Here’s the slide from Dr. Thomas that starts our descent into darkness. Part of the slide contents is accurate. Part is slipped.
Let’s take up the slipped. First, Bayh-Dole does not say the federal government “retains patent rights” when the exceptions apply–it stipulates only that exemptions from the specified requirements apply and in those exemptions the government may require provisions for the disposition of ownership other than those Bayh-Dole’s default provisions.
Second, the “exceptional circumstances” are those in which different handling would “better promote the policy and objectives of this chapter.” Dr. Thomas drops the “policy” part in his account, as if “policy and objective” is really just “objectives” and it’s just so much fluff to have both terms in a statutory text. But 35 USC 202(a) here clearly references 35 USC 200–the statement of Bayh-Dole’s “Policy and objective”–yes, “objective” in the singular. Everything about Bayh-Dole is a slopfest. We are not dealing with just any fantasy objectives imagined by just anyone and not even what Senator Bayh may have written later–we are dealing with the framework established by 35 USC 200 as part of federal patent law. In that framework, policy is operative, if not crucial.
Third, nowhere does Bayh-Dole indicate that “exceptional” circumstances are rare or unusual ones–they are just any circumstances for which the default right of the owner of a subject invention to elect to retain title subject to the provisions of the law is not the best way for Bayh-Dole to carry out its policy and objective. Or in short, exceptional circumstances are any circumstances in which Bayh-Dole doesn’t do so well what Bayh-Dole by default permits.
Finally, we need to consider what “circumstances” means in the context of “promoting” Bayh-Dole’s policy and objective. “Circumstances” in common usage has a meaning along the lines of
“A fact or condition connected with or relevant to an event or action” (Oxford)
“A condition or fact that determines or must be considered in the determining of a course of action” (American Heritage)
Bayh-Dole establishes only these circumstances that leads to the default that a nonprofit or small business that acquires an invention arising in federally supported research or development can elect to retain title to that invention–
- the invention is disclosed to the federal government,
- the invention is owned by a nonprofit or small business,
- the invention is or may be patentable or is a plant variety eligible for protection
- the invention arose in federally supported research or development
Those are the default circumstances. If you look at them, there’s nothing there, really. The circumstances are merely that if an invention is within the scope of a law dealing with inventions made with federal funding that have come to be acquired by a nonprofit or small business, then the nonprofit or small business can continue to keep owning if it wants, subject to an apparatus of mostly bother. That is, the circumstance is generic. It is, in essence, the condition of no circumstance at all, an arbitrary circumstance–disclosed, owned, patentable, made in work with federal funding. An “exceptional” circumstance, in this context, is anything with specificity. And more importantly, the circumstances that will matter are not events or conditions that must be taken into account, but rather the objectives of those providing the funding and those proposing the work. That is, the circumstances here must themselves be themselves policies and objectives.
Rewritten, we have:
Use the default disposition of rights unless one has a policy and objective that better promotes Bayh-Dole’s policy and objective–that is, better promotes such things as using the patent system to promote utilization, collaboration between universities and industry, free competition and enterprise, and the use of United States manufacturing and labor than simply leaving ownership of subject inventions with their nonprofit and small business owners.
Such “exceptional” circumstances could be pretty much any public purpose a federal agency might assert or a faculty investigator might propose.
Let’s start with the context for the Bayh-Dole default and then look at exceptional circumstances. Here’s the Bayh-Dole default in context:
Subject to the provisions of this title, patents shall have the attributes of personal property. [35 USC 261]
It is the policy and objective of the Congress to use the patent system to promote the utilization of inventions arising from federally supported research or development . . . [35 USC 200]
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 [35 USC 202(a)]
The rights of the nonprofit organization or small business firm shall be subject to the provisions of paragraph (c) of this section and the other provisions of this chapter [35 USC 202(a)]
There is no point in Congress stating a policy and objective that has no actual purpose. For instance, it would serve no purpose for Bayh-Dole to state that “it is the policy and objective of Congress that the patent system should be used.” The “promote the utilization of inventions” part is not merely the Constitution’s “promote the progress of . . . useful arts.” If it were, then again there’s no need for Congress to state a policy and objective, because that’s the basis for patent law in the first place. No. Here Bayh-Dole we should assume as a matter of good interpretative practice that Bayh-Dole is intended to do something other than restate the basis for patent law.
Bayh-Dole’s policy and objective–provisions of the “title” of patent law–apply to the personal property rights associated with patentable inventions. Bayh-Dole articulates a new category of patentable invention, the “subject invention.” A subject invention comes into existence when an invention is acquired by a nonprofit organization or small business firm AND it is or may be patentable AND it arose in federally supported research or development (including when “conceived or first actually reduced to practice in performance of work under a funding agreement” (35 USC 201(e)–that is, “the performance of experimental, developmental, or research work funded in whole or in part by the Federal Government” (35 USC 201(b)).
Bayh-Dole therefore states a change in the rights that patent law provides to owners of subject inventions relative to the rights set out by ordinary patent law. One of those changes is given above–that the patent system is to be used to promote the utilization of subject inventions, not merely to promote the “progress of useful arts”–where “progress” means the diffusion, the publication of inventions with sufficient details to permit their practice by others with ordinary skill. Under ordinary patent law, an owner of a patent has no obligation to use the claimed invention or to make that invention available to others for use. There’s no working requirement in ordinary federal patent law. But clearly there is in Bayh-Dole–patents on subject inventions must be used to promote the use of subject inventions. If a subject invention is not used, or is not licensed for use resulting in use, then the patent owner has failed the policy and objective of federal patent law specific to subject inventions. In such a case, the patent owner ought to have no personal property rights in the invention and no standing to enforce a patent against infringers–those using the invention, in keeping with the policy and objective set forth for subject inventions.
Bayh-Dole goes beyond a simple working requirement, however. It also requires the patent system to be used to promote, among other things, free competition and enterprise. There is nothing like this in ordinary federal patent law. One has to look to antitrust law to find a restriction on the exploitation of patents that is anti-competitive. But Bayh-Dole does not merely assert the obvious–that the rights of an owner of a subject invention extend only to the limits permitted by antitrust law–that need not be repeated as a policy or objective. And indeed, Bayh-Dole does the opposite, at 35 USC 211:
Nothing in this chapter shall be deemed to convey to any person immunity from civil or criminal liability, or to create any defenses to actions, under any antitrust law.
Instead, Bayh-Dole’s statement of policy and objective insists that the patent system must, for subject inventions, be used to promote free competition not merely to be used to the limit at which an action would become anti-competitive, and not merely to promote “competition” (ignoring “free” as surplusage). How might the patent system, based on publication in exchange for the right for a limited time to exclude all others, be used to promote free competition and enterprise? More specifically, how does one use the patent system with regard to an invention that one is required to use or permit others to use to also promote free competition and enterprise? If it “free competition” merely meant that a patent provided some “protection” against powerful companies that might otherwise “steal” the invention without paying anything for it, we might wonder at the purpose of Bayh-Dole.
If the purpose was utilization of inventions, and companies were all hot and ready to use inventions made in work that was judged to be in the public interest, what purpose could possibly be served by a patent that prevented those companies from having ready access? No, there would have to be something more–such as, that no company wanted access to an invention in its claimed form, but would be ready to copy the invention if it were “developed” to the point that it became attractive. This is the “free rider” problem–that everyone wants something after someone goes to the trouble of making that something work well enough to be wanted, especially when it is cheaper to copy than to do the original development work. In such a setting, a patent allows the owner to preclude “free riders”–they can wait until the patent expires, and then compete, and only then to develop the invention in ways that do not involve any subsequent patented improvements made by the owner of the original patent. In practice, companies seek to obtain all sorts of inventions on improvements, hoping to catch up the owner of the original patent in some line of critical development and creating leverage for a cross-license–a license to the critical development in exchange for a license to the original invention. But none of this looks like the promotion of “free competition.” Rather, it looks like the typical use of the patent system to stake out bits of exclusivity and barter those bits for access to markets or to partner with or sell out to other barterers.
“Free” is not fluff, and Bayh-Dole’s policy requirement on the owner of a patent on subject invention with regard to promoting free competition is something other than merely to avoid antitrust practices. We might think about how patents can be used to establish standards, can be used to control quality, to gain access to ancillary technology or new developments for common access, can be used to limit foreign imports that would harm the opportunity for domestic manufacturing and jobs. Much of that activity would involve non-exclusive licensing. We might wonder, then, whether Bayh-Dole’s statement of policy and objective all but mandates that organizational owners of subject inventions have an implied duty to license non-exclusively if they do not use an invention themselves to produce a benefit to the public on reasonable terms. Now is not the time for a deep dive into “free competition”–but perhaps it is enough to see that Bayh-Dole requires owners of patents on subject inventions to do something other than pursue their self-interest as if those patents were ordinary patents with ordinary property rights.
We must hold firmly in mind that Bayh-Dole applies to any nonprofit and any small business that acquires ownership of a subject invention–the scope of the law is not simply those nonprofits and small businesses that are parties to a funding agreement or contractors. The general statement of rights and subject provisions at 35 USC 202(a)–to include 35 USC 202(c)–is independent of any particular federal contract. To illustrate, using a practice that was common when Bayh-Dole was drafted:
- a university faculty inventor makes a patentable invention under a federal grant
- the faculty inventor is included as a party to the funding agreement
- the university has no policy or employment agreement that requires assignment of the invention to the university
- the inventor assigns the invention to Research Corporation or a university affiliated research foundation for management
Under Bayh-Dole, the research foundation, if it properly discloses the invention to the federal government, may elect to retain title to that invention, but then the research foundation is subject to Bayh-Dole, including the provisions of paragraph (c) and especially (c)(7), which also forms the basis for the standard patent rights clause to be included in all funding agreements. The right to elect to retain ownership of a subject invention depends on proper disclosure. But there’s no requirement here that the research foundation be a contractor or party to a funding agreement–what triggers Bayh-Dole is the acquisition of title to a subject invention by a contractor. If the faculty inventor is a contractor, and title to the invention does not pass through the university, then (c)(7)(A) does not apply. The patent rights clauses created for Bayh-Dole reflect this outcome–37 CFR 401.9 applies to inventors who own their inventions. They are to be treated as small business contractors, not as nonprofit contractors, even if they work at a nonprofit. Strange as it may be, Bayh-Dole distinguishes inventions assigned by inventors to nonprofit contractors from inventions assigned by inventors to noprofit non-contractors.
The critical step in all of this is step 2–how it is that inventors come to be parties to the funding agreement–if only through that portion of the funding agreement pertaining to the disposition of rights in inventions. Federal contracting regulations, for instance, could stipulate that a contractor’s employees are parties to the funding agreement, as the Public Health Services regulations did. Or, a contractor could comply with a provision of the standard patent rights clause but which is not authorized by Bayh-Dole under which, for the purpose of each awarded contract, the contractor is to require certain of its employees to make a written agreement to protect the government’s interest with respect to subject inventions. The act of requiring that written agreement makes those employees parties to the funding agreement and therefore contractors and their inventions subject inventions–inventions “of the contractor”–meaning, inventions owned by the inventors.
If you are bothered by all the complexity, you might also consider that a clever scheme in its statutory deployment may reach its limit, where it becomes clear that to be legal, the scheme can’t do what people behind the scheme intend, so they have to bury their fudging in technical details as deeply and ambiguously as they can with the expectation that no one bother to look, or if they look they will be confused, and so never find the fudging. That’s what is going on here. The advocates of Bayh-Dole don’t want you to look–because they they pretend what they are doing is legal, virtuous, and successful, when it is none of these. When have you ever seen AUTM quote Bayh-Dole to explain the law? AUTM’s amicus brief in Stanford v Roche was a string of non-sequiturs riffing on phrases taken out of context. Here is a good working hypothesis, given such behavior: Bayh-Dole is a scam.