Getting Closer to the Heart

What is the purpose of university intellectual property policy?  This question is not idle.  For decades, Archie Palmer worked to get universities to adopt formal patent and research policies, publishing accounts of various university policy statements, together with commentary on the nature of the various approaches universities took to such things as invention ownership and patent management.  When Palmer started his efforts, few universities had policies.  When he retired, most had some policy statement, even if it was to confirm an institutional disinterest in patents.  Why then policy statements, and not, for instance, patent agreements or employment contracts?  After all, in companies, a policy is not the means by which a company asserts an interest in inventions—rather, companies use employment agreements, patent agreements, non-disclosure agreements, and non-competition agreements with personnel to establish, in an enforceable contract, what it is, exactly, that the company will obtain from anyone participating in the company business.  That is, companies use contracts, not policies.

A policy, generally, states an organization’s expectations with regard to an area of activity.  A policy therefore may set forth guidelines, may delegate responsibilities and authority, and may authorize certain practices.  A policy may assert control, but it does not create a contract.  That is, it is not enforceable as a matter of law unless in a particular context the policy is used to form a contract with others, who rely upon the policy being followed in the conduct of their own actions.

Why would Archie Palmer then advocate for patent policies rather than patent agreements?  There is a huge difference in focus.  If a policy expresses a guideline, or a delegation, or an authorization, it may be seen as a way for a university to acknowledge the importance of inventions, to allocate resources to support the development of inventions, and to provide inventors and others with some clarity with regard to what claims the institution might make on an invention or the proceeds arising from an invention.

Generally university policy claims were of two forms:  some universities disclaimed an interest in inventions and forbade their faculty, especially in medical fields, from seeking patents.  Others considered inventions a private matter for the faculty, but believed that if the institution had specially commissioned or supported a given patentable invention, that then the institution should have an “equity” interest in the proceeds arising from the exploitation of any patent on the invention.  The “equity” interest of an institution rose to a claim of ownership only when the individual doing the inventing had been expressly hired to purse the invention—hired to invent, under administrative direction.  In such cases, the university asserted the right to own in a patent agreement made at hiring.  Otherwise, patent law provided for a “shop right” as the appropriate equity interest in an invention made by an employee using the employer’s facilities, supplies, or proprietary information—that is, the employer should have the right to practice such an invention for the employer’s own benefit, essentially a limited non-exclusive, royalty-free license arising as an equitable remedy for the employee’s use of the employer’s resources.

University patent policies, then, were constructed as a means to state the university’s administrative protocols for dealing with faculty patenting.  If a policy asserted ownership of inventions—and few did—that ownership claim was directed at work done in the course of assigned duties, a form of “hired expressly to invent.”  “Normal” academic work was typically excluded.  Added to such a claim might also be a policy statement regarding “significant” use of university resources.  Such use might include a dollar figure, or it often required as an express condition of significant support an express agreement governing matters such as equity and ownership in any resulting inventions.  In any case, these policies stated an administrative requirement on the administration of inventions and patents.  That is, there remained a need to enter into agreements with faculty and others to give effect to guidelines for administrators, and a review of circumstances to reach agreement as to whether the conditions of the agreements were met.  In a few states, such as Florida and Ohio, laws were passed to give regents and trustees the power to create policies that required assignment of inventions to the university, but even here, the actual means by which title to inventions came to held by the university was a written assignment signed by the inventor.  Federal patent law, following the US Constitution, places ownership of inventions with the inventors.  No state law can supersede this initial condition.

State law can authorize the state to seek assignment of inventions, but to do so, the state must navigate the requirements of eminent domain—the taking of private property for a public purpose—or it must be viewed as a means of delegating the responsibility for obtaining ownership of inventions to state officials who are authorized to negotiate a voluntary agreement by which the state obtains assignment in exchange for agreed upon consideration.  A university policy follows in much the same manner.  A policy, if not a contract, is not an enforceable agreement with an inventor:  it is, rather, an enforceable condition on the administration of the institution.  That is, a policy of the institution is generally interpreted against the drafting party, against the institution, on behalf of anyone dealing with the institution.   To be clear, although a policy sets out institutional preferences, the policy does not impose those preferences on others, but rather imposes those preferences on its own officials.  To the extent that those officials are given discretion to interpret the policy, waive the requirements of the policy, or otherwise are not constrained to act at all times within the policy, it becomes clear that the policy is little more than an anchor for expectations and is not even a reliable requirement for administrative officials.  Much less so, then, can such policy be considered enforceable on others—whether employees, faculty, students, visitors, collaborators, or the general public—in whatever effect an administrator decides to give the policy statement in any given circumstance.  If a policy were regarded to act in such a manner, it would amount to little more than the delegation to university officials to have powers that transcended law, disregarded the need for contracts, and instead merely required that whatever was asserted was, in fact, both policy and enforceable using legal means, or by threatening privileges, standing, reputation, or employment.

In a company employment setting, such powers are considered against public policy.  A number of states have passed laws expressly designed to limit employer demands in employment agreements with regard to the scope of inventions in which the employer can assert an ownership interest.  See, for instance, Illinois (765 ILCS 1060), Washington (RCW 49.44.140-150), and California (Labor Code 2870-2872).  An employer cannot merely assert that, because an invention made by an employee might be valuable, the employer therefore has the right to own that invention.  The employer’s claim must be limited.  Of course, if there is not an employment agreement, then the employer’s claim simply is not enforceable.  The same is true if there is not an express agreement on inventions.  Employment is not sufficient, nor is an employment contract.  A university patent policy might state what a university administration desires, but the policy itself does not become part of the employment agreement with any given faculty member unless it is intended by both the administration and the individual faculty member to become part of the agreement.

It is important, then, to draw a clear distinction between a policy statement and the formation of a contract with any given individual.  While a university and individual may indeed include a policy statement present at the time of employment in an employment contract, the university may not unilaterally later change the terms of the contract.  That is, the university may change its policy statement as it chooses, but the changed statement is not then part of the employment contract previously entered into with any employee. In Shaw v The Regents of the University of California, the court was express on this point:

When a public employer chooses instead to enter into a written contract with its employee (assuming the contract is not contrary to public policy), it cannot later deny the employee the means to enforce that agreement. . . .

We also reject the University’s argument that the Patent Policy is a mere personnel policy which it may modify unilaterally. Although the University is entitled to revise its Patent Policy, it cannot do so with respect to Shaw because of its written agreement with him. . . .

Having made the Patent Policy a part of its written agreement with Shaw, the University may not unilaterally revise it as to him.

Thus, if a patent policy is to become part of an employment contract, then the university is not at liberty to impose policy revisions on employees with whom it has previously contracted otherwise.  If the policy is not part of the employment agreement or a patent agreement, then it is simply not enforceable on individuals and represents institutional preferences or guidelines or delegations, or authorizations, but is not a document that controls anything having to do with an inventor’s obligations to the university.  The document may restrict an institution’s claims; it may not extend those claims to become enforceable on individuals who happen to invent.  Any effort to do so anyway, to threaten or punish individuals for refusing to accept the reach of a policy claim that is otherwise not legally enforceable, amounts to racketeering, a kind of shakedown in which individual assets, well-being, or employment standing is threatened in an attempt to give effect to a policy that simply has failed in the purpose to have standing to be enforceable.

The same is true of a policy that, even if added to an employment agreement, carries a clause that permits the policy to be altered and remain binding, or permits a university official to decide later what the clause is to mean, or how it is to operate, or the circumstances to which the clause “actually” refers or how the clause was “intended” to be understood.  In any of these circumstances, the clause amounts to a demand for an “agreement to agree.”  Agreements to agree are not enforceable.  They are not contracts.  In the case of a public university, as an instrument of the state, an action to take an invention—a form of personal property—anyway, without regard for an enforceable contract to do so, is an eminent domain taking, and to be legal must follow due process and must carry just consideration.  In such a setting, “due process” and “just compensation” are not matters for the university to assert as additional matters of its policy—it that were the case, a university could merely assert that due process was the act of taking the invention, and just compensation was $0, or whatever the university decided to pay, without regard for the value of the invention at the time of the taken.  Thus, a university might assert that a royalty sharing schedule was just compensation, even though that schedule had no regard for the value of the invention being appropriated and depended entirely on the university’s later decisions with regard to exploitation of the invention and associated patents, which under its own policies it typically has no obligation to exploit, or if it exploits, to make any money to be shared with the inventor.  A university, for instance, may enter into a patent license that pays out nothing more than the costs of obtaining the patent, which the university pockets, by policy, and therefore has nothing more to share with the inventor as “just compensation.”

In a situation in which a university and inventor enter into an agreement by which the inventor will assign an invention, for the agreement to be a contract, there must be consideration for the assignment.  Setting aside the persistent university demand for ownership, it is an important exercise to understand exactly what forms that consideration.  If there is no payment that reflects the value of the invention at the time of assignment—and most university patent policies pay nothing unless there is a patent license that produces income—then the consideration must be in duties undertaken by the university, or services provided to the inventor that have not otherwise already been obligated to the inventor or are required by law.  Thus, if a university accepts a federal grant and therefore commits to the government to provide to the investigative personnel the resources required to carry out the specified program of research and acknowledges reimbursement by the government for such resources in the form of indirect cost payments, then the provision of those resources is already obligated and paid for, and cannot also be used as consideration that makes the patent agreement binding.  Similarly, if a university attempts to make the patent agreement obligations a condition of employment, so that continued employment is the consideration for the assignment of future inventions, then there must be an examination of employment, with regard to faculty members, to ascertain whether they were hired to invent, and whether their activity in the conduct of sponsored research, as with the federal government, is in fact “employment” for the purposes of inventions (patents) or works of authorship (copyright).

In the case of copyright, faculty in producing works of authorship are not generally subject to employment supervision:  the university as employer does not assign the work, direct the work, review the work, require the work to be done during working hours, require the work to be done only with university resources, restrict what the research personnel may disclose or who they may collaborate with, approve the work product, or expect, generally, to use the work product for the university’s own purposes.  In short, for copyrights research and scholarship, other than as expressly assigned and agreed to by individual faculty members, a university is simply not an employer, does not behave as an employer, and in fact it would run against public policy and the conventions of academic freedom for a university to claim that it intended to control faculty work as would an employer, and it would also run against fact that faculty members had expressly agreed to such control as a condition of their appointments to the faculty of the university.

As for inventions, absent an express assignment to invent, an employer must establish that an employee’s invention relates to the employer’s business or used the employer’s facilities.  For a university, what then is the “employer’s business”?  Certainly it is not “making money off any invention a faculty member might make.”  Similarly, it is not “anything that a university administrator says the university is in the business of doing.”  Nor is it “anything that university faculty might take an interest in.”  If that were the case, then any employer could ignore state laws aiming to protect employee inventors from such abuse by simply stating that whatever employees might do, that, too, is part of their work for the company and therefore the business of the company.  It would be a mockery of the law and the public policy on which the law is based.

All the more so for universities in their dealing with faculty, who are granted tenure, who are assured of academic freedom, who are appointed with an understanding that they are independent of institutional control on their areas of interest, and who are not restricted by non-compete agreements, non-disclosure agreements, or administrative ownership of their work unless they expressly and voluntarily agree to such restrictions in specific circumstances.  Thus, “employment” as used with regard to inventions has to be more than the mere fact that a faculty member is also called an “employee”—it must include an examination of the scope of work to be done for the employer as distinct from the activities that a faculty member might engage in as a member of the faculty.  That is, a faculty member is appointed.  Employment covers a certain set of activities that a faculty member may engage in within the scope of and during that appointment.  Even more narrowly is the employment for purposes of producing inventions for the administration, or in the line of the administration’s business (presumably, providing instructional services and resources as needed or requested by faculty to engage in activities expected of faculty), or using facilities or resources that have not already been obligated to faculty consistent with their appointments.  That is, an administration cannot simply assert that a condition of employment is that faculty assign their inventions to the university when that is not a condition of faculty appointment, is not evidenced in any statement of a faculty member’s duties, and for which a university already and independently has made commitments for the provision of resources.  One might argue, in fact, that the commitment goes entirely the other way:  no faculty member would agree to an appointment unless the university as a condition of the offer of the appointment also provided both the salary and the facilities with which the faculty member was to operate.  Provision of facilities is part of the conditions of the offer of a faculty appointment, not part of the payment for employment that covers a claim to own all inventions made by faculty using those facilities.

It should be clear from this account that a patent agreement must carry its own consideration.  That consideration must be independent of what is already obligated.  That consideration has to be firmly established, enforceable, and not subject to the whim of the university.  Without consideration, there is no contract.  Without a contract, the claim to own is not enforceable.  Without an enforceable claim, any attempt to take is a shakedown, a bullying, an abuse of power, or in the case of state instruments, eminent domain taking, and typically done contrary to law.

In a company setting, the business of the company is generally established.  An employee is just that, an employee, not a faculty appointee with the prospect of tenure, with academic freedom, without obligations of secrecy and non-competition with regard to work produced.  The company directs the employee’s work, reviews and controls that work, and decides what work may be disclosed or used.  That setting is not the university setting, and does not operate by analogy with faculty just because university patent policy statements are made that make it appear thus.

It is thus essential that, apart from voluntary assignment of inventions, a contract with clear, stable terms and proper consideration be established.  Such a contract cannot merely be a requirement to conform to a patent policy, however it may be changed or interpreted or waived or unenforced or breached.  Such a contract cannot claim everything that a university administrator might want.  Such a contract cannot be in conflict with commitments of the university to faculty, such as to academic freedom and tenure, not to mention the broader public policy matters of state control of scholarship (in the case of public universities).

The reason that universities have patent policies, aside from Archie Palmer pressing them to have them as a sign of a mature, thinking research university, is that they did not—and still generally do not—have a form of activity suited to the demands an employer may make of employees. Faculty are not simply employees, and for the most part of their work, there is no enforceable patent agreement that would require assignment of their work to the university, and where such agreements exist, they cannot be changed merely because a university decides to change is patent policy, nor is the agreement represented changed because a university unilaterally decides to change the history of what it intended, regardless of what the words read, or especially what the words meant to a reasonable reader at the time they were made part of a patent agreement.  Thus, universities have patent policies because they did not have patent agreements, and were not set up for patent agreements, and still are not.

The present conditions of university patent policies is thus one of gross distortion.  The effort is being made to turn patent policies into ever-changeable contracts with employees.  The reasoning must be something like this:  since you rely on university policy for matters such as tenure, you must therefore also accept the university’s demand in policy to own your scholarship whenever it decides to own it.  Such reasoning, if it exists, fails to note the difference between a policy that offers a benefit on which one might expect to rely, and a policy that attempts to take personal property that otherwise was never committed to the university as part of the arrangements by which an individual agreed to join the university’s faculty.  To be “employed” as a faculty member is merely a metaphor.  A faculty member is paid a salary, and is expected to engage in activities suited to being a member of the faculty.  The actual bits that might constitute “employment” or “official duties” are remarkably narrow and have nothing whatsoever to do with inventing, unless there is an express statement to that effect at the time of hiring.  For most faculty members, employment and official duties have to do with obligations to teach, advise students, to serve on university committees and participate in university governance, and to engage in research.  What research they do, and how they do it, and how they deploy their findings is not part of their official duties, not part of the “scope” of their “employment,” since the university, as “employer” has no actual duties or rights as their “employer” for such purposes.  This is not a defect.  This is by design. This is an essential characteristic of the university and one of its great strengths.  No amount of meddling by administrators in patent policies and abuse of words such as “employment” and “business of the university” can overturn these design elements, just as the assertions of policy do not become enforceable contracts with faculty members simply by assertion, or by threat, or by misrepresentation.

At present, university patent policies are made to appear to be contracts, when they are not.  If they are contracts, then they cannot be unilaterally changed by the university.  If they are contracts, then they must carry consideration that has not already been obligated to faculty or is required by law or other contractual arrangements.  If they are contracts, then they cannot have shifting or ambiguous scope, unilateral interpretation by the university, or may be enforced or waived at the university’s discretion to the disadvantage of the faculty member.  If they are contracts, then they cannot be so badly written that no one can make sense of them, other than a continuing theme of institutional ownership and control whenever the institution so asserts.  Such conditions are merely restatements of the requirement that faculty agree to agree with the university administration.  These are little more than an institutional assertion of power over individuals with regard to their inventions, lacking the proper procedures, promises, clarity, and consideration that attend properly formed patent agreements.

Given that the faculty have no reason to accept such an administrative assertion of power over their scholarship, unless in specific cases they expressly agree to such arrangements, the present effort to make university patent policies enforceable on faculty—as distinct from enforceable on the institution itself—represents a fundamental failure to comprehend the creative situation in which faculty work.  University patent policy exists to constrain the institution, to provide protocol and delegation to supply faculty with resources that might support their work, otherwise and inventive.  Such policy exists as a necessary alternative to combined employment and patent contracts that would purport to control faculty work.  Such policy exists because academic freedom and tenure require policy to be used, not contracts, to manage the fundamental relationship of faculty and their university.  Such policy exists because it is at the heart of the university to use policy and not corporate-style contracts.

One might argue that while university patent policy is not the heart of the university, it does image that heart, a kind of ultrasound that shows the functioning of the heart of the university.  The attempt to turn patent policy into a contract antagonistic to faculty independence and assurance of appointment is also antagonistic to the heart of the university, to the public idea of a university.  It is a shame that money-seeking from inventions could have such a hold over university administrators—and apparently also over some faculty—that they would trade the heart of their institutions in order to create corporate control over faculty work generally, all in pursuit of money from monopoly positions on faculty work.

The frustrating thing is that we have to go through such a complexity of arguments to beat down what is on the face of it simply wrong, inappropriate, unfounded.  Is this the legacy of the scam that underlies the Bayh-Dole Act?  Or is it simply an urge to make money (not that it does make money) that is more important than, say, respect for creative work or the various strengths of a university?  It would appear that the Bayh-Dole Act was used to undermine the role of patent policy and replace it with a requirement, claimed to be a federal law, that the university own faculty inventions made with federal support.  Once it was claimed that university policy had to comply with such law, then it had to appear to take the form of an enforceable contract–enforceable because it (purportedly) carried the force of federal law, not because it was a meeting of minds with mutual offer, acceptance, and agreed upon consideration.

The (f)(2) agreement in the standard patent rights clause (37 CFR 401.14(a)) requires universities (and nonprofits and small businesses) to delegate to their research employees certain obligations with regard to federal government interest in inventions made with federal support.  That delegation includes the right to establish the government’s rights in subject inventions.  That delegation makes inventors parties to the funding agreements by which their work is supported.  University administrators have turned this (f)(2) requirement into a federal demand, or mandate, that universities own faculty inventions when supported by the federal government.  The Supreme Court threw the whole notion out, and thank-you Roche for spending the money to get that squared away.  But that ruling has not changed the underlying problem of the scam:  that a class of folk fixated on making money from patents more than anything else in the university continue to pursue the use of university patent policies as if they are suitable mechanisms by which to coerce faculty to give over ownership of their inventions.  To resist means putting one’s reputation, standing, employment, academic tenure, and freedom at risk.  To accept means to cease being a faculty member and becoming a mere employee, working at the beck and call of administrators.

Patent policies are properly used to restrict university claims on inventions, to delegate to university officials powers to support inventive work, and to provide protocols by which, if the university is to have an interest–whether in equity or ownership–in any invention, that respect the independence of faculty and the voluntary nature of any such arrangements.  Patent policies exist at universities because employment agreements with integrated patent agreements are inappropriate–if not impossible–for general use with faculty.   University patent policies exist because universities have no compelling need to own, or to control, faculty scholarship, inventive or otherwise.  University patent policies exist to provide benefit to faculty, and to the broader community, beyond what might be expected by the defaults of federal laws and the particulars of any single arrangement that might be contemplated.

It is an abuse of patent policies to attempt to turn them into contracts, or to enforce them on faculty as an adverse action.  To the extent that university administrators continue to misrepresent federal law and ignore eminent domain procedures, the abuse of patent policies also exposes universities to substantial financial liability, if not, at some point criminal charges.   More to the point, beyond all these fine complexities, the stark reality is that institutional control of creative work is utterly adverse to innovation.  A bureaucrat’s finger in every pie is no sound national policy for research innovation.  It may be that companies find such fingers to be valuable–though historically even company claims on all inventions does not show consistent support for innovation–but the university is different, must be different.  A university is an institution that provides freedom combined with institutional scale resources–stability of appointment, independence of inquiry, freedom to deploy findings and freedom to teach one’s ideas and inventions to others–all without a need to ask permission of a bureaucrat’s thumb, all without a standing demand that bureaucrat decide when and how an invention might be made available.  There is a time and place for company control of creative work.  There is a time and place for a university to offer to assist in the management of inventions, including accepting an ownership position.  None of this requires hapless, incompetent drafting of complicated, overreaching, offensive university patent policies distorted to appear to be binding contracts.  None of this, but for the hapless policies themselves, should require such a long essay to point out the fatal flaws in these sorts of policies.

It would be well for administrators to find a simple moral compass with regard to innovation and follow it.  That compass does not point to more bureaucratic control presided over by a coterie of patent administrators who have shown themselves repeatedly to be incompetent with regard to the fundamentals of Bayh-Dole, patent law, and drafting policy statements, but also narrow, if not foolish, with regard to the broad, wild, mysterious, and unexpected ways in which new things arise in the world and come to be adopted for use.  The maltreatment of faculty under grasping university patent policy is reprehensible.  The disregard for innovation under the pretense of public good hurts the university and in doing so hurts us all.   There are remarkably simple ways of working this stuff administratively, without all the useless, mind-numbing complexities created by the universities-must-own-inventions-by-federal-law scam of the past thirty-odd years.  It’s time to get back to a sound foundation for university-hosted invention.  It’s time for stuff no more difficult than 70s era arena rock.


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