The Bitter Irony of Vesting

As you might have noticed if you have followed the development of my discussions on this blog, I have spent much time working through Bayh-Dole, often in association with the Stanford v. Roche case.  As I’ve pointed out, I am much more concerned with how Bayh-Dole is represented in that case than I am with the particular outcomes.

AUTM in particular–and, by that, really, I mean certain people who have chosen to use AUTM as a front for their interests–argues that Bayh-Dole is a vesting statute, that it assigns invention title to host universities as inventions are made, and it is up to universities to follow an apparatus of formalities to keep that title or send on.  The reading of the law that supports this position is more a distortion than anything. “Retain” must mean you already had title rather than the *right to secure title ahead of the government*.  Any “other Act” also means the Patent Act, so emendation without notice.   “Elect to retain title” then means “notify the government that one has title” without further formalities.  And stuff like written agreements made by research personnel with specific obligations to the government under (f)(2) means any old IP policy requiring the university have ownership will do.

If AUTM wins, then all agreements regarding present and future patent rights are thrown in doubt pending actual reduction to practice.   That’s not just employment agreements with universities, but all sorts of things–employment agreements in companies, consulting agreements, agreements to assign inventions to start up companies.   If any part of inventive work touches federal funding, according to the AUTM position, the entire title passes via Bayh-Dole to the university.

One reason for this:  Bayh-Dole concerns itself with inventions that are conceived or first actually reduced to practice with federal funding.   Thus, one could conceive of an invention for an employer, assign it to the employer, have a patent application filed (constructive reduction to practice) and even have that application issue as a patent, and then join a university based federally funded research project and *actually reduce the invention to practice* and ho! ho! ho!, the university holds the entire title, even though they didn’t have anything to do with filing the application.   Not good for private contracting on invention rights.

I have also argued that if Bayh-Dole is a vesting statute, then it’s unconstitutional as it involves a taking of private property for public use without due process and just compensation.    For this, it can’t be that a university’s IP policy forms an employment agreement that is bartered for by research employees, since if Bayh-Dole is a vesting statute, there is nothing for research employees to barter for.   It’s a standard thing in contracts that what is obligated by law cannot be the substance of one’s consideration under a contract.   That’s like your benefit is that I promise to do what the law requires.  There is no need for a contract.

Further, even if one claimed that due process was acceptance of the IP policy at employment, or in seeking extramural research funding, there still is not just compensation if there never is compensation.  The constitution says “compensation” not “consideration”.   One might think, then, that actual payment not conditional payment that may never happen, and not aspirational statements about making an effort or public benefit, counts as “just” even if it feels good in its own way to administrators.  Paying a share of royalties to one inventor out of 20 does not constitute just compensation for the other 19.

Along these lines, I have pointed out that even if Bayh-Dole supports a different reading, one that says title to inventions is as it is under the Constitution, a personal right that may be conveyed by a written agreement evidencing the transfer, the damage has already been done  by AUTM and its band of 40+ universities.    They have argued–definitively in their representation of it–that Bayh-Dole can be read as a vesting statute, and they insist that this is how the read it.  Regardless of whether they are right or not, this assertion counts for something.

The Supreme Court then may decide that elite universities representing some of the cream of the crop simply do not know how to read the very law that forms the foundation of their patenting operations (which would be sadly very true), or in the alternative, regardless of decent ways of reading Bayh-Dole, because these elites insist they can read it as a vesting statute and that they conduct their affairs on that basis (whether they do in practice or not–and I expect not in some cases), then Bayh-Dole is unconstitutional because it permits readings that are unconstitutional.  It is overly broad and therefore must be redrafted to make the taking of personal property conform to due process and just compensation, or exclude such taking altogether.

I think there is now a good chance that the Supreme Court will find Bayh-Dole is unconstitutional based on the reading that AUTM gives it.   Bayh-Dole cannot take title, and it cannot re-scope or void assignments of title (also a form of taking) without due process and just consideration.   In the case of Stanford v. Roche, the due process would have to concern Cetus/Roche, not Stanford.   No matter the deal between Stanford and the government, no matter the deal between the government and the investigators.  Essentially, the vesting argument is that Bayh-Dole takes an invention assignment commitment to Cetus and cancels it without notice or compensation.  The bitter irony is that rather than *paying* for the taking, Stanford’s position is that it should get a quarter billion dollars as a result of doing this under the authority of the federal government.

This entry was posted in Bayh-Dole, Technology Transfer. Bookmark the permalink.