“the same provisions as the contractor” in (k)(1)

Here’s a follow-up note on the nonprofit assignment restriction in 37 CFR 401.14(k)(1). With the NIST changes in the standard patent rights clauses, we might ask again about the interpretation of “such assignee shall be subject to the same provisions as the contractor.”

Let’s say the reading is, “such assignee will be subject to the same standard patent rights clause as the contractor.” Well, that makes no sense, because there is only one standard patent rights clause now, since NIST rolled up the clause at 37 CFR 401.14(b) into (a) and then disappeared (a) in favor of notational simplicity. If there is only one standard patent rights clause, then “the same clause” is always going to be that one clause.

But this proposed reading also makes no sense another way. The point of the nonprofit restrictions are to highlight that universities and other nonprofits exist with the tax standing they have because they operate in the public interest. That’s why, in part, they receive their federal grants–through granting procedures, not procurement procedures. If a nonprofit could simply assign a subject invention and the assignee could operate without the nonprofit restrictions, then there’s no point in the nonprofit restrictions, really. They would become an incentive for the nonprofit to assign every subject invention to a for-profit and so rid subsequent invention management decisions of the nonprofit requirements–there would be no further restrictions on assignment, no obligation to share royalties with inventors, no obligation to use the balance of income earned from subject inventions for scientific research or education, and no requirement to make an effort to attract small business licensees.

All this would vaporize if a nonprofit assigned a subject invention without the nonprofit provisions–just requiring the assignee to comply generally with the standard patent rights clause and all its conditionals. The nonprofit assignor of course could still extract financial value from having made the assignment (as in taking equity or in getting paid more than it would receive if the nonprofit restrictions still applied), but the assignee could run happily along as if the invention had been acquired directly, as by for-profit contractor, without all that extra public interest huffing and puffing that applies only to nonprofit contractors.

No, the “same provisions as the contractor” means here, since the contractor is a nonprofit, “subject to the same patent rights clause as the initial nonprofit contractor, including paragraph (k).” That’s the way in which the nonprofit requirements always follow a subject invention acquired by the initial nonprofit contractor. That’s the deal. It makes sense. There’s no point in anyone trying to squirm out of it.

The point of the restriction on assignment of subject inventions is to defeat nonprofits assigning all substantial rights to any one for-profit company unless the for-profit then agrees to behave as a nonprofit for the purpose of managing the invention (and any patents on the invention). That’s the point. It’s a decent point in an otherwise ugly law. It’s so strange that university officials would rather have consistent ugliness rather than anything that smacks of public purpose.

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