The Faster Cures FAQ on Bayh-Dole, 3

We are working through the Faster Cures FAQ on Bayh-Dole.

4. What requirements does Bayh-Dole place on universities?

None. Bayh-Dole applies to federal agencies, not to universities. It’s only loose chatter to say that Bayh-Dole requires universities to do anything. Bayh-Dole authorizes federal agencies to license exclusively inventions owned by the government. Bayh-Dole requires federal agencies to use a standard patent rights clause in their contracting for research or development unless they can justify an exception. Bayh-Dole places limits on the property rights in patents on inventions arising in federally supported (in whole or in part) research or development projects. Nothing about universities. No requirements. The bit in 35 USC 200 that mentions universities is to call out universities as part of nonprofits generally in a statement of policy and purpose. Not requirement. The core gesture of permitting a contractor to retain title to a subject invention becomes effective only after a university has taken action to (i) acquire the invention or (ii) join the inventors as parties to the funding agreement. A university does not have to acquire any invention. But even here, retaining title is not a requirement. It is at best an opportunity, an option, a voluntary choice. No requirements under Bayh-Dole for universities.

The implementing regulations of the Bayh-Dole Act outline the requirements for inventions arising from federally funded research projects.

Federal agencies must use the standard patent rights clauses established by the Secretary of Commerce unless they can justify an exception. There is nothing particularly uniform about the exceptions other than the procedure for excepting–and that federal agencies generally don’t bother to find any exceptions (there are instances, but not much recently). There are presently four such patent rights clauses–one for naval nuclear propulsion and weapons; one for small businesses; one for nonprofits; and one for inventors. Federal agencies may tailor these clauses, and may use entirely different clauses so long as they follow Bayh-Dole’s requirements to do so. The patent rights clause in each funding agreement–however it reads–establishes a university’s obligations for that funding agreement. 

Before we get to the FAQ’s version of the standard patent rights clause, we can point out the actual requirements a university must accept under the standard nonprofit patent rights clause. These are simple. A university must designate personnel for patent matters (37 CFR 401.14(a)(c)(1)). A university must provide education to its employees on the timely reporting of inventions (37 CFR 401.14(a)(f)(2)). A university must require its technical employees to make a written agreement to protect the federal government’s interest in inventions (also 37 CFR 401.14(a)(f)(2)). A university must disclose to the federal government each subject invention (each invention made with federal support the university has acquired ownership of), within two months of receiving an invention disclosure from its inventors. A university must convey title to the federal government when a federal agency, as authorized by Bayh-Dole, requests title (37 CFR 401.14(a)(d)).

That’s it. Everything else that happens under the standard patent rights clause comes about because a university chooses to “elect to retain title” in a subject invention. A university does not have to choose to retain title. The complications in Bayh-Dole come about because university administrators choose to accept them–quite independently of the acceptance of federal funding. The five conditions above are the ones that come with the funding. The rest come with a separate actions by the university to claim ownership of inventions (not required at all) and to notify the government that the university will retain that ownership (optional–a failure to notify of the election to retain title is equivalent to not electing to retain title).

With that preface, here are the “key” requirements, according to Faster Cures. (The FAQ’s citations here are all off. The actual citations are to 37 CFR 401.14(a). So, for example 401.14(f)(2) is really 401.14(a)(f)(2). Just saying. [Ho-ho–NIST’s April 2018 revisions drops the (a) so now the FAQ citations are back on–talk about being wrong in the present and right in the future!])

Execute written agreements with faculty and technical staff requiring disclosure of inventions. 37 C.F.R. § 401.14(f)(2).

No. Not “with” faculty and technical staff. The (f)(2) provision requires technical employees to make a written agreement to protect the government’s interest–to disclose subject inventions, [after the NIST 2018 rule change, to assign subject inventions to the contractor], to sign papers to permit patent applications to be filed, to sign papers to establish the government’s rights in inventions. The (f)(2) agreement is not an agreement between the university and its employees. It is an agreement that delegates to employees as private individuals responsibilities under the university’s funding agreement–the employees become small business contractors with regard to their inventions, and the inventions they make become subject inventions even if not assigned to the university–and subject to the inventors patent rights clause at 37 CFR 401.9. [Though what this means in actual practice after the NIST rule change remains to be seen.]

The (f)(2) requirement limits how a university can require assignment of subject inventions to the university. [The NIST rule change may change this analysis.] A university cannot as consideration for allowing technical employees to participate in the federally supported project obtain any interest in the employees’ inventions. If a university is going to have a relationship with employees that supports a requirement that the inventors assign, it has to involve something other than the federal funding agreement.

In short, inventors do not have to assign to the university so that the university can comply with Bayh-Dole–[but from April 2018 on, inventors may have to assign their inventions to comply with the standard patent rights clause]. Just the opposite–universities must allow technical employee inventors to own their inventions as a condition of Bayh-Dole. If a technical employee inventor–made a contractor by the university’s compliance with (f)(2)– elects to retain title, then the inventor patent rights clause applies, not the nonprofit patent rights clause.

Report each new invention to the federal funding agency within two months of the invention being reported to the funding recipient. 37 C.F.R. 401.14(c)(1)

Yes. Reported to the funding recipient’s personnel responsible for patent matters.

Decide whether to retain ownership (i.e., elect to own the invention) of the technology and notify the agency of any decision to retain title within two years of the date of disclosure. 37 C.F.R. 401.14(c)(2).

No. Bungled. The university does not “elect to own.” The contractor decides whether to continue to own what it has already acquired. And it is to the “invention” and not “technology.” Otherwise, the timing is correct–date of disclosure to the government, not date of disclosure to the university’s personnel for patent matters.

File for patent protection within one year of electing to retain title. 37 C.F.R. 401.14(c)(3).

Yes. But what happens to inventions that the university does not acquire? Those inventions remain with their inventors, subject to the inventors patent right clause.

Provide a license to the government to also practice the subject invention. 37 C.F.R. 401.14(b).

The government license is “to practice and have practiced by or on behalf of the United States.” “Practice” means “make, use, and sell.” In prior executive branch policy, where we find “United States” we would have found “Government” defined to include the federal government, state governments, and domestic municipal governments.

Keep government informed of progress in patenting or commercializing the invention. 37 C.F.R. 401.14(f); 401.14(h).

More bungle. The “or” between patenting and commercializing should be an “and.” But that’s just a minor bit. The requirement at (f)(4) is that any patent application or issued patent include a government funding and rights notice. The requirement at (h) is that the university must respond to requests for reports on “utilization.” There is no requirement in Bayh-Dole for commercialization. Commercialization is one way to achieve “practical application” or “utilization” but it is not the only way, and is not required. Here, Faster Cures makes it appear that commercialization is required. Faster Cures also omits (c)(1), under which a university must inform the federal agency of any publications that would create a statutory bar to patenting. Perhaps that’s not “key.”

What an odd list of requirements to choose. The (f)(2) agreement is important, to be sure. But so are the requirements specific to nonprofits at (k)–a requirement that any assignment of a subject invention must include the nonprofit patent rights clause; a requirement to share royalties with inventors; a requirement to use any income earned with respect to a subject invention for support of scientific research or education; and a requirement to make an effort to attract small businesses as licensees. In fact, it is these requirements in (k) that are the distinctive requirements for university administration of subject inventions.


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