Bayh-Dole Basics, 4: contractor

A primary focus of Bayh-Dole is the disposition of invention rights in funding agreements between federal agencies and nonprofit organizations and small businesses. Funding agreements can take the form of contracts, grants, and cooperative agreements, and these agreements are extended by assignment, substitution of parties, and subcontracts of any type.

The party on the other end of a funding agreement from a federal agency is defined by Bayh-Dole to be a contractor:

The term “contractor” means any person, small business firm, or nonprofit organization that is a party to a funding agreement.

The definition makes it clear that individuals–persons–may be contractors, as well as can nonprofits and small businesses. Anyone on the other side of a funding agreement from a federal agency is a contractor. There can be multiple parties to a funding agreement; thus, there can also be multiple contractors. Wherever “contractor” is used in the standard patent rights clause, one cannot assume that the reference is to the organization that has contracted to receive the federal funding. “Contractor” does not mean “the university,” for instance–it means any party to a funding agreement.

The standard patent rights clause, in fact, requires a nonprofit or small business to make its non-technical or clerical employees become parties to the funding agreement as individuals. That’s the (f)(2) written agreement requirement. This requirement is not in Bayh-Dole, but has been added to the standard patent rights clause in implementing Bayh-Dole (as has a parallel requirement on subcontracting). Anyone relying only on the Bayh-Dole statute alone does not have enough information to understand how patent rights clauses operate in federal contracts.

If a university or small business complies with the standard patent rights clause, each individual inventor, when he or she makes an invention in performance of work under a funding agreement, is also a contractor. Since inventors own their inventions under common law, and each nonprofit or small business contractor has made the inventors contractors, their inventions are “subject inventions”–patentable inventions owned by a contractor and made in performance of work under a funding agreement.

There is no need for an inventor to assign an invention to his or her university for the invention to be a subject invention. Nor, in Bayh-Dole, is there any obligation that an inventor do so. In fact, Bayh-Dole provides for a patent rights clause specific to inventors (see 35 USC 202(d) and 37 CFR 401.9). Under the inventors’ patent rights clause, federal agencies are to treat inventors as if they are small business contractors–but with even more freedom than provided to regular small business contractors.

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