In the summer of 1981, the Bayh-Dole Act went into effect, launching a tsunami that would sweep away the existing infrastructure for faculty-led use of patents to develop research discoveries. In its place, thirty-five years later, sits a manager-led system that is much more expensive and much less productive, all the while destroying academic freedom and suppressing collaboration. For some, this price is well worth the opportunity for windfall profits. For others–they simply deny there are any adverse effects of the law.
Since the Wisconsin Alumni Research Foundation was one of the leading advocates for Bayh-Dole, supplying one of the “Three Amigos” who pushed the law through Congress, we might consider how the University of Wisconsin adjusted to the new law to suit its own self-interest.
The Bayh-Dole Act required federal agencies sponsoring research at universities to adopt a uniform approach to the management of patent rights. This approach took the form of standard patent rights clauses placed in all funding agreements. The effect of Bayh-Dole, therefore, was to change the contracting terms and conditions under which universities operated when receiving federal funds to support their faculty’s research. One key term of the primary standard patent rights clause was what I call the (f)(2) agreement. Section (f)(2) requires each university contractor to flow down certain obligations from the university to its research employees. In essence, the flow down brings these employees within the definition of “contractor” whenever they make an invention within the scope of the funding agreement, and that in turn made this new approach work as drafted since everything depends on “subject inventions” and an invention is not “subject” until it is owned by a contractor. The (f)(2) agreement is not found in the Bayh-Dole Act–it is not a matter of statute but rather of federal contract.
When research employees make the agreement required by their university (so the *university* complies with the funding agreement), the employees agree to disclose their inventions, sign paperwork to allow patent applications to be filed, and to sign paperwork to establish the government’s rights in inventions. The university delegates these responsibilities to each research employee. Nothing in Bayh-Dole or the funding agreement or the standard patent rights clause or the (f)(2) requirement changes the ownership of inventions made in the research–the owner of the invention is the inventor. The US Supreme Court made all of this clear in 2011. But things have been anything but clear.
In 1984, the University of Wisconsin changed its patent policy to account for Bayh-Dole. Let’s work through how the University of Wisconsin represented Bayh-Dole to its faculty.
The University of Wisconsin patent policy long held that university inventors owned their inventions and could do with them what they wished. Faculty were allowed to negotiate their own patent terms in funding agreements. The 1984 policy reaffirms this policy. If there is no contractual obligation otherwise, what happens to an invention is up to the inventor. Thus, for Bayh-Dole to force the university to make a change in this fundamental statement of its policy, there would have to be a change in the contractual provisions of federal funding. The policy statement is firm on the matter of inventor ownership and control: “This policy continues unchanged.” That is, if there is a claim made on faculty inventions, it cannot come from the university. Now let’s see how the university works the matter.
Here is the start of the policy discussion of Bayh-Dole:
This initial statement is odd in a number of ways. First, there simply is no “Section 6” of Public Law 96-517. Take a look for yourself. There’s a Chapter 38, and within that chapter, there are sections 200 to 212. Within Section 202(c) there is a subsection 6, but it has to do with proper marking of patents with government rights legends. The policy points, apparently, to oblivion. But it is worse than that. The policy then asserts, “That section of the law provides, in general, that universities have first right to take title to inventions resulting from research under Federally funded agreements.” But such a section is nowhere to be found in Bayh-Dole or in the standard patent rights clauses. Check for yourself. Bayh-Dole is short enough. Have a go. I’ll wait.
The University of Wisconsin simply makes up a section of law that did not and does not exist. It then adds an explanation from the Federal Register that has nothing to do with the disposition of patent rights, but rather pertains to whether the federal government should be entering into collaborative agreements with industry.
The policy then claims that the “most significant aspect of the law” is that the university can now enjoy the administrative convenience of using a single patent policy for all federal agencies. But the university had a single patent policy document before Bayh-Dole.
But that convenience is not even a policy matter! The policy matter–here, in the patent policy–is that the university claims that Bayh-Dole voids the university policy that inventors own their inventions and are “free to dispose” of their inventions as they wish. The policy statement skips over this, the most significant claim the policy makes regarding Bayh-Dole.
The next sentence simply assumes that the university (or its designee) owns federally supported inventions. Again, the policy misrepresents the law. Bayh-Dole does not require a university (or anyone else) to take any “patent actions” with regard to a federally supported invention. All that is required is
- an (f)(2) agreement is required of and made by each research employee;
- the university provide education to research employees in the importance of disclosing inventions;
- the university report disclosed inventions to the federal agency that funded the research.
There is nothing in this list that requires any “patent action.” It’s not in the law. It is made up by the university. The patent policy then provides a summary of the most important bits of the new “policy.” The first item also is simply wrong:
There is nothing in Bayh-Dole that gives universities a “first right of refusal.” The language does not appear in the law or the standard patent rights clauses. Ah, perhaps the right of first refusal is the upshot of the law, but Congress didn’t want to just out and call it that for some perverse reason. Consider. The law required federal agencies to include a patent clause that limited the agency’s contractual right to require assignment of a patentable invention to the Federal Government. If the inventor assigned such an invention to a pre-approved agent, then the federal agency cannot object to that assignment. There is simply no first right of refusal for any contractor as a requirement of law or condition of the patent rights clause.
All the university has is a right to keep ownership of an invention made with federal support that the university has acquired from an inventor. Under Wisconsin’s policy–which makes no claims to inventions other than when required by contract–there is nothing in Bayh-Dole that gives the university standing to insist that inventors offer the university ownership of their inventions. Again, the US Supreme Court in Stanford v. Roche worked through the argument made by the Wisconsin Alumni Research Foundation and others on Stanford’s behalf, and found only that Bayh-Dole allowed a university that obtained ownership of an invention to keep that ownership, provided it complied with the obligations that come with that ownership.
Even if there were a “first right of refusal” in Bayh-Dole (there isn’t, but if there were), a first right of refusal does not require an inventor to assign ownership to anyone. That is, a first right of refusal operates only when an owner decides to transfer a property–“If you ever decide to part with that thing, you agree that I get the first chance to acquire it.” There is nothing in a first right of refusal that forces an owner to give up the property in the first place. Is this just ignorance–pitiful here–or is it malfeasance? Clearly, if Wisconsin’s reaffirmed patent policy is that the university makes no claims but for contractual obligations, and the federal law as the university states it is that if an inventor chooses to give up rights, then the university has the first chance to get them, there is then nothing that authorizes the university to demand those rights.
A second point. A right of first refusal anticipates a negotiation. The holder of the right of first refusal has the first chance to negotiate. The inventor pitches an offer, and the university has a right to accept that offer, or to refuse it. That’s the point of a right to refuse. The university cannot compel the inventor to give up rights on the university’s terms any more than the university can simply compel the inventor to give over the rights on no terms whatsoever. (Some universities argued in Stanford v. Roche that Bayh-Dole vested patent rights outright in the university that hosted the research, no formalities needed. The Supreme Court tossed that argument, too.)
Take it one more step–even if the university has a standard policy under which it takes on management of an invention (or, in the case of Wisconsin, a standard policy of passing that management to an affiliated foundation, which has its own standard policy), that standard policy is just the university’s authorized response to an inventor’s offered deal. If an inventor offers to assign her invention to the university for 60% of the royalties, a commitment that the university file patent applications immediately, and that the university will follow the inventor’s direction in licensing strategy, and the university cannot change its standard policy to accept such a deal, then the university is in fact refuses the offer. The first right of refusal is exhausted when the university refuses an inventor’s offer. Again, the inventor has no obligation under the Wisconsin policy to take the university’s standard terms.
Do you see how incompetent, or deceptive–or both–this 1984 Wisconsin patent policy is?
Item 4 continues the incompetence. It is the case that if inventors assign their invention to an approved invention management agent, and that agent elects to retain title, then the invention management agent is required to grant to the Federal Government a non-exclusive license. But if the inventors do not assign to an agent, then the agent has no obligation whatsoever. It means nothing for the agent prospectively, or wistfully, to elect to retain title. That “election” is merely a condition on something that hasn’t happened, and there’s nothing in Bayh-Dole or the standard patent clause that can make that something happen. And in Wisconsin’s case, there is nothing in its own policy that can make that something happen.
Furthermore, there is nothing in Bayh-Dole that requires a federal agency to take ownership of a federally supported invention. There, it is a matter of agency discretion. Under Bayh-Dole and the implementing regulations (37 CFR 401.9), an agency can allow the inventors to retain ownership of their invention. If the agency does, then there is nothing in 37 CFR 401.9 that requires the agency to obtain a license for the government or for the inventors to grant such a license. If the inventor does not wish to file for a patent or maintain the patent, the agency can obtain ownership of the invention–but ownership is not a license. Under the march-in rights, a federal agency can compel a non-exclusive license to a worthy party, but again that worth party is not the government.
Do you see how brick-stupid the whole policy statement is? Except, of course, the policy statement is in its way immensely clever.
Item 5 is fine. That recites the standard patent rights clause. But look at how Item 5 works with Item 6. Item 5 only concerns disclosure. Item 6 only concerns retaining title. There’s nothing about assignment, or even the concocted first refusal of a deal, or anything. It is as if the idea of assignment does not exist in the policy. It is just assumed that if there’s federal funding involved, then the inventor must assign. But that’s not the law.
Finally, take a look at the Wisconsin implementation of the (f)(2) agreement:
This agreement is fascinating in a number of ways.
1) It is more expansive than just federally supported work.
2) It makes it appear that the agreement is a condition imposed on researchers in exchange for the university’s permission to participate, rather than as an obligation that the university has accepted under a federal contract. The university interposes its own rationale for the agreement, while hiding the compliance requirement that the university itself has, and which must motivate the requirement that the researcher sign the agreement.
3) The scope of the disclosure requirement is broader than that required by Bayh-Dole’s standard patent rights clause. As made clear by the discussion of scope in the implementing regulation, the standard for disclosure is not anything “resulting” from the research, but rather only those patentable inventions that are within the “planned and committed activities” of the funded project. Lots of things can “result from” research and not be within what one proposed and contracted to do. The discussion of scope (37 CFR 401.1) makes clear that if a federally funded project seeks to understand how something works, and a related project seeks to apply that understanding in some practical way, the application is not within the scope of the Federal Government’s interest unless in some way the second project “distracts or diminishes” the federally supported project. “Resulting” is loose language–but conveniently loose because it requires a disclosure of more than is necessary.
Why is a broad scope of disclosure a problem? Simply put, because the policy claims that what’s disclosed is owned by the university, or claimable without inventor recourse by the university. An invention, just because it is disclosed–even in compliance with this agreement–is not necessarily a subject invention under Bayh-Dole. If not a subject invention, no private attempts at calling it a subject invention can change its status. A university and inventor cannot agree to make something become a subject invention that does not meet the definition in federal law. But if the university makes it appear that an invention is subject to Bayh-Dole, then it can avoid its own policy, which gives inventors freedom to dispose of their inventions however they wish. If the university drafted this policy, it is graspingly (and deceptively) convenient. If the Wisconsin Alumni Research Foundation shadow wrote this policy, it’s predatory.
4) We have the old, handy confusion over “conceived and/or reduced to practice.” An invention is patentable when it is both conceived and reduced to practice. Bayh-Dole defines a subject invention as one that’s patentable and within the scope of the funding agreement’s written deliverables (“planned and committed”). There are two issues. First, is the invention patentable? That means, it has to be both invented and reduced to practice. Now one looks to see if either the activity to conceive or reduce to practice is part of the planned or committed activities under a federally funded project. If so, then the invention is “subject” and reportable to the federal agency. If not, then the invention is not within the scope of the Bayh-Dole framework.
Universities give various rationales for this “conceived or reduced” to practice language. At the University of California, the claim was that if an invention was conceived and “constructively reduced to practice” by filing a patent application, if federal funding was later used to “actually reduce to practice” the invention, then the invention suddenly and magically became “subject” to Bayh-Dole (and the university gets ownership and must grant a license to the government and all manner of administrative hell). But this is nonsense. If an invention is reduced to practice by filing a patent application, then it cannot be reduced to practice again, for patenting purposes, when a prototype is built. Building a prototype at that point is not reducing anything to practice, as a term of art. The invention has already been made.
But the University of California used this confusion to demand control of everything, on the claim that they had to be ready to give the government a non-exclusive license if it turned out that a regular invention had become a subject invention because even $1 of federal money had touched the development of a prototype. Imagine the consternation on the faces of a company that has just funded a half million dollars of research with a right to negotiate an exclusive license to an invention made within the scope of that research, only to hear from the University of California that it must reserve a license to the federal government, on the chance that it–the University–might go off and use federal money to work on a prototype. “Who can say–we can’t control our faculty that well.” One gets very, very angry on the way through the stages of licensing grief.
5) The agreement asks for the wrong commitment of the inventor. The standard patent rights clause requires the university to require action of its research employees. The Wisconsin agreement requires inventors to comply with the provisions of the standard patent rights clause. But it is the *university* that must comply with those provisions, not the inventors. For the inventors to comply, the way Wisconsin wrote this agreement, they would have to require of themselves the (f)(2) agreement. The university’s obligation under the standard patent rights clause is to delegate responsibility to inventors. Instead, Wisconsin demands that inventors comply with whatever the university has agreed to. It’s all messed up–but with the advantage to the university.
6) The agreement commits the person to “cooperate in assuring that the sponsor’s rights…are fully protected.” What does it mean to “protect” a sponsor’s “rights” in an invention? The (f)(2) agreement comes under the heading of “Contractor Action to Protect the Government’s Interest.” The government asks the contractor to delegate to potential inventors the responsibility for disclosing inventions, filing applications, and licensing and assigning inventions. Instead, employees are required to cooperate with the university or the research foundation in “protecting” the “sponsor’s rights” in inventions. Again, the idea that’s implied is that the university protects rights in inventions and patents by taking ownership of inventions and obtaining patents. But that’s not what the Federal Government requires–it clearly is what Wisconsin required in 1984.
7) The requirement for staff to sign this agreement is also much broader than required by the standard patent rights clause. Only “employees, other than clerical and nontechnical employees” are required to make the (f)(2) agreement. But Wisconsin broadens this to “participant” and “project staff.” Other universities extend their claims to volunteers, users of buildings, visiting scholars, and even anyone collaborating. They expand beyond patentable inventions to “inventions whether or not patentable,” to know-how, to software–to patents and non-patents, to things that can be owned and things that cannot be owned. Lovely thing, this Bayh-Dole Act.
So now, can’t you see? Under the 1984 Wisconsin patent policy:
The university does not comply with its federal funding obligation. It fails to implement the (f)(2) agreement, and as a consequence, causes the standard patent rights clause to fail. Instead, the university implements an agreement that is broader than required by the standard patent rights clause, thus allowing the university to take control of more intellectual property than either its own policy or the patent rights clause authorize. In doing so, the university invariably reports as “subject” inventions that are not subject to the standard patent rights clause. Doing so is to the university’s advantage, however, so it does not revisit this claim.
The university also does not comply with its own fundamental policy commitment, that inventors are free to do what they want with their inventions unless there are contractual obligations that require otherwise. Instead, it misrepresents federal law and the standard patent rights clause, and uses this misrepresentation to claim more inventions than its own policy permits.
Finally, the university deceives its employees by claiming that the law requires the university to file patent applications (“take patent actions”) and prevents inventors from doing anything other than taking the deal the university offers (“first right of refusal,” turned backwards and inside out). One wonders how any invention assignments can be valid if made in a such a condition of failure to comply with federal agreements, failure to comply with one’s own policies, and deceptive misrepresentations of the law.
Even though in 2011 the US Supreme Court in Stanford v. Roche tossed the University of Wisconsin’s claims about Bayh-Dole along with those of Stanford, the University of Wisconsin has not changed their published policy–most recent version 2005–to recognize that their policy statement of Bayh-Dole is simply wrong. When do the actions (and in this case, apparent indifference) of an instrument of a state in response to a Supreme Court decision become contempt of court?
Between the 1998 policy revision and the 2005 policy revision, the University did its best to fix things up without backtracking on its misrepresentations. Here’s the 2005 language (highlighting supplied to show the difference):
Here is that 1984 policy document again, the one that insisted that the policy of inventor control “remains unchanged”:
In the absence of contractual provisions obligating the transfer to a third party, the inventor at the University of Wisconsin-Madison traditionally has been free to dispose of these rights in the manner of his or her own choosing.
Here’s the new language (my emphasis):
If there are no specific written agreements or policies to the contrary, the researcher at the University is free to dispose of the rights in the manner of his or her own choosing.
And of course Wisconsin has introduced a change in the policy itself–which I suppose could be considered a policy within a policy, like a dream within a dream. So inventors can do what they want under the Wisconsin policy, except now they can’t because the policy claims ownership of everything done with federal funding as well as anything done with sponsored research agreements “that require the University to grant rights.”
Consider, just briefly, the drafting foolishness of the revised policy. At the start, here’s the general statement that the university does not claim ownership of inventions under the patent policy: “Except as required by funding agreements or other University policies….” Here, “other” refers to policies other than the patent policy–the policy in which the statement is placed. What does this mean? First, it means that other policies of the university can take precedence over the patent policy. So, the university here establishes that it can make patent policy in other policy forums, and that patent policy will control over the patent policy. That is, the control of the inventions and patents can be anywhere in university policy, not here in the patent policy. The university can modify its patent policy at will without ever changing the text of its patent policy. Sweet.
Second, policies have equal weight with external funding agreements. In the past, Wisconsin allowed faculty to negotiate their own intellectual property agreements for sponsored research. In that context, a university policy that says, “You can do what you want, unless you have promised otherwise” makes perfect sense. Now the policy asserts “You can do what you want, unless we have promised otherwise.” This is not even a subtle difference–it turns a policy that holds people to their promises to one that subordinates personal freedom to the policy whim of administrators. This is a huge change from 1984.
Now look at the added sentence, putting aside the incompetent grammar. It makes a direct assertion of university ownership of inventions made with federal funds. That assertion contradicts the previous sentence, because federal funding does not require inventors to assign inventions made with federal support to either the government or to the university. Look at the wording:
inventions funded . . . by a federal agency
sponsored research agreements that require the University to grant rights
The first sentence uses “funding agreement.” That is what Bayh-Dole calls all federal agreements with universities–“any grant, contract, or cooperative agreement” (37 CFR 401.2(a)). The next sentence, however, uses “funded by a federal agency” and “sponsored research agreement” as if federal funding is neither a funding agreement or a sponsored research agreement–when, in actual, material fact, federal funding is both sponsored and the subject of a funding agreement. The policy revision simply ignores the meaning of funding agreement and sponsored research agreement and asserts that “funded by a federal agency” is a separate class of arrangements. But Bayh-Dole only operates under funding agreements–the definition of funding agreement is an essential part of the scope of the law and the standard patent rights clause.
So what has the 2005 policy done? It has completed the arc of misrepresentation to arrive at a bald assertion of ownership of inventions when federal money is involved–even if federal funding agreements do not require that ownership claim (and they don’t).
There’s another way to read the passage (again, showing the utter lack of attention to drafting–so typical of university patent policies):
inventions funded by a federal agency or by sponsored research agreements
that require the University to grant rights
In this way of construing the sentence, the relative clause (“that require….”) restricts both inventions funded by a federal agency and inventions funded by sponsored research agreements to ones that require the university to grant rights. If this interpretation is followed, then inventors must assign only when federal funding requires the university to grant rights–and Bayh-Dole certainly does not require the university to grant rights.
If we follow the first reading, then the policy contradicts its first sentence and simply demands ownership of all inventions made with federal support. If we follow the second reading, then no inventor is required to assign inventions made with federal support unless there’s some special different federal contract–not under Bayh-Dole–that somehow requires the university to control invention rights.
The change is dramatic from the 1984 Wisconsin policy, with its firm, direct affirmation that “this policy remains unchanged” with regard to inventor control of inventions–but overturned by an utterly unfounded, false, deceptive account of Bayh-Dole–to a flat-out claim to own everything done with federal support, drafted in such an ambiguous manner that one can’t quite tell whether the university claims federally supported inventions or doesn’t.
This transformation of policy is an effect of the faux Bayh-Dole, of the misrepresentation of Bayh-Dole, repeated so often that faculty at the Wisconsin–once among the faculty most committed to academic freedom–have rolled over and allowed the university take their patent rights on behalf of what amounts these days to a patent troll–whatever, who cares, isn’t it nice to get all those patents paid for by someone else, so go sue someone and make us all rich. That is not an attitude that the public responds to when asked to fund universities. It is the research environment optimized for the rentier, not for the innovator.