Restoring voluntary assignment for university inventors is the first step in reconditioning university invention management–and putting that management on a road of development consistent with university mores and roles. Voluntary assignment can be accomplished a number of ways. I will outline a few here.
- correct interpretation of policy–often policies are drafted with a narrow scope on claims but that scope has been expanded by administrative interpretation
- change policy–often the change does not have to involve dramatic redrafting
- change acceptance practice in the IP office
- implement (f)(2) properly for subject inventions
- change state law (for public universities)
We have looked at a number of ways to restore voluntary assignment of inventions in university research enterprise. Let’s turn now to another approach to creating a voluntary invention assignment policy at universities. This time we will focus on state law and public universities.
Bayh-Dole has many defects. But one of its virtues is that it does not dictate to universities anything about whether they must own inventions made with federal support–subject inventions–or what they must do with inventions they do acquire, other than that they must use the patent system to promote practical application. Universities don’t have to own, don’t have to license, don’t have to license exclusively when they do license, don’t have to exclude research uses, don’t have to require a royalty, don’t have to even have a capability to manage patents, don’t have to have a patent policy. It’s all wide open for diverse practices, experimentation, and adaptation to changing conditions.
Universities have ignored all this freedom and rushed for a particular version of patent management–portfolio-based speculation on the future value of the patents, rather than agent-based efforts to place subject inventions so they may best be used. So another Bayh-Dole virtue becomes a flaw, and universities have changed their patent policies to demand outright ownership of all inventions they can possibly claim–patentable or not, federally funded or not, invention or not, made by employees or not. It’s a comprehensive, compulsory, invasive, non-selective grab for everything. It creates a huge volume of assets to be processed and sorted, it creates a pile of work (which justifies more begging for money and expectations of salary increases commensurate with the growing responsibilities), and it builds an impressive portfolio of assets–“look at all those inventions, all those patents, all those licenses!” But it doesn’t do so well with practical application.
Universities refuse to publish the exact data, especially for federally funded inventions, but from the information that has come out, it appears that universities operating on the portfolio model–compulsory, non-selective, monopoly-making–are doing 100x worse than the voluntary, selective, and non-discriminatory agent model that they destroyed, and 10x worse than the federal government’s own efforts, which were not even directed at commercialization or rent-seeking or profit-taking speculation.
It’s difficult to change federal law. It took 20 years for folks to sneak through Bayh-Dole, to replace a flexible executive policy on invention acquisition by the federal government with an inflexible, er, uniform policy imposed by law. It’s also difficult to change state law–but at least a state can look out after itself, and Bayh-Dole allows it. Once a middleman tick has found a capillary, it’s not going to release its bite voluntarily. What’s good for the tick is good for the neck. I’m told that’s a common saying among ticks when they are sitting around in bars rationalizing their best practices. It is a proper role, then, for state government, to regulate its own behaviors with regard to the acquisition of inventions, just as the federal government has done.
Bayh-Dole applies to federal agencies. It prohibits federal agencies from claiming ownership of inventions as a default in arrangements with universities to support the work of faculty investigators. States should adopt a similar law. They should prohibit state agencies, including universities, from claiming ownership of inventions as default arrangements with faculty investigators in support of their research.
Start with federal funding. The federal government pays the salary of the investigators and their staff, pays their budgeted direct expenses, and pays the university for the facilities and administration of the research. The university–other than through bungling and mismanagement–is not out anything in the deal. There’s no basis, then, for a university to demand to own anything arising in federal research. A university might make resources available to assist inventors, and that would be a good thing, but only if the inventor desires the resources and can agree on an arrangement for how the invention will be managed. If there’s a voluntary agreement, fine. But there should be no compulsory taking unless eminent domain law is followed–due process, and pay the fair market value of the invention up front.
What’s good for the feds in this regard ought to be good as well for the states. If a state is to acquire inventions created in efforts to serve the public, then it should again do what the federal government attempted to do, and that is to create a state patent commons. If an invention is made in public service, and the state does acquire the invention, then anyone in the state may practice the invention under a state public license, no additional formalities required. If there’s a patent right to control, it is the right to sell–and even there, the right should be FRAND–fair, reasonable, and non-discriminatory.
What happens outside the state is another matter. A good practice is to make the sell right nation-wide. Come to Washington state and pick up all the juicy technology you can, and deploy it under a Washington state general license. No charge, just have operations in the state and you qualify. A better practice is to make the commons nation-wide for federally funded inventions. The national public has supported the research; the national public should have access on FRAND terms. What’s not fair or effective about this?Especially given that federal funding is provided for research that expands the frontiers of science or addresses needs of public health, safety, and welfare. Federal funding is not given for just any profit-seeking venture trying to find a monopoly foothold to get the attention of wealth managers.
This is one of the great intellectual deceits of the university patent middlemen–that they can hide in a nonprofit organization, which then receives federal subventions in the public interest, and they can then say that they can exploit patent rights any which way they can to make money, as if the nonprofit was really a for-profit. Even if the nonprofit doesn’t make any money, the patent middlemen make money (salary) and their patent attorneys make money, and often speculators make money. It’s a great parasitic side business that plays on the illusion that government subsidies or research are in the public interest, when in fact many of the central findings–discoveries and inventions–are siphoned off into a money-making scheme.
It may well be that money-making schemes are a fine way to, um, make money, and along the way, every so often, stuff gets produced to. The art of speculation, however, is an effort by some folks to separate other folks from their money. One can create enterprises to make things and enterprises to out-guess or out-bet or out-scheme other speculators. When an enterprise makes things, and grows, we have economic growth. When speculators bid over the potential for an enterprise, we have a betting pool. If universities use their patent rights to set up a betting pool, it is entirely possible to do so that the “house” stays profitable even if no products are ever created in the process. All one has to do is make the technology look attractive enough (add in the reputation of the university and public interest–“we wouldn’t lie to you, we’re a university“) and folks will show up–if not A-list investors, then B-list ones, or state “early stage” funds. We have economic activity, but not growth–just moving money from unlucky speculators to lucky speculators. Investment, in contrast to speculation, finds its returns in economic growth, in making something rather than betting that someone with money out there is more gullible than the founding investors.
Universities operating without a public covenant with regard to IP assets should lose their tax-exempt status. Their IP–especially if their patent policy claims ownership of IP as a condition of employment or use of resources–is intended for profit-making activities, with the only claim that anything left after the middlemen have taken their cut goes back to the university for use. It’s not that just the royalty income should be taxed, but all income that contributes to the research projects that produce the IP that the university claims without a public covenant in place. That’s a matter for federal law, of course. But it ought to be obvious that patent policies that fail to have a public covenant and claim commercialization as the goal violate the public mission of the organization.
However, if IP assignment to the university is voluntary, and the university operates with a public covenant for the IP that is assigned, then it is clear that the university foregoes profits in favor of benefits made available to the public in the form of access to important results of research. In a public covenant, people who gain access to new technology pay because they want to (again, an alien concept to patent attorneys)–because they want the service to continue, because they want the service to be strong, because they prefer to have open access to having the university create petty monopolies around each gobbet of IP and attract B- and C-list speculators betting on how gullible the next round of investors will be or, failing that, how disruptive their monopoly IP position can be. They pay to keep the university doing the right thing. Idealism? Hardly. Pragmatism? Perhaps. Respect? Often.
Here then are some ways to modify state law to force the compulsory, speculative middlemen out of university business:
1) Prohibit compulsory assignment of IP for faculty–not as a condition of appointment, employment, or use of resources. If a faculty member chooses to assign, then the faculty member can also require staff working on the same project to assign.
2) Prohibit university officials from inserting university ownership clauses into research and licensing agreements as a matter of policy. Such clauses can only be used with the permission of the faculty investigators who have chosen to participate in the activity.
3) A few states (such as California and Washington) have adopted laws that purport to protect employee-inventors from overreaching employer claims. There are arguments that it doesn’t actually do this–instead, it displaces common law of ownership with a great expansion of an employer’s right to claim inventions made by an employee. Universities can exploit the ambiguity of the wording of these laws, especially the part that provides that an employer can claim any invention in the employer’s foreseeable future business. If a university claims to seek to profit off any invention a faculty member or employee might make, then the university’s foreseeable future business is whatever it is that gets invented. Easy exploit. Taking candy from babies. The exploit needs to be closed. One approach: simply exclude public universities from the law. That restores common law ownership of inventions and greatly narrows the scope of what the state can claim.
4) Require public universities to adopt a public covenant with regard to IP created in university-administrated research programs. The public covenant does not extend to all IP created by faculty and staff–such as in consulting or otherwise separated from university work. When when people choose to work at the university, using university resources, they choose to manage their work under the university’s public covenant.
5) Where a public university does require assignment of inventions without a prior voluntary promise to assign, require the university to use eminent domain–due process and just compensation. An offer to pay patenting costs and to share royalties sometime later if there ever are royalties is not, generally, just compensation. Fair market value at the time of the taking, which for patents is a net present value calculation.
There are two classes of legislation, then, to consider:
An innovation bill of rights that, just as Bayh-Dole does on the federal level, limits what the state and its agencies can require in return for state provision of support to university personnel who discover or invent. The resources a public university makes available to its faculty and students as part of the fundamental bargain that brings them to the university is a subvention. The state is not their employer, though the state may also employ faculty and students for specific duties. Professional development and research, whether departmental or extramural, are not among those duties. In extramural research, for instance, universities are reimbursed by the research sponsors. The university has no equity in the results of that research, though it may have an interest in insuring that the results are made public and benefits are available to the public on reasonable terms.
For federally supported research, such concerns are addressed by the public covenant that Bayh-Dole places in federal patent law. For foundation and other nonprofit supported research, the public mission of the sponsor usually provides a similar commitment to public welfare. For industry-sponsored research, publishing results and making inventions available on a FRAND nonexclusive basis ensures everyone can benefit from results and inventions. If an industry sponsor has an established commercial position, allowing the sponsor to own an inventions, subject to a general license for research purposes often addresses the equities involved.
What’s left are inventions made by faculty and other university personnel within the framework of university work–instruction, professional development, and projects that are not sponsored using a funding agreement–donations of money or equipment, university-supplied resources, collaborations with personnel at other organizations. For these, a well established protocol has been to distinguish between projects that rely on generally available university support–lab space allocated for faculty use, libraries and computer systems, offices and clerical support–and projects that request special support–supplementary funding, special access to lab space, facilities, or equipment, or which are commissioned by the university in exchange for something of value, such as release time or supplemental pay.
For projects that use general support, the university should expect that patentable inventions, should the project directors decide that patents should be pursued, will be managed in a manner similar to federally supported inventions–under a public covenant. If not the one set for by Bayh-Dole, then by one adopted by the project. For software, any number of open source or source-available licenses provides such a covenant. Similar licenses are available for hardware, materials and other assets. NSF’s cooperative research center model agreement provides another satisfactory covenant–any qualified participant in the project has a general right to practice any invention and an option to make and sell product based on the invention. However, a project may also propose its own public covenant along with a rationale for how the covenant serves centrally the public interest.
For state law, what matters is that public universities not have the power of the state nor of withholding subventions as means to acquire inventions under compulsory policies. If a given project, as represented by its directing faculty, voluntarily contributes inventions to the university for management, or agrees to a sponsor’s request that it do so, then the university may enforce that agreement on participants in the project who later wish to break their promises.
The state does not allow its public universities to acquire title to patentable inventions unless university personnel have entered into voluntary agreements that allow such assignment of title to the university.
The state authorizes each public university to establish a policy on the public use of patentable inventions made in projects hosted by the university, whether those inventions are contributed to the university, to a patent management organization, to a sponsor, or deployed under an acceptable public covenant that reflects a published primary commitment to the public welfare.
6) Make clear in state ethics laws that university personnel who invent and make their inventions available under a public covenant are presumed to have no conflict of interest.
There is no conflict of interest for university personnel making inventions available under an acceptable public covenant. Nor is there a conflict of interest for inventors and others involved in such a project to receive supplementary income from a share of royalties, higher pay or extended appointments or working hours, from the results of such a release of patentable inventions under a public covenant.
As the Kennedy Statement of government patent policy aptly put it:
The patent system exists to promote the progress of the useful arts by granting inventors exclusive rights in their inventions. The patent system is a creation of government, and government ought to let the system operate as freely as possible, limited by the commitments that faculty and other university personnel make in choosing to work within an organization committed to public welfare. Thus, it is not ethical misconduct for the director of a project to manage the release of inventions under a public covenant, or to ensure that university officials involved in such a release do so appropriately, even if the director of the project is also an inventor and may benefit personally from the release.
7) Require public universities to comply with GASB Statement 51 for all patents that the universities acquire.
As one additional state-level intervention, the state should require its public universities to comply with GASB Statement 51 and account for the value of each patent acquired, and indicate whether the patent has been acquired for use or for investment. All patents acquired under a public covenant should be recorded as for use, along with their estimated value within that public covenant. By documenting the value of patents on inventions under management by the university–even if initially these valuations will necessarily be estimates–everyone involved is able to see the development of each invention over time, and from that record gain insight into the costs and benefits of university management of inventions in the public interest.