Here’s a sliver of divisiveness in Bayh-Dole (35 USC 202(c)(7)).
In the case of a nonprofit organization, …. (B) a requirement that the contractor share royalties with the inventor
On the face of it, this seems to be a happy requirement. But it’s anything but. First, we note that federal law singles out universities and other nonprofits for this requirement (not small businesses). Why should patent law require sharing of patent royalties earned by nonprofits? It is as if, without such a requirement, universities would not share. That speaks volumes.
But there’s more. There’s no guidance whatsoever on what the royalty sharing should be. It could be 100% or it could be $1. Sharing is sharing. Senator Bayh in his amicus brief in Stanford v Roche insisted that inventors could “negotiate” their share. How? In what possible way? An inventor could negotiate a share of royalties if the inventor had freedom to contract–if an inventor could take his (or her) invention to any invention management agent and the university made a bid to be that agent. The sharing of royalties would be consideration for the assignment; the sharing of royalties would be caught up in the university acting as an agent on behalf of the inventor; the sharing of royalties would have to do with the university’s diligence in carrying out a strategy to accomplish a strategy that produced the desired royalty-generating activity.
But if Bayh-Dole vested ownership in the university (as Senator Bayh insisted–and the Supreme Court told him he was wrong), then there’s no basis to negotiate. Similarly, there’s no basis to negotiate if the university implements a patent policy that decrees that the university owns outright all inventions and that royalty sharing is merely administrative largesse, cheese to bait the invention disclosure trap. An inventor gets handed whatever it is that the university decides to share, if the university ever finds a way to license and ever recovers its own costs. Bayh-Dole has nothing to say about any of this. There’s no protection of inventors from nonprofit predation.
Still all this just grates but isn’t so divisive.
Now consider–Bayh-Dole stipulates that royalties must be shared with the inventor. It is as if inventions are made in isolation by single inventors. But in university research, the standard form of research is the sponsored project. That is, a group of investigators working as a team, and building on the work of other teams, many of which are also funded by the federal government and may not be at the same university as the inventing team. Bayh-Dole separates out the inventors of patentable inventions for royalty sharing. The investigators that proposed the research and directed the research are cut out if they are not also inventors–and the bigger the project, the greater the likelihood that an invention will be made without them. So are the research collaborators on the team that missed the key meeting or didn’t happen to be in the lab when someone had a keen idea, or weren’t assigned to the part of the task where something new had to be devised. And certainly, folks at other institutions that shared data or provided access to instrumentation–they don’t have any standing. Bayh-Dole, as it is worded, precludes any broader sharing of royalties. All uses of income is accounted for:
a requirement that the balance of any royalties or income earned by the contractor with respect to subject inventions, after payment of expenses (including payments to inventors) incidental to the administration of subject inventions, be utilized for the support of scientific research or education
Only inventors can receive a share of royalties. No other portion of income with respect to subject inventions can go to royalty sharing. An no non-inventors may share. This is the divisive part. No part of Bayh-Dole wreaks havoc on research teams and collaborations as does this part. No part invites more misinformation on invention disclosure forms as this part. No part causes so much temptation to game the claims construction to cut out problem inventors or the interests of other institutions as this part. No part causes inventors to add non-inventors to disclosure forms so that the non-inventors might share in royalty income.
No one audits this part for the effect it has had on university investigative teams. I’ve seen research teams fall apart over $50 differences in royalty sharing allocations. I’ve seen research teams fall apart because some people did a ton of work but were left off the invention disclosure form. I’ve seen research teams fall apart because people were forced to be on patent applications that they didn’t want to be on. None of this is reported, of course, in AUTM surveys or in reports of the “success” of Bayh-Dole.
There’s one more part to all this. Bayh-Dole requires the sharing of royalties. Some university inventors do not want any share of royalties, want nothing to do with patent shenanigans. Yet university administrators insist that inventors must take royalties (and deal with the tax consequences, even if they want to donate the royalties). Why should federal law insist that inventors receive royalties if they want no part of it? It’s a thoughtless, divisive provision.
If inventors really did have choice–if they had freedom to contract with any private invention management agent ahead of assigning their subject inventions to the federal government–and they could negotiate the strategy to be used (venture-backed startup, open innovation, consortium, standard, exclusive license, sole license, non-exclusive license, stepped annuity non-exclusive license…), the diligence, the share, and the exit conditions–then inventors could also decide if they wanted a share at all. And they could determine who ought to benefit, in addition to themselves. And if they didn’t recognize anyone else, then university administrators could, with the university share (if any) arising from such transactions with invention management agents. The university’s interest in royalties might then not arise from “technology licensing” but rather from (i) providing extra help to research teams to develop their inventions and (ii) helping research teams hook up with invention management agents aligned with team goals.
In media, there is the concept of “above-line talent.” Talent that’s “above the line” expects to participate in royalties. Other talent, “below line,” gets paid wages. In publishing, an author is “above line.” An editor is “below line.” In music, a band is “above line.” A sound editor in a studio is “below line.” Disputes often arise because folks who were hired “below line” feel they have made substantial contributions to the success of a song (as did Clare Torry for her improvised vocals on “The Great Gig in the Sky,” for which she received a below-line fee of £30 but ended up with 50% of royalties). For Bayh-Dole, inventors are declared “above-line talent” and everyone else, by federal law no less, is excluded from having any personal share in royalties.
If we talked equitable sharing, then anyone involved in a project that led to an invention ought to have a share–if a share is what that anyone wants–and there ought to be a cascade of sharing that extends out to research teams at other universities (and other nonprofits, and even companies) that the inventing team relied upon to make their invention. A third for the inventing team, a third for everyone else with an equitable interest in the inventing, and a third for the administrators to fuss over. That’s a policy on sharing that would make a whole lot more people interested in supporting the research of others. Instead, we have this sliver in Bayh-Dole, dividing out inventors from everyone else who contributes and preventing universities from recognizing the work of non-inventors.