What is the status of a university patent policy?
Or, put it another way, how does it come about that a university can force faculty and students to give up ownership of their personal property–patentable inventions–property that inventors own by federal law, following from the US Constitution?
This is a fundamental question, and one that university administrators appear to have no consistent idea about. When the explanations for a common practice vary widely, that’s a bad sign. University administrators made up five different stories about how the Bayh-Dole Act gave universities outright ownership of inventions made with federal support, or was it a first right of refusal or was it that inventors could only assign to the university or was it that inventors could not assign to anyone other than the university, or was it that Bayh-Dole required universities to demand ownership? All untrue. Bad sign. The same situation, with the same bad actors, arises in accounts of the status of university patent policies. Let’s work through the situation, recognizing that university administrators have complicated the issue. About the only thing that is clear is that university administrators insist that they can force faculty and students to give up their personal property in the form of patentable inventions.
There are a few ways to force someone to hand over their property. One can steal or rob. Use force. Threaten. Deceive or defraud. Misappropriate, convert. These are well established methods, but let’s set them aside for the moment. Once we examine how one can obtain another’s personal property in a legal manner, we may have reason to come back around to decide just how it is that university administrators are operating.
Of the legal ways to obtain another’s personal property, there are voluntary ways and compulsory ways. Voluntary ways include gift, sale, bequest, and contract. Compulsory ways involve operation of statute, common law, or through an action of eminent domain.
Voluntary Approaches
In a voluntary IP regime, a university obtains ownership of an inventor’s personal property because the inventor chooses to make the assignment. Whatever the arrangements that surround such an assignment, if the inventor chooses not to make the assignment, there is no problem. The university gets what others are willing to offer, and what the university is in turn willing to accept. This takes care of gifts, sales, and bequests. These approaches do not require the university to compel assignment.
University patent policies built around voluntary assignment authorize the university to accept property for management (just as other policies authorize the university to own real property), designate officials to represent the university in considering whether to take ownership of inventions when offered, and authorize the university to expend resources in the support of inventions that it acquires–and also, perhaps, those that it does not. A voluntary patent policy may require that inventors take their commercialization efforts off campus, or not involve academically supervised students as employees in their commercial affairs, but these are not matters of invention ownership.
Compulsory Approaches
As for compulsory methods, it is now clear that federal law does not require an inventor to assign patent rights to a university that has hosted federally supported research. Bayh-Dole applies to federal agencies, not to universities. Bayh-Dole mandates uniform patent rights clauses to be inserted in federal funding agreements. Those patent rights clauses include a provision that requires a university to delegate certain duties to potential inventors. To make the delegation, the university necessarily must waive any conflicting portions of its own policy or contracts. This delegation of duties to potential inventors makes them parties to the federal funding agreement when they produce patentable inventions–they become small business contractors (for which, see 37 CFR 401.9). They have an obligation, as a result of their written agreement to protect the government’s interest, to disclose their inventions and sign papers to allow patent applications to be filed and to convey rights to the government–which could be by license or by assignment. But Bayh-Dole does not require an inventor to assign invention rights to the university that hosts the research. Plain and simple, it’s just not there, despite many university administrators arguing to the Supreme Court that it is, or should be, or the world would turn all dark and clammy if it’s not.
State Law–Ohio
If a state law were to stipulate that inventions are owned by the state, or by an employer, there would be a problem–federal law takes precedence. If federal law provides that inventors own their inventions, then state laws cannot provide otherwise. [But common law can be preempted by statute. Even so, it’s hard to see how this bit of Ohio law can operate as stated:
(B) All rights to and interests in discoveries, inventions, or patents which result from research or investigation conducted in any experiment station, bureau, laboratory, research facility, or other facility of any state college or university, or by employees of any state college or university acting within the scope of their employment or with funding, equipment, or infrastructure provided by or through any state college or university, shall be the sole property of that college or university.
It would appear that this bit of law upsets federal common law on inventions. It also runs against rulings of the US Supreme Court, which held that research and invention are not one and the same thing. If we parse the Ohio law, we see the elements of a typical university patent policy–claiming institutional ownership of anything made in research using facilities, or within scope of employment, or using resources. To see such stuff in law is breathtaking. Since scope of employment is only one of three possible conditions, one has to accept that the law strips even non-employees of their patent rights, if they happen to be in in a university facility or have used “infrastructure” of the university. The Supreme Court in Stanford v Roche state that (my emphasis):
Thus, although others may acquire an interest in an invention, any such interest—as a general rule— must trace back to the inventor.
In accordance with these principles, we have recognized that unless there is an agreement to the contrary, an employer does not have rights in an invention “which is the original conception of the employee alone.” Dubilier Condenser Corp., 289 U. S., at 189. Such an invention “remains the property of him who conceived it.” Ibid. In most circumstances, an inventor must expressly grant his rights in an invention to his employer if the employer is to obtain those rights.
. . .
Stanford’s reading of the phrase “invention of the contractor” to mean “all inventions made by the contractor’s employees” is plausible enough in the abstract; it is often the case that whatever an employee produces in the course of his employment belongs to his employer. No one would claim that an autoworker who builds a car while working in a factory owns that car. But, as noted, patent law has always been different: We have rejected the idea that mere employment is sufficient to vest title to an employee’s invention in the employer.
[It would appear that the Ohio law, if it wasn’t a problem when it was passed, was challenged, if not implicitly struck down by the Supreme Court in Stanford v Roche. Perhaps Ohio’s law is one of those situations that falls outside of “most circumstances.” Perhaps Ohio’s law is an attempt to state circumstances which in general might involve an equitable claim by the university to invention ownership–if an employee is hired to invent and does so; if individuals are specially authorized to use facilities dedicated to university-directed research and then invent; if the university dedicates special resources to individuals seeking to invent on the condition that the university will own, and the individuals invent. In such cases, the university may well have a case for equitable ownership of resulting inventions–individuals were on notice, they were provided with special access or resources, or they were directed as part of their job to invent.
Otherwise, it may come as a surprise to a visitor or volunteer at a Ohio state university to discover that any invention they have made with university “infrastructure” belongs outright to the university.
Perhaps the Ohio law should be read to authorize university officials to take whatever actions are necessary to obtain ownership of those inventions that are within the legal power of officials to obtain. Mere employment–even scope of employment–is not, in the abstract, legally sufficient–other than that Ohio law apparently makes employment sufficient. One might expect that it would be even more difficult for a university to sustain a claim to own inventions made by non-employees merely because they have used university facilities (the library, say?) or “infrastructure” (a computer system? campus parking?). For an Ohio state university to sustain a claim to owning such inventions, it would have to rely on a written instrument signed by the inventor, not a state law. We might test Ohio state university practice by seeing how each university deals with invention ownership before the USPTO. If the university relied on state law for its claim to ownership, there would be no need to present assignment documents to the USPTO. Otherwise, we arrive at eminent domain–in this reading, state law authorizes university administrators to engage in a special form of eminent domain for inventions.]
Eminent Domain
A well established form of compulsory taking of property by law is eminent domain. This applies to state-operated universities. Government may take private property for public purposes, but when it does so, it must follow due process and pay just compensation. For state universities, then, it is possible that the university, as an instrument of the state, may “condemn” patentable inventions and any associated patent rights and appropriate them for public purposes. Eminent domain is not how public university patent policies describe their action, but it may well be that if a public university relies on operation of law, its taking involves eminent domain requirements, including compensation–at the time of taking, not in some royalty-sharing schedule based on some future, but not required, royalty income.
Common Law
There is also the operation of common law. Absent an agreement to assign, if one is hired to invent, and does invent, then common law principles argue that the inventor must assign the invention to the employer. What has confused lower courts, and has been exploited by university administrators, is whether “encouraged” or “expected” to conduct “research” is equivalent to “hired to invent.” University administrators, when faced with export administration law, argue that universities conduct “basic” or “fundamental” research, and therefore benefit from the exceptions to export control regulations. Across many definitions of “basic” research, the consistent theme is that basic research studies the laws of nature rather than makes a product. Some definitions of “basic research” from various sources:
Fundamental research; it often produces a wide range of applications, but the output of basic research itself usually is not of direct commercial value. The output is knowledge, rather than a product; it typically cannot be patented.
Research aimed at expanding knowledge rather than solving a specific, pragmatic problem.
The purpose is to increase knowledge without concern for practical application.
The purpose of the research is to “increase knowledge” not to create something of commercial value, not practical application. The same distinction is made in the implementing regulations for Bayh-Dole, where the scope of government interest in inventions is restricted (see 37 CFR 401.1):
An example of such related but separate projects would be a government sponsored project having research objectives to expand scientific understanding in a field and a closely related industry sponsored project having as its objectives the application of such new knowledge to develop usable new technology.
But when there is a question about invention ownership, university administrators reverse themselves and claim that as a general case, faculty who conduct research are hired to invent–that the university has a proper right to whatever it is that faculty create. This claim runs against the particulars of almost all faculty research–it is not assigned by the university, it is not chosen with an intent to benefit the university, invention is not a goal of the research (even if patent licensing administrators lust after invention), nor is the university in the business of licensing patents (or, if it is, then it may well be subject to unrelated business income taxes–another place where university administrators are notoriously two-faced). No faculty member is disciplined for not inventing. Tenure reviews do not, generally, consider patenting. Many university patent policies disclaim the idea that inventions and commercial development are direct research objectives. Participation in university research does not imply invention, even when the university provides facilities or administers funds–most research funds are not the university’s to start with.
If we turn to common law, we find that when an employer expressly hires an employee to invent, the employee has an obligation to assign inventions to the employer. G. Kenneth Smith, in a 1997 Virginia Journal of Law & Technology article, nicely summarizes common law disposition of invention rights (my reformatting, citation removed):
Thus, unless there is a pre-employment assignment agreement or state statute, the disposition of faculty and student ownership of their inventions is controlled by common law. Under the common law there are three different employment scenarios:
(1) specific inventive employment, which is employment for the express purpose of creating employer-specified inventions;
(2) general inventive employment, which is typically referred to today as ‘research’, ‘design’ or ‘development’ employment and
(3) general employment.
Scenario 1 requires that the employee assign all rights in the invention to the employer. Scenario 2 enables the employee to retain patent rights and in most situations the employer will receive a non-exclusive shop-right in the invention. Finally, general employment, scenario 3, presumes no inventive responsibilities of the employee and any invention which she creates is her property.
If a university administrator wants to compel assignment of an invention on common law principles, the administrator needs to produce evidence that the inventor was employed “for the express purpose of creating employer-specified inventions.” This approach is in keeping with many university patent policies in place before the Bayh-Dole malaise set in. If a faculty member is directed to invent, is hired for an express purpose of solving a problem, and if within this scope of employment–where the university specifies and directs and funds–the faculty member invents, then the invention should belong to the university. That makes perfect sense (apart from the often horror of universities owning any invention as a matter of bureaucratic right). A policy that makes this claim recites the equity of common law and does not need to add anything else or do anything else. The policy makes express what common law provides, for the sake (one might surmise) of the avoidance of doubt.
As is clear from the above categories, not all employment results in common law transfer of invention rights to an employer. And for non-employees, the situation under common law is even less amenable to the idea that the non-employer has a right to own a non-employee’s invention. And it is even further afield if the non-employer claims to have a right of ownership under common law to a non-employee’s non-invention!
None of this, however, keeps university administrators from arguing to courts that they have hired faculty to invent, and that anyone engaged in research, using university facilities, or using anything else provided by the university, must assign inventions to the university–or, often, the administrators claim that the university owns inventions outright, and that assignment documents merely record the university’s ownership. In this mindview, assignment of inventions is a natural right of the university, a test of obedience to authority, or that faculty inventors have (by magic) a fiduciary duty to assign their inventions to the university, or that faculty inventors have agreed implicitly to assign their inventions to the university as a condition of employment, or because they have agreed (or have been required to agree) to follow university policy, whatever it may say, however it may be changed by the university, and however university administrators choose to interpret it.
Present Assignments
The problem with the case law on the matter is that there is little of it, it is conflicting, and most of it predates Stanford v Roche. University administrators–refusing to accept the ruling in Stanford v Roche–rather than changing practice to comply with federal contracting regulations and to eliminate portions of their patent policies and practices that had been struck down, instead changed their patent policies and practices after Stanford v Roche to require present assignments–that whatever it was that the university was to own under its patent policy, the policy now provided that the inventors (typically defined broadly, going well beyond employees to include non-employees and going beyond an interest in patentable inventions with commercial value to include non-inventions and disregard commercial value) assign all future inventions up-front to the university.
The problems with present assignments are multiple. First, changing how a university acquires ownership of an invention does not change the scope of what inventions a university may legally claim. It just changes the means by which the university’s claim is satisfied.
Second, a present assignment that lacks specificity fails for lack of stating a clear scope. If one says, you hereby assign all future inventions that you are required to assign, there’s no specificity as to what the subject of the assignment might be. “You are required to assign” is equivalent to “what we demand that you assign.” Essentially, a present assignment lacking a clear scope reads as “you hereby assign whatever we decide you must assign,” which amounts to an unenforceable agreement to agree, or a failure of the parties involved to show a “meeting of the minds.” In any event, if the assignment is predicated on employment, then either there is a clear statement in the employment agreement regarding just what it is that the university has specified as of inventive interest, or the assignment can be no better than what common law provides–that is, category “A” inventions above.
Third, if the present assignment is directed to subject matter that falls outside of patentable inventions, then it’s an open question exactly what the nature of the ownership being assigned is–is it trade secret or copyright? (in which case a faculty non-inventor gives up the right to publish) or is it some other non-statutory intangible property right that has been invented specially by the policy? “If we want to make money from what you have done, then you agree not to disclose, publish, teach, or use what you have done unless we approve it and we will call this arrangement ‘university ownership’ of what you have done.”
It’s clear what the administrators want: they want to own what federal law indicates (at least for patentable inventions) that inventors own, and they want to own more than what the Supreme Court ruled they are entitled to own as a matter of employment or use of resources, and more than what common law provides for inventors who are hired to invent. To the extent that university administrators can bamboozle a court, they get their way. To the extent that an inventor does not have the initial $200,000 or so to fight in court a passel of bamboozling administrators, administrators get their way.
Creating Compulsory University Patent Policy
So, let’s restate the opening question: how does it come about that a patent policy can compel anyone to give up ownership of their inventions?
There is one obvious way for a university to have a legal position to expect assignment of invention rights–that the university forms a contract with a faculty member, student, volunteer, visitor, or staff member specific to a particular invention or inventive situation. Rather than rely on common law–as universities did for decades–a university can rely on a contract. Offer, acceptance, consideration, meeting of minds, entire agreement, that sort of thing. In the past, when universities brought a thoughtful approach to the subject of patents, such a contract was the result of a voluntary interaction. If a faculty inventor wanted the university or a university-affiliated invention management organization to manage the patenting, the university and inventor negotiated an arrangement. If the inventor wanted to use university resources specially, that was part of the deal. If in exchange the university wanted a share of the action, that was negotiated, too. If an invention management organization was going to file the patent application at its own cost and wanted ownership, an inventor might negotiate royalty sharing and marketing expectations into the deal. Typically, the agreement to assign and the assignment itself happened at nearly the same time. The agreement to assign did not happen years earlier, wasn’t buried in the nether regions of a policy, wasn’t drafted in garble that only administrators were authorized to interpret.
In the past–in voluntary assignment approaches–the function of a university’s patent policy was to authorize the use of resources (it wasn’t presumed that a university should support patenting at all); authorize receiving a financial interest or ownership in exchange (part of making inventions a form of property that a university was authorized to acquire and dispose of); and delegate responsibility to individuals to act on behalf of the university in such matters (to coordinate the activities). Many university copyright policies continue to provide for just such written agreements. Why are patent policies different?
Adding a royalty sharing schedule to a patent policy was a matter of making uniform the university’s offer to its inventors. If an inventor wanted access to special university resources, or wanted the university or its designated invention management agent(s) to manage the patenting and licensing, then the deal was the one stated in policy. Making the deal uniform–at least the default deal–mitigated the politics, that an inventor who was also a dean or full professor might be able to negotiate a better deal with the university than an assistant professor still without tenure and feeling exposed in a negotiation. Similarly, establishing a standard deal in policy made every deal public–everyone knew the terms and conditions once one knew that an inventor and the university had made a deal. Disclosure provided everyone in the university–and the public–with the deal without a requirement that each deal had to be scrutinized. A standard deal in policy then makes good sense.
In a voluntary approach, a standard deal can be take-it-or-leave-it, because if an inventor wants something different, then it’s up to the inventor to go find it elsewhere. In a voluntary approach, being firm about terms means one selects for those people who choose those terms. Being firm means no favoritism. Being firm means that people choose the university even though it may not offer the best possible deal–because, perhaps, they want the university to manage the rights for the public’s benefit, and they want the university to benefit. All things considered, creating a policy that selects for those who want the university’s participation is a great way of ensuring that the university is working with those who really want to work with the university. It does not get much better than this if one wants to focus resources on licensing and not on fussing with inventors.
In such situations, a university patent policy can set up a forum in which patentable inventions are reviewed for university involvement, extramural contractual obligations, and the like. That is, a university patent policy might require university officials to request a review of any patentable invention made by anyone at the university, and provide a standard arrangement should the inventors choose to allow the university to support the development of their invention or manage the patenting and licensing processes. But that’s a far cry from requiring inventors to give up their personal ownership of their inventions.
University administrators, however, came to dislike the practice of asking for or negotiating for inventions. Their aim was to get as many inventions as possible to push through their licensing office in the hope of finding a “big hit” patent deal that would generate millions of dollars in royalties. There were instances of such deals. The general idea was that by making a comprehensive claim on inventions and therefore increasing the volume of inventions to work with, and by creating a system to deal with the volume, a licensing office could become a patent and deal-making factory, taking in inventions and sputtering out royalties for research–and to expand the factory. This was seen as a really good thing. Bureaucrats control, good mixed with bad, dealing with all areas of invention regardless of the expertise of the office, compulsory, running as a process. In actual practice, this approach is expensive, wasteful, and antagonistic to research collaboration and innovation. But that’s beside the point.
The problem for administrators was how to make their claims on inventions broad, compulsory, and beyond negotiation and challenge. To this end, they moved from a restatement of common law to an expanded interpretation of patent policy, taking “scope of employment” to mean not employer-specified work but any activity one might do while also employed and “invention” to mean, roughly, anything that an administrator might call an invention. While they were at it, they also expanded “employ” to mean “employ” and “anything else we define as ’employ’ even when it is volunteer or visit or collaborate or participate.” These changes in interpretation then gave administrators a mandate to “update” policy to make it “clearer.” The changes in the words of the policies, it was claimed, was to better reflect what the policies were intended to “mean”–even though the meaning that was introduced was significantly different from common law expectations.
A similar move was made by introducing Bayh-Dole compliance. The argument was grossly wrong, but patent policies were modified anyway to assure the university that it would own all inventions made with federal support. Administrators found this argument attractive because it gave them an easy argument to cut ties with Research Corporation and bring patent licensing in-house or locate it with a research foundation holding a monopoly on university patenting and licensing. Once the changes in policy were made, it did not matter that the argument about Bayh-Dole was grossly wrong. The argument could be withdrawn and the patent policy remained with the demand for ownership in the abstract, with veiled statements to public benefit, commercialization, and compliance with federal research contracts as support.
Public universities–the source of so much IP management woe–had the further complication of worrying about appearing to “do business with” their own employees if they negotiated for patent rights. Various “ethics” statutes were drafted using language that made it appear unethical for public employees to also do business with the state–and so, argued clever folks in patent administration, public universities were forbidden from negotiating with their own employees to obtain patent rights. Rather than reading the law to forbid the university from demanding the personal property of inventors (that is, if the state forbids its agencies from doing private business with employees, a university should get out of the business of trying to own and license their employees’ patent rights), university administrators read the law as requiring them to dispense with agreements to gain ownership. University administrators decided to that ethics statutes meant that a university had to find a way to obtain ownership without doing business–that is without a private contract between the university and the “employee” after the employee had become a “public servant.”
One way to do this was to pack the requirement to assign into the employment agreement. But that also requires the obligation to assign to be part of the employment agreement, so it is not part of any later agreement. But to be part of the employment agreement, the obligation to assign has to be more than simply a claim made based on employment. One has to be employed to invent to get close to an obligation to assign. Back to common law principles. That is, it’s not enough, in the United States, at least, to be “employed.” There has to be an additional bargain for invention rights.
The problem for universities trying to pack the obligation to assign inventions to the university into the employment agreement is that a patent policy statement does not do it. Nor does a notice at the time of employment regarding the patent policy, or even a signature that someone will follow the patent policy–even if the patent policy requires assignment. The policy still is not a contract, and the university has still not established itself as an employer nor set the scope of employment by which it has a basis to negotiate for anyone’s future inventions. To get to a legal basis on which to compel assignment of inventions, a university has to create a contract at the time of employment that isn’t the employment contract but rather is a patent agreement that pertains to employment, to use of facilities and resources, to research activities.
This is a special problem for university faculty members. They are not assigned their research work by the university. The university offers them resources as a condition of their appointment to the university–the library, access to a lab, a lab startup budget, a professional development account for travel and conferences. These resources are often offered up front, and not as part of any bargain under which they are only provided if the faculty member agrees to give up all future rights to inventions. These resources were offered up front long before universities got into the compulsory IP policy habit, and nothing changed when university administrators chose to compel assignment of inventions. That is, there was no new consideration for the imposition of the obligation to assign. (One reason: Bayh-Dole was misrepresented as applying directly to inventors and their inventions made with federal support, and university administrators claimed that ownership of such inventions vested with the university that hosted the research by operation of federal law–any paperwork to assign patent rights was merely a scavenger hunt to confirm what had already happened, to satisfy technical requirements in the silly USPTO which hadn’t bothered to change its practices–of course, this was all pure bunk, but universities to this day have left such statements in their formal policies).
Inventions made by university faculty and students, unless there is some special arrangement under which the university assigns the task and the individuals involved understand that they are working for the university as an employer, rather than receiving financial support from the university in compliance with its commitment to support their appointments, are (to use the German distinction) essentially “free” inventions, not “service” inventions. Most American university inventions are not within the scope of employment, because the university rarely contracts for assigned tasks that involve invention specified by the university. It does not matter how the university acquires rights–by written assignment or present assignment of future inventions; and it does not matter that assignment is a condition of employment, if the basis on which a university provides support (salary, resources, facilities) is *not* employment (master-servant) but rather because the university committed to provide that support when the individual entered the university (appointed, matriculated, even hired). Support offered for a university appointment is not then available to stand as consideration for the assignment of patent rights in inventions made later. A patent policy that makes assignment of inventions a condition of employment applies only to those situations in which an individual is actually employed by the university. Not “employed” in a loose way to mean “paid” even “paid for any work” and certainly not to mean “anything one might do concurrently with services provided to the university” or “anything done concurrently with services provided to the university must also be construed as a service provided to the university” or “anything you do we will claim we employed you to do.”
Eight states, at least, have laws that prevent an employer from making just this claim, but universities routinely ignore the law, even when they dutifully recite it in their patent policies. The general drafting approach appears to be to claim whatever one can, and then qualify that claim not to include whatever cannot be claimed as a matter of law. It’s easy to over-claim in this way and argue that anything so over-claimed wasn’t ever intended to be claimed. The problem for actually reading a patent policy drafted this way is that the limits never show up in the wording that expresses the claim. One has to bring a lawsuit to find out what the university intends by its policy. Again, it is difficult to see how there can be a meeting of minds with regard to what inventions have been actually obligated to the university as a consequence of statements in a patent policy becoming part of an employment contract.
If the employment is specific to anticipated inventions, then common law applies and a policy merely restates it. If the employment is not specific to anticipated inventions, then the demand in policy is an abuse of the employer’s position to obtain inventions that the employer otherwise has no right to under common law (and in some states, state law). In other words, a state can pass a law that prevents the state from claiming private property, but it cannot pass a law that claims as its own private property established by federal law. Similarly, a university can create a patent policy that limits the claims that university officials can make on private property, but it cannot create a patent policy that claims as university property what federal law and common law establish as private property.
In a thumbnail:
If a patent policy forms a contract, then it has the property of contracts for both parties involved–the university and the inventor. It cannot be changed unilaterally, it cannot be interpreted exclusively by the drafting party. It cannot be made under duress or misrepresentation.
If a patent policy does not form a contract, then it cannot compel assignment of personal property to the university. It may express an administrative desire. It may authorize university officials to seek ownership of personal property, but it does not have the standing to compel such assignments.
Patent Policy as Administrative Law
At the University of California, lawyers for administrators (university lawyers rarely represent faculty concerned about administrative behaviors–always the other way, representing administrators all puffy-faced about faculty behaviors) have argued at various times that UC policy “has the force of law” and that it is “an administrative document.” Meanwhile, they require all new employees to sign a document that looks and reads every bit like a contract obligating them to assign inventions to the university (without directly specifying exactly what inventions).
In Shaw v The Regents of the University of California, UC argued that its patent policy was “administrative.” The court disagreed, finding that the “Patent Agreement” that UC required Shaw to sign formed a contract, and the patent policy clearly was intended to be part of that contract, and that Shaw had an interest in that contract every bit as much as UC did. So what did UC do? They changed the label on “Patent Agreement” to “Patent Acknowledgement”–to make it appear that an employee signing the document was not doing anything other than indicating that he or she was aware of the policy and would comply with it, whatever it might demand.
The university vision of patent policy, then, is part law and part one-sided contract. That is, the employee is constrained to obey the policy, while the university is free to change the policy to suit its interests. A one-sided contract, however, is not a contract, even if a law is a law. At best (if “best” is the right word), a university patent policy might imply “if you do not assign inventions we require, then we can fire you.” But even this condition depends on other policies regarding university appointments and employment. It may be that a university’s own policies on due process do not allow the university to terminate an employee for refusing to assign an invention–especially if the invention is not otherwise obligated. The logic comes down to a threat: “even though we have no legal right to your personal property, and did not specifically contract with you to obtain that right, we now threaten to fire you unless you sign over to us what we want.”
That line of argument did not help with the next case, Singer v The Regents of the University of California. UC argued that they could impose their policy on employees as an act of government, and that the remedy for employees who did not like that was the process of mandamus, in which they must get a court to require that a government agency (here, the university) to change an action. The court disagreed and found that the university had formed a contract with its faculty inventors and that contract bound the university to share royalties from patent licensing with the inventors, regardless of what the university decided to call the royalties (i.e., research funds). A royalty is any consideration for a patent license. Whether the university books the consideration as “royalty” or “research donation” or “reimbursement of costs”–it’s still a royalty.
A university policy, whatever else it is, is an instrument to bind the university. It states purposes, delegates authority, authorizes the disposition of assets, establishes procedures. Officers of the university are obligated to carry out the policy, and a risk of not doing so is sanction by the university. However, it’s up to the university what sanction, if any, to apply. But a written policy also may be relied upon by others–the public, visitors, vendors, faculty, students, employees. If the university does not follow its own policy, it may be exposed to claims to require it to follow that policy, or claims for damages if it does not. In essence, a policy puts the university in a position to be forced to do what it has promised to do.
But the obligation to carry out policy does not on its own create an obligation by inventors to turn over their personal property to the university. This is the case generally, and is even more true under U.S. patent law, which requires something more than employment or a demand of an employer based on employment.
Let’s say a company goes bonkers and writes a policy that asserts that the company will own each employee’s car if that car is used to transport the employee to and from work or uses a company-supplied parking place or is any way used to benefit the company. The ownership of employees’ cars does not change hands simply because there’s a bonkers policy that asserts ownership has changed hands or must change hands. There still must be a written execution of transfer of title. And there must be something that binds the employees to the agreement. And the agreement must pass a public policy test. Is it a legitimate bargain for an employer to take personal property simply because it is associated with a workplace activity?
It does not matter, further, if our bonkers company adds to its policy a present assignment that asserts that the moment a car is used in a manner described by policy, that transfer of title has automatically taken place. At best, one has a rebuttable expectation of ownership. But even a unilateral expectation of ownership does not give one any actual right of ownership, nor does it give a court any reason to compel an employee to sign over title to the car in question. A policy demand does not create a legal compulsion to comply–it may (if the demand itself is reasonable and legal) create an institutional argument to comply, subject to institutional sanctions (as permitted by policy), but sanctions here operate as a threat to livelihood, not as a legally enforceable demand to receive personal property.
For patent law, ownership of inventions made by an employee is even more remote than that of claiming an employee’s car. The US Supreme Court was clear on the matter in Stanford v Roche. Employment is not a sufficient condition for an employer to expect ownership of an employee’s invention. That is, establishing a master-servant relationship in general is not sufficient. It’s also not sufficient, then, to claim that anything the servant does in serving the master creates an obligation to assign inventions to the master. Within the employment relationship there must be an agreement addresses inventions of interest to the company (a patent agreement) or we are back to common law principles of equity based on circumstances. A patent policy statement on its own does not create a contract nor modify an employment relationship, even if it asserts that it does. What matters is whether an enforceable contract has been formed–that is, a meeting of the minds with offer, acceptance, and consideration, with no agreements to agree, no unilateral ability of one party to change the deal, nothing that runs counter to law, and evidencing that the parties intended to be bound by the agreement.
Consider: a faculty member is typically appointed with a simple letter notification. The letter specifies the department in which the appointment is made, the rank, the term of the appointment, whether it is tenure-track, and salary. The letter typically also indicates that the appointment is subject to confirmation by the regents and is subject to the university’s policies. The “subject to policy” part, which may be expressed in any number of ways, is open to at least two interpretations. One is that the university binds itself to its policies–assuring the new faculty member of due process. The other is that the university seeks to bind the new faculty member to the policy. And indeed, both interpretations may operate. But even in asking a new faculty member to follow policy does not mean that the policy has created the obligation to assign personal property to the university. Some universities, such as the University of California, go out of their way to make each faculty appointee sign a “Patent Acknowledgement” that records that the faculty appointee is aware of the university’s patent policy.
The Compulsory Patent Policy Anti-Pattern
For university ownership of inventions, a policy approach is a big problem. A policy may say that inventions are the property of the university, but that assertion does not make it so. Claiming ownership in policy might, however, bamboozle a judge, so long as the judge does not consider all the elements of policy–including statements of conditions of appointment and academic freedom, and does not consider whether the policy can be unilaterally changed by the university, and does not consider the form of the policy in effect when the inventor was first appointed (or employed) by the university. The judge in the Shaw case made it clear that the University of California could change its patent policy as it wished–it just could not change it unilaterally on people that it had previously contracted with.
A policy assertion may create an institutional mandate for officers of the university to obtain assignment of inventions, but even then, that mandate does not have the force of law and does not on its own form a contract with the faculty member. A policy may ask university officials to do everything in their power to acquire ownership of inventions made by faculty, but their power is limited by law and by other policy. The policy is merely a statement of institutional desire, written perhaps as if the desire were fulfilled. It’s a clever approach. It’s enough to fool most people, but it does not have any standing on its own to take patent rights or to compel someone to sign over patent rights.
If a university does claim its patent policy statement is incorporated into the employment agreement or otherwise forms a contract, then the contract statement in play is the entire policy set of the university, not simply an isolated statement about patents. For faculty, academic freedom necessarily comes into play. University policies often state that academic freedom is fundamental. Some, such as the University of Missouri’s, even make provide that the policy on academic freedom permits faculty to refuse to comply with other policies that conflict with academic freedom. That may well include demands made by a patent policy. Whatever the desire of patent administrators might be in reading their bit of cleverly drafted patent policy, the interpretation of any contract by policy as a whole requires a different approach to get at what a reasonable person would understand as the intent to be bound.
So it’s not enough for a university acting the part of employer to park a statement in policy that says, essentially, “regardless of federal law, all your inventions are belong to us” and claim that this policy statement is sufficient to meet the Supreme Court’s test. That would make a shambles of the Court’s ruling and amount to a catch-all claim without even having to worry about the scope of any particular individual’s work.
One strategy for policy drafting popular among university administrators and the lawyers who work for them is to deal with uncertainties by drafting in generalities, using long, itemized lists, and leaving “wiggle room” for interpretation so that later administrators, faced with problems, can construct whatever interpretation they want to get their way. Conveniently, policies drafted this way typically include an interpretation clause that gives administrators final say over the interpretation of the policy. Appeals processes can be long and convoluted–the longer and more convoluted the better, as this discourages anyone from forcing the escalation of an interpretation from one level of bureaucrat to another. But a policy written to be unclear–because, often, university administrators suspect that they don’t know squat about intellectual property but are determined to get everything they can–is a rotten foundation for a contract. Further, a policy that builds in a demand that one party–the administrator–gets to interpret the policy against any others amounts to a demand “to agree to agree”–again, a rotten foundation for a contract.
Finally, university patent policy sets up as an adhesion contract–the faculty member has no standing to negotiate the terms. The terms are forced on the individual. If there’s a contract there, a standard for interpretation is that the contract is interpreted against the drafting party. The university is not at liberty in any given instance to inform us all what the policy really means, or what it was intended to mean. As the Shaw court put it, “The true intent of a contracting party is irrelevant if it remains unexpressed.” A contractual meeting of minds is not that the faculty member must submit to the will of the administrator. Nor is it merely an assertion by an administrator that the faculty member had to agree to the terms of the patent policy–the faculty member, if agreeing to anything, agreed to the entire policy set, including statements on academic freedom, on freedom to publish (a forced patent application is a compulsory publication), on freedom to conduct research (a patent is a constraint on research; the university does not assign research tasks or even areas of inquiry). The interpretation of a university patent policy, if read as a contract, must take place within the context of the entire policy, and must consider whether the faculty member has had the opportunity to negotiate the terms of the agreement, and if not, then the policy should be interpreted in the light favorable to the faculty member.
For a university, the “business” part of the law has even more uncertainty. A university is not in “business” for the most part, if “business” means customs of selling and offering for sale. Courses and degrees aren’t sold. Faculty members aren’t “employees” for the most part. They are not told what to do, and are not required to do much of anything other than meet their classes and turn in grades and fight about parking. They are not required to conduct research (though they may not be advanced if they don’t), and they are certainly not required to obtain extramural sponsors for research (though there is some status in doing so), and they are certainly not required to invent and are not hired to invent (and, generally, invention is not even considered in academic performance reviews).
No, if a company desires ownership of an employee’s inventions, then the employer hires the employee to invent, and specifies in a patent agreement the obligation, and even then the scope of the obligation is limited to what the employee does under the direction of the employer, and the employer’s actual and foreseeable business. A university does not gain the benefit of an expansive reading–“the university’s business and foreseeable business is anything that anyone at the university chooses to study” but rather a remarkably limited reading–“only those things that a university exercises (or has the right to exercise) the control of an employer over AND which pertains to the activities for which the university has been formally established.” That is, a university administrator is not at liberty to declare on whim just anything to be the “business” of the university and cannot declare on whim the right to assign, direct, review, and approve faculty work when the whole foundation of hiring faculty is to give them academic freedom to pursue what they will, publish and teach what they will, so long as they teach (if they even have teaching duties) the courses to which they are assigned.
If a policy recites law, then it is the law that controls. Even for public universities, policy is not law, not an agency regulation made to implement a law. This is especially true for university patent policies. Even in the few states with invention law–labor law limiting employers’ reach to employees’ inventions, or Ohio’s oddly unconstitutional law pertaining to inventions made at public universities in the state–it is the law that controls, not the policy statement. As for ownership of patentable inventions, a state law cannot pre-empt federal law, nor can a policy statement. An inventor owns rights in his or her inventions as personal property.
Even if a state has a law that demands the ownership of personal property, that’s an instance of eminent domain and requires both due process and just compensation. So if a public university’s patent policy has the force of law, as some strange version of an administrator’s power to create regulations, then in demanding ownership of inventions–personal property–the university asserts eminent domain. It owes each inventor not a royalty sharing schedule along with a denial that the university must license the invention or if it licenses the invention, it could do so royalty-free–it owes each inventor the fair market value of the invention at the time of the taking. Lacking that payment, the taking is contrary to law, is illegal, is unconstitutional.
Public university patent administrators, at least, tend to speak with a forked tongue. To compel assignment, they claim they have formed a contract that requires it. If one objects that the contract is not merely the patent policy assertion but the entire policy set, including academic freedom, then the administrators assert that the patent policy has the force of law and faculty must comply regardless or face sanctions (such as lawsuits and ethics charges and denial of opportunities to participate in extramural research). If the patent policy has the force of law, then so does the policy on academic freedom, and we have a conflict of laws. Policies on academic freedom routinely declare that academic freedom is fundamental. While patent policies make a case for the importance university administrators put on owning and trying to make money from patents, they don’t declare that owning and trying to make money from patent licensing is fundamental to the university or to the relationship between faculty members and the university. Academic freedom policy-law supersedes compulsory invention assignment policy-law.
Here is how the University of California argued its appeal of the Singer court’s determination that its patent policy formed a contract (my bold):
The Singer and Shaw cases together prevent the University
from interpreting, altering, or applying its internal governing
policies without the effective consent of each employee who
signed the form Patent Agreement. In effect, the University
must view each administrative policy decision not only through
the prism of governmental decision-making, but also as a potential abrogation of contractual obligations. This regime of contractual obligations permeating the University’s interpretation and application of its Patent Policy subverts public policy considerations to private pecuniary interests, and creates a minefield for the University to navigate as it fulfills its constitutional charter.By misconstruing the University’s standard employee Patent
Agreement to incorporate the University’s Patent Policy, the Court of Appeal converted the terms of that policy from an administrative policy into a private contract.
I have put in boldface the key elements of UC’s argument. Administrators imagine a magical “prism of decision-making” as a function of government. They assert the right to make up whatever they want. It is the dream of power with impunity. But if the university was right, then the prism here is one of eminent domain taking of private property. By UC’s own argument, it has no private contract with its employees. They merely indicate they will obey, and the “Patent Acknowledgement” is simply there to support some future argument that any non-compliance is “willful.” To swindle is easy. To unwind a swindle, often hard.
UC argues that finding that it has contracted with its employees “subverts public policy considerations.” By allowing individuals to own what federal law provides that they own somehow gets cast as a “private pecuniary interest”–as if individuals should give up their federally provided right to property as if that right is not also a “public policy consideration.” Indeed, the federally provided personal ownership of inventions is a public policy consideration that is prior to the university’s.
Finally, UC argues implicitly that it must have ownership of inventions to “fulfill its constitutional charter.” Of course, it does not need such ownership. Its constitutional charter does not include ownership of inventions, and for the first hundred years of UC’s existence, it made assignment of inventions voluntary. Demanding to own private property–inventions–may be a sparkle in the magical prism of “governmental decision-making,” but it is not a condition of the university’s charter.
The court was not persuaded and let stand the lower court ruling that UC had formed a contract with its employees. That is–the court did not accept UC’s arguments regarding the status of its policies as administrative but with the force of law.
Even though courts repeatedly have found that UC has formed a minefield of contracts with its employees, UC persists in practices that make it appear that UC has created administrative law to govern its claim on inventions. Indeed, UC’s original charter does refer to laws–“The Regents and their successors in office, when so incorporated, shall have power, and it shall be their duty, to enact laws for the government of the University,…”–but these are “laws” for the university, not laws that have the special power to secure private property while avoiding the constitutional requirements for doing so.
Voluntary Practice Persists Despite Compulsory Patent Policy Statements
We have considered various ways that a university might acquire ownership of an individual’s inventions. Voluntary ways are easy and the transactions straightforward. The compulsory ways are more difficult, though making the claim for a compulsory right is as easy as modifying a policy statement and throwing in assertions that the policy statement is a “condition of employment.” Universities do not have to own patents and license patents. There’s no public outpouring of need, no mandate, no public policy that requires it. Merely choosing to own does not create a legal basis to compel assignment of inventions. There’s got to be something else. If it is a taking, then it’s eminent domain. If it’s common law, then it’s a matter of specific circumstances for a given invention, not merely that there is also employment or use of resources. If it is a contract, then the terms and conditions of the entire contract apply, not just the (often garbled) patent policy, including statements on academic freedom, open publication, and freedom in research. And if it is a contract based on employment, then in some states, specific restrictions apply to what an employer can demand. And if it’s not a contract, then no amount of stomping and puffing turns it into one.
If a university patent policy is not part of a contract but merely is a statement of the requirements of the university, then it does not have the legal power to force assignment of inventions, and may not even be sufficient to support sanctions for inventors who refuse to assign. In such a case, the patent policy becomes something more along the lines of “an offer you can’t refuse.” If the demand itself has no foundation in common law or contract and rests instead on administrators retaliating by taking adverse actions, then a university patent policy is essentially a premise for a shakedown.
University administrators, chasing money and power, have created a patent administration architecture that is unsustainable. In programming terms, it is an anti-pattern, an approach that looks good at first but cannot work at scale or in real-time or with the rest of the functions necessary added in. Current university patent policies in the United States are, for the most part, messes of definitions, demands, and procedures that fail as contracts and fail even as administrative rules. The claim is often clear–the university shall own, does own, must own. But the means to effect that claim often is not. This is not a technical quibble. The problem lies at the heart of the demand, at the heart of what it means for a university to appoint faculty. At the heart of what it means for faculty to work in the public interest.
Compulsion is not the heart of university patent policy, and never has been. The heart of university patent policy remains academic freedom and mitigation of the effects of monopoly so that everyone has access to the results of research. Universities might make common law claims on inventions that have been supported with resources above and beyond those offered to any faculty appointee or student. And a university might contract for an ownership interest in a specific invention. But otherwise, most university patent policies, when placed under scrutiny, collapse into heaps of bogusness, illogic, ambiguous drafting, and illegality. Claims of “public purpose” and demonization of faculty inventors as filled with “private pecuniary interests” merely hides the failed architecture. For the most part, faculty assign their inventions to the university because they choose to, even if they are made to believe they have to.
The voluntary approach to invention assignments still operates, despite the best efforts of grasping and sour-thinking administrators to draft policy statements that appear to claim otherwise.
[updated to deal with the argument that state law can preempt common law–something that comes into play not only with Ohio invention law, but also those states that have passed laws purporting to protect employee inventors but which can be read to imply a broader employer privilege to take ownership of inventions that established by common law–that is, the law protects employee inventors after taking most everything from their pockets]