[this article refers to Bayh-Dole’s implementing regulations before NIST’s May 2018 changes–37 CFR 401.14(a) becomes 37 CFR 401.14, and NIST adds a goofball assignment clause under which contractors must require inventors to assign subject inventions–inventions that the contractors already own. NIST is strange, but then so is Bayh-Dole, so perhaps there’s a match there.]
One way is compliant and never used. The other way is non-compliant and used by everyone. One way respects inventors and leaves them free to make choices regarding their inventions. The other way compels inventors to use university-designated patenting services and disenfranchises inventors from their inventions and also, then, control over the publication and use of their research. Which approach goes with which treatment of inventors? Ah, you are way ahead of me. Of course, the non-compliant approach is also the inventor-loathing approach!
Bayh-Dole applies to patent property rights in subject inventions and to the contracting defaults that federal agencies must use in treating inventions as research deliverables. 35 USC 202(a) provides that universities may “elect to retain title to any subject invention.” The Supreme Court in 2011 ruled that a “subject invention” is an invention owned by a contractor, an invention “of the contractor,” where “of” indicates ownership.
Here are the two methods by which an invention may become a subject invention:
1) a university may obtain ownership of an invention by assignment
Assignment may be voluntary, or university administrators may find a way to compel assignment–even though federal funding agreements do not require assignment and do not require university administrators to compel anyone to assign [even with NIST’s strange new language on assignment–inventors have to be made to promise to assign, but a university does not have to call in that promise].
2) a university may comply with the (f)(2) written agreement requirement in the standard patent rights clause
When university administrators comply with the (f)(2) requirement, they make each potential research inventor a party to the funding agreement, and therefore by definition, a contractor. Whenever a contractor-inventor makes an invention, and therefore owns the invention, the invention becomes a subject invention. In this second case, the contractor that matters is the inventor, not the university.
Let’s work through these two methods–carefully.
(f)(2)–the required method no one uses
Let’s start with the (f)(2) written agreement requirement. Since no one complies with (f)(2), we can get it out of the way as administrative fantasy–even though in many ways (f)(2) reveals the central premise of Bayh-Dole.
When a university ever complies with the (f)(2) requirement, each person who makes the (f)(2) written agreement becomes a party to the funding agreement and therefore a contractor, and each invention that person makes then becomes a subject invention, even though not owned by the university-as-contractor. Here’s how this all happens.
Bayh-Dole requires federal agencies to use a standard patent rights clause in each funding agreement for research. Bayh-Dole authorizes an executive branch agency (now, the Department of Commerce, which has delegated responsibility to NIST) to create standard patent rights clauses. The primary standard patent rights clause is at 37 CFR 401.14(a). For grants to universities, this clause gets incorporated into funding agreements by 2 CFR 200.315.
To comply with (f)(2), the university has to take an action within the framework of each funding agreement–for each funding agreement, after it has come into effect, the university must require those employees to which the federal government may make a reasonable claim to an interest in inventions made with federal support to make a written agreement to protect that government interest. It is important that the university must itself require this agreement be made by its specified employees. The employees are not asked to agree with the university. They are to make a commitment to the federal government that they will protect the government’s interest. That is, they become parties to the patent rights clause in the federal funding agreement. They become contractors for the tiny bit of the federally supported project that has to do with patentable inventions.
Now the difficult part for university administrators. If the university requires this agreement, the university cannot at the same time require employees to make a different agreement, or continue in any existing different agreement, with the university, on the matter. We will do that again, slowly.
The (f)(2) requirement is a requirement on the university, not its personnel.
The university must require its research personnel to make a written agreement to protect the government’s interest as part of each funding agreement.
(f)(2) specifies what is to be in this agreement to comply with the patent rights clause.
When the university requires these things, it cannot at the same time require things that would conflict with those things, within the scope of the funding agreement.
(f)(2) requires the university to permit its research inventors to sign papers to establish the government’s rights in subject inventions.
Inventors then must have the authority to establish the government’s rights–by assignment or license.
They have that authority if they own their inventions and are under no obligation to give up that ownership to the university as a condition of participating in the federally funded research.
The commitment to the government takes precedence over any demand for ownership by the university–by the university’s own action in complying with the (f)(2) requirement.
Obtaining this agreement is not difficult. Whenever the university prepares paperwork under which a research employee will be paid from a federal funding agreement account, the employee signs off on the written agreement to protect the government’s interest. The paperwork has to be prepared anyway. Adding a simple statement with a signature line is no big deal.
Except, of course, university administrators cannot figure out how to do this or refuse to do so. Back in 1990, I asked the director of a technology transfer office at a major public university where the (f)(2) agreements were, and he replied that the university would comply when a federal agency required compliance. He wasn’t about to comply until compelled to do so. And he prided himself on compliance.
The (f)(2) agreement requires research personnel–but not clerical and non-technical employees–to promise to report subject inventions to the university host, and to sign papers to permit patent applications to be filed and to establish the government’s rights in subject inventions. Here’s where things get interesting. An invention is not a subject invention until it is owned by a contractor. A contractor is any party to a funding agreement, including parties added by assignment, substitution, and subcontracting (see the definition of “funding agreement” at 35 USC 201). When the university acts to require its personnel to make the (f)(2) agreement, the university in effect assigns the stipulated duties to these personnel, acting in their personal capacity as inventors, not as employees of the university (or volunteers, or whatever). The university does not direct these people to give up their patent rights–it directs them to become parties to the funding agreement.
If you see the difference, then you understand what (f)(2) does and why university administrators refuse to comply with it. They want the federal government to somehow give them the power to compel their employees to give up their personal rights in inventions, even when the university itself by policy has assured those employees (especially faculty members) that the university will not do so. (f)(2) does just the opposite–it says, whatever you require of your employees by way of claims on inventions as a condition of participation in a federally supported, extramural project, forget it and instead make your employees parties to the funding agreement for the purpose of managing their patentable inventions. The Supreme Court was adamant that Bayh-Dole did not give universities any power or mandate to take inventions made in the performance of a federal funding agreement. The (f)(2) agreement is entirely consistent with the Supreme Court’s ruling, much to the dismay of university administrators.
These personnel become parties to the funding agreement for the limited purpose of three aspects of the patent rights clause–disclosing their inventions to their employer the university, signing papers to allow patent applications to be filed, and signing papers to establish the government’s rights in their inventions. And that makes them contractors. And that makes any invention they make in their federally funded work a subject invention, even if the invention is not assigned to the university as the prime contractor.
The (f)(2) agreement then is very clever, very special. In complying with (f)(2), a university necessarily pre-empts any of its own claims on inventions that would conflict with the (f)(2) assignment of duties under the funding agreement. The university cannot require (f)(2) written agreements and at the same time require something else. (f)(2) compliance turns research personnel into contractors for reporting inventions, filing patent applications, and establishing the government’s rights. It makes any inventions they make into subject inventions, regardless of whether the inventions are ever assigned to the university that hosted the federally supported project.
What the (f)(2) agreement is not: it is not a patent agreement made within the framework of university policy or employment. It is not an agreement to protect the university’s interest in inventions. It is not an agreement to assign inventions to the university. It is not an agreement with the university or for the benefit of the university. It is an agreement for the benefit of the government–for the benefit, presumably, of the public interest represented by the government. The federal government does not force university administrators to make inventors give up to the university their patent rights to inventions–rights assured by federal common law and created under the authority of the U.S. Constitution. The federal government is making university administrators assign personal–not employee–duties under a federal contract to individuals. The (f)(2) agreement forces the university to act outside the framework of its own employment relationship with its research personnel. It does not require university administrates to assign (as employment tasks) the absurd requirement that employees give up personal rights in their inventions as a condition of university employment on a federal project.
Once the (f)(2) agreement is in place for each employee participating in a federally supported project (other than clerical and non-technical employees), then the university can turn to the matter of how (or if, and why) the university might acquire ownership of a subject invention. Again, there are two approaches, one that is easy and uncomplicated; one that looks easy but is difficult and crude. Guess which approach university administrators have chosen, and which approach their legal advisors advocate for. Yup.
The uncomplicated (f)(2) approach
The easy and uncomplicated approach is to make assignment of subject inventions to the university voluntary. Inventors must report their subject inventions to the university, and the university must report these reported inventions to the federal agency that provided the funding, but the university has no obligation to take ownership of these inventions. Since university administrators don’t have to take any ownership interest in such inventions, they don’t even have to notify the government whether the university will “elect to retain title”–there’s no title for the university to retain. The title is with the inventors. Any notification of election to retain title is the responsibility of the inventors as contractors. If they don’t choose to retain title, then the government can request title. But if they do, then the matter switches to a different standard patent rights clause–37 CFR 401.9–specific to inventors retaining rights in their inventions. The inventor patent rights clause directs federal agencies to treat inventors as small business contractors, but with even fewer requirements than small businesses have under the standard patent rights clause.
This approach is uncomplicated. For each funding agreement, the university requires potential inventors to make a written agreement to protect the government’s interest, including reporting inventions to the university’s personnel designated for patent matters. As part of part of that requirement, the university adds a statement about how important it is to report inventions promptly. The university reports to federal agencies the inventions reported to it by inventors. Done. Uncomplicated.
If inventors want their university to manage their subject inventions, they are free to offer to assign the inventions to the university or to the university’s preferred invention management organization. For that, inventors can propose whatever deal they want to, and it is up to university administrators to decide whether to accept the proposed deal. The usual administrative position is that all inventions must be treated the same, and therefore it is inappropriate to negotiate any special terms. This all inventions are bureaucratically the same position is baked into most university policies–with regard to ownership, with regard to diligence (or the lack thereof), with regard to accountability (usually none), and with regard to royalty sharing (a standard policy for sharing, no matter the nature of the invention or the extent to which the university has been involved with its resources or not). That is: a “uniform” patent policy of this sort is equitable only if the circumstances of development for all inventions is also “uniform” and the nature of possible deployment of the invention is also “uniform.” Otherwise, such a “uniform” patent policy is formally inequitable to every inventor and invention that does not exactly suit the assumptions and conditions codified in policy.
Stupid policy assumptions can be made to look equitable, but only if everyone turns their brains off and takes the assumptions as the only reality. You know–that every invention should be commercialized or destroyed trying. That to be commercialized, inventions must be patented, to exclude all non-commercializing uses and to put a bureaucrat’s approval (and request for money) in front of every research invention. That patents must be licensed exclusively or no one will commercialize them. That companies must pay for licenses or, well, the taxpayers are not getting a proper return on investment–yeah, that’s it, charge for patents for the benefit of the taxpayers. Invention stupidness policies. But stupid doesn’t bother university administrators who write or defend these sort of patent policies.
In the uncomplicated approach to the (f)(2) agreement, a university accepts ownership of a subject invention only when offered by the inventor, and only then under terms that make sense for the university’s involvement. Doubly selective voluntary management. No more trying to pump up patenting numbers with the swindle idea that more patents means a stronger, more successful licensing program, which underlies the swindle idea that a successful licensing program means commercialization and commercialization means public benefit and public benefit means the federal government should throw more money at university research and state governments and donors should provide more money to build more facilities to house all that additional research work. It may be that federal support for university research is still a good thing–that’s debatable–but the chain of administrative “reasoning” about it is nonsense.