An Outline of Bayh-Dole for Universities (with comments)

Here is a simple outline of Bayh-Dole for universities. I’ve cut out a bunch of technical apparatus and highlighted particulars that walk back or alter things in odd ways. Bayh-Dole is part of federal patent law.

35 USC 200 Statement of policy and objective

Use the patent system to promote the use of subject inventions.

The policy statement uses “utilization of inventions arising from federally supported research or development.” This is a fundamental limitation of the patent property rights in a subject invention. How can one use the patent system to exclude use by others if the mandate is to promote use? That’s a basic, serious question. The answer is not “ha ha–we can sue anyone anytime.” 

35 USC 201 Definitions

Contractor is any party to a federal funding agreement.

Inventors can be contractors, and the implementing regulations require universities to make them parties to each funding agreement for invention purposes.

Subject invention is a patentable invention owned by a contractor and made within the scope of a federal funding agreement for research.

This is the great goof, among many other goofs, in Bayh-Dole. Or perhaps it is one of Bayh-Dole’s unexpected pleasures. A subject invention is one owned by a contractor. But Bayh-Dole does not require nonprofits or small businesses to require assignment of inventions. The Supreme Court confirmed this in its decision in Stanford v Roche

To address the problem, the implementing regulations at 37 CFR 401.14(f)(2) require contractors to make all potential inventors parties to the funding agreement and thus make them also become contractors. But then the inventors’ obligation is to the federal government, not to the university that hosts their research. Inventors are then subject to their own patent rights clause at 37 CFR 401.9. Blast! 

Universities uniformly refuse to comply with the (f)(2) requirement of the standard patent rights clause. Even NIST’s attempt to add an assignment clause in the regulations is limited because it requires contractors to require inventors to assign subject inventions–those would be inventions that the contractors already own. Still doesn’t matter–universities still don’t comply with (f)(2) and substitute their own invention assignment requirements–many of which Bayh-Dole and its standard patent rights clause appear to override. 

Practical application is the use of an invention with public benefits on reasonable terms.

The “utilize” in the statement of policy and objective is the “use” in the definition of practical application. This is the fundamental output of Bayh-Dole. What ought to be measured. Everything else is apparatus, distraction, overhead, and dreck. The “reasonable terms” are the terms on which the public has access to benefits of the use of an invention–those terms are not merely the terms upon which a university grants an exclusive license. 

35 USC 202 Disposition of Rights

If a nonprofit or small business acquires an invention made in work receiving federal support, the nonprofit or small business may keep that ownership provided it

  • Discloses the invention to the funding agency and
  • Complies with the patent rights clause and Bayh-Dole’s statement of policy.

If the invention owner fails to comply with things having to do with patenting, the federal government may take ownership of the invention (but is not required to do so).

For certain other compliance matters, principally involving failure to appear to take effective steps to achieve practical application or to comply with the limited preference for United States manufacturing, the funding agency may “march-in” and compel the invention owner to grant licenses.

For all other matters in Bayh-Dole and the standard patent rights clause, no remedies are stated, no penalties specified, no enforcement required.

Agencies must use a standard patent rights clause unless they make an exception.

Exceptions require a convoluted process.

That is, Bayh-Dole mostly applies to federal agencies. Anything reaching universities comes by way of a federal contract. Other than that Bayh-Dole changes federal patent law by defining a new category of invention and limiting the patent property right associated with this new category.

A standard patent rights clause must have the following in it:

  • Contractors must disclose subject inventions–inventions they have acquired.
  • Contractors may elect to retain title in subject inventions.
  • Contractors must file a patent application on each subject invention retained.
  • Contractors must grant the federal government a broad non-exclusive license.
  • Contractors must provide use reports (if requested, and these are secret).
  • Contractors must put a federal funding statement in patent applications.

The implementing regulations do not require inventors to file patent applications if they are also contractors. Makes sense–federal patent law does not otherwise require inventors to use the patent system. 

Then we get a clause regarding special requirements placed on nonprofit contractors:

  • Nonprofits cannot assign subject inventions

-except to a patent management organization
-or with federal approval
-in either case, must include the patent rights clause with nonprofit conditions.

Assignment is any conveyance of the substantial rights in the invention–make, use, sell. Other indications of an assignment include the right to enforce a patent and the right to grant sublicenses (which is another way to resolve infringements). University exclusive patent licenses are often also assignments of the underlying subject invention–university folks are in denial over this bit and federal agencies don’t bother to enforce it. Another way Bayh-Dole has never operated. 

  • Nonprofits must share royalties with inventors.
  • Nonprofits (except go-co labs) must use royalties and any income relating to subject inventions after expenses for scientific research or education.
  • Nonprofits must prefer to license to small businesses (but not really–walked back).
  • Nonprofits running go-co labs must use royalties with greater hand-wringing.

Why special terms for nonprofits? Patents on subject inventions made at nonprofits are not normal patents, and are even less normal than regularly abynormal patents on subject inventions made at small businesses. The sharing of royalties provision is strange. Senator Bayh claimed that inventors could negotiate terms–but then Senator Bayh was confused about his own law and the Supreme Court had to set him straight. Universities routinely divert royalty income to fund activities not directly involving the management of subject inventions. The distinction between royalties (which must be shared with inventors) and income relating to a subject invention (which need not be shared) is critical if a nonprofit assigns an invention to a company–the company is required to accept the nonprofit’s requirements–including how income relating to invention (sale revenue, for instance) is managed.

Then, a clause pertaining to inventors:

  • Federal agencies may allow inventors to retain ownership of subject inventions (after consulting with contractor).
  • Inventors then are subject to the law and whatever regulations go with.

Essentially, this authorizes a second standard patent rights clause, one pertaining to inventors rather than to research hosts–both of which become contractors when universities comply and make potential inventors parties to their funding agreements. This shows up in 37 CFR 401.9.

And a clause pertaining to federal employees who invent.

And another limiting federal agencies with regard to background rights:

  • Federal agencies are limited in adding a requirement to license non-subject inventions.
  • Federal agencies are limited in the use of any such requirement if they do add it.

35 USC 203 March-in procedures

Federal agencies may intervene to license or require licensing of subject inventions

  • In limited circumstances (and skew from Bayh-Dole’s policy and objective).
  • Only by following procedures (that are appealable).
  • And only if all information gathered is kept secret.

So, march-in procedures are for show, designed never to be used. Bremer said as much. Nothing to protect the public interest. Nothing to allow the public to protest or appeal. No requirement that a federal agency enforce the patent rights clause in a funding agreement. 

35 USC 204 Preference for United States industry

Exclusive licenses for the U.S. must require substantial manufacturing in the U.S. (but not really).

Federal agencies can waive the requirements of 35 USC 204. Again, Bayh-Dole requires the use of provisions in a funding agreement. Bayh-Dole does not require those provisions to be enforced by the funding agency. 

35 USC 205 Confidentiality

Federal agencies will keep confidential:

  • invention reports for a time to permit patent applications to be filed.
  • any patent application materials.

35 USC 206 Uniform clauses and regulations

The Secretary of Commerce may

  • issue regulations applicable to federal agencies to implement 35 USC 202-204
  • establish standard funding agreement provisions

35 USC 207, 208, 209 Federal stuff

Federal agencies may grant exclusive licenses to federally owned inventions–including subject inventions acquired from contractors–after ceremonial handwaving.

There is much more here, but not for university administrators. 

35 USC 21o Precedence of chapter

Bayh-Dole takes precedence over all other statutes but for Stevenson-Wydler and any subsequent laws that recite Bayh-Dole.

Bayh-Dole supersedes but does not repeal any laws requiring disposition of inventions inconsistent with Bay-Dole. The Supreme Court declared that Bayh-Dole, at least with regard to contracting, applies only to subject inventions. Inventions made with federal support that are not acquired by a contractor are still subject to non-Bayh-Dole federal laws and regulations. But those laws and regulations have largely been dismantled. 

35 USC 211 Relation to antitrust laws

Bayh-Dole does not make anyone immune from or provide a defense with regard to antitrust law.

“Unreasonable use” in 35 USC 200 does not mean antitrust behaviors.

35 USC 212 Disposition of rights in educational awards

Federal agencies cannot claim an interest in invention rights arising from educational awards, even if research is involved.


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