There are two ways there could be just compensation. The first form of compensation is the provision of federal funds in support of research proposed by PIs. It’s their work that the government supports. Invention rights are deliverables in that funding arrangement. No one is compelled to propose the work or accept government support. So there is just compensation, so long as the title to inventions is obligated to the government as part of the deal. But if title to inventions is committed outright to *the university*, then we have to find another source of just compensation. The university itself is not part of the research bargain for deliverables. The university is the contracting party but has no claim on personal property of its inventors under the standard patent rights clause, but for the authorization of federal law. When the university moves to elect to retain title, it relies on federal authority to take personal property (title to inventions) for public purposes.
Ah, but there’s a second prospect for just compensation. Bayh-Dole requires universities to share licensing income with inventors 37 CFR 401.14(a)(k)(2), treating it as a cost incidental to the management of subject inventions (k)(3). What about that? Big problem. A requirement to share royalties is only just compensation if in fact there are royalties. Otherwise, it’s just a taking of title. It does no good to say, we took all these properties and we met the obligation for just compensation because we resold a couple and shared the proceeds with just those (former) property owners. All the rest are getting stiffed.
Bayh-Dole requires agencies to place the standard patent rights clause in each funding agreement. The law operates agreement by agreement. For each funding agreement, the standard patent rights clause says, use the patent system to promote the use of each subject invention for which you elect to retain title. It does not say, elect title to a pile of subject inventions, use the patent system to keep them out of circulation, and make money on a few of these when someone takes your deal and call it a busy decade. It’s each invention you claim, funding agreement by funding agreement, not one in one hundred or ten in a decade. It’s not possible for it to be just compensation unless there is some compensation!
While universities may aspire to marketing each subject invention they claim, in practice they are generally not. It isn’t possible, really, if you have 200 or so incoming invention reports a year, maybe 1 for every $2m of federal funding. In a fully mature invention reporting disclosure, over 21 years (20 year patent life + 1 year for time to file), at 200 per year, one has 4000 inventions to deal with, might file on 2/3 of these, get 1/3 patented and have a steady-state portfolio of 1500 US patents spread across a wide range of research areas. That same university might have a technology transfer office with 15 licensing officers, and each would be looking at about 100 issued patents plus sorting through 15 new inventions per year plus dealing with 100 or more inventions that are in in some state of triage or prosecution, some of which won’t get past the provisional or the first office action. As for marketing, that’s about 10 hours per invention per year. Either there’s little marketing for all, or some don’t get much at all.
Let’s say for the sake of not complicating things that just compensation means something like actual monetary payment for the value of the property at the time of the taking. Let’s say, again to be simple about this, that it doesn’t cut it to only promise to share proceeds of future licensing but without any promise to actually create proceeds, but only a policy aspiration about the importance of making an effort. So, a one-page non-confidential summary, a posting on a web site, maybe a mailings to companies pulled off a corporate database, and on to the next invention.
How much is a university research invention worth? That’s a good question. GASB Statement 51 expects public universities to book the asset value of intangible assets, including patents. As they do this, it should make for some interesting reading for inventors.
Let’s say that we take a simple measure: how much has the university spent to acquire the patent right? That would be the cost of preparing the patent application and prosecuting it through to issuance, along with the overhead of employees processing the invention through the management system for subject inventions. Say, $10K or so.
But you say, that’s just expenditure, not what the invention is *worth*. Well, yes, but if we start with a baseline, one might argue that a university has little reason to claim title to an invention unless it expects to recover its costs. The invention may be worth much more than those costs. Indeed, that’s the arbitrage attraction of invention licensing–buy low, sell high. If an invention is not worth even the cost of filing a patent application, then there had be a pretty good reason why the university is claiming title.
We might argue, then, that what a university pays to obtain a patent is what a university ought to pay the inventors for title, up front, as the baseline value of the invention at the time the title is obtained. That’s the minimum the university might expect to get back in the way of licensing income.
Again, we are reasoning from the premise of *taking* an invention. There is no negotiation for consideration with the inventor(s). The transfer of title is compelled by the university, invoking the authority of the standard patent rights clause, part of a federal contract that the university has voluntarily entered into. And we might argue that this baseline value is just that–what is owed if nothing more comes of the invention. A share of royalties would be an additional element, required in addition to just compensation. Of course if there are royalties right from the start, that covers for the baseline value nicely and scales with the value realized by the license(s).
So long as the taking of title is compulsory, there must be just compensation, all the more so if the university is public. Nothing about employment agreements and IP policy statements at public universities allows the state an exception. The university does not bargain for invention rights as deliverables as a condition of employment. And it doesn’t in research funded by extramural sponsors, because it is the sponsors that are negotiating for the rights deliverables, not the university. University policies make it a condition of employment to comply with those extramural contracts. When those contracts are with the federal government, then the standard patent rights clause comes into play, and the university gains the opportunity–but not the obligation–to compel the transfer of title.
Bayh-Dole recognizes all this. That’s why under 37 CFR 401.14(a) section (b) it does not specify who grants the government its royalty free non-exclusive license. It doesn’t have to be the university. That’s why under (k), non-profits are required to share royalties with inventors. (We can ask, why are for-profits not required to share royalties? for another day).
Since universities routinely, even overwhelmingly, have taken title to subject inventions by compulsion arising from the authority they claim under the standard patent rights clause, without compensating inventors, they may be liable for some big payments to comply with just compensation.
Let’s say the Supreme Court finds that Bayh-Dole is a vesting statute in Stanford v. Roche. Then it can look to just compensation for the vesting of personal rights with the university. Just what was the value of the invention at the time that Cetus/Roche lost what they had bargained for? Could it be that the best estimate of that value is what Stanford argues it is due for infringement? If so, is that perhaps what Stanford *owes Roche* as just compensation? Maybe that would be a good reason to call it even, even if the Supreme Court decides to invalidate untold numbers of private contracts dealing with future invention rights and patent rights where the invention is later actually reduced to practice with federal funding.