University of California’s Office of the President self-servingly misrepresents Bayh-Dole

[TL;DR UC gets Bayh-Dole wrong, ignores the Stanford v Roche decision, makes it appear that UC has a right to take title to inventions, when it doesn’t. UC denies inventors their rights to invention under the color of law, a felony. There’s no “returning” rights to the federal government. It had no rights to start with. UC policy is bureaucratic fantasy. Nuff.]

Here is a bit of guidance regarding research agreements from the University of California Office of the President regarding sponsored research [The “Innovation Alliances & Services” unit has been renamed “Innovation Transfer Operations”–certainly that will improve outcomes. The same text is present, in 2023, some twelve years after the Supreme Court ruled that UC and other universities were dead wrong about Bayh-Dole]:

Federally funded research has special provisions on rights to inventions. Pursuant to federal statute, known as the Bayh–Dole Act, UC is entitled to take title to inventions arising from federally funded research; however, it must grant non-exclusive use rights to the Government. Also, if UC decides not to file a patent application on an invention or will not otherwise commercialize it, UC is required to return patent rights to the federal government.

I have highlighted some portions of this advice. Let’s work through these.

Has special provisions. There are indeed special provisions that come into play. The standard patent rights clause sets out four requirements. The university agrees to

  • designate personnel responsible for patent matters.
  • educate research personnel about timely disclosure of inventions
  • require research personnel to make a written agreement to protect the government’s interest in inventions
  • timely report disclosed subject inventions to the government.

Everything else in the standard patent rights clause is conditional on what inventors, the university, and the federal agency decide to do.

There’s also a requirement in federal funding agreements involving grants to universities that’s not in the standard patent rights clause called the “property trust relationship.” For intangible property, including patents and patent applications, acquired or improved with federal funds, the university agrees to act as a trustee of the property on behalf of the beneficiaries of the federally funded project.

This requirement, in 2 CFR 200.316, comes into play when a university uses federal funds as the basis to acquire patent rights–including acquiring those patent rights from the inventors working in the federal project. All that’s required for this to happen is that the university assert that its ownership of inventions is based on the use of federal funds, something that UC’s patent policy asserts as a basis for an ownership claim in inventions (“An agreement to assign inventions and patents to the University . . . shall be mandatory for all employees . . . who receive gift, grant, or contract funds through the University.”)

University administrators never point this requirement out, as they simply reject the idea that when a university uses its control of federal funds to force the assignment of inventions made with those funds, it is using federal funds to acquire the invention–the consideration the university “pays” to the inventor for the assignment is the release of the federal funds. They university “buys” the invention with the federal funds. A university does not have to do this. A university could bargain for invention rights by offering other consideration, such as a share of royalties arising from licensing, along with a commitment to be diligent in marketing and licensing. It’s a choice a university makes with regard to how it acquires rights to patents.

Pursuant to federal statute. The Bayh-Dole Act applies to federal agencies, not so much to universities. 35 USC 202(a) provides that nonprofits and small businesses can retain title to the inventions made under federal contract that they acquire, subject to the requirements of the patent rights clause and the statute. But the law directs federal agencies to make this bargain happen. Federal agencies are required to use a standard patent rights clause in funding agreements for research hosted by universities. Agencies may tailor the standard patent rights clause to meet their needs, following the rules set down by Bayh-Dole. Thus, any requirements regarding inventions happen as a result of the patent rights clause included in each funding agreement. If federal agencies don’t enforce the patent rights clauses, and don’t comply with the law, then nothing much in Bayh-Dole happens except bureaucratic paperwork.

The guidance offered by the University of California is deceptive in multiple ways. The guidance makes it appear that the university is constrained by law, when it is a matter of federal contract. Why does that matter? If Bayh-Dole were to apply directly to universities, then a university could simply point to the law and require its personnel, employee or otherwise, to comply with the law. Instead, Bayh-Dole requires a federal contract by which to operate, and that federal contract, a funding agreement, is an agreement between the federal government and the university as a contracting entity. That agreement does not involve university inventors directly, but it does require the university to involve certain university employees (employees other than clerical and nontechnical employees) by making them conditional (if they invent) parties to the funding agreement. This is the purpose of the written agreement requirement in the standard patent rights clause at 37 CFR 401.14(a)(f)(2). That agreement is not between the university and its inventors. Rather, the agreement is a delegation of responsibilities to potential inventors personally, involving rights they hold personally when they invent, with regard to the federal government’s interest, not any university interest, in their inventions. The written agreement requirement requires universities to make their inventive employees parties to the federal funding agreement. The agreement the inventors make is on behalf of the federal government, not on behalf of the university.

And here’s a point that often gets lost. A subject invention is a patentable inventions “of the contractor”–that is, an invention owned by a party to the funding agreement. A subject invention is also one made in the “performance of work” under the funding agreement. The standard patent rights clause is clear that the (f)(2) written agreement is required only of employees (not volunteers, not collaborators, not users of equipment, not students) and furthermore excludes “clerical and nontechnical” employees from the requirement–even if these employees happen also to be trained in the area of the research–their roles as employees excludes them from the requirement. Even if excluded individuals–volunteers, clerical workers, and the like–were to invent, they would not be doing so in the “performance of work” under the funding agreement, as there is no basis in that agreement to expect that such individuals were hired or commissioned to invent as part of the “planned and committed” activities of the federally funded project. Thus, whatever claims a university might have on those inventions, the claim does not arise from anything to do with Bayh-Dole. They are not subject inventions; there are no special provisions regarding them.

UC is entitled to take title. Bayh-Dole does not vest title to subject inventions in universities, does not mandate that they take title, does not give them a right of first refusal, does not prohibit inventors from assigning to anyone but the university, and does not give the university the right to take anything. All these variants have been asserted as a a matter of Bayh-Dole, and they are all self-serving fantasies of patent administrators and their mercenary legal advisors. The Supreme Court in Stanford v Roche made that perfectly clear.

Despite the redundant word play, this bit of guidance is simply untrue–deliberately untrue, negligently untrue, deceptively untrue. Take your pick. Bayh-Dole does not give UC any right to “take title” to subject inventions. The US Supreme Court in Stanford v Roche was adamant on this point. Universities have a conditional right under the standard patent rights clause to choose (“elect”) to retain title to subject inventions they have otherwise acquired, but they must acquire inventions in the established manner, by entering into an agreement with the inventors.

But this UC guidance, at the Office of the President, ignores the Supreme Court ruling and persists in the assertion that federal law grants the university the right to simply take whatever personal property from inventors that it wants take. For a state instrument, which UC is, this assertion amounts to a conspiracy to deny rights–a violation of 18 USC 241:

If two or more persons conspire to injure, oppress, threaten, or intimidate any person in any State, Territory, Commonwealth, Possession, or District in the free exercise or enjoyment of any right or privilege secured to him by the Constitution or laws of the United States, or because of his having so exercised the same . . . they shall be fined under this title or imprisoned not more than ten years, or both . . . .

In essence, the University of California Office of the President by asserting this guidance aims to deny to citizens of California (among others) their rights in inventions, secured to them by the Constitution. All that’s needed it so show that at least two people were involved in drafting and approving this text. (See 42 USC 1983 for the right to civil action for damages.) There’s no excuse for this sort of language to persist anywhere in UC’s policies or guidance. Whether it is inattention, indifference, ignorance, negligence, incompetence, or cleverness, it’s all a matter of contempt for the Supreme Court’s decision.

Otherwise commercialize it.  This is a sneaky part. The standard patent rights clause authorized by Bayh-Dole has a conditional part–if a university (or other organization) obtains assignment of a subject invention from the inventor(s), then the university is obligated to file a patent application, prosecute that application, and maintain any patent that issues. But there’s nothing in Bayh-Dole regarding an “otherwise” option to “commercialize” without filing a patent application. But the guidance here sets up the idea that UC could decide not to file a patent application but still attempt to “commercialize” the invention–that’s the effect of the “or” in the clause.

The standard patent rights clause requires a university that has acquired the right to ownership of a patent on a subject invention to file a patent application and attempt to obtain that patent. There is no “otherwise” involving commercialization. The wording here is consistent with what a university might try to push past its inventors in its own policy–that a university owns inventions but does not have to use patents if it can “commercialize” the invention without them–“otherwise.” That’s what happens, for instance, with some biomaterials and software. But this “otherwise” is not an option under the standard patent rights clause.

There is an “otherwise” that does matter, however, though it is not in the UC guidance. A university can meet its obligation to achieve “practical application” of a subject invention either by promoting the use of the invention or promoting the “commercialization” of the invention–or both. There’s nothing in Bayh-Dole that requires federal agencies to make universities “commercialize” subject inventions–but universities must make efforts to achieve “practical application.” Thus, UC, once it has obtained ownership of a subject invention. might use the invention itself so that the benefits of the invention are available to the public on reasonable terms, or UC might seek to make the invention available broadly for use by others, or might license the invention for development as a commercial product, or do multiple of these things in parallel. If UC declines to do any of them, however, then it cannot achieve practical application of the invention, and fail the conditions established by the standard patent rights clause. But such thinking appears to be too difficult for UC’s Office of the President to contemplate or express.

There are two conditional commitments under the standard patent rights clause for any organization acquiring title to a subject invention: (i) to seek a US patent; (ii) to seek practical application. The requirements on each commitment in the standard patent rights clause have distinct remedies for failure.  Failure to seek a patent involves a situation in which the government may request title. Failure to achieve practical application involves a situation in which the government may exercise “march-in” rights and compel the university to grant one or more licenses or license the invention itself.

Return patent rights. More cleverness here. There are three pivot points in play. The first is when UC learns of an invention and has to decide whether to request title or having obtained title decides it does not care to retain that title. The second is when UC, having acquired title, decides that it doesn’t have the will to go through with the patenting process. The third has to do with UC’s failure to report a subject invention or notify the government with regard to UC’s interest in retaining title to the invention. Let’s look at each.

Deciding about title. UC, until recently, had a policy that mandated a review of each disclosed invention for circumstances before any decision was made to require the assignment of the invention to the university. Under such a protocol, the inventor owns rights in her invention until she assigns those rights in a written instrument. If UC declines to manage a disclosed invention, and therefore does not acquire title to the invention, then the inventor and federal agency work out management using 37 CFR 401.9 as the standard patent rights clause. Or, if the federal agency desires to obtain title, it can request that title in reliance of the (f)(2) written agreement that the university must require its potential research inventors to establish the government’s rights in subject inventions.

But UC has botched up its patent policy with present assignment language. This makes a greater garbled mess of an already garbled mess of policy. Now it appears that all inventions are automagically assigned to UC when they are made, it’s just that UC has no clue what these inventions might be until they are disclosed and reviewed for the circumstances. So the “written instrument” of the “Patent Acknowledgement” that is really a mislabeled patent agreement has an almost entirely indefinite scope. It’s not at all clear that it operates as an assignment that would be acceptable to the US Patent and Trademark Office. So, it’s garbled.

But if the present assignment wording does operate to transfer title in subject inventions from inventors to the university, then UC by administrative decree skips over the first pivot point in the standard patent rights clause. It is UC’s policy then to ensure administrative complexity and wasted effort when none need exist. Adding to complexity and effort is of course bureaucratically self-serving, but does nothing to advance innovation, research enterprise, or the objectives of Bayh-Dole. But why waste a opportunities for bureaucratic growth created by a poorly written law?

Not patenting. The second pivot point has to do with pulling out of an effort to obtain a patent. In such cases, the standard patent rights clause provides that the government can obtain title to the subject invention–but only by request.

Screwing up. If UC screws up and fails to report a subject invention or fails to notify the federal government that it has elected to retain title in a subject invention it has otherwise acquired, then again the federal government can request title. Screwing up is actually easier than it might seem. It’s not just that a university might botch the process of reporting. A university might also fail to properly identify an invention as a subject invention. For instance, under Bayh-Dole’s scope guidance at 37 CFR 401.1 it is clear that inventions made in a project that receives federal funding come within scope when acquired by a party to the funding agreement even if the inventions themselves were not “funded” with federal dollars. It’s the project that gets some federal funding, not which inventions within that project received federal funding. The expression “federally funded” invention is wrong on two fronts. First, an invention may be developed using federal funds and still fall outside Bayh-Dole’s scope (not assigned to a party to the funding agreement, not an invention within the scope of the project receiving federal funds) and an invention made without federal funds may still fall within Bayh-Dole’s scope (within the scope of the project receiving federal funds, even if the invention was made with separate accounting). Oh, and a university may screw up by failing to put the invention disclosure in the required proper form, as a written report giving all the required information. So, yes, screwing up really is a possible option.

There is nothing in these situations, however, that requires UC to “return” patent rights. Here’s the language of the standard patent rights clause:

The contractor will convey to the Federal agency, upon written request, title to any subject invention—

There is nothing that requires the university to “return rights” and nothing as well that requires a federal agency to require the assignment of rights. A federal agency has to request the rights in writing.

But there’s more to it. UC’s guidance makes it appear that somehow the federal government has rights to start with, and if UC is not going to file a patent application (or “otherwise” commercialize), then somehow UC has to “return” rights that it obtained from the federal government. But UC has not gotten any patent rights from the federal government–it obtained those rights from inventors. The UC policy guidance here is in denial (or complete ignorance) about the requirements of the standard patent rights clause and where the university has obtained patent rights. Perhaps university administrators have been filled with a fantasy that Bayh-Dole suspended common law inventors’ rights in the ownership of inventions made with federal funds, so that a subject invention wasn’t owned at all until a university “took” ownership out of thin air. The US Supreme Court made clear this is just a fantasy, and that inventors do own their inventions made with federal support. But UC policy folks don’t appear concerned to update their guidance, so the fantasy persists.

A well constructed university patent policy, one that aims to make efficient work of the standard patent rights clause, defers any university claim on subject inventions until the university has made a decision to file a patent application and seek practical application. If the university won’t do these things, then it should not ask for title. Then disposition of the subject invention is subject to the (f)(2) agreement and the patent rights clause at 37 CFR 401.9. Such a policy greatly reduces the administrative overhead in managing subject inventions. Such a policy also preserves inventors’ invention rights, subject to a negotiation with a federal agency.

If a university–say, UC–obtains an invention under its own policy, then under that policy (or under an assignment agreement), it can also “return” the invention to the inventors. Here’s UC’s policy statement on the matter:

In the absence of overriding obligations to outside sponsors of research, the University may release patent rights to the inventor in those circumstances when: (1) the University elects not to file a patent application and the inventor is prepared to do so, or (2) the equity of the situation clearly indicates such release should be given, provided in either case that no further research or development to develop that invention will be conducted involving University support or facilities, and provided further that a shop right is granted to the University.

In the case of Bayh-Dole’s standard patent rights clause, UC has no “overriding obligation” to the federal government. If UC does not file a patent application or decides that the “equity of the situation” indicates a “release,” then UC can “release” (i.e., re-assign) the invention to the inventors. (Back before the present assignment garble, “release” actually meant “release.” Another example of UC’s weaselness in saying that inserting the present assignment in the Patent Acknowledgement was not a “change” in policy–the words in the policy didn’t change–but their meaning sure did.) Once the invention is back with the inventors, then their (f)(2) written agreement controls, and the relationship is between the inventors and the federal agency. Of course, that won’t work at UC, since UC refuses to comply with the (f)(2) requirement.

UC’s guidance makes it appear that inventors can never get their rights back. Once UC has the rights to an invention, so the policy goes, the only alternative is that UC “returns” the rights to the federal government. Inventors are entirely cut out of the discussion. This gambit makes it appear to inventors that their only hope of having some benefit from their inventions is to rely on UC’s generous invention management program. This, of course, is a false dichotomy, but one that again creates the illusion that inventors must work with UC or kiss their inventions good-bye. Not so. But if the federal government obtains title to a subject invention, it has no obligation to share royalties with any university inventor, so UC’s guidance poses a workable threat to inventors–collaborate with us, or we can toast you.

Now you can read the UC guidance for yourself, and see how the Office of the President misrepresents Bayh-Dole and the “special provisions” on federally funded inventions.


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