Here’s Bayh-Dole’s definition of “subject invention”:
The term “subject invention” means any invention of the contractor conceived or first actually reduced to practice in the performance of work under a funding agreement: Provided, That in the case of a variety of plant, the date of determination (as defined in section 41(d)  of the Plant Variety Protection Act (7 U.S.C. 2401(d))) must also occur during the period of contract performance.
This is from 35 USC 201(e). That is, this is a definition of patent law. The patent property right in subject inventions is restricted by a statement of policy, also in federal patent law, at 35 USC 200. That statement requires the patent system to be used to promote the use of inventions arising in federally supported research. Subject inventions are clearly within the scope of that policy. A patent on a subject invention cannot be used to troll industry–if the policy on the patent property right is that the use of the patent must promote use, then the patent cannot be used, barely, to prevent use.
Further, the policy statement requires the patent system to be used to promote free competition and enterprise with regard to such inventions. The requirement for use is a working requirement. The requirement for free competition and enterprise requires a patent owner to break up the patent monopoly. Breaking up a patent monopoly might involve limiting the term of exclusivity, licensing non-exclusively on reasonable terms, or restricting exclusivity to sale of product while allowing non-exclusive making and use of the invention.
Bayh-Dole makes the definition of subject invention part of patent law. It defines a new category of patentable invention. Bayh-Dole defines a policy of patent law that governs subject inventions. The contracting clauses prescribed by Bayh-Dole to be used in funding agreements are made within the authority of this new policy of patent law pertaining to subject inventions.
And then there is this, to seal the deal (35 USC 261):
Subject to the provisions of this title, patents shall have the attributes of personal property.
Patents on subject inventions are subject to the policy stated in patent law at 35 USC 200, and subject to those provisions, such patents have the attributes of personal property. There you have it.
Now look at the patent regulations implemented in 1975 having to do with government contracting. Here’s the definition of subject invention:
“Subject Invention” means any invention or discovery of the Contractor conceived or first actually reduced to practice in the course of or under this contract, and includes any art, method, process, 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.
If we pop out the “invention” stuff, we get:
“Subject Invention means any invention or discovery of the Contractor conceived or first actually reduced to practice in the course of or under this contract.
Compare, again, with Bayh-Dole:
The term “subject invention” means any invention of the contractor conceived or first actually reduced to practice in the performance of work under a funding agreement.
There really isn’t much difference in wording–“in the course of or under” becomes “in the performance of work under.” One wonders, why even change the wording at all? Yes, Bayh-Dole does expand federal patent law to include in the definition of subject invention plant variety protection–something not within the scope of patentable subject matter, but then Bayh-Dole is expert at such ironies.
The bigger issue to recognize, however, is that the definition in the earlier regulations, even though those regulations pertain to patenting, is a definition to be used in federal contracting. The definition in Bayh-Dole is placed in the patent statute, in addition to also being placed in the standard patent rights clauses. These are two very different regimes–patent law, with a policy specific to subject inventions, and federal contracts containing a patent rights clause.
The huge change made by Bayh-Dole is to push the definition of subject invention into patent law. It is not merely a definition to be agreed upon by a federal agency and a contractor, governing the scope of the government’s rights in such inventions. Bayh-Dole makes the definition statutory, and states provisions specific to subject inventions, such that ownership of a patent on a subject invention is subject to those provisions, unlike any other patent.
Anyone facing infringement litigation by an owner of a patent on a subject invention would do well to consider whether the patent owner is operating within the patent property right established by 35 USC 200.