SPRCing of Bayh-Dole, Expanded

I added an additional section to an article I wrote in 2010. It drives at the mistaken claim that Bayh-Dole endorses the idea that nonprofit institutions should own the inventive work of faculty supported by federal funds. There is nothing in Bayh-Dole that makes such an endorsement. Whatever happens with Bayh-Dole’s standard patent rights clause (SPRC) apparatus does so after a university acquires ownership. Bayh-Dole does not authorize the taking of ownership, give first right to take ownership, or prevent inventors from doing anything other than giving universities ownership. Universities do not have to take ownership of inventions to comply with Bayh-Dole (or even with the SPRC). To comply with Bayh-Dole universities do not have to make inventors promise to assign, or make inventors agree that they have already assigned future inventions. All these claims are garbage, or muddle, or self-serving incompetence, or abuse of authority, or fraud, or a denial of civil rights under the color of law. 

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Bayh-Dole is implemented by federal agreements. There is no general statement in the Act that ownership of inventions previously with inventors is now with their employer hosts. Not outright, not by notice to the government. It is just not there. Folks are making that part up. One might say, it is an assumption that is necessary to make the law conform to their idea of it–that somehow universities may obtain title by the operation of the Act. But how they do so is not by means of the Act, but by what the Act authorizes, and that is the use of a standard patent rights clause (SPRC) in every funding agreement with universities and small businesses (unless federal agencies follow the rules for changing the clause).

The Act creates the apparatus by which federal agencies are to conduct their agreements with universities and small businesses with regard to invention rights. That apparatus takes the form of 37 CFR 401, which requires agencies to use the SPRC in every funding agreement, with modifications as provided by uniform protocols. The SPRC provides for an allocation of principal rights–that is where the university has a right to retain title in a) inventions b) of the contractor c) conceived or first actually reduced to practice in the performance of the work, and d) that are subject to the SPRC. That title is not compulsory. A university may elect to retain it, may subcontract it, may assign the right to elect it, and may waive it. Title clearly cannot vest in the university upon invention or notice to the agency of election to retain title. (And it would play havoc with all universities that require assignment by their inventors to a research foundation, since all those assignments would be invalid, since the university would then be the owner, not the inventors).

The law does not provide for universities to own title outright, solely, or without formalities. There is no mechanism in the law for doing this. The law establishes the SPRC, and that’s what a university is required to comply with when federal agencies include the SPRC in a funding agreement. That’s how the Act operates. Really. Don’t have an opinion about it. Read the the law.

What in the SPRC reaches to the inventor’s title? There’s (f)(2), but it addresses a written agreement by research employees (only) to protect the government’s interest. It is a very interesting provision. It does not show up expressly in 35 USC 200, but rather is an implementation in the CFR made necessary by portions of 35 USC 202(c). It is possible that (f)(2) also may function to permit the university to obtain rights. Other than that, one finds in (c)(2) that the contractor may elect to retain title by giving notice to the agency within a specified time. But that is an election to retain title, meaning that the contractor is not immediately required to convey title to the government at the government’s request.

It is a big leap to go from the right to retain title, which inventors also have at 401.9 (35 USC 202(d)), to the idea that giving notice to retain title means one already has it, or by giving notice has it, as if it were a statutory gift. If title vests this way, then for it to be constitutional, there must be due process and just compensation to whomever has title before it is removed in this way. The US Constitution says invention rights may be reserved to inventors. The Patent Act does this. The Constitution (5th Amendment) says private property may not be taken for public use without due process and just compensation. Explain how this is happening, given most university inventors do not get paid anything when title is taken (or thereafter), do not have standing to negotiate what they believe their invention is worth, and there is no independent appraisal to make such a determination. One can make this leap. There is nothing in the Act that prohibits leaping. But then one has to deal with how the Act and practices under the Act conform to the Constitution. One also has to explain why all this apparatus around the SPRC if it isn’t actually needed. Was it just confused, sloppy, or redundant drafting?

If Congress wanted to make a law that vested title in inventions with anyone other than the inventors, then how would it have the authority to do so? The Constitution is specific to giving Congress the right to reserve exclusive rights to inventors, not to others who would own what inventors have done. There’s a special case, of course. Congress can alter the patent law so that rights to certain inventions vest with the federal government–that is, they fall outside of normal patent law, rather as certain weapons systems don’t qualify as “arms” under the Second Amendment. We don’t get to keep spare atom bombs around the house to ensure the security of a free State.

But Bayh-Dole is not a direct law. It is a law requiring provisions to be placed in a federal funding agreement made between a federal agency and a research host. It is a law about how to make federal funding agreements with invention clauses–that is, what must be in an SPRC. It is the SPRC that controls in any given situation–a federal contract, which the federal agency on the government side of the agreement can choose to enforce or not, apparently at whim). And even so, those requirements for the SPRC don’t have anything to do with inventors owning their inventions.

If a government agency tried to add an assignment requirement to the SPRC, it would have no authority in Bayh-Dole. The Supreme Court in Stanford v Roche (a ruling six months after this essay was originally posted) made clear that Bayh-Dole does not affect an inventor’s patent rights. Thus, to require an assignment clause as a condition of federal funding directing research hosts to acquire the invention rights of their inventors simply has no authority in the law. It’s pulled, as it were, from the bureaucratic, um, hats of federal administrators at the behest of university patent brokers.

In the meantime, university administrators at public universities–instruments of state government–insist that Bayh-Dole gives them the right to *take* inventors’ patent rights upon notice, with no due process, no negotiation, no consideration. That taking–not authorized by federal law–and not authorized by the SPRC–falls outside both federal patent law (i.e., the Bayh-Dole statute, which is part of federal patent law) and federal contract (i.e., the funding agreement containing a SPRC). It’s just a taking of private property for public purposes. Eminent domain, it would seem.

Okay. So then what about the argument that inventors have agreed to the taking by accepting university patent policy statements? Perhaps, but not in the general case, since forming enforceable agreements is a matter of specific local practice, inventor by inventor, and not a matter of burying a claim of institutional ownership (often badly drafted) in a patent policy. As for consideration, many university policy statements go out of their way to make it clear that royalty sharing is not consideration for the assignment of inventions–it is an administrative perk, offered through the generosity of the university, perhaps as an added inducement (if threat of career assassination and firing weren’t enough) to participate in the “technology transfer” program. One might add that the SPRC requires nonprofit organizations to share royalties with inventors. If royalty sharing is an obligation that a university has already accepted as a matter of federal contract, then that royalty sharing cannot be consideration for assignment–the inventors already had that consideration coming to them, as a matter of the SPRC.

Like all scams, the arguments here are difficult to pin down, since the truth is fluid beneath the cold surface intent that whatever the reason–any reason will do–universities are supposed to get inventors’ inventions outright, without any obligation to the inventors–not to patent their inventions (that’s also a requirement of the SPRC, and so not owed to the inventors), not to license their inventions (or necessarily even make diligent efforts–there is no diligence requirement in the SPRC, just the possibility of march-in if a federal agency does not “expect” the university to take “effective steps” to “achieve practical application” of a subject invention in a given field of use), not to act as agents of the inventors (there is no obligation to license in a particular way, such as non-exclusively). Thus, whatever the transaction that has taken place by which a university asserts ownership of an invention, it does not generally involve anything having to do with the inventors’ interests–not to patent, to license, to be diligent, to pay.

The argument appears to reduce to “if you don’t assign, we can ruin your reputation or fire you, or hey! both.” We can then chase the scam down into the details of whether faculty inventing in research is within the scope of employment for a university (and that depends on pragmatic issues such as assurances in university policy of academic freedom) and whether a university patent policy actually scopes for employment (which may then be really narrow for faculty). And of course, there’s the question whether faculty with tenure can be fired for declining to assign inventions that university administrators cannot show are within a contractual obligation to assign. Contracts are designed to protect parties from abuse of power. In place of an assertion of power there is a set of mutual promises and undertakings. But university administrators use the idea of contract to mean “do whatever we say, be our compliant servants, agree with what we say you agreed to.” Such stuff is not the substance of any contract. And without a contract that shows objectively that faculty inventors have agreed to assign certain future inventions, there’s really nothing left for administrators but to *take* inventions or to fool or threaten inventors into assigning their inventions.

One way to fool and threaten is to claim that assignment is required to comply with federal law (i.e., Bayh-Dole). And even that is nonsense, because federal law is not what controls university patenting behaviors–it is the SPRC–and the SPRC in turn does not give any authority to university administrators to demand assignment of inventions. Quite the opposite, the SPRC requires universities to require potential inventors to make the (f)(2) written agreement to protect the government’s interests in inventions. The government’s interest in invention is not that the research host will own all such inventions. It is to have a non-exclusive license to practice and have practiced, and to receive title upon request if certain conditions take place, and to have patent applications filed by whomever has an obligation to file patent applications. Thus, there’s nothing in Bayh-Dole or its implementing regulations or its SPRC that gives universities the right to demand ownership of inventions from inventors.

One might go so far to argue that the SPRC (f)(2) requirement in fact preempts any such university demand for ownership–if a university agrees in a federal agreement to require inventors to make the (f)(2) agreement, then it cannot at the same time require inventors to comply with a different, state-enforced agreement on the same subject matter. If the (f)(2) agreement preempts any other university claims, then inventors would have some protection in the relationship, not from Bayh-Dole, but from the SPRC.

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It is as if there are two Acts. One for the public, which is the one published in 35 USC 200-212, and the other one for university patent officers, a secret Act of shortcuts and leaps that makes much of the public Act superfluous.

The SPRC is the means by which universities have the right within the funding agreement to secure title in inventions, if that is what they choose to do, relative to agency funding agreement requirements for conveying invention rights to the government upon request. How the university goes about dealing with title once the university has gained standing by electing to retain rights is a different thing. The government requires the university to require a written (f)(2) agreement by employees to protect its interests.

That leaves how the university goes about protecting its interests, once it decides to elect to retain title. That is the rub. That is what the AUTM Practice Manual says folks need to be diligent about. Why would the Practice Manual say that if rights vested with the university outright? Why would universities ask inventors for assignments to subject inventions? Nearly 30 years of practice indicates that if a university wants the title it has retained, it has to get it the old fashioned way under the Patent Act, by an agreement of some kind (employment agreement, agreement to participate in extramural research, IP policy, research compliance policy, special agreement specific to a funding agreement, or at the time of the request by negotiation) that results in a written assignment of title that meets the requirements of the PTO.

The Act authorizes and requires the SPRC.  The SPRC is implemented by means of funding agreements. The SPRC requires a written agreement with research employees of the university to protect the government’s interests. It is up to the universities to protect their own interests. The Act does not tell them they have to take assignment. And it does not do that assignment for them. And it does not protect them if they botch the agreement for getting assignment. That’s freedom. That’s respect. That’s inspired.

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