The use of “subject invention” in federal contracting goes back to at least as early as 1947, when the military used “subject invention” in research contracts. Here’s an instance from a Navy contract (quoted in Mine Safety Appliances Company v. United States):
“Subject Invention” means each invention, improvement and discovery (whether or not patentable) conceived or first actually reduced to practice (i) in the performance of this contract, . . . or (ii) in the performance of any research or development work relating to the subject matter hereof which was done upon the understanding that this contract or any subcontract hereunder would be awarded . . . .
The military at the time had adopted the “license” approach to inventions made in contract work–all the government required was a non-exclusive license to any inventions made by a contractor’s personnel. The issue that “subject invention” addressed, then, was not ownership but rather whether the government was to have a license to any given invention. Subject invention defined the scope of the government’s licensed rights. That right is defined broadly. Let’s work through it.
patentable or not patentable
The definition does not depend on patent law. The government claims a license without regard to any theory of patent ownership.
invention, improvement, discovery
The terminology is from patent law, but here clearly broader than patentable things–even broader than Bayh-Dole’s “is or may be patentable.” The definition is similar to NASA’s use of the term “New Technology.” Whatever has been discovered, made, improved–that’s the scope.
conceived or first actually reduced to practice
Now a restriction on the broad scope. Whatever is within that broad scope must be “conceived” or “first actually reduced to practice.” Again, to be conceived, an invention must be fully formed in the inventor’s mind. To be “first actually reduced to practice,” an invention must be performed or built and tested to demonstrate that it meets the requirements of the invention as conceived. Thus, only inventions, improvements, and discoveries that meet one or both of these conditions are within the scope of subject invention.
in the performance of the contract
A further restriction. What is conceived or first actually reduced to practice must be in performance of the contract or in anticipation of the contract. To ascertain whether something is in scope of subject invention, then, one must look to the scope of the contract and the work undertaken to perform the contract–performance = scope + course.
or related to subject matter of the contract in anticipation of the contract
The definition reaches beyond the scope of the actual contract to include work that anticipates the contract. A contractor cannot “get going early” and do its inventing before a contract has been finalized and then claim that early work is outside the scope of the rights the government has bargained for. The anticipation clause places limits on a contractor’s ability to claim rights as “background.” Another way this sort of thing gets handled is to require all work to be original and no proprietary technology of the contractor or any other may be introduced into the contract work without the approval of the commissioning party. Or, if such proprietary technology is introduced, the contractor is responsible for obtaining the necessary provisions for the license to the commissioning party. And if the proprietary technology is the contractor’s own technology, then the contractor has licensed that technology to the commissioning party. That sort of thing.
Where the government expects a non-exclusive license, it makes sense for the definition of subject invention to be broad. Where the government does not have a license, if it wants to use patented work anyway, things end up in 28 USC 1498 and the patent owner has to pursue a claim for “reasonable and entire compensation” in the Court of Federal Claims. So the government license is basically about what can be claimed as compensation and what can’t. That’s it.
In the Kennedy executive branch patent policy (1963), the definition of subject invention has an expanded role–it’s just that the term “subject” does not get used. Instead, the Kennedy policy uses the term “invention or discovery” and packs the scope into “made”:
Made–when used in relation to any invention or discovery means the conception or first actual reduction to practice of such invention in the course of or under the contract.
That is, “made” carries the meaning of “subject invention.” The Kennedy patent policy established the rules under which federal agencies contracted for inventions as deliverables–hence the restriction to “in the course of or under the contract.” This is the same restriction found in the earlier military contracts. In the Kennedy policy, however, uses this scope of “made” not only to establish the scope of government licenses to inventions, but also the scope of inventions deliverable to the government. The Kennedy policy supports agencies operating with “title” approaches , such as the Public Health Service, along with agencies operating with “licensing” approaches, as the military had been doing. Inventors, then, may be required to assign their inventions to the federal government, provided that those inventions are contract deliverables.
“Made” means “the conception of an invention in the course of or under the contract.” That is, the invention that has been conceived is one that has been contracted for. It is an objective of the contract. “Made” also means “the first actual reduction to practice, when first actual reduction to practice has been contracted for.”
Two examples illustrate how the courts have construed “conception or first actual reduction to practice.” The first example involves work done at the University of Southern California in 1946-47 for the federal government under two contracts. The government work was to study the effects of acceleration on the human body. Two participants in that work invented and patented a crash helmet.
There is little doubt that the University thought that the helmet undertaking could be kept entirely separate — legally speaking — from the Navy research and development work,5 but we think that it erred in this belief. There was a close and umbilical connection which was not, and could not be, severed. We need not go so far as to say that the helmet program as a whole was an integral part of the Navy contract — though there is strong support for that position — but we do hold that the license clause of Section 17, supra, covered an invention so intimately tied to the work to be done under, and the results anticipated from, that agreement.
Example: the government funds one contractor to invent–say, invent a compound to treat malaria. The government funds another contractor to reduce the invented compound to practice. The Kennedy patent policy says–in either case, the invention is considered “made” and the government expects rights to the invention as deliverables. A university is provided federal funds to discover compounds that might treat malaria. A company is provided federal funds to turn a candidate compound into an actual treatment. Both the university’s inventors and the company’s inventors have an obligation to assign any rights they have in the invention (and to developments of the invention) to the federal government.
In other words, the Kennedy patent policy gives federal agencies authority to contract to preclude federal contractors from taking out private patent monopolies on inventions made in the performance of work in the public interest–where a federal agency aims to produce a product that can be released for commercial use, or in matters of public health or safety, or where the government is the primary supporter of the work and user of the results, or where the contractor operates a federal research laboratory for the government. The Kennedy patent policy then gives federal agencies authority, also, to waive the delivery requirement for inventions in some situations, subject to conditions on that waiver.
Thus, a contractor with competence and an established non-government commercial position, a federal agency can allow the contractor to acquire the “principal or exclusive rights” in the invention, subject to a requirement that the contractor get the invention to the point of practical application within three years of the patent issuing or license the invention non-exclusively, plus provide the government with a royalty-free license, and accept that the government can require licensing of the invention for public purposes–regardless of the contractor’s performance with regard to the invention. The invention, in such a case, remains a government asset by federal contract, but the contractor may be permitted to exploit the invention using an exclusive position for non-federal markets that don’t involve public purposes.
The Kennedy patent policy casts a broad scope, but only on inventions as contract deliverables. The key thing has to do with first actual reduction to practice. The wording of the policy has to do with the government being assured that no contractor working to implement an invention in which the government has rights can create an independent patent position in the implementation. No contractor can receive from the federal government a patent position that would block the purpose of the federal government to make inventions available “by dedication or licensing” to American citizens and industry. Repeat: the definition of “made” in the Kennedy patent policy concerns what the government may acquire. A “subject invention,” if you will, is a government deliverable. The “presumption of title” is a matter of a federal contract requiring invention title as a deliverable, with the presumption that a federal agency will not waive that requirement–but has the authority in limited circumstances to do so.
No one I know is taught to think this way by advocates of the faux Bayh-Dole Act. To see why, look next at the Institutional Patent Agreement program revived and transmuted in 1968 by the NIH.
The term “subject invention” as used in this Agreement means any process, machine, manufacture, composition of matter or design, or any new or useful improvement thereof, and any variety of plant which is or may be patentable under the Patent Laws of the United States made in the course of or under research supported by grants and awards from the Department of Health, Education, and Welfare.
This definition is similar to that of the Kennedy patent policy:
Invention, or Invention or discovery–includes any art, machine, manufacture, design, or composition of matter, or any new and useful improvement thereof, or any variety of plant, which is or may be patentable under the Patent Laws of the United States of America or any foreign country.
The IPA replaces “art” with “process” and eliminates patentabilty in foreign countries, but retains the odd capitalization of “Patent Laws.” Why could not the IPA simply recite the definitions of the policy that controlled its operations?
The IPA reads, without the baggage:
The term “subject invention” means any invention which is or may be patentable made in the course of or under research supported by grants and awards from the Department of Health, Education, and Welfare.
A subject invention is a contract deliverable to the government. There is nothing here having to do with a contractor’s ownership or even a contractor’s obligation to obtain title to inventions in order to convey that title to the government. The government will receive delivery of inventions from those that have title–the inventors.
Now for the definition of “made” in the IPA:
The term “made” when used in relation to any invention or discovery means its conception or first actual reduction to practice.
Compare again with the Kennedy patent policy, which the IPA was supposed to follow:
Made–when used in relation to any invention or discovery means the conception or first actual reduction to practice of such invention in the course of or under the contract.
The IPA does a very different thing with its definitions, though the wording switch is subtle. In the Kennedy patent policy, conception and first actual reduction to practice are both restricted to what is done in the course of or under the federal contract–that is, both are restricted to contract deliverables. In the IPA, however, “made” is not so restricted. Any invention, not just any subject invention, is defined as “made” when it is conceived or first actually reduced to practice.
The profound difference is one of scope. In the Kennedy patent policy, the scope of invention and made has to do with the rights the government contracts to acquire. The Kennedy patent policy requires federal agencies to use contracts that comply with executive branch policy. The scope for release of those rights is much narrower: at the time of contracting, when a contractor has competence and an established non-governmental commercial position; otherwise, after an invention has been made and reported, and contractor ownership is most likely to serve the public interest as determined by the federal agency.
In the IPA, the broad scope for government deliverables is turned into a broad scope for contractor ownership.
Similar wording, but an entirely different purpose–a purpose at odds with the executive branch policy that the IPA was to follow. Nonprofits could not generally meet the Kennedy patent policy for having both competence and a non-governmental commercial position. Thus, the IPA has to operate only after an invention has been reported. What it does, then, is by federal contract establish that the HEW will not take an ownership position in any invention that’s a government deliverable if the contractor chooses to take an ownership position. The scope of the government’s invention deliverable then becomes the scope of the nonprofit’s opportunity to claim. Government invention deliverables are made to appear to be deliverables to the contractor.
The IPA again:
The Grantee shall have the right to elect to file patent application in the United States and in foreign countries on any subject invention and to administer such invention pursuant to the provisions of this Agreement.
But this “right” to “elect to file” is not a “right” to any invention. It is a right to file ahead of the government’s own right to file. So the IPA reaches through to inventors:
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.
The IPA defines subject invention prior to ownership matters. A subject invention is to be reported and assigned to the contractor (the “Grantee”). Whatever was a federal contract deliverable has been turned into a contractor deliverable. This is the core of the scheme by which the NIH undermined the Kennedy patent policy and broke the boycott by pharmaceutical companies over the refusal of the HEW to permit private commercial monopolies on inventions in medicinal chemistry supported by HEW funds. Again, in the IPA, the definition of subject invention has to do with government invention deliverables–the government receives the inventions and it is up to the government to decide whether to publish the invention (“dedicate”) or obtain a patent from itself and license non-exclusively and royalty-free to all qualified domestic applicants (“license”). The IPA then uses this scope to establish the contractor’s interest in these government deliverables, and then requires the contractor to have a patent agreement under which inventors must report and assign these subject inventions. Contractor ownership comes after an invention meets the definition of subject invention or government- deliverable invention.
With the agreement to assign in place with inventors, the contractor is then required by the IPA to obtain assignment for each subject invention the contractor chooses to pursue for patenting:
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.
And thus a government invention deliverable becomes, by a sneaky federal contract, an invention deliverable to nonprofit contractors. The scope of the government invention deliverable–conceived or first actually reduced to practice–becomes the scope of interest for the contractor to pick and choose from to decide what inventions to patent. For those, the contractor is required to obtain assignment from inventors. The upshot of the IPA is the appearance that federally supported inventors are working instead for the benefit of the contractor rather than for the benefit of the public as represented by the federal agency under executive branch patent policy.
The definition of “made” in the Kennedy patent policy gives federal agencies incentive to expand the scope of government interest as broadly as they might–anything so invented and delivered to the government becomes part of the public domain or is licensed as part of the federal domestic patent commons, available to all but published through the patent system. The IPA then gives contractors the incentive to expand the scope of government interest as broadly as they might–but for an entirely different purpose: to secure private patent monopoly positions on whatever inventions might otherwise go to the government. The contractors’ incentive to expand the scope of “made” then is driven by the contractors’ own patent monopoly interests, not the public interest as reflected in the Kennedy patent policy, in which private patent monopolies are permitted only in restricted circumstances and only with a strong working requirement not found in federal patent law.
The IPA does other clever things to ensure that the Kennedy patent policy working requirements don’t actually operate–plenty of reasons for the federal government to shut down the IPA program in 1978 and prevent its expansion to all federal agencies.
Now look at Bayh-Dole, the monster statute that brings the IPA program back from the dead in 1981, but now as part of federal patent law, not executive branch policy. Executive branch patent policy stipulated how federal agencies must contract for invention deliverables. But that policy did not affect patent law–it just worked with patent law. Bayh-Dole, by contrast, changes patent law as well as stipulates default patent rights clauses that federal agencies must use in every research funding agreement–unless they can justify changes from the default.