Bayh-Dole Guide

A Guide to the Bayh-Dole Act

Gerald Barnett

Updated 2/1/2017

Updated for new CFR references and textual cleanup 5/16/2018

Major Revision Coming Soon 

Introduction

This Quick Guide sets out the Bayh-Dole Act to make clear what the law does, how it does it, and what those who care about research-based innovation should do about it. The Quick Guide is intended for those seeking to understand Bayh-Dole in the context of broader national research and innovation goals. As such this guide is not a how-to for university administrators, but may also be of some help in framing issues for these readers as well.

The Bayh-Dole Act went into effect in 1981. The law is part of the Patent Act at 35 USC 200-212. Implementing regulations are at 37 CFR 401.1-16. The regulations are incorporated into federal policy involving contracts through the Federal Acquisition Regulations and various FAR extensions and supplements, such as the DFARS. For grants to nonprofit organizations, the controlling regulations incorporating Bayh-Dole are at 2 CFR 200.

Bayh-Dole operates by requiring federal agencies to use a standard patent rights clause in all funding agreements for research or development work unless an agency can justify an exception. Thus, Bayh-Dole applies to federal agencies. The patent rights clause in each funding agreement establishes the rights and responsibilities for each recipient of federal support.

Bayh-Dole makes “uniform” federal agencies’ procurement practices with regard to patentable inventions made with federal support at nonprofit organizations and small businesses when these inventions come to be owned to a party to a funding agreement, called a “contractor.” These inventions are called “subject inventions”–inventions owned by a party to a funding agreement. If an invention is not owned by a party to a funding agreement, it cannot be a subject invention and Bayh-Dole does not apply.

Bayh-Dole applies, for funding agreements, only to subject inventions.

If an invention is not owned by a contractor–a party to the funding agreement–then the invention is not a subject invention, Bayh-Dole’s requirements don’t apply, and the invention is subject to the federal law in place prior to Bayh-Dole. The crucial step in the application of Bayh-Dole’s patent rights clause, then, is when a patentable invention made in work with federal support is acquired by a contractor. Bayh-Dole does not vest ownership of inventions made in work receiving federal support with a contractor, and provides no special privilege or mandate for a contractor to take ownership of such inventions.

Bayh-Dole does not provide a contractor with any special right to take ownership of an invention made in research or development work receiving federal support. 

Bayh-Dole requires federal agencies to use in each funding agreement a standard patent rights clause. The Standard Patent Rights Clause (SPRC) for university work is established by the Department of Commerce and its management delegated to NIST. The SPRC appears at 37 CFR 401.14. Agencies may vary from the SPRC by following the protocols set out in Bayh-Dole. The SPRC, as authorized by the Act, permits nonprofit organizations and small businesses to elect to “retain title” to subject inventions, subject to a number of conditions. Bayh-Dole was extended in 1983 by presidential memorandum to apply (as a matter of executive branch policy) to all companies.

“Retain title” does not mean that title has already vested with the university, or mean that universities have the right to compel assignment of title, or that inventors have no other option but to assign to the university upon demand.  “Retain title” means that if the nonprofit organization or small business receiving funding for work with the federal government (other than funding primarily directed at education) does obtain title to an invention made in work receiving federal support (or anyone qualifying under the the SPRC as a “contractor” obtains title), then subject to compliance with various obligations spelled out in the SPRC, the nonprofit may retain that title. The federal agency may then request title only if an institutional contractor fails timely to disclose a subject invention or elect to retain title to that invention, or fails to file a patent application, or having filed a patent application fails to prosecute the application or maintain or defend a patent once it has issued.

The policy and objectives of Bayh-Dole are set out in 35 USC 200. The policy statements do more than announce intention with regard to Bayh-Dole. As part of federal patent law, Bayh-Dole’s policy statements establish a public covenant that runs with the patent property rights that may be granted on subject inventions. Bayh-Dole’s fundamental policy is to use the patent system to promote the utilization of inventions arising from federally supported research or development.  Other policy requirements include using the patent system to promote free competition and enterprise, create collaboration between nonprofit organizations and industry, and to promote United States industry and labor in the commercialization and public availability of inventions.

Subject inventions are not ordinary patentable inventions. The patent property rights arising from subject inventions are not ordinary patent property rights. 

Bayh-Dole assures the government of its interest in subject inventions, but does not dictate university interests. There is no vesting of title to inventions, as some have claimed. University administrators may request assignment of a subject invention, but they have no obligation nor even mandate under Bayh-Dole to do so. There also is no requirement in Bayh-Dole that a university must require assignment of inventions made in work receiving federal support in order to comply with the law.

As a result of Bayh-Dole’s definitions of funding agreement and contractor and the requirements of the standard patent rights clause, “contractor” becomes a collective plural. Contractors are required to require their non-clerical employees to become parties to the funding agreement–and therefore to become contractors. Each form of contractor has its own distinctive standard patent rights clause. Businesses have one clause; nonprofits have a second clause (an extension of the business patent rights clause). Together, these two clauses are called the standard patent rights clause, or SPRC (at 37 CFR 401.14). Inventor contractors have a their own clause, an inventor patent rights clause or IPRC (a subset of the business patent rights clause) (at 37 CFR 401.9). A fourth patent rights clause, based on exceptional circumstances, is for use in naval nuclear propulsion and weapons systems work sponsored by the Department of Energy, which has been included in the SPRC as a conditional requirement.

With this overview, let’s work through Bayh-Dole and the SPRC.

Bayh-Dole is directed at federal agencies.

Bayh-Dole operates by placing requirements on federal agencies when making grants, contracts, and co-operative agreements for research or development work with nonprofit organizations and small businesses (and by executive order, all businesses). The implementing regulations reflect the combination of the statute with executive branch regulation. These requirements are directed at preempting federal law for patentable inventions made in work receiving federal support when these inventions come to be owned by a contractor.

Bayh-Dole requires federal agencies to use a standard patent rights clause (SPRC)  in all funding agreements with universities; provides a protocol by which the SPRC may be tailored or modified; and establishes an apparatus by which the government may request title to an invention or march-in to require licenses to be granted if inventions are not handled in compliance with the Act.

The centerpiece of Bayh-Dole’s contracting provisions is a contractor may, if it obtains title to a patentable invention made in work receiving federal support, choose to retain that title. The subject invention then is subject to the requirements of the patent rights clause appropriate to the contractor.

Bayh-Dole is focused on practical application through use of the patent system.

The objectives for Bayh-Dole are set out at 35 USC 200. A primary purpose stated for Bayh-Dole is to use the patent system to promote the use of inventions made with federal support. As such, Bayh-Dole announces a working requirement for subject inventions that is not otherwise present in federal patent law. For ordinary inventions, a patent owner has no obligation to use the invention, develop it as a commercial product, or make products or their benefits available to the public, or license the use of the invention to anyone. For subject inventions, however, Bayh-Dole creates a working requirement and states conditions for that working requirement in the SPRC that federal agencies must use as a default.

Bayh-Dole’s primary emphasis is on “utilization” or “practical application.” Practical application is defined as the use of a subject invention so that the benefits of such use are “available to the public on reasonable terms” (35 USC 201(f)).

Commercialization is mentioned as one objective among others in Bayh-Dole, in parallel with public availability. There is no mandate or requirement to commercialize subject inventions. The requirement is to work the invention–to use or develop the invention so that the benefits are available to the public on reasonable terms. Commercialization is one way that might achieve practical application. Making an invention publicly available, such as through non-exclusive licensing (such as to create a standard or to share technology), is another.

Although Bayh-Dole’s policy is to use the patent system to promote the utilization of inventions made in work receiving federal support, Bayh-Dole does not require contractors to use the patent system. Institutional contractors are required to use the patent system only if they acquire ownership of an invention. Inventor contractors are not required to file patent applications, however, under the inventor patent rights clause. That makes sense. Nothing in federal patent law requires inventors to use the patent system. Bayh-Dole, as part of federal patent law, does not add any special requirement. In fact, the inventor patent rights clause at 37 CFR 401.9 excludes (d)(2) of the standard patent rights clause. (d)(2) requires a nonprofit or business contractor to file a patent application or allow the federal government to receive title.

Bayh-Dole requires uniform agency invention procurement practices.

The Bayh-Dole Act makes uniform federal agency policy for delivery of rights in subject inventions in funding agreements involving as contractors nonprofits, businesses, and inventors.  The implementing regulations at 37 CFR 401 authorize agencies to tailor the requirements for implementation, and so various implementations are found for federal contracting in the Federal Acquisition Regulations, Defense Federal Acquisition Regulations, and in agency supplements to these regulations. Under Bayh-Dole, federal agencies may declare exceptional circumstances and modify the patent rights clause to direct the disposition of title in subject inventions under a given funding agreement. To ascertain what patent rights clause is operating, one must consult the funding agreement under which the subject invention was made.

Bayh-Dole is implemented through patent rights clauses in funding agreements.

Funding agreements include grants, contracts, and cooperative agreements for research or development work. Agreements with universities to run government owned laboratories and certain other research centers are covered as well by the Stevenson-Wydler Act, which takes precedence over Bayh-Dole if there is any conflict between the two statutes. Federal agencies have no rights to inventions made in funding agreements primarily for educational purposes, even if involving research or development (35 USC 212).

Bayh-Dole does not impose any requirements on contractors outright. Bayh-Dole requirements are directed at how federal agencies deal with inventions made by contractors.  The implementing regulations, as established by the Department of Commerce, are also directed at federal agencies. Federal agencies comply with the law by using an authorized patent rights clause in their funding agreements. It is by means of the patent rights clauses inserted into funding agreements that federal agencies establish the conditions under which contractors and their inventors may retain title, or a license, to subject inventions.

A patent rights clause must be included in each federal funding agreement. The patent rights clause may be the SPRC, a tailoring of the SPRC, or under a declaration of exceptional circumstances, the patent rights clause may vary from the SPRC. Bayh-Dole has both a statutory component directed at federal agencies, and a contacting component, which agencies are required to implement with contractors.

Now here is the odd thing: federal agencies are not required to enforce the patent rights clause. Bayh-Dole requires federal agencies to use a patent rights clause, but Bayh-Dole does not require federal agencies to enforce the clause. If a contractor fails to disclose a subject invention or elect to retain title in the invention, a federal agency may request title, but the agency is not required to do so. Thus, despite the law and the SPRC, actual practice may–and does–vary significantly from the law. We might say, in fact, that whatever is happening with regard to inventions made in projects receiving federal support, it is not Bayh-Dole.

The patent rights clause establishes the obligations a contractor takes on and the additional obligations that arise if a contractor acquires ownership of an invention made in work under that funding agreement. Since the patent rights clause may vary from agreement to agreement, a contractor may hold many such commitments at the same time, a commitment for each funding agreement that is in effect. The SPRC has no termination condition, so each of these agreements is on-going for as long as the subject invention conditions that arise remain active. The patent rights clause does not terminate with the end of the funding agreement’s term or the expenditure of all federal funds.

Inventions become subject when they meet the definition of the Act.

Bayh-Dole defines a subject invention as any patentable invention (or plant variety protectable under the Plant Variety Protection Act) that (i) is made in the performance of work under a funding agreement and (ii)  is owned by a contractor.

For an invention to be outside the scope of the funding agreement, it must involve work that according to 37 CFR 401.1 is not “planned and committed” activities of the grant and which does not “diminish or distract” from those activities. The CFR distinguishes between a basic research grant and a related project: “An example of such related but separate projects would be a government sponsored project having research objectives to expand scientific understanding in a field and a closely related industry sponsored project having as its objectives the application of such new knowledge to develop usable new technology.” One can see that the scope is not the general subject area, but rather follows from the objectives set forth in the statement of work of the grant proposal. The invention that the government contracts for as a deliverable must be within those objectives, or otherwise “diminish or distract” from the performance of work.

In practice, university administrators claim inventions more broadly than the definition provides.  Some do this “just to be safe.” However, the appeals process under Bayh-Dole is directed the other way—it is up to the agency to question a determination that an invention is not within scope. Others do this because they believe Bayh-Dole requires university ownership, and asserting subject invention status then eliminates any objections that inventors might make regarding assignment. Finally, some do this because their institutional policies require institutional ownership of inventions made in extramural research, but are less demanding if the invention falls outside such research. By asserting an invention is within scope, they are able to use institutional policy to then make a claim under a stronger theory of ownership.

This definition becomes a part of federal patent law, introducing a new designation for a class of federally supported inventions. Inventions meeting the definition are subject inventions. They are that way regardless of who may have an ownership interest in such inventions, or in any patents that issue on the inventions. Further, inventions are subject inventions only when they meet the requirements of the definition. That is, to come under the obligations Bayh-Dole, a university must show that an invention is owned by the university and made within scope of a federal funding agreement.

Universities agree, as contractors, to report subject inventions in a form that provides sufficient information for the characteristics of the invention to be clear. Along with reporting inventions, universities must provide information pertaining to any potential statutory bar to patenting, such as publication of a manuscript describing the invention.

A university agrees to obligations regarding employees and patents under the patent rights clause.

A university, in agreeing to a patent rights clause in a funding agreement, takes on certain obligations. The university must under the SPRC section (f)(2) require a written agreement of its research employees that they will (1) report inventions fully and timely to personnel designated by the contractor; (2) sign paperwork to permit patent applications to be filed; and (3) sign paperwork to establish the government’s rights in inventions.

The university must provide training to its employees on the importance of reporting inventions. And the university must itself fully and timely report inventions to the funding agency. Nothing in this set of conditions provides for the university to hold title without assignment. Indeed, if the university held title outright, the SPRC would need not need to require that the contractor require its employees to protect the government’s rights, as the contractor would hold the authority to do this.

Having reported a subject invention, a university then has the opportunity to elect to retain title.  It does so by written notice to the funding agency. Electing to retain title has nothing to do with who actually holds title. This is a point of some confusion among university patent officials, and even trips up experts. Electing to retain title means that if the university (or other agent, by assignment from the university) comes to hold title, then the university (or its assignee) may continue to hold that title, provided it undertakes the obligations specified—stated most generally, to use the patent system to promote practical application, and more particularly, to timely file patent applications with notice of government rights, to grant the government a non-exclusive license, to give preference to small businesses, to require exclusive licensees to substantially manufacture in the US, to share royalty income with inventors (as an expense) and to use any income after expenses to support scientific research or education.

How the university comes to hold title is not specified in the SPRC. Again, this is a source of much confusion. A number of commentators insist that universities must have a patent agreement with each employee ensuring assignment of title to the university. Some have gone so far as to argue that the Bayh-Dole Act simply vests title with the university contractor automatically. The Supreme Court has held that these interpretations are wrong. The SPRC has no requirement for a university to secure ownership of inventions. Furthermore, a university may obtain ownership of inventions by requesting ownership and negotiating the terms of assignment–rather than demanding ownership as a condition of anything. There is no requirement, for instance, that a university must demand ownership as a condition of employment, use of resources, or participation in extramurally supported research. Thus, any claim that failure to have a patent agreement with employees will result in a breach of Bayh-Dole (or more specifically, the SPRC) is not true. For universities committed to an independent faculty, academic freedom, and innovation, demanding ownership of inventions may not be good practice, even if such efforts are often made in the corporate world.

When a university elects to retain title, additional elements of the SPRC come into effect. If a university elects to retain title, it must file a patent application within a specified period and must report on its efforts to encourage utilization of the subject invention. There is no requirement, however, that a university must elect to retain title, or that it must ever own title if it does elect to retain title. For instance, a university could prospectively assign its interest in title to an affiliated research foundation or other organization that manages inventions.

By agreeing to these obligations, a university necessarily displaces any agreements or policies it may have to the contrary, including those that might otherwise apply to its employee inventors. Once a university agrees to require the (f)(2) agreement of its employees, the university cannot require those same employees to agree with it to some other arrangement at odds with the (f)(2) agreement. Bayh-Dole does not require a university to have a patent policy, or have employees promise to assign inventions as a condition of employment, use of facilities, or any other reason. Employees promise to assign their rights as a condition of the university accepting the SPRC and acting under it to require the (f)(2) agreement. Who they assign to is not specified in the SPRC.  It may be the university, a designated agent of the university, the funding agency, or no one at all (see 37 CFR 401.9). Again, some experts are frequently confused on this point. Many appear not to have any awareness of the (f)(2) requirement. Others apparently believe that the (f)(2) agreement is simply a complicated way of requiring a university to have a patent agreement with each employee.

The language of the implementing regulations, however, makes it amply clear that the purpose of the (f)(2) agreement is to protect the government’s rights, and that the assignment requirement under (f)(2) is to the government upon its request—but any such potential request will be deferred if contractor obtains title and elects to retain that title.

Bayh Dole does not give universities title, require universities to take title, or to commercialize if they do take title.

Bayh-Dole does not require universities to take title to subject inventions, or to seek commercialization as their means of promoting practical application, or to require payment of royalties, or if there are royalties paid to retain any royalties beyond expenses.  These are choices made in practice solely by universities, though there is nothing in the Act that requires universities to make these choices on their own—they could allow inventors to make these choices, or even industry.  Inventors, for instance, could be paid all royalties not required to cover other expenses.  In practice, however, universities routinely do not allow inventors to participate in the decisions on these matters.

While commercialization in the form of sale of products covered by patent rights may be an important objective in public policy discussions, it is not the primary objective of Bayh-Dole.  Throughout the Act, the emphasis is on contractor actions to promote the use of federally supported inventions in the public interest.  Nowhere does the Act set out university profit from licensing as an objective, nor does the Act authorize litigation seeking to disrupt use with claims of infringement except in cases that meet the objectives of the Act, such as to protect the public from unreasonable use or to promote free competition.

Bayh-Dole anticipates a diversity of possible university actions.

The uniformity applied to federal agency requirements for inventions is in contrast to the diversity with which universities are allowed to operate.  Universities may variously acquire, assign, substitute, subcontract, license, and waive title in subject inventions.  Universities may do this at any point in a federal funding relationship, from before the funding agreement comes into effect until after the work is done and the only remaining obligations are those under the SPRC.  For each of these various actions, the SPRC provides guidance with regard to university obligations.  Different forms of transfer carry different requirements.  For instance, if a university assigns title to a subject invention, then it must also assign its Bayh-Dole obligations, but if a university subcontracts federally funded research, it must assign Bayh-Dole obligations without taking any interest in title to inventions made by the subcontractor as a condition of the subcontract.

A great insight in Bayh-Dole is this matching of uniform agency requirements for university recipients of federal research awards with a diversity of possible university actions to promote the use of federally supported inventions.  In practice we find federal agencies seeking ways to vary from the uniform requirements, and universities adopting nearly uniform methods of implementing subject invention management under Bayh-Dole.  The present situation stands in contrast to the thought that Bayh-Dole sought to preserve, if not encourage, university exploration of the many ways subject inventions might be managed and deployed to meet the objectives of the Act.

Universities must report utilization efforts.

Bayh-Dole’s emphasis is on practical application of subject inventions to advance national research and economic development objectives.  As such, Bayh-Dole is an important part of the federal government’s research and economic development policy.  In addition to reporting subject inventions and any potential statutory bars to patenting, universities are required to report on their progress toward achieving practical application, though these reports are also protected from disclosure by federal freedom of information law.

Reporting begins with written notice of invention, and notice of any publication disclosing the invention or public use that would create a statutory bar to patenting.  At the end of a funding agreement, a university must provide a final invention report, even if there has been no invention.  A university must report the filing of patent applications on subject inventions and provide a government purpose license to the government.  A university must place a notice in patent applications of the government’s funding and identify the contract.  Reports of utilization are due no more frequently than once a year.  In these reports, a university must identify any date of first commercial sale along with other information, such as licensing income.

Under Bayh-Dole, these reports are treated as non-public and not subject to FOIA disclosure.  As a result, and most remarkably, there has been little public reporting of the actual condition of the subject invention portfolios obtained by universities and other federal contractors.

A university may transfer its Bayh-Dole obligations.

Bayh-Dole anticipates that the requirements of patent rights clauses in funding agreements will move with transfers of various sorts.  Different sorts of transfers carry different obligations.  In Bayh-Dole, a funding agreement establishes a given patent rights clause, such as the SPRC.  Any assignment, substitution of parties, or subcontract is also defined as a funding agreement, and thus will carry the patent rights clause as required by the patent rights clause, the conditions of the transfer, and the Act.

The SPRC makes some requirements express.  In the case of a subcontract, the contractor must flow down the SPRC and the contractor cannot claim any interest in the subcontractor’s inventions as a condition of the subcontract (37 CFR 401.14(a)(g)).  If the subcontractor is not a non-profit or small business concern, then the contractor must substitute the proper patent rights clause following federal contracting requirements.  If, alternatively, the contractor assigns its interest in title in subject inventions to an organization having a primary function in the management of inventions (or, any organization with agency approval), then it must also assign its obligations under the SPRC.

Variations are possible following contracting practice.  A contractor could substitute a party in the agreement (such as by adding an additional participant to the federally supported project).  Such a substitution would create a funding agreement and impose the patent rights clause of the funding agreement in which the substituted party appears.  Similarly, a university could transfer some of its Bayh-Dole obligations under the SPRC and retain others.  Thus, it could assign commercialization efforts to an independent organization, with transfer of appropriate obligations under the SPRC, but retain the responsibility for promoting practical application outside of commercialization, such as through deployment of research tools and direct assistance to adopting organizations (who may not require a product form of an invention).  In such a case, both the commercialization partner and the university would act under the same SPRC obligations.

Bayh-Dole limits uses of patent license royalties.

Bayh-Dole calls out universities and other non-profit organizations with regard to management of income from licensing patents on subject inventions.  Universities may reimburse from this income their incidental expenses in managing subject inventions (but not, apparently, other inventions).  Universities are required to share royalties with inventors.  There is no guidance with regard to the amount to be shared—it could be all the income received, or it could be a modest sum.  One would think the sharing would be a matter of mutual negotiation between the university and the inventor in the assignment transaction, but in practice most universities dictate the terms of the assignment with an outright demand for ownership based in employment, use of facilities, or participation in extramural research, with a non-negotiable royalty sharing schedule.  Royalty is not defined in Bayh-Dole, but in patent licensing practice, courts have held that a royalty is any payment made in consideration of a patent license.  Thus, in one significant case, a court found that funding provided to the university in a research agreement that was required in a patent license was also a royalty.  Universities have modified their policies to exclude sponsored research payments from their sharing schedules.

Bayh-Dole  treats royalties paid to inventors as a form of contractor expense.  Remaining funds are to be used for “scientific research or education.”   There is no restriction as to who uses funds for these purposes.  It may be the university, or another organization designated by the university, or individuals.  Thus, for instance, a university could dedicate such remaining funds to scholarships for students or to a foundation that supports research.   Bayh-Dole does not provide for the use of remaining funds for general administration or for the management of inventions or other works that are not subject inventions.  As a matter of practice, however, universities do not carry separate accounting for such remaining funds and rarely report their use.

Typical university implementations

A typical university implementation under Bayh-Dole takes the following form.  Employees are required to sign a patent agreement or are required to agree to a policy statement that they will report their inventions of any kind to the university administration, and will assign title to these inventions when required to do so by the university.  Some universities make such a requirement to assign a condition of employment.  Others require assignment if university facilities are used, or if the invention arises in extramural research.  Some require assignment as a condition of federal funding.  For many universities, this agreement to assign attempts to stand in for the agreement Bayh-Dole requires universities to obtain from employees (see 37 CFR 401.14(a)(f)(2)).  However, most such agreements are defective with regard to (f)(2).  An emerging trend is to require assignment in the form of a “present assignment of expectant interests”, so that inventions are owned by the university when they come within scope of a claim and review takes place after ownership has transferred to the university.

A university typically designates its technology licensing office to receive invention reports and to make decisions regarding the university’s interest.  The licensing office by policy may require title, may waive title, may in some cases transfer title (such as to an affiliated research foundation) or may take title and later return it to the inventors if it does not continue efforts to support the invention.  In practice, university licensing offices require assignment of inventions and only waive title to those that are clearly not patentable, or where there is not sufficient funds to move beyond the filing of a provisional patent application.  Universities may have multiple licensing offices.  Often this happens when there is a medical center or major laboratory that operates its own office, or when there is an affiliated research foundation that works in parallel with an internal office.  In university systems, each campus may operate a licensing office, though all are within the same legal organization.

Most university licensing offices are set up to promote commercialization of inventions through patent licensing for a running royalty on sales, milestone payments, equity (in the case of startups), and in some cases, sponsored research.  Most such patent licenses are conceived to be exclusive, though non-exclusive licensing does also take place.  When universities advocated for the passage of Bayh-Dole, one of their arguments was that they could do exclusive licensing more effectively than could federal agencies.  However, some of the most valuable licensing programs have been non-exclusive.  Two of these, Cohen-Boyer and Axel, were also pre-Bayh-Dole, but set the stage for subsequent interest in exclusive licensing, especially in the area of biotechnology.

Other approaches to using patents to support research are generally not used, including open innovation, participation in standards, and cross-licensing with industry.  Patent licensing generally takes two forms, one focused on major corporations and the other focused on investment-backed start up companies.  Corporate licensing, in turn, is divided between licensing in the context of industry-sponsored research, which includes both individual corporate sponsors and industry consortia (which often seek a royalty-free non-exclusive license) and marketing inventions to industry via various announcements, mailings, cold calls, and referral networks.  Startup efforts may take the form of partnerships with venture capital organizations, use of affiliated seed funds, and the formation of specialty centers to vet ideas, such as proof of concept centers and entrepreneurship programs.

University inventors are typically required to agree to a pre-set royalty sharing schedule.  Universities typically allow the inventors to negotiate among themselves for unequal shares in a royalty.

 

Effect of the SPRC on university policies and agreements

The SPRC provides contractors with a right within the funding agreement to retain title in subject inventions.  One way to think of this is that the university is permitted to stand in as the recipient for assignment of rights that a federal agency could otherwise require of the contractor’s inventors under section (f)(2) of the SPRC.

The university must require certain employees—that is, employees other than clerical and non-technical employees–to agree to protect the government’s interest in subject inventions.  Within the context of this (f)(2) agreement, a contractor may independently require its employees to undertake various commitments to the contractor.  The obligation to report inventions to the contractor is not one of these, however, since this obligation is established by the (f)(2) agreement, which is federal, and takes precedence over any other agreement that the contractor may propose with its employees.  While the contractor may require clerical and non-technical employees, as well as volunteers or informal collaborators such as visiting scholars, to report inventions they make, this is not an obligation of the SPRC.   In this regard, it is worth noting that the SPRC therefore is not concerned with a university obtaining exclusive ownership of an invention made with federal support, but only the ownership interest arising from the employees specified within the (f)(2) agreement.  Any others are not obligated to report, or to assign, their inventions to the government.

Closing comments

Bayh-Dole provides a framework for agencies in their contracting with universities for research proposed and conducted by faculty.  Faculty (generally), decide what work to propose, write the proposals, hire the personnel, conduct the work, evaluate the data, publish the results, identify and report their inventions.  The university’s role as contractor is not that of control of research or research results, but rather to provide logistics for funding and facilities and resources necessary for faculty investigators to do their work as proposed under the funding agreement.

Bayh-Dole provides for a diversity of university practices responsive to the needs of research investigators and inventors.  It is up to universities to take advantage of this diversity to promote the use of subject inventions in the public interest.  For that to happen, university investigators and inventors must be brought much more fully into discussions of the conditions on which a university may choose to elect to retain title to subject inventions, and the expectations that accompany subsequent disposition of subject inventions that remain within the scope of university control.

Generally the history of Bayh-Dole has been a continuous reduction in the range of technology transfer programs, increasingly corporate-style demands for ownership of inventions, restructuring of transfer programs to focus on commercialization and making money from new ventures and litigation rather than on the promotion of inventions by using the patent system.  While Bayh-Dole has been credited with the rise of a minor industry in the form of formalized university technology transfer offices, despite the aspirations to public service and benefit, the existing administrative geography looks remarkably similar to the conditions in federal agencies that led to the passage of the Bayh-Dole Act:  universities demand ownership outright, accumulate substantial unlicensed patent portfolios, disrupt research and publication efforts of other universities, raise various barriers to licensing and to research collaboration, and fail through their management processes to meet many of the objectives set forth in Bayh-Dole.  As the situation becomes apparent, we can expect that Bayh-Dole will undergo additional changes to restore diversity, a free market, and more competitive practices to the administration of federally supported inventions.

 

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