Now, let’s emphasize a few points.
There are at least three ways that a contractor may come to own an invention made with federal support:
- inventors assign their inventions
- state law (in some cases, such as Ohio Rev Code 3345.14)
- by making inventors parties to the federal funding agreement.
In the last instance, a contractor turns inventors into contractors rather than takes ownership of inventions from inventors. There are other ways, too–for instance, by bequest, by a court’s finding of equitable title (an implied, compulsory assignment), by exclusive license that grants all substantial rights.
Bayh-Dole’s standard patent rights clause (at 37 CFR 401.14(f)(2)) requires contractors to require certain employees to make a written agreement to protect the federal government’s interest. Let’s explore this written agreement and its status within the federal contracting environment of specialty statutes, the Reagan patent policy that modifies the Nixon patent policy, and Bayh-Dole.
The written agreement requirement is oddly worded. Had Bayh-Dole been intended to apply directly to inventors, the law could (perhaps) have openly required inventors to disclose inventions or to assign or license inventions to the federal government or to contractors as may be provided for under the law. As the Supreme Court noted in Stanford v Roche, the law nowhere does this, and if Congress intended such an outcome, it would have to make its intent to do so manifestly clear.
Moreover, the standard patent rights clause at 37 CFR 401.14 does not address inventors directly. There’s nothing there that requires inventors to disclose, assign, file patent applications, or establish the government’s rights. The standard patent rights clause is clearly between the government and the initial contractor. Only actions of the contractor–any assignment, substitution of parties, or subcontract of any type–can extend the patent rights clause to others, making them parties to the funding agreement and therefore, by the definition at 35 USC 201(c), contractors.
It is also clear that the written agreement is not a patent agreement. The patent rights clause required by the codification of the Nixon patent policy required a patent agreement (FPR 1-9.107-5(e)(3):
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.
When folks (including Norman Latker, who had a hand in drafting Bayh-Dole and the Nixon patent policy) drafted the written agreement requirement, they were looking squarely at the FPR requirement, which had be adopted in 1975–just four years before Bayh-Dole was introduced as a bill:
The contractor agrees to require, by written agreement, its employees, other than clerical and nontechnical employees to [a list of things these employees must agree to do].
Bayh-Dole, too, echoes the wording of the FPR (35 USC 202(c)):
Each funding agreement with a small business firm or nonprofit organization shall contain appropriate provisions to effectuate the following:
It is clear that those involved with Bayh-Dole were keenly aware of the FPR clause requiring contractors to have patent agreements with employees and chose not to do so in Bayh-Dole’s standard patent rights clause, even when they followed the language of the FPR in the very clause that required patent agreements. Instead, they created a requirement for a “written agreement” and (until NIST did a silly thing in May 2018) that written agreement had no assignment requirement:
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, and to execute all papers necessary to file patent applications on subject inventions and to establish the government’s rights in the subject inventions.
to assign to the contractor the entire right, title and interest in and to each subject invention made under contract,
But a subject invention is one that is owned by the contractor. NIST requires contractors to require their inventors to assign each invention that the contractor necessarily already owns. Contractors must take assignment of what the contractor owns. But that does not reach to inventions made under contract, to turn those inventions into subject inventions. The Supreme Court ruled that Bayh-Dole does not provide for any such privilege on the part of employers–contractors.
There is no authority then in Bayh-Dole for NIST to add an assignment clause that would turn inventions made under contract into subject inventions by compelling inventors to assign their inventions to a contractor. Clearly there was authority for such a thing in the Nixon patent policy, because there it is in the patent rights clause of the FPR codification of the Nixon patent policy. But Bayh-Dole’s standard patent rights clause uses “subject invention”–not just “invention made under contract.” Even if the executive branch had meant to compel inventors to give up ownership of their inventions made with federal support where Congress had not so intended, NIST’s change does do that.
The alternative is that the written agreement requirement is a requirement that contractors add certain of their employees as parties to the funding agreement. The written agreement takes the form of a substitution of parties for a special portion of the work that a contractor undertakes under the standard patent rights clause. If contractors comply with the written agreement requirement, they make their employees parties to the funding agreement. If contractors do not comply, or do not otherwise voluntarily make their employees parties to the funding agreement, then their employees are not parties to the funding agreement, and their inventions, when made, are not subject inventions unless a contractor has implemented a private scheme under which it has established equitable title in all such inventions.
Any such private scheme has nothing to do with Bayh-Dole compliance. And depending on the cleverness of the scheme, it may be decidedly inequitable, may violate some state laws regarding employer claims to inventions made by employees (such as California Labor Law 2870-72), and in the case of universities, may abrogate assurances of faculty freedom of research and freedom to publish. A patent application, after all, is a publication, and if a university owns a patent then it controls the venue in which a faculty member may undertake research.
Such a private scheme, too, may fail to comply with Bayh-Dole–if the (f)(2) written agreement requirement requires an initial or prime contractor to make each inventor a party to the funding agreement, and therefore have standing as a contractor with equal rights to elect title to inventions made under contract without interference from other contractors, even employers, then the private scheme not only fails to comply with Bayh-Dole but also it actively works against what Bayh-Dole requires. We probably won’t ever know, because federal agencies do not enforce most of the standard patent rights clause, including its protections for inventors, industry, and the general public.
Since a “subject invention” is an invention “of the contractor,” it is essential in reading Bayh-Dole to know which contractor is linked to any given invention. An invention made with federal support (or “under contract”) that is not owned by a contractor is not a subject invention. If a contractor has expanded the parties to a federal funding agreement, then “of the contractor” could refer to any one of these parties, depending on the facts, documents, and the context.
For instance, if a contractor makes its employees parties to a federal funding agreement, then each of those employees, if they invent, becomes a contractor and their inventions if made under contract–because by default the inventor owns them–are subject inventions.
If a contractor subcontracts a portion of the work under a federal funding agreement, then the subcontractor becomes a party to the funding agreement and any invention the subcontractor owns is an invention “of the contractor”–meaning, now, the subcontractor.
If a contractor assigns a subject invention, then that assignee becomes a party to the funding agreement–a contractor–and any inventions it makes and owns “under contract,” that is, “in performance of work under the funding agreement” are also subject inventions “of the contractor.”
We will look at some examples of how a contractor expands the funding agreement to include more parties, and therefore more contractors. We will also look at what happens when an invention made under contract is not a subject invention and sort out how the Nixon and Reagan patent policies apply.