A federal statute passed in 1974 establishes a federal policy with regard to inventions made with federal support–15 USC 2218(d). Folks wrapped up with Bayh-Dole don’t often mention 15 USC 2218, which establishes the authority of the administrators of federal agencies to enter into contracts for research and to perform other administrative functions. Among these, 15 USC 2218(d) addresses federal claims to inventions and discoveries:
(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.
The Nixon patent policy revised the Kennedy patent policy of 1963 and required a codification of the policy in the Federal Procurement Regulations, which was finalized in 1975. The codification featured standard patent rights clauses to be used in all federal research and development contracting unless a federal agency could justify an exception that better served the public interest.
Thus, by 1975 federal policy had a uniform executive patent policy that was expressly endorsed by Congress, backed by a thorough codification of the policy that included patent rights clauses to be used by all federal agencies and provided for contractors who met certain conditions to own inventions arising in federally supported research or development.
Notable in the Nixon patent policy are the following:
The Nixon patent policy is subordinate to federal statutes. Thus, when Congress determines that a given protocol for the management of patentable inventions made in a specific area of research, such as the development of atomic weapons, should be managed in a given way, that Congressional determination takes precedence over the default executive branch patent policy and its standard patent right clauses. Similarly, should a federal agency determine that a course of management other than that provided by the policy default would better serve the public interest, the codification provides a procedure by which the agency may implement an exception to the default.
Second, the Nixon patent policy expressly provides for contractors to have patent agreements with specified employees who might invent under a federal contract so that federal agencies can obtain assignment of inventions claimed by the federal government. Whether any given contractor could retain title and not fulfill its obligation to assign to the federal government depended on the capability and commercial position of the contractor, the nature and objective of the federal contract, and an assessment by the federal agency of the public interest.
In four areas, federal agencies were expected to claim ownership of inventions: (1) where the federal objective was to develop technology to the point of practical application in the form of products for commercial or public use; (2) where the research involved public health or safety; (3) where the research was directed at regulatory needs; (4) where the contract involved directing the research of others.
Otherwise, commercial contractors could expect to retain ownership of patentable inventions made under contract if they wanted that ownership, while nonprofit organizations could expect to retain ownership of such inventions if the federal agency had provided for such ownership rights up front in the contract, for other contracts nonprofits could appeal to retain ownership for other contracts if they could demonstrate to the federal agency that such ownership would better serve the public interest.
This is the federal patent policy that provides a general, uniform framework for the administration of rights in inventions arising in federally supported research. A second framework provides a framework for the administration of inventions made by federal employees–that’s Executive Order 10096 (dating from 1950) and its codification at 37 CFR Part 501. The third part of the framework is provided by Bayh-Dole (35 USC 200-212; 37 CFR Part 401).
The important thing to understand is that Bayh-Dole did not repeal the Nixon patent policy or any of the statutes that addressed ownership of inventions made with federal support. Instead, Bayh-Dole took precedence over federal statutes and thus repealed only narrow portions of those statutes pertaining to administrative procedures for managing inventions when owned by the federal government. Bayh-Dole did not otherwise repeal federal statutes but took precedence. In particular, Bayh-Dole changed the order of precedence with regard to executive branch patent policy, and other statutes having to do with federal administration of inventions made under contract. Under the Nixon patent policy, federal statutes take precedence, then the Nixon patent policy defaults, and then federal agency exceptions.
Under Bayh-Dole, Bayh-Dole takes precedence over other federal statutes (except for Stevenson-Wydler and any later law that expressly cites Bayh-Dole)–but only for inventions that are acquired by federal contractors.
Let’s repeat: Bayh-Dole applies with regard to the ownership of inventions made under contract only when a contractor acquires ownership of such an invention.
That’s the interpretation of the law made by the Supreme Court in Stanford v Roche:
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.
Bayh-Dole’s section 210(a) expressly preempts 15 USC 2218–but only when there’s a subject invention–an invention owned by a contractor and made under contract:
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)
When a contractor acquires title to a patentable invention made under contract, Bayh-Dole preempts 15 USC 2218(d) and its requirement to follow the Nixon executive branch patent policy. If an invention becomes a subject invention, then Bayh-Dole handles it. Otherwise, if the invention is not a subject invention, then 15 USC 2218(d) requires the 1971 Nixon patent policy.
We can now see the full framework of federal management of inventions made under contract. The most general requirement is that of 15 USC 2218(d)–the Nixon patent policy applies for any such invention. Then there’s Bayh-Dole, which preempts 15 USC 2218(d) along with most other federal statutes when a contractor obtains ownership of any invention made under contract. For any invention that does not come under Bayh-Dole, 15 USC 2218(d) still applies.
Now there’s a bit of problem because the codification of that policy at 41 CFR 1-9 no longer exists. It was replaced in 1984 by the Federal Acquisition Regulations:
The general Federal Acquisition Regulation (FAR) published on that date is codified at chapter 1 of title 48. Chapters 2 through 49 of title 48 were reserved and established for individual agency implementations and supplementations of the FAR. The FAR in chapter 1 together with the agency regulations in chapters 2 to 49 comprise the Federal Acquisition Regulations System that went into effect on April 1, 1984.
The Nixon patent policy then has been reverted to its form prior to the codification of that policy. The Federal Procurement Regulation implementation is gone. In its place is Bayh-Dole, which preempts the Nixon patent policy by preempting 15 USC 2218(d), but only with regard to inventions made under contract owned by federal contractors.
Here’s the botch, then. Both 15 USC 2218(d) and 35 USC 200-212 require a federal agency to use a standard patent rights clause–but these clauses are different and the Bayh-Dole one comes into play only when a contractor comes to own an invention–and how that ownership is disposed is outside of Bayh-Dole’s scope (though the standard patent rights clause authorized by Bayh-Dole has ownership requirements that are no where in Bayh-Dole–with regard to subcontracts and with regard to the assignment obligations of inventors). To cover all cases, a federal agency would have to use two standard patent rights clauses for each funding agreement–one that applies when a contractor acquires ownership and one that applies otherwise.
Far from making federal contracting simpler, Bayh-Dole makes it unfathomably more complicated. But with the elimination of the Federal Procurement Regulations codification of the Nixon patent policy, the executive branch created a great hole in federal contracting–there is a need for two patent rights clauses but instead we now have only one, supplied by Bayh-Dole.
The drafters of the implementing regulations for Bayh-Dole perhaps anticipated that the Federal Procurement Regulations were going to be replaced by the FARs. In any event, they worked hard to broaden what inventions would be subject inventions. They did this with a (nuanced | convoluted) requirement in the standard patent rights clause (37 CFR 401.14(f)(2)) that contractors compel their inventors to become parties to the funding agreement–that is, become themselves contractors.
I won’t belabor all the nuances of the (f)(2) requirement here. No one complies with the (f)(2) requirement anyway and university administrators feign not to know what the inventor patent rights clause at 37 CFR 401.9 means. Heck, even NIST feigns that it does not understand even the (f)(2) provision, and so added an assignment requirement to the clause after nearly 40 years–but that clause is specific to subject inventions–so contractors must require inventors to promise to assign to contractors all future inventions that the contractors already own. Go figure that nonsense. No wonder they all wish a court would bang them on the heads and shake all their sillies out.
The point is that if a contractor complies with the (f)(2) requirement or otherwise makes their inventors parties to the funding agreement (Bayh-Dole’s definition of “funding agreement” provides for contractors to add parties to the funding agreement by assignment, substitution of parties, and subcontract–see 35 USC 201(b)), then inventors when they invent create subject inventions because inventors own their inventions. That is, if inventors are parties to the funding agreement, then Bayh-Dole’s 35 USC 202(a) applies to them and 15 USC 2218(d) is preempted. If inventors are not parties to the funding agreement, then 15 USC 2218(d) applies and Bayh-Dole doesn’t. If a contractor subsequently acquires ownership of an invention made under 15 USC 2218(d), then Bayh-Dole applies.
The problem in all this (er, one problem in all this) is that a federal agency must use the Bayh-Dole standard patent rights clause in its contracts, but if a contractor does not acquire ownership, the federal agency is required by 15 USC 2218(d) to have used a patent rights clause compliant with the Nixon patent policy. As you can see, there is a fundamental mismatch in time because a federal agency cannot know in advance whether a contractor will obtain ownership of any given invention made under contract. It appears that Lakter’s scheme finally grew more complicated than he could control, but the botch gets buried in competing patent rights clauses where it is impossible for federal agencies to comply with both. Things might have been manageable had Latker sought an extension to 15 USC 2218(d) that permitted the IPA program as a standard exception rather than go directly to the General Services Administration with the proposal, where it got blocked and the IPA program was shut down at the NIH and NSF.
Any account of Bayh-Dole should start with 15 USC 2218(d) and the Nixon patent policy. That’s the overarching regulatory framework. Bayh-Dole comes into this framework by preemption when a contractor obtains ownership of an invention made under contract. The overwhelming effort of university administrators has been to find ways to claim ownership of all inventions made by faculty, thus ensuring that all inventions made under federal contract will be subject inventions and thus enable Bayh-Dole’s preemption. But nothing in federal policy–or statute–requires university administrators to do this, and nothing indicates that by doing so university administrators improve the public’s benefit arising from the outcomes of federally supported research.