Faster Cures has at its web site a FAQ on Bayh-Dole. Let’s work through their account of Bayh-Dole and help them where they appear challenged.
1. What is the Bayh-Dole Act?
Co-sponsored by Senators Birch Bayh of Indiana and Robert Dole of Kansas, The Patent and Trademark Law Amendments Act of 1980, more commonly known as the Bayh-Dole Act or simply “Bayh-Dole,” is legislation that shifted the ownership of inventions made with federally funded research.
No. This is slant. Bayh-Dole did not shift ownership of inventions. Bayh-Dole does deal with ownership of inventions, but only second hand, after a contractor has acquired ownership of an invention in the good old conventional way. Instead Bayh-Dole limits how federal agencies may, in contracts for research or development, require assignment to the federal government of inventions already acquired by contractors. That is, Bayh-Dole is about how federal agencies contract for inventions contractors have come to own. We might say Bayh-Dole restricts how federal contracts may require assignment of inventions by contractors. While assignment does indeed “shift the ownership” of inventions, one has to be clear that the effect of Bayh-Dole is to limit how federal agencies contract for assignment once ownership has already been shifted.
In contrast, faux Bayh-Dole claims that the law changes federal common law so that the organizations that host federally funded research own (or have a right to own, or have a right of first refusal, or whatever) inventions made with federal support. In faux Bayh-Dole, the organization does not have to have an independent claim to equitable ownership–not authority to direct employees to invent, not patent agreements, not a financial investment, not a foreseeable business direction. Nothing. The Faster Cures FAQ starts, then, by reciting a basic tenet of faux Bayh-Dole.
Technically–if one reads carefully and complies with Bayh-Dole’s standard patent rights clause–Bayh-Dole does not require inventors to assign to anyone, not to contractors, not to the federal government. Bayh-Dole provides for inventor ownership (35 USC 202(d)). There’s a standard patent rights clause for inventor ownership (37 CFR 401.9). The standard nonprofit patent rights clause requires nonprofits to make potential inventors parties to the funding agreement (and therefore contractors under the standard patent rights clause) (37 CFR 401.14(a)(f)(2)). Inventors then continue to own their own inventions, and as contractors are to be made subject to the inventor patent rights clause. If they report their inventions and elect to retain title to their inventions, then federal agencies cannot require assignment of those inventions. Under the inventors patent rights clause, inventors do not even have to file patent applications. But none of this happens in practice because universities don’t comply with the standard patent rights clause, and federal agencies don’t care that universities don’t comply–and both universities and federal agencies appear committed to the idea that the universities, and not the inventors, should own any inventions made with federal support, even though the law does not demand that outcome and the U.S. Supreme Court ruled that nothing in Bayh-Dole gives a contractor any special privilege to own inventions made with federal support.
This will all change, no doubt, in the next month or so, once NIST gets through with its “amendments” to the patent rights clause. [And NIST announced in April 2018 its final rule that apparently does so.] NIST proposes to turn Bayh-Dole into a vesting statute by requiring contractors to require inventors to assign inventions to the contractors. The effect will be to strip inventors of their common law right in their inventions as a requirement of federal regulation. There’s no authority in Bayh-Dole for such a requirement, and Bayh-Dole preempts any other statute that would provide such authority. The Supreme Court in Stanford v Roche (2011) ruled that Bayh-Dole applied only to subject inventions–federally supported inventions that a contractor had already acquired, and “nothing more.” So NIST will make up the authority out of its own posterior cortex, in spite of the law and the Supreme Court, and then Bayh-Dole will be a truly most awful part of federal patent law.
Before Bayh-Dole, inventors were obligated to assign inventions made using federal funding to the federal government.
This is not true in general. A number of federal agencies allowed contractors to own inventions made with federal support, and it was up to the contractors to obtain assignment from their inventors. The inventors were not obligated to assign their inventions to the federal government in those cases. Further, the NIH and NSF operated “Institutional Patent Agreement” programs under which nonprofits were required to require inventors to assign inventions to the nonprofits when the nonprofits decided to file patent applications. Again, inventors were not obligated to assign to the federal government. In the IPA program, the federal agencies required contractors to require inventors to assign to the contractors. Faster Cures repeats fake history and political bluffery.
For some inventors, after 1968 when the NIH revived its IPA program, it is true that they were required to assign inventions to the federal government. But for many inventors after 1968, especially those at the 70+ nonprofits participating in the NIH and NSF IPA programs, it is not true. Further, where inventors were required to assign to the federal government, the reasoning was that that private patent monopolies should not be subsidized or promoted by public funding–such as in research areas directly related to human health. The inventions were being made by faculty who were not tasked with taking a commercial interest, hosted by nonprofit organizations that had no commercial position, and which were fully compensated for the release of faculty and staff to work on federally sponsored projects.
The general assertion for federal invention ownership, then, is fake history. The fake history obscures the fundamental point that Faster Cures ought to have an interest in making evident: federal policy was that in areas of human health, cures could be developed from research without supporting a broad trade in patent monopolies for private profit on those cures. Patents might be used, rarely, to ensure high quality and to prevent false or misleading claims–as the University of Toronto had done with the insulin inventions assigned to it. Patents were to be used on a case-by-case basis, and generally to break up the patent monopoly. If private investment by a single company really was necessary, and a patent might secure that company’s investment, then a limited monopoly might be acceptable–for three years, or maybe as long as eight years, provided that the company did not exploit the patent monopoly for pricing or availability and did not disrupt future competition. One might disagree with that policy, but it’s another thing to pretend the policy didn’t exist and make it appear that some other policy that didn’t exist was blocking “innovation.” Instead, Faster Cures repeats the unsupported political talking points and fake history used to justify a faux version of the Bayh-Dole Act.
Bayh-Dole grants ownership to the inventors, and permits a university, small business, or nonprofit institution to elect to pursue ownership in preference to the government.
Not true. Bayh-Dole does not grant ownership to anyone. Inventors own their inventions by operation of patent law. Bayh-Dole does not disturb that operation, as the Supreme Court ruled in Stanford v Roche. Bayh-Dole provides no special vesting or privilege to acquire ownership to contractors with regard to federally supported inventions. Nor does Bayh-Dole “permit” universities and others to “elect to pursue ownership.” This makes a hash of the statutory language. By limiting federal agencies’ authority to contract for invention rights, Bayh-Dole opens the door to contractors pursuing ownership of inventions that they otherwise may have had to cede to the federal government. But many universities receiving federal funds were in the IPA programs and already had a government contract, made outside any funding agreement, that required them to take assignment of inventions made with federal support when they decided to file patent applications on those inventions.
Bayh-Dole does not go as far as the IPA program went. Bayh-Dole restricts federal agency contracting for inventions, but it does not stipulate that contractors must make inventors promise to assign inventions to the contractors. In fact, in Bayh-Dole’s implementation, the standard patent rights clause requires contractors to require inventors to have rights to establish the government’s interest in their inventions. That requirement runs opposite to the IPA requirement that inventors must be required to assign to the contractor.
The “elect” in “elect to pursue” comes from Bayh-Dole’s wording “elect to retain title.” Under Bayh-Dole, once a contractor does acquire ownership of an invention made with federal support, that invention becomes a “subject invention.” Bayh-Dole prevents a federal agency from requiring assignment of subject inventions to the federal government unless the contractor fails to report the invention, chooses not to retain title to the invention, or fails to file a patent application or prosecute, maintain, and defend the patent. Thus, to “elect to pursue title” might be accurate if it means “could choose to require assignment of inventions made with federal support that otherwise might be obligated to the federal government to be made broadly available to all for further research, use, and development.” Adding “elect” makes it appear that the law provides some special mechanism for contractors. It doesn’t. By limiting federal agency requirements, Bayh-Dole opens the door for nonprofit contractors to go after inventions to own. It’s not the “same thing” at all. The FAQ makes it sound like there’s a federal endorsement of institutional ownership; there isn’t. There’s a withdrawal of federal oversight for inventions made with federal support, allowing for a predatory, patent monopoly speculative free-for-all in areas directly concerning public health.
The public policy issue is whether such a patent monopoly speculative free-for-all serves the public, and if so, is that service better than alternatives, such as broadening the public domain, refusing to subsidize profit-seeking speculators on cures for diseases, and encouraging development of cures that do not involve monopoly positions to justify participation in the effort.