Bayh-Dole Up Your Counsel, 4

We are working through the UpCounsel account of Bayh-Dole. It’s not all terrible. There are some useful points to come. Overall, however, the work here is sloppy, misleading, not what one would expect for a barrel full of part-time legal help offering their services.

Does the Bayh-Dole Act Have Any Controversies?

One of the lesser-known details of this law is that Bayh was a lame duck member of the Senate at the time. His term had ended after he lost his re-election bid to Dan Quayle, who would later become Vice President. This act was Bayh’s last major legislation, but it had political opponents.


Outgoing President Jimmy Carter considered a pocket veto. He didn’t believe that such important legislation should happen during a lame duck session. He also wanted a more comprehensive law. Eventually, Carter’s advisers persuaded him to sign the bill, which he did on December 12, 1980.

And that proposed law was backed by Sen. Harrison Schmidt, the former astronaut, with many co-sponsors.

Since Bayh and Dole had to work together quickly, the law had a few omissions.

No–they had plenty of time, starting with the introduction of S. 414 in 1979. Omissions? What omissions?

The largest one is how the law applies to nature and the human body. The Supreme Court eventually ruled in Molecular Pathology v. Myriad Genetics that a business couldn’t claim ownership of genes.

This is an issue for patent law, not Bayh-Dole. Bayh-Dole applies to federal agencies. Perhaps UpCounsel thinks of these as “government bodies.” There we go.

Potential conflicts of interest between inventors, universities, and businesses have created other debates about the law.

You mean the law creates conflicts of interests for universities? But that’s, like, okay because it gave universities that “greater incentive” of seeking money from patents on publicly supported research? Perhaps “debates” are fine, so long as they don’t interfere with university administrators stripping inventors of their inventions, violating faculty inventors’ freedom to publish, and generally chasing after money, usually in the form of patent monopoly pipelines to the biomedical industry.

Finally, an ongoing debate exists about the future of innovation and research in an era of millions of patents.

And where is that debate? And does “ongoing” mean “chronically inconclusive”?

Are Any Changes to the Bayh-Dole Act Possible?

Any legislation that is decades old has the potential need for updating. Technology has changed in ways that no one could have guessed in 1980. A law from that time understandably doesn’t cover some modern issues.

The law didn’t cover plenty of pre-modern issues. But whatever.

The primary issue with the Bayh-Dole Act is that it has changed the way that universities do research. The drive to earn money through innovation has changed the goal from the pursuit of knowledge. Critics note that universities don’t manage intellectual property as well as businesses.

It’s not established that Bayh-Dole has changed the way universities do research. It’s a false dichotomy that pursuit of knowledge is contrary to a drive to earn money through innovation. It’s a stupid critic that worries whether in the abstract universities or companies do a better job managing “intellectual property.” Look: Bayh-Dole sets up a patent pipeline from universities to companies. The university’s role is to secure a patent and move its management to a favored company. So the business ends up managing the “intellectual property.” What’s the point then of worrying whether in general universities do better or worse than businesses at this? What is the secret alternative? That federally supported inventions should vest with patent trolls? There’s a perfectly legal, lucrative invention-based system. One could easily argue that a patent troll does a superb job managing intellectual property.

We might also observe that in the broad Bayh-Dole framework, patents on inventions made with federal support are not ordinary patents, do not have ordinary property rights, and carry restrictions on their use through the patent rights clauses. Why would businesses be better at managing such things? Why would businesses even want to deal with such things? Only if they can get a patent monopoly and disregard the rest of Bayh-Dole?

Meaningful discussion of the management of inventions made with federal support starts by abandoning useless abstractions and generalities about inventions, inventors, and the purposes of the patent system. Only at that point–setting aside Bayh-Dole’s arbitrary requirements–can we start to look at the various pathways by which new technology–innovation–comes into public use.

The four major suggestions for Bayh-Dole improvements are as follows:

Research exemption: A flaw with the law prevents university researchers from using some of their own patents. Many colleges with exclusive licenses cannot use them for non-commercial research.

The common law “research exemption” was pretty much eliminated by the decision in Madey v Duke. It has nothing to do with Bayh-Dole, though Bayh-Dole is part of federal patent law. Bayh-Dole does require the patent system to be used to “promote free competition and enterprise without unduly encumbering future research and discovery.” That provision of policy might be interpreted to require owners of patents on subject inventions to grant a general right to make and use subject inventions for research purposes. But no one cares–really, they don’t. You don’t, I’m sure of it, and I likely haven’t ever met you. Further, universities could simply refrain from granting exclusive licenses to make or to use and deal only with exclusive licenses to sell–if such an exclusive license is indeed necessary. The law does not have to be changed for university administrators to do “the right thing.” Of course, most of those administrators don’t agree that they aren’t already doing “the right thing” by pipelining inventions as patent monopolies to their favorite companies (or whoever shows up), so they would reject UpCounsel’s suggestion for a research exemption as moralizingly wrong.

Research tool availability: Universities face a lack of access to many of the newest tools and inventions. The result is a roadblock preventing innovation. The law needs to prevent exclusive licensing that discourages innovation.

But the whole point of the law, earlier, was to provide a “greater incentive” to universities to innovate, and march-in threatened patent holders (“innovators”) with the loss of a “key market advantage.” So what is it? Where’s the evidence that universities “face a lack of access” to the newest research tools? It’s not a matter of access–it’s a matter of payment. If Bayh-Dole prevented exclusive licensing, then we are back to the federal approach that Bayh-Dole’s advocates disparaged, the approach that’s the subject of the fantasy history elsewhere in this document. And if it’s just the “exclusive licensing that discourages innovation” that is in need of further federal regulation, exactly how is it that we go about figuring out how to write such a regulation?

Anticommons: A huge issue with innovation is the cost of transaction fees. The law needs changing so that universities can deal with transactions in a timely manner and at a reasonable cost.

The anti-commons hypothesis is that many patents on basic findings create difficulties with downstream development because developers cannot obtain all the permissions they need. Look at NSF-funded research on carbon nanotubes. By my count, 33 universities hold 108 patents citing NSF funding with somewhere around 3,000 distinct claims. How is anyone supposed to get the rights they need to legally develop carbon nanotubes–at least in the United States? No changes in Bayh-Dole could possibly address the upstream invention ownership fragmentation issue. Those changes would dismantle the law. We would be back to the federal government taking ownership of such inventions, to make them available–as a package of cumulative technology–to all. The idea that Bayh-Dole might be changed to address anticommons issues amounts to an appeal to repeal Bayh-Dole. There, I’m in full agreement!

Transparency: The current version of the law doesn’t force transparency during the patent process. It also doesn’t require details of licensing of publically funded research. Many organizations abuse this glaring oversight.

Yup. Bayh-Dole purports to exclude invention utilization reports from FOIA disclosure. So there’s no public data available regarding Bayh-Dole’s primary objective–to promote the utilization of inventions arising in federally supported research or development. But here, too, “transparency” is a choice. University administrators could publish their invention utilization data. University administrators could make their patent applications public as soon as they had filed them. Given it is entirely legal to keep a patent application secret, and to keep subject invention utilization secret, UpCounsel here moralizes about “abuse” of the law. But it’s not abuse of the law and it is not an oversight–it is intentional public policy in the form of a federal law. Again, if Bayh-Dole were “improved” with “transparency,” it would no longer be anything like the law we have now. The same folks how argue (without substance) that patent rights are essential to private investment or innovation are also the ones that argue that if the terms of exclusive patent licenses (or invention assignments) were revealed, then companies would decline to accept the monopolies on offer. Transparency would not improve Bayh-Dole; it would destroy Bayh-Dole. I’m all in, then, for transparency.

What’s Are Examples of Court Cases Involving the Bayh-Dole Act?

In 2011, the United States Supreme Court made a ruling that involved the Bayh-Dole Act. The case was Stanford University v. Roche Molecular Systems. The Supreme Court voted 7-2 in favor of the inventor.

No, the Court ruled in favor of Roche, that Bayh-Dole did not vest rights.

The debate centered around a researcher at Stanford who held a second job. He also worked at Cetus, which later became a part of Roche Molecular. The inventor made advancements in the field of blood tests for the HIV virus.

The researcher was a post doc sent by his Stanford supervisor to work for nine months at Cetus, a company that developed PCR. The supervisor served on Cetus’s technical advisory board. Cetus required the post doc to sign a patent agreement that assigned any inventions arising from the post doc’s work at Cetus to Cetus. Stanford was aware of this agreement and the agreement was entirely consistent with Stanford’s policies and its own patent agreement with the post doc.

Stanford workers questioned the inventor’s licensing of the patents to other parties. The university believed that they had rights to the patent since the inventor had done some of the work in their labs.

The post doc returns to Stanford, joins a federally funded research project and soon after reports an invention. Stanford files patent applications, and later requires the inventors to assign their invention to Stanford. Stanford then seeks to have Roche (which acquired Cetus’s PCR assets) take a license. When Roche refuses, Stanford sues for infringement. The case moves through the courts. The CAFC rules that when the post doc invented, his patent agreement with Cetus (now Roche) gives Roche equitable title to his undivided interest in the invention as clearly one within the scope of the Cetus agreement. Thus, the post doc has no rights remaining to assign to Stanford. Therefore Stanford does not have standing to sue Roche, because it lacks the rights from all co-inventors. Stanford appeals with the argument that Bayh-Dole voided the post doc’s assignment to Cetus and vested title to the federally supported invention with Stanford.

The key language that settled the matter was in the contract of the inventor. The person agreed to assign his right title and interest to Stanford. It was a condition of employment. At Cetus, the innovator gave away the rights to his “ideas, inventions and improvements.”

Stanford’s patent agreement was conditional. The post doc had an obligation to assign to Stanford only if Stanford was legally required to obtain ownership. At the time the post doc signed the patent agreement with Stanford, Stanford had absolutely no legal obligation to obtain ownership. Federal funding, the Supreme Court ruled, did not vest ownership with Stanford. So Stanford’s patent agreement would not have operated. The CAFC appeals court ruled that the post doc’s agreement with Cetus took precedence over the post doc’s agreement with Stanford based on differences in wording rather than that the Stanford agreement was conditional and Bayh-Dole did not trigger that condition.

The Supreme Court ruled against the University. The majority opinion stated that the rights of invention haven’t changed since the start of America. An inventor owns the innovations before anyone else can make a claim. The Bayh-Dole Act didn’t change that basic fact of patent law.

Well, the Supreme Court ruled that Congress did not intend with Bayh-Dole to change the rights an inventor had in his or her invention. Bayh-Dole applies only to “subject inventions”–inventions made with federal support and which have been acquired by a contractor. Bayh-Dole deals with the priority of rights in an invention only after a contractor has acquired those rights.

The other important court case was Madey v. Duke University. John Madey was a famous researcher. He made patentable discoveries while working at Stanford University. The college didn’t apply for the patents. Madey did it on his own, earning two.

The inventor later left for Duke. During his tenure there, he ran the research labs. Then, he had a conflict that caused the university to fire him. They continued to use his patents after he left. Duke students didn’t use them to profit.

Madey sued anyway since the university didn’t have a license to use his patents. He won the case in the Federal Circuit Court of Appeals. This ruling ended the 170-year practice of letting scientists use patents for research purposes.

And this case has nothing to do with Bayh-Dole, other than one of Madey’s patents recites federal funding. The case might have had to do with Bayh-Dole, had Duke included in its defense a limitation on Madey to use his patent to promote “the utilization” of his invention and to promote “free competition and enterprise without unduly encumbering future research and discovery.” Instead, Duke claimed a “research exception” and the CAFC found that Duke’s research activities advanced Duke’s “legitimate business objectives” and therefore the district court must narrow the scope of the research exception. The ruling did not end the research exception–it narrowed it. Where a university undertakes systematic research and especially where a university insists on making the attempt to commercialize (and profit from) patents on research inventions, it is difficult to see how even a broad “research exception” would apply. University administrators cite Bayh-Dole to rationalize their patent licensing business, but in doing so, they also ensure that faculty research is part of the university’s business and cannot make use of a narrow research exception. For public universities, however, the research exception defense is not used–public universities rely on sovereign immunity instead.

How Do These Court Rulings Impact Universities?

Infringement lawsuits similar to Madey’s are a huge issue for universities today. A research lab must have proof of a license to use it. Otherwise, the university is at risk of a lawsuit.

Actually, no. Public universities rely on sovereign immunity, not a research exception.

The problem at research labs is that the people working there rarely know who has rights to the license. The University of Iowa did a study to see who had invented intellectual property. They had to interview 71 people and groups at a cost of $24,000 before they could apply for a patent. It’s a costly but needed step to avoid lawsuits.

Determining the true inventors is unrelated to whether a given laboratory has a license to practice a given invention.

Many universities are using broadly written research exemptions to avoid this issue. They expect that all researchers cede licenses to the school for any innovations made at their labs.

Where do the universities get “broadly written research exemptions.” Nonsense. Most universities claim ownership of inventions and therefore do not require inventors to grant a license to the university–unless the university agrees to release its claim on title. And therein lies a wonderful abuse of institutional authority. If the university has no right to claim ownership of an invention, then it lacks the authority to demand a license as consideration to give up that claim. But university administrators operate with impunity on such matters, so why do I bother?

Unfortunately, broad adoption of this idea has yet to happen. Until it does, Madey vs. Duke prevents lab researchers from using unlicensed patents. It’s become a stumbling block for technology transfer.


An amendment to the Bayh-Dole Act could solve the problem. It would restore the law to its original intent. That idea included university use of patents solely for research purposes.

Nothing in Bayh-Dole indicates that the intent of the law was that universities would use either inventions or patents “solely for research purposes.”

Does the Bayh-Dole Act Work as Intended?

It depends on who gives an account of intentions. Bayh-Dole has been a failure based on its own statement of policy and objectives. As for Senator Bayh’s claims that Bayh-Dole would reverse American’s loss of technology leadership, there’s no evidence that Bayh-Dole has even “helped.” As for the idea that Bayh-Dole opens a patent monopoly pipeline for federally supported inventions to move to biomedical companies, Bayh-Dole has done its job wonderfully.

Due to its age, the act has a few issues. On the whole, it’s worked better than anyone could have possibly predicted, though.

Bayh-Dole’s issues have nothing to do with “its age.” Bayh-Dole is a dismal failure, but for the patent monopoly pipeline so pharmaceutical companies can better exploit matters of public health.

American universities have an impressive track record in the area of innovation. Many inventions have started in university labs. The Bayh-Dole Act takes those ideas and coordinates a transfer into the business world. The American economy is stronger due to this piece of legislation.

Inventions starting in university labs is not directly related to Bayh-Dole-inspired dealings in patent rights. Inventions that make it from lab to market do so, most often, despite Bayh-Dole and its regulatory paperwork. There’s no support that university patenting even shows up as a rounding error with regard to the American economy or to startup companies.

The University of California is a great example of excellent research. They have 10 satellite universities in the state. With 200,000 students, they have many innovators whose research leads to patents. In fact, this university earns more patents than any other college.

Random. It’s a university system. It has the money to file many patent applications.

Biotechnology is the focus of many University of California research labs. Students have earned U.S. Patent No. 8,518,871 and U.S. Patent No. 8,512,943 for their work in peptides and nanomaterials.


Students also made huge advances in autism in U.S. Patent Application No. 20130210650.  They even learned more about the functions of the aging human brain in U.S. Patent Application No. 20130216985.

More random.

The Bayh-Dole Act has led to amazing innovations in mankind’s understanding of the human body and other fields. All of the discoveries listed here wouldn’t have happened if not for the law. Instead, the patents would have remained in possession of the federal government. The real world applications of the ideas are because of the Bayh-Dole Act.

Cited instances don’t involve Bayh-Dole–they involve federally supported research. To show a Bayh-Dole effect, one would have to show that these inventions have been licensed, and the licenses were necessary to attract private risk capital (and that otherwise no use or development of the inventions would have been possible) and that the licenses have resulted in use of the inventions with benefits available to the public on reasonable terms. Then we would have something about Bayh-Dole to discuss. As it is, nothing. Baseline: Bayh-Dole is a dismal failure.

Do Other Countries Have Similar Laws to the Bayh-Dole Act?

Yes, other governments have written legislation to encourage university-based innovation, too. Here’s a list of the largest countries (by population) that have similar laws:

Let’s skip the list. “Similar” is a weasel term. The laws adopted by these other countries vary in all sorts of ways–especially in their starting conditions. The thing that’s similar actually arises in faux Bayh-Dole–that non-government institutions should own the inventions made by inventors working with government research support. Bayh-Dole does not require such an outcome–even with the new NIST final rule adding an assignment requirement to the written agreement initial contractors must have with their technical employees. But the faux version of Bayh-Dole exported by university patent administrators argues institutional ownership. And that’s what has happened. It’s an awful result for most countries, but it will take them three decades or more to figure it out.

Do you need help with an innovation? The nuances of the Bayh-Dole Act are difficult for a layperson to understand. Your best bet is to post your legal need on the UpCounsel marketplace. Many of these attorneys have years of experience with helping innovators bring their ideas into the business world. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.

Is UpCounsel the first place to go for accurate information or legal guidance with respect to Bayh-Dole? To resurface the now very old Pat Paulson quip–“We’ve upped our counsel, now up yours!”

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