We are considering disclosure under Bayh-Dole. You may have thought that every invention made with anything like federal support must be disclosed. That you now know is not true. Under Bayh-Dole, inventors have no obligation to disclose anything, though they might under the statutes and regulations not preempted by Bayh-Dole. Under Bayh-Dole’s standard patent rights clause, universities are required to require inventors to promise to disclose, but only inventions that a university already owns. Fathom that.
But university administrators refuse to comply with the standard patent rights clause requirement. Fathom that, too.
I won’t go into the details, but the upshot is, Bayh-Dole does not require university inventors to use the patent system or to assign their inventions to anyone. Even NIST’s silly addition of an assignment requirement to the written agreement requirement that university administrators blow off applies only to subject inventions, not to all inventions made in work receiving federal support.
What Bayh-Dole requires to be disclosed is only those inventions that are determined to be subject inventions. Anything else might have to be reported to a federal agency–but that obligation falls outside of Bayh-Dole and into the framework of federal statutes and regulations that Bayh-Dole otherwise preempts.
And even if a contractor fails to disclose an invention that turns out by federal agency determination to be a subject invention–what happens? The contractor discloses the invention, elects to retain title, grants the government its license and life goes on. What then is the point of disclosure? A contractor could just agree not to file claims in the Court of Federal Claims for compensation for government use of subject inventions. No disclosure necessary. And since the Court of Federal Claims is where disputes regarding a determination of subject invention show up, the requirement is merely that things will get settled in the Court of Federal Claims, where disclosure will be necessary to determine whether a given invention was made in the performance of work under a federal funding agreement.
Disclosure is the Trigger
Disclosure is the key trigger for Bayh-Dole. A contractor can keep ownership of a patentable invention that the contractor has acquired and which was made in work receiving federal support, but only if the contractor discloses the invention to the federal government. But this sort of disclosure is really a meaningless, purposeless paperwork requirement with respect to innovation–or practical application–or utilization of an invention. The consequence for failing to disclose is nigh unto nothing with regard to Bayh-Dole’s statement of policy and objective. The practical application of federally supported inventions does not change one way or another as a result of bureaucratic paperwork such as disclosure. If a contractor owns but does not disclose an invention and creates public benefit, would the lack of disclosure matter–oh, the uncertainty that a federal agency acting in the public interest would demand to own a non-disclosed subject invention that was being used in the public interest. Got that?
Disclosure is wasteful administrative overhead. It is there for political show to get Bayh-Dole passed. It does not operate in any way to advance the use of inventions or to protect the public from anything. Bayh-Dole would function fine, if not better, without disclosure. Let’s see how this is the case.
The scenario that the law firms champion is that a university could assign (i.e., exclusively license all substantial rights) a non-disclosed subject invention to a company that invests millions in producing a commercially available product only to find out that the federal government can step in and claim ownership of the invention. Will the federal agency void the assignment/exclusive license? Why? If there’s a royalty-bearing license, why wouldn’t the federal agency just redirect the firehose to the U.S. Treasury? What difference would it make to the company? Does anyone really believe that a federal agency–especially the NIH, which has been the primary advocate for blah doltishness for fifty years–would then license the invention royalty-free and non-exclusively? Even if it did, how would that adversely affect the company making commercial product? How long would it take for anyone else to get through the regulatory process to come out with a generic version? Sure, there’s some prospect, but it’s a slow landslide from the top–it would have to happen early in the life of a patent on the disputed subject invention, since dealing with the dispute itself could take years, during which time no generic manufacturer would have the right to proceed.
The big “loser” in such a scare scenario is the university owner, not the company the university assigns a non-disclosed subject invention to. The university gives up future royalty income to the federal government. So what does the university do? It sells the future royalty steam to a middleman like Royalty Pharma. The middleman then is on the hook for the lost payments–but oddly, the middlemen don’t appear to be subject to the same requirements for the use of royalties that the nonprofits are. Don’t you wonder why, given that Bayh-Dole is clear that under the nonprofit patent rights clause any royalties or income earned, after deducting expenses incidental to the administration of subject inventions, must go to scientific research or education (see 35 USC 202(c)(7)(C)). It would appear that requirement applies to Royalty Pharma, too. Otherwise, a university could simply sell each future royalty stream for a tiny price to a not-quite-affiliated company, say, run by university boosters, and then have free use of the royalty income without any obligation to account for that use. Not that the federal government ever audits a nonprofit’s use of royalty or income earned anyway.
We might ask, what would the consequences be if a federal agency determined that an assigned and commercialized undisclosed invention was indeed a subject invention, but that the university had sold its future interest in any royalties? The federal agency would have no revenue to collect from the university’s side of the assignment/license. The royalty middleman might be exposed to a loss of revenue, and perhaps then would sue the university for failure to disclose–but then, if the university could show that it had no reason to determine that the invention in play was a subject invention, perhaps the middleman would lose and be out its payment to the university. But perhaps, too, the middleman took out insurance against such a thing and then it would be an insurer on the hook for the payment. And we can chase this rabbit a long ways, with eager attorneys seeing regular income for many years. Luckily, it only rarely happens that any university invention is licensed with such revenue potential that anyone would care. Emory and UCLA are two noteworthy instances. But we are talking 50,000+ utility patents that recite federal funding since 1981, and we are hand-wringing about a hypothetical that doesn’t even apply to two instances. The disclosure issue is like a mouse trap that has rusted until frozen in the set position. Ominous, but useless for anything other than getting people signed up for compliance seminars.
A scenario in which a federal agency might march-in for non-disclosure is one in which a contractor were brazen enough to file a claim with the Court of Federal Claims for compensation for the federal government’s use of a patented invention that turned out to be based on an undisclosed subject invention. Almost all of the shaky-kneed bureaucratic uncertainty with regard to the ownership of undisclosed subject inventions turns out to be just that–bureaucratic theatrics. If an undisclosed subject invention hasn’t been used or licensed and commercialized, then no one cares. If an undisclosed subject invention enters the public domain, no one cares. If an undisclosed subject invention has been licensed and commercialized and no one is sticking it to the government, no one cares. Even if the subject invention has been licensed and a company is working on commercialization, no one cares unless they take too long and someone complains. And if the company takes a long time because it turns out the invention is crap or has no economic future as a commercial product, again, what does it matter? Again, the only practical situation in which a contractor might piss off a federal agency is filing a claim with the Court of Federal Claims trying to get compensation for the federal government’s practice of an undisclosed subject invention. For everything else, a federal agency won’t know, won’t care, and won’t act. There’s no uncertainty but for BDCBF afflicted university administrators.
Of course, university administrators can choose to disclose everything “just in case” “as if” everything the university acquires is or might be a subject invention. Then the university gets to keep ownership, at least ownership based on disclosure of subject inventions. Such a practice is fact-free. It’s just a demand by university administrators to avoid bothering with determining whether a given invention is a subject invention. Just pretend it is.
There’s a bit of fraud in all of this. University administrators can pretend many inventions are subject inventions. They can then turn to the public and to the federal government and point to all those subject inventions as an indication of the productivity and potential of federally supported research. Everyone gets big heads about it all, and more public money goes flowing out to universities for research, where the administration skims off about 1/4 for administrators. Yes, they have both personal and institutional financial interests that benefit from misrepresenting the effects of federal funding, including subject invention activity. Bayh-Dole: do and say WTF you want to.
While there’s nothing that happens for almost all instances of failing to disclose a subject invention, the consequences for thumbing one’s institutional nose at the federal government might be significant. Thus, we should work through the statutory logic that Bayh-Dole puts forward as the proper way to manage this critical point in the life of an invention.
Disclosure as Specification
We must recognize that “disclosure” is a technical label for “revealing the information concerning a given invention for the specification of a patent application.” That is, the “disclosure” that is required by Bayh-Dole is the revelation of a “constructive reduction to practice”–providing the information that specifies the invention that has been made so that a patent application could be filed by a federal agency in the event of a default on patent filing by an institutional owner of a subject invention. “Disclosure” does not mean that a patent application, including claims, must be drafted–but rather that information necessary short of claims has been assembled. There may be some references in the literature to cite, and some issues to explain with regard to prior art. But the point of disclosure is to provide to someone else not the inventors themselves with the information on which an inventor or assignee would be prepared to use in order to seek a patent.
We might put things more like this: “if you are an institutional owner of a patentable invention made in a project receiving federal support, and you assemble the information necessary to file a patent application, then whomever you work with to file that patent application must share that information with the federal agency that funded the project.” Bayh-Dole does not require inventors to disclose anything. Bayh-Dole’s standard patent rights clause adds a non-statutory requirement that contractors require inventor-employees to make a written agreement to protect the federal government’s interest, and in that agreement, employee-inventors are to agree “to disclose promptly in writing” each subject invention. But a subject invention is one that the contractor already owns–not merely an invention that has been made in a project receiving federal support. Somehow, the institutional contractor has to already own an invention that has not been disclosed to the contractor’s patent administrators.
Equitable title? Present assignment of future inventions? Keep in mind that Bayh-Dole’s standard patent rights clause also limits the interest a contractor can have in inventions made by subcontractors–other parties to a funding agreement, as, say, inventor-employees delegated with the right to act on their own personal rights in, um, subject inventions.
It’s a swamp of logic, but it sort of works if you slog through it with hip waders. Inventors, when they make the written agreement to protect the government’s interest as required by their employer, are made parties to the funding agreement–become small business subcontractors, and because they own their inventions, those inventions become subject inventions, which then they have promised to disclose to their employer’s patent administrators. That is, they promise to assemble the information necessary to file a patent application, even if they don’t want to file such an application, and provide that information to their employer’s patent administrators, who then must forward that information to the federal agency.
And if these inventor-employee-contractors don’t want to file a patent application, they don’t have to. Nothing in federal patent law compels an inventor to use the patent system, and Bayh-Dole is part of federal patent law. And if you don’t like that logic, then deal with the Supreme Court, which ruled that nothing in Bayh-Dole gives anyone a special right to take ownership of inventions from inventors. About the same thing. And deal as well with Bayh-Dole’s implementing regulations, that instruct federal agencies to treat inventors who own their inventions as small business contractors, but with fewer requirements than small business contractors, including no obligation to file a patent application.
It’s awful drafting at this point. But then Bayh-Dole was never properly scrutinized. It is the fantasy child of government and university patent brokers wanting a law that authorizes institutions to take ownership of inventions for the purpose of maintaining a patent monopoly pipeline to the pharmaceutical industry and to speculators betting on the future value of patent monopolies.
Gaming the Time Requirement for Disclosure
Bayh-Dole’s (35 USC 202) paragraph(c)(1) restates the disclosure requirement and adds a time requirement in which the contractor must act. Originally, here’s how the disclosure requirement read:
In the original Bayh-Dole Act, each contractor was required to monitor research for inventions and timely disclose to the federal government those that the contractor choose to acquire. Thus, the original disclosure time period was “a reasonable time” from when the invention was “made.” In the 1984 revision of the law, the disclosure time requirement was shifted to start when university patent personnel had received a disclosure from inventors. Radical! Think about it–originally, a contractor was responsible for monitoring inventions and making a decision about acquisition and then disclosing those inventions the contractor intended to keep. There’s a time frame from making, to knowing about, to acquiring, to obtaining a disclosure, to disclosing–all in a reasonable time. But now, the time is indefinite between making an invention and disclosing it to “contractor personnel designated as responsible for the administration of patent matters.” It could be years. Doesn’t matter. Slack. Inventors might report an invention within their university, but until the report meets the requirements of Bayh-Dole’s disclosure provision–and the university has acquired the invention–and the university’s patent administrators have received the disclosure, the invention does not have to disclose the invention to the federal government. Very slack.