Part 1 of this article is here.
By requiring the contractor to require “technical” employees to make a written agreement, (f)(2) does some fundamental things within the framework of definitions set up by Bayh-Dole. Watch the devils tumble out in the details.
First, this written agreement transfers rights and obligations from the contractor to the “technical” employees–these employees must report certain inventions (subject inventions, inventions owned by a contractor and made in the performance of work under a funding agreement) and must sign papers to establish the government’s rights. In effect, (f)(2) requires the contractor to “substitute parties” for the purpose of inventors’ actions to protect the government’s interest. Requiring (f)(2) written agreements is a required contractor action (and yes, it is just that awkward–Bayh-Dole requires a standard patent rights clause, and added to that clause (without any statutory authority) is the written agreement requirement that requires contractors to require their technical and supervisory workers to make a written agreement to protect the government’s rights)).
The definition of funding agreement at 35 USC 201(b) expands to including such contractor actions:
includes any assignment, substitution of parties, or subcontract of any type entered into for the performance of experimental, developmental, or research work under a funding agreement as herein defined.
It is clear that (f)(2) is working the apparatus of Bayh-Dole to deal with what people who want institutional ownership of inventions as a matter of fiat take to be a basic problem in the statute. If it is really true that federal agencies, after Bayh-Dole and Reagan’s executive order 12591, no longer have any contractual standing to claim ownership of inventions made with federal support, and have only limited rights to claim ownership in such inventions after a contractor has acquired ownership–then, O Devil!–if a contractor does not acquire ownership of a given invention, then there is no way at all for the federal agency to have any rights in that invention–not a license, not a right to request title, nothing, nothing, nothing at all. The government has the right to acquire title to subject inventions–inventions owned by a contractor–and only when the contractor fails at certain things. You must see it now. Big hairy red devil.
But the folks drafting the patent rights clause were led by the same man who drafted the Bayh-Dole statute–Norman Latker–and so they had a chance to deal with this devil, and did with (f)(2)’s fussy apparatus. When a contractor complies with the (f)(2) written agreement requirement, it makes its “technical employees” parties to the funding agreement by substitution via this little bit of obligation in the patent rights clause–to disclose and to execute papers. As parties to the funding agreement, the “technical” employees become contractors. Here’s the definition of contractor at 35 USC 201(c):
The term “contractor” means any person, small business firm, or nonprofit organization that is a party to a funding agreement.
Isn’t this interesting–the term contractor expands to include “person” in a list where it’s clear “person” includes “individual human being.” When “technical” employees make the (f)(2) agreement as their employer requires, they become contractors for a little bit of the funding agreement’s patent rights clause. Thus, we have to re-read the use of “contractor” everywhere it occurs in the standard patent rights clause, once a contractor has complied with (f)(2).
Now for the second devil in (f)(2)’s details. If a “technical” employee is made by the contractor into a mini-contractor for the purpose of “establishing the government’s rights,” then the contractor cannot possibly have rights in the invention as consideration for the federal award. The contractor–call it the contractor-host–has passed that right through to the mini-contractors, the “technical” employees. The contractor-host cannot both claim ownership of inventions and require employees to have the right to establish the government’s rights in those same inventions. Thus, (f)(2) operates in a parallel manner to the subcontracting requirement at (g). The (f)(2) requirement forces the contractor-host to give up any claim to inventions made with federal support as consideration for involving the employees in the federally funded project.
There is a subdevil here. I will mention it and move on. The (f)(2) requirement has a markedly different effect on universities from that of other nonprofits or small businesses. In other nonprofits and in small businesses, an employee is the servant of a master who determines what the servant will do. Thus, if a small business enters into an employment agreement that provides for the business to assign work and to have a claim to ownership of inventions made in that work, then (f)(2) compliance does not change this outcome, since the claim to inventions does not arise as a condition of work under the funding agreement.
But in universities, for faculty, things are different. The university assures faculty of academic freedom, freedom of research, and freedom to publish. The university cannot assign faculty to research, and does not discipline faculty who fail to conduct research or fail to invent or fail to publish–though faculty members on soft money may not get paid and faculty members who don’t have tenure might not receive tenure. For faculty members, then, the requirement of (f)(2) prevents the university from turning academic freedom and freedom of research and publication into a requirement that the university now suddenly gains an ownership interest in inventions made in that federally supported research. (f)(2) compliance means that faculty inventors have rights in their inventions unless they have previously given up their policy-assured rights to academic freedom, freedom of research, and freedom to publish.
Think about it: a patent is a publication. That’s core to the patent system–publish in exchange for exclusive rights for a limited time. If a university claims ownership of an invention (and therefore the right to obtain a patent), the university asserts the right to compel faculty inventors to publish under their own names a document that the university controls. That’s not freedom to publish–the faculty inventors cannot remove their names, cannot exercise authorial control, cannot choose the forum for publication. If faculty have these freedoms, then (f)(2) precludes the university from altering these freedoms as consideration for faculty participating in the federally funded research–and as consideration for using resources made available by the university for such research.
There’s more, but you get the picture. The (f)(2) agreement works differently for faculty at universities than it does at other nonprofits and small businesses. For faculty–and for anyone else at any contractor who does not have a patent agreement in place independent of the federal funding–(f)(2) prevents the employer from claiming ownership of inventions as consideration for the involvement of the employees in the federally supported work.
Now perhaps you see the second devil clearly–(f)(2) forces, for university faculty (and others), ownership of inventions to common law, outside of university policy demands.
This sets up the third, and very handsome devil, that enables Bayh-Dole’s patent rights clause to close the gap created by the big hairy red devil. When an inventor invents, by common law, the inventor owns that invention. The Supreme Court in Stanford v Roche reaffirmed this outcome in the context of federal funding and Bayh-Dole. But with (f)(2) in place, inventors are also contractors, and since a contractor-inventor now owns the invention, the invention meets the definition of subject invention–it is owned by a contractor. It’s just that the contractor doing the owning is the inventor, not the contractor-host, the university. Holy handsome devil! (f)(2) compliance makes every patentable invention made in performance of work under a funding agreement a subject invention.
The fourth devil appears. What is the patent rights clause specific to inventors? Bayh-Dole’s implementing regulations provide the answer (37 CFR 401.9):
Retention of rights by contractor employee inventor.
Agencies which allow an employee/inventor of the contractor to retain rights to a subject invention made under a funding agreement with a small business firm or nonprofit organization contractor, as authorized by 35 U.S.C. 202(d), will impose upon the inventor at least those conditions that would apply to a small business firm contractor under paragraphs (d)(1) and (3); (f)(4); (h); (i); and (j) of the clause at § 401.14(a).
This is devilishly odd wording. It states a fourth standard patent rights clause, one specific to “contractor employee inventors.” The inventor has “imposed” conditions that “would apply to a small business firm contractor.” That is–ho-ho–the inventor is to be treated as a small business contractor, but with a reduced set of requirements. This is the most favorable of the four patent rights clauses that have been created under Bayh-Dole, at least with regard to the obligations a patent owner has to the federal government.
What about this “agencies which allow an employee/inventor of the contractor to retain rights”? Where is it that Bayh-Dole establishes for agencies the authority to take rights of a contractor? Yup, Bayh-Dole has preempted any such statutory authority. Instead, as a result of (f)(2) compliance, that faculty inventors own their inventions, their inventions are subject inventions, and the federal government has the right to obtain title to these inventions as provided by section (d)(1) and (d)(3) of the small business patent rights clause–that is, for failure to report, elect to retain, or fails to continue prosecution of a patent application or to maintain or defend a patent. Even the obligation to file a patent application (d)(2) is waived for inventor-contractors.
Faculty inventors, if they disclose the invention and elect to retain title, are free to donate the invention to the public domain without interference from their university–the effect of (f)(2)’s fussiness–and from the federal government–the effect of 37 CFR 401.9.
If they do file a patent application, it must carry the federal funding and rights notice, and they still have a reporting obligation (h), a requirement to prefer American industry in certain, narrow exclusive licensing situations (i), and agree to march-in procedures (j). Clearly anything having to do with the nonprofit requirements in section (k) are excluded–the inventors are to be treated under the small business version of the patent rights clause, not the nonprofit version–so, no restrictions on assignment of the invention, no restrictions on the use of royalties or income with respect to the invention, no preference for small businesses in licensing.
It’s a sorry day that such an amazing result has to be discovered through such a long process. The public account of Bayh-Dole should declare this from the outset:
For university faculty, Bayh-Dole provides broad protection from predatory university patent brokers and predatory federal agencies! University faculty are to be treated as limited small business contractors when they invent in work supported by the federal government. If they report their inventions and elect to retain title, they can do pretty much what they want–they can dedicate the inventions to the public domain, they can file patent applications, they can assign the inventions as they please, and they can spend anything they make however they want. That’s the import of what we might call the university faculty patent rights clause at 37 CFR 401.9.
Bayh-Dole, for all its posturing, was directed at university research led by faculty. And faculty decide what they will study. Faculty request a release from their university duties to undertake “extramural” research. The federal government pays their salaries, pays their direct costs, and pays the university administration for the facilities and administrative cost of supporting the research. Nonprofits entered because they fronted generally for university patent administration–Howard Bremer, the patent counsel at the Wisconsin Alumni Research Foundation, was extensively involved in the development of Bayh-Dole. That there were some nonprofits set up as contract research organizations that generally didn’t care to exploit patent rights just expanded the possible work for the nonprofit patent brokers working the university market. Adding in the small business contracting was helpful in conflating federal grants to universities with procurement awards to companies. The SBIR program had not been established when Bayh-Dole passed–it was just eye candy to make it clear that the SBIR grants to small businesses were not instruments for invention procurement by the federal government.
At the heart of Bayh-Dole, at the heart of its “First Principle,” is the academic freedom of university faculty inventors. Read again:
Each nonprofit organization or small business firm may, within a reasonable time after disclosure . . . , elect to retain title to any subject invention
University faculty as contractor employee inventors are to be treated as small business contractors–they are included within the definition of contractor:
The term “contractor” means any person, small business firm, or nonprofit organization that is a party to a funding agreement.
The (f)(2) requirement in the standard patent rights clause makes inventors parties to the funding agreement, makes their inventions subject inventions, and in the case of universities, precludes a university from violating a faculty inventor’s academic freedom to claim ownership of subject inventions:
The contractor agrees to require, by written agreement, its employees, other than clerical and nontechnical employees, to disclose … each subject invention . . . , and to execute all papers necessary to file patent applications on subject inventions and to establish the government’s rights in the subject inventions.
If the inventor is required by the university to have the right to establish the government’s rights in subject inventions, then the university cannot secretly have some other requirement that precludes the inventor from having this right–and the right to establish the government’s right is a right of ownership–a right to own the invention made with federal support.
Bayh-Dole then also prevents federal agencies from unilaterally taking ownership of subject inventions owned by inventors. Inventors have to fail to report, fail to elect to retain ownership, fail to maintain a patent application or issued patent. Otherwise, faculty inventors are pretty much free birds:
Agencies . . . will impose upon the inventor at least those conditions that would apply to a small business firm contractor under paragraphs (d)(1) and (3); (f)(4); (h); (i); and (j) of the clause at § 401.14(a).
If there’s rule of law and compliance with federal contracts, then Bayh-Dole is an amazingly wonderful law for university faculty. Yes, there’s this oddity of “at least those conditions” suggesting other conditions might be “imposed” but an agency would have to do some work to show that other conditions are necessary–much as it would to determine “exceptional circumstances.” All this appears to be the work of the devil, according to university patent administrators who have normalized their corruption of the Bayh-Dole Act and have substituted their own faux, flawed, failed boogerish “law” that sets them up for business on their own self-serving terms.
If this thread of Bayh-Dole were enforced–the law and the patent rights clause and the contractor-host compliance and the federal agency enforcement–then Bayh-Dole would be worth keeping on the books to see if it had the desired beneficial effect on the use of inventions by and on behalf of Americans. As it is, we have our own federal invention management swamp to drain. The devils in the details, it turns out, are on the side of academic freedom, the “free play of free intellects,” as Vannevar Bush envisioned.