Exceptional Circumstances in Bayh-Dole, 4

In more plain language, even with regard to outcomes, Bayh-Dole is crappy public policy. At best, Bayh-Dole has enabled a betting parlor managed by nonprofits for the future value of patent rights, especially those patents directed at controlling the “market” for public suffering from disease and injury. There, Bayh-Dole’s effective public policy is that both the federal government and university faculty should stand down from having any thought about how to respond to disease and injury in favor of the development of a private “market” for exploiting patent rights to create products to sell at whatever price that this “market” will bear. That’s what “commercialization” means when used by advocates for Bayh-Dole.

The only way such a situation becomes “uniform” is if all contractors, for some reason, collude to force such an outcome by adopting the same polices and making such a fuss that federal agencies refrain from using any of the processes set out in Bayh-Dole to improve upon the default contractor ownership provision and contractor performance under those provisions. That is the role adopted by the Association of University Technology Managers –AUTM, along with the various “higher education associations” that front for AUTM’s agenda.

The “uniform” regulations referenced in 35 USC 206, then, are procedures to vary from the default provisions. The default provisions themselves are specified in 35 USC 202(c). What’s referenced as “uniform” by Bayh-Dole, for federal contracting, is both a “standard funding agreement” and the procedures by which federal agencies may vary from that funding agreement or exercise their rights under the standard funding agreement.

Interestingly, for federally owned inventions, Bayh-Dole does not label the implementing regulations as “uniform” (see 35 USC 208). Federal agencies may license however they wish, or not file patents at all. Similarly, Bayh-Dole does not stipulate “uniform” practice for contractors–they may license however they wish, or not file patent applications at all (the federal government could then step in and request title, but doesn’t have to). Thus, while the Bayh-Dole policy standard is that if a contractor obtains ownership of a qualifying invention, it can keep that ownership, there’s nothing at all uniform about what inventions a contractor might acquire–in which case inventions that aren’t acquired by a contractor remain in that prior statutory framework which Bayh-Dole advocates continue disparage–and there’s nothing at all uniform about what contractors might do with the inventions that they do acquire–and nothing at all uniform about how federal agencies enforce the standard funding agreement (and standard patent rights clauses)–and nothing at all uniform about how federal agencies use the “uniform” process to determine that a different treatment of contractor ownership might better promote Bayh-Dole’s policy and objectives. “Uniform” is just more political spin meaning “not uniform at all.”

Look at it from an “industry” point of view–of any random company in an “industry.” Under the prior statutory framework–still in place–when an invention is made in federal research hosted by a nonprofit contractor, the government has a right to acquire title and federal agencies make that invention available via the public domain or non-exclusive, royalty-free licenses. For nonprofit-hosted federally supported research, “industry” has an expectation of uniform access to those inventions. For the inventors, the same is true–regardless of where they subsequently go, they always have access to their federally funded inventions. The prior statutory framework was and is “uniform” for industry, research, and entrepreneurial access to federally supported inventions.

The “uniformity” referenced in Bayh-Dole is, by contrast, that of how federal agencies must respond by default when a contractor gains ownership of an invention that otherwise would be made uniformly available for research, entrepreneurs, and industry. If a federal agency determines that Bayh-Dole’s default is for whatever reason crappy, then Bayh-Dole insists that the federal agency follow a “uniform” procedure to vary from the default. If a federal agency determines that a contractor is doing a crappy job of complying with the default, then Bayh-Dole insists that the federal agency follow a “uniform” procedure for dealing with that crappy job.

Bayh-Dole does not require federal agencies to invoke these “uniform” procedures. Federal agencies don’t have to press for improved handling requirements for inventions that contractors acquire; federal agencies don’t have to enforce the standard patent rights clauses; federal agencies don’t have to intervene to protect the public from nonuse or unreasonable use. No one is specially charged with oversight and enforcement of Bayh-Dole. And if Bayh-Dole makes it difficult for federal agencies to improve handling of contractor-owned inventions, then again there’s all the more reason to find that Bayh-Dole is designed to prevent federal agency use of Bayh-Dole’s own public interest apparatus. Stuff cannot be in the public interest if any private interest objects.

This, then, is the “uniformity” asserted for Bayh-Dole–that federal agencies should not have different practices with regard to the public interest in research they support if something patentable arises and is acquired by a contractor. The contractor’s practices should then control–without uniform enforcement or uniform public oversight or uniform reporting or uniform federal agency response to nonuse or unreasonable use or even federal practice of inventions under the government’s license to every invention owned by a contractor.

We will take this discussion one brief step further, and then return to a consideration of Dr. Thomas’s views on NIH “exceptional circumstances.” Consider inventors. If nonprofit inventors are not contractors, then Bayh-Dole does not apply to their inventions when they make them. They have no obligation under Bayh-Dole to disclose their inventions, no obligation to file patent applications, no obligation to do anything with their inventions–publish, use, or commercialize. Those inventions are under the statutory framework not preempted by Bayh-Dole. Bayh-Dole simply does not operate. The other statutory framework operates–and the federal government under that framework expects to have assignment of those inventions by statute or regulation as authorized by executive branch patent policy as implemented by each agency.

But how do federal regulations reach to individual inventors, if the regulations stipulate the provisions of federal contracts? Answer: the individual inventors must be parties to the federal funding agreement. Indeed, old PHS policies stipulate as much. Otherwise, inventors have no obligation to assign inventions to the federal government or even grant the federal government a license to practice, in the absence of a statutory requirement. We might then consider that the prior invention regulatory framework requires nonprofit inventors to be parties to each federal funding agreement. If so, then under Bayh-Dole’s definitions, nonprofit inventors are contractors. Their inventions become subject inventions because they, the inventors, own them outright, and Bayh-Dole then applies to these inventions as well, even if these inventions are not acquired by the inventors’ employers or anyone their employers might do business with or designate.

Think about the Supreme Court analysis in Stanford v Roche in this way. If inventors are parties to federal funding agreements under the old (and still existing regime), then their patentable inventions are subject inventions (when within scope of a federal funding agreement) and Bayh-Dole does apply. But there’s still nothing in Bayh-Dole that overturns federal patent law’s expectation that inventors own their inventions. Nothing, further, that gives a university, say, title to an inventor’s invention, or any special privilege to acquire that invention–no first right, no right of first refusal, no mandate, no necessity to “make Bayh-Dole work.” And there’s no “gap” in Bayh-Dole–because Bayh-Dole is not the only federal statute or regulation at work and does not have to repeal all other statutes and void all other regulations. Bayh-Dole preempts those statutes and regulations when a contractor obtains ownership of an invention within scope of a funding agreement.

Nothing here conflicts with the Supreme Court decision. Bayh-Dole does not vest ownership with a contractor. For institutional contractors, they still must obtain ownership by assignment. For inventors, they obtain ownership by operation of federal common law. For inventions owned by inventors, Bayh-Dole permits federal agencies to allow inventors to retain that ownership (35 USC 202(d)). And Bayh-Dole’s implementing regulations instruct federal agencies to treat inventors who own their inventions as small business contractors, using a subset of the standard patent rights clause that does not require inventors to file patent applications. That’s entirely consistent with Bayh-Dole’s position in federal patent law. Nothing in federal patent law requires inventors to use the patent system. Nothing in Bayh-Dole does, either.

As for NIST’s new addition (May 2018) of an assignment requirement to the non-Bayh-Dole requirement in the standard patent rights clause (at (f)(2)) that inventors make a written agreement to protect the government’s interest, I expect when it is challenged the assignment addition will fail–either because it is in contempt of the Supreme Court decision in Stanford v Roche that it would take a clear expression of intent by Congress to make Bayh-Dole into a vesting statute, or because the assignment requirement violates Bayh-Dole itself (since contractors are given the right to elect to retain title to subject inventions, and inventors as small business firm contractors have just as much right to that benefit as do institutional contractors), and if were deemed necessary for such an assignment to be required, that requirement must come about through legislation, not through a random administrative whim at NIST; or the assignment provision will be limited to a special case because it can be interpreted to apply only to those conditions in which an institutional contractor has equitable ownership of an invention and requires inventors to make formal assignment of the invention to perfect legal title. Until then, NIST enables Bayh-Dole to continue to be the creepy and crappy faux law that it is.

Federal agencies with research or development programs that would not benefit from at-will/no oversight contractor ownership of inventions and exploitation of patent monopolies would be expected to use this same process within Bayh-Dole. If for instance a federal agency required federal ownership of a class of inventions in order to make the inventions available to all (public domain, non-exclusive royalty-free licensing), then the agency could determine that an exception from Bayh-Dole’s arbitrary default would better serve Bayh-Dole’s objectives–utilization, maximal small business participation in development, collaboration, free competition and enterprise, United States industry and labor, protecting the public from unreasonable use.

We might expect just such a determination anywhere that the federal government was the primary user or developer of an area of technology, and thus its contractors were selling to the government or doing work to assist in development. There would be no reason for the government to allow private ownership and exploitation of patent rights in such a case–doing so would fragment the patent situation in the cumulative technology and the federal government could not then release developed technology for industry use. The government would have use under its own license, but would be restricted to that use and could not then develop a technology to be released in a mature form for all to use–directly or through the intermediary of commercial versions sourced from multiple manufacturers.

We might expect, also, just such a determination anywhere that the federal government spreads research work in a given area around to investigators at multiple institutions or encourages multi-disciplinary research where contributions from various industries and areas of expertise might be combined to create new technology. If inventions made in such work were then controlled by the institution that happened to host a breakthrough to which all others were participating in, then that institution could decide to favor one single industry or application against the interests of all the others, and against the interests and objectives of all the other investigators and organizations that had collaborated on the effort. Such an outcome would be grossly unfair, if not an outright defection against the collective effort, all in the name of valuing a patent monopoly exploited for a single institution’s profit over the collaboration and all the varied possible uses and lines of development for that invention. Witness, say, the problems with CRISPR technology, with nonprofits fighting it out over patent rights “worth billions” if everyone else could be excluded–but worth untold more in “economic growth” and “commercialization” if the CRISPR technology in all of its variations were made generally available to all.

One might expect, then, too that the NSF would invoke exceptional circumstances for its cooperative research center program, and require contractors to non-exclusively license all subject inventions royalty free to all industry members of a cooperative research center. This exceptional circumstance would then operate as a condition of a CRC award rather than stand as a potential “march-in” right if a CRC contractor failed to achieve timely practical application or failed to make a given invention sufficiently available. That is, for the CRC program, if economic growth or commercialization was indeed the goal, then perhaps one might acquiesce in the Bayh-Dole default and let the contractor find a monopoly partner for any invention rather than making each invention available to at least the CRC industry members. But the NSF has not used Bayh-Dole this way. Instead, the NSF requires universities proposing a CRC to include an invention management plan, and if that management plan isn’t the NSF’s model plan, then the university is given to understand that the NSF won’t fund its CRC. The NSF simply avoids Bayh-Dole’s process for determining exceptional circumstances and creates an environment that is not “uniform” with regard to contractors’ rights in inventions that they come to own.

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