Here’s a new query on RE: “What if the university fails to patent under Bayh-Dole?”
Answer: Nothing ever happens.
Okay, let’s take more time with this question. First, let’s be clear. Under Bayh-Dole, universities have no obligation to use the patent system for inventions arising in federally supported research or development. Bayh-Dole does not require universities to take ownership of inventions arising in federally supported research or development or to use the patent system, even if they do. Furthermore, nothing in Bayh-Dole vests ownership of such inventions with contractors or mandates that they take ownership or encourages them to take ownership or implies that it is better if they do take ownership. See Stanford v Roche (2011).
Under 35 USC 202(a), a federal contractor, if it acquires a patentable invention arising in federally supported research or development has the right to elect to retain title in that invention relative to any statute that would require otherwise. 35 USC 210(a) sets out this preemption. If the contractor does not acquire title, then Bayh-Dole does not operate. Other statutes might operate, but not Bayh-Dole. In practice, because the other statutes are largely forgotten,
nothing ever happens.
For instance, if an investigator at a university invents in a research project that receives federal funding and publishes the invention instead of disclosing it–this happens all the time–most foreign patent rights are blown and in a year so are all US rights. If no one takes action to compel the investigator to disclose the invention, nothing happens. Everyone has access to the published information, and any supplementary information remains with the investigator. There is no penalty under Bayh-Dole for an inventor’s failure to disclose any invention. Bayh-Dole does not even require inventors to disclose any such inventions. The closest the standard patent rights clause gets–and this is not in Bayh-Dole–is that contractors must “instruct such employees . . . on the importance of reporting inventions in sufficient time to permit the filing of patent applications.” So inventors are to get a lecture, but nothing more.
The lack of a requirement to disclose makes sense. The government has no business compelling researchers to report to their employers (or non-employers, in the case of university faculty, volunteers, and the like). It also makes sense not to require inventors to file patent applications. That would amount to forcing inventors to use the patent system as a condition of receiving federal support. Thus, if inventors invent in work receiving federal funding and do not report their inventions, nothing happens under Bayh-Dole. There is no compliance issue for inventors. The compliance issue for the contractor is that of requiring a written agreement from potential inventors of interest–also not in Bayh-Dole but added without any statutory authority to the standard patent rights clause–that they will “disclose promptly in writing to personnel identified as responsible for the administration of patent matters . . . each subject invention made under contract in order that the contractor can comply with the disclosure provisions of paragraph (c) . . . .”
Well, paragraph (c) of the standard patent rights clause stipulates only that the contractor must disclose subject inventions to the federal government only after contractor patent personnel receive a conforming disclosure from inventors. If those patent personnel don’t receive a disclosure, then they have no obligation to disclose, and they have no obligation to go get a disclosure from inventors. (Under Bayh-Dole as originally passed, they did–but they got that requirement changed three years after Bayh-Dole went into effect and so avoided it–but the consequence is that they also removed any mechanism that required a contractor to be diligent in identifying, obtaining disclosure of, and reporting inventions made in work receiving federal support.
So, still nothing ever happens.
And it doesn’t matter anyway, because no one complies with the (f)(2) written agreement. Contractors don’t obtain it, and so it does not operate. Federal agencies don’t enforce it. NIST, charged with administration of the patent rights clauses, shows no indication that it even understands the law and has gone out of its way to add new goofiness to the (f)(2) written agreement. It’s important to understand that a contractor’s rights and obligations under the standard patent rights clause pertain to subject inventions–inventions that the contractor has acquired, not to inventions in general and not even to inventions made in work receiving federal funding or even federally funded inventions. If a contractor has not acquired title to an invention, or if it is not patentable (including that the inventor does not recognize it as inventive), or if it has not been either conceived or first actually reduced to practice under a federal funding agreement, then it cannot be a subject invention.
Thus, when 37 CFR 401.14(f)(2) requires inventors to make a written agreement to disclose subject inventions to contractor patent personnel, those are inventions that the contractor already has acquired. No assignment document? The contractor doesn’t own. Not a subject invention. No disclosure obligation. And even if an invention is a subject invention (through some magical form of acquisition by which a contractor comes to own it) and has not been disclosed by the inventor to contractor patent personnel, the contractor still has no obligation to disclose that invention to the federal government or elect to retain title in that invention.
If you think this result is not right, then look no further than the bungled drafting of the Federal Procurement Regulation (1975) and Bayh-Dole (1981) that screwed up the definition of “subject invention” as it was in the Institutional Patent Agreement master agreement (1968) and in a wide range of federal statutes. In those statutes and the IPA, invention was defined to be any invention made under federal contract. Who might own it–inventor, contractor, assignee–did not matter. But Bayh-Dole follows the Federal Procurement Regulation (1975) and adds “of the contractor.” And that “of the contractor” dramatically narrows Bayh-Dole’s scope.
When an invention arises in federally supported research or development, it is just that. Only when a contractor acquires ownership of that invention does it become a “subject” invention. All the requirements in Bayh-Dole pertaining to contractors is restricted to subject inventions, as the Supreme Court made clear.
If a contractor does not take ownership of an invention made under federal contract, under Bayh-Dole nothing ever happens.
But university administrators are pretty thick about this stuff. Scores of university attorneys signed on to amicus briefs in Stanford v Roche insisting that Bayh-Dole vested rights with contractors, not inventors, or granted a first right of refusal, or prevented inventors from assigning to anyone else. It was all nutso and tossed by the Supreme Court. Not to be caught being this stupid, the attorneys opted to be super-stupid and insisted that Justice Breyer’s dissenting opinion in the case—that there should not be such a magical difference between the wording of a promise to assign and a present assignment of future rights—implied that there was such a magical difference and that universities had to implement present assignment language in their policies and patent agreements. This has been too stupid for words, since the university implementations of present assignments have been for the most part incompetently done and fail to address the issues raised as a result of the Stanford v Roche decision. But the university adoption of broad (even overdrafted) present assignments does create the expectation that a university owns inventions when they are made, even if there is no specification of what actually has been assigned. In that case–assuming universities are allowed to get away with this kind of thing–inventions become subject inventions when they are made. But even then, Bayh-Dole requires more–as we have seen, Bayh-Dole still requires inventors to disclose those inventions to the contractor’s patent personnel before the contractor has any obligation to disclose those inventions to the federal government.
Only after disclosure to the federal government does a contractor have the right under 35 USC 202(a) to elect to retain title in that invention relative to any act that would require otherwise. If inventors do not disclose the invention, then the contractor cannot elect to retain rights in that invention, and there is no obligation for the contractor to file any patent application—or do anything at all, for that matter.
Now let’s go the next step. Let’s say that a contractor does receive a disclosure of an invention conceived or first actually reduced to practice in work funded at least in part by the federal government, and the contractor discloses that invention to the federal government. Now the contractor must notify the federal government whether the contractor will elect to retain title in that subject invention. If not, then it is up to the federal government to request title to the invention. If the federal government does not request title, then the contractor has no further obligation under Bayh-Dole. The contractor may have obligations under any other federal statute that applies but not Bayh-Dole. Chasing all that down lies madness, so we won’t do it for now. If the federal government does request title, then the government owns the invention and the contractor has no obligation to seek a patent.
If a contractor does elect to retain title, however, then Bayh-Dole requires the contractor to file a patent application before the expiration of the one-year grace period in the US for inventions that have been publicly disclosed (see 35 USC 202(c)(3). If the contractor or inventor does not publicly disclose the invention, then the contractor has no obligation to file any patent application. This is another Bayh-Dole amendment bungle. In Bayh-Dole’s original version, contractors had “reasonable times” from the election of title to file a patent application. The standard patent rights clause replaced reasonable times with one year or less. NIST hasn’t bothered to amend the patent rights clause to reflect Bayh-Dole’s new wording, so it’s all a crock. Now, only when a statutory bar has been created in the United States do contractors have an obligation to file a patent application before that bar date.
Once there’s a bar date (or under the patent rights clause that conflicts with Bayh-Dole, at the end of the one year period required by the patent rights clause), then the federal government can request title to any invention the contractor has not filed a patent application on. But you can see the problem. If the contractor does not file a patent application, then the bar date easily may pass, and there are no patent rights available to file a patent application on. So if the contractor does not file an application, then the government can request title, but it’s mostly an empty request–administrative waste. And there’s no consequence for the contractor, under Bayh-Dole.
So, even with all that, nothing much happens. In theory something could happen. In practice, nothing ever happens.
Once a contractor gets title and elects to retain title, it can sit on a subject invention without public disclosure without consequence, and even under the one-year requirement of the bungled standard patent rights clause, there’s no consequence under Bayh-Dole for a failure to file in time to meet a statutory bar.
And just to be clear, Bayh-Dole does not obligate a university to obtain a patent–just to file the application and be diligent prosecuting the application. If the university gives up prosecution, then the federal government can request title to the invention. But in practice, if a university doesn’t want to keep at the patent prosecution, the federal government does not want to, either. And
nothing ever happens.
You have come along this far, with the recurring refrain nothing happens. Let’s go one step further. The (f)(2) written agreement requirement of the standard patent rights clause is carefully drafted. By requiring contractors to require certain potential inventors-to-be to make a written agreement to protect the government’s interest in subject inventions, the (f)(2) requirement requires contractors to make those inventors parties to the federal funding agreement. As parties to the agreement, the inventors are–by the definitions in Bayh-Dole–also contractors. As contractors, any inventions they make under contract are subject inventions–but are inventions owned by the inventors, not by the organizational contractors that host their work.
Bayh-Dole has this neat structure in that it has a patent rights clause for each of small businesses, nonprofits, and inventors. When a party is added to a funding agreement, the general rule is that the party is subject to the patent rights clause appropriate to it. If a nonprofit subcontracts a small business, the nonprofit is subject to the nonprofit patent rights clause (37 CFR 401.14(a)-(l)), but the small business is subject to the small business patent rights clause (37 CFR 401.14(a)-(j) and (l)–i.e., no (k)). And if an inventor has been made a party to the funding agreement, the inventor is subject to the inventor patent rights clause (37 CFR 401.9). NIST claims not to know how to deal with 37 CFR 401.9, so all this is lost on them. The one exception in Bayh-Dole to this general rule is when a nonprofit assigns a subject invention. Bayh-Dole requires (35 USC 202(c)(7)(A)) that the assignee, regardless of its status, must comply with the nonprofit’s patent rights clause.
That’s huge, because an exclusive license to all substantial rights in an invention is an assignment. Nonprofits do this all the time with exclusive licenses. Under Bayh-Dole, the licensee-cum-assignee, even if a for-profit, must accept the nonprofit patent rights clause. Under the nonprofit patent rights clause, the assignee must share royalties with the inventor–even if the nonprofit is also sharing royalties with the inventor–doesn’t matter. That the nonprofit shares royalties does not give the assignee a free pass. And even more hugely, the assignee must use all income earned with respect to the invention for scientific research or education, and is permitted to deduct only expenses incidental to the administration of subject inventions. In effect, the company must adopt a nonprofit orientation with regard to income–not just profits–earned with regard to that assigned nonprofit subject invention.
If Bayh-Dole were enforced, then very few companies would want an exclusive license. They would demand at best a limited exclusive license, without any right to enforce patents covering the invention, and more likely just be happy for a non-exclusive license–you know, the kind of license that promotes free competition and maximizes the participation of small businesses in research and development, just as Bayh-Dole’s statement of policy at 35 USC 200 sets forth. But Bayh-Dole is not enforced, so no one gives a hoot about this requirement. If Bayh-Dole were enforced, they go, then Bayh-Dole would be a disaster. And yet Bayh-Dole is a disaster anyway!
Now, for all that, if a contractor makes all its inventors into contractors, and those inventors own their subject inventions, and they have rights under 35 USC 202(a) to elect to retain title to their inventions, and the inventor patent rights clause at 37 CFR 401.9 applies to them and their inventions, and not the standard patent rights clause at 37 CFR 401.14. The inventor patent rights clause is a subset of the standard patent rights clause. It stipulates that inventors are to be treated as small business contractors. Thus, while a university operates under the nonprofit patent rights clause, when it makes its inventors parties to the funding agreement (as it is required to do by the (f)(2) written agreement requirement), those inventors are subject to the inventor’s patent rights clause, not the university’s nonprofit patent rights clause. Under the inventor’s patent rights clause, inventors have no obligation to file patent applications on their subject inventions. Under the inventor’s patent rights clause, inventors have no obligation to assign title to their employers or to the university that hosts their work. Under the inventor’s patent rights clause, inventors are treated as small business concerns, the written agreement changes their status, and the university’s patent rights clause forbids the university from claiming an interest in their inventors’ inventions as a condition of their federal funding. In effect, the (f)(2) written agreement voids any and all university claims on inventors’ subject inventions that recite as a basis use of federal funding, compliance with federal law (i.e., Bayh-Dole), or on the use of university resources provided to comply with federal funding. So much for the stupid university present assignment craze–especially where the justification for demanding present assignments is federal funding. Void on the face of it.
No one complies with the (f)(2) requirement and federal agencies don’t enforce it, and NIST claims it can’t make sense of the inventor’s patent rights clause at 37 CFR 401.9, so none of this matters. But if it did, then when an inventor-party to the funding agreement-contractor-small business owned a subject invention, and disclosed the invention to the federal government and elected to retain title to that invention, then if the inventor did not file a patent application–
nothing ever happens.
Bayh-Dole does not require inventors to use the patent system. It does not require universities to make inventors use the patent system. It does not require inventors to give up their inventions so it can make universities use the patent system (and make inventors help them).
Thus, in all, what happens is just what the Talking Heads say happens in “Heaven“: “heaven is a place where nothing ever happens.” Thus, Bayh-Dole must be heaven.