Policy
For the last couple of weeks I have been considering the nature of university patent policies. I have looked at a number of university patent policies and written a number of drafts. Things get complicated quickly, but there appears to be a simple set of points that ought to be clear, yet in practice aren’t clear at all. Here is what ought to be the case, put simply:
A university policy establishes principles upon which a university acts. A policy is a set of statements that delegate authority, authorize the use of resources, establish bodies and standing, and set out procedures to be followed in making and appealing decisions. These statements serve to bind the university to formalized purposes and courses of action that those dealing with the university may rely upon.
So far, so good. University policies cover all sorts of areas–faculty appointments, purchasing, risk management, conduct of research, health benefits, conflict of interest, donations, academic programs, student conduct, employment, and patents. There is little in university policy documents to indicate that one policy is special and another policy to be happily ignored. Policy statements are set up to have comparable authority within the organization. Other administrative statements, with lesser standing, are segregated out to procedure manuals, to guides and information pieces. A statement of procedure describes how some action should be done, but it is the policy that requires that the procedure be done. In the absence of policy–or some executive order–the statement of procedure is a memory device, a matter of organizational convenience, helpful in its way, but not the only way to do things.
Officers of the university are expected to follow policies, as they are the ones who create the policies on behalf of the university. Employees also are expected to follow the policies. If they don’t, they could be disciplined or fired. Students, too, are expected to follow the policies. If they don’t, they could disciplined (put on academic probation, excluded from certain activities, reprimanded) or expelled. Others–visitors, the general public, contractors, and the like–may also come within the scope of university policies, but who expects any of these others to make a study of the policies and so come to know what the university requires? That is, if some other person violates a university policy–enters a laboratory without authorization, say, or shouts out some politically incorrect thing–the university’s remedy is for its employees to follow the university’s policy, which may require intervention, investigation, or removal of the offending person from campus.
University policies also often have built into them room for exceptions, exemptions, alternatives, revisions, appeals, and arbitration of disputes. A policy applies unless an officer excuses the operation of the policy, and then the policy doesn’t apply. There is a practical purpose at work–policies must leave room for institutional judgment, recognizing that it is darned near impossible to anticipate every possible situation in advance and draft a statement in words that provides clear and equitable and un-stupid requirements for each and every situation that could ever arise. So, in a sense, a policy is a statement of defaults, of starting points, with the organization able to reason away from the defaults when the defaults don’t provide an equitable outcome. Here, “equitable” is a difficult word choice. Perhaps “institutionally desirable” outcome or “so we avoid getting sued” outcome or “to comply with the law” outcome would work as well.
To reprise–a university policy states principles that constrain officers of the university to act to achieve stated goals in prescribed ways. Faculty, employees, students, visitors, and the general public may come within these policies, and may rely on the proper operation of the policies, and if they do not comply with the policies, they may be disciplined (within the benefits and actions available to the organization) or made to leave the organization or the campus, or both. A policy in this way has attributes of power, just as religious law does–an organized religion can discipline an offending member or excommunicate that member, but doing so exhausts the organization’s reach. It is not a matter enforced by the state or federal government. If a visitor to a church is disrespectful or disruptive, the visitor may be asked to leave, and if the visitor refuses, then the situation moves from one of policy to one of trespass, and the power of the state may be summoned to evict the trespasser. The power of policy is limited to the authority of the organization, the assets that the organization controls, and the individuals who are constrained to act according to the policy. A policy authorizes those individuals to exclude others who do not follow policy from the benefits of the organization. If the offenders do not leave, then the power of the state may be used to force them to leave.
Liberty, then, is the principle in play in university policy. By following the policy, one enjoys the liberty of the institution. Failing to follow the policy leaves that liberty in jeopardy, subject to the decisions (and exemptions, interpretations, and appeals) of those authorized by policy to administrate policy. If one screws up, one may lose one’s access to benefits of the university–access to facilities, position, parking pass, signing authority, approval to travel, approval to participate in extramural research, approval to consult. Refusal to accept such sanctions may result in loss of appointment (for faculty) or loss of employment (for employees), termination of contract (for contractors), expulsion (for students), and escort off campus (for visitors).
A policy is not a public law. A policy is not a contract. A policy is statement of the purposes and the bounds of an organization by which its officers may offer organizational benefits and withhold access to organizational benefits. Without a policy, an officer has the freedom of whatever delegation of authority the officer has to act on behalf of the organization. With a policy in place, the officer’s authority is constrained by that policy, at least as a starting point, for the officer’s decisions and other actions. A policy, therefore, is at its heart asymmetric: it cannot expand an officer’s authority to act beyond that of the organization’s power, but it can and often does constrain an officer’s authority to act on behalf of the organization. Thus, while a policy provides a stable basis for faculty, students, visitors, and others to rely on access to the benefits of an organization, in doing so it limits the organization from acting in ways outside of the policies it has adopted–to act outside of policy, one has to follow the policy on acting outside of policy (or face sanctions for violating policy).
So the remedy within the authority for failure to comply with a policy is exclusion from a benefit or from the university. If the failure is also a crime or breach of contract, then the power of the state, and not just the power of the university, may come into play. But then it’s a matter of justice, not access. Policy administrates liberty within an organization. It delegates, authorizes, establishes, and sets defaults. It constrains officers to act in accordance with the policy and not on whim. For all others, it authorizes sanctions–a denial of benefits–for failure to comply.
Now let’s turn to the particular problem of a university IP policy. Patents and copyrights–and inventions and works of authorship–have attributes of personal property, per federal law and the US Constitution. If a policy establishes purpose and procedure, authorizes and delegates, how does a university IP policy come to claim ownership of personal property?
There is a simple, obvious answer–a university IP policy cannot claim ownership of personal property. The organization simply lacks the power to do so.
Silly examples follow: if you park on campus, the university does not own your car. If you give a talk on campus, the university does not own your clothes. If you invite students over to your house for a discussion related to a course, the university does not own your house. In each case, it’s clear that a policy that made such claims simply does not operate. The same is true, even if the action violates policy: you park in a no-parking zone; you give a politically incorrect talk on campus; you invite some students over to your house, but not other students, who are left at a disadvantage. Even with such violations of policy, the remedy is not a claim to own personal property. Of course, no university officer would be silly enough to write such a claim into policy. That’s why the examples are silly–but you see the pattern.
Four Approaches
To transfer title to a copyright or patent, there must be a written instrument. To compel the transfer of title, there has to be a basis (1) in law or (2) contract–in either case, the power of the government backs the demand. But there are two additional options available to a university–(3) authorization to deny organizational liberties, and simply (4) a threat (of force, to ruin reputation, to cause financial harm, and the like).
Let’s work through these four pathways.
Law is short. The simple story is that Bayh-Dole does not require university ownership of inventions, so policies that claim ownership to comply with Bayh-Dole are nonsense.
Contract is long. University drafters, inept as they are willful, create a document they claim is binding but rotten as a contract. We look at a sample policy, with a detour to examine how truly nasty such monsters can be.
Liberty is short again. It is the way things were handled prior to Bayh-Dole, in a world where university research was productive, patents were handled in a variety of ways mostly by agents external to the university, and a policy authorized the provision or withdrawal of benefits as circumstances indicated.
Threat is short, too, and obvious. It costs north of $150K to resist a university policy claim, even when one is right about resisting. Folks don’t have that much money, usually, so they give up, preferring security to financial ruin.
1. Law. Ownership of copyrights and patents is governed by federal law, in both cases derived from the US Constitution, Article I, Section 8. The author of an original work of authorship is the the owner of the copyright. The inventor of a new, useful, and non-obvious invention is the owner of patent rights and has the right to seek a patent. These are personal rights. In the case of “work made for hire” in copyright law, the “person” may be a corporation that exercises authorial control over those preparing a work. Given that ownership is established by federal law, there’s nothing for a policy statement to do but recite the law.
The rub comes from the misrepresentation of the Bayh-Dole Act by patenting professionals. They claimed (in a range of versions) that Bayh-Dole granted ownership of inventions made with federal support to the universities that hosted the research. They also claimed that federal law required them to pursue commercialization of such inventions. For the university to comply with federal law, they argued that the university must change its patent policy to reflect that it owned federally supported inventions, and that inventors were required by law to assign inventions to the university (with the understanding that so assigning was merely paperwork to document what the law had already caused to happen). (Ignore the fact that the US Patent and Trademark Office did not recognize any change in the law, and still required universities to submit an actual assignment document to show they had obtained ownership; ignore, too, the fact that the US Supreme Court in Stanford v Roche made clear that Bayh-Dole does not give universities ownership of anything.)
A number of universities have ignored the US Supreme Court ruling and retained wording in their policies that federal law requires the university to own inventions made with federal support. The policies often then expand the claim to all inventions, and often to non-inventions, to stuff that simply cannot, even, be owned. But no matter. The intent is to establish a claim as the default, and leave it to others to try to resist the claim. University of California attorneys have gone so far as to argue in court that university policy has the “force of law”–“laws” created by bureaucrats who can then happily change these “laws” or suspend them as they please, working for university corporations established by state laws and charters. All these claims are bluster.
Universities have no legal requirement or mandate to own inventions or works of authorship or most anything else created by faculty, staff, and students. University patent policies that attempt to cause the university to comply somehow with ownership requirements of federal or state law are chasing unicorns. The serious upshot is that university unicorn chases claim to have a right to every personal property–such as an invention–they trespass upon while chasing their unicorn.
The huge problem in practice is that the unicorn-chasing university bureaucrats insist that it is a good thing that universities own all patents and most copyrights, no matter what reasons are given as rationalization for demanding university ownership. If the law doesn’t require it, no matter. The law should have required it, and to make up for that defect, the university will require it anyway. But if the law doesn’t require university ownership, then the university claim to ownership is obviously not a matter of law, and a policy claiming invention ownership for a university must operate by some other means.
Worse for a public university. If a public university asserts that it has a legal right to take ownership of patent rights–personal property–as a matter of law, then it is making an eminent domain claim. It is condemning personal property, as it were, for a public purpose. To make that claim properly, at a minimum, the claim must follow due process and involve just compensation. In the case of real property, the owner gets paid what the property is worth (in some politically charged calculation of market value). Public universities that take patent rights from individuals under the claim that they have a legal right to do so do not appear to pay the inventors anything. Instead, they offer a royalty-sharing schedule, which sounds nice, but does not require the university ever to make a dime from licensing a patent, and does not even require the university to market the patent. The royalty schedule is imposed, as is the demand for ownership.
University assignments made under a claim of legal necessity but without compensation–the power of the state embodied in the university as an instrument of the state, and backed by a claim that the assignment is necessary in the public interest–is challengable as an illegal taking. The even better challenge is to sue for the compensation–what was the market value of the patent rights at the time the university condemned those rights for public use? Clearly, if the patent rights had no value, then the university would not have taken them. Look to the university’s statements on the importance of commercialization, look to the royalty payment requirements in patent licenses (template and actual), look at the royalty income reported in annual reports, look at administrative evaluations of technology transfer offices based on income–it should be a straight shot to arrive at just compensation in excess of one million dollars per patent taken. That would be even better, for most university inventions, than having the rights back, years later, to a dead invention. It is a wonder that a challenge has not already been mounted, a little black swan waiting in the wings to send university administrators scattering when it shows up.
2. Contract. A contract is a meeting of minds that embodies mutually enforceable promises (offer, acceptance, and consideration) made with the intent to be bound. A contract is voluntary, and to be valid for longer than a year, must be in writing. A contract cannot be changed at whim by one party to the contract–changes require mutual consent. A contract drafted by one party without negotiation (an “adhesion” contract) is often interpreted against the drafting party. That is, the drafting party is not at liberty later to construct what it meant or intended by the words it chose to use–a meeting of the minds means that what the other party reasonably believes the words to mean ought to control what is enforceable in the relationship. Or, of course the drafting party can say whatever it wants about its intentions and what it wants the words to mean, but judges don’t necessarily give those appeals much weight.
When a contract is formed, if one party to the contract wants to add additional terms, these do not become part of the contract unless the other party agrees to change the contract. One can draft elaborate additional terms, but that does not make those terms enforceable. Similarly, if one party demands in a contract that the other party agree to any changes made in the contract, that’s an agreement to agree, and also not enforceable–a contract by its nature is enforceable for all parties involved, not just for some against others, for whatever the some want to do.
A university policy can also form a contract. But to do so, there must be offer, acceptance, and consideration, with an intent to be bound. For patents and copyrights, it’s not sufficient for there to be an employment contract. And for university faculty, it’s even more difficult because faculty are appointed as well as employed, and the scope their appointment may differ substantially from the scope of their employment. Further, for state-operated universities, there are public policy arguments against the state owning (and therefore controlling) faculty scholarship–not only does state ownership open the door for political control over faculty endeavors, but also state ownership runs against academic freedom and open scholarship.
A statement of ownership in a university policy does not in itself form a contract. A statement that the university will own patents states an intention of the university, and authorizes university officers to seek to obtain ownership, and may even authorize university officers to sanction those who refuse to assign ownership, but a statement itself is not binding. Something else must make the statement binding–a written agreement. In patent management, this is the patent agreement, which expressly provides for the disposition of patent rights, which by federal law are with the individual inventors and not with their employers, even if they use the employer’s facilities to invent. At best, the employer gets a “shop right”–a right to use such inventions, and not a right to own the inventions. Some states go so far as to limit what an employer can claim of employees by way of patent rights, in an attempt to make the public policy issue clear.
Consider this scope of policy, from NYU’s Statement of Policy on Intellectual Property:
This policy applies to all members of the “University Community.” As used in this policy, “University Community” means: NYU faculty, including visiting faculty; researchers, including persons participating in research at or under the auspices of NYU; employees; professional staff, including medical, dental and nursing staff; volunteers; fellows, trainees and post-doctoral appointees; students; and any other persons involved in the creation of Inventions, Copyrightable Works and/or Tangible Research Property at or under the auspices of NYU, including consultants, vendors and contractors, irrespective of the source of funding for the creation.
If “applies” means “forms a contract with” or “is part of the employment contract with,” then it is clear how *employees* could come within the scope of the policy, but given “employees” is used in this statement of scope–everything else would appear to be non-employees–faculty, visiting faculty, researchers, professional staff, volunteers, fellows, trainees, students, “any other persons involved in the creation of Inventions.” A crazy list. How can the policy “apply” to volunteers, to “anyone involved in the creation of inventions at NYU or not at NYU but under its “auspices”? If “apply” means “contract with,” then how does a statement of policy turn into a contract with, say, volunteers? Where is the offer, acceptance, and consideration? Where is the meeting of minds? The indication of the intent to be bound? Not there. Not a contract, though it may have the trappings of a contract.
The NYU policy goes on to make a claim for ownership of “Inventions that are conceived, reduced to practice or developed by members of the University Community” (my bold):
(1) NYU Ownership. Except as otherwise provided in this Section III, Inventions that are conceived, reduced to practice or developed by members of the University Community are owned by NYU if conceived, reduced to practice or developed, in whole or part: (1) in the scope of NYU employment or other duties at or for NYU; or (2) in connection with training, research or clinical activities at or under the auspices of NYU; or (3) with Substantial Use of University Resources; or (4) the Invention is subject to the rights of research sponsors or other third parties under agreements duly entered into or agreed to by NYU;. [sic] In such cases, it is presumed that NYU owns every Invention made by a member of the University Community.
Let’s pause long enough to show the start of how badly drafted this document is. “Invention” is much broader than “an invention that is or may be patentable”:
“Invention” refers to any novel idea, discovery, invention, know-how, show-how, or process, whether or not patentable, together with any associated or supporting technology necessary or useful for the protection, development or application of the idea, discovery, invention, know-how, show-how, or process, and also includes all patents and patent rights derived from that Invention, and all non-patentable Copyrightable Works, Tangible Research Property and Research Data that are closely associated with the Invention. “Closely associated with” includes useful in practicing the patent, in effectively prosecuting the patent application or in maximizing the licensing potential or other commercialization of the Invention.
“Invention” is defined to be “invention and non-invention”–that about covers everything, no? “Know-how” and “show-how” are perhaps ownable under a trade secret theory, but otherwise are the expertise of individuals–and for faculty, it forms an odd, even fascist claim, that the university owns the expertise of its faculty.
Take a look, then, at the claim of ownership–
anything “conceived” OR “reduced to practice” (patent terms of art) OR “developed.
An invention is made when it is both conceived and reduced to practice. But the policy here separates stuff conceived from stuff reduced to practice. Conceived stuff is ideas. Reduced to practice stuff is stuff that is built or used or documented. Those are expansive claims compared to an invention that is both conceived and reduced to practice. And what does “developed” mean, since clearly not the former terms–does it mean “worked on”? or “improved”? or “made”? Clearly, it has nothing to do with patenting.
“in whole or in part”–the claim does not even have to extend to the entirety of the asset claimed. Any “part” within scope creates a claim for ownership of the whole.
“in the scope of NYU employment or other duties at or for NYU”–employment and non-employment are both within scope of the claim. “Duties at” is distinct from “duties for” and “duties for” are expressly not “employment duties”–they would have to be duties for the university for which the person involved was not employed by NYU. “Duties at”
does not even require NYU’s involvement. Just having “duties” to anyone and being located on the NYU campus appears to meet the conditions of scope.
“activities at or under the auspices of NYU”–“activities at” does not necessarily include “under the auspices” of the university–one could attend a training session in rented space at the university, perhaps, and come within scope of the policy claim. How far off campus does the “auspices of NYU” reach? “Auspices” may mean “endorsement” or “guidance” or “blessing” or “support from” or “protection of”–here, the claim is (apparently) that mere approval of an activity by NYU creates a claim to ownership of inventions arising in the approved activity.
“Substantial Use of University Resources” is given its own definition, buried in an appendix:
“Substantial Use of University Resources” means more than incidental use of NYU resources. The following are examples of Substantial Use of University Resources (in the absence of advance written approval of NYU that explicitly states they will not be deemed to be considered Substantial Use of University Resources): use of NYU funding or of grants administered by NYU; use of NYU employees, physicians, consultants, vendors, contractors, students, post-doctoral scholars or fellows; use of NYU intellectual property; use of NYU laboratories or other facilities; or use of NYU research, clinical or other equipment. Use of NYU libraries on a basis similar to scholars who have no association with NYU is not considered Substantial Use of University Resources.
There would appear to be a gap between incidental use and substantial use that the policy definition ignores. However, what does it mean to “use” NYU students or “use” NYU consultants? What connection must such “users” have with NYU to come within the scope of the definition? What does it mean to use NYU intellectual property? Does that mean by using an invention owned by NYU, one’s own “Inventions” come within the scope of NYU’s ownership claim? This is murky, if not nasty, stuff. It would appear that those drafting this policy were at some pains to try to make the policy cover everything they could–and would figure out exactly what they had caught later, when something of value, or at least interest, surfaced. “research sponsors or other third parties”–what is a “third party” in this context? In a research agreement between the university and a sponsor, the sponsor is not a “third party”–but a first or second party! Third parties would be others, not party to the contract. The policy here must imagine that someone subject to the policy is a “second party,” making all others “third parties.”
“entered into or agreed to”–what difference is indicated here? Can one enter into an agreement and not also agree to it? Can one agree to an agreement and not enter into it? If one agrees to an agreement but does not enter into it, the agreement is not binding–yet it would appear to be sufficient for the university to make a claim for whatever results from the agreement agreed to but not entered into. How woefully strange.
Finally, this first paragraph of the statement of ownership concludes with:
In such cases, it is presumed that NYU owns every Invention made by a member of the University Community.
That is, the policy claim’s first sentence starts with
Inventions that are conceived, reduced to practice or developed by members of the University Community are owned by NYU
if any of the listed conditions are met. The policy claim’s second sentence changes this statement of ownership to a presumption, without indicating who does the presuming or how presuming results in ownership. What a mess. There’s more–the “Scope of NYU Employment” is defined to both employment and “other duties”–so the scope of employment is employment and non-employment. But it is even worse. The Inventions “are deemed made” within scope if the Inventions (not the making of them) “are within the broad academic field or area of teaching, scholarship, research or clinical activities in which such academic member of the University Community is engaged.” That is, all someone has to do is decide that an academic member has made something as a result of doing something that member “is engaged in.” The “broad field or area” is whatever that poor person does. The university policy here–in the patent policy of all places–aims to determine the scope of employment for “full-time academic members.” Yes, there are some “exceptions”–for inventions made by faculty on unpaid leave, by students if not compensated for their course work, and in consulting work, or if the university for some reason grants a release. If there is any question about scope of employment, a Dean decides–though the policy appears to preempt scope for much judgment.
The university states that it will decide whether it owns Inventions:
Upon disclosure of an Invention, NYU will determine whether or not ownership vests in NYU pursuant to this policy.
That is, the university’s policy is that it gets to decide what is within scope of its policy.
How does all this mess end up a contract? Section D “Agreement to Policy” has this:
This policy is binding on NYU and on all members of the University Community. All members of the University Community are advised of NYU’s policies and procedures relating to intellectual property through publication on NYU’s website at www.nyu.edu. To the extent NYU requires formal confirmation of patent assignment or other agreements to implement this policy, the absence of such executed agreements does not in any way invalidate, in whole or in part, the applicability of this policy or diminish NYU’s rights under this policy. Nothing in this policy constitutes a waiver by NYU of any rights that NYU may have under any other NYU policy, by contract or pursuant to any applicable law.
The policy asserts that it “binds” everyone identified as a “member” of the “University Community.” The policy claims public notice on the web site is sufficient. “Formal” agreements are optional. “Formal” here must mean something along the lines as “as a mere formality, as administrative busy-work, pro-forma, without doing anything that hasn’t already been done, going through the motions.” One would think that “Formal” would have the opposite meaning–that the policy states informally what is formalized in legally binding instruments prepared under the direction of the policy. Instead it’s the reverse–the policy is somehow “binding” and “formal” documents are mere fluff as needed to symbolize what the policy has already accomplished.
More, section E. “Intellectual Property Agreement” lays out conditions under which a member of the University Community must sign an “Intellectual Property Agreement”–at first grant proposal, first engaging in a sponsored program, on accepting an appointment, or whenever the Provost, EVP or EVP for Health asks. But we are reminded:
Notwithstanding the above, the failure of NYU to obtain a signed Intellectual Property Assignment does not in any way diminish NYU’s rights under this policy.
That is, the Intellectual Property Agreement does not formally operate–it is a mere formality–but the policy asserts that it is the policy statement that is binding, not the written agreement. To repeat–on its own terms, the policy claims any agreement merely confirms the policy, but does not represent the agreement. It is a policy to create paperwork for show.
There are parallel policy statements for copyright and for “tangible research property” and data using much the same language. The copyright policy carves out “Traditional Works of Scholarship” as stuff the university will not “assert ownership” of–suggesting here at least that the policy operates by assertion (or presumption) and not by contract.
Now let’s look at the “NYU Intellectual Property Agreement, which all three sections require, but claim is not required (Appendix B, page 51, if you are reading along).
The signee is required to acknowledge that the deal is–the payment to be a “member” of the University Community is giving up rights to Inventions, Copyrightable [sic] Works, and Tangible Research Property, and Data. The agreement “confirms in writing” what the policy already claims has happened. The signee confirms “that I have assigned to NYU all of my right, title and interest” to Inventions and whatnot, with a long list of details about all the things involved by way of forms of intellectual property rights. The signee also agrees (not confirms agreement) to cooperate “in every necessary way” with the university’s efforts to commercialize the assets assigned; to disclose Inventins and what not “even if I believe at that time that NYU has no ownership rights to the Invention” (talk about invasion of privacy!) and this disclosure obligation survives after the signee ceases to be a “member” of the University Community; and “certify” that the signee has no conflicting “consulting or other agreements” and “warrant” that the signee won’t “knowingly” enter into any such agreement.
Now, in addition to the obvious oddities of this “Agreement” paperwork, there is nothing in the NYU policy that stipulates a person cannot have any agreements with others that are in conflict with the obligations under the NYU policy. The place this “certification” and “warranting” happens is in the Agreement that members of the NYU community are asked to sign. So does this Agreement form an actual contract on this particular issue? Do people understand the nature of the NYU policy when they sign the Agreement, even if the Agreement demands that they do?
It is helpful to look at a university patent policy case from across the country to get a feel to how the NYU policy and Agreement might operate. The University of California has a written patent policy which also requires an “Acknowledgement” of the patent policy by every employee (and even some non-employees). The “Acknowledgement” used to be labeled an “Agreement,” but it turns out that a court held that “Agreement” meant, reasonably, “contract”–much to the University of California’s displeasure.
In the case of Shaw vs the Regents of the University of California, Shaw challenged the university’s attempt to divert strawberry patent royalties by changing the patent policy. The court was clear that the royalty schedule in the policy did form part of the patent agreement–a contract–with each faculty inventor (my emphasis below):
We also reject the University’s argument that the Patent Policy is a mere personnel policy which it may modify unilaterally. Although the University is entitled to revise its Patent Policy, it cannot do so with respect to Shaw because of its written agreement with him. The University prepared, and Shaw signed, a patent agreement whose references to the Patent Policy are so direct as to indicate the parties’ intent to incorporate the policy’s then-existing terms into the patent agreement, including the University’s promise to pay Shaw 50 percent of the net royalties of any patentable invention. Whether, absent the incorporation, the Patent Policy would constitute a mere statement of personnel policy is immaterial. Having made the Patent Policy a part of its written agreement with Shaw, the University may not unilaterally revise it as to him.
The court considered the University of California’s various arguments and rejected them all–the policy is incorporated into a contract, and it does not matter that the university claims it intended otherwise, or that the policy is purely administrative, or that as a public employee, an inventor has no actual employment contract. While the Shaw case did not involve ownership of inventions, it does show the pattern of reasoning that follows.
If a university patent policy is a contract, then the university has no unilateral right to change the contract it forms any time the university decides to change the wording of the policy. A faculty member operates under the contract he or she agreed to, and not anything else, unless and until the faculty member agrees to changes. If a university patent policy can be changed at will by the university, then whatever it is, it does not form a contract with university employees or anyone else. A policy can have the trappings of contract, using language one would find in contracts, and still not meet the standard of a contract. One of the big failings of university patent policies is the effort to make the policy appear to be contractually binding. Doing so presents a policy with a false face, as if the effort is to deceive members of the university community, rather than inform them or contract with them.
A policy may announce a goal–that the university should own certain inventions. A policy may then delegate authority to an officer of the university to enter into agreements that will secure that ownership for the university. Those agreements take the form of contracts, with offer, acceptance, and consideration. If payment of salary is the consideration for the assignment of an invention made by an employee, the employee had better be hired to invent. Otherwise, the additional agreement to assign an invention to the university needs to carry its own consideration.
In the case of NYU, the patent policy asserts a presumption of ownership and requires an agreement to as an optional acknowledgement that the policy is “binding.” That is, somehow the policy is presumed (by the policy) to form an obligation with each “member” of the university–regardless of whether any contract is formed between the university and the member. How strange!
Contracting would be simple: Each targeted person signs an agreement to conform to the policy statement, for which the university offers sufficient consideration. But NYU expressly does not do this. Instead, NYU claims that the policy is binding on its own, publication on a web site is sufficient notice, and by being included within the scope of “members” and producing an asset within the scope of “Invention” (and other such stuff), one necessarily is constrained to accept NYU’s claims. The question, then, in earnest is what sort of creature is this NYU monster of a policy? How does it obtain ownership of personal property–patents and copyrights–if not by contract, when federal patent and copyright laws both require written instruments signed by inventors and authors to transfer ownership? How can a policy be binding by assertion or presumption and not by mutual agreement? How can a demand for agreement, absent a written agreement that is voluntarily entered into, result in a transfer of ownership of personal property?
The simple answer is that NYU’s patent policy does not hold up as a contract. It’s total crap. Expensive crap. Mindless crap written by someone sophisticated in building complicated crap, but utterly unclear on the idea of policy or intellectual property or contracting or academic freedom. A big crap having the purpose of claiming as much intellectual property as possible for the university, and making the university responsible for deciding what it wants to keep and how to handle any disputes. That’s not a contract, not even an adhesion contract. It’s something else.
If not law and not contract, then could the NYU policy actually be authorization to deny the liberties of the university? Or is it just a threat?
3. Organizational Liberties. A policy distributes authority within an organization and establishes how the organization is to act in stated circumstances. The organization acts by means of officers of the organization causing it to act. The organization itself is something of a golem, a heartless, brainless fictional “person” that does what it is made to do by its human handlers, who gain the benefit of a liability screen for their decisions, provided they don’t violate their organizational policy and otherwise don’t commit any criminal act personally, on their own, while not wearing the mask of institutional authority.
A policy drafted as an administrative document is a great way to manage intellectual property procedures. Such a policy can state the university’s position on patents–they are good, perhaps, and the university wants to manage as many as possible; or they are worrisome and expensive and complicated, and full of liability and bitterness and the university wants as little to do with them as possible. Either way and anything in between is fine. It’s up to the institution and its handlers to state the guiding principle.
From there, the policy operates by delegation and authorization. The policy grants authority for officers to enter into agreements on patent matters. The policy identifies circumstances under which officers must make agreement to assign inventions a condition of access to university benefits. If an officer fails to obtain such an agreement, the university’s remedy is to exclude further access to university resources. But the university cannot–does not have the power–to simply claim ownership of inventions anyway. If there is some equitable behavior–the university has expressly provided funding and everyone has discussed that this funding should be reflected in some share of ownership or financial interest, then the university might sue to obtain that share, though if the university has a policy that requires a prior agreement and hasn’t bothered to get that agreement, the policy itself might sink the university’s claim that it intended to enjoy a benefit it could bother to follow its own policy to secure.
To have a patent policy, and not to make it contractual, means that the university remedies are (if provided by policy):
(i) to obtain express agreements prior to the start of work in which the university intends to benefit from ownership, or
(ii) to operate on a voluntary basis, requesting assignment and if refused letting it go, or
(iii) to operate on a case-by-case barter basis, offering to exchange additional benefits (such as paying for patenting, dealing with patent attorneys, taking the liability, seeking to license the invention, sharing royalties) for assignment of patent rights, or
(iv) to deny the inventor privileges with regard to the invention, such as use of laboratory resources or funding to work on the invention, or otherwise expelling the offending inventor and the offending patent rights from the university.
This is the approach used by most university patent policies prior to the Bayh-Dole debacle. Set up a statement of support for invention management, indicate when the university should contract for rights, set up a faculty committee to determine whether the equities of a situation should provide the university with a financial interest in the commercial success of an invention, and manage access to university resources once an inventor seeks to profit from an invention. Policies written in this mode can be direct, clear, and simple. Four or five paragraphs rather than the 50+ pages of the NYU policy.
In a policy based on organizational liberties, what a university has to offer is support for inventions, and what it must manage is the behavior of inventors relative to their university obligations–that is, conflict of interest between institutional and public norms and their private interests. It’s fine to have private interests–especially for inventions–but a university does not have to allow those interests to dominate other things, such as teaching or examining issues on behalf of the public.
4. Threats. The threat is the time-honored alternative to agreement. Jane Jacobs, in Systems of Survival, argues that two distinct moral traditions have developed in parallel, taking and trading. Taking is the moral tradition of the warrior class, of government, of the aristocracy. Taking invokes honor, obedience, respect for authority, strength, the use of force, and vengeance. Trading, by contrast, is the moral tradition of commerce, of merchants. Traders bartered goods for goods, services for services. Chains of trade existed long before there were governments to write laws to control trade. The “lex mercatoria” controlled–if a trader violated the customs of trade, the word would get around, and the trader would lose business. Trading invokes voluntary agreements–the origin of contracts–honesty, collaboration, competition, industry, and efficiency. Where taking values force, trading shuns it. Where taking excludes negotiation, trading thrives on competition.
A threat, then, is a taking-class behavior, or as Jacobs would put it, “guardian class syndrome.” A university, when its officers are determined to be the protector of society, will see it entirely within proper behavior to play the guardian of the public, and for that purpose demands to own all inventions and anything else that might have commercial (or financial) value. Ownership is a right that comes with the territory, just as nobility comes by birth or marriage. No one can buy nobility. One is a princess or isn’t. A university (when one thinks this way) has rights through what it imagines it is, or from law, or tradition, not from any arrangement with society.
Commercial class syndrome, or values, require a different frame of mind, different morals. One has to be willing to barter, to trade; one does not use force. Instead, one moves to other deals, where partners are ready to trade, are reliable, are trustworthy. One accepts that freedom, competition, and efficiencies will win out over monopoly, tradition, and force. Indeed, innovation–introduced change in established order–appears to thrive where institutional control of inventions–government, corporation, university, guild–does not dominate.
An established order has a vested interest in preserving itself and its status, and so desires to change only in ways that enhance its prestige, its standing, its access to wealth. An established order does not willingly make changes that diminish its standing. A chamber of commerce does not vote to disband in favor of something else. An industry does not defer to another industry. The ice delivery services did not go down without a fight. The vacuum tube industry fought until the hearing aid doomed them. All the while, both industries innovated like crazy, to preserve their operations. But it was change coming from the outside that represented the big advances.
The consternating thing about university patent policies is that to be successful, a policy should promote commerce, and yet most university patent policies are written by people with guardian-class pretensions. They write to take all they can, with an assertion of power, with an implication that violators will be prosecuted, even where violation actually means efforts to achieve a public purpose.
In this environment, most university patent policies operate as threats to inventors, to innovation. They present invention as a conflict of interest between loyalty to the university (which claims a monopoly on public service) and personal greed in the form of patent exploitation. They offer university invention management services not only as a monopoly right of the university, regardless of employment, regardless of the legitimate scope of a patent agreement, regardless of actual outcomes. They even offer those services with the claim that the university is more effective at being greedy than any individual inventor might be–that the royalty-sharing schedule is sold as a wonderful form of generosity, not an overwhelming tax and disenfranchising of inventors at the very point that they, as inventors, are the most enabled to lead the next steps in the development of their inventions, whether for broad public access or for commercial investment–or both.
The threat is simple: the university has a nearly unlimited budget to pursue legal action against faculty that refuse to conform. It does not matter that the faculty often win–what matters is that it costs them hundreds of thousands (some, millions) of dollars to beat back the university attorneys. Even when the universities lose, they go right back to their same ways, as if the case was a one-off and “wrongly decided.” They double down. When the universities lost Stanford v Roche, they didn’t undo their policy statements that were contrary to law. Instead, they made up a new story about how they had to be even more demanding in order to “comply” with a law that that did not apply to them, even while refusing to comply with the federal contracts that the law authorized.
Policy is easy if it is merely an administrative threat. If universities have unlimited resources to sue faculty, then any old statement–the more confused and inept the better–so long as it sounds legal and asserts that it is binding, will do. If there is one reform in university patent administration, it is to pass a law that limits what a public university can spend on litigation with a faculty member or student over a patent matter. The limit ought to be something in the neighborhood of $10K. If it costs the university more than that, then it’s a waste of public resources and suggests that university is operating in policy-as-threat mode.