Another university misrepresents Bayh-Dole

Here’s another misrepresentation of Bayh-Dole by a university technology transfer office–at Loma Linda University. This statement is typical of what happens when someone relies on the information put out by organizations such as AUTM–information people ought to be able to expect is reliable but it is not:

The Bayh-Dole Act (1980) requires universities to report all inventions arising from federally supported research, and to diligently pursue patent protection and commercialization for new technologies that are commercially promising.

Seven big time problems in a single sentence! Such density!

(1) Bayh-Dole does not require universities to report all inventions arising from federally supported research. Bayh-Dole requires disclosure only of *subject inventions*–inventions that a contractor owns and which were made under contract. If a contractor does not own the invention, then it cannot be a subject invention, and is not therefore subject to the disclosure provision of Bayh-Dole’s standard patent rights clause. 35 USC 201(e). Stanford v Roche

(2) A university’s obligation to disclose subject inventions under Bayh-Dole is conditional–the university must disclose only when its personnel designated for patent matters receive a complete disclosure of a subject invention from the inventor. If those personnel do not receive such a disclosure, then the university has no obligation to disclose that invention to the federal government. That’s just the way it is. 35 USC 202(c)(1).

(3) Bayh-Dole requires a contractor to file a patent application for a subject invention only when the contractor chooses to retain title to that invention. If a university does not choose to retain title, then it has no obligation to file a patent application. A university has to have some reason of its own, consistent with its mission, to choose to retain title and to use the patent system. See 35 USC 202(c)(3).

(4) If a university complies with Bayh-Dole’s standard patent rights clause and makes its inventors parties to the federal funding agreement, then those inventors become contractors under Bayh-Dole’s definitions, and are subject to the inventor’s patent rights clause. Under the inventor’s patent rights clause, inventors have no obligation to use the patent system. They may elect to retain title, as small business contractors, but they do not have to file any patent application. Nothing in Bayh-Dole requires universities to take from inventors title to inventions made under federal contract. See 37 CFR 401.9, 37 CFR 401.14(f)(2).

(5) There is no mandate in Bayh-Dole for “commercialization.” Bayh-Dole’s primary stated objective is “utilization.” The threshold upon which the federal government can require the licensing or further licensing of a subject invention is “practical application”–use with benefits available to the public on reasonable terms. Nothing requires commercialization. Use and public availability are the objectives. Commercialization is merely one way that these objectives might be achieved. Nothing in Bayh-Dole compels a university to adopt commercialization as the first, primary, or only way of achieving utilization or practical application. See 35 USC 200, 35 USC 201(f), 35 USC 203.

(6) Bayh-Dole pertains only to subject inventions–owned by a contractor and either (i) are or may be patentable or (ii) protectable under the Plant Variety Protection Act. Bayh-Dole does not deal with “new technologies”–a term so broad that it includes inventions that are not patentable and things that are not inventions at all, such as new software that operates according to known algorithms. Representing that Bayh-Dole extends to new technologies generally makes it appear that Bayh-Dole extends to more than it does, and obligates a university to report more than it is required to, and suggests that the university has a claim to ownership based on federal law to far more than it does. See 35 USC 201(d) and (e).

(7) There is no provision in Bayh-Dole that restricts university activity to those subject inventions that are “commercially promising.” If a university acquires ownership of an invention made under contract and chooses to retain that ownership, then the university undertakes the duty to use the patent system to promote the utilization of that subject invention, entirely without regard to whether the invention is “commercially promising” or even whether the use resulting in public benefit on reasonable terms is “commercial.” The use could be in research or could be professional use, such as a tool for analysis, without any selling involved. Bayh-Dole has no provision for holding a portfolio of subject inventions, excluding all of them from general use, on the expectation that only some–those that are “commercially promising” need be worked. Further, a university must make an effort to attract small businesses to take licenses–and again that duty does not depend on a finding that a given subject invention is “commercially promising.”  See 35 USC 200, 35 USC 202(c)(3), 35 USC (c)(7)(D), 35 USC 203, 37 CFR 401.14(k)(4).

Each of these problems is a fundamental misrepresentation of Bayh-Dole. These are not technical quibbles. They run to the heart of Bayh-Dole. The Supreme Court in Stanford v Roche affirmed and restated that heart.

The impression left by this university statement is that federal law gives universities the authority to take ownership of any and all new technologies made with federal support and for those that appear promising to partner with companies seeking to profit from exploiting them. Bayh-Dole gives no authority to take ownership. Bayh-Dole has no mandate to include unpatentable stuff. Bayh-Dole has no exception for the subject inventions that a university does not work or make available, regardless of whether they do not appear to a university official to be “commercially promising.”

As drafted, this statement full of density makes it appear that federal law condones university poaching of inventions made with federal support, requires universities to seek commercialization deals, but gives the universities a free pass if they don’t bother. That’s a sweet dream if all one intends to do is speculate on research inventions. It’s a nightmare for everything else.

The irony is that Loma Linda University once had this in its patent policy (1956):

Medical and dental ethics which prohibit physicians and dentists from realizing any direct or indirect material return from the manufacture, sale or distribution of any product for which the patient pays, or which is used as a therapeutic device or health aid, or which in any manner affects public health shall be the governing principle to the faculty member, the employee or student of the University who has a patentable idea of possible value to medicine. 

Loma Linda still could manage medical inventions under Bayh-Dole–it’s just that it would do so (i) only when asked to do so by physician or dentist inventors and (ii) only if physicians and dentists agreed to have no direct or indirect material benefit from the activity and (iii) the basis for management was “possible value to medicine”–not to commerce.

Nothing in Bayh-Dole forbids such a policy or requires any change. While Bayh-Dole requires nonprofits to share royalties with inventors, nothing in Bayh-Dole requires nonprofits to demand royalties. They can license royalty free. They can develop, use, and make available without licensing. Bayh-Dole does not require that decisions with regard to invention management focus on what is “commercially promising.” A university could, in full compliance with Bayh-Dole’s standard patent rights clause, take up management of only those inventions with value to medicine, quite apart from whether such inventions also were “commercially promising.”

Indeed, it is a cognitive illusion to make it appear that inventions have an inherent value that may be perceived by university administrators or even by specialist advisors. One does not reason from invention to the market, but from an understanding of practice to what one might do with an invention. It is not the invention that carries the value, but rather than change in practice that may be brought about by the invention. In my experience, inventions that appeared “commercially promising” often were not, and ones that appeared anything but “commercially promising” turned out to have substantial value, even to industry, even if never formed into and sold as products.

An inventor and others may imagine how an invention might change practice, and might then run on to the benefits that may come from such changed practice. It is entirely another matter to scheme how one might induce investors or companies to pay to buy up the opportunity to monopolize and profit from this imagined change in practice and those imagined benefits. It is a further matter altogether to scheme how a university might be complicit in the financial upside of having the right to exclude all others from changing practice and the benefits of doing so, unless they are able to pay the university’s and its commercialization partner’s price. It is far afield to go the next step and rationalize such a scheme as in the public interest and within the university’s mission.

And it is to normalize just such far afield rationalization of university financial interest in the exploitation of monopoly positions in matters of public health that universities casually and thoroughly misrepresent Bayh-Dole and so compromise, if not poison, their public purpose.

To be even more helpful than I already have been, here’s a statement that better gets at Bayh-Dole.

The Bayh-Dole Act (1980) requires federal agencies to require universities to report to the federal government all inventions that they acquire arising from federally supported research, and which are disclosed to their patent personnel, and to diligently pursue patent protection for those inventions that the university chooses to continue to own.

I can’t help it if Bayh-Dole is a prissy, convoluted law. But even this summary really does not get at Bayh-Dole–instead it reads as a reminder for administrators about a tiny bit of their duty. A statement about Bayh-Dole that might be meaningful is this:

The Bayh-Dole Act (1980) gives inventors the right to retain title in patentable inventions made under federal contract with a university. If the university subsequently acquires ownership of such an invention, the university commits to use the patent system to promote the utilization of the invention.

This statement follows Stanford v Roche. Bayh-Dole does not dispossess inventors of the ownership of their inventions. It does just the opposite, in fact. Bayh-Dole preempts other federal statutes, including executive branch patent policy, which required both inventors and their employers to be prepared to assign inventions made under contract to the federal government unless the federal government decided (or had already decided) otherwise.

Bayh-Dole conditionally preempts federal claims of ownership when an inventor discloses an invention to the federal government and gives notice that he or she will retain title to the invention. That’s the point of 35 USC 202(d) and 37 CFR 401.9. Unlike the inventor patent rights clause, the standard patent rights clause applicable to universities, 37 CFR 401.14, requires the university that acquires ownership of a subject invention to use the patent system. The primary objective given at 35 USC 200 (there are others) is to use the patent system to promote the use of the invention. If the university does not promote the use of the invention such that the benefits of that use are available to the public on reasonable terms, then the federal government can intervene and compel the university or any subsequent assignee or exclusive licensee to grant licenses to others (including even an exclusive license, which could amount to an assignment of the invention) on terms set by the federal government that are “reasonable under the circumstances.”

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