Bayh-Dole’s “subject invention” botch of the Federal Procurement Regulations, 1

Bayh-Dole botches its management of invention ownership.

To see how, we need to look at how Bayh-Dole in 1980 changed the Federal Procurement Regulations put in place in 1975. In particular, let’s look at how the definition of subject invention slips between the patent rights clause in 41 CFR 1-9.107-5 and Bayh-Dole 35 USC 201(e).

Keep in mind that Norman Latker appears to have been involved in drafting the Federal Procurement Regulations, the Nixon patent policy revisions that the Federal Procurement Regulations codify, Bayh-Dole (he had someone else type the draft bill so it couldn’t be traced to his typewriter), and Bayh-Dole’s implementing regulations. In a sense, then, Latker botches “subject invention” in Bayh-Dole, but I expect the detailed history is more nuanced than the apparent conclusion.

Here’s the invention ownership scheme under the federal procurement regulations:

The federal government requires contractors to assign inventions made with federal support. The contractor must have patent agreements with those employed under a federal contract so the contractor can assign inventions to the federal government. The contractor doesn’t have to assign inventions if an exception applies. In any case, the contractor at all times is required to have equitable title in each invention made under contract.

Let’s look, then, at the patent rights clause at 107-5 in the old Federal Procurement Regulations. Here it is, broken into sections for emphasis:

“Subject Invention” means any invention or discovery

of the Contractor

conceived or first actually reduced to practice in the course of or under this contract,

and includes any art, method, process, machine, manufacture, design, or composition of matter, or any new and useful improvement thereof, or any variety of plant,

which is or may be patentable under the Patent Laws of the United States of America or any foreign country.

Here, by contrast, is part of Bayh-Dole’s definition stack–invention and subject invention:

The term “invention” means any invention or discovery

which is or may be patentable or otherwise protectable under this title

or any novel variety of plant which is or may be protectable under the Plant Variety Protection Act (7 U.S.C. 2321 et seq.).

The non-patent PVPA has been swapped in for “any variety of plant, which is or may be patentable.” Silliness–amend patent law to add unpatentable subject matter. Phew. Otherwise, “invention” is defined to be anything which is or may be patentable, along with the mysterious “otherwise protectable”–something protected by patent laws but that isn’t patentable and isn’t the PVPA. Strange doings, no?

Now for Bayh-Dole’s subject invention–already carrying a custom definition of “invention,” unlike the FPR:

The term “subject invention” means any invention

of the contractor

conceived or first actually reduced to practice in the performance of work under a funding agreement:

Provided, That in the case of a variety of plant, the date of determination (as defined in section 41(d) [1] of the Plant Variety Protection Act (7 U.S.C. 2401(d))) must also occur during the period of contract performance.

Here we get “invention of the contractor,” where “contractor” is defined as “any person, small business firm, or nonprofit organization that is a party to a funding agreement” (35 USC 201(c)). And “funding agreement” has its own definition that complicates things further (35 USC 201(b))–but that’s enough for now. In addition, we have the constraint that the invention must be conceived or first actually reduced to practice “in performance of work under a funding agreement.” Compare with the federal procurement regulation–“in the course of or under this contract.”

Now let’s get at this “of the Contractor” bit. The first order of  business in the FPR patent rights clause is government acquisition of title with the contractor having a non-exclusive license. A contractor then may appeal for a determination that the contractor should hold greater rights:

(b) Allocation of principal rights. (1) Assignment to the Government. The Contractor agrees to assign to the Government the entire right, title, and interest throughout the world in and to each Subject Invention, except to the extent that rights are retained by the Contractor under paragraphs (b)(2) and (d) of this clause.

And at (e)(3) we have a requirement for patent agreements:

The Contractor shall obtain patent agreements to effectuate the provisions of this clause from all persons in his employ who perform any part of the work under this contract except nontechnical personnel, such as clerical employees and manual laborers.

Combined, these two provisions mean that in any federal contract using this patent rights clause, the Contractor must have patent agreements with those in “employ” who invent. Thus, the Contractor, by federal regulation, must have an equitable interest in all inventions made under the federal contract. Any invention that gets made must necessarily be “of the Contractor” because the patent rights clause requires the Contractor to have the right of ownership–that ownership is the means by which the Contractor can comply with the requirement to assign all such inventions–Subject Inventions–to the federal government unless exceptions apply.

Thus, in the federal procurement regulations, Subject Invention involves first a requirement that a Contractor hold equitable title–by patent agreement–to all inventions made under contract. The Contractor, to comply with the requirement to assign any such inventions to the federal government, must then obtain assignment and then assign the invention to the federal government. Thus, every invention made under contract must necessarily be a Subject Invention, an “invention of the Contractor.” Neat.

Keep that all in mind. Now the FPR also provides a patent rights clause (41 CFR 1-9.105(b)) in which contractors may retain title to each Subject invention. But contractors still must have patent agreements in place to “effectuate” the provisions of the patent rights clause, and thus must still hold equitable title for the condition under which they elect not to retain title to any given invention made under contract. Thus, even when the contractor is allowed to retain title, the contractor still is required to have a patent agreement in place that provides the contractor with equitable title. The inventions are still Subject Inventions–inventions “of the Contractor” meaning “owned by the Contractor.” The Contractor is required to have the right of ownership.

Now for Bayh-Dole, the zombie Latkerstein monster of body parts stitched together from dead and dying federal regulations and practices. In Bayh-Dole, there are no comparable requirements to (b)(1) and (e)(3).

In Bayh-Dole, the ownership scheme is this:

A contractor may preempt government ownership by obtaining title to any invention arising in federally supported research or development. If the contractor fails to disclose or elect to retain title to such an invention, or fail to pursue patenting, the federal government may require assignment of the invention–but the government does not have to require assignment. This scheme preempts any other scheme.

Unlike FPR 9-1.107-5(a)(b)(1), Bayh-Dole has no standing requirement that a contractor assign to the federal government, but for exceptions. The federal government’s right to obtain title to an invention are specific to Subject Inventions and show up only upon failures of the contractor–to disclose, to elect to retain, to file patent applications, to maintain or defend issued patents. Furthermore, Bayh-Dole preempts all other “Acts” with regard to ownership of inventions–so if a contractor obtains title to an invention made “in performance of work under a funding agreement,” Bayh-Dole preempts any other federal claim to ownership. Once an invention becomes a Subject Invention under Bayh-Dole, there can be no standing federal claim to ownership.

Unlike FPR 9-1.107-5(a)(e)(3), Bayh-Dole has no requirement that a contractor have patent agreements with those in “employ.” It’s just not there. The US Supreme Court in Stanford v Roche looked  for and did not find such a requirement. Bayh-Dole applies only after a contractor acquires title to an invention made under contract–but does not require a contractor to acquire title to such inventions. The Supreme Court was adamant–there’s no requirement for a contractor to acquire title, no vesting of title, no special privilege by which the contractor may claim title.

It makes sense that there’s no such requirement in Bayh-Dole. Unlike the Federal Procurement Regulations that it preempted, Bayh-Dole is part of federal patent law. Nothing in federal patent law requires inventors to use the patent system, nor to assign their inventions to employers or anyone else as a condition of inventing. There’s no reason for Bayh-Dole to turn patent law upside down merely for federal funding. But then, sense is not high on the value chart for those enraptured by Bayh-Dole. We might even argue that Bayh-Dole could not require inventors to assign their inventions–as a matter of the Constitutional authority under which the federal government can enact patent laws. The government has the authority to reserve exclusive rights to inventors–not to employers, and not to universities that aren’t necessarily even employers in the case of faculty inventors working with federal grant support.

Thus, under Bayh-Dole it is entirely an open question whether in any particular setting a university has equitable title in any given invention made under federal contract. Rather, it is a hopelessly muddled question, given how faculty, staff, and students might be involved in research, university policies on freedom of research and publication, claims by university patent policies and university handbooks to form part of the employment contract with faculty and others, and the goofball nonsense drafting in those policies and handbooks with regard to what obligations any given individual must fulfill.

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