NIST’s Explanation of the Addition of an Assignment Requirement

NIST added an assignment requirement to the standard patent rights clause authorized by Bayh-Dole. There’s no authority in Bayh-Dole, however, for an assignment requirement. The Supreme Court in Stanford v Roche made clear that Bayh-Dole does not vest ownership, does not require assignment of ownership, does not give contractors any special privilege to take ownership, or otherwise mandate that contractors obtain ownership of any invention made in work with federal support. NIST has nothing to stand on, but they still must think that forcing bureaucratic control of federally supported inventions is a top-notch way to “unleash” innovation.

Let’s look at how NIST tries to rationalize what they have done.

First, keep firmly in mind that Bayh-Dole does not require any written agreements whatsoever between employers and employees. There’s no authorization in Bayh-Dole for federal agencies to require that employees who invent assign their patent rights to their employers or even to the federal government. When the Supreme Court looked at Bayh-Dole in 2011, it made clear that Bayh-Dole does not vest ownership of inventions with federal contractors and does not give contractors any special privilege to take ownership:

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.

Nothing in Bayh-Dole authorizes NIST to require that contractor require assignments of inventions. If NIST had the good sense to comply with the law, NIST would have to determine that there were extraordinary circumstances and create a patent rights clause that required contractors to require assignments from inventors to address those circumstances. But NIST has not done that.

When Bayh-Dole’s implementing regulations were put in place in 1987, they included in the standard patent rights clause that added a requirement that contractors require a written agreement. That written agreement did not include any obligation to assign inventions. The agreement requirement–at (f)(2) of the patent rights clause–came under the head of “Contractor Actions to Protect the Government’s Interest.” The contractor was required to delegate responsibilities to inventors–to disclose subject inventions timely, to sign papers to permit patent applications to be filed and to sign papers to establish the government’s rights in subject inventions.

A subject invention, as the Supreme Court in Stanford v Roche made clear, is an invention owned by a contractor. A contractor is defined by Bayh-Dole as any party to a federal funding agreement. The definition of funding agreement in Bayh-Dole includes adding parties to the funding agreement by any assignment, substitution of parties, and subcontract of any type. The effect of the written agreement requirement is to add research employees as parties to the funding agreement. Otherwise, the (f)(2) requirement makes no sense–inventors are to be required to disclose subject inventions–inventions that the contractor already owns. But what inventions are those? They would have to be ones that the contractor assigned the inventor to invent, ones that the contractor would have an equitable right to based on something other than the funding agreement or use of federal funds. But in that case, an inventor would have no rights remaining by which to establish the government’s rights by signing papers.

But there is a way to make sense of all this. The (f)(2) requirement does not require assignment, but it does make inventors parties to the funding agreement. Thus, when an inventor invents within the scope of a funding agreement, the inventor owns the invention and the invention therefore is a subject invention–without any assignment to the employer/contractor. The inventor also is a contractor–but as a contractor, the inventor has the same right as the employer/contractor under Bayh-Dole’s fundamental provision at 35 USC 202(a):

Each nonprofit organization or small business firm may, within a reasonable time after disclosure as required by paragraph (c)(1) of this section, elect to retain title to any subject invention

The implementing regulations make clear that when an inventor owns a subject invention, the inventor should be treated as a small business contractor. See 37 CFR 401.9. That is, the inventor has, by federal law, the right to retain title, provided the invention is disclosed and the inventor elects to retain title.

In May 2018 NIST changed the (f)(2) written agreement requirement to include an assignment requirement:

. . . to assign to the contractor the entire right, title and interest in and to each subject invention made under contract . . .

But the subject invention referred to here must be an invention already owned by the employer/contractor because Bayh-Dole provides that small business contractors can retain title, and the inventor has been made a small business contractor by the (f)(2) written agreement requirement.

If NIST insists that the assignment requirement is for any invention made by employee/contractors, then NIST turns Bayh-Dole back into a vesting statute–which the Supreme Court emphatically ruled that Bayh-Dole is not. There’s no authority in Bayh-Dole for such a requirement, except as an exceptional circumstance, which requires a formal justification.

NIST provides an FAQ that lays out its reasoning for adding an assignment clause. Here’s the question in the FAQ:

Can the present assignment agreement collected at the time of invention disclosure serve as the “written agreement….to assign” in the revised rule?   Does the assignment agreement have to be in place at the time of award funding?

And the answer:

The purpose of the requirement under 37 CFR 401.14(f)(2), that a contractor agree “to require, by written agreement, its employees . . . to assign to the contractor the entire right, title and interest in and to each subject invention made under contract . . .” is to ensure that an employee’s written obligation to assign to the contractor is clearly established for the entirety of the funding agreement, and so to protect the Government’s interest against competing claims.

There is of no requirement in Bayh-Dole that inventors must give up their rights to inventions. NIST is just pulling the requirement from its posterior cortext.

This issue was addressed by the Supreme Court in Stanford University v. Roche Molecular Systems, Inc., 563 U.S. 776 .

And there, the Supreme Court made clear that there was no assignment mandate in Bayh-Dole, so NIST has no authority to put an assignment requirement in the standard patent rights clause. Any assignment clause would have to be a declared exceptional circumstance to comply with Bayh-Dole. The Supreme Court observed that if Stanford had wanted ownership, it could get that assignment through the conventional means of a patent agreement. NIST pre-empts employers’ choices by requiring assignment.

Waiting until the time of invention disclosure to require an employee to execute an agreement to assign to the contractor would satisfy neither the rule nor the purpose of the rule.

Many contractors fulfill this and other elements of 37 CFR 401.14(f)(2) by incorporating these requirements into employment agreements or through separate written agreements with their employees.

These agreements have nothing to do with the (f)(2) requirement. Those agreements do not make inventors parties to the funding agreement and thus any inventions made are not subject inventions–there is no obligation for such inventions to be disclosed under Bayh-Dole. Indeed, there is no Bayh-Dole compliance required whatsoever. Inventions that are not subject inventions but made under a federal contract are subject to the statutes that Bayh-Dole otherwise preempts, including 15 USC 2218(d), which requires an agency to comply with the Nixon patent policy, at least for fire prevention and control research:

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.

NIST does not seem to be aware of these basics of Bayh-Dole. Contractors protect the government’s interest by requiring the (f)(2) written agreement. When they comply, they make inventors parties to the funding agreement and those inventions then become subject inventions when they are made. Nothing in the (f)(2) agreement, however, protects the government’s interest one way or another. If the (f)(2) agreement is not executed, then federal statutes otherwise preempted by Bayh-Dole apply and otherwise the Nixon patent policy controls and federal agencies have the right to acquire title as provided by that policy statement.

NIST concludes:

Such agreements are contracts generally governed by state law, and contractors may wish to seek counsel familiar with the laws of their state with questions regarding such agreements.

NIST has no idea what the (f)(2) agreement does nor what it cannot do, according to the Supreme Court.

Another of the elements under 37 CFR 401.14(f)(2) is the contractor’s agreement to require its employees to “execute all papers necessary to file patent applications on subject inventions and to establish the government’s rights in the subject inventions.”

This is not quite accurate. The (f)(2) requirement is for contractors to require employees to make a written agreement–the employees agree to execute all papers–but they make that agreement as part of the federal funding agreement, not as a benefit to their employers. Employers require the written agreement; if they require employees to execute papers on behalf of the employer, that’s not a matter for Bayh-Dole compliance. Well, actually it may be, since the standard patent rights clause at (g)(1) also forbids a contractor from asserting any interest in subject inventions of subcontractors. Given that employees become contractors by the action of the employer/contractor, they are subcontractors under (g)(1) and the employer/contractor is limited in how it can require assignment.

All this is lost on NIST, which aims to make Bayh-Dole become once again a vesting statute, not only by adding a spurious and unauthorized assignment provision but also by posturing that contractors should use present assignments to secure title. The effect is to disenfranchise inventors as a condition of compliance with NIST regulations.

More NIST:

These papers may include, inter alia, an assignment identifying a patent application by number as required by the USPTO under 37 CFR 3.21, separate and apart from the employee’s written obligation to assign, discussed above.

The USPTO does not require inventors to file assignments identifying a patent application by number. The issue of assignments is for anyone else claiming ownership of an inventor’s invention. The government’s interest in any subject invention is protected by the inventor agreeing to establish the government’s rights, not by the inventor agreeing to make a second assignment for each invention–one that’s upfront the time of the contracting and one later after there’s an invention that the employer desires to claim.

There is no point to NIST’s added requirement to assign subject inventions but to add administrative overhead, disenfranchise inventors of their rights under federal law, violate Bayh-Dole, and thumb their noses at the Supreme Court. Other than that, we are all fine here.

It’s then silly that NIST proposes further changes to Bayh-Dole’s regulations that add administrative overhead and move yet further away from compliance with Bayh-Dole in the name of “unleashing” innovation arising from federally supported research. For all the talk of the importance of the patent system, NIST disregards the fact that the Constitutional authorization is for Congress to reserve for inventors exclusive rights. NIST apparently believes that the patent system should exist for the benefit of organizations not inventors, and that federal funding somehow justifies NIST’s regulatory rewriting of federal patent law.

In 35 USC 200, Congress declares its policy and objective to use the patent system to promote the utilization of inventions arising in federally supported research or development. Congress did not declare a policy and objective to circumvent the patent system’s preference for the inventor. NIST ought to pay attention. Instead, NIST is intent on creating a patent system for bureaucrats and speculators as the primary approach to unleashing federally supported inventions.


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