NIST’s Chief Counsel on Bayh-Dole, 1

In 2011, the Supreme Court provided a clear interpretation of the Bayh-Dole Act in Stanford v Roche. Bayh-Dole applies only to subject inventions. A subject invention is a patentable invention made in work funded by the federal government and owned by a contractor–a party to the funding agreement. Thus, Bayh-Dole applies only to such inventions after a contractor has acquired ownership of the invention. And then, Bayh-Dole decides the priority of ownership between the contractor, who now owns the invention, and the federal government, which may have an interest in acquiring that ownership. That’s it.

Here’s the Supreme Court:

But because the Bayh-Dole Act, including §210(a), applies only to “subject inventions”—“inventions of the contractor”—it does not displace an inventor’s antecedent title to his invention.

Bayh-Dole does not deal with inventions before they are owned by a contractor. There is nothing in Bayh-Dole that vests title in inventions with a contractor. Nothing in Bayh-Dole that requires a contractor to take ownership, gives the contractor a right of first refusal; nothing that forces an inventor to assign only to the contractor or the federal government; nothing that gives a contractor any special privilege, mandate, or encouragement to take title to inventions made in work funded by the federal government. Why? Because Bayh-Dole does not apply to any such inventions until a contractor owns them and they become “subject inventions.”

Only when an invention belongs to the contractor does the Bayh-Dole Act come into play.

A contractor intercepts an invention that might otherwise be published or assigned to the federal government or assigned to some other entity. When a contractor owns, then Bayh-Dole has jurisdiction.

The Act’s disposition of rights—like much of the rest of the Bayh-Dole Act—serves to clarify the order of priority of rights between the Federal Government and a federal contractor in a federally funded invention that already belongs to the contractor.

Bayh-Dole sets out the conditions upon which the federal government can compel a contractor to cough up an invention that it has come to own. That’s it.

Nothing more.

It’s this last bit that seals the deal. The “nothing more” from the Supreme Court makes clear that this is the full interpretation of the scope of Bayh-Dole, that there is no special privilege whatsoever in the law for a contractor to require assignment of any invention made in a project receiving federal support. There can, therefore, be no special privilege for contractors to require assignment of inventions created in the regulations that implement the law or in the default patent rights clauses authorized by the law.

Can this be any clearer?

Let’s then take a look at a slide deck from NIST’s chief counsel, Henry Wixon. By working through Wixon’s talk, we not only get a good picture of what’s wrong with Wixon’s account of Bayh-Dole, and how that surely must have shaped NIST’s revisions to Bayh-Dole’s implementing regulations and standard patent rights clauses, but also we may use the defects of Wixon’s talk in a positive way, to show how Bayh-Dole and its standard patent rights clause do operate–if only they were enforced and the federal government acted on the rights provided for it by Bayh-Dole. Undoing shit like this is never a simple job.

Wixon’s slide deck file is dated 2013, two years after the Supreme Court’s decision in Stanford v Roche. We should expect, then, that his talk will incorporate that decision. Alas, our expectations will not be rewarded. That in itself is a matter of some concern–here’s the chief counsel for the agency charged with the administration of Bayh-Dole ignoring the Supreme Court’s decision on matter fundamental to the law and its implementation. Well now.

After listing a series of statutes that may have something to do with federal policies on research and invention, Wixon spends a slide on that quote from The Economist in 2002, that Bayh-Dole was “possibly the most inspired piece of legislation to be enacted in America over the past half-century.” Wixon does not point out that The Economist walked back this claim three years later in an article titled “Bayhing for blood or Doling out cash?” Wixon also does not bother to provide any evidence that Bayh-Dole has succeeded in any of its stated purposes. So far we have Wixon making the case that Bayh-Dole is a law among other laws and is a really inspired law.

Now let’s look at Wixon’s series of slides all titled “Bayh-Dole Highlights.” Remember, this is two years after Stanford v Roche and Wixon is chief counsel–still is–for the agency responsible for Bayh-Dole’s implementation.

Let’s start with the matter of electing to retain title:

This is a true statement, if one already knows what the statement must mean. A contractor does have the right to elect to retain title to any subject invention. That is, a contractor, having come to own an invention made under federally funded R&D through some other means than anything in Bayh-Dole, has a right under Bayh-Dole to choose to keep ownership of that invention.

Do you think anyone reading Wixon’s bullet point would understand what should be understood by “elect to retain title” and “subject invention” and “contractor” unless they already know what the phrase means and therefore do not need Wixon’s talk? Perhaps Wixon shows this slide, looks back at it there on the screen, and says, “You may have heard this about Bayh-Dole–but I’ve put in quote marks and boldface some terms and phrases that can be easily misleading if you don’t know the law, and trust me, here at NIST this is one area that I’ve had to become an expert, so listen up.” Somehow, I don’t think that’s what happens, but perhaps someone who has heard this talk live will wizen me up.

Here’s 35 USC 202(a):

Each nonprofit organization or small business firm may, within a reasonable time after disclosure as required by paragraph (c)(1) of this section, elect to retain title to any subject invention

We might add, then, to Wixon’s slide–a reasonable time after disclosure to the government of the invention. Wixon does not explains what a subject invention is. A subject invention could well be any invention “subject” to federal support. Who would know unless someone explained the point?–and someone really should at this point in the talk because the definition of subject invention is fundamental to Bayh-Dole. For later, keep in mind as well that Wixon here distinguishes grants, contracts, and cooperative agreements–the three forms of funding identified in Bayh-Dole’s definition of “funding agreement.”

Next point:

Now Wixon wobbles into the weeds. Bayh-Dole’s basic premise in 35 USC 202(a) continues with

Provided, however, That a funding agreement may provide otherwise

That is, the stated condition, that a contractor coming to own an invention made in federal R&D can keep that ownership, is an initial, arbitrary default contract position. Bayh-Dole then provides a mechanism for federal agencies to change the default for four enumerated reasons:

  1. non-U.S. contractor
  2. in exceptional circumstances
  3. if there’s counterintelligence operations
  4. for DOE GOCO lab naval propulsion and weapons

An “exceptional circumstance” is not necessarily a rare circumstance. It is any circumstance for which the stated initial default is not appropriate. The first, third, and fourth items listed are, in essence, default exceptional circumstances. Federal agencies, if they follow the procedures set out for “exceptional circumstances” can create their own additional patent rights clause. We might say that Bayh-Dole does not create a uniform policy so much as it delays with expensive procedures the departure of a federal agency’s patent rights clauses from an arbitrary starting point.

At the end of his point, Wixon adds an entirely anomalous point: “an agency may limit the presumption that ownership will vest in the contractor.” That’s not at all what Wixon just quoted from Bayh-Dole. Here’s Bayh-Dole:

restriction or elimination of the right to retain title

Wixon:

limit the presumption that ownership will vest in the contractor

In Bayh-Dole, there is no presumption of any ownership vesting anywhere. This elimination of presumption is in fact a great highlight of Bayh-Dole, whatever one might think of it as public policy.

But for NIST’s chief counsel, it is as if Stanford v Roche does not exist. There is a way to squeeze Wixon’s words to fit a technical reading of the statute, but no one expecting Bayh-Dole “in a nutshell” would jump to that twisted technical reading, which goes something like this. In federal contracting for research, there is often a question whether tangible equipment purchased with government funds is purchased on behalf of the government and thus made available to the funded project for its duration, or whether that equipment, even though purchased with federal funds supplied to a contractor, becomes the property of the contractor. If the equipment becomes the property of the contractor, then we can say that the contractor not only possesses the equipment (upon purchase, the equipment is delivered to the contractor) but also that ownership–legal title–to the equipment “vests” with the contractor.

Here’s sample language from federal grant regulations for nonprofits (2 CFR 200.313):

Subject to the obligations and conditions set forth in this section, title to equipment acquired under a Federal award will vest upon acquisition in the non-Federal entity.

The regulation then goes on to differentiate “conditional” title from title “without further obligation to the Federal Government.” If we reason by analogy with this requirement, we can see how one might construe Bayh-Dole in dealing with a particular form of intangible property–an invention made with federal support. But we have to be disciplined at this point. A contractor acquires an invention “under a Federal award.”

By analogy, we could imagine then a regulation–just as 2 CFR 200.313 does–to establish the conditions upon which the contractor may hold title to that invention. But here we have something very different in Bayh-Dole. It is not merely a matter that a contractor have possession of an invention, and that title to that invention then “vests” in the contractor when the federal government agrees. Bayh-Dole applies only after the contractor has obtained title. That title “vests” in the contractor when the contractor obtains title (through some means).

Bayh-Dole then concerns whether a contractor having obtained title to an invention (rather than to equipment, say) may keep that title, and if so, under what conditions. It is clear that Bayh-Dole operates with the same concept of “conditional title” used for equipment in federal grants to nonprofits. A contractor may keep title to an invention but only if the contractor complies with a set of conditions that run with that ownership.

The important point here is that for a contractor to acquire title to an invention made “under Federal R&D”–that is, “in the performance of work under a funding agreement”–the contractor has to take an action independent of the funding agreement. There is nothing in any federal funding agreement–short of the determination of an exceptional circumstance–that would authorize a contractor to take title to an invention as a condition of the federal funding agreement. There’s the Supreme Court’s “Nothing more” again. Bayh-Dole concerns only the priority of claim between a contractor and a federal agency once the contractor has acquired ownership of an invention made in a project receiving federal support.

What, then, can we make of Wixon’s “presumption of ownership”? This is language that the Supreme Court’s decision requires us to understand to mean “the presumption [that is, the expressly stated default] that title acquired by a contractor may remain with the contractor, provided the contractor meets the conditions for such title.” The idea of “vest” here is simply that of a conditional title that does not depend entirely on a federal agency not demanding that title at any time for any reason. It is a presumption that title is conditional, not that title vests. Bayh-Dole does no vesting, authorizes no vesting, no special privilege to compel vesting, no acquisition to avoid non-compliance. Wixon, however, in 2013, apparently had not figured it out, and as we shall see, apparently still  hasn’t. Stanford v Roche held that Bayh-Dole does not vest ownership in a contractor. Wixon owes his audience to use clear language.

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