We are working through the answer to when an invention is a Bayh-Dole subject invention. The reasoned answer is when the invention meets every element of the definition of subject invention at 35 USC 201(e). The simple answer in practice is that a subject invention is whatever someone who can ruin your life says it is. Bayh-Dole is a bully-happy law this way. However, to work through the largely meaningless reasoned answer, we have to work through the definition of subject invention. There’s absolutely no point in doing so, because most everyone ignores the law, and the law itself is clumsy and the implementing regulations both clumsy and stupid, but if you insist, then why not? Yeah! Let’s do it!
4. The definition of subject invention.
Now let’s look then at the Bayh-Dole definition of subject invention. First, the full definition. Then we will nibble it off, bit by bit.
The term “subject invention” means any invention of the contractor conceived or first actually reduced to practice in the performance of work under a funding agreement: Provided, That in the case of a variety of plant, the date of determination (as defined in section 41(d)  of the Plant Variety Protection Act (7 U.S.C. 2401(d))) must also occur during the period of contract performance.
of the contractor
Let’s work first with “of the contractor.” The Supreme Court in Stanford v Roche was clear that “of” means “owned by” not “produced under the auspices of.” If a contractor does not own a given invention, then it cannot be a subject invention. That much is clear. If a contractor does not own a given invention, then nothing in Bayh-Dole specific to subject inventions applies. That goes for obligations to disclose, assign, file patent applications, promote utilization, achieve practical application–contractor does not own, these obligations do not come into effect.
If someone wants to prevent an invention from becoming a subject invention, the obvious thing is for no contractor to own it.
Federal statutes might otherwise apply, but the apparatus to enforce them has been largely abandoned or repealed. If a contractor–a party to a federal funding agreement–does not own a given invention, it cannot be a subject invention.
Now for “contractor.” Bayh-Dole defines contractor:
The term “contractor” means any person, small business firm, or nonprofit organization that is a party to a funding agreement.
“Contractor” is any party to a funding agreement–that includes individuals, small businesses, and nonprofits. Bayh-Dole provides that a party to a funding agreement may add other parties to the funding agreement. Contractors may add contractors. See the definition of funding agreement at 35 USC 201(b). Funding agreement
includes any assignment, substitution of parties, or subcontract of any type entered into for the performance of experimental, developmental, or research work under a funding agreement as herein defined.
Thus, if a party to a funding agreement makes any assignment, substitutes any party, or subcontracts, it adds a party to the funding agreement. That new party is also a contractor. The assignment, substitution, or subcontract itself becomes part of the funding agreement, and those that are parties to the assignment, substitution, or subcontract are by definition also necessarily parties to the funding agreement. Bayh-Dole goes out of its way to make clear that *any* assignment and subcontract *of any type* becomes part of the funding agreement. In 35 USC 202(c)(7)(A), Bayh-Dole insists that an assignment of a subject invention requires the assignee to accept the provisions of the nonprofit assignor’s patent rights clause, a part of the funding agreement. Thus, assignees of subject inventions are also parties to the funding agreement and therefore also contractors.
If a contractor makes employees parties to a funding agreement, then those employees are also contractors. If such an employee-contractor subsequently invents, then under federal patent law, the employee owns the invention, and if the other elements of Bayh-Dole’s definition are met, then the invention is a subject invention, even if the institutional contractor does not own it.
Thus, to avoid turning an invention into a subject invention, a contractor should avoid making its employees parties to the funding agreement.
Bayh-Dole does not require a contractor to make its employees parties to a funding agreement. Nor does Bayh-Dole require a contractor to make its employees assign their inventions to the contractor. Bayh-Dole also does not mandate that a contractor own inventions or give contractors any special privilege to take ownership of inventions.
The standard patent rights clause implemented by the Department of Commerce (and delegated to NIST for administration) includes a requirement (37 CFR 401.14(f)(2)) not in Bayh-Dole that contractors must require certain of their employees to make a written agreement to protect the government’s interest in subject inventions. That written agreement requirement, if complied with, would make the contractor make those employees parties to the funding agreement. When those employees invented (within the scope of Bayh-Dole’s definition), those inventions would be subject inventions, owned by the employees as parties to the funding agreement, as contractors. Bayh-Dole does not require inventors to assign their inventions, and neither did the written agreement requirement in the standard patent rights clause until last year, when NIST added an assignment requirement to the written agreement. (While it is apparent what NIST was aiming for, NIST doesn’t have the authority to achieve it–you can can work through the law and the Stanford v Roche decision to see that it doesn’t, but NIST doesn’t give a rat’s ass about it.) Fortunately, no one complies with the written agreement requirement anyway.
To make sure that an invention does not inadvertently become a subject invention, contractors and federal agencies alike should continue to ignore the written agreement requirement in the standard patent rights clause.
“Invention” is also defined by Bayh-Dole 35 USC 201(d):
The term “invention” means any invention or discovery which is or may be patentable or otherwise protectable under this title or any novel variety of plant which is or may be protectable under the Plant Variety Protection Act (7 U.S.C. 2321 et seq.).
Next we have to deal, then, with “is or may be patentable” and “or otherwise protectable.”
which is or may be patentable
If an invention is not in a condition to be patentable, then it is not a subject invention.
If the invention is not directed at patentable subject matter, it is not patentable. If the invention is not new, useful, and non-obvious, it is not patentable. If the invention has been disclosed publicly for more than a year, it is not patentable.
If the inventor does not recognize an invention as inventive, then it cannot be shown to have been reduced to practice and is not patentable. Here’s the MPEP (2138.05) on the matter:
The invention must be recognized and appreciated for a reduction to practice to occur. “The rule that conception and reduction to practice cannot be established nunc pro tunc simply requires that in order for an experiment to constitute an actual reduction to practice, there must have been contemporaneous appreciation of the invention at issue by the inventor.. Subsequent testing or later recognition may not be used to show that a party had contemporaneous appreciation of the invention.
This is important. If an inventor does not want an invention to become a subject inventions, then don’t recognize it as inventive. It doesn’t matter, then, whether a contractor (say, a university) insists that it owns everything that an inventor makes–if the inventor does not recognize some discovery or apparatus or whatever as inventive, then whatever-it-is does not meet the condition of “is or may be patentable.” You may think it odd that an inventor might not want an invention to be patented, but there are plenty of reasons for such a desire if the inventor will lose control of the invention to university patent administrators who then might license the invention exclusively to a favorite company (or, much more commonly, not license it at all, excluding everyone–even the inventor should he/she leave the university and not be prepared to take a license that at minimum requires the inventor to pay the university for its patent expenditures).
If the invention has not been described in sufficiently complete detail, it is not patentable.
University invention disclosure practice totally messes up this step. Many university disclosure policies require the disclose of “inventions” regardless of whether they are “patentable.” Policies may use “creation” or “technology” or may define “invention” to mean “anything that our attorneys can put in a list of things we want as well as anything else they didn’t think of–because we just don’t know what we might want until we see it.” Thus, just because some new thing is reported on a university disclosure form does not mean that those doing the reporting think they are inventors of a patentable invention, even if they write their names on lines labeled “inventor”–because that use of “inventor” is based in the university’s idiosyncratic policy definition of “invention.”
Here is what goes on: a university requirement that an invention be disclosed has the effect of requiring that the invention be described. If that description is of sufficient detail and completeness, then the description in the disclosure meets the requirement for patentability, if the invention has not already been so fully disclosed. Here is what Bayh-Dole has to say about it (35 USC 202(c)(1)):
That the contractor disclose each subject invention to the Federal agency within a reasonable time after it becomes known to contractor personnel responsible for the administration of patent matters,
That is, Bayh-Dole says next to nothing about how inventors document inventions. As far as Bayh-Dole is concerned, until an invention meets the definition of subject invention, there is no obligation on the part of any contractor to report it to a federal agency. Even an invention known to employees of a contractor doesn’t matter–it is when the invention “becomes known” to patent administrators that the disclosure obligation comes into effect.