NIST’s Chief Counsel on Bayh-Dole, 3

NIST’s chief counsel gives, let us say, a unhelpful representation of the law. Let’s continue with his second slide titled “Bayh-Dole Highlights.”

The government does not “retain” a license. The government is entitled to receive that license. The law uses “shall have” (35 USC 202(c)(4)):

With respect to any invention in which the  contractor elects rights, the Federal agency shall have a nonexclusive, nontransferrable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States any subject invention throughout the world

The difference in wording matters. “Retain” implies that the government has broader rights and “keeps” some of these rights while giving up others. But under Bayh-Dole, the government is forced to use a standard patent rights clause which requires the contractor to establish or confirm the government’s rights (37 CFR 401.14(a)(f)(1):

The contractor agrees to execute or to have executed and promptly deliver to the Federal agency all instruments necessary to (i) establish or confirm the rights the Government has throughout the world in those subject inventions to which the contractor elects to retain title,

A contractor would have no need to either establish or confirm anything if the government “retained” rights. The mindset here is all wrong, and gives the wrong impression, and again is not helpful.

NIST’s chief counsel again uses “retains,” now for march-in. But the government does not “retain” this right–it asserts it as a matter of federal contract, at least as a default. Most of the rest of the point is quoted material, but at the end, Wixon inserts his own interpretation in place of the law. The law requires that compulsory licenses must be “upon terms that are reasonable under the circumstances.” That does not at all mean “with compensation.” It may be entirely reasonable under the circumstances that any compulsory license be royalty-free. It’s one thing if the owner of a subject invention has granted an exclusive license and the licensee has failed to make product based on the subject invention sufficiently available. It’s another thing if the owner has done nothing whatsoever with the invention. Why should it fall to a federal agency to round up paying licensees for a non-compliant, do-nothing owner?

The “certain circumstances” under which the government could itself grant the required licenses is that the owner of the subject invention refuses to do so. May as well out that, too.

Behind all this is the distinction between the government market and the private market for subject inventions. The government market is served by the required non-exclusive license to practice and have practiced. “Practice” was defined for executive branch patent policy since at least 1963 to mean “make, use, and sell.” “Have practiced” then means “to have made, have used, have sold.” This a broad license, extended to any action “by or on behalf of the United States.” Bayh-Dole does not use “the federal government of the United States.” The license is much broader. In executive branch patent policy, the license was directed to the “Government,” which was defined as the federal government, the States, and domestic municipal governments. In Bayh-Dole, the words used are “United States”–that includes not only making, using, and selling by the federal government for its own purposes, but also on behalf of States and their municipal governments. The license is also broad because the federal government may authorize others to make, use, and sell.

Why is march-in even necessary, then, if the government license already includes the right to make, use, and sell and to authorize others to make, use, and sell? The government license is restricted to actions that the federal government and states, and domestic municipal governments are authorized to undertake–that is, in fulfillment of their public missions and charters. Selling goods merely because goods can be sold is a different thing. However, if a government has a mandate to provide for the health of certain of its citizens–say, members of the military and military veterans and their families, then that government also has a royalty-free license to practice and have practiced those inventions as a government market.

The private market, by contrast, lies outside what a government has standing to do. A government, also, may procure from the private market when doing so provides goods and services at a lower cost or with greater quality or availability than the government could otherwise obtain by exercising its licensed rights or authorizing others to do so. Federal law, of course, permits the federal government to infringe any patent it pleases (28 USC 1498), and a patent owner’s recourse is to the Court of Federal Claims for “reasonable and entire compensation.” The effect of Bayh-Dole’s license is to eliminate any claim for compensation by the owner of patent on a subject invention.

March-in is necessary only to address matters pertaining to the private market for the subject invention. The federal government does not have to march-in to exercise its own licensed rights–it can do that at any time, for any reason, within the scope of its authority. March-in applies only where the owner of a subject invention fails in some way with regard to the private market–fails with practical application, fails with availability, fails with exclusive licensees that must source U.S. manufactured products. All this is obscured by Wixon’s choice of verbs. It is a big deal.

This is garbled. The agency’s determination is whether a contractor has failed to achieve practical application and is not likely to take “effective steps” to achieve practical application in “a reasonable time.” There is no “agreed upon time frame.” That’s for federally granted exclusive licenses, which don’t need march-in. The government itself is in the place of the “contractor”–the government does not need to march-in on itself–it exercises its contractual rights. Other than that, our chief counsel identifies but two of the four march-in conditions. A better statement would be something along the lines of “Before an agency may march-in, it must determine that a contractor has failed to meet one of four specified conditions, such as . . . .”This much was true in 2013 and still is true today. Given universities and foundations have acquired at least 50,000 U.S. utility patents that recite federal funding, one would have to believe they have all achieved practical application–or that march-in is terribly defective as a public protection. There’s not much middle ground. Why make march-in a “highlight” of Bayh-Dole if it is, for all practical purposes, inoperative?

Our next slide of Bayh-Dole “Highlights” is nigh unto perfect, dealing with the fussy time requirements on contractor reporting of inventions that the contractor has acquired, election to retain title in those inventions, and the filing of patent applications with the proper notice of federal funding and rights.

What is fascinating about Bayh-Dole is that these time requirements appear to be the only requirements that operate–and these are essentially paperwork requirements. There’s nothing about reporting within two months that speeds innovation; nothing about taking up to two years (with extensions available) to decide whether to keep title that provides the public with a new benefit from the use of an invention. It’s just paper shuffling. None of it has anything to do with speeding the results of federally supported research into use. Yet these are the “highlights” of the law. Bizarre, really, to call these highlights. Exciting times for bureaucrats, perhaps, but for the rest of this, such attention to the paperwork of invention priority of claims is a big snore, if not deeply troubling.

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