Federal agency patent enforcement under Bayh-Dole, 4

We are working through the contention that Bayh-Dole does not authorize federal agencies to enforce patents on federally owned inventions. It’s clear that there is no such authorization in Bayh-Dole, though the law authorizes everything else–getting patents, licensing patents, administrating patents, transferring patents between agencies. Bayh-Dole intends uniform federal patent practice, both for disposition of inventions in federal contracting and for disposition of inventions acquired by federal agencies. There’s an authorization for regulations for each aspect, at 35 USC 206 (contracting) and 35 USC 208 (licensing). Bayh-Dole expressly takes precedence over any prior Acts that dealt with subject inventions–inventions acquired by contractors and made under federal contract. Bayh-Dole does not expressly take precedence over any prior Acts that dealt with federally owned inventions because there were none. Bayh-Dole, however, does set up as the authority under which federal agencies are authorized to dispose of federally owned inventions. And federal enforcement of patents is not authorized.

There are exceptions. We have noted the TVA freedom to do its own thing. Also, Bayh-Dole expressly does not take precedence over Stevenson-Wydler, which authorizes federal agencies to engage in cooperative research, license and assign inventions, and handle royalties–but only in the context of cooperative research and development agreements, and there only with regard to subject inventions–patentable inventions of a contractor, patentable inventions made under a CRADA contract and acquired by a CRADA contractor. But Stevenson-Wydler has some things to teach us. We go down that rabbit hole now.

Stevenson-Wydler has been amended to operate under Bayh-Dole for many matters, including the licensing of patents (15 USC 3710a):

Each Federal agency may permit the director of any of its Government-operated Federal laboratories, and, to the extent provided in an agency-approved joint work statement or, if permitted by the agency, in an agency-approved annual strategic plan, the director of any of its Government-owned, contractor-operated laboratories—

(1) [do cooperative research and development agreements]

(2) to negotiate licensing agreements under section 207 of title 35, or under other authorities (in the case of a Government-owned, contractor-operated laboratory, subject to subsection (c) of this section) for inventions made or other intellectual property developed at the laboratory and other inventions or other intellectual property that may be voluntarily assigned to the Government.

The Bayh-Dole bit is 35 USC 207. We will get to it later. The “other authorities” part is of interest. First, that Stevenson-Wydler acknowleges other authorities makes clear that Stevenson-Wydler is itself not an authority. It’s Bayh-Dole, the TVA, and any subsection (c) GOCO lab. Let’s look at subsection (c) then. At 15 USC 3710(c)(7)(B) Stevenson-Wydler authorizes the limited licensing of non-public information for up to five years for information resulting from cooperative research agreements:

that would be a trade secret or commercial or financial information that is privileged or confidential if the information had been obtained from a non-Federal party participating in a cooperative research and development agreement.

That is, if a federal lab works with a company under a cooperative agreement and develops information that, if the company involved would consider protected information, then the federal lab can license that information (presumably, to the company involved, at least) and withhold the information for up to five years. Thus, this sort of information must be included within “intellectual property.” What else? It’s not clear whether mask works, internet domain names, plant variety certificates, and the like are within the scope of “intellectual property.” Further, in common usage, intellectual property may refer to most anything in which someone may assert a right (as of compensation or attribution) or ownership (arising from possession, say, rather than patent or copyright). But Stevenson-Wydler provides only this case of dealing in non-public information developed in cooperative research with a company and licensing that information rather than publishing it. The definition of intellectual property that operates in practice is exactly what federal agencies are given express authority to license–inventions and pseudo trade secret information.

Nothing in Stevenson-Wydler, however, takes precedence over other federal “Acts” that may require federal ownership of inventions–the very Acts that Bayh-Dole asserts precedence over. Instead, Stevenson-Wydler goes a different way and gives federal agencies the right to give federal labs the authority to assign inventions to companies engaged in cooperative research and development agreements with those labs. Even if a federal agency operates under a federal law that requires assignment of inventions, Stevenson-Wydler authorizes federal agencies to authorize federal lab directors to waive that requirement at will.

In its way, Bayh-Dole has Congress regretting all its past requirements with regard to contracted research inventions, but for Stevenson-Wydler. Thus, Bayh-Dole is more like Congress establishing a uniform default position and making it somewhat harder for Congress to vary from this default. The really odd thing is that the Stevenson-Wydler approach is more direct–don’t worry statutory precedence–just authorize federal agencies to assign or agree in advance to assign inventions to contractors without the bother of having contractors pitch the public interest or document a marketing plan or compete with other candidate assignees or licensees or even wait for an invention to be made.  Bayh-Dole makes a big whoopdidoo over something Stevenson-Wydler handles with delegated authority.

The licensing authority in Stevenson-Wydler is broader than that of Bayh-Dole as well. Bayh-Dole just one of the “authorities” for the licensing–that of inventions–but also Stevenson-Wydler anticipates the licensing of “other intellectual property developed at the laboratory” and licensing of stuff assigned to the government “voluntarily.” There’s no definition given for “intellectual property.” The statutory forms of intellectual property are patent, copyright, and trademark. Stevenson-Wydler uses the same definition of “invention” that Bayh-Dole uses–with the screwy addition of plant variety protection certificates (15 USC 3703(7)). But there’s no “subject invention” definition in Stevenson-Wydler. Nothing in Stevenson-Wydler depends on a contractor–a party to a funding agreement, even a funding agreement in the form of a CRADA–acquiring ownership first. But if there is an invention, and a CRADA contractor does acquire it, and the invention was made under the CRADA, then per Bayh-Dole it is a subject invention and Stevenson-Wydler controls, but Stevenson-Wydler in turn recites Bayh-Dole, 35 USC 207 and 209 as its authorities for licensing, and there we are–Bayh-Dole is the sole authority for the disposition of patent rights held by federal agencies, but for the TVA.

There’s a part of Stevenson-Wydler, however, that is of some use in understanding Bayh-Dole and its controls on federal licensing and patent enforcement. Let’s look at 15 USC 3710a(b) “Enumerated Authority”:

(1) Under [a CRADA], the laboratory may grant, or agree to grant in advance, to a collaborating party patent licenses or assignments, or options thereto, in any invention made in whole or in part by a laboratory employee under the agreement.

These inventions may or may not be subject inventions. If the federal laboratory is contractor-operated, then the laboratory employee inventor will be a contractor employee. When the contractor acquires, the invention becomes a subject invention, but because of Bayh-Dole’s precedence exclusion, Bayh-Dole doesn’t apply. Stevenson-Wydler does. But only for these CRADA-developed inventions. For any other federally owned inventions Bayh-Dole (35 USC 209) controls:

or, subject to section 209 of title 35, may grant a license to an invention which is federally owned, for which a patent application was filed before the signing of the agreement, and directly within the scope of the work under the agreement, for reasonable compensation when appropriate.

If an invention is made outside of the CRADA and is federally owned and the patent application pre-dates the CRADA, then any licensing comes within Bayh-Dole, 35 USC 209. The enumerated authority goes further:

In consideration for the Government’s contribution under the agreement [a CRADA], grants under this paragraph shall be subject to the following explicit conditions:

These grants are specific to the companies involved in a given CRADA. One way around Bayh-Dole preemption is CRADA cooperative research and development agreements. (The other way is to declare that the purpose of a contract is not for the performance of “experimental, developmental, or research work–what’s called “Other Transaction Authority.” See Bayh-Dole, 35 USC 212, for guidance for how this works for funding agreements “primarily . . . for educational purposes.” Declare the primary purpose to be something other than experiment, development, or research, and you are off and running.)

Now, what are these conditions?

(A) a paid-up license for the federal laboratory to practice or have practiced the invention, but subject to FOIA-like restrictions on federal disclosure of company and company-like information.

But here’s the juicy part:

(B) If a laboratory assigns title or grants an exclusive license to such an invention, the Government shall retain the right—[to march-in].

Stevenson-Wydler then recites various of Bayh-Dole’s march-in conditions, but not in quite the same wording, making for goofiness. Here’s the march-in:

(i) to require the collaborating party to grant to a responsible applicant a nonexclusive, partially exclusive, or exclusive license to use the invention in the applicant’s licensed field of use, on terms that are reasonable under the circumstances; or
(ii) if the collaborating party fails to grant such a license, to grant the license itself.

That’s pretty much Bayh-Dole’s 35 USC 203 wording. Bayh-Dole anticipates the possibility of more than one “applicant” and authorizes federal licensing when a contractor “refuses” to grant the march-in license. Stevenson-Wydler uses “fails.” The loop hole in Bayh-Dole, then, to avoid march-in altogether is never to to refuse to grant a license–just fail to do so! So many oddities, so little time. But under Stevenson-Wydler, refusal is not an option.

Stevenson-Wydler then enumerates the conditions on which march-in may be predicated:

(C) The Government may exercise its right retained under subparagraph (B) only in exceptional circumstances and only if the Government determines that—

In Bayh-Dole, it is the federal agency that does the determining. In Stevenson-Wydler, it is the Government. Bayh-Dole, drafted by the NIH, goes out of its way to delegate the determination of march-in conditions to each agency entering into a funding agreement with one or more contractors. Stevenson-Wydler does not do so–it could have used “laboratory” as it did in 3710a(b)(1)(B). But it doesn’t. Further, in Bayh-Dole, the right to march-in is simply a “right”–it has nothing to do with federal license or assignment, since Bayh-Dole allows contractors that acquire ownership of subject inventions to retain those inventions–subject to a license to the federal agency and a right of the federal agency to march-in. In Stevenson-Wydler, predicated on a grant of title or exclusive license, the march-in right is a “right retained,” as if it were a function of the grant of title or exclusive license rather than a right established by statute.

A third difference between Bayh-Dole and Stevenson-Wydler here is the latter’s use of “exceptional circumstances.” Nothing like this arises in Bayh-Dole for march-in. Exceptional circumstances is used in Bayh-Dole as a condition under which a federal agency can vary from the default standard patent rights clause. There, the exceptional circumstance is any circumstance that is not the default circumstance on which small business and nonprofits that acquire title to an invention made under contract can retain that invention. Here, in Stevenson-Wydler, the exceptional circumstance has to do with something entirely, um, different–and not even with the conditions under which march-in may be determined to apply, since those conditions are distinct from the “exceptional conditions”–which then must be something else. In Bayh-Dole, the march-in conditions are the conditions under which a federal agency may march-in–exceptions from the default in which an agency may not march-in. In Stevenson-Wydler, in addition to march-in conditions, there are also exceptional circumstances. It is as if, even if the Government determines that march-in is indicated, the Government still has to determine that the march-in indicated is exceptional–that it is not just any ordinary march-in situation, but some situation that requires action because it is not some ordinary failure to satisfy public health needs or requirements for public use or US manufacturing.

It is this sense of “exceptional circumstances” that NIST is advocating for in trying to restrict federal agency use of march-in under Bayh-Dole. That march-in should be used rarely. That makes nonsense of Bayh-Dole, which involves a different situation altogether, and also messes up Bayh-Dole’s express policy statement at 35 USC 200 that the government should have sufficient rights to protect the public from the nonuse and unreasonable use of “federally supported inventions”–not merely subject inventions, but any inventions in which the federal government has an interest, including those owned by the federal government entirely outside of Bayh-Dole’s contracting side.

But the Stevenson-Wydler use of exceptional circumstances is not in Bayh-Dole for march-in. It is not even clear what the sense of Stevenson-Wydler is, other than backing off on the use of march-in for CRADA-based licensing and assignment of inventions owned by the federal government to CRADA “collaborating parties.”

If Bayh-Dole were amended to add “exceptional circumstances” to 35 USC 203 march-in, the effect would be to provide that federal agencies might march-in but only rarely. A failure to satisfy public need would have to be a really big failure, or only a once in a while march-in, to whack the hornet’s nest but not a regular thing to protect the public from nonuse or unreasonable use of covered inventions. And that’s the interesting omission in Stevenson-Wydler–it leaves out Bayh-Dole’s march-in for failure to achieve practical application. There’s no march-in in Stevenson-Wydler for CRADA-licensed or -assigned inventions for nonuse or for a failure to make benefits of use available to the public on reasonable terms. And with the addition of the screwy use of “exceptional circumstances,” the federal government position in such CRADA transactions is that the collaborating parties can do what they want with the licensed or assigned inventions–there is, in effect, no public diligence requirement. There’s still a grin of requirement, but there’s no longer any cat.

And having got through all of that, we are left with this: for CRADA situations, Stevenson-Wydler authorizes licensing, exclusive licensing, and assignment of inventions made under CRADA, and refers everything else by way of invention to Bayh-Dole. There’s nothing in Stevenson-Wydler about federal enforcement of patents, whether inventions are licensed or assigned.

If an invention is licensed exclusively, and all substantial rights in the invention are conveyed, then the exclusive license functions as an assignment. The new owner of the invention, if the invention is patented, becomes the patentee under federal patent law, for 35 USC 281’s right for a civil action to deal with infringement. Under Stevenson-Wydler assignments–whether by means of “grant of title” or “exclusive license”–the assignee, the collaborating party, has the right to enforce the patent. The federal government gives up that right in the transaction, if it ever had that right. For any other licensing, outside of CRADA situations, Bayh-Dole controls. And Bayh-Dole does not authorize federal agencies to enforce patent rights. And Bayh-Dole is part of federal patent law. Federal agencies are not patent owners entitled to relief for infringement under federal patent law, even if they are patentees. We will get at this part next.

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