What has NIST done, actually?-1

NIST has made an attempt to turn Bayh-Dole into a vesting statute. From all appearances, that is what a casual reader would think has happened with NIST’s new subject invention assignment language. With help from inept (if not complicit) university patent managers, a casual reader might even think that all NIST has done is provide a technical “fix” to what was intended by Congress all along, if not for a “mistaken assumption” (as Sean O’Conner calls it) that universities always obtained invention assignment agreements from their employees. But all this–the assignment, the true intention, the mistaken assumption, the fix–is hogwash.

The folks in charge of Bayh-Dole are clueless as to how the law operates and attempt to substitute their own public policy for the one expressed by the law, and in doing so make an even deeper hash of the implementing regulations. It’s like bad software programmers adding their own buggy patches to an already failed code base.

What has NIST done, actually? It’s tempting to say “nothing.” But that wouldn’t be true. And it’s tempting to say that NIST has addressed a “technical flaw” in the reasoning behind Bayh-Dole, that somehow the folks drafting Bayh-Dole overlooked the fact that universities might not require inventors to assign. But that would be a stupid temptation, since the folks drafting Bayh-Dole knew the university situation through and through–they were from universities and did business with the universities. They were crappy draftsmen, but not stupid crappy draftsmen.

Or perhaps Congress meant for universities to own inventions made with federal support and couldn’t find a way to out and say that, so they talked around the point, nudge, nudge, wink, wink, and NIST merely gives expression to the Congressional innuendo. But here the Supreme Court made it clear that if Bayh-Dole was going to change two hundred years of federal patent law, it would have to do so openly and expressly, not with goofball meanings to “subject invention” and “retain.” The Supreme Court was also made it clear that Bayh-Dole did not provide any special rights to universities or other contractors with regard to acquiring ownership of inventions made with federal support.

Oh, I know, I know, when the Supreme Court offered this helpful advice:

With an effective assignment, those inventions—if federally funded—become “subject inventions” under the Act, and the statute as a practical matter works pretty much the way Stanford says it should. The only significant difference is that it does so without violence to the basic principle of patent law that inventors own their inventions.

NIST must have reached the conclusion that it would be then perfectly fine to require contractors to require assignment of federally funded inventions. But that would be exactly what the Supreme Court ruled Bayh-Dole did not authorize. You can see how confidence in NIST’s competence might waver.

It’s just that NIST’s new rule does not require contractors to require their employees to assign to them inventions that the contractors don’t own. The new rule requires assignment of subject inventions, which as the Supreme Court also helpfully observed are inventions the contractor already owns. So NIST’s new rule reads: to protect the government’s interest in subject inventions, contractors must require their employees to assign to the contractor all those inventions made in projects with federal support that the contractor already owns. Because we are curious, we ask, “Why do employees have to agree to assign to their employers what the employers already own?” And how do the employers come to already own these inventions, since this agreement to assign is not the instrument that conveys that ownership? Sigh.

It’s also tempting to give up in disgust and conclude that NIST is clueless about Bayh-Dole–and it appears they are–but why give up? Why give in to the pressures of meaningful life, the warmth of the sun, the intensity of playoff hockey, and coffee? Why not press on and figure out what NIST has actually done? Is Bayh-Dole, the love monster of patent attorneys and pharmaceutical firms, that most dismal of all public policy on research inventions, really worth it? No of course not, but let’s find out anyway!

The new assignment requirement introduced into the standard patent rights clause is not what it might seem at first sight. It is more muddle than substance, and the likelihood is that it will be represented as requiring vesting, but now cleverly through a requirement to require contractors to require inventors to assign all their inventions made with federal support–amounting to the same thing–patent law cited as authorizing a regulation that requires federal contracts to default to a requirement that contractors require their inventors to assign inventions made in projects with federal support to the contractors. This despite swaths of other apparatus in the law and the patent rights clause that operate otherwise.

Even with the layers of cleverness, Bayh-Dole still ends up as a vesting statute, against the decision by the Supreme Court on the matter. Contempt is contempt, even if it is covered over by the claim that the law made a mistake about public policy and it is up to a federal agency and university patent brokers to “fix” the “mistake.” If there really had been a mistake, then it would be up to Congress to mandate the fix expressly as new public policy.

The irony is that Bayh-Dole took from federal agencies the right to impose whatever invention delivery terms they wanted to in their funding agreements, within the guidance of executive branch patent policy. Then Bayh-Dole appeared to take away that executive branch patent policy, too. The Secretary of Commerce, however, was charged with administrating the law and creating the implementing regulations–and the Secretary subsequently delegated the responsibility to NIST, and within NIST apparently the too heavy burden has fallen on NIST’s chief counsel. And so NIST takes on to write its own policy and attribute that policy to Bayh-Dole–and make its own policy become government-wide. The executive branch is doing what Bayh-Dole forbade, but now instead of the executive branch following a reasonable presidential executive order, it takes its orders from NIST’s chief counsel. The boatswain’s mate third class thus must be better suited than the commander to know where the ship should go. Apparently that is a primary outcome of Bayh-Dole’s public policy on inventions made with federal support.

Here is the new language, required to be used in the (f)(2) written agreement requirement–a requirement that itself is not in Bayh-Dole, only in the standard patent rights clause–and no one complies with the requirement anyway (new language in bold):

The contractor agrees to require, by written agreement, its employees, other than clerical and nontechnical employees . . . to assign to the contractor the entire right, title and interest in and to each subject invention made under contract . . .

Let’s make a few points about the new assignment requirement first, and then we can get into the details.

1. This is not a requirement that contractors must require employees to assign all inventions made with federal support to the contractor. It applies only to subject inventions, which are inventions already owned by the contractor. An organization receiving federal funds must require each specified employee (employees other than clerical and nontechnical employees) to agree to assign to the organization those inventions made under contract and that the organization already owns. We will have to sort that out, setting aside the premise that this is just NIST being stupid or too clever for its own good.

2. This requirement, placed in a federal contract–the funding agreement– and requiring specified employees to make a written agreement that becomes part of the funding agreement, takes precedence over any other agreement that the employer may have with its employees on the matter. Even if the employer has patent agreements with its employees that require assignment, once the (f)(2) agreement is in place with its new assignment language, those other patent agreements do not operate. This new language takes precedence, and it is this new language that controls assignment. This matters bigly.

3. The new assignment requirement is not general for all funding agreements. It expressly applies only to contracts–not to grants and not to cooperative agreements. Here’s the start of the definition of “funding agreement” (37 CFR 401.1(b)): “The term funding agreement means any contract, grant, or cooperative agreement  . . . .” The language used in NIST’s new assignment clause is specific to contracts (“made under contract”). We might think then that the change is directed at companies in procurement situations operating under the Federal Acquisition Regulation, not at nonprofits doing basic research under federal grants, governed by 2 CFR 200.

[Or perhaps it is a problem with the meaning of italics. 37 CFR 401.5 permits federal agencies to replace italicized terms in the standard patent rights clause with information specific to a given funding agreement:

Agencies may replace the italicized words and phrases in the clauses at § 401.14 with those appropriate to the particular funding agreement. For example, “contracts” could be replaced by “grant,” “contractor” by “grantee,” and “contracting officer” by “grants officer.”

But in the NIST final rule revision published in the federal register, we find this:

each subject invention made under contract in order that the contractor can comply with the disclosure provisions of paragraph (c) of this clause, to assign to the contractor the entire right, title and interest in and to each subject invention made under contract,

Contractor is italicized. And in the unrevised form of the regulations, the first “contract” is italicized. But now the term is not italicized either place. Given that there’s no authority for agencies to alter words that aren’t italicized–other than by declaring exceptional circumstances–what are we to make of NIST’s final rule drafting. It would appear that the change is intentional. It’s bad interpretative form to go around assuming what the federal government “really meant” if there’s a reading that is reasonable available given the words as they sit there. It’s reasonable that NIST intends that the entire written agreement requirement applies only to federal contracts–procurement– and not to grants or cooperative agreements–subvention. The italicization should matter if there’s a reasonable interpretation, and there is. Let’s see what shows up in the published regulation. ]

Still, we are left with the odd sense that companies are not where the lack of patent agreements is much of a problem–with the added thought that the new requirement if misread would still amount to a vesting scheme that forces a company contractor to force its inventors to give up ownership of inventions made in projects receiving federal support, all wrapped up in the regulatory apparatus of patent law, which the Supreme Court ruled could not happen under Bayh-Dole.

4. The new assignment requirement is in conflict with the later requirement in this same provision that contractors must make their specified inventors agree to sign papers to establish the government’s rights in subject inventions–how can this possibly be the case if the employer already owns the invention and now each specified inventor must also assign those rights to the contractor? The inventor would apparently have no rights to establish for the government, having already lost those rights to the contractor not once, but twice. It cannot be.

The new assignment language appears to run against the established language that requires contractors to require their inventor-employees to sign papers to establish the government’s rights. How to make sense of what NIST has done?

5. There are plenty of ways that the federal government may not capture inventions as “subject inventions” or if subject inventions are not within the scope of a government claim of rights under Bayh-Dole. For instance, the assignment requirement, like the broader scope of the written agreement requirement into which it is inserted, applies only to a contractors’ employees other than clerical and nontechnical employees. Inventions made by nontechnical employees, even if subject inventions, are not ones that must be disclosed, and the government does not require any papers to be signed to establish the government’s rights.

Furthermore, the written agreement requirement does not apply to non-employees–to volunteers, independent contractors, collaborators, and others. The government does not have any interest in inventions made by these not-specified inventors. Their inventions, even if those inventions might be construed as subject inventions once assigned to the contractor, are not within the scope of the government’s claim to rights. That’s strange, but there it is. Clearly, public policy has never included an effort to capture rights for the government to all inventions made in projects with federal support–but rather only to those that an institutional contractor acquires the ownership of, and only then from its specified employees. Why just those specified employees? More to sort out.

By contrast, Bayh-Dole’s statement of policy in section 200 does not apply only to subject inventions–but rather to “inventions arising from federally supported research or development.” And Bayh-Dole also pertains to the licensing of federally owned inventions, which are not subject inventions. Perhaps then while Bayh-Dole’s contracting provisions are limited to subject inventions, Bayh-Dole’s overall policy is broader than merely subject inventions. More to sort out.

It would appear that NIST has a muddled conception of Bayh-Dole and has made Bayh-Dole’s implementing procedures better reflect NIST’s own muddled understanding of Bayh-Dole. We have seen that NIST’s chief counsel, at least in 2013, did not evidence a firm grasp on Bayh-Dole. It would appear that little has changed.

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