The NSF recommends bureaukleptic compliance

Here’s interesting guidance in a footnote to the current NSF statement of terms and conditions for grants to universities:

NSF silliness

Footnote 2 offers a “reminder” that universities should adopt a present assignment in “employee assignment agreements.” The idea is that somehow a minority opinion musing on the magical effect of “hereby assign” has turned into the idea that universities to comply with the standard patent rights clause must require immediate, upfront assignment of future inventions, before any are made, for a university to comply with “its responsibility under the Bayh-Dole Act.” This advice is outside the standard patent rights clause itself and outside the authority of the Bayh-Dole Act itself. And it has nothing to do with the Supreme Court’s ruling in Stanford v Roche.

The Supreme Court was clear: Bayh-Dole doesn’t vest title or require the assignment of title to the university of inventions made with federal support. If a university wants title, the Supreme Court reminded Stanford and other universities, they can do it the way it is normally done, with a patent agreement:

As just noted, universities typically enter into agreements with their employees requiring the assignment to the university of rights in inventions. With an effective assignment, those inventions—if federally funded—become “subject inventions” under the Act, and the statute as a practical matter works pretty much the way Stanford says it should. The only significant difference is that it does so without violence to the basic principle of patent law that inventors own their inventions.

But it is also an odd thing, that a law would allow universities to manage inventions made with federal support but not, somehow, provide the guidance for how universities are to comply with the law. But Bayh-Dole, when combined with the standard patent rights clause, does provide all the requirements needed. It’s just that the Supreme Court was not asked to explain Bayh-Dole in its entirety, and made its judgment on the part of Bayh-Dole that it was directed to, the part under dispute, the part about vesting (which isn’t even in Bayh-Dole, as the Court discovered!). Since Stanford didn’t comply with the standard patent rights clause in its federal funding agreement, and Roche didn’t raise the point, the Court didn’t take it up.

Bayh-Dole doesn’t apply to universities. It applies to the federal government, it applies to some inventions. Read the Act. Check for yourself. It requires agencies to use a standard patent rights clause and stipulates much–but not all–of what must be in that clause. The standard patent rights clause, included in each federal funding agreement for research, creates obligations for universities. But until a university actually owns an invention made with federal support, there is virtually nothing a university has an obligation to do except to report subject inventions–owned by inventors, per federal patent law and the US Supreme Court, as we will see–to the federal funding agency.

But a university does have an obligation under the standard patent rights clause that’s not in Bayh-Dole: a university must require that potential inventors make a written agreement to protect the government’s interest. This is the key, the heart, the enabler of all else. The (f)(2) agreement (37 CFR 401.14(f)(2)) requires the university to assign three responsibilities to potential inventors: 1) to disclose subject inventions to the university’s patent management officials; 2) to sign papers to permit patent applications to be filed; and 3) to sign papers to establish the government’s rights in inventions. These are things only an inventor can do when an invention is first made:

The inventor recognizes the work as inventive–an essential condition to make an invention potentially patentable–and so is the first person to be able to report the invention.

An inventor is required to file for a patent in his or her own name, and so must sign various documents. A university cannot (except in rare cases) do this for the inventor, so it makes sense that the inventor be required to sign. The (f)(2) clause does not indicate who may direct the inventor to sign such papers–the inventor could do it voluntarily, or at the direction of a new owner of the invention, if the inventor assigns title to the invention. That new owner could be the university, an organization that the university assigns the invention to, or the federal government.  Or it could be any other organization that the inventor assigns the invention to–along with the standard patent rights obligations that come with an invention being a subject invention.

Finally, the (f)(2) clause makes clear that the inventor is released from any obligation to the university with regard to the inventor’s role in establishing the rights of the federal government. The written agreement, required by the university, confirms that the inventor has the right–and responsibility–to establish the government’s rights in subject inventions–by license or assignment, as permitted by the standard patent rights clause and beyond that, at the agency’s discretion.

The (f)(2) clause, if a university complies with it, provides the government with all the rights it needs.

There is absolutely no assignment of inventions to the university necessary for the university to fulfill its responsibilities under Bayh-Dole. 

[The NIST change to the (f)(2) agreement in May 2018 now requires universities to require inventors to assign subject inventions. But for an invention to be within scope of the new clause, the invention has to be owned by a contractor, a party to the funding agreement. If an inventor is not a party to the funding agreement, then the inventor has no obligation to assign. If an inventor is a party to the funding agreement, then the inventor according to 37 CFR 401.9 has the same standing as small business contractors and thus has the same benefit of the grant in 35 USC 202(a) to retain ownership as any other contractor–as confirmed by the standard patent rights clause at 37 CFR 401.14(g)(1). The effect of the NIST change is to require institutional contractors that hold equitable title in an invention (and therefore by a stretch have ownership without legal title) to require inventors to assign those inventions. Work it through. If an inventor isn’t a contractor, no subject invention other than for equitable title (assigned to invent). If the inventor is a contractor, then has the same rights as any other contractor and the institutional contractor may have no claim. Or, NIST’s change is FUBAR–most likely, but it will take another court case to unscrew NIST from the light socket.]

Now consider “subject inventions.” According to the definition provided by Bayh-Dole, an invention becomes a subject invention when it is owned by a contractor (and is patentable and within scope). How is it possible, then, for a university to need assignment of an invention to “to meet its responsibility under the Bayh-Dole Act to provide the agency with a license to patented inventions,” as the NSF puts it? If the invention is a “subject invention,” then the contractor already owns it.

If the contractor must already own the subject invention for it to be “subject,” then clearly the contractor can also provide the required license (or assignment) to the agency. NSF folks have things bass-ackwards. The Supreme Court in Stanford v Roche made this a key point of their decision:

Construing the phrase to refer instead to a particular category of inventions conceived or reduced to practice under a funding agreement—inventions “of the contractor,” that is, those owned by or belonging to the contractor—makes the phrase meaningful in the statutory definition. And “invention owned by the contractor” or “invention belonging to the contractor” are natural readings of the phrase “invention of the contractor.”

If an invention is a subject invention, then it is already owned by the contractor. The assignment, if one is needed, has already taken place! This is exactly the point at which university attorneys decided that the assignment must have happened automagically, as a presumed “vesting” mandated obliquely by the Bayh-Dole Act. It is exactly this point that the Supreme Court rejected:

It would be noteworthy enough for Congress to supplant one of the fundamental precepts of patent law and deprive inventors of rights in their own inventions. To do so under such unusual terms would be truly surprising. We are confident that if Congress had intended such a sea change in intellectual property rights it would have said so clearly—not obliquely through an ambiguous definition of “subject invention” and an idiosyncratic use of the word “retain.”

This is the very essence of the decision in Stanford v Roche. If only folks would bother to read the decision and not get lost in a minority opinion fussing over whether a present assignment is any different than a promise to assign–something that didn’t matter to the Stanford situation anyway, since the promise to assign was out of scope of Stanford’s patent policy at the time, which permitted Stanford to require assignment only when “necessary.” If federal funding didn’t (and doesn’t) *require* Stanford to obtain assignment, then Stanford’s own policy did not authorize Stanford to require assignment. So, no promise to assign was made. A present assignment would not have made a speck of difference. The issue was scope, not priority, not form of assignment.

Federal funding does not require inventors to assign inventions to the university that hosts their work. The (f)(2) provision requires universities to require inventors-to-be to agree in writing to license or assign their inventions to the federal government. 

But the (f)(2) agreement has another effect. When an inventor-to-be makes the written agreement, as required by the university-contractor, the inventor-to-be also becomes a party to the funding agreement. This a result of the operations of the definitions of funding agreement and contractor (37 CFR 401.2)

(a) The term funding agreement means any contract, grant, or cooperative agreement entered into between any Federal agency, other than the Tennessee Valley Authority, and any contractor for the performance of experimental, developmental, or research work funded in whole or in part by the Federal government. This term also includes any assignment, substitution of parties, or subcontract of any type entered into for the performance of experimental, developmental, or research work under a funding agreement as defined in the first sentence of this paragraph.

(b) The term contractor means any person, small business firm or nonprofit organization which is a party to a funding agreement.

The university-contractor is made to assign responsibilities under the funding agreement–certain duties required by (f)(2) of the standard patent rights clause inserted into the funding agreement–to potential inventors. The effect of that assignment is to make potential inventors also conditional parties to the funding agreement, potential contractors. When potential inventors invent, they become contractors. When inventors invent, they own their inventions. Inventions owned by a contractor and within scope of the standard patent rights clause are subject inventions. Any invention made by an inventor who has made the (f)(2) agreement is necessarily a subject invention.

Because the university has an obligation to report subject inventions, and subject inventions are “inventions of a contractor” not “inventions of the university-contractor,” the university has an obligation under the standard patent rights clause to report all subject inventions–ones owned by any party to the funding agreement–not merely those owned by the university. Thus, (f)(2) provides a mechanism to ensure that inventors report their subject inventions to the university, so the university may report those inventions to the federal funding agency. Any license or assignment to the government then follows either the inventor’s own obligations under the (f)(2) agreement or the university’s obligations, if it obtains title to the invention.

Bayh-Dole may be a convoluted law, disorganized, even ill-conceived. But Congress appears to have understood their limits. What Bayh-Dole does not do–probably because it has to be left out–is a statutory requirement forcing inventors to give up ownership of their inventions to private parties (universities, or their research foundations). The limit of federal authority is that patents have the attributes of personal property and the federal rights in inventions is reserved to the inventors, not to universities with dollar signs in their administrative eyes. The standard patent rights clause respects this limit, too, by requiring universities to protect the government’s interest using a delegation of responsibilities to potential inventors, not by requiring an assignment of inventions to the university.

If Bayh-Dole had required inventors to assign their inventions to universities that hosted the research, as a matter of statute, the requirement would function as a form of eminent domain–a government taking of private property for a public purpose. Eminent domain, in turn, requires due process and just compensation for the taking. If Bayh-Dole had required inventors to assign to host universities, it would also have required universities to provide just compensation to inventors at the time of the taking. Sharing royalties with inventors might be just compensation (it is, after all, also required by Bayh-Dole), but only if combined with diligence to make money (ah, Wake Forest!) and not what Bayh-Dole requires–diligence to achieve practical application with benefits available to the public on reasonable terms.

Bayh-Dole would have also had to require payment for the transfer of title, not merely effort to use the patent system to promote the utilization of inventions made with federal support. There’s not much point in a requirement to share royalties when the law doesn’t require any money to be made. It would be like requiring property owners to give up their land, but stipulating that the compensation will be a share of a future resale of the land–without any obligation by the new owner to ever sell. One could wait more than a lifetime for any money. For patents it’s worse, because the clock stops ticking at twenty years.

But Bayh-Dole is not a law that strips inventors of their property rights and hands those rights to the universities that host federally supported research. Nor is it a law that allows universities to acquire those inventors’ property rights for free, without diligence. Instead, Bayh-Dole–through the standard patent rights clause–focuses on making sure that funding agreement requirements on inventions reach to potential inventors. If an invention gets made within the scope of the government’s interest, then that invention will become a subject invention whether or not it is assigned to the university, provided a university has complied with the (f)(2) requirement and inventors-to-be have made the required written agreement to protect the government’s interest.

The NSF “reminder” in footnote 2 shows how deeply and completely and ubiquitously folks don’t understand Bayh-Dole and the standard patent rights clause and are happy to make things up as they go in place of working directly with the law and the implementing regulations. What’s the more dismaying, however, is that these folks–NSF, university administrators, patent attorneys desirous for added work from universities–don’t want to understand. Their business (as they see it) depends on not understanding. They have no qualms about taking everything they can from university faculty, staff, students, visitors, and collaborators. They see it as necessary, natural, convenient, neat. They have been involved in a thirty-five year, now voracious, feeding frenzy, started by a desired misreading of Bayh-Dole (that it vested invention rights directly in universities), and turned into a frantic feast after Stanford v Roche, not by comprehending what the Supreme Court ruled but fixating on how to restore the lost misreading, to make invention rights vest with the university anyway.

The reality here is what university administrators and government officials and people with the money to keep a corral of attorneys will make it. I can show how their claims and advice are not supported by the law. I point it out chapter and verse, so to speak. I can trace compliance through practice, show the inconsistencies in university patent policies and disclosure forms and license agreements, show the awful drafting that’s necessary to hide the inconsistencies. I point to the universities’ failure to report the status of each subject invention claimed by a university, the hand-waving and deceptive metrics that are published instead. I point out that those involved want to strip inventors of their rights–inventor loathing–and I point out how generally ineffectual those involved have been. But somehow, the meme persists: people in positions of leadership at universities want it to be the case that

  • university inventors should not have any rights in their inventions,
  • institutional bureaucrats managing inventions are the great hope for the future
  • the bureaucrat’s primary goal is to create a betting parlor for patent speculators
  • in the hope of obtaining slush funds for administrative use

That’s the national research enterprise innovation system, as imagined and implemented and rationalized by these folks. It sounds like something from Orwell or Hesse. Bayh-Dole props the whole thing up–even though Bayh-Dole doesn’t do what people claim it does or want it to do or worry that they can’t comply with Bayh-Dole unless they become invention bureauklepts, which is what the NSF’s footnote 2 cheerfully and helpfully recommends they become.


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