Do what you have promised to do: Further consequences of (f)(2)

[Updated with a discussion of NIST’s May 2018 rule change]

The (f)(2) requirement in the standard patent rights clause authorized by the Bayh-Dole Act is a requirement for the host university to delegate, to flow down, to subcontract a portion of the patent rights clause to technical employees involved in a federal funding agreement.

This delegation is essential to connect the patent rights clause with each inventor. The delegation makes each inventor a party to the funding agreement for a narrow but important set of tasks that only an inventor can perform, initially. That is, once the (f)(2) agreement is in place, “contractor” in the standard patent rights clause means “host university and each of its technical employees working on a federally funded project.” It’s wrong to read “contractor” to mean only the university. “Contractor” is necessarily–by operation of the standard patent rights clause and the definition of “funding agreement,”–a plural with a singular form. 

Another thing happens, too, when the (f)(2) agreement is implemented. When a university makes the (f)(2) delegation/subcontract, the university and the technical employees substitute the (f)(2) agreement for any other obligation on the same topic that the university may have imposed on its technical employees (by policy or adhesion contract) or any agreement that the university has made with its technical employees (such as a patent agreement). A university cannot make the (f)(2) delegation/subcontract and at the same time require something else from those same technical employees.

If a technical employee discloses a subject invention–one that the “contractor” already owns–it is under the (f)(2) agreement, not any university policy or employment agreement or patent agreement that requires reporting. The (f)(2) requirement takes precedence. It controls. (f)(2), as part of a federal contract, takes precedence over any university policy or contract. And (f)(2) requires the university to act–the university agrees to act–to require the (f)(2) agreement of its technical employees. The university’s own action supersedes any prior policy requirement or patent agreement. The result is that where (f)(2) operates, university policy does not. One can stiffen the wording in a university patent policy all one wants, but the federal regulations–federal law, if you will–that establish the standard patent rights clause require the university to displace that policy in favor of the federal requirement.

Note the apparatus. There is no reason for such an apparatus if the law is simply broadcast generally to apply to every person in the land, or at least in the university. Instead, the standard patent rights clause goes out of its way to make the university itself act to reach potential inventors working with federal support. The (f)(2) requirement is not in the Bayh-Dole statute. Law professors who would be Bayh-Dole pundits will never find it in 35 USC 200-212.

It is a requirement that is chosen when a university accepts a funding agreement with the standard patent rights clause, not imposed. It is chosen, first, by the university. This disables any broken, incompetent, overreaching university patent policy–and that covers most all such policies. And the (f)(2) agreement is chosen, too, by the technical employees who want to work on the federally funded project. In so choosing and making the required written agreement under the standard patent rights clause, they become parties to the funding agreement–they become contractors, each the equivalent of a small business firm for the period in which they hold their invention rights personally, as provided by federal patent law under the authority of the US Constitution, subject to the standard patent rights clause specific for inventors (37 CFR 401.9).

The apparatus is one of contracting–agents agreeing to be bound to their promises–not one of law imposing demands regardless of notice or consent. And by the way, under the inventor patent rights clause, inventors have no obligation to give up ownership of their inventions if they don’t file patent applications. This is basic patent law: patent law does not force inventors to use the patent system. Nor does Bayh-Dole. Nor can then the patent rights clause authorized by Bayh-Dole. And it doesn’t, even with NIST’s new assignment clause, which cannot force inventors to assign anything but what they have already assigned. As the Supreme Court made clear, Bayh-Dole confers no special privilege for a university or other prime contractor to take, claim, demand, or have first right to any subject invention.

People who ignore (f)(2) implicitly *want* a totalitarian interpretation of Bayh-Dole–they support a vision of government that autocratically decrees law in what they take to be their institutional and personal favor. They in turn then feel justified in imposing a similar totalitarian regime on inventors, just as they claim Bayh-Dole has imposed such a regime on universities, all for everyone’s own good, of course. As far as I can tell, totalitarian approaches are not strongly associated with either good science or innovation. Jared Diamond makes the argument against totalitarian government control of innovation in Guns, Germs, and Steel. Steven Johnson makes a similar argument in Where Good Ideas Come From. Matt Ridley makes the argument in The Rational Optimist. Vannevar Bush makes the argument in Modern Arms and Free Men. The established order is a lousy director of what’s good for anything but the established order, if even that. Innovation not controlled by the established order to the established order appears as an accident, as criminal, as subversion, as heresy. In any case, why in America would university patent management personnel end up siding with totalitarian views of government? Does their job insecurity really run that deep?

The preemption that results from implementing (f)(2) carries with it an important point for the management of invention disclosure. The standard patent rights clause lays out what is required in a disclosure of a subject invention (37 CFR 401.14(a)(c)(1)):

The disclosure to the agency shall be in the form of a written report and shall identify the contract under which the invention was made and the inventor(s). It shall be sufficiently complete in technical detail to convey a clear understanding to the extent known at the time of the disclosure, of the nature, purpose, operation, and the physical, chemical, biological or electrical characteristics of the invention. The disclosure shall also identify any publication, on sale or public use of the invention and whether a manuscript describing the invention has been submitted for publication and, if so, whether it has been accepted for publication at the time of disclosure.

To summarize:

The disclosure by the university to the government:

  • is written
  • identifies the contract
  • identifies the inventors
  • conveys in sufficient technical detail a clear understanding of
    • the nature, purpose, and operation of the invention
    • the physical, chemical, biological, or electrical characteristics of the subject invention
  • identifies any publication or pending publication, on sale, or public use of the subject invention

In short, a compliant disclosure of a subject invention requires the information that would permit a patent application to be filed. A compliant disclosure is not a report that an invention has been made–it is, in essence, a patent application without the claims and the fussy legal language. The question remaining is whether the contractor that owns the subject invention is ready to elect to retain the title it has and (if required) file a patent application.

Now (f)(2) sets out the nature of the disclosure that the university agrees to require the inventors to follow when the inventors disclose to the university:

promptly in writing to personnel identified as responsible for the administration of patent matters and in a format suggested by the contractor each subject invention made under contract in order that the contractor can comply with the disclosure provisions of paragraph (c), above

The format for the information that’s required by the government is up to the university (or other contractor–the technical employees as contractors could do the suggesting, too–the use of “suggest” is not random)–but the information the university and inventors agree to provide is specified in paragraph (c) of the standard patent rights clause. The purpose of the inventor’s disclosure to the university is to supply this agreed-upon information to the university’s personnel designated for patent matters so the university can then pass that disclosure information on to the federal agency. That is the extent of the inventor’s obligation, and the university is required to delegate this obligation so that this, and not anything else, is the obligation. If a university administrator gets clever and tries to put on a disclosure form for a subject invention an assignment clause or a demand for market information, or anything else, that’s not what the (f)(2) agreement–which controls–requires. The university breaches its agreement with the government, and with its own technical employees-inventors-parties to the funding agreement-contractors.

[Even NIST’s new assignment requirement, as of May 2018 made part of the written agreement requirement, is limited to subject inventions–ones that the contractor already owns, that is, to put the best possible spin on it, ones that the contractor holds equitable title to but not has not formalized legal title. Oh, and if you flip and happen now to find yourself agreeing that the (f)(2) written agreement makes technical employees into contractors, and since inventors own their inventions, those inventions are subject inventions, and NIST’s (f)(2) assignment requirement then applies to those inventions–so one contractor must assign to another contractor. But that violates reason in many ways–paragraph (g) of the standard patent rights clause forbids a prime contractor from having an interest in the subject inventions of a subcontractor as consideration for the subcontract; furthermore, once an inventor owns a subject invention, the inventor is to be treated as a small business contractor under 37 CFR 401.9 and has no obligation to assign. In the big picture, federal patent law does not require inventors to use the patent system and does not require inventors to assign rights to anyone–Bayh-Dole is part of federal patent law, Stanford v Roche, and all of that. In an even bigger picture, there’s nothing to the idea that compulsory, comprehensive institutional ownership of inventions for the purpose of excluding everyone and all uses except for a single hoped-for and rarely obtained exclusive “commercialization partner” is an effective way of serving the public interest. So if inventors own their subject inventions, then the NIST (f)(2) assignment requirement can be effectively only if those inventors have entirely outside the federal funding agreement and compliant with it have acted in such a way that to a reasonable person it is clear that the university holds equitable title and an assignment confirms the legal transfer of title that perfects the university’s equitable right to ownership. So there. Like that.]

One practice tip here is: implement the (f)(2) agreement. It is at the heart of the standard patent rights clause. It enables subject invention at the moment of invention; it protects the government’s interest regardless of university practices; it self-implements the policy necessary to comply with the patent rights clause; it protects employee-inventors from overreaching exploitation of their personal rights by institutions using the fact of the funding agreement to extract ownership of inventions.

A second practice tip here is this: create a disclosure form specifically for subject inventions where the university holds equitable title or has negotiated an arrangement–nothing to do with federal funding or use of resources made available to a federally funded project (could even be {gasp} a voluntary arrangement) under which inventors have assigned their rights to the university. Comply with the requirements the university and its technical employees have agreed with the federal government to follow. Don’t introduce anything else. Don’t leave anything out. Keep it clear, keep it simple. Do what you have promised to do.


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