You Make the Call–NIH Version

It’s time for you to test your reading ability with that of the aces at the NIH. Let’s see how well you can do!

Here is NIH guidance on Bayh-Dole compliance for awardees of NIH grants:

The Bayh-Dole Act includes provisions for the grantee to assign invention rights to third parties. Grantees that are non-profit organizations must request NIH approval for the assignment. If the assignment is approved and the rights are assigned to a third party, invention and patent reporting requirements apply to the third party. The grantee should review existing agreements with third parties and revise them, as appropriate, to ensure they are consistent with the terms and conditions of their NIH grant awards and that the objectives of the Bayh-Dole Act are adequately represented in the assignment.

Here is 35 USC 202 (c)(7)(A):

(A) a prohibition upon the assignment of rights to a subject invention in the United States without the approval of the Federal agency, except where such assignment is made to an organization which has as one of its primary functions the management of inventions (provided that such assignee shall be subject to the same provisions as the contractor);

Here is 37 CFR 401.14(a)(k)(1), quoted from NIH’s version of the regulations:

If the contractor is a nonprofit organization, it agrees that:

(1) Rights to a subject invention in the United States may not be assigned without the approval of the Federal agency, except where such assignment is made to an organization which has as one of its primary functions the management of inventions, provided that such assignee will be subject to the same provisions as the contractor;

You make the call. Is the NIH guidance correct?

Yes! You have got it!

The NIH guidance is not correct. Replay overturns the call on the field.

A nonprofit contractor can assign to anyone having a primary function (one among others) of invention management.

We also know from Stanford v Roche and a careful read of 37 CFR Part 400 that inventors personally may assign their invention rights to others without agency approval. Not being “nonprofit organizations,” inventors are not subject to the same restrictions as their university (and other nonprofit) hosts. When inventors do assign, they flow down their obligations under the (f)(2) agreement, if the contractor has complied with that fundamental requirement in the standard patent rights clause. (Stanford, for instance, did not implement the (f)(2) agreement in Stanford v Roche).  Inventors are to be treated as small business concerns according to 37 CFR 401.9:

Agencies which allow an employee/inventor of the contractor to retain rights to a subject invention made under a funding agreement with a small business firm or nonprofit organization contractor, as authorized by 35 U.S.C. 202(d), will impose upon the inventor at least those conditions that would apply to a small business firm contractor under paragraphs (d)(1) and (3); (f)(4); (h); (i); and (j) of the clause at Sec. 401.14(a).

The contractor (f)(2) flow down to inventors protects the federal agency’s interest in the invention.

As provided by federal policy (and respected by federal contracts), inventors own their inventions made with federal support. Mere employment is not sufficient to transfer ownership–whether legal or equitable title–to an employer. Further, federal contracts include a requirement, which contractors accept as a condition of the award, that the employer must authorize inventive employees to act to protect the government’s interest in inventions. To accomplish this purpose, the employer must delegate to the employee any right that employer otherwise may have obtained from the employee (or demanded from the employee; or asserted that the employee owes the employer) so that the employee may fulfill his or her obligations to the government. This delegation includes the ability to assign title or grant licenses to the government. If the inventor is delegated these rights, then the contractor sure as rabbit pudding does not have them.

Furthermore, if the contractor does not obtain title to an invention made with federal support, the rights remain with the inventors (along with the inventors’ (f)(2) obligations) pending discussions under 37 CFR 401.9 between the inventors and the funding agency. The contractor has no obligation to obtain title in an invention to which the contractor will not elect to retain rights in order to assign title to the government. Doing so is wasted effort for everyone involved.

It appears that Bayh-Dole is a law that even government agencies cannot get right in their public guidance. It appears that the interpretation bureaucrats like best is: “Make it up as you go, folks, to serve your convenience.” That’s a fine law, now, isn’t it! The implementation of Bayh-Dole has been critically flawed, if not deliberately distorted. And national research innovation has been deeply damaged as a result. Maybe for these reasons alone–no one can even bother to state the law correctly–Bayh-Dole (or at least its AUTM-bastardized version of it) has to go. Thirty-five years of suffocating the national infrastructure for research innovation in the name of monetizing university fiefdoms of patent monopoly. Haven’t y’all had enough of it? Don’t you think it’s time to free the slaves again? Let the players, not the bureaucrats, play the innovation game.


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