OMB Circular A-110 sets the overall federal policy for the funding of university research. Within A-110, Bayh-Dole appears as a section within __.36, which pertains to Intangible Property. Other sections of __.36 address copyright and data.
There are other federal regulations, as in the FARs, that also pertain to intellectual property in contracts. When those contracts are with universities, then these will come into play as well. For federal contracts, Bayh-Dole still mostly comes through, but copyright and data matters can get twisted around, such as through the FAR Special Works clause or under restrictions imposed by agency specific FAR supplements in the Rights in Data General clauses.
Intangible Property is defined this way in A-110 (at __.2(s)):
(s) Intangible property and debt instruments means, but is not limited to, trademarks, copyrights, patents and patent applications and such property as loans, notes and other debt instruments, lease agreements, stock and other instruments of property ownership, whether considered tangible or intangible.
The definition is quite broad, encompassing intellectual property, debt instruments, and other contracts. Where it becomes interesting is when we turn to __.37, the next section in A-110:
___.37 Property trust relationship. Real property, equipment, intangible property and debt instruments that are acquired or improved with Federal funds shall be held in trust by the recipient as trustee for the beneficiaries of the project or program under which the property was acquired or improved. Agencies may require recipients to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with Federal funds and that use and disposition conditions apply to the property.
I’ve boldfaced some parts for emphasis. There are couple of things to get out of the way. First, does this apply to patents and copyrights? On the face of it, it certainly appears to. One can push it further, however, and ask what it means for patents to be “acquired or improved” with federal funding. “Acquired” alone might mean “purchased”, such as one might acquire equipment, or obtain permission to practice to carry out the project. “Improved”, however, has little of this and suggests improvements to the underlying inventions, or to the claims one might make in the patent office. “Improved” could also mean something along the lines of “made more valuable through the conduct of the research”, but in that sense it would only matter if the improvements were held by the recipient (let’s say, here, a university) as property (through an assignment, contract, deed, or other such instrument).
If we look specifically at patents, it is clear that these are only acquired by a university by means of an assignment transaction from the inventors. There is no “work for hire” or automatic statute that operates to hand patent rights to a university as employer. Thus, the university as recipient of federal awards is clearly acquiring patents when its policies require assignment of right, title, and interest to inventions made with federal funds. Such actions would appear to fall directly within the scope of A-110 __.37.
A second point has to do with the term for which such obligations under __.37 operate. What happens, for instance, at the end of an award period, when the money has been spent, the final report accepted, and the grant account closed out? We note that the licenses granted to the government under __.36 do not terminate. In a related section, covering Program Income (__.24), language expressly limits the requirements for such income to the “project period” (see subparagraph e). There is no such language here in __.37. We are left to conclude that the obligations of __.37 continue after the end of the project period.
Getting all of this out of the way seems sort of stuffy. But it’s important. Here’s the juicy part. This little __.37 clause is the roadmap to what universities should be doing with their IP policies, and the routine violation of this clause is what’s gone so very wrong.
The point of __.37 is that universities as recipients of federal grants are to act as trustees for the IP they acquire that results from that funding. To put borders on it, not simply to act as corporate owners of copyrights and patents, nor as indifferent hosts as if the research were private and they are just in it for the indirect costs and prestige. When a university seeks to own rights to patents made in the course of federal funding, it should be making the acquisition of the patents on behalf of the beneficiaries of the research. That’s what __.37 says. Further, __.37 says, even if the recipient doesn’t acquire the rights, but merely improves them, the recipient still is to play the role of trustee.
For all those technology transfer programs trying to make money licensing commercial rights, the challenge of __.37 is to demonstrate that doing so results in benefits for the intended audiences of the research. It may be obvious that the invention in use will have benefit, but explain how making money in doing this is what a trustee should be doing.
Bayh-Dole lays out who the beneficiaries are to be for university-retained invention title: US labor, small business, industry collaborators, scientists, students, and inventors. Other than the share of income provided to inventors, I don’t see universities reporting on how these other objectives are being met. And when it comes to inventors, I don’t see how cash only can possibly be the only obligation a trustee owes them in managing patent rights.
Right now university technology transfer appears fixated on starting companies. That amounts, mostly, to helping venture capital firms with their deal flow. That is so sweet and caring. The VCs I’m sure really appreciate having university folks so fixated on helping them make money. I can’t see how that is what a trustee is to supposed to be doing.
We can take it one step further. Universities need to account for their Bayh-Dole income. All they do is report their total licensing income. We need to see what of it is from subject inventions. More importantly, however, we need an accounting of how they are using this money. Bayh-Dole says: cover the costs of managing subject inventions (including the costs in sharing with inventors), and use the remaining funds (if there are any) to support scientific research or education.
Since this last bit appears to be lost on administrators, perhaps it is worth spelling it out more clearly.
1. Fund the darn tech transfer program. It’s a Bayh-Dole mandate. This idea that you can do it on 20% or 30% of licensing income is crazy. That’s being a slumlord not a trustee. 40% plus costs if you’ve got the program working exceptionally well. That amount from your own funds until you do. File some patents and take care of them. If you’ve got enough income to handle full participation in the program, then scale the re-investment back then.
2. Share with inventors. The pre-set “royalty sharing” schedules in policy are a crock. These schedules are only there set in stone because no one trusts you guys to do the right thing. Start by sharing income with *all* inventors participating in the subject invention licensing program, not just with the ones that hit it big with a licensing deal for their own inventions. Then let inventors have a say in the sharing for the inventions they contribute to the program. And for the portion they dedicate to the university, let them have a say in how that is used, too. And make that all public. Let’s see how inventors want to cut things, as between themselves and their science and students.
3. Put the remaining funds to visible use. They are not slush funds, nor funds for whatever pet project. So use them well, and account for them. Consider, as trustee, putting them to work in support of scientific research in the labs of the scientists who are doing the inventing. Consider, as trustee, supporting that work beyond your own institution. Same for educational uses. Consider asking the audiences that expect to benefit from the research how the funds might be best used. Yes, it means you have to ask the dirty masses what they think, but you know, that’s what a trustee does. A trustee communicates with the intended beneficiaries.