Going to Eleven on NIST and (f)(2)

NIST is drafting new rules for the standard patent rights clause authorized by Bayh-Dole. Included in the proposed new provisions is a requirement that contractors require the assignment of inventions to the contractor. This is a bad idea. Besides, it’s nuts. It can’t happen, except in the fantasy world of faux Bayh-Dole.

For once, NIST, cut inventors some slack. If you are going to revise (f)(2), bolster the protection for inventors by expressly forbidding, in the case of nonprofit contractors, for any contractor requirement that inventors must assign inventions. That is, make it clear that (f)(2) takes precedence over any nonprofit patent policy, employment agreement, patent agreement, non-competition covenant, trade secret claim, claim based on use of resources, financial interest, demand to control, threat, or abuse of authority that would claim the nonprofit has a right to own inventions made with federal support. 

1. There’s nothing in Bayh-Dole that requires assignment of inventions to a contractor–or mandates such an assignment, or restricts any other assignment, such as with a first right of refusal. That’s what the Stanford v Roche decision was all about. The Supreme Court made clear there that Bayh-Dole is not a vesting statute–that means, there’s nothing that changes federal common law of invention ownership, and contractors if they want title should contract for that title outside of Bayh-Dole. Here’s the Court:

The Act’s disposition of rights—like much of the rest of the Bayh-Dole Act—serves to clarify the order of priority of rights between the Federal Government and a federal contractor in a federally funded invention that already belongs to the contractor. Nothing more.

2. There’s no mechanism in Bayh-Dole for such an assignment requirement. Bayh-Dole concerns “subject inventions”–this is a new category of invention in patent law. A subject invention is one that is already owned by the contractor.  If NIST proposes that contractors must require the assignment of subject inventions, then it’s proposing a redundant rule, because contractors already own subject inventions. Again, re-read that bit from the Supreme Court just quoted. If NIST wants to require assignment of inventions other than subject inventions, well, that’s outside the scope of Bayh-Dole.

3. Inserting a requirement that contractors require assignment of inventions (subject or otherwise) creates new executive branch patent policy outside of Bayh-Dole. The point of Bayh-Dole was to replace executive branch patent policy and various statutes with special requirements with a “uniform” statute embedded in federal patent law that established the authority and limits of federal government interest in inventions made in projects with federal support. If the purpose of Bayh-Dole was simply to do away with individual agencies constructing their own interpretations of executive branch patent policy, then Bayh-Dole could be simple–just reduce it to 35 USC 206 and 210 and let NIST make up everything else on its own.

4. Changing (f)(2) to an assignment clause reverses the effect of (f)(2). NIST already curates the (f)(2) clause, which protects the government’s interest in inventions made with federal support by making inventors parties to the funding agreement and therefore contractors who own their inventions as a matter of federal common law. The (f)(2) clause protects inventors because it forces research hosts to delegate reporting, assistance, and ownership matters to their inventors. That delegation takes precedence over any other competing claim. Patent bureaucrats at universities hate (f)(2) and refuse to implement it. But if NIST replaces (f)(2) with an assignment to the research host clause, then inventors have no protection at all. The Supreme Court found that prospect “deeply troubling” (citations removed):

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. 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, 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.

Bayh-Dole does not protect inventor rights because it does not concern inventor rights–only who has a claim to inventions in the case that a contractor acquires those rights ahead of the federal government. If NIST is going to make (f)(2) into an assignment clause, then there must also be protections for inventors–they must have the right to challenge a contractor’s claim that an invention was “conceived or first actually reduced to practice in the performance of work under” a federal funding agreement. That is, the contractor must demonstrate that the invention is anticipated in that funding agreement, or that the funding agreement specifies actual reduction to practice, or that actual reduction to practice “diminished or distracted” from the work that was specified in the funding agreement.

5. NIST proposes to make the assignment sequence bass-ackwards. Look at the IPA template. The IPA did have an assignment requirement. But that assignment requirement ran a different way. If the university decided to seek a patent on an invention, then it must have an assignment:

IV. (a) The Grantee shall obtain patent agreements from all
persons who perform any part of the work under a grant or
award from the Department of Health, Education, and welfare,
exclusive of clerical and manual labor personnel, requiring
that such persons promptly report and assign all subject inventions to Grantee or its approved patent management organization.

VI. (a) The Grantee shall require assignment to it of all right, title and interest in and to each’ subject invention on which it elects to file any patent application for administration by it in accordance with and subject to the terms and conditions herein set forth. Assignments from the inventor to the Grantee under U.S. patent applications shall be promptly obtained and recorded by the Grantee in the United states Patent Office, and copies of the recorded assignment shall be furnished to the Grantor.

Here’s the IPA sequence. 1) Grantee obtains a patent agreement from persons involved in grant work. 2) Grantee elects to file a patent application; 3) Grantee prepares a patent application; 4) Grantee obtains assignment from inventors specific to that patent application. In this sequence, a “present assignment” approach is disabled. The Grantee does not get ownership of all inventions made with federal support, but only those that it has prepared a patent application for. We don’t have in the IPA program a “claim-everything, file on whatever, release nothing” approach.

If universities get assignments before making a decision to file patent applications, and the assignments to inventions are broader than the applications they do file, that’s a recipe for overclaiming inventions, abandoning inventions (at the last minute) that the university suddenly decides it doesn’t want, and inviting nonuse of inventions the university does file patent applications on. None of these behaviors is a policy objective set forth in Bayh-Dole.

6. There is no public policy served by an assignment requirement. If NIST changes (f)(2) to an assignment requirement–that all inventions made with federal support are hereby assigned to the contractor before they are even made, then we are back to a vesting statute, which the Supreme Court ruled Bayh-Dole wasn’t and lacked the scope to be. If NIST merely requires contractors to obtain assignment before filing, well that’s about the same as requiring an invention to be a subject invention before the contractor may file a patent application. Interesting but useless. If (f)(2) requires contractors to require inventors to assign to the contractor as a condition of the federal funding, the government is essentially requiring contractors to screw over their inventors. There’s nothing in such a requirement that represents a government interest or even a public interest. All we get is that the government requires contractors to acquire inventions made with federal support, but why? so that patent brokers have grander livelihoods? There’s no public policy there. It’s just private entitlement, wrapped up in pretty paper by NIST.

7. Requiring inventors to assign to contractors as a condition of public funding fails subvention, academic freedom, and the incentives of the patent system. If inventors must assign to nonprofit research hosts–especially universities–then all federal grants become merely subsidies for a patent speculation industry. Inventors have no say in whether a patent is sought or how that patent is to be managed. As for academic freedom, which includes the freedom to publish, a patent is a publication with inventors’ names attached–essentially, NIST’s assignment requirement gives universities the right to control how anything substantive by way of discovery or invention is published by those who make that discovery or invention–the university chooses the forum (the patent system) and forces the publication. It’s all very efficient. But it repudiates academic freedom. Where is the federal public policy in that?

The incentives in the patent system are based in the federal common law that inventors own their inventions and should have an opportunity to seek exclusive rights in exchange for publishing their inventions. NIST would turn that incentive into an institutional incentive. That’s not the basis of the federal patent system. While private employers might seek to acquire those exclusive rights from inventors, it’s not the federal government’s place to require contractors to do so, or to require inventors to give up their rights to contractors, as a condition of federal funding, especially when that funding is subvention funding directed to the contractor for the benefit of the project proposed by faculty.

8. Making (f)(2) an assignment requirement makes a hash of Bayh-Dole’s inventor ownership clause 35 USC 202(d) and its implementing patent rights clause at 37 CFR 401.9. If contractors are required to require assignment of inventions, then inventors cannot “retain” rights under 35 USC 202(d) because they will never have those rights. If inventors “retained” rights, then the contractor would be out of compliance with the patent rights clause. The Supreme Court was clear on the interpretation of 35 USC 202(d)–inventors retain rights because they have them all along. Bayh-Dole does not disturb federal common law:

The isolated provisions of the Bayh-Dole Act dealing with inventors’ rights in subject inventions are consistent with our construction of the Act. Under the Act, a federal agency may “grant requests for retention of rights by the inventor . . . [i]f a contractor does not elect to retain title to a subject invention.” §202(d). If an employee inventor never had title to his invention because title vested in the contractor by operation of law—as Stanford submits—it would be odd to allow the Government to grant “requests for retention of rights by the inventor.” By using the word “retention,” §202(d) assumes that the inventor had rights in the subject invention at some point, undermining the notion that the Act automatically vests title to federally funded inventions in federal contractors.

So NIST will require contractors to obtain assignment of all inventions made with federal support, so 202(d) won’t operate, nor will 37 CFR 401.9. All NIST has done is changed the mechanism of vesting from statutory to regulatory–and this after the Supreme Court authoritatively interpreted Bayh-Dole to say that there is no vesting by operation of law, that inventors own their inventions, and it is out of Bayh-Dole’s scope to do anything about that.

9. NIST’s proposed change to (f)(2), lacking statutory authority, is preempted by Bayh-Dole itself. Here’s the Supreme Court, again:

And §210(a)—which provides that the Act “take[s] precedence over any other Act which would require a disposition of rights in subject inventions . . . that is inconsistent with” the Act—does not displace the basic principle that an inventor owns the rights to his invention. Only when an invention belongs to the contractor does the Bayh-Dole Act come into play.

Bayh-Dole does not stipulate when a contractor obtains rights in an invention made with federal support. It only stipulates that when a contractor has got those rights, then it has obligations to the federal government under the patent rights clause of the funding agreement that controls. But more importantly, Bayh-Dole stipulates that it takes precedence over any other act “which require a disposition of rights in subject inventions.” If NIST is acting outside the scope of Bayh-Dole (which the Supreme Court’s ruling indicates it would be in dictating assignment of inventions made with federal support), then its regulation concerning assignment is pre-empted by Bayh-Dole itself. It is inconsistent with Bayh-Dole to require contractors to require inventors to assign their inventions to the contractors.

10. For subvention funding, where the contractor is compensated for the direct and indirect costs of the funded research, there’s no public policy basis for the contractor to have a right to ownership of any inventions created as a condition of the funding. The contractor merely manages the money and contracting logistics on behalf of the investigators. The contractor is not even an employer in the IP sense of the term–the contractor has less right to inventions than would a company contractor, who might have a shop right at best, absent a basis for entering into a patent agreement. It defies public policy on inventions, then, to require contractors to obtain assignment of subvention inventions–grant-funded inventions. Those contractors have no other reason to have an ownership interest, but for the argument of special entitlement to exploit patent monopolies. NIST might enable that entitlement, but there’s no public policy pertaining to inventions that could possibly justify it–it’s just a decision that institutions should exploit patents, not inventors–even when the inventors, not the institutions, proposed the research.

11. Because every loud thing goes one notch louder, requiring inventor assignments for subvention research is bad for innovation. Making invention management a matter of institutional control as a condition of federal funding encloses the commons, takes inventors out of a position of control and choice, gives them no basis to negotiate or recourse with regard to institutional exploitation of their work. Requiring inventors at universities in particular to assign to their university hosts amounts to inventor-loathing. “A bureaucrat’s thumb in every innovation pie” becomes federal research innovation policy. And that’s going to be one crappy pie. Bayh-Dole is messed up enough as it is. NIST doesn’t have to mess it up more.

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