As you may have noticed, I have been working through ownership issues for inventions made under Bayh-Dole. A question that has come up is: What’s the minimum policy required at a university to implement Bayh-Dole?
It would appear that a university could be entirely in non-compliance and leave funding agencies exercising their default rights at 37 CFR 401.14(d). The problem would be in the time-out of no-one reporting inventions, so it would be hard for an agency to file on anything. That would push for some minimal implementation to protect the government’s interest.
It would appear that a university could address Bayh-Dole in a decent way if it met the obligations set out in 37 CFR 401.14, paragraphs (c) and (f). I’ve arranged these in a somewhat chronological order:
(c)(1) designate personnel responsible for patent matters
(f)(2) have written agreements with employees to protect the government’s rights
(f)(2) instruct employees on importance of timely reporting subject inventions
(c)(1) disclose inventions within 2 months after inventor discloses to university
(c)(1) disclose with sufficient technical detail to convey a clear understanding of the invention
(c)(2) provide written notice of decision not to elect to retain title
(f)(1) execute, have executed, and deliver all instruments to protect the government’s rights
we might add to this 37 CFR 401.9 and a bit from 35 USC 202(d): consult with agency with regard to inventor requests to retain title.
I’ve added in (c)(2) in on the assumption that’s bad for relationships to default rather than be up front about things. The first thing to notice about this minimal implementation is that it doesn’t involve the university electing title to inventions and therefore doesn’t require a ramp up to do anything with title.
Nothing in Bayh-Dole requires a university to seek ownership of subject inventions. It’s just one pathway that a university may take. Even then, that ownership is not full ownership in the sense of having the right to “possess, use, and convey”. Rights cannot be assigned except in certain circumstances, cannot be licensed exclusively without conditions, cannot be dropped without the government getting the opportunity to pick them up (so cannot dedicate to the public domain without government approval). When a university takes ownership of patent rights in federally sponsored work, it becomes a trustee on behalf of the beneficiaries of the research (see Circular A-110). In essence, it gains legal title to patents, but not necessarily equitable title, which remains with the inventors with a lien on that by the government. Further, however, it undertakes obligations on behalf of the beneficiaries–inventors, public, small business, US manufacturing jobs, scientists, educators, students, university-industry collaborations. Bayh-Dole does not give any indication that the law intends universities to manage patents primarily to benefit themselves. Sort of screwy when you get to thinking about it. But then, “everyone is doing it” makes it okay, no?
What policy is needed in a university to implement these minimum Bayh-Dole requirements? It would appear the key thing is the written agreements with employees, which Bayh-Dole anticipates are not employment agreements and are not a general IP policy. The part of policy that matters most is that which requires all university personnel to comply with the terms of extramural awards. That policy need not have anything specific to say about intellectual property. It just makes the connection solid between the incoming research obligations and the personnel who participate within the “planned and committed activities” of the award.
Repeat: this is research compliance policy, not specifically university IP policy. What is needed, then are written agreements that make this happen. Perhaps one could get by with a master statement in a handbook, and perhaps it could be incorporated by reference into employment agreements. But the best way would be to get a sign off on a general statement the first time someone seeks to participate in a federally funded project, and thereafter only require a statement of potential conflicts that might disqualify a participant from participation (for various reasons, but here because other commitments would prevent the participant from being able to protect the government interest in inventions).
With one addition, we can simplify this list of requirements still further for a university. If the university designates one or more foundations to manage subject inventions, the list might look like this:
(c)(1) designate invention management foundation personnel as responsible for patent matters (done!)
(f)(2) have written agreements with employees to protect the government’s rights
The foundation(s), because the university transfer these responsibilities to them, will now do:
(f)(2) instruct employees on importance of timely reporting inventions
(c)(1) disclose inventions within 2 months after inventor discloses to university foundation
(c)(1) disclose with sufficient technical detail to convey a clear understanding of the invention
the university then assigns its rights under Bayh-Dole to the foundation(s), so they:
(c)(2) provide written notice of decision of whether or not to retain title
(f)(1) execute, have executed, and deliver all instruments to protect the government’s rights
and there’s still 37 CFR 401.9 and a bit from 35 USC 202(d): consult with agency with regard to inventor requests to retain title
There are other compliance matters for the foundations–in terms of reports and the like–but those are not the university’s concern in this scenario.
With this scheme, the university offloads receiving invention disclosures, federal reporting, and decisions whether to elect to retain title. It is left with written agreements, and consulting with an agency if inventors seek to retain title. That’s not a big compliance load at all. So far, so good. One remaining item in this variation is the money. What kind of deal does a university cut with foundations that manage inventions? A typical one is that the foundation covers patenting costs and retains 40% of net licensing income, returning the rest to the university, where it would pay royalties royalties to the inventors and pocket the rest for “scientific research or education”. But the university can also assign to the foundation(s) the task of sharing royalties with inventors, and only see the net after that. In Bayh-Dole, sharing royalties with inventors is listed as an “expense” among others that are “incidental to the administration of subject inventions” (37 CFR 401.14(a)(k)(3)).
Thus far, we have successfully kept any patent management out of the university. Compliance with Bayh-Dole can still be robustly interested in the juiciest of patents on subject inventions, and not stir any administrator’s heart with worries at all. This ought to be a good life, getting a check once a year from foundations working hard to find ways to use the patent system to promote the use of federally supported inventions. Why would a university choose anything else?
In phase 2 of our build out of policy, we will have to deal with what happens if a university wants to bring a greater share of the operation in-house. We will also look at the reasons a university might have for doing this, and some ways this could work out fine or be a huge gobbet of rottenness. For now, it’s enough to note that to comply with Bayh-Dole, a university need only set up to create written agreements to protect the government’s interest, designate personnel (at a research foundation, say) to receive invention disclosures and provide training on the importance of timely disclosure, and assign any further compliance to the foundation, perhaps in exchange for a share of the licensing action, if and when it happens.