We are working through the details of Bayh-Dole’s requirement that all subject inventions must be disclosed. What are subject inventions? What is the scope of a funding agreement? Who must disclose? What is the nature of the disclosure? Good questions, all. If Bayh-Dole were a clear, smart law, the answers would be clear and smart. But alas, Bayh-Dole is a mess and the people who have exploited the mess haven’t bothered with logic or public purpose and have turned Bayh-Dole into a do WTF you want law. If you believe that bureaucrats doing WTF they want is grand public policy, then what goes on here is not likely to help your peace of mind. I’m not at all opposed to bureaucrats doing WTF they want–if that’s the public policy we decide on, I’m not going to go all resistance on it. What’s wrong is bureaucrats deciding on their own to do WTF when law and regulation don’t authorize the bureaucrats to do so. Rule of law or rule of WTF bureaucrats–probably a lousy dichotomy for federally supported inventions, but there it is.
We see what happens with the WTF bureaucrat part–dismal practice, most everything locked behind patent paywalls, patent speculators attracted, lack of public domain, fragmentation of cumulative technology, exclusion from participation in standards, lack of interoperability, no competitive development of variations and functional equivalents, a twenty-year lock out on the results of federally funded research with incentives not to use, to design around, to undermine, to ignore, to take work offshore where the sun still shines. And for a handful of cases, mostly in pharma, a lucrative deal in which a university shares in the upside of a patent monopoly on a class of compounds that would treat a disease. Now let’s look at the rule of law part.
Disclosure of Subject Inventions
Let’s consider, then, disclosure of subject inventions in Bayh-Dole. Disclosure is the fundamental requirement in Bayh-Dole pertaining to subject inventions–inventions a contractor has acquired. Here’s 35 USC 202(a):
Each nonprofit organization or small business firm may, within a reasonable time after disclosure as required by paragraph (c)(1) of this section, elect to retain title to any subject invention
This is the heart of Bayh-Dole’s carve out. The federal framework of laws gives federal agencies the right to require contractors and their employee inventors to convey title to the government, except for contractors with established commercial positions in non-governmental markets or otherwise when the agency has determined that it is in the public interest that a contractor be allowed to deal in patent monopolies. For the rest–where statute, regulation, and federal agency policy might require federal ownership as a default in the public interest, Bayh-Dole instead permits a contractor who gains title of a patentable invention made in performance of work under a funding agreement to preempt the framework and exploit patent monopolies, subject only to the apparatus of Bayh-Dole, which turns out not to operate, despite hand-waving gestures to the public interest.
If a contractor gains ownership of such an invention, the contractor can keep that ownership and preempt by patent monopoly any disposition of the invention in the public interest expected by law, regulation, agency policy, faculty investigator, or inventor.
In this regime, disclosure is everything.
Disclosure establishes the scope of the invention that the contractor claims. In turn, each disclosure establishes the scope of the preemption to the federal invention management framework that otherwise would apply, in the absence of Bayh-Dole. Each disclosure then also establishes the scope of the federal government’s license to practice and have practiced the subject invention (not merely under a given patent–any one of which might claim only part of the invention). Finally, disclosure constitutes a paperwork requirement that, if not complied with, permits a federal agency to request title to the non-disclosed invention if it ever finds out and then decides there is some public purpose in taking title. If this last bit makes you scratch your head in wonder, well, that’s just how Bayh-Dole does things–sucky to the last drop.
Without disclosure, Bayh-Dole provides that the federal government can request ownership of the invention, and the contractor is constrained to convey title. The provision is mostly nonsense–how does the federal government come to learn of an invention and ascertain that it has not received a proper disclosure of it? It’s clear that a contractor can blow patent rights at will with no consequence within Bayh-Dole. Or the contractor may choose not to acquire ownership. Not a subject invention, then. Government has no right under Bayh-Dole to request title. The contractor could obtain ownership and not disclose, and then blow a patent bar date. Now no longer a subject invention because not patentable and there’s nothing for the government to request title for, then, anyway. There are a number of variations. I’ll leave you to muse on them if you wish.
Failing the disclosure requirement matters only when a subject invention is licensed exclusively with its patent rights to a company. If a subject invention is licensed non-exclusively, is the government really going to request title and disrupt the existing non-exclusive licensees? Hardly. If a subject invention is not licensed at all, who cares whether the contractor or the federal government sits on the paywall? Funny thing, Bayh-Dole provides no recourse for nonprofit inventors if a nonprofit acquires an invention and then sits on it and does nothing. Inventor can’t even get the government to initiate a march-in for nonuse. And if the federal government does acquire such an invention, then it has no obligation to share royalties with the inventors. Other than that screwing of inventors, again, what’s the federal government’s rush to own something that is apparently unlicenseable?
Chase the practice logic. If a contractor–a nonprofit, likely–licenses a subject invention exclusively without disclosure to the government, and the license results in happy practical application or commercial product, why would the federal government request title to the invention? Why not just request disclosure to meet the paperwork requirement and confirm the government’s license, since the objective of the law–use the patent system to promote utilization with public benefit on reasonable terms–has already been met? What happens to the license then? Does the federal government cancel the license and try to find a different licensee? Or release the invention for all to use? On what planet smoking what hallucinogenic plant would the federal government do anything like that? This “you could lose title” stuff is like swiss cheese that’s mostly holes.
There’s virtually no scenario in which the federal government could discover that it has not received a conforming disclosure and require assignment of an invention. Given that there may be only about twenty lucrative patent licenses involving subject inventions out of some 50,000 patents obtained by mostly university nonprofits on subject inventions, again, what is the big worry? The government’s right to request title is another of Bayh-Dole’s handwaving but useless apparatus to make it appear that the government is actively keeping watch over the use of patent monopolies in the public interest.
Burden to Determine an Invention is Subject
For all that, a contractor confronted by a federal agency about not disclosing a subject invention could simply respond (“with all due respect”) that the invention is not a subject invention. That is, either it was not considered patentable, or the contractor does not own it, or that it was not made in performance of work under a funding agreement. It then becomes the federal government’s problem to “show” that the invention is indeed a subject invention.
(d) Appeals procedures established under paragraph (c) of this section shall include administrative due process procedures and standards for fact-finding at least comparable to those set forth in § 401.6 (e) through (g) whenever there is a dispute as to the factual basis for an agency request for a conveyance of title under paragraph (d) of the standard clause, including any dispute as to whether or not an invention is a subject invention.
A federal agency must follow “administrative due process procedures” “comparable” to those of the march-in procedures. In effect, a federal agency must “march-in” if it is to claim that any given invention is a subject invention. Here’s the march-in procedure, abbreviated:
- notify contractor in writing
- request oral or written comments and information
- wait 30 days, if no response proceed; if response, must act within 60 days of response
- send written notice of considering march-in with reasons, notice of facts, and contractor’s rights
- march-in decision must be made by agency head or designee
- contractor may file opposition within 30 days with information that raises genuine dispute over the material facts recited by the agency
- agency head or designee must refer case to “another official” for “fact-finding”
- fact finding must follow established procedures, be informal as practicable, and be fair
- fact finding must allow contractor to appear with counsel and confront agency witnesses
- fact finding must have written transcript
- agency official transmits written findings of fact to agency head or designee
- head or designee must proceed with recommendation of findings
- copy of findings of fact sent to contractor by registered or certified mail
- contractor has 30 days to submit comments or request oral hearing before agency head or designee
- agency head or designee must make determination based on facts found, contractor arguments, agency arguments, and any other information in the administrative record, plus consistency with 35 USC 200
- agency head or designee must send written notice of determination within 90 days of the later of end of fact finding or oral arguments
- contractor may appeal any agency determination via 35 USC 203(2) [which does not exist!–perhaps 35 USC 203(b)?] by filing a claim with the Court of Federal Claims
You don’t have to read the procedure carefully to see that any dispute over whether a given invention is a subject invention can easily run a year just to get to an appeal to the Court of Federal Claims. And from there, more years. Even if a contractor doesn’t dispute a final agency determination regarding a given invention, it’s clear that Bayh-Dole places the burden on the federal agency to gather the “facts” and show that an invention is indeed a subject invention. Contractors could simply refuse to designate any invention as a subject invention and make the federal agency come find–discovery, essentially–the information to show that an invention was made in the performance of a work under a funding agreement.
And at the end of that process, what happens? The federal agency determines that a given invention is indeed a subject invention and . . . then . . . the contractor “discloses” it, elects to retain title, and we are pretty much back to where we started. The contractor could be made to give up title only if the federal agency could show that the contractor knew the invention to be a subject invention and still failed to disclose it. If the contractor claims the invention is outside scope and the government determines otherwise, then the contractor discloses the invention as a subject invention. That’s all. Nothing operates by which a contractor loses title to inventions it wants to own unless the contractor is stupid beyond all understanding. Perhaps the public should be protected from such stupidity–but Bayh-Dole does not bother protecting the public from cleverness.
For work by faculty at universities, it might be difficult in any event to determine that a given invention is indeed a subject invention. While there is case history that the government’s claim to what has been invented with federal support is broad, that history is based on the scope of federal research contracting in general, not on Bayh-Dole’s statement of scope. That is, an invention may be within the scope of a federal claim under any number of statutes and regulations that dictate ownership, but Bayh-Dole preempts this framework for subject inventions. The government to determine an invention is a subject invention has to show that a given patentable invention owned by a contractor was “conceived or first actually reduced to practice” in the “planned and committed” activities under a funding agreement. Does a federal grant for faculty-initiated specify work that includes an invention owned by the university will be actually reduced to practice? Almost always, no, so we can consider that prong useless.
What about “conceived”–can the government show that a given conception is within scope of the “planned and committed” activities? Given the standard march-in procedure that a federal agency must follow to “find facts,” it might be impossible to show that a given conception was “planned and committed”–at least for inventions. A grant proposal would have to propose solving a problem for which the solution was not obvious–and for that, how could anyone write a statement of work that planned and committed the investigators in some way? That’s right, to plan and commit to an activity to solve a problem works against the idea that any invention that results wasn’t already anticipated before the proposal was drafted! Conception then would be before the funding. Or that whatever does get produced is not inventive, because the nature of the invention is obvious given the planned and committed activity stated in the grant proposal. One would have to specify an objective–as one might in procurement contracts.
Subvention support is different. The faculty investigator proposes the work, not the federal government. It may well be that very few inventions made in the general environment of federal grants to faculty are subject inventions, even if assigned to the university, because they are not made in “planned and committed” activity. They arise as something else–realizations that the science is wrong or inadequate, thoughts about applications, alternative ways to do things, using the same pattern of analysis for a different field, a new instrument that could help with observation or data collection, new software for analysis. None of that necessarily planned and committed activity. Bayh-Dole requires planned parenthood for inventions. Unplanned conception falls outside Bayh-Dole, so long as it does not diminish or distract from the planned and committed activities.
Thus, there’s this open question of why university administrators are so fixated on finding everything possible to be a subject invention–even inventions clearly outside any possible scope of claim by Bayh-Dole. One answer is that they believe that Bayh-Dole allows them to bypass or override their own university policies that might allow inventors rights in inventions. Stanford v Roche made clear that Bayh-Dole does no such thing–but university administrators are terriers and don’t learn from a single repetition. Bayh-Dole applies only to subject inventions, and nothing in Bayh-Dole requires universities to take ownership of inventions to turn those inventions into subject inventions. That is, nothing in Bayh-Dole requires universities to demand ownership in order to “make Bayh-Dole work” or to “fix a technical flaw in Bayh-Dole.” That would be silly, wouldn’t it now, Henry Wixon?
Under Bayh-Dole, disclosure depends on a finding by a federal agency that a subject invention has been made. The only incentive for the contractor to make this determination is that if an invention owned by a contractor is called a subject invention, then the contractor may generally choose to keep that ownership. Otherwise, the invention, if it was made within scope of a federal funding agreement, is subject to the framework of federal laws that Bayh-Dole preempts and a federal agency may request title or not, depending on laws, regulations, and its own determination of the public interest relative to private exploitation of patent monopolies. The disclosure requirement serves to enable the private preemption of public purpose by a nonprofit institution serving as the broker of a patent monopoly to a commercial investor. That’s it. The patent pipeline.
I have never heard a university administrator worry about the “uncertainty” that a federal agency might challenge a university’s claim that a disclosed invention was not, in fact, a subject invention. Yet Bayh-Dole’s procedures provide for that possibility. Think about all the fraud that may have gone on as university administrators told faculty inventors that their inventions were subject inventions and federal law required them to assign those inventions to the university. We are talking 50,000+ utility patents alone–maybe more than 100,000 inventions–acquired by universities in the Bayh-Dole era, citing federal funding. What if many of those inventions are not subject inventions?
When a contractor is a university receiving federal subvention funds on behalf of a faculty-initiated research project, why would university administrators have any care one way or another? Why should it be so important to preempt a federal agency’s public purpose in awarding a grant, or a faculty investigator’s public purpose in seeking the grant? If a faculty investigator wants to place any inventive work in the public domain, why should university administrators second guess that judgment? Bayh-Dole does not require such second-guessing. Bayh-Dole merely provides that if a university does gain ownership of an invention (for which it has to do something actively to obtain that ownership), then the university can choose to keep that ownership, subject to all the apparatus of Bayh-Dole that doesn’t operate. Nothing in Bayh-Dole says that Bayh-Dole must apply to all inventions made in projects receiving federal support.
It’s just brain-dead cluessless bureaucratic fixation that creates the conditions under which Bayh-Dole must be made to apply to all inventions made in projects receiving federal support. It’s BDCBF that Bayh-Dole must apply. It’s BDCBF that faculty research must be co-opted by administrators. It’s BDCBF that publicly supported research must be co-opted by patent monopolies. It’s BDCBF that speculators should get the first or perhaps only opportunity to control the inventive results of such research. It’s BDCBF that anyone would think that innovation is driven by BDCBFs. Maybe it’s genetic and bozo administrators cannot help it. Whatever the cause–it’s not Bayh-Dole, but something that happens to people around Bayh-Dole. Maybe it’s a stink given off by Bayh-Dole that drives them to BDCBF.
The 1998 GAO report on university compliance with Bayh-Dole reported one major research university declared an invention to be a subject invention if anyone in the lab had a government grant. Nonsense. Why would administrators do such a thing? One answer: because they believed that Bayh-Dole gave the university ownership of every invention that was a subject invention. So rather than bother to make a determination based on documentary evidence that an invention that they had acquired was within scope of a federal funding agreement, they instead simply declared inventions to be “subject” inventions without any process at all. If an inventor indicated federal funding might be associated with the work, university administrators declared the invention to be “subject” and then could demand assignment “to comply with federal law.”
As it is, university administrators routine prepare invention disclosure forms and guidance that make it appear that any invention that might be associated in any way with a federal grant is a subject invention. University disclosure forms and guidance routinely misrepresent Bayh-Dole, conflate the presence of federal funding with a determination of subject invention, and make it appear that one has to report inventions as subject inventions “just to be safe.” Yet, under Bayh-Dole, a federal agency has to march-in to show that an invention is a subject invention. If the faculty investigators (and anyone else who invents) doesn’t care about patent monopolies and wants to see inventions they make in the public domain, available to all (including themselves), then why should university administrators object? Because they want to hold inventions hostage for a payment? BDCBF. And if a federal agency wants such an invention, is it to exclusively license it, since that’s what Bayh-Dole stipulates that federal agencies may do?
Here’s the tangled logic of Bayh-Dole. Under Bayh-Dole, inventors don’t have to assign their inventions to anyone or use the patent system themselves–unless (with NIST’s silly new change) they have acted so that someone else holds equitable title in their inventions. Furthermore, under Bayh-dole’s standard patent rights clause for inventors, inventors don’t have to file patent applications. Bayh-Dole’s provisions kick in only if inventors choose to file patent applications. Furthermore, inventors may assign their inventions without requiring Bayh-Dole’s patent rights clauses (any version of them) to follow the assignment. Thus, if Bayh-Dole’s standard patent rights clause requires contractors to make their employees make a written agreement to protect the government’s interest in subject inventions and the act of requiring this written agreement makes those employees parties to the funding agreement and their inventions therefore subject inventions, then Bayh-Dole allows inventors not to assign to anyone and permits them not to use the patent system. And otherwise, inventions simply drop out of Bayh-Dole if they are not assigned to a party to the funding agreement, and it’s up to each federal agency to determine what federal statutes and regulations and policies apply and act on them.
If university inventors don’t want institutions fighting over patent monopolies on their inventions, they simply don’t disclose them. There is no penalty in Bayh-Dole for inventor non-disclosure other than that the government may request title. But if inventors have blown the patent rights, there’s no title for the government to request. And if university administrators have not required inventors to make a proper written agreement to protect the government’s interest in inventions, then the inventions cannot be subject inventions when the patent bar gets established. This is the legacy old-school (and good-school) federal approach to subvention research inventions, especially in areas of basic science (NSF) and public health (PHS, HHS, NIH)–inventions go to the public domain or if published through the patent system are licensed royalty-free, non-exclusively. Thus, in the old but good school of federal invention management, it doesn’t matter whether inventors disclose or not–unless they intend to seek patents and intend to exploit a monopoly position.
Furthermore, if inventors want to see their inventive work generally available and university administrators demand ownership, then what do the inventors do? Sure, assign under duress. But then they work around the assigned inventions, show people how to avoid the patent claims, make the assigned invention obsolete, stop doing research on the assigned invention, undermine the inventions any way they can–actively if they feel like it or through disinterest otherwise. The BDCBF’s argue that any of these behaviors is an ethics violation–that inventors have a financial duty to the university to assist BDCBF’s trying to exploit patent monopolies for money–which the BDCBF’s claim is “in the public interest” but for which they have no actual support–not reasoning, not evidence, not public acclamation of how good their deeds have been. Damn BDCBFs, dog turds on the green grass of our softball field.
You can see that the university administrators had it backwards, and still do–and most don’t realize it and most of those that do don’t care. Under Bayh-Dole, one has to acquire an invention (patentable, within scope) before it becomes a subject invention. (Or, if one complies with the (f)(2) requirement, then the invention is owned by the inventor, and if patentable and within scope, it is up to the inventor, not the university, to decide what to do with it. When an inventor is a faculty member, then (despite a withering array of administrative schemes), there’s really nothing a university has by which it could make an argument for equitable title to such an invention–indeed, universities would appear to be locked out from making any claim on faculty inventions, if Bayh-Dole were enforced. And it would be a good thing for innovation if university administrators were locked out from claiming ownership of such inventions.
At least it would be a good thing to have that policy debate. The institutional bureaucrat with BDCBF syndrome would lose the debate. Their approach is crap. Innovation generally springs from freedom, not from bureaucrats and not from bureaucratically controlled patent monopolies.