I promised one more angle on Stanford v. Roche. Here it is. Read on, if you must. What happens if AUTM’s cruel world argument prevails? Let’s say the Supreme Court goes, why yes, Bayh-Dole *is* a vesting statute. Is that the end of it?
I want to explore this, not so much because I think this will come into play, but because it highlights one of the brilliant bits of Bayh-Dole, which is pretty much overlooked. It has to do with the mechanism by which inventors give up title to their inventions, and in that way might have something to do with how things end up with S v. R.
I’ve aimed to show that Bayh-Dole is a law of federal agreements dealing with rights to inventions as deliverables to the government. Bayh-Dole requires agencies to make their conditions on deliverables of inventions uniform, varying only with cause. The conditions that agencies require in funding agreements have the feel of contractual agreements, promises in exchange for federal support but with a federal flavor. In turn, universities in accepting the support on behalf of PIs, are required by the standard patent rights clause to require written agreements of what we call the research employees, but not others. It is by means of these written agreements that the government obtains the invention rights deliverables that it bargains for in funding the work.
Sorry for the repetition. I just want to be clear as possible about what comes next. Let’s say that it turns out that Bayh-Dole is an OMG! vesting statute that no one has recognized for thirty years, but there it is. Then there’s a big party on El Camino Real in Palo Alto for sure. But wait. Is it possible that as a vesting statute, Bayh-Dole is unconstitutional under the Fifth Amendment? Let’s have a look (my bold):
Amendment V
No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.
If Bayh-Dole is a vesting statute, then title to inventions, otherwise the personal property of inventors, is taken from them and placed with universities. Inventors are being deprived of property, and certain liberties that come with that property, such as being free to practice what they themselves have invented and brought into the world. We may ask, does Bayh-Dole provide (i) due process and (ii) just compensation?
Again, we are going to do our best, but this isn’t a law review article, and I wouldn’t be up to that task at any rate. Perhaps, however, it is worth exploring the idea.
There have been vesting statutes in the Patent Act before. We’ve pointed out one in a previous post, and the Solicitor General’s brief identifies a few other instances. In all of these, however, the vesting is with the federal government. I know of no situation where the federal government has established a patent law that passes private property automatically to other private parties. That is, the AUTM argument is that individuals under Bayh-Dole lose their private property–title to inventions–by operation of law, not to the federal government (who grants that property under its Constitutional authority) but rather to private organizations and universities operating as instruments of state government who happen to agree to funding conditions in receiving awards. The inventors are not party to those agreements, and according to AUTM they have no standing whatsoever to prevent title passing to those organizations. (In another recent amicus brief in an unrelated case, UC has argued this point expressly).
Let’s draw some distinctions. Yes, there is work for hire in copyright. But that is a matter of agency. In work for hire, the author is the controller of the work, and individuals working on it are not contributing original expression but rather the expression that the commissioning party or employer has specified and controls. The work does not exist in a tangible medium of expression until the author says so. So in copyright, we can argue, no one loses their private property in work for hire, because it was never theirs because they did not meet the requirement for making an original work of authorship. It’s the authorship bit that they have trouble with, not originality.
Now with inventions. The problem with an invent for hire statute is that it can’t possibly work that way. The invention arises in the mind, not as something fixed in a tangible medium of expression. Conception plus reduction to practice (actual or constructive) creates a patentable invention. There’s title. It’s property. The Constitution authorizes the federal government to reserve for inventors rights to their inventions. There is no question that if it is in your mind, you are the inventor and not your employer or someone hiring you. They cannot know what is in your mind, they cannot reduce to practice what is in your mind until you tell them. And if you tell them, then you have reduced it to practice and they aren’t inventing anything.
I can see how one could get to a vesting statute for inventions. There are instances in the Patent Act from various times. For a few months in the 1950s, inventions in the area of nuclear weapons, say, were claimed by the federal government. And of course nothing forces the government to grant patents where it believes these are not in the public interest (such as surgery methods), and for national security reasons, inventions can be suppressed by the government. There are processes for these situations.
Our concern is with the federal government taking personal property and rather than keeping it handing it to another, say, for public use. Looks like eminent domain. That’s what it is if title goes to the university *automatically*, as AUTM has argued it does. What is the due process in this happening? It’s not the written agreement at (f)(2) is it? That at best just informs employees of what will get taken from them. They don’t have any choice in the matter, and they have nothing to do. And what is the fair compensation? All we have got there is the fact of the federal support and the obligation that the university share royalties with inventors, if there ever are any royalties, which very, very, very often, in fact, almost all the time, there are not and even then, there are universities with policies not to share any royalties until costs are recovered, so even if there is a license, and some money paid for it, there might not be anything shared. Just compensation? Which leads to how does a standing university IP policy royalty schedule come to represent just compensation? Can it be that every research invention is compensated justly at just the same %, regardless of its significance to social welfare, the markets in which it operates, the role it may have, the cost to realize it in practice, and the role of the university in bring any of this about? Or might each invention benefit from an independent assessment as to value, which might cause the university pause if it did not have the resources available to pay what the invention is judged to be worth? If a city government said, when we want a property owned privately for public use, we will pay 25% of what we sell it for to others, regardless of what we do with it, or the manner of sale, and when–and we might never sell it, and in fact historically even if we try, we don’t sell many of these properties–would that be just compensation? I wouldn’t think so, because there would be no compensation in many cases, just a conditional without accountability.
If Bayh-Dole is a vesting statute, then there’s got to be just compensation. An obligation to share what may never be isn’t compensation at all.
As far as I can see, if Bayh-Dole is a vesting statute, then it is unconstitutional. It takes private property for public use, it lacks a process for doing this, and it fails to require just compensation as a condition of the taking. For all that, no one apparently has realized for 30 years that this is how Bayh-Dole quietly has done its thing. Thus, if AUTM is right about Bayh-Dole–and I regret I cannot give it much respect–then AUTM is advocating for an unconstitutional statute. The Supreme Court might then agree with AUTM and all its 40+ universities and COGR and AAU and APLU and everyone else that they *want* it to be such a vesting statute, and with that, also find that in that form, it is unconstitutional and throw out the portion of the law having to do with any university obtaining title to subject inventions by operation of Bayh-Dole. That would make for pretty interesting times.
I don’t see AUTM’s argument prevailing, however, because it doesn’t hold up. It all turns on a selective, out of context claim on the meaning of “retain” in the construction “elect to retain title”, along with a statement that as between the government and the contractor, the government will allow the contractor to retain title (see 37 CFR 401.14(a) sections (b) and (c)(2)). But that reading makes nonsense out of 37 CFR 401.9, where the inventors may retain that same title, the written agreement requirement at (f)(2) which is identified as the means by which the government’s interests in subject inventions, which may include title, are protected and established. And that reading fails to accommodate wording in (f)(1), where the contractor is required to “execute or have executed and promptly deliver” various instruments, including title. Why would a contractor that holds title outright have to anything executed by others? It doesn’t add up. It is a reading that chops out whole sections of the Act and creates a new Act, a vesting statute, that ignores how the Act as written operates.
As a law establishing how federal agencies should behave in awarding funds to universities for the support of PI research, Bayh-Dole works through federal agreements. Agencies require universities to accept the standard patent rights clause (or variations, as provided by the Act). Universities in turn, having accepted the standard patent rights clause, require research employees by written agreement to do three things to protect the government’s interest in subject inventions: report them (fully and timely to university designated personnel), execute papers necessary for patent applications to be filed, and execute papers necessary to establish the government’s interest in subject inventions (whatever that turns out to be).
Inventors have title to their inventions under Bayh-Dole. They have the personal rights in title they have under the US Constitution, as implemented by US patent law. They give up those rights, if they have them, by written agreement following the protocols of the standard patent rights clause. Bayh-Dole does not reach into the pocket of every person who happens to be employed by a university receiving federal support via a funding agreement and pluck their patent rights and hand these to university administrators. No amount of public spiritedness of the purpose for such a plucking can make any difference. It is simply not how the Act operates. One must follow the pathway of obligations: these are federal obligations, first on agencies, then on universities each time they accept support under a funding agreement from these agencies, and then as a requirement on universities under the standard patent rights clause of each funding agreement, on university research employees (but not others) working within the planned and committed activities of each of those awards,
It may well be that these obligations pre-empt other attempts to do the same thing, but these obligations do not pre-empt private ownership of inventions, nor the means by which title is communicated by written instruments, nor do they relieve universities of the obligation to due process of law and just compensation. It may well be that even if Bayh-Dole isn’t found unconstitutional, universities’ implementation of royalty sharing without actually paying inventors just compensation for taking their property could be found unconstitutional and out of compliance with the requirements of the Act.
What do you think? AUTM wins, it loses. The universities win on the local argument, and are found to have taken without just compensation. I think Bayh-Dole is much better as a law of federal contracts and not a vesting statute. What do you think?