Equity Policies and Ownership Policies, Part I

In 1962, the dominant concept addressed in university patent policies was that of “equity” in inventions.  By 2012, fifty years later, equity has largely vanished from these policies, replaced by “ownership.”  In 1962 most universities did not have a patent policy, and by 2012, many have created such policies.  Here are typical statements from policies in effect in 1962 that illustrate the use of the concept of “equity” in inventions:

The University shall have an equity in any patent obtained by any person if the development of the patent involved the substantial use of University facilities or funds.  (University of Southern California, 1961)

An alternative procedure may be used by any inventor who prefers to prosecute the patent action himself instead of utilizing the Foundation.  In such case, however, the equity owning to contributions of the University and others must be considered…. (Delaware, 1958)

Payment of salary for normal academic work and use of facilities normally available in the teaching departments and within the University shall not form the basis of a claim of equity by the University. (Western Illinois, 1962)

Equities of participating parties.  It is the policy of Purdue University, with reference to all creative endeavors of its staff members and students conducted on its time or with its facilities, to recognize the interests of the University, the staff member, student, sponsor and other cooperating or participating agencies. (Purdue, 1955)

If a member of the University faculty or staff desires to obtain a patent on his own responsibility, he may file an application for the same whether he has consulted the General Patent Committee or not, but he will be expected to furnish promptly to the General Patent Committee a copy of any such application and a copy of the patent when issued.  The Committee may raise the question whether the University has an equity in the proceeds of any invention.  It is expected that the determination of the character and the amount of University’s equity shall take into account the use of University materials and facilities and the relationship of the invention to his regular employment.  (University of Iowa, 1949).

The Institute will not construe the payment of salary or the provision of normal academic environment as constituting grounds for equity by the Institute in such invention. (MIT, 1952)

The equity of any faculty member, employee or student who makes an invention and the equity of the University shall be established in conference with the inventor.  Unless there are unusual equities, division will be made as hereinafter provided.   The University will consider that it has an equity in any invention which is developed in the course of research supported by funds or utilizing facilities administered by the University or any other invention which is handled through the University.  The University will consider it has no equity in inventions where are patented by the inventor on his own initiative and which are not developed (even though intellectually conceived) in the course of research supported by funds or utilizing facilities administered by the University.  The payment of salary, scholarships and fellowships or similar stipends will not of themselves constitute any basis for an equity by the University in an invention. (Princeton, 1961)

In such event, the determination of the character and amount of the University’s equity in any such invention will be settled in conference between the Patent Committee of the Foundation and the member, or members, of the University concerned. (Cornell, 1952)

To give the flavor for the change, here are a few recent policies from some of the same universities:

Unless otherwise stated in this Policy, the University is the owner, under federal and California law, of all intellectual property created by members of the University community which is:

*created or developed during the course of an individual’s responsibilities to USC, including works made for hire; or

*created or developed pursuant to a sponsored agreement or pursuant to a written agreement to transfer ownership to USC; or

*created or developed with the significant use of University facilities, funds, resources or supplies.

Members of the University community own intellectual property that is developed on their personal, unpaid time, in the absence of any sponsored project agreement or other agreement giving rights to USC, and with only incidental use of University funds or facilities.  (University of Southern California, 2001)

One might note, as well, the unrevised implication (made explicit later in the policy) that federal law gives the university ownership of patents, when the Supreme Court two years ago rejected that claim.  A similar claim is made in the current Iowa policy:

On behalf of the University, the UIRF shall assume ownership of patents to qualifying inventions. In order for the UIRF to assume ownership, inventors subject to this policy shall assign to the UIRF their entire right in the invention and shall provide reasonable assistance to the UIRF in obtaining patent protection and in licensing the patent rights to others. In the case of qualifying inventions arising from federal research support, this assertion of ownership rights follows from federal law. In other contexts, the University’s right to require assignment from its employees or appointees will be understood as a condition of employment or appointment. Similarly, the limited right of the University to claim ownership of patents in inventions made by students will be understood as a condition of enrollment, whereas the limited right of the University to claim ownership of patents to inventions made by institutional visitors will be understood as a condition of their access to institutional resources. (University of Iowa, 2009)

The aim of the policy is to lay out the conditions under which the university takes ownership of inventions, rather the equity in inventions when a faculty member (or other invention) chooses to patent the invention.  These are not subtle changes.  Indeed, they turn everything on its head.  In the one case, a review takes place only if a faculty member seeks a patent, while in the other, the invention is claimed outright by the university, and the claim is a made the condition of some affiliation with the university, without regard for whether any inventor desires that a patent be taken out on the invention.

Here is Princeton’s current policy:

1) The University shall own all rights in any discovery or invention resulting from research carried on by any Faculty member, employee, or student

a) in which all or part of the cost thereof is paid from University funds or from funds administered by the University, or

b) which is made as a direct result of University duties, or

c) which has been developed in whole or in part through the utilization of University resources.

2) All such discoveries or inventions must be disclosed to the Office of Technology Licensing as soon as practicable.

3) The Office of Technology shall determine that such discovery or invention be either:

a) assigned outright to the discoverer or inventor in the event the discovery or invention does not meet any of the criteria set forth in paragraph 1) above;

b) assigned outright to the discoverer or inventor if determination is made that commercial exploitation is not warranted

c) transferred to one or more patent management organizations with which the University has contracted for commercial development or marketed by the Office of Technology Licensing;

d) forwarded to the outside sponsor if such action is required under the terms of a sponsored project agreement or by law. (Princeton, 2012)

Fifty years earlier, Princeton’s patent policy stated simply:  “It is not the University’s policy to take title to an invention or patent.”  Research Corporation was the contracted agent, and inventions were referred to Research Corporation for management.  The policy that has replaced it claims ownership of everything–even what the policy does not claim–and then decides whether to keep that ownership based on issues of commercial value and requirements of contracts or, of all things, law.  What law would require the university to keep ownership or give it up?

While the Princeton patent policy claims ownership, there is no assignment step–it is as if the policy can simply extract ownership out of inventors by declaration.  Yet the policy acknowledges a possible assignment step to be made by the institution–to the inventors, to an agent, or to a sponsor.   It is an excellent instance of the hairball ownership theory.  Here, the university by policy claims ownership of all inventions, even ones that its policy does not authorize ownership of, in which case, the university will “re-assign” such inventions.  How very strange.

In all, the transformation of university invention practice from informal to formal policy, and then from equity policies to ownership policies, has been dramatic.  The shift from equity to ownership took place sometime in the last fifty years.  Some universities had ownership policies almost from the start.  But of those that had a formal policy in 1962, most were based on equity not ownership.  Something happened, though, since then, so that nearly all universities in the United States have adopted an ownership model.  The apparatus for institutional ownership and exploitation of patents is substantial compared to that of considering the equities among the participants, once a decision has been made to seek patent protection.

A second article in this series explores the differences between equity policy architecture and ownership policy architecture, and a third considers how the Bayh-Dole Act has been exploited to effect this transformation in university patent policy and what might be done by way of new policy that supports rather than feeds on innovation.

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