There are three relatively well-formed ways that a university might acquire rights to inventions made by faculty. Let’s review, starting with the clearest and simplest.
An inventor donates an invention to the university and the university agrees to accept it. There may be stipulations on the donation–that the university will file a patent, or that the invention will be licensed broadly on a non-exclusive basis. The donor may get a big tax write-off that’s worth real money, and separate from the cost and risk of deploying the patent rights that are donated.
Note–when a university demands assignment, it denies faculty inventors the financial benefit of tax deductions for donating their inventions to the university. Furthermore, it prevents an assessment of the value of the invention at the time of acquisition, which would at least make transparent the nature of the acquisition and the reasoning behind it. There would have to be a finding of value (not merely on principle–ahem–“inventions are always valuable”, not sentimental (“our inventions are valuable because they are ours”); there would have to be a finding of public purpose, not merely “more grist to try to make money with by running a betting pool for mostly second class speculators.”
Even more technically–but it matters–public universities are being pressured to adopt GASB Statement 51, which covers accounting for intangible assets, including inventions and patents. Here, again, universities are required to identify and state the value each year of the intangible assets they own. Establishing a value for each donation (to comply with issuing acknowledgements to comply with federal tax law) would be a good start to compliance with GASB Statement 51.
Donation is by its nature voluntary and disinterested in personal benefits. Enabling donation allows faculty inventors to demonstrate their choices in the matter of invention. A compulsory policy eliminates a large swath of donative possibilities. A comprehensive, compulsory policy all but eradicates these possibilities. We reveal character by our free choices. Removing choice means removing social signals of character. Faculty are lessened as moral agents by policy that precludes reasonable choices.
- Common Law
Common law principles of equity in inventions are well established. If one hires another to invent, then it’s reasonable to expect assignment of an invention made in that work to the hiring party. If an employee inventor uses facilities, money, equipment, or trade secrets of the employer, then the employer should have a right to use the invention for the employer’s purposes–a shop right. Otherwise, the invention is a free invention, not a service invention, and the employer has no interest in it, as a matter of equity.
Those are pretty straightforward rules. The bug is in their interpretation. A university patent policy can help to manage application of common law. It can require written agreements when special resources of the university are to be used, or when the university specially commissions work, or when the university contracts with others for work that carries special conditions. To determine the degree of equity, universities historically relied on a committee presented with the circumstances, which then made a recommendation to the president or other officer of the university. Achieving agreement on what’s fair is easier than demanding ownership outright, in defiance of principles of common law (and in an effort to displace common law in favor of a broader institutional claim).
There is a further concern. Universities are set up to contribute to the development of individuals. For students, this is obvious. A place to study, to learn, to demonstrate. No one begrudges the art student access to a studio in which to paint, or practice rooms to the music student, where he or she might compose a great quartet or popular song. No one begrudges the student their access to a great library, or computer access to the internet, even if the student makes something of great value in doing it. That thing of great value is a hope, a gift of the university enabled by the support given to the university by its donors and by state and federal government. It is not a bargain–it is not we give you access to a library in exchange for all the copyrights in anything you ever create that can be traced back to your use of the library. Same for inventions.
Same for faculty, unless they are expressly hired to invent and trigger common law principles of shared equitable interest in the invention by their pattern of dealing. A university offers faculty access to resources to conduct their professional development, their scholarship, their inquiry, and their public service at a high professional, and professorial, standard.
The magic of the university is personal expertise combined with access to institutional resources with freedom to deploy the results–teach, announce, publish, demonstrate, transfer, license, sell. It doesn’t matter if it is a poem, a movie script, a sculpture, a collection of rocks or beetles, a piece of software, a data set, or an invention. It doesn’t matter if there’s a copyright attached, or the possibility of a patent. The university provides libraries, laboratories, and shops for just these outcomes. Again, it is no bargain that trades access to institutional resources for institutional ownership of anything that results.
Common law is a great way for a university to handle its management of inventions. A patent policy directed at managing common law to reduce uncertainties is a great way to go about it. Such policies are simple, selective, and pro-innovation. Establishing the basis for deciding equitable interest is much less contentious than demanding ownership of everything and farting out what turns out to be undigestable.
- Express bargains
A university can create a patent policy that authorizes its officials to bargain for invention rights. A university can set up a patenting and licensing operation–it could be internal to the university or external, and if external, it could be an allied research foundation or one or more contracted specialty invention management agents. It can then negotiate for inventions that it wishes to place in that operation, or that faculty inventors wish to place in that operation.
Express bargains, well documented and drafted, are a fine way to acquire patent rights. Both parties come to the deal voluntarily, and if they find common ground, they memorialize it in an agreement. Things may turn out, or may fail, but if everyone has been straight up going into the deal, and the writing itself is competently drafted, then at least the deal is built on good will and an intention to be bound. That’s a great foundation for trying to do challenging things, such as introducing something new to an industry that already has the spreadsheets it loves or a public that likes the habits it has already.
A university patent policy makes a lot of sense that authorizes the university to acquire intangible property, designates who should represent the university in accepting such property, and authorizes the use of resources and commitment of money to such deals. Such a patent policy can also lay out the terms of default deals–this is the university’s standing offer. Take it or suggest something better or find a different route to developing your invention, but don’t use university resources for commercial purposes–take that work outside the university and don’t take any students you supervise into that work without supervision for conflict of interest. A nice policy, open, stable, public, protective, allowing choice.
Some administrators at public universities put up the fuss, or worry, that they are not allowed to do business with public employees. This is nonsense fuss and becomes self-fulfilling. If administrators fuss, then there is an appearance of a problem, and appearances are enough to trigger ethics investigations. Sort of funny in a sad way, given that ethical issues tend to be based on reasoning. It’s much more along the lines of a moralizing witch hunt. Witches weren’t accused of being unethical–no one is challenging their reasoning. They were accused of being witches, in league with the forces of evil, and using that evil to subvert others and community and everything good in the world.
Agreeing on how to manage inventions has nothing to do with “doing business” until a university sets up as a “business” to manage inventions. Once it does that, it ought to pay unrelated business income taxes on its income from licensing and settlements. But universities routinely argue that technology licensing is not a business activity but rather part of the university’s primary activities. Not a business. Not doing business with employees. Reaching agreement with faculty appointees, with students. Accepting for management their inventions, just as a university might accept for management course materials, or a film, or a collection of rocks, or a box of archival materials. Agreements can back these arrangements without there being any “doing business.”
Mostly the administrators who fuss about “doing business” preventing “reaching agreement regarding the management of inventions” don’t have a clue about the implications of their fuss for unrelated business income tax, university non-profit status, or much of anything else. They see only the opportunity to stop an activity that they have got in their heads in such a narrow, wrong way, that they have an incentive to turn the activity into the very thing they oppose, so they can then successfully oppose it. But they don’t see the consequences of doing so–not for unrelated business income tax, not for the problems their fuss poses to the development of reasonable, agreement-based transactions. And, generally, the folks making the fuss aren’t accountable to anyone for the consequences of their fussing. It’s a facile form of demonization. It turns an ethics law into modern witch hunt, but with different words. One might think it is a form of envy, of the deadly sin variety.
Another objection to written agreements comes in the form of a fuss over agency. A public university, so the worry goes, cannot become the agent for private individuals. That is, it (or the state) cannot agree to share royalties with inventors as part of any bargain, because that would contractually obligate the university in good faith to go out and license the invention so as to bring in royalties, and the most royalties it could, and sue for infringement, and the like. It would be forced to do this because it contracted to serve in good faith the interests of the faculty inventor. The university would have a fiduciary duty to inventors. Intolerable.
Yet, here’s the thing. Universities with internal offices for patenting and licensing have based those offices on precisely the agent model set up with Research Corporation and with the early university-affiliated research foundations. These organizations could be agents representing the interest of inventors and the universities involved. They could have a fiduciary duty to both inventors and universities as beneficiaries, by contract, of proceeds from their licensing activities. When universities moved to create their own licensing operations based on the same model, using the same vocabulary, they create the appearance of acting as an agent for inventors. The royalty sharing schedules come across from the research foundations where they are a key part of the consideration for assignment, when assignment is voluntary.
If assignment is then made compulsory, a great deal of cognitive dissonance is created. An agent program becomes not-an-agent operating as if an agent program. Consideration becomes non-consideration. Agreements become non-agreements. A great deal of policy revision and reinterpretation has to take place to justify a university implementing a program for invention management by copying the practices of programs set up under an agency model. So we end up with patent policies that use words upside down from their meanings–at best, with custom definitions that make the normal reading of a patent policy extremely difficult; at worst, the policies are deceptive, contradictory garble that serve as code for administrators to do whatever they want.
And yet, of course, public universities for fifty years, and long before Bayh-Dole, entered into agreements with inventors and shared royalties. A notable example was the University of California, which set up its licensing office in the 1960s but retained a voluntary assignment patent policy. Things were nice, then, at the University of California, unlike now. Many universities still have copyright policies that call for written agreements when the university provides extra or significant resources to support the development of materials covered by copyright. These policies generally do not require the assignment of the copyright in the materials to the university, but do ask that ownership be addressed in the writing. That means negotiating. That means agreeing with faculty over the disposition of their work–not taking it outright, not claiming that it’s the university’s even if no resources are used if it is in the general area of expertise that the faculty member had when hired.