UCSF has produced a short PowerPoint presentation [since removed] that lays out their rationale for changing their policy from a “promise to assign” to a “present assignment.” You can flip through the slides in a few seconds. Standard story. Stanford v Roche is about a present assignment beating a promise to assign, so the “US Supreme Court decision has resulted in UC’s Patent Acknowledgment language having a different meaning than what was originally intended.”
It just isn’t true. The Supreme Court decision is about the Bayh-Dole Act. The Patent Acknowledgement language meaning is just fine the way it was. In Stanford v. Roche, university administrators from around the country, in a fit of fuster-clucking, claimed Bayh-Dole was a vesting statute and they didn’t need assignments at all. The Supreme Court ruled Bayh-Dole wasn’t a vesting statute. This is no surprise. No university practices that way anyway. Everyone gets assignments. The PTO requires assignments. It was an entirely made-up, spurious, even desperate argument by university patent administrators. It was a clueless, unfounded, misguided, and deliberately deceptive argument about Bayh-Dole by the people who claim to know the law best. Being nice and fluffy about it doesn’t drive the point home and lets people off the hook for their actions.
The Supreme Court ruling told the universities they didn’t have any substance to their claim that Bayh-Dole vested rights (fluffy version), i.e. that they were plain bonkers (closer to it). The idea that “elect to retain title” meant “title is magically yours” just didn’t go anywhere with the Court folks who could, er, read the law.
The point is, places like UC never practiced as if Bayh-Dole were a vesting statute. You know that. The policy in place required assignment when an invention matched the university’s stated scope of interest. That interest was determined by review of disclosed inventions. Then an assignment could be requested. Other than the ubiquitous failure to implement the (f)(2) agreement, the UC policy was entirely consistent with Bayh-Dole. The Supreme Court decision had absolutely nothing to say to disturb UC practice.
No, the change is driven by something other than the Supreme Court decision. I’m going to help you folks at UC figure out what the problem is, because it’s clear you are uncomfortable with close reading. Here’s what’s going on. Having made the argument to the Supreme Court that if Bayh-Dole isn’t a vesting statute, then everything falls to dust, then you feel you have to appear to do something to make your totally discredited argument look like it was substantive. You feel that you have to revise your policies to make it appear that folks weren’t just, well, making untrue claims to the Supreme Court to try to win a case and *change the law, strip university inventors of their rights, and void any deals these inventors may have made with university approval*. Well now. There is still time to change the road you’re on.
The problem in Stanford v. Roche does not arise from a later assignment trumping a promise to assign. The problem arises from a valid obligation to assign–valid under patent law, valid under university consulting policy (own time/no university resources), valid under state law–being carried back into the university without being addressed. The university knew of the assignment obligation and didn’t take any action. Instead, the consulting employee was allowed to participate in research and contributed to an invention. The CAFC found that at the time of the invention, the only valid assignment was to the company. That it was in the form of a present assignment of expectant interest is merely the means by which the assignment operated. Any assignment would have done the same. Stanford’s promise to assign language didn’t operate. First, it was precluded by the assignment to the company. That’s all the courts cared about. But clearly, also, it was precluded by Stanford’s acceptance of the consulting terms with the assignment obligation to the company.
The effect of Stanford’s later attempt to obtain an assignment was to try to void the deal that the co-inventor had made with the company. In essence, Stanford for whatever reason refused to respect the deal that it had permitted, that it directly aimed to benefit from, and that was intended to protect the company from exactly this kind of situation. Sadly (for me, anyway) Stanford behaved like anyone’s worst nightmare of a patent vampire. This is what company IP counsels fear, and why they draft visitor’s agreements–especially 9 month visitor agreements where someone is going to learn proprietary technology and can be expected to go off to try to exploit it for someone else–to include assignment obligations scoped beyond what merely happens within the company facilities.
So your problem, my UC administrative friends, who I dearly like but am presently very critical of, is what to do with consulting agreements folks make and then bring back with them to university work. Your problem is, you can’t re-apply your policy, whatever it says, promise to assign or present assignment, to their work. It is out of scope of your claims. Your deeper problem is that you allow consulting agreements, even encourage them, and yet consistently try to avoid reviewing them. You have various reasons for this that you use to justify looking away. But now you see that even with all those reasons *for* your approach, you didn’t do a good job looking at the reasons *against* that approach. That’s so like administrators. But enough.
We can distinguish two situations. First, the one Stanford faced, where you know the consulting deal. The policy change that’s indicated is that you have to take a responsive action when the employee comes back into the university to do research. At that point, you can prevent the employee from participating in research that has conflicting commitments, you can require the employee to negotiate a satisfactory modification to the consulting obligations, or you can work something out directly with the organization that is on the other end of those consulting obligations.
Now, here’s the zinger: the Supreme Court decision means that it is not a breach of Bayh-Dole for a researcher with obligations to another organization to participate in federally supported research. This also is obvious from the Act itself (which I encourage folks to read, really, really carefully before they fume about me chiding them). The Act provides for a standard patent rights clause. That clause goes into funding agreements. Universities agree grant by grant to whatever standard patent rights clause is in each funding agreement. The patent rights clause requires an (f)(2) agreement from only employees other than clerical and non-technical employees. The (f)(2) agreement sets out the actions and rights that the government is interested in–disclosure, filing applications, assignment. The (f)(2) agreement does not apply to folks that might visit the lab, folks that researchers might talk to with questions, volunteers–any of whom can have obligations to an employer exactly of the form of the visitor’s agreement signed by the Stanford post doc. Bayh-Dole doesn’t care. It’s not about a university getting all rights. It’s about the rights a university does get, and only those rights coming from its research employees, not anyone else. Any other rights the university hankers after–that is the university’s independent desire, not anything required by federal law, not granted by federal law, not mandated by federal law, not encouraged or advised by federal law, not the secret intent of federal law, not the intended but poorly drafted and uncorrected for 30 years purpose of federal law. Get over it, folks. Bayh-Dole doesn’t give universities title to patents, and doesn’t insist that universities get title.
If UC is suddenly worried about a breach of federal law, it should look square at its failure to comply, for 30 years, with the (f)(2) provision of 37 CFR 401.14(a)–which isn’t Bayh-Dole at all, but is in the standard patent rights clause authorized by Bayh-Dole. That (f)(2) agreement solves the whole problem for Bayh-Dole compliance. But you have to do it. Funding agreement by funding agreement. When the folks line up to take the money from the grant, then they sign off on the (f)(2) agreement. That agreement is federal and takes precedence over non-federal agreements, and that includes consulting agreements and university patent policies and patent acknowledgements.
Implement the (f)(2) agreement, UC. Why worry about potential future breaches when you breach federal law willingly every day? If you have the (f)(2) agreement in place, then it displaces any conflicting agreements. This does not help you, UC, with your desire to acquire, but it does settle your worry about compliance. Your problem is that you keep conflating acquisition of rights with compliance. It just isn’t the case. You will have to work to separate these and not rush the food bowl. Bayh-Dole is not about how you get ownership, it is about what happens when you do. If you don’t, then Bayh-Dole is not about you, your work is done, keep your focus on the public mission.
Now you can see your problem, I trust. It is that when folks come back from consulting with continuing commitments with some area of scope, you need to know that these commitments exist so that you can manage (a) any deals with other sponsors or licensees and (b) to take ownership of stuff that you have set out to claim based on employment or use of facilities or whatever condition you insist on. Nothing happens with (b) if you don’t insist on conditions, just as nothing happens under your patent policy if some official waives a claim the university might otherwise make. So at best it is an urge you have, with (b), to acquire stuff because you want it, because you have thought up some powerful good rationalizations in favor of the urge, and like the administrative group think that goes around the place, you haven’t put the same attention into the arguments against, because you wanted to win out over those arguments not give them any space.
But let’s look at (a) stuff–the other deals–because that’s where you are going to get hit between the eyes. The most likely nasty thing is double licensing. That’s what took down the University of Arizona program for years and substantial money. So you are spot on, you have to deal with this, and policy is part of the answer. But the promise to assign part is not the part of policy that you have to deal with. And it’s not restricted simply to your employees, because you have exposure with volunteers, visiting scholars, students, and other non-employees. Let’s be clear: autocracy will not solve your problem. Bureauklepticism won’t solve your problem. It’s deeper. That’s why this has to be so long, and why I have to be snarky to keep writing this, because otherwise I won’t, and then I can’t help you out.
The part of policy you need to change is what you allow to be obligated by way of inventions to research sponsors. You have worked at this for years, I know, and worried it all sorts of ways. You’ve tried limiting sponsors to a first right to negotiate for a license, and hid behind the Tax Reform Act of 1986 and various Revenue Procedures to insist on this approach. But you also let through the idea that the first right could be for an exclusive license, but for federal government rights. And this doesn’t actually get at your problem. Let’s leave off that it’s been 30 years of Bayh-Dole and it hasn’t generally been a problem, and it has not been a problem for reasons other than that you were so diligent in worrying about it–because your policy and practice have generally not dealt effectively with it. The problem hasn’t come up for *other reasons*.
But now you are worried. You feel like Stanford lost a lot of money (and it did, but not because of the outcome of Stanford v. Roche, and not because it must have spent a lot on the case, but because it apparently hasn’t managed to license such valuable rights to any other company to make a product that competes with Roche’s–sorry but there it is). You also feel like Stanford dodged a bullet–what if the inventor with obligations to the company had been the sole inventor? (Relief: Bayh-Dole doesn’t care–Supreme Court to the rescue). What if the sponsor had not been the government, but instead had been the arch-enemy of Roche, and spiteful and demanding, and ready to cut a pound of flesh from the rump of the University’s endowment if you trip up? (No relief: this is exactly the problem!–you won’t be able to deliver even a first right to negotiate an exclusive license because, you worry, you won’t have exclusive ownership).
You run open labs, UC. You make a virtue of this. This is one of the really amazing, important stands that you have taken. It is an honorable thing, even though it makes things tough for administration. You insist on open labs because if you don’t, then export laws kick in, and when they kick in, you are forced to discriminate against foreign nationals that don’t have permanent residency status–like students from other countries working in those labs, getting an education. And you stand up for these folks, UC, and it’s good that you do, and you say, there won’t be any such discrimination–we will run open labs.
Now you have to chase this open lab idea seriously into your research contracting with companies, some few of which are of the spiteful and demanding sort, and are the ones that worry you because you can’t always tell up front. For this, you would do well to differentiate between grants and contract research, rather than conflate the two. Industry grants will involve a contract, but it will be a contract that looks more like an IRC 41(e) basic research tax credit contract. For those, you can limit your commitment to only the rights that you come to own. You don’t have to own anything, and any exclusive rights you are willing to negotiate concern only the rights you have, with no representation that you will get exclusive title, or even have any rights at all. It is up to the sponsor to worry that point. If the sponsor worries too much, then refer them to the contract. Charge these out at the full F&A rate that you proposed to the government and they rejected and set your federal rate lower so you’d lose money and have to scramble to get it from somewhere else–the state, or tuition, or the endowment, or donations.
The contract research approach is what you do when you run a clinical trial as a public service for a company. The company has the dominant patent position, supplies the protocol, but needs someone else to do the work with a high degree of care, so it’s clear the company hasn’t fudged the data. You routinely cede all rights in inventions to such sponsors. It makes sense to do it. It’s contract research. The kick here is, you have to screen all participants in the work to make the arrangement stick. For that, lots of extra diligence, or barring that, extra worry with a chronic desire for autocracy. Yes, absolute power over people does seem to solve the problem, but really, shouldn’t we be working a different direction in a university of all places? The solution here is that you need a participation agreement at the time that people join the contract research activity. That’s like the (f)(2) agreement but now it’s with you, and the aim is to surface any conflicting obligations. If you don’t know about them, then 35 USC 261 is on your side–you can put your present assignment of expectant inventions right there in the participation agreement *for that project* and you are covered if you get to the PTO first. If you do know about an existing obligation, then you are back to excluding the employee, or working a renegotiation of the obligation. This can be done, it takes a bit of work, but it shows up in only a tiny portion of your research contracting, so it’s not like it should be a huge hardship. There is plenty of other paper already flying around to start up any new sponsored research project, so it’s one more thing, and then you can sleep at night.
You can make things even clearer by adding language to your template agreements for sponsored research–that the sponsor understands the lab is open, that people come and go, and short of very special contract research in some classified or deeply secure off-campus facility that we aren’t supposed to know about–the sponsor accepts that the university will rely on this participation agreement with each participant, but only those that the university employees. The gesture is: we will make a reasonable attempt to secure rights to inventions, and we can commit in some way the rights we do get to a negotiation with you, O Sponsor and supplier of much that is good, but we cannot assure you that we will get all rights, and you will be happy with that, because we are a messy, wild, fun-loving place and that’s how we attract these people to do this research, that’s who you want to have work on stuff, and we intend to keep them focused on research, not on stuff we can’t control, and have no interest in controlling. If you want wild ponies, you’ve come to the right place. If you want a mule train, or for us to turn wild ponies into mules, that’s not something we are going to do, not with policy, not with threats, not with pieces of paper.
There you have it. You can put your present assignments into contract research where you agree to make a commitment to sponsors that represent that they are potentially spiteful and demanding if you cross them up on IP that despite your open lab policy (see above) on contracting, you will get a formal, company-style patent agreement from each employee participant. Then keep the students out of it, the visiting scholars and stuff. And if they want a look, then they sign up with the same agreement as the rest. It’s just a piece of paper, but it’s as good as you are going to do. In this way you limit your autocracy to a situation in which a faculty member has requested it. No contract research gets assigned to faculty investigators–they ask for it. I’ve seen them begging for it. So, express your autocratic urges there, where they are wanted. With a little care, you can set things up very nicely, and the UIDP folks will be asking you to their meetings to explain how you figured it all out, and you don’t even have to cite this blog. Take the credit for yourselves–if you work this out, it will take some courage and some smarts and some stay-with-it-ness, and I will be the first to commend you for it.
Drop the “it’s because of the Supreme Court” and the “we have to comply with Bayh-Dole” and the “we want to own everything to solve all our problems at once” stuff. Drop the effort to change employment agreements with present assignments. Apologize and step back for a moment. No harm, no foul. None of that matters for the problem you have with research contracting involving patent rights. Focus on dividing your non-federal research into grants and contract research, and focus your attention on participation agreements for the contract research–some companies, some foundations, and, yes, your friends in state of California agencies. That may be 1% of your total research contracting. Focus on dealing with them, and leave the 99% for the benefit of the wild, free, rogue, fun-loving, and among the best darn researchers in the world.
By the way, I’m ready and willing to help draft up any of this. Just drop a note. Glad to assist. I’ve always liked you folks.