Getting it clear on the Stanford v Roche decision

While the history of the work to create the Bayh-Dole Act is always fascinating, the intentions and later reasoning about the law by advocates for legislation does not necessarily translate into the intention of Congress, nor to the actual language of the law, nor into the clear sense that the Supreme Court made of the law.  The substantial effort to patent and license by universities–an effort that often and by university policy outstrips the reasonable sense and self-interest of the inventors themselves–is not material to the interpretation of the law.  Well, er, I guess it is if you want the law to be different than it is, or you don’t want to accept that many universities are in breach of Bayh-Dole’s standard patent rights clause and are, by policy and practice, intending to frustrate the purposes of the law, misstate the law and its operation, and mislead faculty and the public as to the reasons why a university takes ownership of federally supported inventions.

With regard to those federally supported inventions, the standard patent rights clause provides that  inventors own their inventions, consistent with federal patent law and federal research grants policy–both Circular A-110 and the Bayh-Dole Act.  This is not a matter of personal opinion but rather is the Supreme Court’s opinion.  That opinion counts, as it shapes the interpretation of the law.  The Court’s reasoning is clear throughout.  Read the decision.  The text is at http://www.supremecourt.gov/opinions/10pdf/09-1159.pdf

Here are excerpts, with my boldface, that make the case as clear as day:

Although much in intellectual property law has changed in the 220 years since the first Patent Act, the basic idea that inventors have the right to patent their inventions has not. (6)

Nowhere in the Act is title expressly vested in contractors or anyone else; nowhere in the Act are inventors expressly deprived of their interest in federally funded inventions. (8)

Stanford asserts that the phrase “invention of the contractor” in this provision “is naturally read to include all inventions made by the contractor’s employees with the aid of federal funding.” Brief for Petitioner 32 (footnote omitted). That reading assumes that Congress subtly set aside two centuries of patent law in a statutory definition. It also renders the phrase “of the contractor” superfluous. (9)

We have rejected the idea that mere employment is sufficient to vest title to an employee’s invention in the employer. Against this background, a contractor’s invention—an “invention of the contractor”— does not automatically include inventions made by the contractor’s employees. (10)

The Bayh-Dole Act’s provision stating that contractors may “elect to retain title” confirms that the Act does not vest title. 35 U. S. C. §202(a) (emphasis added). (11)

The Bayh-Dole Act does not confer title to federally funded inventions on contractors or authorize contractors to unilaterally take title to those inventions; it simply assures contractors that they may keep title to whatever it is they already have. Such a provision makes sense in a statute specifying the respective rights and responsibilities of federal contractors and the Government. (11)

The isolated provisions of the Bayh-Dole Act dealing with inventors’ rights in subject inventions are consistent with our construction of the Act. Under the Act, a federal agency may “grant requests for retention of rights by the inventor . . . [i]f a contractor does not elect to retain title to a subject invention.” §202(d). If an employee inventor never had title to his invention because title vested in the contractor by operation of law—as Stanford submits—it would be odd to allow the Government to grant “requests for retention of rights by the inventor.” By using the word “retention,” §202(d) assumes that the inventor had rights in the subject invention at some point, undermining the notion that the Act automatically vests title to federally funded inventions in federal contractors. (12)

It would be noteworthy enough for Congress to supplant one of the fundamental precepts of patent law and deprive inventors of rights in their own inventions. To do so under such unusual terms would be truly surprising. We are confident that if Congress had intended such a sea change in intellectual property rights it would have said so clearly—not obliquely through an ambiguous definition of “subject invention” and an idiosyncratic use of the word “retain.” (14)

The Supreme Court firmly establishes that “elect to retain title” does not mean “the institution has the right to take title” or that “title has already vested with the institution.”  The ruling means that title to inventions made with federal support vests in inventors, not institutions.  It is a private matter, not a matter of federal law, whether the inventors assign title to the university or to any other qualified agent.

Any statements past or present that purport to repeat the old claims that universities must have ownership of inventions to comply with Bayh-Dole are simply bunk. In the past, they were perhaps misguided.  Now, if they remain up and unrevised, they are simply defiance of the law, rather a kind of contempt of the Supreme Court decision.

We can drill it down:  universities do not own invention rights under Bayh-Dole.  Universities do not have a mandate to own inventions rights under Bayh-Dole.  It is not an objective of Bayh-Dole that universities own invention rights.  It is not a secret unstated but everyone knows objective of Bayh-Dole.  Universities do not necessarily advance innovation or economic development by taking ownership of inventions rights.  Innovation does not necessarily advance through licensing of patent rights.  Innovation certainly does not necessarily advance by universities exclusively licensing to monopoly speculators.

When you see continued restatements of Bayh-Dole to imply that it is the federal government’s will and desire that universities take ownership of faculty inventions as expeditiously and early as possible, know what the truth is.  A university may choose to take ownership of inventions, but it has next to nothing to do with Bayh-Dole, other than that once an ownership position is taken, folks understand that Bayh-Dole does not force a university to give up that position, short of a failure to meet the reporting and diligence requirements of the standard patent rights clause.

With the ruling in Stanford v Roche, the Supreme Court made repeatedly and absolutely clear that the arguments that have been advanced by AUTM and a number of universities are simply wrong.  To be blunt, because bluntness here is indicated since the arguments persist in being made, AUTM and participating universities have been wrong on the law and wrong on the federal policy that the law is meant to enable.  Their business now should be actively and promptly to remove or revise their policies, agreements, and public statements to conform to the Supreme Court’s ruling, not be to persist in promulgating now demonstrably wrong and legally unfounded interpretations of Bayh-Dole and the standard patent rights clause.

The Bayh-Dole Act applies to federal agencies.  It shapes their funding agreements with contractors such as universities.  It transmits obligations to universities by means of a standard patent rights clause developed by the Department of Commerce.  That patent rights clause, inserted in each federal funding agreement, controls a university’s obligations with regard to inventions for each federally supported project.  The critical requirement in the standard patent rights clause, and which is not found in the Bayh-Dole Act proper, is that universities are to require their employees who may invent to make a written agreement to protect the government’s interest, including signing paperwork “to establish the government’s rights in the subject invention” (37 CFR 401.14(a)(f)(2)).  An inventor cannot do such a thing if the law is interpreted to give each university host for the research outright title to such inventions.

It is this agreement at (f)(2) of the standard patent rights clause, and not any requirement made by the university to assign patent rights, that controls the inventor’s obligations.  This agreement is an integral part of the patent rights clause, and for the purpose of inventions, makes university employees “contractors” under the definition of “funding agreement” and “contractor” given in the standard patent rights clause and in the Bayh-Dole Act proper.  Inventors are “contractors” with regard to their inventions every bit as much as their university employer.

Bayh-Dole Act and the implementing regulations provide further support for this understanding.  Inventors may be allowed to “retain title” in the event that they do not assign title to any other agent and provided that the federal agency has a policy that permits the inventors to retain title (35 USC 202(d) and 37 CFR 401.9).  If the inventors are allowed to retain title (that is, the title they have had all along by operation of federal patent law), then the agency is to treat them as if they were a small business contractor under the Bayh-Dole Act—they are conditional contractors all along, awaiting only their decision as to whether to assign title to an approved agent, and in the event they choose not to assign, then the agency’s decision not to require assignment.  There is no absolutely no requirement in the law that agencies must make universities make inventors assign to the university.  The requirement in the patent rights clause is that university employers are to require employees to protect the government’s interest, not the university’s interest.

Under the standard patent rights clause, it is up to the university (or other agent approved by the university) to obtain ownership of an invention if it wants ownership.  The arrangements may be voluntary or required by the institution.   When Bayh-Dole was passed, most arrangements were voluntary.   If the university does indeed acquire title (no demand in policy is necessary), then under the standard patent rights clause, it may elect to retain that title.  Nothing in the standard patent rights clause, or in Bayh-Dole, compels inventors to give up their rights or mandates that universities compel inventors to give up their rights.  “Elect to retain title” does not mean “elect title”.

The greater challenge in all of this, however, is to persuade faculty investigators and university administrators to recognize the tremendous opportunity that is presented by the Stanford v Roche decision.  Universities right now have an opportunity to restore to a healthy, creative balance the collaboration between faculty inventors and industry that was the foundation for the Bayh-Dole Act, and which it carefully, and now clearly, reflects.  Rather than retrench behind a discredited interpretation that has produced needless administrative overhead and caused a great deal of misunderstanding and even bitterness in invention matters, universities are now provided with the chance to revisit, rethink, and rebuild approaches to inventions and innovation that are based on cooperation, not compulsion.

 

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