You have a personal right–title to an invention, say. How does it get from you to anyone else? By transfer! Yup. We can identify three ways to do this: first, by contract–offer, acceptance, and consideration. Second, by eminent domain–authority of law with due process and just compensation. Third, by will or deed or similar written instrument that evidences the transfer, but isn’t a contract and so does not require consideration.
It appears that a number of university patent administrators are at risk of missing key elements in the management of research inventions. If transfer of title is predicated on a contractual requirement, such employment, or participation in research, or use of facilities, or Bayh-Dole (meaning the standard patent rights clause), then there has to be offer, acceptance, and consideration. If transfer is predicated on law, such as state law, or Bayh-Dole (construed as a vesting statute), then there has to be just compensation if there is a taking of personal property for public use. If the transfer is voluntary, or required because the inventor no longer is living to hold the right, then there’s no consideration required (though there can be conditions), but then also the transfer is not compulsory nor negotiated in the absence of the holder of the private property, the inventor.
The concern is, when folks get sloppy with their practice, there are consequences. While the end result that’s desired is that the university owns title (I’m not saying I think that’s desirable–just that a lot of university patent administrators do), the sloppy thinking says, any old way will do, pathway doesn’t matter. It’s rather along the lines to aspiring to a proper pathway without knowing exactly what it is, or how it works, or what is necessary to execute on that pathway.
Oh, okay. Let’s not call it sloppy thinking. Let’s call it less attention to detail than is necessary to implement a program of transfer with the care required to properly execute the steps in the order necessary to accomplish what is required. It is easier to say, “you must transfer your title to the university.” But that does not look like sloppy thinking. That looks clear and direct, without any room for confusion or inventor negotiation or choice. But it is sloppy. Or, er, it is deliberate in skipping steps. Which might make it malicious, deceitful, or even like fraud, or er failing to fully disclose the basis on which the assignment is required and instead representing a negotiated or conditional obligation as an absolute one for the sake of clarity, no harm intended. But I say, that’s still sloppy, to put a face on it. And at some point, sloppiness itself is not particularly civil, so the edge in this reminds us of what we are dealing with.
Where universities have policies regarding institutional claims on IP, these are typically directed at employment, privilege, law, or extramural contract.
A claim based on employment says: you are hired to invent, and your pay is your compensation in the bargain. Companies have such arrangements. State labor laws often place bounds on the scope of such claims, and the requirements for making those claims binding.
A claim based on privilege argues that employees do not have access to all resources of their employer, so that use of a research lab or participation in extramural research only is permitted with the additional commitment of inventions to the employer. This gets around making assignment a condition of employment, but it also requires some additional consideration. It is then as if the consideration for doing research with university resources is the transfer of ownership of inventions.
A claim based on law has to do with an outright taking. For these, there needs to be due process and just compensation. If the claim is based on law, then it is not based on employment or privilege (though these may be used to invoke due process). It’s hard to see how a transfer compelled by law carries just compensation unless the property is valued at the time of the taking and some compensation is provided. Bayh-Dole as a vesting statute comes here, as does state law that requires state ownership of research inventions (as is the case in some states).
A claim based on research contract requires the contract to require the taking, and requires those participating in the research to comply with the requirement. One might expect that it is the sponsor that requires the university ownership (or its own ownership), but in practice it may be that the university has a practice of inserting that requirement into all research contracts and then gaining benefit of the compliance policy to compel participants to assign.
If the sponsor is acquiring title, then one might see how participation in the research could be the consideration provided by the sponsor, however the rights get from the inventors to the sponsor. But if the university ends up with the rights from the inventors, then where is the consideration for that transaction? Certainly not the money paid by the sponsor to support the work, even if the contract calls for the rights to end up with the university.
In the early days of technology transfer, before even it was called that, university faculty held invention rights. None of these four kinds of claims operated, generally. If a sponsor wanted rights, it negotiated with the investigators / inventors for those rights. A university obtained rights when faculty requested that outcome. The great research foundations were created by faculty inventors, some with the support of industry folk, as places where inventors could bring their work, on a voluntary basis, to be developed.
What has changed? For one, the idea that if things worked some times with stuff presented voluntarily, how much better it would work if things were presented compulsorily. More stuff, more likelihood of success. After 30 years, it is starkly evident that this idea has not at all been very good. Lots of inventions means lots of noise. Lots of inventions means lots of processing. Compulsory disclosure means folks with demands, expectations, antagonisms, and conflicts. Compulsory means a standard deal rather than a negotiated one, so low ball or just wrong but uniform comes with the territory as favored over responsive and differing.
In addition to making things compulsory, folks buttoned down the model. The reason to use patent rights is monopoly based investment to create commercial products paying a royalty on sales. This is the soul of commercialization. Everything else is a qualifier and wishy-washy to deflect criticism. Whether the deal is with a big company or with a start up, the goal is commercialization. Gone is company use, or standards, or research tools. Oh, yes, in bits and pieces, as exceptions, not as the heart of things.
More recently, we have seen a slippage from commercialization of research technology to commercialization based on expertise that otherwise would be doing research. This is called “culture change”. As in, we have to change the culture of the university, to make it more entrepreneurial, meaning however, not entrepreneurial, but compliant in letting us claim ownership of everything, including your business ideas. This kind of culture change approach is not compliant with Bayh-Dole’s standard patent rights clause, but it is good as an effort to make money, and has good cover as a form of economic development, where university-backed start ups compete successfully for private financing (and government grants and loans) with other enterprise in the community.
Why isn’t such culture change compliant with Bayh-Dole? Bayh-Dole says, use the patent system to promote practical application of subject inventions. Starting companies that don’t have subject inventions is not part of the cost recovery that the standard patent rights clause permits. Separate accounting or audit fail. I’m betting many universities would fail such an audit. Second, licensing subject inventions into a start up, only to see the start up raise investment funds and develop something else as a product fails the standard patent rights clause, which aims for the practical application of subject inventions (with an express definition) and that does not include burying an invention in a license contract so a company can make money on something else. That is not a practical application. That in fact is a non-use, and Bayh-Dole has as a stated objective to protect the public from non-use of subject inventions. Well now. Not compliant, this culture change, but in the world of sloppy thinking, er, skipping steps, or er “you all know the law was aiming at this kind of thing though it didn’t come out and say it or it would never have passed, and we need to be efficient here, given all the pressing things, so get off asking us to follow the law like exactly. Think of it is a script that permits ad-libbing, or think of it more like script no one reads, or only has read little bits, like universities own research inventions and have to commercialize something, anything, to make money and gain status. Yeah, just that part.”
Sloppy. Okay.
We come back around. If an inventor has not negotiated the deal, then if it’s a contract, it’s interpreted against the drafting party. It’s an adhesion contract. If there is no consideration, then one wonders if it is a contract at all. The deal to claim rights is rather more like a threat relative to other charges, such as ethics or misuse of university property (for conducting research in research facilities!).
If it’s not a contract with the inventor but just a taking claimed by law, then there has to be due process to show the basis for the claim (not just its assertion) and just compensation (not merely a promise to try to license but who knows or cares really). Really. Invention rights are personal under the Constitution. Taking those rights for public purposes requires due process and just consideration under the 5th Amendment. Whatever the policy statement or the state law about it, the Constitution trumps them. I know, details.
My sense is, other than the ubiquity of practice that ignores the fundamentals of history, reasonable practice, and the clear means of transfer, university patent administrators are really rather exposed to charges of conversion, fraud, negligence, and dealing in unconstitutional practice. There are a lot of wagons that will circle to defend current practices. That’s understandable. But it will also set up a class action. That’s a hazard of uniform practice, imitating others because that’s what everyone is doing.
Now, what ought to be done, if a university wants to avoid this problem of lack of consideration to form a contract, lack of just compensation to make constitutional a taking of private property for public use, and interpreting contract language against the drafting party, meaning the university?
First, make clear the basis for assignment. Sort this out. Is it a contract, compulsion, or a voluntary thing? If it is a contract, what is the basis for the transfer?
Second, if assignment is compelled, then the consideration or just compensation has to be provided at that time. This is particularly true if the university is an instrument of the state.
You really have to do these two things asap.
Third, and better, handle inventions as personal assets and quit trying to m to make them university owned by various kinds of claims. Innovation is not an effort to make the claims more efficient, more air tight. Innovation is to get the opportunity to handle the best stuff matched to one’s opportunities and capabilities. Make policy clear that it is expected that research folk will invent and those inventions are theirs to do what they want with, subject to a shop right to the university and obligations to sponsors.
Make any assignment of invention rights to the university voluntary and negotiated. I have pointed out how this is entirely consistent with Bayh-Dole’s standard patent rights clause. It is only a matter of folks being willing to do it. If a university does not want to take someone’s patent rights, then the inventor can find someone else to deal with them. Policy can say, licensing patent rights is fine, but the policy can also say, don’t use the university facilities for commerce. Take commerce–selling product, testing product, building product–somewhere else. But doing research, that’s fine, so long as it isn’t your own company funding you.
Even better, for federal funding, make the PI the “personnel responsible for patent matters”. That is, under the standard patent rights clause, the university must designate someone to receive invention disclosures. Make that the PI unless the PI requests the university designate someone else. Inventors disclose to the PI, and the PI reports to the government, until the PI requests otherwise. Designate also the PI to decide whether the university should elect to retain title or allow the funding agency to negotiate title with the inventors. And designate the PI to represent the university in any consulting with the university the agency is required to do.
Put the emphasis of policy on what the PI needs to do if the decision is to elect to retain title. The university tech transfer office does not have to take title as a result. It can decline the PI’s request, and the PI can then assign the right to retain title (and Bayh-Dole obligations) to anyone else that meets the conditions of the standard patent rights clause. For all that, the university technology transfer policy does not require that the technology transfer office be the first in line to consider title. The PI could decide that university technology transfer office is the best thing. Then the decision to use the tech transfer office would be something of a vote of confidence rather than just another mundane compliance detail.
If the PI doesn’t want the role, the PI can designate the tech transfer office and folks are back to normal.
The university might not get as much money from licensing. But perhaps the university would get more money. Or, better, perhaps the university program would be more successful with the PI taking the lead, working things out with the inventors. Again, since the financial success of most US university technology transfer offices is carried by a very few deals–maybe 1% or less of the disclosed inventions–changing things up may not have any adverse effect at all, may reduce the load on the office, reduce the useless things the office has to deal with, reduce the contention and dissatisfaction, and select for stuff with a profile that meets the practices the office has got the expertise and resources to deal with.
Yes, I know this sets up an agent model. But it also may set up the technology transfer office for success, for better working relationships, for an advisory and consultative role, to be more responsive to changing conditions of all sorts. And that in turn will promote the overall success of the research program, not just the work flow passing through an administrative office.