The first part of this essay showed how the architecture of the Institutional Patent Agreement differs from the new structure introduced by the Bayh-Dole Act. An IPA was a master agreement while Bayh-Dole was embedded in patent law, applied to agencies, and was implemented agreement by agreement through patent rights clauses. Part I then works through differences in scope and definition of “subject invention” between an IPA template and Bayh-Dole and shows that the changes bear the marks of a particular style of university-affiliated patent broker, one that seeks to “protect” inventions from use in order to improve profits through licensing and for that purpose seeks to expand the scope of federal claims to remove inventions from conventional, and generally liberal, approaches to inventions left in the hands of faculty policy makers and faculty inventors.
To get Bayh-Dole passed, the advocates had to omit what they knew would be objectionable in the IPAs. The idea must have been that once the bill was through Congress, these things could be added in later. Thus, Bayh-Dole rather than stating things in clear terms, defers key elements to what is now the Department of Commerce to draft–not only implementing regulations but also the patent rights clauses themselves. In this way Bayh-Dole authorized the creation of a standard IPA, but then devolved it to each funding agreement rather than preserving an IPA as a master agreement covering all work with a given institution. Once Bayh-Dole was passed, Norm Latker, who had spearheaded the effort from within the NIH, moved to a position where he would be responsible for drafting the implementing regulations. What he may not have anticipated, however, was the battle he was to experience with the agencies over what would go into those regulations. It was not going to turn out to be the straight shot that the university patent brokers had imagined to back fill the regulations with the parts of Bayh-Dole that would never have gotten through Congress. As it was, plenty enough never made it through.
The implementing regulations, and the standard patent rights clause, therefore, should be read not as merely procedural boffin drafting, but rather the debris left from battles among opposing forces. The debris are assembled, and put into a condition of operation, as something of a compromise, leaving it to practice, and agency interests in compliance, to determine what actually would happen. Having had to omit much in the text of Bayh-Dole, and finding themselves unable to add everything back that they wanted in the regulations and standard patent rights clause, the advocates for Bayh-Dole settled for ambiguity, relaxed reporting and licensing compliance, and a declawed march-in provision that was expected would never be able to operate.
Ownership of inventions. The second important aspect of the IPA and its differences from Bayh-Dole has to do with ownership. The use of “of a contractor” to denote ownership has been discussed in the context of “subject invention.” But the IPA went about things very differently. In section IV, the IPA identifies two “supplementary patent agreements.” These correspond to the SPRC requirements regarding subcontracts at (g) and agreements made by potential inventors at (f)(2). The correspondences are not so dramatic as the differences.
In both the IPA and Bayh-Dole, there is a need to distribute the obligations that attend the oddity of American patent law, that inventors even when employed own rights to their inventions as personal property. This is the position taken by the US Constitution (Article I, Section 8) and for the most part federal patent policy has not strayed from this position, but for a brief bout with concerns over atomic and nuclear weapons at the start of the Cold War. For subcontractors, it is a matter of flowing down the obligations. But the IPA and Bayh-Dole are world apart on the effect. In the IPA, the Grantee is required take assignment of any subcontractor’s inventions. In Bayh-Dole, the practice of using federal funding as leverage to gain ownership of subcontractor inventions. Compare:
(1) The contractor will include this clause, suitably modified to identify the parties, in all subcontracts, regardless of tier, for experimental, developmental or research work to be performed by a small business firm or domestic nonprofit organization. The subcontractor will retain all rights provided for the contractor in this clause, and the contractor will not, as part of the consideration for awarding the subcontract, obtain rights in the subcontractor’s subject inventions.
This is an express rejection of the IPA pattern of dealing. The subcontracting language is not in Bayh-Dole. It is the result of a debate that overturned the IPA approach. This is a debris field. Someone’s ship got sunk here.
The treatment of inventors runs into a similar challenge. In the IPA, the matter is handled directly and expediently. A patent agreement by the potential inventors is required:
And later, this requirement is reaffirmed. The agreement covers reporting and creates an obligation to assign, and when the Grantee university decides to file, then it is required to require the assignment that has been promised by the inventors-to-be under the patent agreement:
The university, the Grantee, is required to require assignments of subject inventions. Contrary to one’s expectations, this is likely a clause that came from the universities and their patent brokers, not the government. That is, this is one of those fine examples in which it is convenient, to seal something in local policy, to request that the government require it.
But there is more going on here, beyond the requirement to assign. That requirement is restricted to subject inventions on which the Grantee “elects to file any patent application.” The election is not of “title to an invention” but a decision to file a patent application. The Grantee must decide to file a patent application, and having done so, to comply with the IPA must go get an assignment. The inventor is required to assign title when the university has decided to file a patent application. One might add, that the assignment would be especially useful if it were to pertain to a patent application that has been drafted and is ready to file. That is, the decision to file a patent application ought to be made when there is an application to review, to determine that in fact the claims that are proposed are consistent with the costs and benefits of seeking a patent. But of course, other practice is possible.
Bayh-Dole and the SPRC deal with things differently. Here too there are signs of an effort to expand university claims, and an effort to thwart that expansion. Bayh-Dole is silent on assignment. Other than “of the contractor” which indicates that at some point the contractor will have to obtain ownership in order to have an obligation to report inventions or have a right to retain title in inventions, there’s nothing to indicates how inventions are to be assigned. It’s difficult to believe that the patent lawyers working on the bill would have just plum forgot about assignment, especially when it is sitting there so ripe in the IPA. Assignment was omitted, to be dealt with in the patent rights clause, which was to be the analog of the IPA, except different, and better. Here’s the (f)(2) provision in the SPRC:
(2) The contractor agrees to require, by written agreement, its employees, other than clerical and nontechnical employees, to disclose promptly in writing to personnel identified as responsible for the administration of patent matters and in a format suggested by the contractor each subject invention made under contract in order that the contractor can comply with the disclosure provisions of paragraph (c), above, and to execute all papers necessary to file patent applications on subject inventions and to establish the government’s rights in the subject inventions.
This is ambiguous as one can get. There is little obvious reason for it, given the language of the IPA. Something is going on. Removing the qualifications and details, we get:
(2) The contractor agrees to require, by written agreement, its employees . . . to disclose . . . and to execute all papers necessary to file patent applications on subject inventions and to establish the government’s rights in the subject inventions.
There is no agent identified for the filing of patent applications. An inventor would not need to be required to sign paperwork on patent applications that the inventor had chosen to file, so the requirement must be to cover the case that the inventor would rather not file and that someone other than the inventor is making the decision to file. The final requirement, furthermore, is like the signing of paperwork that an inventor must sign (at least before AIA), the acts of “establishing the government’s rights in the subject inventions” is direct: it pertains to actions that the inventors are to take, not the university-as-contractor. Otherwise, the language would be simply that of the IPA–assign to the university.
There are questions with regard to the nature of the written agreement. Is it a written agreement between the university-as-contractor and potential inventors? If so, it is limited to certain employees and is not nearly as broad as the IPA assignment clause, which is directed at “all persons who perform any part of the work” except “clerical and manual labor personnel.” In the IPA, there is no restriction to employees: those obligated could be students, visitors, volunteers, informal collaborators. In the SPRC, the written agreement obligation is restricted to certain employees, an important difference. If the government wanted all rights, why leave out what the IPA had already covered? Clearly, again, someone pushed back on the IPA and prevailed.
Finally, as I have discussed elsewhere at length, is the matter of just what the written agreement is. University administrators have routinely considered the obligation to be to get an agreement to assign inventions to the university out of everyone, employee or otherwise, again “just in case” but really “to serve administrative expediency in obtaining all rights in an invention without having to negotiate for those rights.” But the language here is not that of the IPA, and not that of a master agreement. Under the IPA, a university administrator need only obtain an agreement to assign once for each of the “personnel” who might work on federal grants. But Bayh-Dole’s obligation to get a written agreement is enabled for each funding agreement. There is no master agreement. The law itself is silent. There is no federal mandate to get assignments in general, once for all. Bayh-Dole is directed at the agencies, not the universities, and not the inventors. It reaches to neither university nor inventor, but for the definition of “subject invention.” This is a huge departure from the IPA.
Under the SPRC, the obligation to require written agreements arises *after* a funding agreement has been put in place, not before, as in the case of the IPA. That obligation is itself a requirement of each funding agreement, a condition of the funding. The written agreement clearly must involve the employees, who are the ones making the agreement. But the (f)(2) obligation does not identify who is on the other end of the agreement. It’s free-standing. (f)(2) does not require the university to agree with its employees that they will do these things–report subject inventions, file applications, establish government rights; rather, (f)(2) requires a commitment by the employees that they will do these things, as if the university is a third party in the matter.
The written agreement arises in section (f), which is headed “Contractor Action to Protect the Government’s Interest.” The contractor, the university, must require the written agreement, but it functions not as a requirement to assign to the university, which would make the final requirement utterly inoperative (since there is no point in signing paperwork to establish the government’s rights in an invention one no longer owns), but rather as part of the patent rights clause, just as does the subcontracting clause. In both cases, the university is required to flow down the SPRC and not take an institutional interest in the inventions as a condition of the award of federal funds. In the case of the subcontracting clause, this is made express, and directly opposite of the practice in the IPA template. In the case of employees, the reversal of language is just as clear.
There is nothing in (f)(2) or the SPRC generally, or Bayh-Dole, that provides the university with the standing to condition the written agreement required in (f)(2) on the provision of resources and release of the federal funding to do perform the work under the grant. Under the terms of the federal funding agreement, the university has already agreed to provide the resources and release the funds to the faculty investigators who proposed the work and by means of direct and indirect cost accounting, has agreed it has been fully compensated for doing so. Consideration that one is already obligated to pay cannot be made consideration for a subsequent agreement. That is, if I am obligated to pay you money, I cannot use that money, as well, as consideration that binds a contract on something else. Similarly, if a university is obligated to provide facilities and resources and employees to do certain work, it cannot make such provision a pre-condition for requiring assignment of inventions to the university.
To use an old but useful vocabulary, the university has no equity in any invention made with federal support. None. The effect of (f)(2) is to confirm the release of any such claim to equity by confirming that employee-inventors have the right to “establish the government’s rights” and that any interest that the university might have in such inventions is not established by the SPRC. Under Bayh-Dole, unlike the IPA, agreements to assign inventions to the university-contractor are voluntary. What is made a requirement is that employee-inventors, like subcontractors, have obligations to the government, just as the university does, under the SPRC.
The written agreement in (f)(2) functions as a delegation of key bits of the SPRC from the university to its employees, at least to those in which the government has identified an interest. Under that delegation, employees when they invent take on a bit of the SPRC pertaining to knowledge (that an invention has been made (i.e., conception and reduction to practice) and has been made (i.e., one or both of conception or reduction to practice were stipulated in the statement of work, or distracted or diminished that work), and as well pertaining to what only they have the right to do when an invention is made–to sign the paperwork declaring that they are the true inventors, and to establish the government’s rights in inventions, provided they do not dispose of the inventions first in a way that permits a university or invention management agent to retain title. The university cannot do these functions for the inventors or without the inventors. Only when the university obtains title to an invention that is reported in sufficient detail for a patent application to be filed (or thereabouts) is it able comply with the obligation to report the invention to the government and to take over the responsibility of “establishing the government’s rights.”
If all this seems complicated, there is a reason. It is not turgid drafting–the IPA is perfectly clear and it only takes brute copying to translate that language to the SPRC. This is a pile of fragments from a power struggle with regard to what the power of the federal government is going to accomplish. Should that power force university inventors, as with subcontractors in the IPA, to assign all their rights to the university? Or should that power do something else, such as focus on the rights that the government requires to do its business and watch out for the public interest, and leave alone how universities or any one else comes to have ownership of an inventor’s work? It is this latter position that wins out in the text of the SPRC. The defeat however is not accepted by the university patent administrators, who misrepresent the written agreement requirement in (f)(2) to be exactly what it was under the IPA, when clearly it is nothing of the sort, and it would have been easy to make it that sort if anyone been allowed to do so.
The consequence of this change runs deep. Perhaps it is another simple thing. In the IPA, the university is tasked with deploying inventions “in the public interest.” In the SPRC, such a requirement is dropped. It is the government that takes on the role of supervising the universities and their patent agents. The universities and agents are to pursue their patent licensing as if an unseen hand will guide their institutional self-interest toward the optimal public benefit, as if what applied to individual liberty might also apply to the institutions that were devised to protect and promote that liberty when they act in their own self interest rather than that of those that participate in their activities. Thus, in the objectives of Bayh-Dole, we find
to ensure that inventions made by nonprofit organizations and small business firms are used in a manner to promote free competition and enterprise without unduly encumbering future research and discovery
to ensure that the Government obtains sufficient rights in federally supported inventions to meet the needs of the Government and protect the public against nonuse or unreasonable use of inventions
These clauses are directed not at industry, but at the universities that stand to obtain patents on federally funded inventions and will be allowed to operate without direct federal agency oversight. The universities, in Bayh-Dole, abandon their role in protecting the public interest, in favor of the pursuit of profits from patent licenses. These statements in the objectives of Bayh-Dole are not the only part that reflects this change. The IPA was full of protections that the universities managed to relax or eliminate from the SPRC. We turn to these in Part III.