Penn State manages its IP by means of an IP policy statement and an IP Agreement form. The policy statement made effective in 1991 requires various university personnel (including in the category “academic”–whatever that means) to “complete” an IP Agreement and states that these personnel are obligated to disclose certain inventions to the university, where “inventions” means “inventions and non-inventions.” (Policy HR76 distinguishes “academic employee” from tenure-track faculty and graduate students, so that much at least is clear.)
Let’s look then at Penn State’s 1992 IP Agreement. The IP Agreement is divided into two parts, A and B. Part A covers IP policy requirements. Part B covers sponsored project requirements. First, there is a general preamble:
I understand that my employment with The Pennsylvania State University (hereafter referred to as the University) may be, at least in part, in connection with one or more research, development or other type of project, and which may include contracts or grants between non-University sponsors (hereinafter referred to as Sponsors) and the University.
Let’s clean it up a bit:
I understand that my employment with the university may be in connection with one or more projects, and some projects may involve contracts between the university and sponsors.
What is going on here, besides stating the obvious? We have some key words–employment, project, contract, sponsor. We can break things down further. There’s employment, and that employment may involve projects, and some of those project may be sponsored. The distinction between employment and project is most interesting. While the IP Agreement identifies “research” and “development” projects, it also makes the term general with “or other type of project.” Anything, so long as it is a project, apparently, and projects are distinct from employment generally. What is the reason for requiring this general acknowledgement, that projects are distinct from other activities of employment?
The answer that first comes to mind is–there is no reason whatsoever. It is a document written by amateurs and incompetent ones at that. But let’s suppress the obvious and seek after stranger possibilities. The point of distinguishing projects from general employment picks up on the university’s IP policy, which in turn distinguishes employment, commissioned work, and encouraged work. The IP Agreement does not indicate that projects are part of employment–rather, that employment may be “in connection with” projects. What does it mean for employment to be “in connection with” something else, such as a project? That first answer keeps coming to mind–but we might posit as well that projects involve some sort of commissioning, just as the IP policy recognizes that employed personnel may also be commissioned or encouraged.
Some projects are what we recognize as sponsored projects. An external entity provides money and perhaps direction and in exchange expects various obligations to be met by the university. The challenge then for the university is to flow down certain of these obligations to the personnel involved in the project–since they may not be parties to the contract itself, the university has to provide a means to bind them to the obligations of the university’s contract. The IP Agreement (in part B) does this. So part A, we might think, applies to projects that are not sponsored. These non-sponsored projects may then be considered to be commissioned by the university and distinct from general employment. If this preamble acknowledgement can be read at all to mean anything, this reading must be close to that meaning: what follows concerns IP obligations in projects supported by the university or by an external sponsor.
Again, no doubt university administrators will disagree with this reading. But they have nothing to offer to explain why this preamble acknowledgement distinguishes employment and projects, and university-sponsored projects from projects sponsored by others. If it’s purposeless, why include it? If it has nothing to do with the IP policy’s distinctions, why include it? The first response comes to mind.
We move then to part A, which consists of a general statement and four “responsibilities.” Here’s the general statement:
I agree, as a condition of my employment, to abide by the terms of the University’s Intellectual Property Policies and Procedures currently in effect, as well as any subsequent revisions thereto as approved by the Board of Trustees of the University. In so agreeing, I especially note the responsibilities set forth below. I understand that a complete copy of the Intellectual Property Policies and Procedures is available in my Department Head’s office.
The IP Agreement requires employees to agree that the IP Agreement is a condition of employment. We might say, the IP Agreement forms a contract between the employee and the university. Otherwise, why have it? What difference is there between a general requirement that employees “abide by the terms of the University’s policies” and requiring employees to complete a form agreement to that effect? All one needs in policy (and in employment offers) that if an employee fails to follow university policy, the employee is subject to disciplinary action, which may include termination. We might add that such an assertion would then also apply to administrators who go rogue and act outside of their policy authority or fail to follow the university’s policies.
As an agreement, however, the IP Agreement presents a serious problem. Employees are required to agree not just to current university IP policies (and procedures) but also to any “subsequent revisions” “as approved by the Board of Trustees.” The problem is that this extension to whatever the Board of Trustees might require in the future makes the IP Agreement depend on an agreement to agree, and that’s pretty fatal to the concept of a contract, which consists of mutually enforceable promises. If the university can alter the deal whenever it wants, then it’s not a bargain at all. It’s just a Darth Vaderific assertion of power. Not a contract. Not enforceable with regard to subsequent revisions. See the Shaw court ruling against the University of California.
At best, the IP Agreement here implies: “we can fire you if you don’t do what we say, whatever it is that we choose to say, so long as the Board of Trustees authorizes it.” Fine–but why try to put it into the form of an “agreement” that everyone has to “complete”?
There is a second thing going on. This opening statement of part A asserts that the four “responsibilities” to follow are in the IP policy and procedures of the university. As we will see, that’s a stretch. We might put things differently: the IP Agreement requires employees–“condition of employment“–to agree only to those responsibilities present in IP policy and procedures. And we might wonder why procedures are included–given that the IP policy does not include them or make any reference to them–other than the procedure for getting the IP Agreement signed and disclosing inventions.
There are three ways to construe the IP Agreement’s play to include unspecified procedures along with IP policy.
1) This is a clever way for administrators to expand their power by writing a blank check for themselves in the IP Agreement. Personnel as a condition of employment agree up front to whatever administrators require, so long as they put their requirements in the form of a procedure. The IP Agreement itself is evidence of this approach–the IP Agreement should create a contract between the university and each employee with regard to the disclosure requirement stated in the IP policy. Instead, the IP Agreement makes assertions about requirements that aren’t in the IP policy.
2) This is an extra clever way for administrators to create an exception to IP policy by means of agreement with each employee. The IP Agreement is, in fact, an agreement to amend the IP policy to include whatever the IP Agreement includes. Once an individual has signed the IP Agreement, anything in the IP Agreement comes into effect, regardless of what the IP policy says.
3) Nothing in the IP Agreement, other than committing individuals to disclose their inventions to the university, is authorized by IP policy and therefore has no effect, even though the form makes it appear that individuals have agreed to things that aren’t in the IP policy. The truth is, individuals agree to the IP policy and the IP policy stipulates disclosure of some inventions. That’s the end of it.
Now, which of these interpretations do you expect university administrators to demand? Certainly not 3). It’s just that it costs $100K or more to have an attorney chase down administrators and pin them to the written words of policy–as Doug Shaw had to do at the University of California–and university administrators appear to have a nearly unlimited legal budget to use university attorneys to defend whatever rogue interpretation of policy they want.
Now let’s look at the four “responsibilities” in the IP Agreement. First, an obligation to assign inventions–a requirement not in IP policy:
(1) to assign to the University (or its designee) all rights which I have or may acquire in inventions, discoveries, or rights of patent therein which are conceived or first actually reduced-to-practice by me;
(a) with the significant use of University facilities or resources as defined by policy (and revisions thereof), or
(b) in the field of expertise and/or within the scope of responsibilities covered by my employment with the University;
To read this requirement, we must interpret the semi-colon at the end of (1) as a colon–what follows as (a) and (b) are restrictions on the scope of what is to be assigned.
As for (a), the restriction differs in the IP Agreement from that of IP policy. In IP policy, the requirement is for disclosure, not assignment. The scope of disclosure may be drafted broadly so that for areas of doubt, both inventor and university administrator may consider the circumstances and negotiate whether an invention meets the requirements of scope for assignment. But here, the IP Agreement attempts to make the scope of disclosure also the scope of assignment. Of course, it bungles even this.
Here’s the IP policy (disclosure obligation):
developed with University resources (facilities, funds, or equipment)
Here’s the IP Agreement (assignment obligation):
conceived or first reduced to practice with the significant use of University facilities or resources as defined by policy
How difficult is it to keep a simple policy straight? For “developed” we find substituted “conceived or first reduced to practice”; for “with” we get “with the significant use of”; for “resources” (expanded to “facilities, funds, or equipment”) we get “facilities or resources,” as if these are coordinate terms rather than that resources is the general term and facilities is an instance. Again, this is incompetent drafting, whatever else is going on. At the least, the IP Agreement binds individuals to assign only those inventions involving significant use of university resources, even if all inventions are required to be disclosed. As usual with incompetent drafting, we again find an ambiguous terminal constituent. Does “as defined by policy” modify “significant use”? or “facilities or resources”? Or perhaps both or anything at all? Given that the only gestures in IP policy are “develop” and an expansion of “resources” to mean “facilities, funds, or equipment,” we might then read the assignment scope here in (a), making the appropriate substitution, as “significant use of University facilities or facilities, funds, or equipment.” Silly garble, but that’s what university administrators decided met their standard for clear, reasonable, authoritative prose.
It is clear, however, that the IP Agreement’s gesture is to claim nothing more than IP policy claims–even as the IP Agreement claims assignment–something that’s not in the IP policy at all. Quite the nerve.
We might dwell a moment on “conceived or first reduced to practice.” These are terms derived from federal patent law as components of what is required to “make” a patentable invention–the invention must be conceived in the mind of the inventor and reduced to practice–and recognized as an invention (along with the other requirements–new, useful, and non-obvious, taught so as to be practiced without undue experimentation by one with ordinary skill in the art, and the like). But since the IP policy does not restrict “invention” to inventions that are or may be patentable, here “conceived” could be read to mean “thought of” (as an idea or concept). The IP Agreement then would claim to be a thought-ownership agreement: “if you think of anything with commercial value, then you agree to assign that anything to the university–if you were using significant University facilities or facilities, funds, or equipment.” But this reading is nonsense. The IP policy of course does not endorse it, for starters.
The deeper nonsense is that it’s clear that the IP Agreement is referring to patent law–and especially to that part of patent law called Bayh-Dole. Bayh-Dole defines the scope of a subject invention to include patentable inventions that are “conceived or first actually reduced to practice” under a federal funding agreement (35 USC 201(e)):
any invention of the contractor conceived or first actually reduced to practice in the performance of work under a funding agreement
Work this scope in reverse. First, the work of the invention must be specified in a funding agreement–written into the statement of work (“we will build a prototype,” e.g.) and/or the budget (“materials for prototype,” e.g.). Either conception or first actual reduction to practice. Conceiving the invention in each of its parts or functions; building the invention so that it demonstrates the function of each part of the invention as conceived. The implementing regulations to Bayh-Dole are clear that an invention may be “closely related” and not be within scope of the funding agreement if the funding agreement fails to anticipate the invention (37 CFR 401.1):
To the extent that a non-government sponsor established a project which, although closely related, falls outside the planned and committed activities of a government-funded project and does not diminish or distract from the performance of such activities, inventions made in performance of the non-government sponsored project would not be subject to the conditions of these regulations.
In the context of the IP Agreement, the missing element in the construction of scope is the IP policy’s use of “project.” It is illegitimate for the IP Agreement to claim ownership of any invention, but if we were to manage its illegitimacy for consistency, we would require that the scope of any university claim of ownership must be restricted to projects (expressly commissioned activities; expressly retained activities). Anything conceived or first actually reduced to practice in these commissioned or retained activities might come within the scope of a university (or sponsor) claim to ownership. You might see how this revision actually implements what Bayh-Dole’s standard patent rights clause requires the university to do–to require individuals to make a written agreement as part of each funding agreement to protect the federal government’s interest by disclosing inventions and establishing the federal government’s rights in these inventions (by assignment or license). But of course, the Penn State administrators are not up for this and instead state a general claim that’s outlandish, not authorized by IP policy, and garbled with regard to IP policy.
The distinction between first reduced to practice and first actually reduced to practice is significant. An invention may be reduced to practice by filing a patent application. It is difficult to see how filing a patent application can involve the significant use of university resources unless the university is itself preparing (or paying for the preparation) of the patent application. Otherwise, the arrangement must be that the inventor uses “significant” university resources to build or practice the invention for the first time. What is meant by “significant” isn’t explained either here or in the IP policy. Since ambiguous elements of adhesion contracts (such as this IP Agreement) are interpreted against the drafting party, we might find that “significant” must mean “whatever an inventor reasonably believes to be significant.” Using a lab that the inventor has open access to anyway would not be “significant.” Using $100K specially allocated by the university administration to develop an invention may well be significant. Given the ambiguity of the term, the IP Agreement at this point asserts (by implication) that “the inventor decides what reasonably constitutes ‘significant’ in complying with the obligations created by this IP Agreement.” But pity the poor inventor or even university administrator who proposes following this reading. “Damn! That would be a consionable interpretation–we can’t have that! We are university administrators here, with no obligation to be decent! We are morally obligated to be incompetent jerks.”