Bayh-Dole served up by the Catholic University of America’s general counsel

Here’s a bit from the office of general counsel at Catholic University of America. See how many things this statement of Bayh-Dole gets wrong in only four sentences. I’ll give you a few minutes.

The Bayh-Dole Act of 1980 (Patent Rights in Inventions Made with Federal Assistance)

35 U.S.C. § 200-212; 37 C.F.R. Part 401

Purpose: Establishes a uniform policy for the disposition and licensing of rights to patentable inventions discovered in the course of federally-funded research. The definition of a subject invention is intellectual property that is either conceived or first actually reduced to practice in performance of a government-funded project. This Act gives grantee/contractor organizations first rights to title of a subject invention stemming from federally-funded research, provided the federal funding agency is notified of the invention within 60 days, receives a nonexclusive, nontransferable, irrevocable, paid-up license to practice the invention, the federal agency support is acknowledged in any related patent application, and commercialization is actively pursued. In certain instances, the university may retain title to inventions made with the assistance of federal funding.

Had enough time? Let’s work through these four sentences. 

Purpose: Establishes a uniform policy for the disposition and licensing of rights to patentable inventions discovered in the course of federally-funded research.

[Decent start. The purpose Bayh-Dole states, however, is to use the patent system to promote the utilization of inventions made with federal support. See 35 USC 200. (And for federally owned inventions, the implementing regulation statement of policy is only this use of the patent system–See 37 CFR 404.2.) The law does have a section having to do with “uniform clauses”–that’s 35 USC 206. There, the law requires the Secretary of Commerce to create “standard funding agreement provisions”–the uniformity is in the standard funding agreement provisions. Federal agencies may vary from the standard patent rights clauses–it is just that they now have to do so following a uniform procedure.]

The definition of a subject invention is intellectual property

[oops, not intellectual property–“invention that is or may be patentable”]

that is either conceived or first actually reduced to practice in performance of a government-funded project

[oops, and is owned by a contractor–not all inventions].

This Act gives grantee/contractor organizations

[oops, gives nothing–limits the claims federal agencies may make]

first rights to title

[oops, allows universities to retain title if they obtain title]

of a subject invention

[it’s not a subject invention until it is owned by a contractor]

stemming from federally-funded research,

[oops, stemming is wrong–made in the performance of work–what is planned and committed, not just anything that might “stem”]

provided the federal funding agency is notified of the invention within 60 days,

[well, 60 days from the date the university’s designated personnel receive an invention report]

receives a nonexclusive, nontransferable, irrevocable, paid-up license to practice the invention, the federal agency support is acknowledged in any related patent application, and

[this much is accurate, though an oddly selective list that is made to appear complete–we could add much more, such as that the university must give notice of whether it will elect to retain title within two years of the invention report and file a patent application within one year of its decision to retain title (that’s the whole point of the retaining title!), and we haven’t even started on preferences for small businesses, requiring substantial manufacturer in the U.S. for U.S. exclusive licenses, and sharing royalties with inventors…]

commercialization is actively pursued.

[oops here, too. Nothing in Bayh-Dole requiring the pursuit of commercialization. The standard throughout is practical application–use that can be established, with benefits available to the public on reasonable terms. Commercialization is a university choice (and definition), not a requirement of federal law]

In certain instances, the university may retain title to inventions made with the assistance of federal funding.

[what? This is redundant–it’s what the previous sentence was all about, except that it uses “retain”–which is closer than “gives a first right”–which is not close at all. If there is a first right, it is a right under federal contract to request from inventors to hold title ahead of a federal agency requesting from inventors to hold title. That’s a different sort of “first right” than what general counsel here sets out.]

By my count, there are five material misstatements, three significant omissions, a glaring redundancy at the end, and a fussy argument we could make about whether the primary purpose of Bayh-Dole is what it states for itself (use the patent system to promote the utilization of inventions made with federal support) or what university patent administrators are told to say (establish uniform federal patent ownership policy without regard to government purposes in contracting).

While we are here, it’s worth considering that further down the same page we find a discussion of Stanford v Roche (my emphasis):

Stanford University v. Roche Molecular Systems, U.S. Supreme Court, June 6, 2011. Case No. 09-1159

In a case that highlights the importance of drafting, the U.S. Supreme Court, in a decision (7-2) authored by the Chief Justice, held that an inventor who was a research fellow at Stanford but who also conducted at research at Cetus (with Roche Molecular later acquiring certain Cetus assets relevant to this case) had not signed away his rights to an invention that is used to quantify blood borne levels of the HIV virus. The Court held the Bayh-Dole Act does not automatically vest title to federally funded inventions in federal contractors or authorize contractors to unilaterally take title to such inventions, and that patent law is unique and the basic idea that inventors have the right to patent their inventions has not changed “in the 220 years since the first Patent Act.”

Actually, the case highlights the importance of reading. Stanford’s patent policy required assignment of inventions only when assignment was required by an external contract. Thus, the fellow in working for Cetus had no reason to expect a claim from Stanford.

The agreement the inventor signed with Stanford stated the inventor “agreed to assign” to Stanford his right title and interest resulting from his employment at the University. In contrast, the agreement he signed at the Company Cetus stated he “will assign and do[es] hereby assign” to Cetus his “right, title and interest in each of the ideas, inventions and improvements” made “as a consequence of [his] access” to Cetus.”

While this fuss over “agree to assign” and “hereby assign” did take place in the CAFC decision, it did not figure in the question before the Supreme Court. And at the CAFC, the court reasoned that a promise to assign did not effect an assignment, but a present assignment (“hereby assign”) did. The CAFC never got around to dealing with the fact that the promise to assign could never operate for the fellow with regard to Cetus, because his work there was outside any obligation to assign to Stanford. The fellow never promised to assign his Cetus inventions to Stanford. Had the case returned to the CAFC, now with clarity that nothing vests as a result of Bayh-Dole, I’m quite sure the CAFC would have noted (I would have helped to make sure they did!) that the Stanford promise to assign, even interpreted to grant equitable title, could not have operated as the invention was out of scope when the fellow went to Cetus to work for nine months, was clearly in scope of the assignment made to Cetus (now, without regard to the particular wording) and was still out of scope of the assignment obligation to Stanford when federal money later touched (or so Stanford claimed) the invention. The result would have stood–Stanford lacked standing to sue Roche for infringement–but we would not have had the fuss over assignment wording that we do now, waiting another Supreme Court case to speak directly to the matter.

The issue of the wording to use for future assignments comes up in the Supreme Court decision as a minority dissent on the CAFC handling of the distinction between promise to assign and present assignment. There should not be such a magical difference, argued Justice Breyer. His point was a good one–but just the opposite of what university patent administrators are told. The Supreme Court’s decision left alone a bit of CAFC confustion, and a minority decision argued that there should not have to be differences in the interpretation of arrangements of words that in effect do the same thing. So university patent administrators, had they accepted Breyer’s reasoning, would have left their promise to assign language as it was. Instead they rushed to change it, accepting the CAFC argument–which Breyer opposed–that there was a difference.

What the patent administrators didn’t–and still mostly don’t–understand is that their university patent policies are mostly based on a premise of request for assignment based on review of circumstances. A present assignment fails such policies. Either it demands ownership prior to review, which violates the review and release procedures of the policy. Or it operates only once the review has taken place and an invention has been established as within the scope of the policy’s claims–meaning that it lacks the priority that patent administrators desire.

See the SCOTUS blog for background  documents and analysis of the case.For an excellent article on the case see “The Supreme Court’s Decision in Stanford v. Roche: Important Implications for Research Institutions. by David W. Burgett and J. Trevor Cloak,  Medical Research Law and Policy Report, 10 MRLR 435, 6/15/11, BNA, Inc.

Here is a link to the BNA article by Burgett and Cloak. It’s interesting, having been on the amicus brief drafting side of Stanford v Roche that opposed the idea of vesting of title (IEEE, AAUP, IP Advocate) to see how the folks who were all for vesting salved their defeat. Burgett and  Cloak argue that present assignments are now prudent:

Researchers might protest that such a policy change effects too fundamental a change in their rights as inventors to be imposed unilaterally. But that objection is not very persuasive because the change from ‘‘agree to assign’’ to ‘‘hereby assign’’ is only one of timing in achieving the same result. The change does not alter institutional policy regarding patent ownership; in either case, the institution already is identified as the rightful ultimate owner.

But the authors ignore the structure of university patent policies, assuming that universities operate with the same sort of corporate employment expectations that, well, most corporations do. Except corporations do not have faculty who are members or appointees, do not have policies on academic freedom (stating such freedom is fundamental, no less), do not have tenure, do not distinguish scholarship from “official duties,” and have trade secrets (generally) and non-compete covenants (mostly) with their employees, and expect to assign, direct, approve, or restrict faculty research activities. So the nature of university assignment obligations is anything but similar to a corporate situation–unless of course one attempts to impose a corporate solution on academic practice.

In the matter of university patent policies, there is nothing in most policies (beyond assertions, of course) that stipulates that a university is the “rightful ultimate owner.” The patent policies regularly assert that research contract provisions take precedence. Here’s CUA’s:

Research work financed wholly or in part by an outside sponsor comes under the provisions of the grant or contract covering such work, but inventions under such sponsors must be reported as required in Section III.

In the case of federally funded research, the standard patent rights clause does not require or mandate university ownership of inventions made with federal support. In federally funded faculty research, the university is fully compensated for time, resources, and infrastructure. The university releases faculty from their “official duties” to conduct the research. Again, here’s CUA on the matter:

The University has no vested interest in inventions discovered by faculty, lecturers, instructors, staff or students entirely on their own time and without the use of University resources as defined above.

If the federal government pays for all salaries and supplies and in effect leases the facilities the faculty researchers use, then in what sense are those resources “University resources” for the purposes of the federally funded research? And if “their own time” means “any time not committed to duties for the university,” then surely the release by the university of faculty from university time should count equally well as “their own time” even if that time then is committed to work for the federal government (or to any other organization, or to one’s own efforts–one’s own time is one’s own to commit to others).

The university, but for an overt action to provide additional support, has no equitable interest in inventions made with federal support. It has no right to be the “ultimate owner” other than as it imposes administrative will on faculty, threatening them with discipline, termination, and litigation.

In essence, university general counsel adds a citation to an article that makes the case for sticking it to faculty–that the change in wording doesn’t change policy (which it does–both lexically and often in practice). The practice advice that ought to be given is this: implement the (f)(2) agreement as required by the standard patent rights clause; provide public notice of promises to assign as equitable title to defeat 35 USC 261 assignments by later purchasers claiming they act without notice. Still, what’s fascinating is that despite the general counsel’s materials presented here, the CUA patent policy is still based on review and request:

Any person to whom this policy is applicable is required to report any inventions or inventive concepts in which he or she is involved to the Office of Technology Transfer.

Any inventors covered by this policy shall cooperate in the disclosure, patenting, development and licensing of any inventions with which he or she is involved and in which the University has an interest as defined herein. Every University employee or student to whom the patent policy is applicable shall agree to assign to the University, to a patent development agency designated by the University or to a sponsoring agency (if required under agreements governing the research activity) any and all inventions in which the University has an interest. In addition, all employees or students shall agree to execute such documents of assignment of patent title as are necessary at the time a patent application is forwarded to the U.S. Patent Office and to do everything that may be reasonably required to assist all assignees to obtain, protect, and maintain patent rights.

This is a perfectly well formed, mid-century (last century, of course) patent policy. Report, review for interest, promise to assign, obligation to assign at the time the university actually files a patent application. No present assignment demanding title to everything regardless of subsequent review or action. It’s all very civil, decent. Too bad CUA general counsel can’t post a citation to an article that backs up how CUA does things.

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