A bureaucrat’s thumb in every hopeful innovation pie

Advocates of the “faux” Bayh-Dole make the claim that the inspired part of the Act is that it gives ownership of faculty inventive work supported by federal funds to university bureaucrats for their fun and profit. I know, I’ve skipped over all the rationales for public benefit and orderly management and the apparent inability of all faculty inventors to be patent and contract experts and the just all around fine idea that managers are better at management than inventors are at innovation. Recently, I came upon this discussion at IP Whiteboard of the Stanford v Roche case and its application to Australia, posted by Martin Ivanovski.  It’s a pretty good discussion, as far as these sorts of web discussions go.  Still, there are things to add:

The case highlights that:

  • US government-funded contractors have to ensure that they take assignment of rights to inventions from all employee inventors as this is not inherent in the operation of the Act;

True, nothing in Bayh-Dole forces inventions from their inventors to their employers. But it is not at all a highlight of the case that universities (in particular) must “ensure that they take assignment” from all inventors.  Perhaps one might put it thus:  if a university is intent on granting an exclusive license, then it better have valid assignments from all the co-inventors. But then, one does not need a law case to know this!  But the point made here is rather different, that somehow universities must have this fixation on monopoly licensing, and this fixation is sufficient to strip inventors of their personal property–their inventions–and hand control of their scholarship to university bureaucrats. What’s the thought behind such doings? What’s the basis for this as good advice? Who does one serve?

  • US government-funded contractors need to be cautious about other assignment agreements an employee has entered into with third parties: priority rules will determine the exact nature of the contractor’s interest in the employee’s inventions vis-à-vis the employee and any third parties;

“Cautious about” is an interesting usage here.  “Aware of” and “ready to respect” might be considered.  Again, it is true:  priority rules will determine what assignment actions and obligations prevail.   Practice tip:  ask “have you obligated this invention to anyone else?”  Also note:  a scope-of-everything present assignment at employment does not relieve one of the need to examine other assignments.  1) such an encompassing scope claim may be illegal under some US state laws; 2) the scope claim may be waived or modified by subsequent university actions, such as accepting a sponsored research or licensing contract, or approving personal consulting; 3) a later present assignment may supersede the former present assignment, based on circumstances; 4) if the university patent policy requires a review step, the present assignment operates later, after the review determines university interest, and not earlier, at the time the present assignment is executed, or when an invention within scope is made.  Any valid assignment made before the present assignment operates would then potentially take precedence.  In short, the present assignment in such a case merely eliminates the effort to request a more specific assignment document directed at the invention in hand, but doesn’t much change the point in time at which the assignment takes effect.  It is a matter of the time to prepare the more specific assignment document and have it executed.  A day or two.

and

  • entities (including Australian entities) entering into agreements with US government-funded contractors that touch on rights in inventions or patents (eg, licences) should consider negotiating a warranty to the effect that the contractor warrants that it is the owner of any relevant inventions and patents.

That will be a tough one to get out of American universities.  It would be easier to get a drink out of a Vogon.   One can, however, often get a representation that to the best of the university licensor’s knowledge, it has obtained assignments to the relevant inventions and patents.  That’s not quite the same thing as a warranty.  So the rep fails–then what?  The license has failed anyway, and one is out on one’s ear.  The warranty is a way to make one whole for such an ear-plant.  Typically universities aren’t willingly going to go in for that kind of exposure.  It might be better to get title insurance and not rely on a trying to get warranty language that shifts the burden.  In the case of a non-exclusive license, so long as the licensor has a right to grant the license, it does not matter much whether the licensor is the sole owner of the licensed assets.

If the arrangement is exclusive, however, then there is more to it than a warranty of ownership.  It is all too easy for a university to also have granted licenses to the inventions in the course of other research and licensing dealings.  For instance, consider an invention that recites a method, developed in Lab A.  Lab B creates a software package that implements the method, and the university releases this software under an open source license like Apache.  Now you, the Australian firm, negotiate an exclusive license to the invention from Lab A, along with the warranty on ownership.  Foof!

Of course, in some playbooks–mine included–universities should not be offering such comprehensive exclusive licenses to method patents that are readily implemented, and companies should be thinking differently about how they acquire university research assets.  But if one is going to go monopoly, then may as well get it right.  An even better take-away point for companies might be:  get your deals on inventions with university faculty before they invent, if at all possible, so long as you don’t interfere with an employment or business relationship.  Make sure the university is aware of these deals.  That limits the need for needing a license later, with all the pain and complexity such negotiations often entail.

In any event, since my comment at IP Whiteboard is so late to their discussion of Stanford v Roche, I include it here as well:

I am coming late to this particular discussion of Stanford v Roche, but have spent much of the past three years involved in aspects of the case.

Folks have to keep in mind that 1) Stanford at the time had a policy that stated that ownership of inventions would be with the inventors “whenever possible”.  That placed substantial limitations on the scope of any “promise to assign”.  Stanford’s claim to ownership under this promise to assign then depends on it not being possible for the inventors to own, such as because a federal law like Bayh-Dole vests ownership with Stanford.

2) the facts of the case make clear that Stanford knew of and approved of the arrangements with Cetus, including the invention assignment provision. Stanford had other relationships with Cetus, including granting Cetus royalty-free rights in any inventions Stanford made using Cetus-supplied assets.  The effect of a vesting argument would have been that Stanford could approve of a commitment of an employee to assign to Cetus, and therefore gain months of access to Cetus’s proprietary, new technology PCR and its research efforts in the direction of HIV intervention assessments, and then apply federal funding to its own subsequent efforts and presto! void its approval of the assignment provision its employee cum inventor had made with Cetus, and which Cetus relied upon to provide access to all that technology and research expertise.

3) Stanford had rights in the inventions via assignments made by other co-inventors.  It could have licensed those rights to Cetus/Roche competitors, or it could have worked a deal to standstill on such licensing in deference to Cetus/Roche meeting market needs with its own products.  Instead Stanford chose to sue Roche for infringement–from a public policy point of view, a bad decision, all things considered.

The Stanford v Roche case is *not* about a present assignment trumping a prior promise to assign.  Stanford imposing a present assignment would not have fared any better, given its “whenever possible” provision for inventor ownership and its apparent waiver of interest with the scope of Cetus’s interest by approving the consulting arrangement.    The case is about whether a law regarding federal funding agreements can void legitimate, private assignments.  Nothing about Holodniy’s assignment violated any Stanford policy at the time that it was made. And there was no federal funding to deal with. The take-home message is that Bayh-Dole does not dictate to contractors how they handle inventions, nor does it assume that contractors would demand ownership of all such inventions.  Rather, Bayh-Dole leaves it to the universities and their faculty to work out invention ownership.

The “exported” version of Bayh-Dole is simply wrong.  Federal law does not vest invention title with university contractors.  The “exported” lesson from Stanford v Roche that universities must now also have air-tight, iron-fisted upfront present assignments is also wrong, and is suspect public policy.  It certainly is not federal policy.

The fundamental issue to take up is:  when should universities expect an express assignment of invention from faculty, student, and other personnel?  In the case of state universities, the question becomes:  when should the government assert control of scholarship that happens also to be inventive?

In the big wide swing of things, it appears that keeping university bureaucrats (no matter how nicely trained) out of early ownership of faculty inventions is a good thing, and keeping governments out of ownership and control of scholarship is also a good thing.  There will always be those with an urge to power, and order, and process, and accumulation, and for these, federal law is attractive, and lacking that, then demanding all rights from  academic inventors seems only natural–“the employer should have the benefit of the fruits of the employee’s labor”.  Even though academic investigators do not work for the benefit of their employer–they propose the research, and they request release to conduct the work, and the employer does not direct or approve such work.

But more than that, it is a disturbing kind of “natural”–innovation more often benefits from freedom than captive bureaucracy, and in this regard, “a bureaucrat’s thumb in every hopeful bit of innovation pie” seems to be an absurdly foolish national innovation policy.

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