Assigning the SPRC

Melba Kurman asks in a comment to the previous post that I discuss assignment of the SPRC in more detail. Melba has an interesting blog on university technology management, so check it out here. [The blog has been retired–but for some twitter activity].

When a university accepts a federal grant or contract, it also accepts a patent rights clause as set forth by Bayh-Dole. Bayh-Dole requires federal agencies to contract for inventions in particular ways, by using the Standard Patent Rights Clause (SPRC) or permitted variations. The interest agencies have in inventions made with federal support takes the form of a federal agreement.

As an agreement, it is also assignable.  Bayh-Dole makes  clear in 35 USC 201(b) that a funding agreement may be extended by assignment, substitution of parties, or subcontract (“of any type”). Thus, under a funding agreement’s SPRC(g), if a university subcontracts federally supported research, it must include (assign) the SPRC suitably modified for the subcontractor, and furthermore for subcontracts with nonprofits or small businesses a university cannot have any interest in the invention rights acquired by the subcontractor as a condition of the subcontract. Under SPRC (k)(1), a university may assign title to a subject invention but only if it also requires (or assigns) its own university SPRC obligations. (If Bayh-Dole followed, automagically, each extension of federal funding and transfer of title to subject inventions, then there would be no need for such requirements in the SPRC.)

We see that SPRC rights and obligations are transferable–and indeed in some situations must be transferred. This is a central expectation of Bayh-Dole—that agencies are not to require a university to participate in invention management (beyond reporting inventions, educating employees on the importance of timely disclosure, designating personnel responsible for patent matters, and requiring (f)(2) agreements to protect the government’s interest). Bayh-Dole prevents federal agencies from dictating, beyond the SPRC, who the university can work with when it comes to inventions. A federal agency has no express authorization outside the conditions of the SPRC to forbid an assignment of the SPRC.

A university may undertake a transfer of SPRC obligations at any time. A university may, for instance, designate an affiliated research foundation to elect to retain title to subject inventions on behalf of the university. This designation may be prospective—that is, done for all future federal funding agreements, before any invention has been made or acquired by or on behalf of the university. The designated research foundation then may receive disclosures (as the personnel designated by the university to receive disclosures under SPRC (f)(2)), and may take assignment of title (thereby making the inventions subject inventions) and elect to retain that title because the right to elect to retain title under the SPRC has been assigned by the university to the foundation. (See 35 USC 202(c)(7)(A))

Similarly, the SPRC rights may be assigned after a disclosure has been received, after title has been assigned, or even after a patent has been issued. The SPRC restricts such assignments only in the case where the receiving organization does not have as one of its primary functions the management of inventions. Then agency approval is required.

Consider then one further step. A university may have multiple nonprofit subcontractors, and they may be working together—indeed one would expect that they would be. For each, the university must flow down its SPRC obligations and stay out of the way of any invention rights that may arise to the extent those rights are acquired by any one of the subcontractors. Every subcontractor has SPRC obligations, then, and will have to coordinate if they co-invent, and may have to coordinate under the CREATE Act if they invent within the scope of the inventions of other subcontractors or the prime contractor.  That is, in these situations, invention management will have to be coordinated among the various participants, even if Bayh-Dole limits how any one of them may have an interest in the inventions acquired by the others. This is a fact of life. No one has raised a peep in 30 years about it being a problem or difficult or a worry.

Now look at the situation for management of inventions. It can go the same route under the SPRC. This happens all the time in the singular. A research foundation agrees to receive disclosures, and may obtain title, and agrees to pay, say 60% of its earnings after costs to the university. Such a designation may happen entirely outside of Bayh-Dole. But when the university receives federal funding carrying the SPRC, the SPRC for that funding agreement also extends the funding agreement, and therefore the SPRC, to include the research foundation with regard to any invention made in the federally funded project that the research foundation acquires. In this case, the SPRC gets assigned to the research foundation before the

It could also happen in the plural. A university could designate multiple agents to receive invention disclosures, and have a deal with each. Since there is no prohibition on deal making in the assignment of title to inventions, the deal with each could involve a financial consideration as well.

At one time, the University of Washington identified in policy that disclosures could be handled by its technology transfer office, by the Washington Research Foundation (a private nonprofit), and by the Washington Technology Center (a state-run agency with a building on campus). Furthermore, policy identified Research Corporation and Battelle Memorial Institute as organizations that could also receive disclosures and manage inventions for the university. Since then, all of these options have been stripped out of policy but for the technology transfer office. But it was all entirely well formed under Bayh-Dole.

The University of Washington could just as easily have continued to operate with a patent officer and not have created a technology transfer office at all. It would have fully complied with Bayh-Dole, and perhaps in retrospect even had a stronger overall innovation ecology, better relationships with industry, and a greater focus on advocacy for the advancement of research in community rather than, as now, a fixation on making money through “commercialization” rather than, say, public availability of inventions.

The broader point is that Bayh-Dole requires agencies to contract for minimum requirements on university activity. The SPRC can be assigned in whole or in part, with only a few limitations. An innovation program has every likelihood of prospering under arrangements in which the university acquires title to inventions sparingly, and only then upon request of the inventors or principal investigator, and only then when its role is to be the steward of inventions to advance collaboration and community use, especially with research tools, and only then when it has the expertise and resources to do so. The rest it really should decline to do, and  instead should actively seek organizations that are willing and capable to take on such work. If not, the default in Bayh-Dole is that inventions not owned by a contractor fall outside the scope of Bayh-Dole because they are not subject inventions, and those inventions are subject to the statutes and regulations that otherwise apply in the absence of Bayh-Dole and its SPRC.

[This piece holds up well for being pre-Stanford v Roche–I’ve made minor edits for clarity. Prior to the Supreme Court decision, I thought it was possible that Bayh-Dole could be construed to operate by assigning a federal agency’s right to invention deliverables to the institutional contractor such as a university. In that interpretation, each federal agency in effect would designate the contractor to receive interest in inventions made under a funding agreement as if the contractor were the federal agency. The contractor then could require assignment of a given invention within scope because the federal agency had that right (or even obligation under certain statutes). The pathway would then be equivalent, but administratively simpler, to the federal agency receiving assignment from the inventors and then assigning that invention to the contractor, subject to the same conditions in the SPRC. The scheme works on the basis that federal statutes are arranged to require the federal government to receive title to certain inventions, but there’s no general prohibition on the federal government’s assignment of those inventions to others–or delegation of management duties with regard to those inventions. In that case, Bayh-Dole could be said to make uniform the basis on which each federal agency assigned inventions back, or in the scheme, delegated the right to receive assignments on behalf of the federal government.

In this scheme, however, Bayh-Dole would preempt only those statutes that prohibited the federal government from assigning inventions that it had acquired or delegating the right to receive assignments of inventions on behalf of the federal government. In effect, the parts of Bayh-Dole relevant to federal agencies, especially 35 USC 207(a), all but provides for federal agencies to assign both inventions and the duty to administrate inventions. Drafted another way, Bayh-Dole would start with the existing obligations on contractors and their inventors to assign to the federal government and then exploit that obligation in the form of a uniform delegation to the contractor within each funding agreement.

In that way, contractors would be authorized to “take title” as if they were acting as the federal agency, with all the force of law on their side, and the university argument that Bayh-Dole vested title in the contractor would be much closer to Senator Bayh’s amicus brief account. A university would have the right to title that a federal agency otherwise had, with all the statutory authority to request and expect to obtain that title. The vesting argument would still fail–there would still have to be an assignment step–but inventors could not resist that requirement when made by a university contractor any more than they could resist the federal agency’s requirement.

But that’s not how Bayh-Dole is drafted. Bayh-Dole does preempt all other statutes but for Stevenson-Wydler. Bayh-Dole does define a subject invention to be one already acquired by a contractor, not just one made under contract. Bayh-Dole does nothing to indicate that the process of authority to acquire inventions is delegated or transferred from the federal government to each contractor subject to the contractor’s compliance with a SPRC. And Bayh-Dole is placed in federal patent law, which changes the interpretative context. If Bayh-Dole were part of federal contracting regulations, then its point would be to require agencies to uniformly delegate their right to receive inventions made under contract to the contractors. Patent law wouldn’t be involved at all. Just a federal contract switcheroo, as it were.

Funny. I hate how Bayh-Dole is implemented, with its crazy definitions, its disorganized development, its endless loopholes and waivers, its apparently deliberately obtuse and unworkable provisions, the misrepresentations it allows, its lack of public accountability and enforcement mechanisms, with no right of third parties to appeal federal agency inaction or improper action. But here’s a way that the schemers could have nailed it. Of course, Bayh-Dole would have worked more as Senator Bayh described if subject invention had been defined as it was in the IPA program, without the “of the contractor” tagged on.

If the “federal option scheme” I was considering had been used, then Bayh-Dole would not require contractors to obtain ownership of inventions made within scope–it would require contractors to comply with federal agencies’ federal obligations to take ownership–that is, contractors would take ownership on behalf of the federal government, administrate that ownership on behalf of the federal government following the SPRC, and if they were unwilling or unable to do so, then to convey ownership on to the federal government for disposition. That’s not Bayh-Dole, but it sure could have been.

Just sayin’–there are other ways to do things, if one wants to construct a better, happier, more fully realized Moloch state. Why limit the Moloch state when one can delegate contractors to do the Moloching who swear they can out-Moloch even Moloch?!


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