There never was a promise to assign

When Stanford in its litigation against Roche appealed to the U.S. Supreme Court, it included in its petition for certiorari a declaration by Luis Mejia, the licensing manager responsible for filing the patents and offering an exclusive license to Roche. His account of Bayh-Dole helps to show the problem with how accounts of Bayh-Dole circulated in technology transfer circles. A look at his declaration also shows how there never was a promise to assign to Stanford that was later pre-empted by a rogue assignment to a company.

Here are the parts of the declaration that I want to focus on:

15. Stanford’s Policy on Inventions, Patents, and Licensing that was in effect in the 1980s is reflected in Exhibits 24 and 25, attached to the Rhyu declaration. According to that policy, Stanford allowed rights in inventions to remain with inventors “if possible.”

That is, Stanford’s policy required it to show that there was a legally binding requirement that Stanford obtain ownership of an invention before it could require assignment of an invention. Inventions could be assigned anyway, by choice, but doing so is not a condition of employment or use of resources or anything else that the patent policy recited as possible consideration to bind the promise to assign inventions when required to do so.

However, the policy recognized that “the great majority” of inventions arose from research that was externally funded and covered by those external funding agreements. (See Exh. 24, ¶ 1.)

But even then, Stanford’s policy was not simply that if there was a contract, Stanford had to own. The patent policy required that Stanford had to be obligated by the contract to own the invention.

In the case of government-funded research, distribution of rights in the invention was governed by the Bayh-Dole Act. Within the Office of Technology Licensing, the Bayh-Dole Act is understood to grant the University the first right to retain title to an invention that was made with government grants.

Here we encounter a version of the faux Bayh-Dole Act–a “first right to retain title.” Notice how the declaration does not attempt to declare a factual statement about Bayh-Dole, but rather a factual statement about what office staff thought about Bayh-Dole. No doubt it is in that form a true statement about Bayh-Dole–that office staff believed something. It is even consistent with what some other people, not in the Stanford OTL, have thought. But it is not a true statement regarding what the law requires.

If the University does not elect to retain title, and the inventor wishes to obtain rights in the invention, the inventor must petition the granting agency for permission to retain rights in the invention. Only after the government consents can the inventor obtain ownership of the invention.

This is the standard line that folks like Joe Allen had been repeating for years. It may well have been the intent of Allen, Bremer, and Latker to have Bayh-Dole suspend common law for nonprofit and small business inventors so that there was something of an “invent for hire” requirement that came along with federal funding. But they did not get it into the text of the law, and they failed (despite apparently clever efforts) to tweak the implementing regulations and standard patent rights clauses to do what they could not put outright in the text of the law.

Those happy with the faux Bayh-Dole version of the law have no way of showing in the law where it happens that inventors no longer own their inventions when they invent, and that title remains unsettled on anyone until a university has made its choice about it. But “first right” talk is contract talk. If there’s a “first right” to title, it has to come from the federal contract. And there, in a federal contract, the parties cannot agree to change the law on patent ownership. They can only decide between themselves how they will manage their claims on inventions. Bayh-Dole requires agencies to allow universities to keep ownership of subject inventions that universities acquire. It doesn’t indicate how universities might come by those inventions. The faux Bayh-Dolers are reduced to claiming there is a “presumption”–which is to say, it happens by magic.

Senator Bayh was adamant in his amicus brief to the Supreme Court in this case that the purpose of Bayh-Dole was to put inventors last in the pecking order for ownership of inventions. Universities first, then government, then the poor sots with the ideas, as if their ideas were the result of university administrators imagining what needed to be invented and assigning capable employees to the task of carrying out their administrative vision. It’s some strange children’s book story for bureaucrats about how management leads the way to a bright world, with labor merely supplying the hands. It sounds good–simple, obvious. Just that it’s not true, especially when it comes to university faculty.

17. Consistent with the Bayh-Dole Act, Stanford required employees to assign to Stanford their interests in inventions that had been supported by U.S. government grants. The Stanford Copyright and Patent Agreement, Exhibit 23, paragraph 2, sets forth this obligation. A copy of the agreement is attached to the Rhyu Declaration as Exhibit 23.

But here, even a reading of the faux Bayh-Dole fails. Even if Bayh-Dole had given universities a first right to title in subject inventions, that first right is not an obligation to take title. Nothing in the standard patent rights clause or Stanford’s patent policy or Stanford’s patent agreement require Stanford to exercise a “first right.” So it is not consistent at all with the idea of a first right that Stanford would require employees to assign their inventions to Stanford, as Stanford does not have to exercise that first right (assuming it had that right as a matter of law, which it didn’t).

The obligation in paragraph 2 of the Stanford patent agreement is specific to the requirements of “Contracts or Grants”:


For Stanford to have a right to require assignment, by the terms of the patent agreement, Stanford must be required by a Contract or Grant to take ownership of an invention. Having a first right doesn’t cut it. Notice as well that this paragraph 2 does not require assignment to Stanford. The wording is indefinite–“to Stanford and/or Sponsors.” The commitment made in agreeing to this requirement is to assign to whomever has rights that Stanford must comply with by contract.

If under the faux Bayh-Dole, Stanford merely holds a first right, and there’s no requirement that Stanford exercise that first right, then in the inventor-loathing pecking order that Senator Bayh imagined, it is the federal government that has a right to require assignment, and until the federal government asserts that right, Stanford has nothing to require of its inventors. If the government asserts its right, then Stanford relies on paragraph 2 to require its inventors to assign their invention to the Sponsor. If the government does  not assert its right, then the invention remains with the inventors, just as Stanford’s patent policy provides.

Even in a faux world built by bureaucrats for bureaucrats, Stanford has no obligation to require assignment of a subject invention to Stanford–and thus no right to any such invention.

18. According to the Stanford policy, Stanford had the first right to have title in the Merigan patents. Stanford exercised that right and the inventors have assigned the patents to Stanford.

And in exercising that faux first right, Stanford violated its own patent policy and breached the terms of its patent agreement. The only way that first right works is if Stanford requests title and title is voluntarily assigned–for “good consideration” as required by 35 USC 261.

Now look again at the Stanford patent agreement. Here is its statement that sets up consideration:


This is a broad list of possible forms of consideration:

  • employment (we hired you, so you must assign)
  • continued employment (if you invent and come back to work)
  • remuneration from Stanford (pay for employment)
  • participation in projects (as if we can exclude you)
  • access to facilities (even coming into a building, you see)
  • use of facilities (doing anything in those buildings)
  • other valuable consideration (anything else we might provide)

But the scope of this consideration, broad as it is, is focused on the obligation to assign that arises only as the result of Stanford being contractually required to obtain that assignment. The scope does not have to do with anything invented in the course of employment or using university facilities or whatever. It is just that one or more of these things forms the consideration for the obligation to assign inventions made under Stanford contracts with others that require such an assignment. Form of consideration is not the same as the scope of claim. Basic stuff, really.

There never was any promise to assign the invention that was in dispute.

Now come back around to the problem that comes up if Stanford wants to obtain ownership of a federally funded invention. The deal is strictly–by policy–voluntary. Stanford has to come up with consideration to bind the deal, and it cannot use–again, by policy–anything in that list other than “other valuable consideration.” All the rest of those things are provided by Stanford without stating any claim to ownership of inventions. All those other things in the list are already offered. They cannot be consideration for a voluntary assignment. All this is moot, of course, in the broader picture, because Stanford has since changed its patent policy so the form of consideration is conflated with the scope of claim, leaving Stanford mired in the same dullness as most every other research university. Sad, given that Stanford was once a leader, a bright shining light of hope. Perhaps it will someday return to that role.

Even had the faux Bayh-Dole been in operation, Stanford still did not have any promise to assign from its inventors as a result of federal funding or Bayh-Dole. That leaves vesting. Contrary to the declaration’s account of the Stanford TLO’s understanding of Bayh-Dole, perhaps faux Bayh-Dole conditionally vested title with the university, pending its decision to “elect to retain” that title. Then the “first right” would simply be a consequence of what faux Bayh-Dole actually did–not really wrong, just reciting an aspect of a greater right.

There are still a few things wrong with this version–even allowing for fauxness. First, Stanford’s patent policy and patent agreement are specific to contracts. There is nothing in either that gives Stanford a claim as a matter of law. It’s not really an oversight, because there wasn’t anything that needed to be addressed, no agreement to be made on the matter. Copyright, for instance, does have a work made for hire provision, in which the author (and therefore outright owner of copyright) is the employer or in some circumstances a commissioning party. There is no need for an assignment in such a case, because the federal definition of work made for hire controls. So there is also no need for an agreement on the matter with any employee. The agreement that would matter is one of whether Stanford is required by the terms of a contract to employ someone to prepare an indicated work–is that work within both the scope of employment and the requirements of an extramural contract?

Second, if title vests with the university, then there’s no need for a promise to assign title, because the inventor has nothing to assign. The university, by faux vesting law, already has that title until it gives it up. So again there’s no promise to assign–this time because there’s nothing to assign (rather than that what there is to assign is not required to be assigned).

Even with vesting, there never was any promise to assign the invention.

We come back around to the court of appeals analysis. When Stanford sought an assignment from their fellow, he had nothing to assign, having already obligated his ownership interest to Cetus. The fact that there was an earlier promise to assign does not matter. That promise was directed at other inventions, not the one in question. The only valid assignment was the one to Cetus.

Stanford then had to show not only vesting but that federal law voided prior, valid assignments. This is what got Roche up into an even bigger tizzy (getting sued for a quarter billion was nothing, really). And it got the Supreme Court’s attention, too:

As Roche correctly notes, however, “the Act contains not a single procedural protection for third parties that have neither sought nor received federal funds,” such as cooperating private research institutions. Brief for Respondents 29. Nor does the Bayh-Dole Act allow inventors employed by federal contractors to contest their employer’s claim to a subject invention. The Act, for example, does not expressly permit an interested third party or an inventor to challenge a claim that a particular invention was supported by federal funding. In a world in which there is frequent collaboration between private entities, inventors, and federal contractors, see Brief for Pharmaceutical Research and Manufacturers of America as Amicus Curiae 22–23, that absence would be deeply troubling. But the lack of procedures protecting inventor and third-party rights makes perfect sense if the Act applies only when a federal contractor has already acquired title to an inventor’s interest. In that case, there is no need to protect inventor or third-party rights, because the only rights at issue are those of the contractor and the Government.

The Supreme Court was unwilling to read Bayh-Dole to require that vesting trump valid claims of others. The exploit involved would have been simple. For any invention one wants, simply have the inventor subsequently join a project involving federal funds, assert that the invention is “subject” and come away with ownership–“title certainty”–that voids any prior assignments, regardless of 35 USC 261. That’s pretty cool, if one wants to play that way. Consider these scenarios:

A. Faculty member invents in a consulting relationship, and is required by the terms of the consulting contract to assign to the company she has consulted for. But the company doesn’t pay a share of royalties. So the faculty member heads back to the university and works on a federally supported project and “first actually reduces to practice” the invention (or “diminishes or distracts” the project from its planned activities by working on the invention. The invention is now a faux subject invention, title vests in the university, and the inventor can enjoy the federal requirement that the university share royalties with the inventor. And what company is an obvious candidate for an exclusive license? Why, yes, you get it!

B. Company employee is working on a project and has promised to assign inventions arising from his access to company information to the company. But then an opportunity comes for the employee to quit and join a university research project in the same area of work, funded by the federal government. He invents–and his invention clearly arises from his access to company information. But the invention is now also a faux subject invention, so federal law voids the inventor’s promise to assign to the company (and even voids any present assignment, too). At the moment of invention, there are two assignments that instantly fight it out–and the federal one wins.

Thus, no company can be assured of title to inventions that they hire for and bargain for and enter into valid patent agreements to obtain–because all the inventor has to do is run to a federally funded university project and all those former promises are voided by federal law. The inventor on the surface of things gets a better deal, since the university must share royalties. Deeper in, however, it may not be a good deal at all, as the university does not have any obligation to license for royalties or even to retain title–and if the federal government takes title, the inventor doesn’t get any royalties, either. In any event, “title certainty” for the university bureaucrat means “title uncertainty” for everyone else.

C. University employee with promise to assign works in a research project sponsored by a company. She invents, reports the invention, and the university obtains assignment as required by the company contract. The university then licenses the invention exclusively to the company sponsor, again as provided for in the research contract. Oh, but now the employee moves over to a research program with federal funding and first actually reduces the invention to practice there. Oh-ho! The invention becomes a faux-subject invention. Title is already with the university, but the university now has to grant the government a non-exclusive license. But it cannot because it has already exclusively licensed the invention to the company. But faux federal law voids that exclusive license so that the government has its non-exclusive right. Or else the university, anticipating that possibly faux subject inventions will vest with it after doing deals with companies, inserts into every exclusive license a reservation for federal government rights. It’s just that a company will never know when or if the federal government actually has rights. Tough times for companies that do business with the government.

One can see how the assertion of faux title vesting, so sweet to the university administrator’s ear, is some poisonous to everyone else. Vesting destroys the freedom to contract, induces universities to insert strange reservation clauses into licensing agreements, and allows inventors and universities alike to void their contractual promises whenever they feel like it, merely by “diminishing or distracting” a federally funded research project from its stated activities. Even if you believed that university administrators were the best people in the world to handle inventions made with federal support, why on earth would you sacrifice inventors’ common law rights in inventions and everyone else’s freedom to contract on the alter of your belief?

The Supreme Court, for one, was not ready to accept such libations of cleverness as an inducement to confirm the rule of bureaucrats as law–or, implicitly, as federal research policy. The faux Bayh-Dole is indeed a “cleverly crafted scheme,” as a university amicus brief in Stanford v Roche aptly put it. For over three decades, this scheme–an exploit–has induced the growth of university invention accumulating bureaucracies, created barriers to faculty-industry collaborations, suppressed reporting and public accountability for the status of claimed inventions, fraudulently denied inventors their Constitutionally established rights in their inventions, dismantled an existing infrastructure for research invention management (one that advocates for the faux Bayh-Dole used to make their case!), and turned university patent policies from generally clear, open, and voluntary to mangled, grasping, and compulsory. For the few inventors who have gotten rich, and the many university licensing professionals and their attorney associates who have had relatively lucrative careers, the faux Bayh-Dole has been a remarkable success. For everyone else, however, faux Bayh-Dole has been a disaster, a nasty scheme, a bottleneck on the use of the results of federally supported research.

So for all those folks writing accounts about how a later present assignment prevented the operation of a prior promise to assign–you are mistaken. Despite the musings by the Supreme Court justices, there never was that first promise to assign. Not that I think you give a rat’s ass about the fact. In a battle over equitable title to inventions, we have 35 USC 261. It may not matter whether the magic words “I hereby assign” get used. Justice Breyer raised a good point in his dissent. But the problem in a present assignment is this–certainty that an inventor will assign has been traded for ambiguity over the scope of what is to be assigned–if that scope becomes “anything that I want, after I get around to seeing what I’ve already claimed,” then it’s no assignment at all–just an agreement to agree, using deceptive wording.

When university administrators and their ever pliant, willing, mercenary legal advisors rush to add “present assignment” language to their patent policies, patent agreements, and employment agreements, they are just starting up another cleverly crafted scheme, another faux exploit. Present assignments have nothing to do with complying with Bayh-Dole. Bayh-Dole does not mandate an abrogation of academic freedom, the submission of research faculty to the vision of bureaucrats, or the transmogrification of university policies into their worst moloch-state dopplegangers. Bayh-Dole does not require that a university even have a patent policy or patent agreement with its employees.

The standard patent rights clause, however, does require a university to require inventors to make a written agreement to protect the government’s interest–not the university’s interest. What would have happened had Stanford complied with the standard patent rights clause in its funding agreement? Isn’t it remarkable that university administrators (and their lawyer accomplices) who are so concerned about “complying with Bayh-Dole” happily ignore compliance with the standard patent rights clause. I guess it is all lies and jests, but for the parts that a bureaucrat wants to see. Adding present assignment wording to university patent policies and employment agreements is just the next clever exploit by folks who participated in the faux Bayh-Dole exploit.


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