“Compliance with Bayh-Dole”

There are folks out there making money by offering compliance services for Bayh-Dole. At one level, it’s understandable. University administrators make a big deal about compliance. They see a complicated world. Many administrators aren’t prepared to read regulations carefully and implement the proper procedures. It makes sense, then, to hire professionals who have worked things out.

And of course, if there weren’t any big issues with compliance, there wouldn’t be a need for a lot of administrators. Hey! That suggests a public policy strategy! How about implementing federal research programs with compliance any researcher can do? Roll back all the useless pages and pages and pages of regulations governing federal research grants to universities. If you think about it, those pages of regulations are not directed at university investigators for the most part, but at administrators. The implication is that university administrators cannot be trusted to exercise judgment to see that federal money is well used by researchers to do what they proposed to do. Oh, but if we rolled back all those regulations (and doing so would result in nothing adverse for research), then a lot of federal administrators also would be out of work–so the strategy will have to be tweaked somehow to prevent too many administrators from tumbling into the private sector job pool.

On another level, university Bayh-Dole compliance is super silly. Bayh-Dole doesn’t apply to universities–it is directed at inventions made with federal support and at federal agencies that provide that federal support. Anything that a university must comply with is in the patent rights clause put in each federal funding agreement. Bayh-Dole requires federal agencies to use a default patent rights clause unless an agency can demonstrate that it must use a different clause. Bayh-Dole and its implementing regulations make it difficult–almost but not quite administratively impossible–for federal agencies to vary from the default patent rights clause.

While Bayh-Dole stipulates what must be in the default patent rights clause, when it came time to create the clause itself, folks stuffed additional requirements–not authorized by Bayh-Dole expressly–into it. So there are prohibitions on making claims on inventions by prime contractors when they subcontract, and a strange set of requirements having to do with a contractor getting a non-exclusive license even when the federal government takes title to a given invention–and that license extends to anyone that the contractor was obligated to grant a license to at the time the federal funding was awarded. Also stuffed into the default patent rights clause is a requirement that contractors must require their research personnel to make a written agreement to protect the government’s interest. This is the (f)(2) requirement. It makes some sense, but it is not authorized by Bayh-Dole. We might say that Bayh-Dole forgot about that part–which involves federal agencies as a matter of executive branch policy requiring the assignment of inventions made with federal support at nonprofits except when an agency grants an exception.

Bayh-Dole made the exception to agency policy the default, and made that exception “uniform” across all federal agencies and funding agreements. But at the same time, Bayh-Dole expressly pre-empted all federal statutes regarding inventions in federally funded research. That apparently also pre-empted federal regulations on the matter, leaving federal agencies with no claims on inventions made with federal support except as provided by Bayh-Dole, and Bayh-Dole in turn provides no authorization for a federal agency to acquire title to an invention that is not a subject invention, and for subject inventions, a federal agency may obtain title only when a contractor fails to report an invention, fails to elect to retain title having once acquired title, or chooses not to continue to seek a patent or maintain a patent.

This gap has tied university administrators into knots. They refuse to comply with the (f)(2) written agreement requirement–the only thing that really matters–and then they seek ways to force all inventions made with federal support to become a subject invention–that is, an invention owned by the university. For this, they expanded claims to ownership in their patent policies and patent agreements and employment agreements. They inserted present assignment language in these documents as well, hoping that the magical words “hereby assigns” sprinkled like fairy glitter throughout would make all the difference–or at least run up the legal costs for anyone who might think to resist. University administrators and their legal advisors have thought up a passel of tricks that avoid compliance with the default patent rights clause, run against public policy, and ignore effective innovation management to ensure that a university can claim ownership of any invention made with federal support.

Rather than being highly selective about what inventions a university takes on for management, university administrators have done just the opposite and claim all inventions–whether patentable or not, whether inventive or not, whether ownable or not. The point for compliance is that administrators make this effort out as a matter of compliance with Bayh-Dole, and it is not. It’s not even a matter of compliance with the default patent rights clause. It is not a matter of compliance with anything having to do with the requirements that come with federal funding for research.

After Bayh-Dole,  the default patent rights clause is entirely indifferent regarding whether a university obtains ownership of any invention made with federal support. As a result of Bayh-Dole, federal agencies do not have any regulatory claim on inventions made with federal support that do not become subject inventions–though they may have a claim against universities that refuse to comply with the (f)(2) written agreement requirement.

And that brings us to the second reason why compliance with Bayh-Dole is super silly. While federal agencies comply with Bayh-Dole and use the default patent rights clause in their funding agreements, they don’t enforce that patent rights clause in any material point that would affect invention ownership. Federal agencies might audit for subject invention reporting, and might insist on proper federal funding statements in patent applications, but beyond that, almost nothing. No march-in, no bother about assignment of subject invention, no worries about U.S. manufacturer or preference for small businesses, no problems with reporting for utilization, or practical application. You see, while Bayh-Dole requires use of a default patent rights clause in federal funding agreements, Bayh-Dole does not require federal agencies to enforce that clause. Rather, at almost every turn, Bayh-Dole walks back enforcement, and where Bayh-Dole doesn’t walk enforcement back, the implementing regulations do, and even where federal agencies obtain important rights, such as a non-exclusive license to practice (make, use, sell) and have practiced (have made, have used, have sold), federal agencies have no obligation to exploit those rights, and so don’t.

There is nothing–absolutely nothing–in university compliance with Bayh-Dole (not possible anyway) or with the default patent rights clause that has any beneficial effect on innovation arising from federally funded research. University administrator insistence on owning inventions made with federal support has nothing–absolutely nothing–to do with compliance with Bayh-Dole or with the default patent rights clause. And university ownership of such inventions has nothing–absolutely nothing–beneficial to do with research innovation. Whatever you read in the press by way of success stories and proxy metrics is nonsense made up by people who don’t have the evidence to support their claims or don’t want you to know what that evidence really is. The reality is that under the Bayh-Dole regime, the rate of university research inventions converted to practical application has dropped by about 80x from the reported rates outside either Bayh-Dole or the IPA program that preceded Bayh-Dole and out whose dead body parts Bayh-Dole was stitched together.

If one feels the need to comply with “Bayh-Dole”–meaning with the default patent rights clause–where nothing really matters for innovation management other than making a show of following regulations, here is the checklist:

  1. Does your university designate personnel responsible for patent matters?
  2. Does your university provide education on the importance of timely reporting of inventions made with federal support?
  3. Does your university implement the (f)(2) written agreement to protect the government’s rights?
  4. Does your university report inventions to federal agencies within two months of the receipt of those invention reports by the personnel designated for patent matters?

The answer to 1 is almost always yes. The answer to 2 varies. No university that I know of complies with 3. The answer to 4 is also generally yes–but few universities actually check invention reports for accuracy with regard to federal funding. Administrators simply assert that inventions are “subject inventions” if a federal grant is listed on the invention disclosure form without regard for the definition in the law or the regulatory explanation that limits the interpretation of “made in the performance” of a federally supported project.

Instead of implementing (f)(2), which makes inventors parties to the funding agreement, administrators substitute an overarching claim to own all inventions. That claim itself could be disputed–in how it is implemented, in whether faculty are employed to invent in federal research, and the like–but faculty generally don’t have the $200K or so it would take to stick their university administration with a lawsuit to resolve the matter, and those directing collective bargaining for faculty don’t appear to have any awareness of what is at stake with Bayh-Dole.

A university does not have any obligation or mandate under Bayh-Dole or the default patent rights clause to take the ownership of any invention made with federal support. The compliance issues that arise under the default patent rights clause all kick in when a contractor acquires ownership. Administrators create a complicated situation that might benefit from consultants assisting with compliance because administrators choose to create that complicated situation. They make their own nest, and are happy to spend additional money to line that nest with the appearance of compliance.

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