Bayh-Dole’s “subject invention” botch of the Federal Procurement Regulations, 2

We are looking at how Bayh-Dole botches invention ownership. Where the Federal Procurement Regulations implemented in 1975 were clear, Bayh-Dole in 1980 is muddy. The FPR approach is simple: contractors must have patent agreements that ensure that contractors will be able to assign inventions made under contract to the federal government unless the federal government allows a contractor to retain ownership. Thus, in the FPR every invention made under a federal contract will be a “subject invention”–an invention “of the contractor” because the contractor, as a requirement of the patent rights clause prescribed by the Federal Procurement Regulation, the contractor must have an equitable interest in every such invention.

Bayh-Dole fails to do this. Bayh-Dole does not require contractors to have patent agreements. Thus, while the Federal Procurement Regulations create a mechanism by which all inventions made under contract become inventions “of the contractor,” Bayh-Dole applies only after a contractor acquires–if ever– an invention made under contract. Further, the Supreme Court made clear in Stanford v Roche that Bayh-Dole has no mechanism to vest title of inventions made under contract with the contractor, nor to otherwise create a mandate for contractors to acquire title to such inventions. Law professors are led to crazy propositions such as that somehow a report from 1947 led federal policy makers–patent attorneys, in this case–to assume–mistakenly–that everyone got patent agreements so they could just drop what they had drafted five years before about requiring contractors to have patent agreements.

No, instead it was a botch job in drafting–like much of Bayh-Dole. Or was it? Perhaps the move from a federal procurement regulation under the control of the executive branch to an amendment of federal patent law under the direction of Congress fundamentally altered what a patent rights clause could require by way of contractor rather than inventor ownership. Or perhaps in the wrangling that produced Bayh-Dole and its standard patent rights clause, people decided to create a pathway by which inventors rather than organizations had the freedom to decide what to do with their inventors. But university patent administrators have insisted since Bayh-Dole was passed that the law intended universities to own all inventions arising from federally supported research, even though the law has nothing of the sort–nor does its standard patent rights clause.

To add to the muddiness, the implementing regulations for Bayh-Dole construct out of the blue without authorization from Bayh-Dole a “written agreement” requirement to the standard patent rights clause–37 CFR 401.14(f)(2), under the heading of “Contractor Action to Protect the Government’s Interest.”

(2) The contractor agrees to require, by written agreement, its employees, other than clerical and nontechnical employees, to disclose promptly in writing to personnel identified as responsible for the administration of patent matters and in a format suggested by the contractor each  subject invention  made under contract in order that the contractor can comply with the disclosure provisions of paragraph (c) of this clause, to assign to the contractor  the entire right, title and interest in and to each subject invention made under contract [added by NIST in 2018], and to execute all papers necessary to file patent applications on subject inventions and to establish the government’s rights in the subject inventions.

We can see here legal clown work. The (f)(2) requirement is clearly based on the Federal Procurement Regulation, but screws with just about everything. Let’s go through it:

(FPR) The Contractor shall obtain patent agreements to effectuate the provisions of this clause

(SPRC) The contractor agrees to require, by written agreement,

The FPR refers to patent agreements–agreements between the contractor and inventors. The SPRC refers only to written agreements–it is not at all clear that the written agreement is between the inventor and the contractor. Rather, the written agreement is an inventor work product required by the contractor. The SPRC makes the contractor make inventors parties to the funding agreement.

(FPR) from all persons in his employ

(SPRC) its employees

The FPR is specific to “persons in [the contractor’s] employ.” The SPRC conflates verb and noun and refers to employees. The meaning changes. One may “employ” persons in any number of ways, including as servants, independent contractors, faculty, or workers. But a person who is an “employee” has  standing relative to duties to the employer generally but that’s not what matters here–what matters is the duties to the contractor specific to the contract. What duties owed by researchers to the federal government under the federal contract are also duties the researchers owed to the contractor independently of the federal contract?

(FPR) who perform any part of the work under this contract

(SPRC) x

The FPR is specific to the contract. The SPRC ignores the contract and launches instead into requirements that inventors must accept to allow the contractor to meet its disclosure obligation for subject inventions–inventions that the contractor must already own. The SPRC then makes the written agreement general to all employees regardless of whether they work on the contract. It’s clown drafting.

Both the FPR and SPRC then have an exclusion from the requirement for certain employees:

(FPR) except nontechnical personnel, such as clerical employees and manual laborers.

(SPRC) other than clerical and nontechnical employees,

The FPR excludes a class–nontechnical personnel and gives two illustrations of the class without limiting it. A rationale for the FPR exclusion is that it would not be equitable for an employer to claim ownership of inventions made by people who could not possibly be hired to invent, and it would therefore also not be equitable for the federal government to have a claim to any such inventions made by people who the contractor had no equitable basis for claiming.

By contrast, the SPRC conflates clerical and nontechnical employees, as if clerical employees might also be technical employees, but are nonetheless excluded. I suppose a post doc could  be hired under a federal contract to clerical work. The SPRC fails to expressly exclude manual laborers, who may very well end up being inventors (as was, say, Eddie King–who if you don’t know about, arg!).

The FPR is clear as to scope and is done. A contractor is required to assign inventions “of the Contractor” to the federal government. The contractor must have patent agreements with those in employ to allow the contractor to so assign. The contractor, then, must have equitable title to all such inventions, based on those in the contractor’s employ for the contract promising to assign all such inventions. Thus, under the FPR, every invention made under contract will be a subject invention, an invention “of the contractor.”

The SPRC authorized by Bayh-Dole, however, is muddy as mud. A contractor is required to require employees to assign subject inventions–but by the definitions set out by Bayh-Dole, those are inventions that the contractor already owns. Since the contractor would not need an assignment if the contractor already has got assignment, then the inventions remaining that could be subject inventions would be ones that the contractor holds equitable title to but has not obtained formal title. The contractor would hold equitable title to inventions that the contractor would have an equitable claim to in the absence of the federal contract.

That is, the equitable claim cannot be based on the fact of federal funding or the use of federal funding to pay salaries or purchase supplies or the use of university resources reimbursed by the federal funding or because the work is done with an extramural research sponsor (i.e., the federal government). The equitable claim has to arise because the contractor-employer has hired an employee to invent, or directed the employee to engage in experimental work, or hired an employee on the condition that all rights to inventions will be with the contractor-employer as a condition of continued employment–a patent agreement, as it were.

Put it this way. If university faculty were understood to have the freedom to choose their research (not assigned or controlled by university administrations) and freedom to publish (so university administrations could not force faculty to publish, even in the patent literature)–and this these freedoms were a desired component of federal grants made to faculty for work proposed by faculty–then Bayh-Dole was crafted to preclude university administrations from forcing faculty into situations in which the university could use federal funding to claim equitable title to faculty inventions made in those federally supported projects.

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