More on Can universities assign patents rights under Bayh-Dole?

35 USC 201(b) makes clear that any assignee of a subject invention becomes a party to the funding agreement–a “contractor” in Bayh-Dole’s definitional usage:

The term “funding agreement” means any contract, grant, or cooperative agreement entered into between any Federal agency, other than the Tennessee Valley Authority, and any contractor for the performance of experimental, developmental, or research work funded in whole or in part by the Federal Government. Such term 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, assignment of a subject invention (and associated patent rights) does way more than an ordinary assignment of a patent. The assignee becomes a party to the federal funding agreement and by the definitions of Bayh-Dole, is a contractor subject to the patent rights clause of that funding agreement. The provisions of Bayh-Dole, communicated through the patent rights clause, then run with ownership of any subject invention (and any patent rights). It’s not just that the federal government has a license to practice any subject invention, regardless of assignment–it’s also that the owner of the subject invention must comply with the requirements of the patent rights clause, including disclosure of subject inventions (an invention may be assigned before it has been disclosed to a federal agency, for instance) and reporting on utilization and exposure to march-in interventions.

Another way to put it is that Bayh-Dole is part of federal patent law. Bayh-Dole creates a new category of patentable invention, the subject invention. A patentable invention becomes a subject invention when, in addition to being patentable (“is or may be patentable”) the invention (i) is owned by a party to the funding agreement (“contractor”) and (ii) was made in the performance of work under (or supported by) the funding agreement (“conceived or first actually reduced to practice”). When an invention meets the definition of subject invention, Bayh-Dole’s contracting requirements apply. The contracting requirements then run with the ownership of each subject invention and affect–restrict–the property rights in patents on those inventions.

Much of this doesn’t much matter in practice, however. Universities ignore the assignment requirements by using a document labeled exclusive patent license and federal agencies don’t enforce the requirement. So, in practice, despite the wording of Bayh-Dole and its standard patent rights clause, the restrictions don’t exist other than as paperwork gestures that sometimes get a rise out of licensee legal counsel until it’s explained it’s all a ruse for appearances. In practice, none of the public interest protections in Bayh-Dole’s apparatus actually operate, other than that universities share royalties with inventors.

For folks wondering what “any assignment” might refer to in Bayh-Dole’s definition of funding agreement, we can parse things out.

First, assignment may refer to assignment of subject inventions or related patent rights. Second, assignment may refer to assignment of the funding agreement (as distinct from subcontracting work under the funding agreement).

But Bayh-Dole goes out of its way to identify any assignment. That is, it does not matter what of these two possibilities were intended–both were, and any others you can think of.

It makes sense that assignment must include assignment of subject invention rights. Otherwise, a contractor could simply assign prospective invention rights to some third party–even before becoming a party to the funding agreement–and no invention made in that federally funded work could ever meet the definition of subject invention because no invention would ever be “of the contractor” because the contractor had assigned those rights to a non-contractor. Even if a contractor obtained ownership of an invention made in federally funded work–and so a subject invention–the contractor could then assign the invention to a third party and the invention would no longer meet the definition of subject invention. Like magic, all the requirements of Bayh-Dole’s standard patent rights clause would be moot. No reporting. No march-in. No preference for US industry. No nonprofit preference for small businesses or sharing royalties or dedicating income from inventions to scientific research or education. For that matter, no government license to practice and no notice in patent applications of government rights. All these things are specific to subject inventions.

If an invention could be assigned and then not be a subject invention, then Bayh-Dole would be a very silly law indeed. It would reduce to a bit of 35 USC 202(a)–without really much need for anything else. Anyone, if they get ownership of an invention made in work receiving federal support, can keep that ownership. Everything else just blows away.

Thus, Bayh-Dole has to guard both (i) assignment of a subject invention and (ii) the assignment of the patent rights clause that governs the disposition of subject inventions. For (i), the invention would not be a subject invention because the contractor would no longer own it. For (ii), the invention would not be a subject invention because the assignee would not be a party to the funding agreement–would not be a contractor. There’s a similar problem with regard to subcontracting, which Bayh-Dole’s definition of funding agreement also picks up. Otherwise, one could subcontract work under a funding agreement and the subcontractor would not be a party to the funding agreement and any inventions made in the subcontractor’s work would then not meet the definition of subject invention. Easy-peasy to move inventive work out from under Bayh-Dole jurisdiction via selective subcontracting of work.

Thus, any assignment in 35 USC 201(b) results in the assignee becoming a party to the funding agreement and therefore a “contractor” subject to the requirements of whatever patent rights clause has been used in the federal funding agreement–almost always that is the standard patent rights clause at 37 CFR 401.14, though some bits of that clause are conditional.

So, universities can assign patents on subject inventions. Federal agencies don’t worry such activity as long as universities assign to invention management organizations (such as their research foundations) or use documents labeled “exclusive license agreement” (even though exclusive licenses of all substantial rights in an invention is effectively an assignment).

That universities don’t use patent assignment openly and routinely as an IP management strategy is baffling.

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