveries. They get promoted for obtaining competitive federal grants.

I’ve helped with a number of cases involving “digital learning resources”–in nursing, medicine, psychology, education–and in my experience, federal funding counter-indicates widespread dissemination. It’s not about federal regulations or policies, not about whether something is open or proprietary. It’s something about federal funding itself that makes people focus on making things without worrying about widespread dissemination. In most cases, if there’s federal funding involved, I expect that nothing much will happen. Oh, yes, there will be invention disclosures and publications and events at which the number of attendees are counted. But actual production of a distributable final work? Not so much. But there will be more grants to do more development work, make more “inventions.”

The same thing has happened in the National Science Foundation’s SBIR and STTR programs. Why don’t these small companies ever get past Phase II and produce commercial products? Perhaps it is because companies that are happy waiting nine months to get a $100,000 grant with audit strings attached aren’t the kind of companies that generally get to commercial sales. Perhaps companies started on a business model of getting SBIR and STTR grants find that getting grants is easier than producing commercial product. Next year there will be more grants, and grants are the thing that the company is good at getting. It’s like feeding the bears in Yellowstone Park. It’s becomes easier to steal picnic baskets than to hunt up real food. Everyone becomes a Yogi Bear.  Continue reading

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Who Owns Digital Learning Resources?–4

Now let’s deal with “digital” educational works in the context of university intellectual property claims. This is something I’ve spent a couple of decades dealing with.

The Department of Education published its final rule in January 2017, requiring open licensing of final versions of works prepared in the Department’s competitive grant programs, with some exceptions and an opportunity for appeals. The implementation of the final rule is at 2 CFR 3474.20.

There are a couple of big observations to make at the outset. First, if someone doesn’t like the idea of open licensing of final work prepared with the support of the Department of Education, then he or she (or it, in the case of organizations) can seek elsewhere for funding. No one is forced to take Department of Education funding. Just move on. In my experience working with university-hosted research of digital media and other works of authorship, most of the effective dissemination programs I have seen have been ones that have not received federal funding.

Federal funding counter indicates “technology transfer.” Nothing in the federal regulations appears to matter one way or another. Folks that seek out federal funding are not the folks that are primed to do much of anything else but seek out more federal funding. The same is true of the SBIR and STTR programs. The National Science Foundation cannot figure out why its SBIR grantee companies don’t create commercial product. Well–it’s easier to get another SBIR grant! And SBIR grant proposals only have to look better than other SBIR grant proposals. If one really did have a great product idea, then being happy to spend nine months waiting for $100,000 with a bunch of audit strings attached is often  a bad sign. Just saying.

Second, the Department of Education open licensing requirements are simple to work around. Prepare a final version of a work under grant, release it as required via an open license, and then prepare a new, revised version not using Department of Education funding–add a user interface, correct bugs, add useful extensions, give the new version a distinctive name and put it out on a web site or distribute through a major publisher. The new version will swamp out the open version. It would take a determined group to develop the open version in competition with a revised, corrected, and extended version. Department of Education open licensing requirements make this workaround express. Continue reading

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Who Owns Digital Learning Resources?–3

Plotkin moves on to make another good point–that “Big Pharma is the Model.” And it is–but the model is something other than the Cohen-Boyer patents that Plotkin launches into. Plotkin does not appear to recognize that Cohen-Boyer gene-splicing inventions were not made under Bayh-Dole. Or that the patents were licensed non-exclusively to everyone at very low cost. Or that Stanford consulted with industry representatives before filing patent applications. Stanford did not “lock down” the inventions and (as far as I know) did not even bother with requiring universities to take a license. Whatever the pace of genetic medicine based drug approvals, that pace had nothing to do with patents on Cohen-Boyer inventions. Gene splicing and “accurate genetic information” are, other than the common use of “gene,” worlds apart, technologically speaking.

a transition that has many rent-and royalty seeking university technology managers and investors sensing a potentially lucrative new opportunity.

Now this is an area I know well. Most university technology managers couldn’t find lucre in software or digital media if it bit them in their nerveless tails. They are friggin’ clueless. No, the lucre is not what motivates them. What they are concerned with is having their administrative power undermined by research work that is not required to move through their hands. They put a thumb in every innovation pie “as a service.” Yes, they insist on such things. Continue reading

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