In working through the agent model anticipated by Bayh-Dole, I was chasing down the citations for each of the possible outcomes. The one that caught me up, however, was how a subject invention gets to the public domain. I thought it was obvious–if the contractor elects not to retain title, and the funding agency doesn’t request title, then the invention goes to the public domain, because the contractor isn’t filing and the agency isn’t filing. (That’s how I put it here). That would be fine if the contractor doesn’t have a policy that commits it to commercialization. It’s often the case, however, with universities that the premise of taking ownership is in fact commercialization, and that means, generally, filing patent applications.
I’ll come back around to the university side of it. The agency side also seemed obvious. An agency could take title to an invention for which an application hadn’t been filed, or was pending, and simply let the invention go to the pubic domain. But then as I was doing some idle reading in Stevenson-Wydler, I came upon the following:
Sec. 3710d. Employee activities
(a) In general
If a Federal agency which has ownership of or the right of ownership to an invention made by a Federal employee does not intend to file for a patent application or otherwise to promote commercialization of such invention, the agency shall allow the inventor, if the inventor is a Government employee or former employee who made the invention during the course of employment with the Government, to obtain or retain title to the invention (subject to reservation by the Government of a nonexclusive, nontransferrable, irrevocable, paid-up license to practice the invention or have the invention practiced throughout the world by or on behalf of the Government). In addition, the agency may condition the inventor’s right to title on the timely filing of a patent application in cases when the Government determines that it has or may have a need to practice the invention.
This is of course restricted to inventions made by government employees, and not to university inventors working under Bayh-Dole. But it got me thinking–if an agency is required to offer back inventions obtained from its own employees, why should it treat contractors’ inventors any differently, if they assign to the government? Clearly, under Bayh-Dole, an agency is given the authority to allow university inventors to retain title, but Bayh-Dole doesn’t say anything about whether an agency can refuse the inventors’ request to retain title and then do nothing with the patent rights or commercialization. 35 USC 207, for instance, authorizes agencies to obtain patents, grant licenses, administrate inventions, and pass title around among agencies. Under Stevenson-Wydler, the agency would be required, if it is not going to pursue these activities for which it is authorized, to offer to allow the inventors to retain (or receive re-assignment) of title. It is not so obviously the case with Bayh-Dole–but there’s more to it.
Inventors under Bayh-Dole of course have the option of finding a qualified agent, and then the agency does not have standing (except through march-in or other agent failures) to obtain title. A reasonable inventor’s pathway, then (and setting aside university propensities to claim ownership rather than wait for it to be offered) would be to notify the agency of an invention (via the university reporting pathway), and then request to retain title. If the agency refused the request, then the inventors go get an acceptable agent. If the agency agrees to allow the inventors to retain title, then 37 CFR 401.9 kicks in and the inventors are treated as if they had been small business contractors under Bayh-Dole.
Most universities aim to frustrate the 37 CFR 401.9 pathway, using policy and employment claims in an effort to ensure it never operates. Again, perhaps Wisconsin is the only major university that permits inventors to choose the government for first offer of title. Whether Wisconsin would permit such an offer, if along with it was a request to retain title by the inventors, is an open question.
Thus, it would appear that a federal agency cannot let a claimed invention of a government employee pass into the public domain without offering to let the inventors keep it or have it back, but university inventors are stuck with finding an agent if the agency isn’t going to file an application and the university has checked out. The question then becomes, if an agency is authorized to have an interest in personal property (inventions) to pursue patenting, is it also authorized to have that interests to *not pursue patenting*? That is, if a law is needed to confirm an agency is authorized to have an interest in inventions in the first place, does the agency have any power to prevent an inventor from pursuing the development of his or her personal property?
In the case of copyrights, under the Federal Acquisition Regulations, we can see that agencies do claim the authority to prevent the assertion of copyright. Although a contractor may hold copyright, agencies can use federal contracting to prevent the contractor from benefiting from holding the copyright. (See, for instance FAR 52.227-14(d)(3). And see agency extensions to this clause, such as NASA’s at NFS 1852.227-14 (which is not indicated for use in basic or applied research with universities, but note that computer software development may not be considered “basic or applied research” (per FAR 27.404-4(a) and (b))). It would appear that an agency can use contract means to prevent the assertion of intellectual property rights, at least under contracts. Can it do so under federal *grants* to universities? There is nothing I find in 2 CFR 215 that provides the same contracting authority for grants to universities as the FARS do for government contracts. I would say, then, no, federal agencies under grants made to universities do not have authorization to prevent the contractor or recipient from asserting either copyright or patent rights in inventions, except via the march-in provisions of Bayh-Dole. Thus, while an agency has the right to take title under the (f)(2) agreement, if inventors don’t secure an approved agent, it appears that agency only has this right to the extent it requests title, and if it does not request title, then it has to go to the 37 CFR 401.9 process, unless it has internal policies that do not allow inventors to hold title.
While I was considering how subject inventions got to the public domain, I also checked Stevenson-Wydler’s royalty sharing provisions.
Sec. 3710c. Distribution of royalties received by Federal agencies
(a) In general
(1) Except as provided in paragraphs (2) and (4), any royalties or other payments received by a Federal agency from the licensing and assignment of inventions under agreements entered into by Federal laboratories under section 3710a of this title, and from the licensing of inventions of Federal laboratories under section 207 of title 35 or under any other provision of law, shall be retained by the laboratory which produced the invention and shall be disposed of as follows:
(A)
(i) The head of the agency or laboratory, or such individual’s designee, shall pay each year the first $2,000, and thereafter at least 15 percent, of the royalties or other payments, other than payments of patent costs as delineated by a license or assignment agreement, to the inventor or coinventors, if the inventor’s or coinventor’s rights are assigned to the United States.
(ii) An agency or laboratory may provide appropriate incentives, from royalties, or other payments, to laboratory employees who are not an inventor of such inventions but who substantially increased the technical value of such inventions.
At face value, this merely sets some parameters for what an agency should pay its inventors as a share of royalty income. The minimum of $2K each year is a nice touch to offset the strangeness of a linear treatment. It would be a decent thing for universities to adopt as well, as it saves having to divide up tiny amounts into multiple bins. I’ve seen university checks actually drawn for *under $1* just to make sure everyone gets their proper share. And this was in a university where the conservative estimate was that it cost over $50 just to cut the check! And folks insist that universities are running as efficiently as they possibly can. Yowser.
But there’s more to it than just royalty sharing. Further in the section we read:
(b) Certain assignments
If the invention involved was one assigned to the Federal agency—
(1) by a contractor, grantee, or participant, or an employee of a contractor, grantee, or participant, in an agreement or other arrangement with the agency, or
(2) by an employee of the agency who was not working in the laboratory at the time the invention was made,
the agency unit that was involved in such assignment shall be considered to be a laboratory for purposes of this section.
This means that subject inventions under Bayh-Dole, if assigned to a federal agency, come within Stevenson-Wydler when the agency takes title–at least this “section” of Stevenson-Wydler. If that section reference is limited to just Section 3710c, then federal agencies owe university inventors royalties if they license the subject inventions. I don’t know of this ever happens–that a university inventor gets a royalty check from a federal agency. A similar provision is in Bayh-Dole that requires universities to share royalties with federal employees when they co-invent with university personnel under a federal funding agreement (see 37 CFR 401.14(a)(k)(2)).
There is some oddity in these provisions. One has to follow the wording. First, 3710c (a)(1)(A)(i) conditions authority to pay royalties “if the inventor’s rights . . . are assigned to the United States”. I’ve gone around with a good friend and colleague on what this means. He argues this means that if title to the invention goes from the inventor to the university and then to the government, then the conditional is satisfied because what once were the inventor’s rights are now with the United States. I see how this is a reasonable interpretation, but the language of the Section appears to be narrower. My reading is that Stevenson-Wydler recognizes the obligation in this section to pay royalties to inventors, not to any other entities that might happen to own an invention assigned to the government. Paragraph (a)(3) of this section, for instance, places limits on payments made under paragraph (a)(1) and throughout references employees and inventors, and never “other entities”. Even the one reference to “person” is hard to construe as intending to include fictional golem corporate “persons”, given the usage in the paragraph.
If my reading is correct, then when a university takes title to a subject invention under a self-executing, prior to review present assignment, it also makes it more difficult for inventors to get a share of royalties. If the university declines to retain title, and it passes by assignment from the university to the agency, and thus per 3710c(b) comes under Stevenson-Wydler, the university inventors do not have the benefit of Stevenson-Wydler royalty sharing under 3710c(a)(1)(A)(i). The assignment path to meet the requirements of the wording would have to be that the university reassigns to the inventors, and they then (under their (f)(2) obligations–gotta have them in place) then assign to the United States government.
It may be my friend is right on this one, but it would appear to open the door to the government owing royalties to contractors and not merely to inventors, and in any event, it’s not the burden of the royalty-sharing clauses, which are about employees and inventors, not organizations.
One may go further and ask whether a university, in taking title to a subject invention, has the right to dedicate the invention to the public domain? And does the pathway by which title is acquired make a difference? For instance, does it matter if title is acquired in a voluntary agreement between the inventor and the university-as-agent? My sense is that it does. If the agreement is voluntary, then it can address whether the university may allow patent rights to lapse, or is required to offer the rights back to the inventor (who then could offer the rights to the government under the inventor’s (f)(2) commitment). If the agreement, however, is compulsory (voluntary only in the sense that one seeks to keep one’s employment and not be charged with unethical behavior for using research laboratories), then things are different. The inventor has no contractual basis for negotiating a return of the invention, or for that matter the university’s administration or licensing behavior. That becomes a thing of administrative policy, as that policy may be modified by law or contract requirements (such as the standard patent rights clause).
Under the standard patent rights clause, a university may retain title to a subject invention only on the condition that it file patent applications timely and promote practical application. If the university is not going to do these things, then it does not have standing to retain title. If the university cannot retain title, then where does that title go? Under the standard patent rights clause the government can request title, and the university is then obligated to “convey” title to the government (see 37 CFR 401.14(a)(d)).
Universities also may have policy obligations of their own to follow. Some patent policies predicate university ownership on an obligation by the university to pursue a program of licensing. This obligation is a remnant of a once-voluntary system, transformed into a kind of compulsory agreement that takes the general form of what a voluntary approach entailed–“I will assign to you if you agree to pursue patenting and licensing and pay me a share of royalties” becomes “since this is such a good idea, you must assign and we will pursue patenting and licensing and share royalties”, which is now becoming, “you must assign and whether we pursue patenting and licensing is none of your business, but if we do license your (now our) stuff, we will share royalties–but we don’t have to pursue patenting or licensing or royalties.” This is the power of moving from a mutual agreement model, based on respect, options, and mutuality to one based on duty, process, and accountability to abstractions rather than to individuals.
If a university does have a policy obligation to pursue patenting and has no intention of doing so, then does it even have policy standing to assert ownership of a subject invention, even if all it intends to do is convey title to the government upon request? If the process I’ve laid out from Stevenson-Wydler is followed, then inventors should *request* that the government take title (to get it out of the hands of the university administration) and then *request* that the government, if it is not going to file an application, offer title back to the inventors under Stevenson-Wydler! There is more to this piece than I can cover here, but one might be able to see how the line of argument might be developed in various local policy circumstances.
All this raises another element of the public domain question. Once a Bayh-Dole subject invention is assigned to the agency, it comes under Stevenson-Wydler. If it’s under Stevenson-Wydler for Section 3710c, what about Section 3710d regarding royalties?
If one follows a broad reasonable reading, then one might argue that if an agency takes title to a subject invention, or has the right to take title (per, in our case, the (f)(2) agreement in the standard patent rights clause under Bayh-Dole), and then decides not to pursuing patenting, then per 3710d it *must* offer the rights back to the inventors under 37 CFR 401.9. (Note, Stevenson-Wydler is passed *after* Bayh-Dole, so it would be tough for Bayh-Dole to make a note of it, except with a later amendment.)
If one follows a narrower reading of the words, then one might find that the agency only has a positive obligation to share royalties with inventors, and has no obligation to offer rights back or to pursue patenting if it takes title to a subject invention. With an even narrower reading, one might argue that although an assignment to an agency is construed as to a laboratory under 3710c(b) does not mean that license agreements for inventions so assigned, when licensed by the agency and not a laboratory, are to be construed as done by a laboratory. If we go this narrow, then Bayh-Dole inventors look pretty much screwed if they assign to the United States.
While there are competing readings at play here, it does appear that Stevenson-Wydler applies when a subject invention is assigned to an agency, and that the agency then does have obligations that one might not expect, if one read only Bayh-Dole on the matter. While an agency may then take title and dedicate an invention to the public domain, there does appear to be some strength to the reading that it is not the public policy of the government to be taking title to personal property only to destroy it. Certainly the point of Bayh-Dole, and it is a law that is focused on federal agencies, is to use the patent system to promote the utilization of inventions made with federal support, not to *not use the patent system*.
A *not use the patent system* law might be a good balance to Bayh-Dole, allowing for more things to be open and in the public domain, but that would also be a law gifting the results of American research to everyone else in the world, which may seem open hearted but also strikes some as imprudent, given there are folks out there not supporting their own research efforts and more than happy to run with what America produces.
On the whole, then, one might well argue that if an agency has the right to take title, or has taken title to a subject invention, then under both Bayh-Dole and Stevenson-Wydler (in some combination), the agency has to pursue patenting or offer the rights back, and if the agency does license the invention, then it owes the university inventors, at the very least, a share of royalties. Whether the agency owes royalties to a university or other corporate title-holder who has assigned (perhaps because of failures by the contractor under the standard patent rights clause) is an open question. I think not, but then some good thinkers think so, so it would be nice to get this one resolved.
It is also not clear at all that agencies, in grants made to universities, generally have authorization to claim title to subject inventions but not pursue patenting–that is, to allow inventions to fall to the public domain. Clearly they are not authorized to do so for inventions made by government employees. It does not appear they are authorized to do so for Bayh-Dole subject inventions either. That means, perhaps, that the ones with the final say with regard to whether they will assert property rights in inventions or dedicate the inventions to the public domain are the inventors themselves.