The First Principle of Bayh-Dole

Here is the First Principle of Bayh-Dole:

A federal agency may not require the assignment to the federal government of an invention made with federal support at a nonprofit or small business if an inventor or the inventor’s assignee reports the invention, elects to retain title to the invention, and files a patent application. 

There are various qualifications to this principle.

A federal agency may require the assignment of an invention made with federal support if there are exceptional circumstances (and other similar conditions).

A federal agency may require the assignment of an invention made with federal support if an assignee fails timely to report the invention to the agency, fails to elect to retain title to the invention, fails to file a patent application or otherwise fails to prosecute the patent application or maintain the patent.

A federal agency may require an assignee to grant licenses to an invention made with federal support if the assignee fails timely to achieve practical application of the invention so that the benefits of the invention are available to the public at a reasonable cost.

The invention must be a subject invention to be governed by the patent rights clause–that is, it must be owned by a contractor, arise in the performance of work in a federal funding agreement, and be within the scope of the planned and committed activities of that agreement or the work involving the invention must diminish or distract from those activities.

More importantly, there is no other secret standing presumption under which a federal agency can require assignment of inventions to the federal government. Bayh-Dole takes precedence over all other laws (but for Stevenson-Wydler). The only way specified by Bayh-Dole for a federal agency to have the authority to require assignment of an invention made in work supported at least in part by the federal government is for the inventor or inventor’s assignee to fail to report and elect to retain ownership of an invention, or fail to file a patent application and maintain the patent.

Let’s look at the situation graphically:


The fundamental obligation in the standard patent rights clause reaches to the inventors. There’s no authority in Bayh-Dole for it to do so. Inventions are owned by their inventors as a matter of common law. The fundamental obligation of Bayh-Dole, however, moves through the standard patent rights clause to each university. The problem then was how to get from the university to each inventor when federal law doesn’t authorize such reach.

Those drafting the patent rights clause required the nonprofit or small business contractor to require technical employees to make their (f)(2) written agreement, and it is the (f)(2) agreement that governs the fundamental relationship between inventors and the government (A):

Technical employees making the (f)(2) written agreement as delegated and required by their host university become contractors within the definition of “contractor” in the law and enabling regulations (37 CFR Part 400).  Technical employees are parties to the funding agreement when they make an invention with federal support.

Inventors will report patentable inventions made with federal support to their university hosts.

Inventors will assist in filing patent applications by signing necessary paperwork.

Inventors will license or assign patent rights to the government upon request.

The (f)(2) relationship is the primary relationship between the inventors and the government. Nothing else matters. 

Now an invention is made. With the (f)(2) agreement in place, the technical employee inventors are parties to the funding agreement and contractors; therefore, their invention is a subject invention, owned by the inventors under federal patent law. If the inventors don’t assign their patent rights to anyone else, the disposition of the patent rights is between the federal agency and the inventors (A). If the federal agency asks the inventors to assign, they assign. If the federal agency does not ask the inventors to assign, then the agency uses the patent rights clause at 37 CFR 401.9, the most generous of the standard patent rights clauses–giving the inventors a better deal than small businesses get, which in turn have a better deal than nonprofits have.

Inventors, however, may assign to their host university (B). Nothing in the standard patent rights clause requires such an assignment, however. Assignment to the university is not required to comply with the standard patent rights clause or (to be loose to the point of being wrong about it) “with Bayh-Dole.” Only disclosure is required. It is entirely open whether and how a university comes to acquire ownership of a subject invention. Assignment could be voluntary. Or a university could require assignment as a condition of pursuing commercial opportunities (a conflict of interest requirement). Or a university could require assignment as a condition of employment or use of facilities (which, for federally funded agreements, means that the patent rights are acquired with federal funds, since federal funds pay for the employment on the grant and for the facilities used in the grant work). Once a university acquires title to an invention and elects to retain that title, then a bunch of other requirements in the standard patent rights clause kick in. If a university does not acquire title, then everything is amazingly, totally simple.

A university, having acquired title, may also assign title to any organization that has as a primary function the management of inventions, so long as with the assignment, the organization also is assigned the patent rights clause that governs the subject invention. But nothing in Bayh-Dole prevents the inventors from also assigning directly to such an organization. Indeed, when Bayh-Dole was passed, a number of universities used this approach, requiring their inventors to assign inventions directly to an affiliated “research” foundation. Some universities take assignment directly, and then either “exclusive license” the invention to an affiliated foundation, or assign title. I put “exclusive license” in quotes because most of these instruments function as assignments, no matter what label is put on the document.

Beyond assignments to universities, inventors can assign to other organizations as well. That they can do so was confirmed by the US Supreme Court in Stanford v Roche. The important thing to understand is that once an invention is a subject invention (a definition that is part of US patent law), then the standard patent rights clause requirements stay with the invention. When an inventor of a subject invention assigns the “entire right, title, and interest” in a subject invention to any organization other than her university employer (which already has obligations under the patent rights clause in the funding agreement), the assignment carries with it the obligations of the patent rights clause that applies to the organization receiving the assignment. The subcontracting requirements are instructive. If the assignment is to a nonprofit or US small business, then the standard patent rights clause applies. Otherwise, the assignment carries the patent rights clause required by the agency for agreements outside the scope of Bayh-Dole authorized patent rights clauses (See 37 CFR 401.14(a)(g)(2)):

The contractor will include in all other subcontracts, regardless of tier, for experimental developmental or research work the patent rights clause required by (cite section of agency implementing regulations or FAR).

A similar thing appears to be required when an inventor assigns a subject invention to an organization other than the university that hosted the research. Whether the obligation moves from the university to the assignee or from the inventor to the assignee doesn’t much matter–a subject invention is a class of invention within federal patent law and carries with it the requirements of the patent rights clause required by the agency as part of the original funding agreement. It’s just that there’s no express guidance in Bayh-Dole or the implementing regulations that addresses assignments by inventors to other than the host university.

Some people have interpreted the absence of express guidance in the implementing regulations to mean that universities have a first right to assignment, or a right of first refusal, or some implied right to own, or equitable ownership. There’s no basis for such an interpretation, especially post-Stanford v Roche. While there are clear parallels with assignment for subcontracting, and guidance for when a university assigns a subject invention, and even a separate patent rights clause specifically for inventors when they don’t assign to an approved agent and wish to retain their personal patent rights, there’s nothing to indicate that an objective of Bayh-Dole or of the standard patent rights clause is to give universities some claim of ownership in subject inventions. At best, universities are given the opportunity to review each report of a subject invention, and handle the administrative duty of reporting such inventions to the federal government. It is worth noting that US small businesses do not have any restriction on the assignment of subject inventions, and inventors, when they retain ownership of their inventions, are to be treated as US small businesses, but with a much reduced set of requirements for the management of inventions (see 37 CFR 401.9).

There are two cases for such assignment, whether by the university or the inventors. The standard patent rights clause makes it clear that the university may assign a subject invention, without federal agency approval, to any organization that “has as one of its primary functions the management of inventions” (See 37 CFR 401.14(a)(k)(1)). For assignment to any other organization, federal agency agency approval is required. One might expect that if inventors desire to assign to such an organization, they are expected to obtain agency approval, just as their university host would.

Finally, if the inventors do not assign to any other organization, then the federal agency can allow the inventors to retain ownership of their inventions–it’s up to each agency on the matter, essentially returning invention management to pre-Bayh-Dole procedures. Once the inventors have ownership, apart from a few requirements that follow subject inventions held by inventors, they are free to assign their inventions just as US small businesses are.


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