Only Bayh-Dole and University Research Enterprise, 4

Consider, then, this (f)(2) written agreement requirement that’s outside Bayh-Dole but made a condition of federal funding agreements anyway. The (f)(2) requirement is most certainly not a private patent agreement between a university as employer and its faculty inventors. It is not the IPA’s required promise to assign inventions on which a nonprofit has decided to file patent applications. It is not an agreement already in place or asserted to be in place by a university patent policy. Unlike the IPA master agreement, which required one agreement with potential inventors to cover all subsequent NIH-funded research, the Bayh-Dole (f)(2) is required each time a funding agreement is put in place. Why would that be?

Ah, that’s the question. The (f)(2) agreement does two things. First, it extends the reach of the government’s interest through to the inventors themselves. If the university declines to “retain title” to inventions it has previously acquired (and so these inventions are subject inventions), then the federal agency may request title. But if the university has obtained only “equitable title,” then the federal agency must rely on the inventor’s (f)(2) agreement promise to establish the government’s rights in subject inventions–and therefore request assignment from the inventor. Of course, if the university does not have equitable title in such an invention, but the invention is otherwise within scope of the funding agreement (though not necessarily Bayh-Dole’s scope, which is in certain respects formally more narrow), then Bayh-Dole doesn’t apply at all, and the invention falls back under the regulations that Bayh-Dole otherwise preempts.

You can see, then, that Bayh-Dole is anything but uniform. It is a carve-out. There are then two regimes always in play. The flexible and public-purposed regime, and the “uniform” regime under Bayh-Dole that applies only when a contractor acquires an invention and that invention is within scope of Bayh-Dole. Then Bayh-Dole allows the contractor to preempt the public purposes of any federal agency that has not been able (or willing) to justify the extraordinary circumstance of having a public purpose other than making inventions for patent monopoly exploitation by contractors.

Now, the (f)(2) written agreement requirement has a second effect, also directed at expanding the scope of Bayh-Dole after the fact. The convoluted apparatus that passes the responsibility for the (f)(2) written agreement to the university means that the university must necessarily accept the (f)(2) agreement in place of any other requirement that the university might impose on its inventors. The only thing in play with regard to an obligation to assign is the equity of the circumstances outside of any federal funding.

For faculty, that means freedom of research and publication, which in turn means that of all possible inventors that might be affected by Bayh-Dole, university faculty are certainly the least affected of all. Only if faculty have agreed to give up their freedom of research and accept the right of control of university administrators over their work might a university been considered to have a right of equitable ownership.

For company inventors, by contrast, the equitable ownership circumstance will often arise–companies routinely assign employees to invent, to experiment and especially so when companies have been awarded federal contracts to conduct research, to experiment. Companies have the right to control research; universities, with regard to their faculty, generally do not, have expressly waived any right to such control, have made it a virtue, central to the university, that they do not have such control.

When the university then complies with the standard patent rights clause in a given funding agreement in requiring the (f)(2) written agreement, the university in effect takes an action within the funding agreement–the action amounts to a subcontract with potential inventors–and thus by the definitions in Bayh-Dole, those potential inventors become parties to the funding agreement, just as do any other subcontractors, substituted parties, or assignees. The inventors become contractors. When they invent, their inventions are then “inventions of the contractor”–it’s just that now “contractor” does not refer to the university, but rather to the inventor-as-contractor, just as a subcontractor has standing as a subcontractor-as-contractor.

If a university complies with (f)(2), it makes its potential inventors into contractors, and their inventions within scope of Bayh-Dole become subject inventions. That mops up a whole lot more inventions that otherwise, if unassigned, would not come within the scope of Bayh-Dole. You see where the “uniform” argument is headed? To make their claim *stick* that Bayh-Dole is “uniform,” the operators felt pressure to force all inventions within Bayh-Dole’s carve-out within the otherwise flexible and public purposed federal patent policy.

But now look at it. Bayh-Dole has an apparatus for inventor ownership of subject inventions. It’s at 35 USC 202(d). The implementing regulations at 37 CFR 401.9 go even further–having to deal with not only the right of inventors to own their inventions (and not to be forced to use the patent system) but also how inventors are to be treated. 37 CFR 401.9 requires federal agencies to treat inventors as if small business contractors with regard to their subject inventions. That is, (f)(2) makes inventors into small business subcontractors, and if inventors don’t assign, then 37 CFR 401.9 sets out a subset of the standard patent rights clause that applies. Most noticeably, that subset does not include any obligation for an inventor to file a patent application.

Under Bayh-Dole, inventors are not forced to assign their inventions and are not forced to use the patent system. That’s exactly what one would expect, if one didn’t have Bayh-Dole derangement syndrome. That’s exactly what the Supreme Court found, more generally, in its Stanford v Roche decision. Get assignments the conventional way, all you university attorneys that claim to know so much but clearly lack the ability to read the law. The Supreme Court, of course, did not snark it out quite like this, but in their supreme way, said about as much.

Thus, while Bayh-Dole as a carve-out, a preemption of other regulations, is in a sense “uniform,” Bayh-Dole does not impose a policy that provides uniform ownership of all inventions within scope for the benefit of university administrators. The effect of the (f)(2) written agreement is to force the expansion of “contractor” to include faculty and other inventors, to be treated as small business subcontractors-as-contractors.

The drafters of the implementing regulations (including folks who also worked on Bayh-Dole the statute) were able to expand the scope of the law, the scope of the preemption, and thus make Bayh-Dole appear all the more “uniform.” But in doing so, they also made “contractor” necessarily become a collective noun–“contractors”–and stipulated that each contractor, each party to the funding agreement, each party to the patent rights clause portion of a funding agreement has its own standing with regard to “uniform” rights that cannot be taken away by any other contractor. If one university gets a government grant and parcels out the work to five other universities, then the prime contractor has to deal only with the work that it comes to own and cannot make any other contractor assign that contractor’s inventions to it. Thus, a university cannot, under Bayh-Dole, given (f)(2), make any inventor assign to the university what the university doesn’t already own–no matter what NIST adds by way of an assignment requirement to (f)(2).

Here’s the basic statutory action of Bayh-Dole, once again. Read it with an understanding of “contractor”:

Each nonprofit organization or small business firm

[including inventors made parties to a funding agreement]

may, within a reasonable time after disclosure as required by paragraph (c)(1) of this section

[inventors must disclose their inventions to their employer even if the employer has no right to own that invention]

elect to retain title to any subject invention

[inventors have this right under the law, against all other claims, the moment they are made parties to a funding agreement] . . .

The rights of the nonprofit organization or small business firm

[including inventors who are contractors]

shall be subject to the provisions of paragraph (c) of this section and the other provisions of this chapter.

Paragraph (c) lays out the provisions for the standard patent rights clause. 37 CFR 401.9 selects a subset of those provisions specific to inventor-contractors. The standard patent rights clause itself, at 37 CFR 401.14, now consists of three distinct clauses–one for DOE nuclear programs, one for nonprofits, and one for small businesses. If NIST wanted to continue to write spaghetti code for regulations, they would combine 37 CFR 401.9 into the standard patent rights clause, too, just to make a thorough mess of it.

Why put four separate clauses, each appropriate to a different contracting situation, into a single standard patent rights clause? Well, one reason is to prop up the claim that Bayh-Dole is “uniform.” Well Bayh-Dole isn’t uniform, and uniformity is not a virtue in the context of federal research contracting, especially research contracting that takes the form of grants-in-aid for faculty-proposed research in the public interest. Take away a government procurement justification, and there’s nothing left to justify federal funding for faculty research other than the public purpose of the federal agency in awarding the funds. Bayh-Dole’s carve out claims to preempt that public purpose with whatever purpose an institution imposes on inventions that the institution acquires. With Bayh-Dole, federal purposes in awarding grants to faculty are preempted by whatever private purpose university administrators care to assert. They can make up anything they want to, call it a public purpose, and the effect of Bayh-Dole is to say “that public purpose is better than whatever purpose the federal government used to justify the funding in the first place.”

This then is the “uniform” element in Bayh-Dole–to uniformly override federal public purposes with patent broker purposes–and the patent brokers are not accountable, their work is kept a government secret. As the Supreme Court worried, there are no protections for “third parties” in Bayh-Dole. No right for third party appeals. No right, even, for inventors to appeal. No right for the public to initiate a march-in procedure. Or to require a federal agency to enforce any of the substantive portions of the public protections in Bayh-Dole that are there, apparently, for appearances only, or in political terms, “to reassure the public” that patent monopoly exploitation by universities is a really good thing.

We are working a complicated scheme to circumvent federal policy and suppress a public discussion of the merits of doing so. This stuff isn’t easy, any more than a fraud scheme is designed to be obvious. If it were obvious, it would not be so successful as a fraud scheme. Bayh-Dole may not quite be fraud, but it works on the same principles. If you demand a Bayh-Dole account be simple, so you can understand it without much effort or knowledge, then you are crying out for self-delusion and there are a number of people happy to service your need. Here, we are trying to characterize the canker and come to understand its policy physiology–the illogic by which it operates and what might be done about its dismal outcomes. If all you wanted was that Bayh-Dole sucks and we should shoo the rascals out, you need not have read this far.



but now flip it–bd permits institutional patent monopoly dealings. those dealings are anything but uniform–license terms vary–governing law, royalty structures, milestones, royalty stacking, approvals, audits, dispute resolution.

Even if the terms in each patent deal were exactly the same from university to university, the jurisdictions change, the pattern of dealing changes, any complex technology is fragmented into multiple claimants.

From a company perspective, the federal approach was uniform–free access to everything developed with government funds, regardless of the nonprofits involved, but for special cases (and but for NIH and NSF IPA universities). Patent monopolies were the exception for collaborative research and development.

Now look at federal programs that spread research around in a given area–multiple investigators at multiple universities; or multi-institutional grants–the big center grants; or multi-disciplinary grants, with multiple investigators drawn from divergent fields; or university-industry consortia, with investigators working with industry scientists and engineers. For these activities, Bayh-Dole makes no sense at all. Absolutely absurd nonsense.

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