Consider these two pathways by which universities might acquire inventions under Bayh-Dole’s patent rights clause.
1. Non-compliant. University by policy asserts ownership of all inventions made by faculty. University refuses to comply with the (f)(2) written agreement requirement in Bayh-Dole’s standard patent rights clause. Inventions are not subject inventions until the university has acquired them.
If the university subsequently decides not to elect to retain title, or not to file a patent application, or not to prosecute the patent application, or not to maintain the patent, then under the standard patent rights clause, the government has the right to obtain title.
The university can re-assign the invention to the inventors, but only with federal agency permission, and only if the university also requires the inventors to accept the nonprofit version of the standard patent rights clause, 37 CFR 401.14. See (j)(1).
2. Compliant. University complies with the (f)(2) written agreement requirement in Bayh-Dole’s standard patent rights clause. Doing so makes qualified potential inventors parties to the funding agreement, so that any invention they conceive or first actually reduce to practice in the performance of work under a funding agreement becomes a subject invention.
The (f)(2) requirement requires the university to suspend any claim it has on the invention as a condition of permitting the inventor to participate in the federally supported research or use university resources that the university has committed to the research (compare subcontracts, at (g)).
The university may obtain ownership of such inventions by voluntary assignment by the inventor or some agreement made outside of the federal funding agreement that’s not preempted by the written agreement required by (f)(2). If the university obtains ownership, then the nonprofit patent rights clause applies. If the inventor retains ownership, however, then the inventor patent rights clause at 37 CFR 401.9 applies–the inventor is to be treated under a reduced version of the small business patent rights clause. 37 CFR 401.14 but for (j). [And that’s the case even with regard to the NIST May 2018 revision to (f)(2), adding an assignment requirement for subject inventions–to see that the assignment clause applies pretty much only to those inventions in which the university has equitable title requires logic to combate NIST silliness, and thus we deal with it elsewhere.]
Under the inventor patent rights clause, the inventor has no restrictions on assignment of the invention, no restrictions on the use of royalties or income relating to the invention, and the federal government has no expressly authorized license to practice and have practiced the invention.
In the non-compliant version, no inventions are subject inventions until the university as contractor acquires ownership. If the university fails to acquire ownership, then the federal government has no right under Bayh-Dole to require the inventor to assign the invention to the government or to grant the government a non-exclusive license to practice and have practiced. The inventor does not even have a reporting requirement, nor does the university–under Bayh-Dole, the only inventions to be reported are subject inventions. The invention falls entirely outside Bayh-Dole and ends up subject to various federal statutes and the Nixon executive branch patent policy, all of which (but for Stevenson-Wydler) Bayh-Dole preempts, but Bayh-Dole preempts these things only for inventions a university or other contractor has acquired.
However, if the invention arose in federally supported research or development, then Bayh-Dole’s policy statement with regard to patent property rights appears to still apply–35 USC 200. The patent owner still has a working requirement, a free competition requirement, and an American manufacturing requirement–but without any safe harbors to establish how these requirements may be met. Nothing in 35 USC 200 appears to restrict inventions covered to subject inventions, ones owned by a contractor.
In the compliant version, the inventors have a much more robust and workable patent rights clause than does the university. The inventor may assign freely, may use income for any purpose, and has no obligation to favor small businesses in licensing. This is a much more favorable patent rights clause than the nonprofit version.
If universities were committed to research-based innovation, then they would always follow the compliant pathway and defer to inventor ownership, with its much more favorable terms. Inventors could assign to companies without having to get federal approval or including the nonprofit patent rights clause with the assignment. Inventors could assign to invention management agents operating independently of the university–and those agents also would be free of requirements on the use of royalties and income relating to the invention. The university, too, would be free of its massive institutional conflict of interest between supporting faculty in their research and encouraging innovation on the one hand, and on the other seeking financial gain for itself at the expense of research, innovation, public interest, and research oversight.
Why is it, then, that university administrators choose the non-compliant approach? They insist on saddling subject inventions with the least favorable version of the patent rights clause; they refuse to allow inventors to enjoy the more favorable rights that Bayh-Dole provides for them; and they create a situation in which, when the university no longer cares for an invention, that the rights come back to inventors, if ever, tainted by the nonprofit patent rights clause. Plus massive institutional conflict of interest, plus a sketchy claim to ownership that defies academic freedom and freedom to publish, plus piles of unlicensed, unused patents that fail Bayh-Dole’s fundamental statement of policy.
If university administrators were committed to research-based innovation, they would comply with Bayh-Dole’s patent rights clause.
But they put their sad, flawed vision of institutional gain ahead of research-based innovation. They claim what they do is virtuous. The boogers.