Under the standard patent rights clause (SPRC) in a federal funding agreement, a university is required to obtain the agreement of its research employees (that is, other than its clerical and non-technical employees) to protect the government’s interest. The requirement for this agreement shows up in section (f)(2) of the SPRC.
Since the SPRC is part of a federal agreement, it supersedes any agreements that the university may have to the contrary, including agreements with employees that run counter to (f)(2). Further, a university in agreeing to a given patent rights clause, let’s say the SPRC, is agreeing to implement the (f)(2) agreement, and not some other agreement “on the side” that differs from the (f)(2) agreement. In essence, the SPRC displaces any such other agreement. This includes IP policy statements and agreements to assign. It does so not by fiat, but because a university agrees to do so. The university chooses to do so. This is the difference between a law and a contract. Somehow this difference gets lost by university patent administrators looking for shortcuts to power.
Here is an example of how this displacement of other agreements by the SPRC works. Under Bayh-Dole, a federal agency may permit university inventors to retain title to their inventions. This is covered in 37 CFR 401.9, following 35 USC 202(d). That is, when inventors invent, under US patent law, they hold title to their inventions unless they agree otherwise in writing. This is true also under Bayh-Dole. The only difference is that an invention made with federal support is a “subject invention”–that is, it is subject to the requirements of the patent rights clause in the funding agreement, a clause that the university has agreed to.
It is worth pointing out that the university inventor has not agreed to the SPRC. The university inventor is not a party to the funding agreement. The funding agreement is between the university and the government. The way a university inventor gets involved is by way of the agreement the university is required to obtain in (f)(2). That is, the agreement under (f)(2) is with whomever has standing under the SPRC to direct the disposition of a subject invention.
How does all this affect university policies and agreements on inventions? A lot has been made recently about how universities must move from promises to assign inventions to present assignments of future inventions to better protect university interests in inventions. For subject inventions, this is bad advice. Things don’t work that way.
When a university agrees to the SPRC, it also agrees to set aside anything in its policies and agreements with employees to the contrary. A promise to assign is displaced by the (f)(2) agreement. An employee cannot both promise to assign inventions to the university and at the same time be required by the university to agree to assign inventions to the federal government if it comes about that the government requests such an assignment. There has to be a dividing conditional. That conditional is, if the invention is a subject invention, then (f)(2) controls, and even does so if the university subsequently elects to retain title.
Consider what happens if a subject invention is made and a university chooses not to elect to retain title. Now the government has standing under the (f)(2) agreement to direct disposition of title to the subject invention. Let’s say that the agency agrees to allow the inventors to retain title under 37 CFR 401.9. If the university’s IP policy or patent agreement was still effective, the moment that the agency allowed the inventors to retain title, they would be again subject to the policy and agreement claims of the university.
A university could waive election to retain title, wait for the inventors to be allowed to retain title, and then could invoke a university policy to claim the invention as a condition of employment, or because facilities were used, or because the university has a policy that allows it to claim inventions. But the university has agreed to the SPRC. The university has agreed that none of these other conditions will apply. The university has agreed that if it waives its contractual right under the SPRC to elect to retain title (that is, to have standing to rely on the (f)(2) obligations that its employees have agreed to), then it has no way to later invoke its own policies to make a grab for invention rights when an agency does not require assignments from the inventors.
From this, one can see how the SPRC displaces other claims on subject inventions. A university is not forced to displace those claims; rather, the university positively agrees to displace those claims in accepting the funding agreement with its patent rights clause. If a university waives its right under the contract to retain title, then that’s that. The university does not have any separate right to title under its own policies, or by means of a prospective agreement with inventors. If the university did, then it could use this method to circumvent Bayh-Dole. Wait for the inventors to secure their ownership in the inventions, with the greatly reduced requirements that 37 CFR 401.9 imposes, and then take ownership with a lot less to bother with, such as being freed of the obligations under SPRC (k), which are specific to nonprofit organizations and not required of inventors when they retain title to their own inventions.
35 USC 202(d) requires the agency to consult with the contractor before granting inventor requests to retain title. What could this consultation be about? Clearly, a university has no veto power over the transaction. The university can receive information (so that it might manage the situation), can put forward arguments (such as that the agency not allow the inventors to retain title), and it can request that additional controls be placed by the agency on the inventors, as permitted by 37 CFR 401.9. If the inventors at this point are going to be subject to anything, it is through the action of the agency, not the university, its policies, or any prior agreements.
One can readily see how a university demand of a present assignment of future inventions is similarly displaced. Even if a university were to impose such a requirement on employees, when the university agrees to the SPRC, it necessarily must suspend that requirement. It does not have standing under the SPRC to impose the requirement of a present assignment. The (f)(2) agreement requires an agreement by inventors to assign. It must wait for a subject invention to be reported, must report that invention to the government, and must elect to retain title under the SPRC. The university then has standing under the (f)(2) agreement to require its inventor employees to assign title to the university, or to whomever the university may designate.
Note further that even though a university’s own demand of a present assignment for future inventions is displaced, an employee making such a commitment to another party is not disrupted. The university’s demand is displaced because the university itself agrees to act otherwise. The university’s changed position is because it has chosen to accept the SPRC. The SPRC is not imposed by the government unilaterally on everyone, including the university. Not at all. The SPRC touches only those that agree to it, whether directly, or by way of a valid transfer of interest, such as through a subcontract or assignment of title.
It turns out (f)(2) agreements are the special key element that makes Bayh-Dole work. These agreements are not in Bayh-Dole. They are required by the implementing regulations. They become part of the SPRC, and are agreed to by universities as a condition of the federal support. To become effective, however, the university has to fulfill its obligation and require the agreement of its research employees. (f)(2) agreements are the primary delivery clause for subject inventions. They are the sole connection between the government and the investigators–the university’s research employees. Without (f)(2), there is no agreement on delivery of inventions, not for the agency and also not for the university.
Again, even if the university fails to require the (f)(2) agreement, it cannot then substitute some other arrangement. The university does not have that freedom because it has agreed with the government that it will require the (f)(2) agreement. The university would be in breach of the SPRC if it attempted anything otherwise.