Federal patent policy for the 21st Century, Part 1

How about a new Dole/Bayh Act? Of course, it will have different names attached to it. How about a law that tracks what Vannevar Bush recommended for scientific frontiers, nearly 75 years ago, in Science the Endless Frontier? One that puts inventors first. But now with protections against predatory institutions and patent brokers–something not in vogue back then. And still retaining the idea that public funding should alter the patent monopoly rights available to researchers who have chosen to work at universities. If a publicly funded invention should result in patent that ought to be worked, ought not be trolled, ought to be limited in its exclusivity, and ought to result in new use faster and at lower price than what an ordinary patent might do or not exist at all–if these are the policy aims, then Bayh-Dole is no longer a meaningful approach.

Keep it short and sweet. Restrict the new law to federal funding agreements with universities and to research to advance scientific and technological knowledge, and to address matters of public welfare. Don’t conflate federal purposes involving university research with procurement of deliverables for government use. Arrangements with other organizations can be federal procurements–follow a different policy for those. Uniformity that doesn’t track purpose is merely arbitrary or indifferent or blind (take you pick). Or, if organizations want to receive grants that otherwise would go to faculty at universities, then those organizations will have to treat their own research talent as if it were faculty–released from employment duties, publishing results for general use–and allow their inventors to own their inventions (“free” inventions, not “service” inventions). All involved must recognize the purposes and limitations on public purpose patents that might result from such research.

In this new law, electing to retain title and reporting aren’t necessary, so we will have low administrative costs–no more of the Bayh-Dole useless paper shuffling. In this new law, there is no room for institutional interference in inventors’ choices. No policy of a bureaucrat’s thumb in every innovation opportunity. In this new law, we will let the patent system operate, assuming that the patent system is a public good. But we must insist on a few limitations, given that the federal government has a purpose in funding scientific and public interest work proposed by university faculty, and that purpose is not to make universities wealthy or to lose patents down the sewer hold of private speculation or trolling (as the LES would have it, if developing product doesn’t work out, and it almost never does work out under Bayh-Dole’s methods).

Patents on subject inventions focused on advancing science or technological knowledge or meeting a matter of public welfare (health, environmental safety, and the like) should carry special provisions–to permit any research use, to allow making and using immediately, to protect against nonuse or failure to timely achieve practical application. With these provisions, we arrive at a form of patent suited to scientific and technological advance, and to developing things for public welfare and use. Not quite demanding stuff go into the public domain, and not quite allowing a patent with a monopoly right that need not be worked or licensed or which could be licensed just for the money and not for any public outcome or put into service to support monopoly prices.

The policy idea behind provisions on top of patent law for patents on subject inventions is that in the advancement of science and technology, and in addressing public welfare needs, a special form of patent is required. If that’s *not* the case, then we can have an even simpler federal patent policy. But let’s start with a new Dole/Bayh, one that might just work.

This new approach uses the law’s position in patent law to limit the property rights in patents on subject inventions. Bayh-Dole does this, too, but it does a lousy job of it, so universities and federal agencies alike just ignore it. The new law implements an express public covenant that runs with each patent on a subject invention made at a university by tracking the language in 35 USC 271 regarding infringement. Happily, 35 USC 271 already includes language that enables these new sections of the new law.


§200 Policy and objective

It is the policy and objective of Congress to enable inventors to use the patent system to promote the use of inventions arising in federally funded research to advance scientific or technological knowledge or to address matters of public welfare.

[Focus the policy and objective on frontier and public welfare research. Put inventors first. Skip all the other stuff. What matters is that science and technology are advanced, and public welfare is addressed–“advanced” and “addressed,” what bland verbs. But, hey, this is policy.]

§201 Definitions

(a) “Federal agency” means any executive agency as defined in section 105 of title 5, and the military departments as defined by section 102 of title 5.

[Why should the TVA get an exception again?]

(b) “Funding agreement” means any agreement between the Federal Government and a contractor for the performance of experimental, developmental, or research work designated to advance scientific knowledge or to address matters of public welfare. Such term includes any assignment, substitution of parties, or subcontract of any type entered into for the performance of experimental, developmental, or research work under a funding agreement as herein defined.

(c) “Contractor” means any a party to a funding agreement.

[These are right from Bayh-Dole.]

(d) “Subject invention” means any invention protectable under this title and made in the performance of a funding agreement.

[Removed the “of the contractor” part. If the invention is patentable and within scope, it’s “subject,” just as the Institutional Patent Agreement master contract had it. But the IPA definition is strictly a contractual one. Bayh-Dole makes the definition part of federal patent law. That’s a huge difference. If Bayh-Dole had wanted to do the IPA thing, the definition of subject invention would have been in the list of standard patent rights clauses in 35 USC 202(c), not a stand-alone definition in patent law.]

(e) “Practical application” means the use of a subject invention under such conditions as to establish that the subject invention is being utilized and that its benefits are to the extent permitted by law or Government regulations available to the public on reasonable terms.

[Could also add definitions for “establish” and “public welfare.” Could restrict to nonprofits or nonprofit universities. Not all research at universities is within the scope of this new law. And non-universities and even for-profits could participate–but those organizations would have to give up claims to invention ownership to do so.]

§202 Disposition of rights

(a) Each funding agreement entered into by a Federal agency with a contractor shall contain a patent rights clause to effectuate the following:

(1) The Federal agency shall have a nonexclusive, nontransferrable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States any subject invention throughout the world.

[This is from Bayh-Dole. It’s what Vannevar Bush recommended. No right to take ownership of inventions. No inventions are deliverables to the government.]

(2) The contractor shall have a nonexclusive, nontransferrable, irrevocable, paid-up license to practice or have practiced, for non-commercial and nonprofit purposes only, any subject invention throughout the world.

[Add the same right for the contractor. Not a shop right, but a compulsory license. Broader than the research use license. The obligation runs with the patent. No point in inventors being able to sue their research hosts for infringement. No point in trying to make things into a shop right, when the inventors are not, for the purposes of federally funded work, working for the benefit of the host institution or its TLO.]

(3) The contractor shall require, by written agreement, its employees, other than clerical and nontechnical employees,

(A) to disclose each subject invention to the contractor and to the Federal agency within a reasonable time; and

(B) in the event a United States patent application is filed

(i) to execute all papers necessary to establish the Government’s and the contractor’s rights in subject inventions; and

(ii) to include within the specification of such application and any patent issuing thereon a statement specifying that the invention was made with Government support and that the Government has certain rights in the invention;

(C) if a United States patent application is not filed within one year of the date of disclosure to the Federal agency, then the Federal agency shall have the right to disclose the invention.

[This is the heart of the law, and follows the (f)(2) requirement in Bayh-Dole’s implementing regulations. Disclosure is necessary to start clock on extending exclusive rights upon practical application and to provide the government with the information to publish if the inventors don’t. Inventors must agree to confirm the non-exclusive licenses required. And if a patent isn’t sought, then the government may publish the invention–so, no trade secrets, no indifference.]

(4) The contractor shall not, as a condition of performance under the funding agreement, obtain rights in any inventor’s subject inventions.

[This makes clear that contractors–universities–cannot claim ownership or a financial interest in subject inventions as a condition of allowing their employees (or others) to participate in work under a funding agreement. They can receive ownership by assignment–just cannot claim or require or compel assignment. This provision is a consequence of the (f)(2) agreement in Bayh-Dole’s standard patent rights clause, and parallels the same restriction for subcontracts, also in the standard patent rights clause. These requirements are elevated from regulation to statute.]

(5) The contractor will include the patent rights clause, suitably modified to identify the parties, in all subcontracts for experimental, developmental or research work.

(6) The contractor shall not, as part of the consideration for awarding a subcontract, obtain rights in any subcontractor’s subject inventions.

[These track the current language of the standard patent rights clause on subcontracts, which isn’t in Bayh-Dole, but is implied in that a subcontract is defined to make a subcontractor party to a funding agreement. However, since the subcontractor’s subject inventions are also limited for research purposes, the prime contractor will have some access to those inventions without having to make a claim for them. Same for make-use commons uses.]

§203. Property rights in patents on subject inventions

[research commons:]

(a) No person shall be deemed to infringe a patent on a subject invention who makes or uses the subject invention for research purposes; namely, to evaluate claims made regarding the subject invention, or to investigate the manner of a subject invention’s operation, or to study the subject invention, or to use the subject invention in research for which findings are published in a reasonable time.

[make-use commons:]

(b) Unless the inventor or assignee of a patent on a subject invention, within two months of public disclosure or publication, offers to license for making and using the subject invention on non-exclusive, fair, reasonable, and non-discriminatory terms, no person shall be deemed to infringe a patent on a subject invention who makes or uses a subject invention two months after the date on which the subject invention is disclosed or published by the inventor or assignee or under the authority of the inventor or assignee.

[limited term for nonuse:]

(c) Unless an inventor, assignee, or exclusive licensee has filed an affidavit of practical application with the Federal agency or otherwise has established practical application within a reasonable period not to exceed eight years from the date on which a patent on a subject invention has issued, no person shall be deemed to infringe a patent on the subject invention who offers to sell, sells, has made, or imports products that incorporate the subject invention or sells or imports products made using the subject invention.

[sole source pricing for government purposes:]

(d) The inventor, assignee, or exclusive licensee of patent on a subject invention shall offer to sell to the government, no later than one year after first commercial sale, and in each year thereafter for as long as product is offered for sale from a single source, product at the lower of (A) the median price paid for the product in any foreign country within the previous year or (B) the lowest price offered to any customer in the United States within the previous year.

[Part (a) restores a research commons for subject inventions. This is done by restricting the property right in a patent on a subject invention, not by compulsory licensing.

Part (b) creates a make-use commons. The patent owner has the opportunity to create this commons upon public disclosure or publication, and if so, can charge a reasonable license fee and enforce patent rights against those that do not obtain a license. Otherwise, the patent owner’s property right in the patent is restricted to the rights to offer to sell, sell, have made, and import. 

Part (c) limits the term of exclusivity for nonuse. The patent owner has eight years from the date any patent issues on a subject invention to achieve practical application. This is plenty of time even for diligent development of a pharmaceutical compound. The point of the new Bayh-Dole is to speed things up. If things can’t be sped up, then the patent serves no particular purpose in this context. If a patent owner achieves practical application, then the patent may run for its entire term, including any exclusive license. 

Part (d) limits the pricing of product charged to the federal government. The government need not negotiate price if the price reflects the best price offered to any customer in the U.S. (such as private customers who negotiate price) or the median price paid by customers in foreign countries (where there may not even be patent protection and so may reflect competition as well as purchasing power).]

§204. Reserved

§205. Confidentiality

Federal agencies are authorized to withhold from disclosure to the public information disclosing any subject invention for a reasonable time in order for a patent application to be filed.

[Same as in Bayh-Dole, but ignores the requirement on patent application materials, since there is no requirement for patent applications to be provided to the federal agency.]

Pre-emption, anti-trust, and exclusion for educational grants can stay the same as now. Federal ownership and licensing is an entirely different thing, and never should have been in Bayh-Dole to start with. Deal with it separately. There is plenty to fix with federal ownership and licensing, too–even if Bayh-Dole were to remain. For instance, the federal government should have to share royalties with non-federal inventors if the federal government acquires patent rights in subject inventions from contractors–they don’t elect to retain title, say, or fail to comply resulting in the government obtaining title. Same for non-federal co-inventors on patents arising in federal labs. Bigger picture, before Bayh-Dole, a university inventor would likely have access to any invention acquired by the government–it would be dedicated to the public domain or licensed non-exclusively. Now, however, the federal government uses the same “portfolio” approach to commercial licensing, starting with exclusive licenses and commercialization rather than with non-exclusive licenses and broad public access. Huge difference. Folks that can’t see it shouldn’t be in innovation policy discussions.

This new Dole/Bayh sets up protections for inventors. They cannot be forced to assign to universities that host their research, but they are required to grant licenses to the organization that hosted their research and to the federal government. Should there be more requirements?

Federal patent policy from 1947 to 1980 argued that federally supported patents should be dedicated to the public or licensed non-exclusively or at least used in the public interest (with the implication that it was otherwise legal to use patents in ways that were not in the public interest, putting pressure on what those ways might be, and what determines the public interest as conceived by federal officials).

We are left with this problem: if federal funding is for research to advance scientific and technological knowledge or to address the public welfare, should there be any restrictions on the use of patents by inventors or anyone inventors might assign or license rights exclusively to? Are patents on inventions made with federal support of this form ordinary patents, or are they special patents, for specific purposes, in “promoting the useful arts”–to advance science, –or to advance public welfare?

Put another way, is the patent system as we have it already best suited to the particular efforts to advance scientific and technological knowledge or to address matters of public welfare? If the patent system as we have it is as good as it gets, even for these efforts, then we are done. If the patent system is not as good as it gets, then we have more to do. We may find undesirable monopolies on subject inventions inventions (i) if the patent owner just sits on the invention and prevents others from using it; or (ii) if the patent owner milks the patent for maximum money rather than a reasonable return that broadens public benefit through access to and use of a subject invention; or (iii) if the patent does not produce beneficial products in less time and at better prices than non-monopoly approaches.

In the standard patent system, an inventor does not have to do any particular thing beyond publishing their invention in the patent system and pay fees. There’s no working requirement. No mandate to show compassion. No need for speed. No reason to keep prices low. But if an inventor petitions the government for financial assistance on an assertion that the work funded will advance science or technology or public welfare, then the inventor-to-be has made public commitment with regard to any invention that results. While patent law does not enforce such public commitments, an extension of patent law to address such research funding has good reason to. There is a public covenant on a patent on water in a time of drought, obtained because the government funded the project in which the inventor discovered a new source of water. The funding agreement should reflect that covenant.

When you propose to do things on behalf of others, and that’s the basis on which you obtain financial support, then you ought to honor your commitments when you succeed.

There might also be a provision that forces non-exclusive licensing in foreign jurisdictions if the patent owner or assignee or exclusive licensee has not established practical application in a foreign jurisdiction within eight years. Advancing science and addressing public welfare is not a U.S.-only concern. Similarly, where in Parts (a), (b), and (c) the new Dole/Bayh can restrict the scope of property rights in patents, for patents issued in foreign jurisdictions, the new Dole/Bayh cannot make the same change–it’s not part of those other countries’ patent laws. For those jurisdictions, the new Dole/Bayh can require compulsory licensing–research exception, make-use commons, and practical application within eight years, or lose the right to exclude for those activities.

That’s my take on it. But see Part 2, coming soon.


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