There are plenty of jewels in Gene Quinn’s recent opinion piece. Perhaps the readers at IP Watchdog are all true believers in Bayh-Dole, so Mr. Quinn does not feel much need to work hard at what he writes. Here at Research Enterprise, the rather different aim is to document the evidence, check the arguments, be skeptical of things that sound too good to be true, and be honest about the uncertainties. Yeah, a different mindset.
Here’s another observation Quinn makes:
If a company cannot own title to the innovation they simply cannot afford to engage in the commercialization research necessary.
Let’s parse this claim a bit. First, “innovation” is the wrong term here. The opinion piece concerns Bayh-Dole and Bayh-Dole is about the management of patentable inventions made with federal support. Innovation is not the subject of Bayh-Dole. Promoting use of inventions by the use of the patent system is. Innovation currently can mean adoption of something new, or the commercial offering of something new, or a new structure of business, or a new social habit. Or, as Benoît Godin describes its historical use, “an introduced change to an established order.” Patentable inventions may be owned (by means of the patent), but innovations are not owned. They happen, they exist. So Quinn is working loosely, or carelessly.
Now let’s look at the major claim of the assertion–if a company cannot hold title, then the company cannot afford to invest. This is not a generally true claim. Companies invest all the time in standards, in generic methods, in technology that’s licensed-in. Open source software demonstrates how companies invest without ownership. Ownership is not the driving factor–what matters is freedom to practice.
But flip this argument around another way. If Quinn is right about title, then why on earth would companies want to rush in to take licenses from university administrators? Why would they not want the university to assign title to the patent? According to Quinn’s argument, they cannot afford to invest unless they have title. If that’s true, then Bayh-Dole is an awful law, because the standard patent rights clause limits the ability of universities to assign patents on subject inventions. They can assign such patents, but it requires federal agency approval if the assignment is not to a company that has as a primary function the management of inventions. One would think that if a company needs title to invest, then Quinn would be pushing to permit universities to assign patents to companies rather than offering exclusive licenses.
Oh, but there’s more. Universities actually do assign patents all the time. It’s just that they use a document titled “Exclusive License.” Courts have found that when a patent owner transfers substantial all rights of a patent under a license, the actual act is an assignment of ownership. Copyright law, by way of a similarity, expressly defines an exclusive license as a transfer of ownership. So when a university grants an exclusive license to a patent for all rights in the patent (make, have made, use, offer for sale, sell, import) with the right to sublicense, a first right to sue for infringement, and a reservation of only non-commercial or educational or research rights at the university, the transaction is essentially an assignment with a limited grant back of rights, not a license at all. So perhaps universities are breaching the standard patent rights clause authorized by Bayh-Dole in yet another way–granting exclusive licenses to companies without a primary function to manage inventions without first obtaining federal agency approval.
It is also odd that the Bayh-Dole Act makes a big deal about limiting assignment of subject inventions to organizations having as a primary function the management of inventions, but somehow, Bayh-Dole gives a free pass to assigning to a university. Universities may not have any capability to manage inventions, but under the standard patent rights clause, they can still take assignment of subject inventors. This holds even if the university has a “technology licensing” office staffed by mostly incompetents. Oh, doesn’t happen? I’ve been on the backside of enough university-industry transactions to know that there are some pretty sketchy university licensing offices out there. (I can help–really, I can–but you have to ask). If Bayh-Dole was all that concerned with making sure that subject inventions ended up in competent hands, it would prevent universities from claiming ownership of faculty subject inventions. The inventors would have to agree, voluntarily, to such an assignment.
One place the Bayh-Dole Act does work is if university inventors of a subject invention don’t assign to either the university or any other invention management agent. Then the standard patent rights clause at 37 CFR 401.9 comes into effect. That’s not the patent rights clause that applies to universities–it’s a special one for the inventors. If the inventors don’t assign to anyone, then the federal agency can permit the inventors to keep the patent rights they have. In doing so, the federal agency is to treat the inventors as if they are a small business, but with greater freedom. The inventors, under 37 CFR 401.9, could assign to anyone, once the federal agency has no basis to request assignment.
It’s pretty interesting that Bayh-Dole trusts inventors with much more rights than it does universities. Indeed, universities and other nonprofits have the most restrictive treatment in the standard patent rights clause. It’s as if someone drafting Bayh-Dole did not trust universities at all–not to develop inventions, not to license to small companies, not to share royalties with the inventors. Inventors and small companies–it’s clear how these folks would deal with inventions they owned. But universities are a crap shoot. Why is that? Perhaps because university administrators don’t have the same focused reasoning that tends to guide small companies and inventors behaving like small companies–where title to invention is tied to one’s livelihood, and does not represent simply another opportunity to extract rents from creative folk or split rents with speculators.
Mr. Quinn’s assertion is a mixed up sad mess. Companies invest all the time in work they don’t own. If companies really do do better by holding title to patents, then Bayh-Dole’s restrictions on assignment are a huge problem. If universities granting exclusive licenses are actually assigning title, then they are breaching with impunity the standard patent rights clause and screwing up Bayh-Dole’s happy perfection. If universities weren’t run by folks so easily swayed by the idea of riding unicorns in search of pots of gold at the ends of rainbows (or being duped by the goofballs who claim Bayh-Dole is a vesting statute or that requires present assignments), then they would let 37 CFR 401.9 operate and see how their faculty inventors manage if the federal agency allows the inventors to retain their patent rights and assign to whomever they think will best advance their interests. Advocate freedom to innovate, reserve for the university the role of advocate and trustee, not this nasty bureaucratic self-interested, conflicted, inventor-loathing slavery brought on by Bayh-Dole.