Personal ownership of inventions is a matter of federal common law and a personal right to a patent on that invention is established in the US Constitution. The Bill of Rights also provides that the government cannot take property without due process and just compensation. State laws in various states place limits on what an employer may require of employees by way of assignment of inventions, as a condition of employment.
Now let’s ask the question–if a public university, that is, an instrument of government–requires assignment of inventions as a condition of employment, but the employment does not involve duties that would pertain to the invention, is that a taking of private property without just compensation? I think so.
Of course, one can argue that the employee has agreed to the deal, so of course it is fine. But in states like California and Washington, labor law limits what an employer can claim. Employers cannot just claim everything, say there was a deal with the employee that the employee accepted, and call it good.
Here are some points to consider:
In company employment, the company (generally) directs the work, approves it, decides on matters of publication, disclosure, and use. The work is done for the benefit of the company. The employee is a servant of the company. The company has a line of business.
A university faculty member may be an “employee” but not in the company sense. The faculty member’s research is not at the direction of the employer, and not for the employer’s benefit (unless expressly commissioned). The employer does not decide what is to be published or disclosed. The employer does have a line of business, but it is teaching and administrative duties, including the administration of research. But the employer does not have a line of business in specifying research.
It is a fiction that the research done by faculty at a university is “done by the university.” It is done by faculty members (and others that they ask to work with them), released from other duties to undertake research and scholarship. In fact, where there is release time, funding for it comes from other sources–donors, sponsors, their own pockets, and the like. Not generally or primarily from the university. When an extramural project is funded, it is the sponsor that pays for faculty time on the project, and pays 1/3 more in indirect costs to cover the university’s expenses in administrating the project and providing facilities support. Research supplies and equipment are generally paid for by grant funds.
It is a fiction that these supplies and equipment are the “employer’s.” Of course, they are in some sense–but they are not provided to faculty for research in the same way that a company employer provides such resources.
The analogy of employment of faculty with employment in companies is very limited. We should be mindful that faculty in universities have a long history of relationship, and that relationship has served very well to permit universities, over the centuries, to continue to be responsive to the changing needs of society. During the same time, most companies with master-servant polices of employment, have come and gone. It may well be that the form of university appointment, with broad personal control of direction and purpose, provides universities with much of their adaptive response to changing conditions. The smarts are at the periphery. The direction is set at the borders.
University administrators do not decide when and how faculty members may publish. Rather often they argue against the imposition by sponsors of suppression of publication. Thus, for university research, there are no trade secrets owned by the university (unless other things are put in place). In all, this sort of “employment” that faculty have for research must be reasoned from according to what actually takes place on the ground, not from some abstract (and company-like) version of “employment.” When a research explorer is told by his (or her) “employer” that he (or she) is to go out into the world and explore, but the cost of doing so has to be found somewhere else, and a measure of success will be how much money one does find somewhere else, the activity of that exploring is hardly for the benefit of the “employer.” The employer’s benefit, in such circumstances, is the portion of the funding that offsets any bother that the employer has in allowing the employee to go off exploring.
Now add “technology transfer” to this mix. Not the “technology transfer” that means teaching capable audiences how to practice what you know, but rather the form that means “take ownership and license for profit.” If universities adopted technology transfer policies of the former form, they would encourage exploration and ask for an account of what was accomplished, and use those accounts to encourage further activity. But universities have generally adopted policy directed at the second form and have increasingly asked themselves how they can get more IP, deal with it more efficiently, and maximize the income relative to the costs. Don’t let anything slip away. Nothing out the back door. Nothing, certainly, that someone says is worthless (they may be lying or confused). Get things cleanly, exploit it without being delayed or blocked, and limit accountability for anything that doesn’t work out. Celebrate the successes, and share proceeds with inventors (but not others) if there ever are any proceeds, which there often never is (funding gap, innovation capacity, lack of faculty training or cooperation… you know, the usual excuses).
In fact, most universities do not have a technology transfer policy or an innovation policy or an economic development policy tied to their research programs. Aspirational statements, yes, but policy guidance, no. Instead, they have “patent” policies, or “intellectual property” policies, into which various claims directed at technology transfer or innovation or economic development, or, better, the production of discretionary funds. And as we have seen at various points, their policy statements (link 1) are (link 2) incoherent (link 3) a lot of the time.
The general operating model of a technology licensing office is to receive invention reports, evaluate them for suitability for investment, and strike a deal for those that look promising with those offering the work. Universities have improved on this model by demanding invention reports, insisting on owning anything they want–reviewed or not–and pre-stating the deal–inventors do not have a voice, get a standard share whether they do a lot or little, and that’s that. Oh, and they get no share if there’s no deal at all, and they have to pay to get their inventions back, if the university even is willing to contemplate such a thing. In other words, university administrators have sought to nail down the licensing office as a monopoly. In this they have transformed an important service into a powerful servitude. If you think it’s just a technical difference, we can have a chat about slavery sometime.
It is a fiction that a university making money on patent licensing is doing something “in the public interest.” This circumstance can be distinguished from a university benefiting from a patent license. In the former, the university sets out to make money. In the latter, the university does something else, and is recognized for that by someone dedicating a portion of patent income to the university. It is not the making of money that is in the public interest, but the dedication of money to the university. It is the dedication, not the making, that is in the public interest. Subtle? Is this all too subtle? Is it a fine line?
The new-style compulsory technology licensing office takes as its “business” to “make money on anything that university policy provides for it to own.” Make that as broad as possible–inventions, software, data, know-how, expertise. Make that as early as possible–at employment. Make that as unavoidable as possible–present assignment, these days, with a claim of ethics violation if one attempts to resist.
What does this compulsory approach do to the employment situation? Does the mere presence of a technology transfer office with a compulsory binding to policy change the nature of faculty employment? That is, are faculty hired to teach and explore (on someone else’s dime) but once there is a technology licensing office, then they are hired to invent, too–that is, not just to do good things for the public by inventing, but rather inventing for the particular benefit of the university’s financial condition? And that’s “the public benefit”?
Imagine a company employer. Say, a company that makes trucks. It hires workers to design trucks, build trucks, and sell trucks. It has a patent agreement with its workers and requires assignment of everything that they make with company resources, in company facilities, and pertaining to the company business, which is trucks. But now imagine that the company also adds a technology licensing office, with a compulsory binding to employment, and adds, further, that employees have to disclose everything they invent, whether it has to do with trucks or not, and that since the business of the technology licensing office is to make money on everything, that the company’s business now is everything, too, not just trucks. Therefore, the company claims the right of assignment not just what’s done for the company, on company “time,” with company facilities, or even if not, in the general area of “trucks”–but now, everything, with the implication (if not express idea) that the employees owe their inventions to the company so that the company may benefit. This is just the kind of behavior that is illegal in the Washington and California. Yet it is also what university technology transfer offices are doing by creating compulsory ownership policies with pre-stated deals.
The question is: can the addition of a technology licensing office with compulsory requirements change the conditions of employment such that workers who formerly were not hired to invent, now, with the existence of the office, are hired to invent–not just in their area of employment, but in any area that they might invent in, because the technology licensing office is interested in all areas?
I think the answer is no. What do you think? I think that the employment deal for university faculty is utterly unlike the corporate model of employment, and is even more constrained as to what an employer can require as a condition of employment. Even what “employer facilities” and “supplies” means is different when those facilities and supplies are paid for by sponsors and donors and not by the employer. When the work is initiated by the employees, without direction or supervision, and not by the employer. For research, though the university may be the administrator of funds, it is not an employer for the purposes of intellectual and other intangible property–not for patents, not for copyrights, not for trade secrets.
If that’s the case–that the university is not a research employer unless it expressly hires or commissions someone to conduct a study for its own benefit–then any claim to ownership of research assets based on employment fails. There has to be some other basis for the claim. We know that Bayh-Dole also does not require university ownership. Thus, for all federally funded research (other than the stuff with exceptional circumstances or under a special works or similar rights in data clause), neither employment nor federal funding creates any obligation to assign rights to the “employer.”
We may also look at how universities handle other sponsored research–with foundations and industry, especially. Here, many universities demand, in their negotiations with the sponsor, that the university will own the results of the research–inventions, software, data, reports. Yet the university does not have a basis in employment for such ownership. That creates a problem. Now in order to comply with the terms of the research, the university has to impose the ownership assignment on those that participate in the research, even though it was they, not the university, that proposed the work, and even though they are not working at the direction of the administration in doing the work.
How does it come to be that the university has authority to demand ownership of work by means of such a contract? In particular, consider public universities. Is it not just a taking? It truly does not matter whether the university asserts the taking directly or asserts it in a negotiation with a sponsor. It doesn’t even matter if the sponsor demands that the university must own. It’s still a taking. It’s not employment. It’s research. The university is providing administrative services. But it has decided also to take ownership. I think there should be due process (including notification and provision of reasons) and just compensation, which cannot be at the whim of the university, cannot be imposed on a pre-set schedule that doesn’t consider the value of the property being taken, and cannot be for nothing, eventually.
Think about the pre-set royalty sharing schedule most universities have. It’s one thing if a university has a policy that says, if you want us to handle your invention, then our standing deal is this: we will own, we will try to find licensees, and if we do, and they pay us, we will share with you, but if they don’t, then we are all out our efforts and expenses, us more than you. It’s another thing entirely to make this deal compulsory: then the pre-set deal is that there could be compensation or nothing at all and there’s nothing you can do about it.
Imagine–I am the Govt and I want your house. So I say, here’s the deal: I take your house, and if I ever resell it, I will give you a share of the net from the sale, but I never have to sell it, and you can’t make me. That’s not “just compensation.” That’s just taking. It’s only “just” if you offer your house to me, the Govt, knowing those are the terms. That’s the deal that a compulsory technology licensing policy offers. It’s a taking, but not with just compensation, unless the folks getting took decide, after the fact, that they are okay with it. Otherwise, what is “just” when a claim is imposed is a matter of *valuation*–the market value, the commercial value, of the property–and for inventions, that is the net present value of potential licensing deals. That’s what the public university owes the inventor under a compulsory licensing office approach. Not some future share of income but with no obligation to get that income.
With the GASB Statement 51 coming into practice, public universities are going to be pushed to document and value the intangible assets they hold, including inventions. That’s going to mean that there is going to be a great potential for fraud. If the universities state a fair market value, then they should owe that market value to the inventors now, not at some future point that may never arrive, and they should be responsible if that market value later wanes if the invention languishes unlicensed, unpracticed, undeveloped. If, however, the universities decide to under-value their inventions, then there’s a huge problem with the accounting practices, something auditors ought to be paying a lot of attention to. It does matter. GASB 51 requires the identification of “assets acquired or created primarily for directly obtaining income or profit.” Here’s a slide from a CSU talk by Chris Ray of KPMG that lays out the basics. (The full talk slide deck is here.) That would include compulsory obtained inventions subject to a pre-set royalty sharing policy. It should be interesting to see how public universities straddle the accounting–they will have to report value, and they will have to deal with how they acquired such assets without providing compensation.
This then is the problem for public universities claiming ownership of inventions. As you may have surmised, I don’t think they should be claiming ownership–as a matter of social policy, as a matter of innovation, as a matter of what’s right. But I also think, for public universities, the whole approach lacks standing under the Fifth Amendment. Oh, I know, only snarky attorneys are supposed to be able to read the Constitution. But it’s there, and it says due process and just compensation and inventions are personal property of inventors. I also am keenly aware of the arguments such as:
calling something “employment” grants an exception to the Constitution
public universities should use the same strategies as private universities and companies
it’s a great thing for universities to own inventions, so whatever argument works is fine
no one reads the Constitution except loser patriots, snarky attorneys, and delusionals
it’s “just” compensation because folks agree to all the policies when they are employed
no one has objected, so it is okay to do until the courts stop it
Perhaps there is a well reasoned, nuanced, coherent argument. I’m willing to bet that if there is (doubtful), no university licensing administrator or legal counsel is capable of making it.
If the deal is, folks truly want universities to lose their distinctiveness and end up operating like companies when it comes to innovation–accumulate a pile, try to make money from it–then fine. Pick any of the above and we’re done. If, however, you think that someone other than the steward should make the decision that the steward should also be king, then we need to get at the arguments that end the present practice, at least for public universities, and push them back toward the productive, distinctive role that they have had and should have–that we need them to have.
The way I see it, if faculty are not hired to invent, and the facilities that are provided to them for research are paid for largely by sponsors and donors, and that they are released from other duties to do research for the benefit of the public, then the faculty are not IP employees. They are not servants of the university administration. They are not hired to invent. Their activity is not dedicated to making the university financially richer by means of invention licensing. Their research activity is not employment activity, even if it is approved within the scope of their appointments as members of the faculty. Their inventions, discoveries, software, data, and articles are not for the benefit of the administration, just as their art, their novels, their architecture, and their textbooks are not for their university administrators. These sorts of output are for other purposes.
It’s a fine question, then: who should decide on ownership? Perhaps principal investigators rather than inventors. Perhaps sponsors rather than principal investigators. Perhaps a big wheel spun in the quad on Friday afternoons. But let’s get it clear that it should not be administrators who have been asked to provide logistic support for faculty research work, and most definitely not administrators who have been told to go make money on inventions by licensing, favoring monopoly licenses without regard to the later effect on innovation. If there’s a glaring institutional conflict of interest, it’s in universities demanding ownership of inventions for the purpose of pursuing their own financial interests. Talk about a self-destructive behavior, one that violates the public trust, sets up faculty as somehow bad players (inept, gullible, unethical, selfish–you know, what AUTM argued in SvR), and argues against public support for university work.
If employment is not a legitimate basis for claiming university research inventions, and if Bayh-Dole doesn’t support it, and if the royalty sharing schedule is not an acceptable substitute for just compensation, and it just seems odd, if not a little creepy, that government innovation policy in America must somehow be that an administrator has to touch every good idea before it can prosper–if all this, then just what is the legitimate basis for public universities claiming ownership of IP outright? Doesn’t exist. I am not going to try to make something that sounds plausible, but I do want someone to give it their best shot. Skip the arguments outlined above, as they stink. But come up with something rooted in how the community prospers when universities grab as much as they can, as early and often and expeditiously as they can, and then some magic happens that makes things just plum, and how this plumness just far outweighs anything else and at the same time doesn’t walk one over to a dictatorial state that does not value personal property nor individual freedom and most especially does not value these things in the people who one would expect would be among the most capable, independent folks around, at public universities.
We have a logically broken system. Like other things in the university these days, it is largely not thought out, confused in opportunistic ways, and rationalized in superficial claims that on inspection fall apart. It is a kind of corruption. Not necessarily dark heart, deceitful, greasy palm sort of corruption. But certainly a kind of convenient inattention, a sitting on the hands to see if anyone will notice, a political scheming in pursuit of what appears like personally rewarding ways of dealing. Chipping away at an old model of independence, freedom, and breath-taking inspiration and replacing it with a patched together model of servitude, control, and process that aspires to comprehensive bureaucratic efficiency and then cannot comprehend for a moment why, at each point, it is met with opposition and misfortune. Just with more money, more training, more “industry” people, more industry “cooperation”–why then the model would work.
The model won’t work, any more than it can be a happy place under a dictator. I suppose it all depends on what you mean by happy, as in “life, liberty, and pursuit of happiness.” For my part, in this business, I will value freedom, even if that means losing out on some big haul of cash. Yes, the compulsory model produces income, from time to time. Innovation even happens in the face of it. Slaves can build pyramids. But it is not a model that can work for long. It is not even that it is operating “sub-optimally” any more than dictators could do a better job if they worked at it. It’s simply the wrong path. We have been going down this path for nearly thirty years. If your institution is on it, remember the 10 ways to deal with it. It is time to get off that path, to frustrate that path, to show it up as a bad thing to be doing. Time to have a real discussion of the options, to reason from what we know, with some humility for what we do not know. This should start with public universities, which have the greatest reasons to be open, and the weakest reasons to be compulsory. Take the Fifth, folks. Personal ownership, due process of law, just compensation, or base your technology involvement not on glorifying compulsory IP taking, but rather on celebrating liberty.