Can federal agencies enforce patents on federally owned inventions?

Something outlandish.

Bayh-Dole does not authorize federal agencies to enforce patents on federally owned inventions. Go look. I’ll wait.

Patents on federally owned inventions are not ordinary patents. Bayh-Dole is part of federal patent law, Chapter 18 0f Title 35. Patent law stipulates that patents have the attributes of personal property, subject to the provisions of the law. 35 USC 261. For federally owned patents, Bayh-Dole applies and alters the property rights available in federally owned patents.

Bayh-Dole stipulates that for any invention arising from federally supported research or development–including, therefore, federally owned inventions–that the patent system is to be used to promote the utilization of inventions. 35 USC 200. Property rights in federally owned patents are bounded by this requirement. The codification of federal agency licensing requirements reaffirms that promoting the utilization of inventions is the primary objective of Bayh-Dole. 37 CFR 404.2. This is a working requirement. Federally owned patents are not ordinary patents. No one can reason from what the ordinary patent allows. One has to start with the abbynormal patent system as created by Bayh-Dole.

Federal enforcement of patents may not suppress utilization of inventions. Federal agencies do not have a patent right that permits them to create barriers to entry, raise the cost of use, or suppress use with threats to obtain an injunction on use. That’s in addition to all the requirements on federal agencies, should they decide to license rights under the patents they hold.

To enforce a patent, a federal agency must assign the invention to a non-federal entity. 35 USC 207(a)(2). The assignment must take the form of an exclusive license that grants all substantial rights in the invention. That’s the only authorization in Bayh-Dole for the enforcement of patents on federally owned inventions.

Federal agencies are restricted in granting exclusive licenses. Federal agencies are authorized to grant exclusive licenses only if granting the license is “a reasonable and necessary incentive” to either “call forth investment capital” to bring the invention to practical application or otherwise promote utilization of the invention by the public. 35 USC 209(a)(1).

Any exclusivity must be no greater in scope than necessary to provide the necessary incentive to develop the invention to practical application. 35 USC 209(a)(2).

Consequences

A federal agency may not play patent troll, litigating merely to collect fees from users. The patent property right as defined by Bayh-Dole does not extend to patent troll behaviors–unless a federal agency can demonstrate that suing users of federally owned inventions somehow promotes the utilization of such inventions. Sort of hard to do, eh?

Furthermore, a federal agency may not grant an exclusive license just to give a chosen company a position to collect settlement fees from patent litigation or to induce the payment of licensing fees under the threat of such litigation. Simply not allowed as a condition of granting an exclusive licensing.

If a federal agency lacks the circumstances to grant an exclusive license, then the federal agency is reduced to granting non-exclusive licenses, but without the right to enforce the patent. And what happens then? Federal non-exclusive licenses therefore must in practice be royalty-free. Even if a non-exclusive licensee doesn’t pay, there’s no authority in Bayh-Dole for a federal agency to sue for infringement to collect payment–unless suing somehow would promote use of the invention. Yes, a high standard. Any attempt by a federal agency to sue for payment without demonstrating that payment promotes utilization is exposed to a claim of illegal extension of the patent right as provided by 35 USC 271(d)–in such a case, may as well rule the patent invalid and be done with it.

The only basis for a federal agency to enforce a patent absent an exclusive licensee is to sue to stop a practice that prevents or suppresses–fails to promote–the utilization of an invention so that there are benefits available to the public on reasonable terms.

A federal agency may terminate a license for (i) failure to achieve practical application, (ii) antitrust violations, (iii) requirements for public use not reasonably satisfied by the licensee, and (iv) if exclusive, a failure to meet the US manufacturing requirement. 35 USC 209(d)(3). Once a license is terminated, however, the federal agency has no standing to sue the former licensee merely for practice of the invention without payment.

And no, there’s no authority for federal agencies to sue for patent infringement under Stevenson-Wydler either. Everything just points back to Bayh-Dole.

 

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