“Government” rights in federally supported inventions, 1

Bayh-Dole requires federal agencies to use a patent rights clause that includes a provision under which contractors who obtain ownership of a patentable invention made in the performance of work under a federal funding agreement and elect to retain that title must grant to the government a license. The wording matters. Here’s 35 USC 202(c)(4):

With respect to any invention in which the contractor elects rights, the Federal agency shall have a nonexclusive, nontransferrable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States any subject invention throughout the world . . . .

The requirement states a licensee (the federal agency that made the contract) and a scope (to practice and have practiced for or on behalf of the United States . . . throughout the world). Bayh-Dole does not define “United States” and so one might think “United States” is just a handy synonym for the federal government. But no.

In the Kennedy and Nixon patent policies, the grant of license is to the “Government” and Government is defined to be the federal government, state governments, and domestic municipal governments. Here’s the old Federal Procurement Regulations (1975) restatement of the Nixon (1971) patent policy:

Whenever the principal or exclusive rights in an invention remain in the contractor, the Government shall normally acquire:

(1) At least a nonexclusive, nontransferable, paid-up license to make, use, and sell the invention throughout the world by or on behalf of the Government of the United States (including any Government agency) and States and domestic municipal governments, unless the agency head or his designee determines that it would not be in the public interest to acquire the license for the States and domestic municipal governments . . . .

The FPR then provides a standard patent rights clause that includes this requirement (41 CFR 1-9.107-5(a)(c)):

Minimum rights acquired by the Government. With respect to each Subject Invention to which the Contractor retains principal or exclusive rights, the Contractor:

(1) Hereby grants to the Government a nonexclusive, nontransferable, paid-up license to make, use, and sell each Subject Invention throughout the world by or on behalf of the Government of the United States (including any Government agency) and States and domestic municipal governments . . . .

The standard patent rights clause also defines “States” (41 CFR 1-9.107-5(a)(a)(3)):

“States and domestic municipal governments” means the States of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, American Samoa, Guam, the Trust Territory of the Pacific Islands, and any political subdivision and agencies thereof.

That definition makes express that the government license extends to political subdivisions–a generalization of “domestic municipal governments” that implies a reading that “domestic municipal governments” must have been a narrower technical term that might exclude counties, say, or water districts, or subdivisions in territories that go by different nomenclature. Something.

Now 41 CFR Part 1-9 gets rolled out of existence in 1984, replaced by the Federal Acquisition Regulations at 48 CFR. There we find a definition of “United States” with exceptions, including one for 48 CFR part 27, where we will find Bayh-Dole (48 CFR 27.001):

United States, as used in this part, means the 50 States and the District of Columbia, U.S. territories and possessions, Puerto Rico, and the Northern Mariana Islands.

Bayh-Dole shows up in 48 CFR subpart 27.3. There, 27.303(b) requires the use of Bayh-Dole’s standard patent rights clause:

(1) Unless an alternative patent rights clause is used in accordance with paragraph (c), (d), or (e) of this section, insert the clause at 52.227-11, Patent Rights – Ownership by the Contractor.

The standard patent rights clause at 52.227-11 has this to say about government licenses:

License. If the Contractor retains ownership of any subject invention, the Government shall have a nonexclusive, nontransferable, irrevocable, paid-up license to practice, or have practiced for or on its behalf, the subject invention  throughout the world.

It’s just that “Government” is not defined by 52.227-11, and the use of “Government,” while echoing the use of “Government” in the Nixon patent policy fails to establish the scope of the required license or define what it means to “practice and have practiced.” In the Nixon patent policy, the term used is “make, use, and sell.” The Kennedy patent policy, on which the Nixon patent policy is based, used “practice and have practiced” and supplied a definition within the definition of “Governmental purpose” (Section 4(f)):

Governmental purpose–means the right of the Government of the United States (including any agency thereof, state, or domestic municipal government) to practice and have practiced (made or have made, used or have used, sold or have sold) throughout the world by or on behalf of the Government of the United States.

It’s clear that in both instances “Government of the United States” means the federal government, the states, and political subdivisions of states–domestic municipal governments. That’s a broad license, indeed.

To add one more antecedent to Bayh-Dole, consider the Thornton bill, HR 8596, introduced in 1977 as another attempt at a uniform federal patent policy. Later, Betsy Anker-Johnson claimed that Bayh-Dole was based on Thornton (Latker claimed Bayh-Dole was a codification of the IPA master agreement). Here’s what Thornton has to say about the government license (Section 313(a)(2)):

the Federal agency shall have a nonexclusive license to practice or have practiced for the Federal Government any subject invention throughout the world by or on behalf of the Federal Government (including any Federal agency), and may, if provided in such agreement, have additional rights to sublicense any State or domestic local government or to sublicense any foreign government pursuant to foreign policy considerations, or any existing or future treaty or agreement, when the Federal agency determines it would be in the national interest to acquire such additional rights.

If Thornton had become law, federal agencies had the right to stipulate either a narrow license to the federal government or a broader license with the right to sublicense states and local governments, along with foreign governments. The wording is a bit different, but this is essentially the Nixon patent policy, with a reversed default and a strange scope. In Nixon, the federal government gets a license that includes the states and domestic municipal governments unless a federal agency determines it would not be in the public interest to acquire such broader rights. One has to wonder what it would take for it to be in the public interest for state or local governments to be open to suit by a contractor for infringement of an invention made in publicly funded work. As for scope, Thornton turns a license that’s broad enough to include state and local governments into a right for the federal government to sublicense state and local governments–but only if a federal agency bothers to acquire this right to sublicense. One might see how it would be easy for a federal agency not to bother with those additional sublicensing rights, leaving state and local governments (and universities conducting research, say) open to infringement claims. (States, it turns out, cannot be sued for patent infringement in federal court unless they agree to allow themselves to be sued, so this whole bit from Kennedy to Thornton is all rather moot, but for local governments).

Bayh-Dole’s text and implementing regulations are just plain sloppy with regard to this stuff. Norman Latker appears to have been Dr. Frankenstein, gathering statutory body parts from wherever. Latker’s IPA master agreement–produced in 1968 for the Department of Health, Education, and Welfare–includes a license to the Government of the United States that includes the Kennedy patent policy definition of “Governmental purpose” and along with it, then, definitions of “Government of the United States” and “practice and have practiced.” But Bayh-Dole omits these definitions while using the same terminology. Given that Latker was involved in the work to draft the Nixon patent policy and the codification of that policy in the Federal Procurement Regulations, and then drafted Bayh-Dole and worked on Bayh-Dole’s standard patent rights clause, we would expect Latker to be keenly aware of the matter of the scope of the required license to the federal government. Haste? Bungle? Intentional ambiguity? Hard to say–perhaps all three!

Here’s the government license in Bayh-Dole’s standard patent rights clause (37 CFR 401.14(b)):

With respect to any subject invention in which the Contractor  retains title, the Federal government shall have a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States the subject invention throughout the world.

Not exactly the text in Bayh-Dole at 35 USC 202(c)(4). Instead of “Federal agency,” the standard patent rights clause has “Federal government.” And this isn’t the same wording as the FAR standard patent rights clause at 52.227-11, which has “Government,” not “Federal government” or “Federal agency.” More slop. It’s as if no one intended for anyone to bother with the scope of the government license–as if the license was to be for show, not for actual use.

The standard patent rights clause at 37 CFR 401.14 does not bother with the definition of “United States” nor do the implementing regulations provide any guidance. The FAR is all we have, and there at 48 CFR 27.001 we have “United States” defined broadly to include the states, DC, and various territories. In the FAR, then, the standard patent rights clause requires a grant to the Government for use for and on behalf of the states, the District of Columbia, and various territories. States and these other territories have an interest in the licenses granted by contractors who retain ownership of the inventions that they have acquired and which were made in projects receiving federal support.

On the federal grants side, however, we don’t have this guidance. All we have is a citation in 2 CFR 200.315(c) to 37 CFR part 401:

(c) The non-Federal entity is subject to applicable regulations governing patents and inventions, including government wide regulations issued by the Department of Commerce at 37 CFR Part 401, “Rights to Inventions Made by Nonprofit Organizations and Small Business Firms Under Government Awards, Contracts and Cooperative Agreements.”

To round out the framework, we have to consider 15 USC 2218(d), which dates from 1974, and applies to fire prevention and control legislation:

(d) Inventions and discoveries

All property rights with respect to inventions and discoveries, which are made in the course of or under contract with any government agency pursuant to this chapter, shall be subject to the basic policies set forth in the President’s Statement of Government Patent Policy issued August 23, 1971, or such revisions of that statement of the policy as may subsequently be promulgated and published in the Federal Register.

Bayh-Dole, when it came into effect, expressly preempted 15 USC 2218(d) with regard to the subject matter of Bayh-Dole (35 USC 210(a)):

This chapter shall take precedence over any other Act which would require a disposition of rights in subject inventions  of small business firms or nonprofit organizations contractors in a manner that is inconsistent with this chapter, including but not necessarily limited to the following: . . .

(18) section 21(d) of the Federal Fire Prevention and Control Act of 1974 (15 U.S.C. 2218(d); 88 Stat. 1548)

Yes, that’s our general purpose clause connecting federal contracts to the Nixon patent policy, a year before that policy was codified (codification involving Norman Latker) as 41 CFR part 9-1. Now the Supreme Court in Stanford v Roche directly addressed the scope of Bayh-Dole. The majority decision made it clear that Bayh-Dole applies only to subject inventions–inventions “of the contractor”–inventions that a contractor has acquired and which otherwise meet the definition of subject invention supplied by Bayh-Dole:

But because the Bayh-Dole Act, including §210(a), applies only to “subject inventions”— “inventions of the contractor”—it does not displace an inventor’s antecedent title to his invention. Only when an invention belongs to the contractor does the Bayh-Dole Act come into play. The Act’s disposition of rights—like much of the rest of the Bayh-Dole Act—serves to clarify the order of priority of rights between the Federal Government and a federal contractor in a federally funded invention that already belongs to the contractor. Nothing more.

Thus, with Bayh-Dole there are two regimes of federal rights operating: one regime–that of Bayh-Dole–operates when a contractor acquires ownership of an invention made under federal contract. The other regime, the forgotten but not gone regime–that of the Nixon patent policy and statutes such as 15 USC 2218(d)–operates when a contractor does not acquire ownership of an invention made under federal contract.

The Bayh-Dole regime is full of slop and non-compliance, however. Contractors are required to make their inventors parties to each federal funding agreement, but contractors don’t do this and federal agencies don’t enforce the requirement of the standard patent rights clause. Contractors instead demand ownership of all inventions made under federal contracts, citing Bayh-Dole compliance, even though the Supreme Court made clear that Bayh-Dole has nothing to say with regard to contractor privilege in obtaining that ownership.

University administrators don’t want Bayh-Dole to operate as the law has been written and implemented–they want ownership of federally supported work with impunity and without accountability. That’s understandable, but that’s not the law, and it hasn’t been productive practice–rather, it has been destructive practice and, well, normalized badness with glossy brochures and happy fantasy talk about “innovation” and “public benefit.”

For any invention made under federal contract for which a contractor does not obtain ownership, the Nixon patent policy applies and with it the conditions under which the federal government has a claim to ownership of those inventions. But there’s no contract to cover the government’s claims. An Executive Order can require federal agencies to take action, but cannot divest inventors of the ownership of their inventions or their rights under federal patent law. We are left, then, with the intended purpose of Bayh-Dole–that is, the intent of Congress as expressed by the words of the statute, not the intent of Norman Latker and others who advocate for Bayh-Dole–and that intent is that Bayh-Dole applies only when a contractor owns an invention made under contract, and Bayh-Dole provides no requirement or special privilege that a contractor must own any such invention. That’s the reality of Bayh-Dole.

Regardless of the ownership, however, there’s a government license. Under Bayh-Dole, the license is to a Federal agency with a scope that includes state and territorial governments. Under the Nixon patent policy, the scope also includes domestic municipal governments–it’s just a matter of how federal agencies who have forgotten how to draft a patent rights clause for the Nixon patent policy could implement or enforce the Nixon policy government license. Perhaps the big gaffe in this whole gaffe-strewn affair called Bayh-Dole was the replacement of the Federal Procurement Regulations with the Federal Acquisition Regulations. At that point, the Nixon policy codification, which included a patent rights clause with a standing government claim in four areas of research activity and for research contracts where the contractors lacked technical competence or a commercial market position was eliminated. In its place we got Bayh-Dole’s patent rights clause, that lacks the standing claim–“reverses the presumption of ownership”–but only once a contractor has got ownership. No wonder Bayh-Dole advocates had to resort to the “vesting” argument in Stanford v Roche. Bayh-Dole was a botch job, and the move to the FARs doubly botched it.

If the federal government re-implemented the Nixon patent policy for all inventions made under federal contract not owned by a contractor, then we would see the two regimes again. We could then ask whether Bayh-Dole, which in effect permits contractors to preempt federal objectives and inventors’ objectives with their own purposes, is really a proper or effective policy. Clearly, the policy part is not effective–inventions are not used more frequently under Bayh-Dole. From all appearances, inventions are used less frequently under Bayh-Dole, other than their “use” as objects of speculative interest by technology transfer offices. As for the proper part, why should it be that the government funds research based on an authority to promote the public interest but have a law that permits any private speculator that gains ownership of an invention made in that research to preempt the public interest that justified the funding in the first place?

Bayh-Dole’s preemption of public purpose makes a sham of public purposes. Bayh-Dole is not effective at what it does, and the preemption is not proper. For all that, Bayh-Dole is too complicated for the ordinary lawyer or university administrator to comprehend. On that basis alone, it ought to be done away with. Innovation from research is difficult enough. We don’t need innovation policy sleight-of-hand contracting tricks.

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