The public policy idea around Bayh-Dole march-in would appear to be straightforward. It was so in the Kennedy patent policy: make the benefits of using an invention accessible to the public in three years from the date of a patent issuing or license to all on reasonable terms or make your case for holding onto exclusive rights even though you’ve failed at the other bits, or the government will step in and require licenses on royalty-free terms.
It was this straightforwardness that the Bayh-Dole drafting party needed to disrupt. Bremer was clear that he saw march-in as a threat to university patent dealings. Why? Perhaps because universities, unlike companies, lacked a whole lot of resource and mandate to make products from inventions–the university patent managers wanted to deal in exclusive rights to federally funded inventions and didn’t want federal agencies to simply take away their exclusivity if the university managers couldn’t transact patent licenses quickly enough or if they licensed exclusively to companies that did not move quickly enough to meet the standard of practical application. Thus, the Bayh-Dole drafting party did four things: (1) they changed the definition of practical application; (2) they made the march-in procedure so difficult that it would not work for its stated purpose; (3) they delegated the decision to march-in to the agency that funded the work (so they could control NIH-funded inventions to feed their preferred patent monopoly pipeline to pharma); and (4) they weakened the march-in criteria. Here, look:
action is necessary because the contractor or assignee has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention in such field of use
unless the contractor, his licensee, or his assignee has taken effective steps within three years after a patent issues on the invention to bring the invention to the point of practical application or has made the invention available for licensing royalty free or on terms that are reasonable in the circumstances . . .
In Kennedy, it’s clear that practical application and non-exclusive licensing are different things. In Kennedy, it’s also clear that the contractor (and ilk) must bring the invention to the point of practical application (use with benefits reasonably accessible to the public) or must license on reasonable terms (and if the license exclusive, then the licensee must license on reasonable terms).
In Bayh-Dole, all this is muddied. Instead of asking–is there practical application? has each element of the definition been met? (use? established? benefits? available to the public? on reasonable terms?) Bayh-Dole backs away. The “effective steps” now suggest an undertaking, an effective effort toward practical application, not achieving it. The “effective steps” in the Kennedy policy are bounded by a three-year deadline. In Bayh-Dole, it is “within a reasonable time”– and the implementing regulations both in the standard patent rights clause (37 CFR 401.14(j)) and the procedures (37 CFR 401.6) don’t provide any further guidance–even though for other “reasonable time” references in Bayh-Dole, the standard patent rights clause supplies definite times:
35 USC 202(a):
Each nonprofit organization or small business firm may, within a reasonable time after disclosure as required by paragraph (c)(1) of this section, elect to retain title
37 CFR 401.14(c):
The contractor will elect in writing whether or not to retain title to any such invention by notifying the Federal agency within two years of disclosure to the Federal agency.
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
37 CFR 401.14(c):
The contractor will disclose each subject invention to the Federal Agency within two months after the inventor discloses it in writing to contractor personnel responsible for patent matters.
35 USC 202(c)(3):
shall thereafter file corresponding patent applications in other countries in which it wishes to retain title within reasonable times
37 CFR 401.14(c):
The contractor will file patent applications in additional countries or international patent offices within either ten months of the first filed patent application or six months from the date permission is granted by the Commissioner of Patents to file foreign patent applications where such filing has been prohibited by a Secrecy Order.
But somehow the “reasonable times” in the march-in provision–the provision that presumably protects the public and provides a balancing to the exclusive rights that each contractor is otherwise arbitrarily allowed to retain–receives no attention. It is left, as it were, ambiguous. Federal agencies get to make up what constitutes a “reasonable” time in which a contractor may take “effective steps” to achieve practical application. But it goes on. Bayh-Dole isn’t even about taking “effective steps” but about a disembodied expectation not to take steps:
or is not expected to take within a reasonable time
The standard for march-in for not achieving practical application is an agency “expectation” that a contractor won’t take steps “within a reasonable time.” The clear standard is that practical application has been achieved–establish use, benefits, availability to the public, and reasonable terms and you are home free.
The muddier standard is that effective steps are being taken–that is, establish that there are steps and show that these steps are “effective.” What could it mean to take “effective steps” that have not yet accomplished their purpose? Would those steps be anything that looks good? Anything that follows conventional wisdom (even though the invention, as something new and non-obvious, is in some way outside conventional wisdom)? Muddy.
But the muddiest standard is that an agency expects that effective steps won’t be taken within a reasonable time. Now the standard is to establish a federal agency “expectation” with regard to a contractor’s future “steps” and show that in the view of this expectation, those steps will not be taken “within a reasonable time.” Well, what makes some time frame “reasonable”? Again, Bayh-Dole is drafted on the claim that a single, uniform patent policy–an arbitrary release by the federal government of invention ownership rights to contractors that acquire these rights–will provide great outcomes for American innovation based on federally funded research and development.
But here we have “reasonable times”–with nothing about how long the public might have to wait for a contractor, having acquired the right to exclude all others and with no obligation to work the invention (other than as Bayh-Dole requires–which involves Bayh-Dole’s statement of policy and objective at 35 USC 200, which gets ignored–and march-in, which we have been slogging through here as we look at the idea that invention is not a thing). If “reasonable time” here is not defined–left to the discretion of each federal agency, could be anything, could be tomorrow or forever, then at its core there’s nothing about Bayh-Dole that’s uniform. Bayh-Dole merely states that a federal agency cannot take ownership of an invention made under a federal contract from a contractor that obtains ownership, but for the contractor failing to pursue patenting.
March-in in its way does involve ownership. Bayh-Dole is just too sissy to come out and show it. The federal government may march-in and require an exclusive license to a subject invention or grant that license itself. If the scope of that exclusive license grants all substantial rights in the subject invention, that license entails a conveyance of ownership to the exclusive licensee–the license functions as an assignment. Ownership has moved. And whether a federal agency has the right to compel ownership to move comes down to whether it has an expectation that a contractor will not begin to take effective steps within some undefined future time. How does a federal agency come to have an expectation about something not happening within a “reasonable time”?
Really, this condition makes no sense. Sure, a contractor in a required invention utilization report could state, “We are not using this subject invention and do not intend to take effective steps within a reasonable time to achieve practical application.” Aside from that, however, a federal agency would have to determine that a contractor’s utilization reports were inaccurate or if accurate the contractor was incompetent or insolvent. And on what basis would a federal agency know to audit a contractor’s reporting for that purpose? Even so, we would still have to deal with what constitutes “within a reasonable time.” And even then, we still would have nothing to say about how long it should take from the start of effective steps to then achieve practical application. It is not so much muddy here as muddy covering nonsense, and nonsense drafted to make something look good while making it inoperative.
Benefit available to the public on reasonable terms is necessarily a public standard. There cannot be anything secret about it. The benefit must be public and the terms must be public. The availability, too, must be public. But a federal agency expectation regarding effective steps not being taken within a reasonable time does not have to be public at all. Bayh-Dole keeps all invention utilization reporting secret. We will never know what a federal agency “expects” until it in some situation might act to march-in. There’s not even a time frame stated in which a federal agency must act if it determines that it has formed the expectation that a contractor will not take effective steps within a reasonable time. There’s not even a requirement that a federal agency must march-in, or even that it must make a determination with regard to a contractor’s effective steps for each subject invention at some arbitrary point, say, three years from patent issuance (since Bayh-Dole’s touted virtue is its arbitrariness with regard to what any given invention might be, what the federal objective in supporting research might have been, or how the public might expect to benefit).
In Bayh-Dole, then, unlike the Kennedy patent policy, there is no time frame whatsoever in which a contractor obtaining and retaining exclusive rights to an invention made in federally supported work must work the invention (since “worked” is replaced with “utilized”) or otherwise make the invention’s benefits available to the public on reasonable terms. Federal agencies can make up whatever they want, but don’t have to determine anything, can decide in each case what “within a reasonable time” might mean, and don’t have to act in a timely fashion even if they do determine something. Even if a federal agency does march-in and require licensing, there’s no guidance whatsoever with regard to what the licensing might be nor any review to determine if that licensing has any beneficial effect. Under Kennedy, if a contractor at three years from a patent issuing cannot show that it has taken effective steps to bring an invention to the point of practical application–got it out of its invention hole, if it ever had one–or hadn’t made the invention available for licensing on reasonable terms, then the federal government would require the invention to be licensed royalty-free and non-exclusively. There’s some uniformity for you.