Does Bayh-Dole apply only to patentable IP?

Posted on September 2, 2019 by Gerald Barnett

Here is a question at Research Enterprise. Does Bayh-Dole apply only to patentable IP?

Answer: No. In its contracting parts, Bayh-Dole applies to subject inventions, and the definition of subject invention includes more than patentable IP but also restricts what of this “more than patentable IP” is covered.

A subject invention (35 USC 201(e)) is one that

(i) is owned by a party to a federal funding agreement

(ii) is or may be patentable OR protectable as a plant variety

(iii) was made in performance of work under the federal funding agreement

Where “made” means either conceived or first actually reduced to practice. An invention may be first actually reduced to practice–such as testing to demonstrate that it performs as conceived–after it has otherwise met all the requirements for patentability. (See in re Eddie L. King.)

And “funding agreement” includes any assignment, substitution of parties, or subcontract of any kind.

And “work” means a project that receives at least some federal funding at some point. As 37 CFR 401.1 makes clear, neither separate accounting nor chronology is determinative–it’s not that federal money must be spent directly on a given invention, but that federal money at some point supports the project in which the invention has been made. (For the scope, see Mine Safety Appliances v United States.)

Since Bayh-Dole applies to plant variety protection via certificates as well as via patents, Bayh-Dole applies to this one other sort of quasi-IP that’s not patentable IP. That’s part of the answer, then.

There’s another limitation. Bayh-Dole does not apply to all patentable IP, even with plant variety protections added in. Bayh-Dole applies only after a federal contractor has acquired an invention made under a federal funding agreement (see Stanford v Roche). It is not true, despite widespread “guidance” otherwise, that Bayh-Dole applies to any invention made with federal support. Bayh-Dole requires contractors to disclose subject inventions–inventions they have acquired. Bayh-Dole does not require inventors to disclose any inventions that are not subject inventions. Some people view this as a lapse in the law. The Supreme Court did not and observed that the lack of protections for inventors, companies, and other “third parties” would be “deeply troubling” if things were otherwise. Perhaps Bayh-Dole is just this “lapse” short of being unconstitutional.

Nothing in Bayh-Dole or in the implementing regulations for Bayh-Dole, including the standard patent rights clause, requires inventors to disclose to their employer or to the federal government any inventions other than subject inventions. A federal contractor does not have to require inventors to disclose or assign inventions made in work receiving federal funding “in order to comply with Bayh-Dole.” That sort of talk is worse than nonsense–it’s incompetence or malpractice.

Bayh-Dole did not repeal other laws pertaining to ownership of inventions made in work receiving federal support. Bayh-Dole instead preempts those other laws when a federal contractor owns an invention that is otherwise within scope of Bayh-Dole’s definition of subject invention. If an invention made under contract is not acquired by any federal contractor, if any of those other laws applies, then the invention is subject to that law. Bayh-Dole does not then apply.

A federal contractor may make others parties to the funding agreement by assigning, substituting parties, or subcontracting. For instance, if a nonprofit assigns a subject invention, the party receiving the assignment must accept the nonprofit’s patent rights clause–and thus, becomes a party to the funding agreement. See 35 USC 202(c)(7)(A).

A federal contractor may make employees parties to the funding agreement by subcontracting patent rights clause obligations to them. When such an employee then makes an invention under contract, the invention is a subject invention even though it is not assigned to the employer-contractor. In this case, Bayh-Dole’s implementing regulations provide a special inventor patent rights clause that applies to the subcontracted funding agreement. See 37 CFR 401.9. The inventor patent rights clause provides that inventor-owners are to be treated as small business firms and thus have the right to elect to retain title to subject inventions without interference from their employer under 35 USC 202(a).

Bayh-Dole’s standard patent rights clause requires contractors to require their employees, other than clerical and non-technical workers, to make a written agreement to protect the government’s interest in subject inventions. The flow down of the written agreement–that contractors must require it–and the substance of the written agreement–assigning to employees responsibilities under the funding agreement (and its patent rights clause)–make it apparent that when a federal contractor complies with the written agreement requirement, it makes the employees involved parties to the funding agreement. Just that no one complies with the written agreement requirement and instead substitutes a patent agreement that operates outside the funding agreement. And I don’t know of a single university legal counsel that would accept the idea that the standard patent rights clause requires contractors to make their inventors parties to the funding agreement. So expect a legal fight if you take this route. You would be right, but it would take a couple hundred thousand dollars to beat back the university corruption of the law.

 

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University inventions that aren’t exactly worthless-4

Posted on August 30, 2019 by Gerald Barnett

If we work through these issues, it is apparent that it is a very special case where an invention cannot be used unless it is first productized, and that such productization will not be undertaken by the federal government, or a nonprofit, or a consortium of companies working to establish a standard, and that the cost of productization is sufficiently great that no one individual or company, other than one having ready access to great wealth, is willing to take on the work, and even then, the resulting products are not of such public or social value that an individual or company would do the work in the public interest (i.e., to release the product for all to make, use, and sell) or even in the public interest after recovery of development costs (or plus a reasonable profit for having taken the risk and expense)–but rather only if the individual or company is free to make as much profit as it can over the life of the patent.

Again, productization here means, loosely, “defining a product based on or incorporating an invention that meets expectations for profit, and developing production, supply and distribution resources to make and sell the product on a national if not global scale.” No kidding there is “risk” in such undertakings, and that they are “high risk, high return” endeavors. It’s just that for nearly all research inventions, there is absolutely no need for such ventures. Most inventive stuff can be used immediately without excluding anyone. Of the stuff that’s left, if it is compellingly in the public interest, it can be used with development costs shared among governments, non-profits, and collaborating companies. Any product version can come later, if public needs are not met by local, custom, craft, just-in-time production. Continue reading →

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University inventions that aren’t exactly worthless-3

Posted on August 29, 2019 by Gerald Barnett

To show the limits of policy rationalizations over the university use of patents to benefit the public, let’s consider only those university inventions that have “worth”–that aren’t (in the eyes of university administrators, at least) “worthless.” If we work this way, then we have these categories of inventions:

inventions that aren’t worthless

(A) could be used by the public without productization

(B) could be used in research without productization

(Uses in research–research conducted using the invention; research on the invention to determine how it operates; research to improve upon the invention for further research)

(C) could be used in industry without productization

(D) but for which the inventors are indifferent to their value and decline to help others use them and so cannot be used (or used readily) by those that would use them or productize them

(That is, the invention has worth, but the worth depends on what the inventors know–lines of development, technical problems in getting things to “work,” expertise in making key components, and the like)

(E) but only because could be held by speculators hoping that someday the right to exclude others will become valuable

(Worth–because someone is willing to pay for the chance to hold)

(F) but could have greater worth if made into commercial products but won’t because the cost of development is high unless a single company is recruited to invest with the prospect of excluding all others

(G) could have worth and be used only if made into commercial products but won’t because the cost of development is high unless a single company is recruited to invest with the prospect of excluding all others. Continue reading →

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University inventions that aren’t exactly worthless-2

Posted on August 28, 2019 by Gerald Barnett

Companies, it turns out, are pretty good at evaluating inventions that are “worth” something to them. Companies with large research enterprises appear to be less good than others, however. The story at Xerox PARC was that inventors hoped that their inventions would not be judged “strategic” by Xerox executives. If “strategic,” then Xerox would take ownership, form a division around the invention, and there it would usually suffocate. If non-strategic, then the inventor was free to do whatever. Thus, we have ethernet and postscript and graphical user interfaces, among other things. Inventions that clearly have had “worth” but only if not controlled exclusively by an organization hoping to “realize” that “worth.”

Universities have almost no capacity to judge the “worth” of an invention, even to themselves as a source of money. They don’t have products and markets and areas of development from which to reason about any given invention. Instead, they ask only (and often with some degree of ignorance) whether they can get anyone to pay them for their taking out a patent position. All they require, then, is posturing in a legal document to put a veneer on the transaction that it is in the public interest to grant an exclusive license. A few states have passed laws that purport to limit what an employer can require in an employment agreement by way of assignment of inventions. Actually, these laws tend to expand what an employer can demand, since they include the employer’s business and future business, and use of employer resources, non of which matters to common law invention ownership. University administrators take it to 11, however, and argue that since they intend to make money on any invention that an employee makes, their future business is always redefined to be any invention on which they can practice their arts. Any company could adopt the same scheme. The law is essentially useless in protecting employee inventors from predations, if this interpretation is permitted.

One of the great problems is the insistence that the “worth” of an invention be monetized through a patent licensing contract. A great deal of university “value” flows through other channels–in donations, in the hiring of graduates, in offers to support research, in collaboration with faculty, in government subsidies arising because there is great public support for the work a university is doing. Continue reading →

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University inventions that aren’t exactly worthless-1

Posted on August 27, 2019 by Gerald Barnett

Let’s work the logic of university administrators thinking, ahem, about innovation. We have to do this sort of thing because it appears few university administrators bother with logic. Logic certainly is easily distracted by fallacies and is perhaps then overrated. But let’s give it a try. Let’s start by dividing inventions into worthless ones and not worthless ones. “Worth” is its own problem. There’s “worth” in the sense of “worthy of praise”–such as a discovery that wins acclaim, such as finding a new minor planet. There’s “worth” in the sense of apparent “social value”–a finding, say, that poor people are more charitable than rich people. There’s “worth” in the sense of offering a benefit–such as a new potential medical therapy. There’s “worth” in the sense of “having the potential to make money”–universities call this “commercial value.” And there’s “worth” in “advancing one’s interests”–whether personal or organizational reputation or business opportunities.

Given the different meanings we might give to “worth,” we ought to use a different word for each meaning. But then we would disable university administrators from using “worth” and similar words such as “value” and “benefit” expecting the public to expect one thing when the administrators may mean another–or not mean anything at all, using these words to keep the public complacent with regard to university invention practices.

In all of this, a key question is “worth” relative to the role of the institution making a claim to own inventions. Continue reading →

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When is an invention a subject invention?–5

Posted on August 16, 2019 by Gerald Barnett

We have pounded our way through the definition of subject invention. We started with the observation that Bayh-Dole is part of federal patent law, not merely an executive branch regulation. Bayh-Dole preempts other federal law and executive branch patent policy when an invention meets the definition of subject invention. Rather than repealing those other laws and policy, Bayh-Dole adds yet another layer of administrative fussiness. But this fussiness is embedded in patent law and changes the property attributes of patents obtained on subject inventions as well as requiring owners of inventions to behave in ways that are not required of the owners of ordinary inventions.

However, in the case of both ordinary inventions and subject inventions, nothing in federal patent law-including Bayh-Dole–requires inventors to use the patent system or behave so that their inventions become subject inventions. Bayh-Dole applies after an inventor becomes a party to a federal funding agreements or assigns his or her invention to someone who is a party to the federal funding agreement–provided that the invention is patentable and was made under that funding agreement (that is, made in a project that received at least some federal funding in some part of the project). Got it.

Subject invention is a definition in federal law. People cannot merely assert an invention is a subject invention, even “just in case” or to gain (what they may think is) a legal advantage. People cannot agree with a federal agency that something is a subject invention and somehow make it so. People can conduct their affairs to bring an invention within the scope of subject invention (by acquiring ownership, say, or by documenting the invention sufficiently for it to be patentable, if it is otherwise patentable). But patent law does not force anyone to use the patent system, the Bayh-Dole part included.

Let’s wrap up. Continue reading →

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When is an invention a subject invention?–4

Posted on August 15, 2019 by Gerald Barnett

We are working through Bayh-Dole’s definition of “subject invention” at 35 USC 201(e). For an invention to be a subject invention, it must meet every element of the definition. Folks can’t just say something is a subject invention and by doing so make it a subject invention–though this is what many university administrators try to do in practice. Similarly, just because folks say an invention is not a subject invention, it does not make it so. The definition of subject invention is placed in federal patent law. (Bayh-Dole amends federal patent law–that in itself is really, really strange.) Thus, “subject invention” defines a new category of invention in patent law–invention and subject invention.

Here’s 35 USC 101:

Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.

Here’s 35 USC 261:

Subject to the provisions of this title, patents shall have the attributes of personal property.

Bayh-Dole introduces new conditions and requirements on inventions that meet the definition of subject invention. The conditions upon which patents may be obtained, and the attributes that those patents have, are then based in whether Bayh-Dole’s conditions and requirements apply. If an invention is a subject invention, then the attributes of any patent obtained are subject not only to patent law generally but specifically to Bayh-Dole’s statement of policy, other conditions, and requirements. Bayh-Dole makes these conditions imposed on subject inventions a matter of statute, not federal contract.

We now turn to two restrictions on subject inventions having to do with when an invention is determined to have been “made”: Continue reading →

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When is an invention a subject invention?–3

Posted on August 14, 2019 by Gerald Barnett

We are dealing with when an invention becomes a subject invention under Bayh-Dole. An invention must meet every element of Bayh-Dole’s definition at 35 USC 201(e) to become a subject invention and cause Bayh-Dole to preempt most other federal law and executive branch patent policy with its own clumsy additional layer of administrative fussiness. We are dealing with the problem of patentability, and in particular with the necessity that an invention must be sufficiently documented to meet the requirements of federal patent law for patentability as one of the conditions set down by the definition of “invention” within the definition of subject invention. Again, if an invention has not been documented at the level required to obtain a patent, it is not patentable. Nothing in Bayh-Dole requires an inventor to document an invention so as to make it (all other things aligned) become an invention that is or may be patentable. Bayh-Dole doesn’t even come into effect for merely patentable inventions, anyway–the invention must be a subject invention for Bayh-Dole to preempt other law and impose its own clunky, mostly useless administrative layer.

Bayh-Dole’s implementing regulations attempt to add some structure to the law–mostly by introducing stuff not in the law but dragged in from past executive branch policy and regulations. Here, for instance, is 37 CFR 401.14(c)(1), on invention disclosure. It’s stuff not in Bayh-Dole but required anyway. And tt’s longish. The point of the disclosure requirement is that the elements in the disclosure by a contractor (having come to own a given invention) to the federal agency are those that would provide the necessary documentation that makes an invention patentable and a subject invention.

The contractor will disclose each subject invention to the Federal Agency within two months after the inventor discloses it in writing to contractor personnel responsible for patent matters.

Remember, “contract” here is defined shorthand for “funding agreement” and “funding agreement” includes any assignment, substitution of parties, and subcontract of any kind, and the “performance of work under a funding agreement” means developmental, experimental, or research work, at least some of which has been supported by federal funds.

The disclosure to the agency shall be in the form of a written report and shall identify the contract under which the invention was made and the inventor(s).

The written report meets a requirement for constructive reduction to practice of an invention and provides the information necessary to demonstrate that the invention indeed is a subject invention.

It shall be sufficiently complete in technical detail to convey a clear understanding to the extent known at the time of the disclosure, of the nature, purpose, operation, and the physical, chemical, biological or electrical characteristics of the invention.

For an invention to be disclosable, it must already meet every element of the definition of subject invention. If a disclosure sent by a contractor to a federal agency fails to provide the information necessary to satisfactorily document a given invention, it is not that the report is defective–it is that the invention, until it is satisfactorily documented, cannot be a subject invention because without such documentation it is not patentable. Continue reading →

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When is an invention a subject invention?–2

Posted on August 13, 2019 by Gerald Barnett

We are working through the answer to when an invention is a Bayh-Dole subject invention. The reasoned answer is when the invention meets every element of the definition of subject invention at 35 USC 201(e). The simple answer in practice is that a subject invention is whatever someone who can ruin your life says it is. Bayh-Dole is a bully-happy law this way. However, to work through the largely meaningless reasoned answer, we have to work through the definition of subject invention. There’s absolutely no point in doing so, because most everyone ignores the law, and the law itself is clumsy and the implementing regulations both clumsy and stupid, but if you insist, then why not? Yeah! Let’s do it!

4. The definition of subject invention. 

Now let’s look then at the Bayh-Dole definition of subject invention. First, the full definition. Then we will nibble it off, bit by bit.

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: Provided, That in the case of a variety of plant, the date of determination (as defined in section 41(d) [1] of the Plant Variety Protection Act (7 U.S.C. 2401(d))) must also occur during the period of contract performance.

of the contractor

Let’s work first with “of the contractor.” The Supreme Court in Stanford v Roche was clear that “of” means “owned by” not “produced under the auspices of.” If a contractor does not own a given invention, then it cannot be a subject invention. That much is clear. If a contractor does not own a given invention, then nothing in Bayh-Dole specific to subject inventions applies. That goes for obligations to disclose, assign, file patent applications, promote utilization, achieve practical application–contractor does not own, these obligations do not come into effect.

If someone wants to prevent an invention from becoming a subject invention, the obvious thing is for no contractor to own it.

Federal statutes might otherwise apply, but the apparatus to enforce them has been largely abandoned or repealed. If a contractor–a party to a federal funding agreement–does not own a given invention, it cannot be a subject invention. Continue reading →

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When is an invention a subject invention?–1

Posted on August 12, 2019 by Gerald Barnett

A search query here at Research Enterprise recently asked how to determine if an invention is a “government subject invention.” Here is your answer. Keep in mind that Bayh-Dole is poorly drafted, not enforced, not complied with, and there’s plenty of misinformation available that is intended to keep things that way. Universities and academics, in particular, consistently misrepresent the law in policy, in guidance documents, and in articles. But hey, people still want to know what subject invention would be if anyone bothered to follow the law. So here it is.

Here are the key points. For those who want more discussion, that follows.

1. Key points.

“Subject invention” is a statutory definition in the Bayh-Dole Act (35 USC 201(e)). An invention is a subject invention when it meets every element of the definition. No one–not an inventor, not a contractor, not a federal agency can simply declare an invention to be a subject invention. But contractors and inventors can take actions that determine whether an invention meets the definition of subject invention.

The invention must be owned by a party to the funding agreement.

Contractors may receive assignment of the invention or may make inventors parties to the funding agreement. If an invention is not owned by a party to a federal funding agreement, then it cannot be a subject invention. Nothing in Bayh-Dole’s requirements for contractors applies if an invention is not a subject invention. Bayh-Dole’s policy requirements may still apply, but that does not depend on an invention being a subject invention.

The invention must be patentable or possibly patentable. 

If the inventor does not recognize work as inventive, then it is not patentable. If the invention is not directed at patentable subject matter, it is not patentable. If the invention is not new, useful, and non-obvious, it is not patentable. If the invention has been disclosed publicly for more than a year, it is not patentable. If the invention has not been described in sufficiently complete detail, it is not patentable. If an invention is not in a condition to be patentable, then it is not a subject invention.

The invention must have been made–conceived or testing completed–in a project that has received at least some federal funding for research, experimental, or developmental work. 

Wording here is important. Define a project. If some part of that project receives federal funding, then any invention made in the project is a subject invention if it meets the other elements of the definition. Conception is more than just having an idea or insight–it involves having in mind every element of an invention. It is difficult for conception to be “funded” unless one is hired to invent or a project expressly requires invention to succeed. First actual reduction to practice means testing necessary to demonstrate that an invention satisfactorily performs each function as conceived.

Any party to the funding agreement may make a subject invention, even one recruited to develop a commercial product, if the recruitment takes the form of assignment, substitution of parties, or subcontract. 

The scope of the definition of subject invention depends on the scope of the funding agreement. Contractors may add parties to the funding agreement, and these parties are also contractors. Everything in the law that applies to the initial contractor also applies to each additional contractor as they become parties to the funding agreement.

Continue reading →

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