USC still misrepresents Bayh-Dole, 2018 version-Fitt 1

USC has a document on the web titled “Bayh-Dole Act Obligations for Universities” dated Sept 26, 2018 by the “USC Office of Research.” Let’s have a look.

This memorandum provides an overview of University and Federal policies and procedures concerning disclosure of Intellectual Property (IP), and the importance of timely disclosure of IP at USC.

We might note at the outset that Bayh-Dole pertains only to inventions and plant varieties–not to IP generally. USC also overstates the subject matter of Bayh-Dole by conflating Bayh-Dole with “University and Federal policies.” There’s an implication, drawn from the title and this opening statement, that the university’s policies are made to comply with Bayh-Dole. As we will see, this cannot be the case.

The document appears to be USC’s attempt to comply with Bayh-Dole’s standard patent rights clause requirement (at 37 CFR 401.14(f)(2)) that

The contractor shall instruct such employees through employee agreements or other suitable educational programs on the importance of reporting inventions  in sufficient time to permit the filing of patent applications prior to U.S. or foreign statutory bars.

Notice that this particular requirement in (f)(2) is one for instruction of employees, not a requirement that employees report inventions. The disclosure requirement in (f)(2) is specific to subject inventions–inventions already owned by a party to a federal funding agreement. Inventions that are acquired by the contractor and made under federal contract must be disclosed to the contractor’s personnel designated as responsible for patent matters. Disclosure means provision of the information necessary to prepare a patent application and evidence that the application is not barred by prior publication, public use, or offer for sale–it’s not merely reporting that an invention exists and some of its characteristics or applications. And this disclosure must be to patent personnel, not just anyone at the contractor. The contractor’s obligation to disclose any given subject inventions does not arise until the contractor’s patent personnel have received a conforming disclosure from the inventor(s).

Now on to USC’s instruction. Under “Key Takeaways” (bold added):

Compliance with both USC and Federal policies requires prompt disclosure of inventions and software to the USC Stevens Center for Innovation via its online portal Sophia.

More conflation. Bayh-Dole does not distinguish software from patentable invention. There is no special disclosure requirement for software in Bayh-Dole. Perhaps there is in USC policy–but this document purports to be about “Bayh-Dole Act Obligations.”

As for the use of the online portal, the standard patent rights clause requires contractors to require specified employees to make a written agreement to protect the government’s interest, including (more added bold):

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

So, yes, the standard patent rights clause permits contractors to suggest a format for disclosure of subject inventions and specify where disclosures should be directed (to personnel responsible for patent matters). But Bayh-Dole requires this disclosure format only for subject inventions, and thus not all inventions, and not even all inventions made under a federal funding agreement–only those that the university already owns. “If the university owns it, then you must disclose it in writing and among other things be ‘sufficiently complete in technical detail to convey a clear understanding to the extent known at the time of the disclosure, of the nature, purpose, operation, and the physical, chemical, biological or electrical characteristics of the invention.'”

Now for the fun. Bayh-Dole does not actually require inventors to disclose any subject inventions. Federal contractors are required to disclose subject inventions (inventions they own) but only after those inventions are disclosed to the contractors’ personnel responsible for patent matters. See 35 USC 202(c)(1). Got that?–Bayh-Dole requires contractor disclosure, but only after the contractor receives disclosure from the inventor *and* owns the disclosed invention *and* that invention is or may be patentable. Software that isn’t patentable can never be a subject invention.

The (f)(2) written agreement requirement in turn requires contractors to require inventors to make a written agreement to “disclose promptly in writing each subject invention”–that is, an invention the contractor already owns–“in order that the contractor can comply with the disclosure provisions of paragraph (c) of this clause.” Paragraph (c) is the requirement that the contractor disclose subject inventions to the federal agency in a specified format and with specified content.

The contractor has no compliance obligation to disclose an invention unless an inventor has disclosed it (and the contractor owns it, and it is patentable, and it was made under contract…).

If an inventor does not disclose, then the contractor has no obligation to disclose. Thus, the inventor has no obligation to disclose, since the contractor’s obligation to disclose only comes about if the inventor does disclose.

You see the problem? Bayh-Dole was drafted by clever incompetents. What better way to unleash American innovation but to have a single law preempting all other law and agency policy and then place that law in the hands of policy fools.

If USC were to comply with the (f)(2) written agreement requirement (just a hypothetical–no one to my knowledge does), then inventors would be parties to funding agreements, their inventions would be subject inventions (because the inventors own them), and the inventors would be de facto subcontractors who would have their own independent right to elect to retain title and USC would be prohibited by (g)(1) (among other things) from having any interest in those inventions as a condition of its subcontract (the written agreement that is compulsory on USC). That is, if USC complied with the standard patent rights clause, USC would have no claim to ownership in federally supported inventions if an inventor elected to retain title under 35 USC 202(a) and 37 CFR 401.9. Given that this USC document purports to describe university obligations under Bayh-Dole, there’s some fine irony for you.

Actual key takeaways, then–ones USC doesn’t bother with:

Inventors own their inventions, even when made under federal contract.

Nothing in Bayh-Dole requires inventors to disclose their inventions, use the patent system, or assign their inventions to anyone.

USC has an obligation under Bayh-Dole only when USC acquires ownership of an invention made under federal contract, and USC has no right under Bayh-Dole to acquire that ownership.

More of USC’s statement of university obligations:

Disclosure to USC Stevens of funded inventions should be made at least 75 days prior to any public publication  or presentation so that USC can fulfill its obligation to notify government sponsors.

There is nothing in Bayh-Dole that stipulates 75 days for inventor disclosure. There’s nothing–absolutely nothing–that places a time limit on when inventors must disclose inventions owned by a contractor to that contractor. The only whiff that there might be a time concern is in the (f)(2) requirement that contractors instruct their inventors on reporting “in sufficient time to permit the filing of patent applications . . . .” And there, perhaps mystifyingly, the requirement is to “instruct on the importance of reporting” rather than to “require reporting.” The wording we have must be intentional. Anyone with any competence could have drafted “require reporting” if they had wanted contractors to require inventors to report inventions. So we assume competence. Therefore the wording we have is what was intended, and inventors have no time deadline in Bayh-Dole in which to disclose inventions.

In Bayh-Dole, a contractor has a deadline on its own disclosure of subject inventions reported to it. The contractor’s disclosure to the federal government must be within “a reasonable” time–but that is the time from when the university’s patent personnel receive a conforming disclosure to the time those personnel disclose the invention to the federal government. In the standard patent rights clause, “reasonable” becomes “two months” after the inventor discloses it to the contractor’s patent personnel. The contractor’s obligation to disclose has nothing to do with whether there’s a bar date created by a publication or offer for sale (oops–USC forgot that bar to patenting) or other action that creates a patent bar date.

The issue of a bar to patenting has to do with the contractor’s time to elect to retain title, not disclosure. The contractor has two years to elect to retain title, except if there’s a bar date in the US, then the federal agency (provided it knows because the university has informed it) can shorten the election of title period to 60 days before the bar date. If an inventor discloses within 60 days of a bar date–that is, nearly a year after publication, say–then the federal agency doesn’t have any basis to shorten the period of election of title because it has no authority to shorten it more than to 60 days.

In any event, USC can’t distinguish between (a) its own obligation to disclose to the federal government when it has received a conforming disclosure of an invention it has acquired and (b) the period in which USC has the right to elect to retain ownership of what it already owns. USC can request disclosure 75 days before a publication, but there’s nothing in Bayh-Dole that creates any obligation for USC to comply with on the matter. Clearly, the folks writing USC guidance are not competent to manage any obligations under Bayh-Dole.

Failure to comply with any Bayh-Dole regulations and/or associated sponsor policies on intellectual property may result in the loss of patent rights or a withholding of additional grant funds.

Gobble-de-gook. What are these “associated sponsor policies” of which USC speaks? The document purports to concern Bayh-Dole obligations. There are no other “sponsor policies” on inventions. Again, the document conflates Bayh-Dole’s limited concern for patentable inventions and plant varieties owned by USC (in this case) with “intellectual property.” If we assume competence at this point, we are forced also to consider bad faith or malpractice.

It is simply untrue that any “failure to comply” with Bayh-Dole regulations may result in “the loss of patent rights.” Most of Bayh-Dole’s standard patent rights clause can be ignored at will. The only spots where a federal agency can request title are if a university contractor fails to disclose, fails to elect to retain title, fails to file a patent application, fails to prosecute that application, or fails to maintain or defend the validity of an issued patent. For everything else, crickets with regard to loss of patent rights. For nonuse or failure to comply with the thin preference for US manufacturing or fails to provide for needs not reasonably satisfied–there’s march-in, which has never been used and does not result in the loss of patent rights or funding–just compulsory licensing. For everything else–nada. For inventors, the list of worries is even smaller, as inventors have no obligation to file patent applications.

In some contexts, this would be fraud. If we assume competence, it is not an honest mistake. USC tries to rationalize its over/misrepresentation by adding “or a withholding of additional grant funds” as if this withholding would be directed at the inventors rather than the institution. There’s nothing in Bayh-Dole either way about withholding additional grant funds. This is just ghost story tactics, or administrative bullshit.

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