Some Questions from a Future FAQ on Bayh-Dole

Q. Can a university violate the Bayh-Dole Act?

A. No.

Bayh-Dole applies to federal agencies. The law requires federal agencies to adopt uniform practices regarding patent rights to inventions in funding agreements. Bayh-Dole (now) authorizes the Department of Commerce to create standard patent rights clauses for these funding agreements.

There are presently three such clauses: 1) 37 CFR 401.14(a), the general-purpose clause; 2) 37 CFR 401.14(b), a specialized clause for the Department of Energy’s nuclear propulsion and weapons program; and 3) 37 CFR 401.9, a clause for use when inventors retain their invention rights. The general-purpose clause is actually two clauses–one for small businesses, and another created by adding a special section for nonprofits. A standard patent rights clause may be modified by an agency in accordance with Bayh-Dole when there is a finding of “exceptional circumstances” and certain other circumstances involving foreign countries, intelligence gathering, and some DOE owned, contractor-operated laboratories. The DOE nuclear propulsion and energy clause at 37 CFR 401.14(b) is an example of such a clause.

The actual requirements that a university must follow for grant-funded research are therefore a matter of federal contracting in each instance of an award. The standard federal grant funding agreement is 2 CFR 200, and intangible property rights, including patent rights, are addressed at 2 CFR 200.315 and 2 CFR 200.316. 2 CFR 200.315(c) incorporates 37 CFR part 401 by reference. A university may breach its federal contract obligations by failing to comply with the standard patent rights clause, but a university cannot violate the Bayh-Dole law.

Q. What are the implications for university policy of this distinction between Bayh-Dole the statute and the patent rights clauses authorized by Bayh-Dole?

A. The requirements created by Bayh-Dole come within a university’s policies on sponsored research.

If the university has a policy that obligates its personnel to comply with the terms of an extramural research contract, then it has satisfactorily delegated responsibility for meeting the requirements of any federal funding agreement. No other policy statement is needed. No change in policy statement is necessary for a university to comply with the Bayh-Dole Act or with the terms of any federal funding agreement.

It is important to realize, however, that a university’s delegation of responsibilities results in benefits for inventors that the university’s patent policies may not anticipate. If the university’s contractual obligations take precedence, however, then those contractual obligations also take precedence over the defaults of the university’s own patent policy.

Q. What then are the minimum requirements for a university to comply with the standard patent rights clause?

The minimum requirements for a university to comply with the standard patent rights clause are set forth in 37 CFR 401.14(a).

These are:

(c)(1)  Designate personnel responsible for patent matters

(c)(1) Timely report subject inventions reported to such personnel to the government (a subject invention is a patentable invention that the university has acquired ownership of independently of the standard patent rights clause)

(c)(2) Notify the government whether the university elects to retain title in a subject invention

(d)      Convey title in the subject invention to the government when the government is authorized to request title and does so

(f)(2) Train research personnel on the importance of timely disclosure

(f)(2) Require technical personnel to make a written agreement to protect the federal government’s interest: to report inventions to personnel designated for patent matters; to sign paperwork to permit patent applications to be filed; to sign paperwork to establish the government’s rights in inventions

(g)     Flow down the standard patent rights clause in any subcontracts (including the subcontract with technical personnel required by (f)(2))

That’s it. All other requirements are contingent on the university electing to retain title to subject inventions. A university has no obligation under the standard patent rights clause, nor any special privilege or right to acquire ownership of any invention or to retain title to any invention that it does acquire.

Q. So what is the simplest university policy to comply with the standard patent rights clause authorized by Bayh-Dole?

A. Here it is:

________________ is responsible for patent matters at our university.

________________ will

(i) comply with federal requirements for reporting subject inventions (determine, for inventions that the university has acquired, whether the invention was made in a research or development project supported at least in part with federal support);

(ii) educate research personnel on the importance of timely reporting subject inventions; and

(iii) convey subject invention title to the government when requested.

Research personnel participating in federally funded projects will make a written agreement (i) to report subject inventions to _______________ ; (ii) to sign paperwork to permit patent applications to be filed; and (iii) to sign paperwork to establish the government’s rights in their inventions.

The university will include the standard patent rights clause, modified as needed, in any subcontract made under a federal funding agreement.

Q. Is it true that the (f)(2) provision isn’t in Bayh-Dole?

A. Yes. (f)(2) is not in Bayh-Dole.

Nor are the provisions at (e) and (g). Anyone simply reading the Bayh-Dole statute fails to understand the fundamental nature of how the law operates. Bayh-Dole authorizes standard patent rights clauses. A patent rights clause, suitably modified, is included in each federal funding agreement. The (f)(2) provision thus comes to universities by means of 2 CFR 200.315(c). The disposition of patent applications and patents acquired in a federally funded project is furthermore also covered by 2 CFR 200.316, which places limitations on how a university may use such intangible assets. These limitations also are outside of the Bayh-Dole law but are part of the standard federal funding agreement with universities.

Q. What does the (f)(2) agreement require?

A. The (f)(2) provision requires the university to delegate to its research personnel the responsibility (both authority and obligation) to report inventions timely, to sign paperwork to permit patent applications to be filed, and to sign paperwork to establish the government’s rights in inventions.

When a university requires technical employees to make a written agreement to protect the government’s interest, it makes those employees “parties to the funding agreement” by “any assignment, substitution of parties, or subcontract of any type.” Those technical employees therefore are, by the definitions in the standard patent rights clause, “contractors” and the inventions they make become “subject inventions” because those inventions are “of the contractor.” We must be clear that “contractor” does not mean the university only. Once a university complies with the (f)(2) written agreement requirement, technical employees making their written agreements are also contractors. Thus, all inventions arising in projects having federal support become subject inventions regardless of whether a university acquires ownership. Subject inventions owned by inventor-contractors are subject to the inventor patent rights clause at 37 CFR 401.9, which in turn is a subset of the small business patent rights clause–not the nonprofit patent rights clause.

Q. Isn’t this (f)(2) agreement just a requirement that a university require its inventors to assign patent rights to the university?

A. No. Absolutely not.

The (f)(2) requirement is not a requirement that the university obtain a patent agreement from each of its research employees obligating the employees to report and to assign inventions to the university. Such a patent agreement does not comply with the (f)(2) requirement, and may in fact be contrary to the (f)(2) requirement.

The (f)(2) requirement protects the government’s interest in inventions made with federal funding; it is not a federal requirement that the university protect its own interest in inventions. The delegation required by (f)(2) makes research personnel “parties” to the funding agreement and permits a standard patent rights clause to apply also to them if and when they make an invention within the scope of planned and committed activities specified by the funding agreement.

Q. What is the effect of the (f)(2) delegation?

A. (f)(2) makes the standard patent rights clause operate as intended by Bayh-Dole.

Failure to implement the (f)(2) delegation is a formal repudiation of the public policy represented by the Bayh-Dole Act. With the (f)(2) delegation in place, university research personnel become parties to the funding agreement and therefore “contractors” within the definitions of the standard patent rights clause.

Under US patent law, when an invention is made, the inventor, not an employer or research sponsor, is the owner of patent rights to the invention–and certainly no organization that simply hosts federally supported research has any special claim in patent law to own such inventions. The definition of “subject invention” in the Bayh-Dole Act and in the implementing regulations, and in the standard patent rights clause, is an “invention of the contractor conceived or first actually reduced to practice in the performance of work under a funding agreement.” The US Supreme Court has ruled that “of” in this definition means “owned by.”

The standard patent rights clause depends on inventions made with federal funds becoming subject inventions. Inventions that are not subject inventions are not within the scope of the standard patent rights clause and are not addressed by the Bayh-Dole Act. Thus, if an inventor under federal law owns her invention made in a federally funded project, that invention is not a subject invention because it is not an “invention of the contractor.” If such a condition were to exist, the inventor would have no obligation under the standard patent rights clause to report the invention, and if the university did not require assignment of patent rights to the university (or to any other organization), then the university (or that other organization) also would have no obligation to report inventions made with federal funding.

The standard patent rights clause addresses this problem by requiring universities to make their research personnel become parties to a funding agreement when they invent. At that moment, they become “contractors” under the definition given by the standard patent rights clause: “The term ‘contractor’ means any person, small business firm, or nonprofit organization that is a party to a funding agreement.” The definition of”funding agreement” states that “funding agreement” includes “any assignment, substitution of parties, or subcontract of any type entered into for the performance of experimental, developmental, or research work under a funding agreement….”

When the (f)(2) delegation is made, research personnel are substituted as the parties to report inventions and sign paperwork pertaining to patenting, assignment, and licensing. The (f)(2) delegation is part of the funding agreement. Thus, the research personnel become parties to the funding agreement for the purposes of invention reporting and patent and licensing paperwork, and thus are contractors when they invent. Their inventions, then, are inventions “of the contractor”–now each inventor is also a contractor–and are therefore the inventions are Subject Inventions within the scope of the standard patent rights clause.

Q. Does the (f)(2) delegation have any other effects?

A. Yes. The (f)(2) delegation supersedes any conflicting university policies or contracts.

Federal contract law takes precedence over state laws. The (f)(2) delegation requires a university to make its research personnel parties to a federal funding agreement. By doing so, a university expressly waives any policy or contractual claim (such as through an employment contract or patent agreement) that conflicts with the (f)(2) delegation. A university cannot require the (f)(2) delegation and also require its employees to do something that conflicts with that delegation.

With the (f)(2) delegation in place, university inventors

  • report their inventions not to comply with university policy or with an employment contract or a patent agreement, but because they have agreed as parties to a federal agreement to do so.
  • sign paperwork to allow patent applications to be filed (the “declaration and oath” statements attesting that they are the true inventors), again as a consequence of their standing as parties to a federal agreement that obligates them to do so.
  • inventors are authorized by the university to assign their inventions (acting in their private capacity, not as university employees) to the government upon request, or to execute a license to the government. That is, the university cedes this authority to inventors prior to any claim the university might make to own any given invention. The university does not have this authority outright–the university only may make a claim to inventions, and the (f)(2) delegation provides that the university will not prevent inventors from complying with their obligations as parties to the funding agreement.

Q. So, do universities comply with the (f)(2) requirements?

A. Generally no. 

Universities instead have circumvented the standard patent rights clause and ignored the broader requirements on their use of inventions acquired with federal funding under 2 CFR 215.37. It is ironic that university administrators make such a big fuss about the need to “comply with Bayh-Dole” when the law does not apply directly to them, and they ignore the core of the standard patent rights clause that enables the apparatus authorized by the law.

Instead, universities that refused to implement the (f)(2) delegation changed their patent policies purport to require assignment of all inventions made in federally funded projects. They argued that such an assignment was mandated by the Bayh-Dole Act–in some versions, Bayh-Dole vested title to inventions directly with the universities; in other versions, Bayh-Dole required inventors to assign to their universities; in yet others, Bayh-Dole gave universities a right of first refusal for assignment of inventions–meaning that inventors could not assign to anyone else before offering to assign to the university. In 2011, the US Supreme Court in Stanford v Roche looked at this hodge-podge of rationalizations and tossed them all.

Ever contemptuous of the Supreme Court, five years later universities have not retracted policies made with the claim Bayh-Dole required them to take ownership of faculty inventions. Bayh-Dole makes no requirement that a university ever own any Subject Invention. After the Stanford v Roche decision, university administrators and the their legal counsel have implemented “present assignments”–making faculty and other research personnel assign in advance not only patent rights to future inventions, but by making the definition of “invention” wildly broad, also claiming to own rights to other forms of intellectual property and other intangible assets (information, know-how)–some of which otherwise have no ownership method other than trade secret or assertion of power over those that possess the asset–and either of these methods is fundamentally in contradiction with the basic premises of university work–academic freedom and open instruction and publication.

Thus, universities aim to prevent the implementation of the (f)(2) delegation and seek to make its requirements moot by substituting a policy and practice of claiming everything upfront, and sorting through whatever they haul up for the bits they can sell off to industry or investors. It’s the worst possible university patent practice one could imagine. It is at once a product of the Bayh-Dole Act (the law was cleverly drafted not to protect against such exploitation by universities) and not a product of Bayh-Dole (the law and its implementation propose a different pattern of invention management, one that universities have ignored).



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