When an invention is made, title to the invention—essentially the standing to file a patent application and have a patent issue in your name—is with the inventors. Under the Patent Act, for that title to shift to anyone else, the inventor has to assign title in writing. Bayh-Dole sets it up that the funding agency can request title to any subject invention, unless the university acts in certain ways to elect to receive that title instead of the government, subject to obligations to the government to meet public objectives. That’s what “retaining title” means in Bayh-Dole: obtain title from one’s own employee inventors under the invention title acquisition conditions implemented under the federal award under which the invention was made.
That title to subject inventions is never “clear” of obligations. For grants, the purpose is even more clear with regard to Circular A-110, which implements Bayh-Dole at 2 CFR 215.36(b). At 215.37, interestingly enough we get this (my bold):
§ 215.37 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.
This provision says that any intangible assets acquired or improved by the recipient (i.e., the university) are to be held in trust by the recipient for the beneficiaries of the grant. In 2 CFR 215.2(s) we get a definition of “intangible assets (my bold):
(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.
That is, subject inventions are assets to be held in trust when they are acquired by the university under Bayh-Dole. The university in electing to retain title is nominating itself as the steward of those assets. That’s a lot bigger responsibility than being just the self-selected owner of patent rights, no matter the public spiritedness to rationalize that selection. It’s not enough to say holding something in trust for beneficiaries of a grant = whatever the university does is in the public interest because well, it’s in the mission statement of the university that it acts in the public interest. No, we need something closer to earth than that.
Bayh-Dole says, subject to the obligations imposed on the steward, the agency does not have to conduct any review to accept the university’s proposal to act as steward of a subject invention. Thus, the university’s election to retain title is accepted upon receipt, provided everything else is in good standing. One might say, the proposal to be steward is automatic, or self-implemented, to save needless administrative costs at the agency and to prevent a host of non-uniform, difficult to manage, obligations to be drafted, negotiated, and managed for every subject invention.
Using steward rather than owner goes a great way to reminding everyone that the university function to manage patent rights in subject inventions is not to benefit the university, but to meet the stated objectives of the Act, and insofar as the funding is a grant to universities, to serve the beneficiaries identified in the funding agreement. The university and its administrative budgets are rarely, if ever, among those identified beneficiaries. The technology licensing office in acting as an agent of the university administration, simply cannot under the law make the university’s administrative budgets out as a beneficiary.
The beneficiaries of Bayh-Dole awards are set out in 35 USC 200 and 202: industry, American workers, small businesses, scientists, students, inventors, the American public. Circular A-110 adds—anyone identified as a beneficiary in the grant under which the invention is made.
The invention management program at the university is a beneficiary to the extent that it is permitted to recover the costs incidental to managing subject inventions (which includes sharing royalties with inventors). Universities acting as owners of patents are not identified as beneficiaries. They hold patents on subject inventions in trust, not for their own corporate interests—even when these interests are justified by mission statements and expression of public benefit. The public benefit intended by Bayh-Dole is expressed through other beneficiaries than the university taken as a corporate or administrative body.
This gets at the heart of one of the weaknesses of current technology transfer practice and IP policy implementations at universities. They ignore their role as steward, encourage people to think of research inventions like corporate property, and treat licensing as a bilateral game to get the best deals they can *for the university* as if the university were a for-profit company or a patent owner. Whether that is written up as “fair consideration” or “revenue for the university” it’s not compliant with the objectives of Bayh-Dole or federal university research policy.
The university is not an owner of patents on subject inventions but rather a steward, and that’s something that matters. And that’s where industry and entrepreneurs have a point. The university should not be seeking to share a private upside in exploiting patent rights, but in creating a public upside through the deployment of rights held in trust.