A Bayh-Dole Quick Read, made longer with comments–Orp!

A Twitterer admonished another Twitterer to give Bayh-Dole a quick read. Sigh. But then I thought that I could help out. Here’s a really short version of Bayh-Dole, extracted from the swamp of muddy drafting that is Bayh-Dole. I’ve added comments (in red), because, well, short reads are boring compared to reads the point out the drafting and conceptual awfulness of Bayh-Dole rather than gloss everything over in generalities that obscure practice.

It is the policy and objective of the Congress to use the patent system

This is a statement of limitation of patent property rights, not merely a new rationale for the Bayh-Dole bit of federal patent law. Bayh-Dole’s policy replaces executive branch patent policy (codified in the Federal Procurement Regulation, which has since been replaced by the Federal Acquisition Regulation). 

to promote the utilization of inventions arising from federally supported research or development;

This–use patent system to promote the utilization of inventions arising from federally supported research or development–is Bayh-Dole’s fundamental statement of scope. This is a working requirement within patent law, not there for other inventions. The scope is general–“inventions arising from federally supported research or development.” It covers inventions made in work done by both contractors and by federal employees. The stated purpose imposes a limitation on the use of the patent system: to promote use of inventions. Not to promote use of the patent system. Not to make huge amounts of money by suppressing use.  

The Constitutionally authorized purpose of federal patent law is to promote the “progress” of the useful arts–“progress” meant “spread” or “dissemination.” Bayh-Dole adds a new element–the utilization of inventions–and doing so by using the patent system. A working requirement is also a restriction on the rights that a patent holder if an ordinary invention otherwise has. Question: how does a patent holder enforce patent rights to promote use of a claimed invention? If infringement is use, then suing to stop use would violate Bayh-Dole’s fundamental statement of policy. 

to encourage maximum participation of small business firms in federally supported research and development efforts;

Development efforts includes licenses to small companies. The aim is maximum participation, not merely participation. How should this requirement affect how universities license their Bayh-Dole inventions? Think: maximum participation all but requires non-exclusive licensing on fair, reasonable (if not royalty-free), and non-discriminatory terms. 

to promote collaboration between commercial concerns and nonprofit organizations, including universities;

One form of collaboration is a university licenses exclusively an invention to a company that then attempts to create a commercial product. But there are other forms–including companies funding research at the university, as in a consortium; and companies and universities sharing data and technical information, or cross-licensing patents to create a commons or platform technology or standard. 

to ensure that inventions made by nonprofit organizations and small business firms are used in a manner to promote free competition and enterprise without unduly encumbering future research and discovery;

Here, Bayh-Dole uses “ensure” rather than “promote,” a more demanding standard. How does a non-profit promote free competition and enterprise in its licensing programs? Think: non-exclusive licensing. Either a short-time exclusive license followed by non-exclusive licensing, or an exclusive license with a requirement to sublicense broadly, or non-exclusive licensing from the get-go. 

to promote the commercialization and public availability of inventions made in the United States by United States industry and labor;

Two pathways from utilization–commercialization and public availability. Public availability is not just a restatement of commercialization. In executive branch patent policy, a contractor could develop a product or grant non-exclusive licenses. Bayh-Dole echoes these two approaches. “made in the United States” and “by United States industry and labor” modify “inventions”–it is those specified inventions that Bayh-Dole is concerned with. “made” is a defined term in Bayh-Dole (35 USC 201(g)) and is specific to the actions of inventing–conceiving an invention and reducing an invention to practice (by testing to demonstrate that the invention performs all essential functions). Thus, this provision is just strange. One would expect “inventions arising from federally supported research or development” or “of products and services in the United States by United States industry and labor based on inventions arising from federally supported research or development.” But no. It appears that this provision states a nationalist or protectionist requirement, which is reflected in the manufacturing requirement of 35 USC 204.

to ensure that the Government obtains sufficient rights in federally supported inventions to meet the needs of the Government and protect the public against nonuse or unreasonable use of inventions; and

This provision forms the basis for the public interest apparatus in Bayh-Dole, which is prominent but largely non-operative. The government obtains rights to meet its needs (that’s the government license in 35 USC 202(c)(4)) and to protect the public (that’s the march-in provisions in 35 USC 203). 

to minimize the costs of administering policies in this area.

Mostly, to relieve federal agencies of having to make a determination for nonprofits and contract research organizations, and for anyone contracting to do public health research or research for NASA or DOE (AEC, back in the day), whether they must assign inventions to the federal government for open access or they can be allowed to hold title to those inventions, subject to a working requirement. Delays by DOE in addressing a Purdue Research Foundation request to keep title to an invention led to Senator Bayh’s involvement in Bayh-Dole. Nothing about Bayh-Dole’s current red tape reduces the costs of administrating policies or complying with Bayh-Dole. Bayh-Dole changes where the administrative costs are–such as in determining exceptional circumstances, subject invention disclosure requirements, and attempting to march-in for nonuse or unreasonable use. 

Bayh-Dole has two prongs, a contractor prong and a federal agency prong. In both, Bayh-Dole is not concerned with how a contractor or federal agency initially acquires rights in inventions, and instead focuses on how contractors and federal agencies may dispose of rights once they have got them.

Here’s the contractor prong:

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 to any subject invention: [35 USC 202(a)]

A subject invention is a new class of invention in federal patent law. Nothing in Bayh-Dole vests ownership of inventions in any nonprofit or small business. Nothing in Bayh-Dole mandates that nonprofits or small businesses acquire title. Nothing in Bayh-Dole gives nonprofits or small businesses any special right or privilege to acquire title. 

The term “subject invention” means any invention of the contractor conceived or first actually reduced to practice in the performance of work under a funding agreement: [35 USC 201(e)]

The Supreme Court in Stanford v Roche made clear that “of the contractor” means “owned by the contractor.” If a contractor does not own a given invention, then the contractor cannot elect to retain title in that invention–it’s simply not a subject invention.

The term “invention” means any invention or discovery which is or may be patentable or otherwise protectable under this title or any novel variety of plant which is or may be protectable under the Plant Variety Protection Act (7 U.S.C. 2321 et seq.). [35 USC 201(d)]

Invention is distinct from patent. A patent claims an invention. But depending on the drafting, a given patent may claim less than all the claims possible for a given invention. 

The term “contractor” means any person, small business firm, or nonprofit organization that is a party to a funding agreement. [35 USC 201(c)]

Bayh-Dole’s implementing regulations add a requirement not specified by Bayh-Dole that contractors require certain of their employees to make a written agreement to protect the government’s interest in subject inventions (37 CFR 401.14(f)(2)). That written agreement makes those employees parties to the funding agreement and therefore contractors. As contractors, those employees, when they invent, have the same right to retain title to their inventions that their employers have, if and when the employers acquire title from the inventors. Employee inventors contractors have their own patent rights clause at 37 CFR 401.9. The contractor patent rights clause is at 37 CFR 401.14, and distinguishes between nonprofits and for-profits. 

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. [35 USC 201(b)]

This is important. A contractor is any party to a federal funding agreement. Contractors may add additional parties to a funding agreement, including by assignment (some exclusive licenses act as assignments). These additional parties are also contractors. The federal funding may be only part of the funding for a given bit of “work”–“in whole or in part.” It’s not then that inventions must be “federally funded.” Rather, it is that inventions arise in some part of work that somewhere (in some other part, say, at some other time) requests and receives federal support. 

This chapter shall take precedence over any other Act which would require a disposition of rights in subject inventions of small business firms or nonprofit organizations contractors in a manner that is inconsistent with this chapter, [35 USC 210(a)]

This provision means Bayh-Dole takes precedence over all those prior federal statutes that required federal ownership of research and development inventions made by federal contractors. Executive orders cannot reach to the same precedence. Thus, Bayh-Dole creates two separate invention management regimes–one with precedence for nonprofits and small businesses when contractors–parties to a funding agreement–and another one without precedence for everyone else–large companies or anyone receiving federal support but not by means of a “funding agreement.” A procurement contract, for instance, may not be a funding agreement. The NIH, for instance, uses “Other Transaction Authority” agreements to avoid Bayh-Dole requirements. Stevenson-Wydler is excluded from the precedence requirement, as is any later law that cites Bayh-Dole and requires otherwise. In essence, Bayh-Dole just resets the basis for special federal statutes to require federal ownership. Not these past statutes, but any new ones properly drafted are okay. 

Now for the federal prong:

Each Federal agency is authorized to—

grant nonexclusive, exclusive, or partially exclusive licenses under federally owned inventions, royalty-free or for royalties or other consideration, and on such terms and conditions, including the grant to the licensee of the right of enforcement pursuant to the provisions of chapter 29 as determined appropriate in the public interest; [35 USC 207(a)(2)]

This is the hugest sea change made by Bayh-Dole. It runs against the Attorney General’s 1947 report, which had set federal patent policy for over 30 years. The AG’s report determined that the federal government should not grant exclusive licenses, should not have a money interest in public use of federal inventions, and should not police either licenses or infringement of inventions. This provision reverses all these findings, as an act of Congress. The provision goes further and authorizes federal agencies to assign federally owned inventions–that’s the import of the “right of enforcement” language. To enforce a patent, one must own the invention. There you go. 

The contractor’s management of subject inventions it chooses to retain title to is dictated by a default standard patent rights clause [35 USC 202(a), 35 USC 206], which federal agencies may vary from if they follow proper procedure. So much for uniform.

There are a crapton of requirements for invention disclosure, electing to retain title, filing patent applications, putting notices of federal support in patent applications, and writing out a government license. Read those on your own! Slowly, because there’s no quick way.

If a contractor fails to disclose, or does not elect to retain title, or does not file timely a patent application, or gives up on an application, or does not defend a patent that’s issued, then the federal agency can request title to the invention. Otherwise–and here’s the bowel-locking slider–federal agencies have no right under Bayh-Dole to claim ownership of inventions arising under funding agreements. When Reagan changed executive branch patent policy to require agencies to use Bayh-Dole requirements in all contracting, Reagan effectively voided any standing federal claim in executive branch patent policy to own inventions arising in federally supported research or development. If a federal agency wants to own inventions made in federally contracted work anyway, the agency has to determine exceptional circumstances and follow another ungainly procedure.

Now for two contractor requirements that would appear to matter because they are given their own sections–march-in (203) and US manufacturing (204). But they don’t actually matter because both are conditional on agency discretion. Again–so much for “uniform.” A federal agency must decide that march-in is “necessary” according to four specified conditions and so doesn’t have to march-in at all. No agency has ever marched-in. Similarly, the US manufacturing requirement is limited to exclusive licenses in the US to use or to sell. But contractors are not required to license, and so the requirement kicks in only if they do license, and license exclusively for the US. Worse, federal agencies can waive the requirement if the contractor tries and fails to find US manufacturer or decides it’s not worth trying in the first place. Agencies routinely waive the requirement. So it’s not worth reading these two sections, for a quick read of Bayh-Dole.

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