I see a question in my search feed: “Does a Bayh-Dole patent clause make a grant a contract?” Let’s sort this out.
Short answer. No, the presence of a patent rights clause does not change the nature of the agreement.
Bayh-Dole requires the use of a standard patent rights clause in every federal funding agreement. Here’s the definition of “funding agreement”:
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. Such term 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 herein defined.
So whether a funding agreement is a grant or a contract is determined by something other than the presence of a standard patent rights clause.
Used here, “contract” and “grant” have meanings established by federal regulation. The starting point is the Federal Grant and Cooperative Agreement Act. The Department of Energy provides a useful overview of the distinctions between “contract”–procurement and “grant”–subvention. Or, as DOE puts it, acquisition and assistance. There’s a long history of trying to sort out how the government can provide assistance to support what it deems to be worthy activity without a contract and still hold the recipients in some way accountable for their use of the money.
Charles Kidd, in American Universities and Federal Research (1959) provides a helpful discussion. The federal government could not bring itself to just give away money to citizens–not like it does with foreign governments, say. Thus, everything has ended up looking like contracts, just some without defined deliverables to the government, and these without such deliverables are generally called “grants” and generally offered to nonprofits with the argument (or illusion) that nonprofits have some special standing with regard to public purpose that for-profit companies cannot reach to, unless they are small businesses and then for some reason they are okay with grants (SBIR, STTR), too. A grant delivers an activity. A contract delivers an item or service.
We might add that the use of contracts goes hand in hand with the idea that the money funds projects not persons. A contract is a project with a deliverable. A grant is a project whose activity is the deliverable. Thus, contracts and grants for research differ from things like “educational assistance,” which, while they may be called “grants” don’t have any expectation of a project or deliverable.
Imagine what federal research support might be like if it were focused instead on people, using gifting or awards, rather than on projects, using contracts or grants “for research.” Maybe new faculty might qualify for a “minimum annual income” for five years to be used for whatever research they wanted. No writing fifteen proposals to get funded for one. No piles of review committees diligently scoring project proposals because it is too dicey to try to score people based on their resumes or their “potential.”
Imagine if you will federal awards “for merit” or “made in hope” or “made out of pity” rather than based on projects. Projects, after all, evaluated competitively, would seem to favor consensus science. The scientists recruited to score such proposals will have a difficult time finding value in proposals that would undermine their own work and the status of their careers. And even if scientists recruited to score such proposals can set aside their own interests, if the proposals run outside their expertise and expectations, how can the selected scientists do a good job of scoring the proposals? The proposals will look like crackpot science, goofball stuff–you know, like hand washing could reduce deaths from infection, or that perhaps continents drift, or that bacteria might cause stomach ulcers. The problem with projects is that they tend to feed the status quo more of what it expects. There’s a role, of course, for feeding the status quo, and the federal government has fed the status quo huge gulps of money each year, and innovation just creeps along, often moving past federal funding or using stuff that’s decades old (you know, after all the bureaucrats can no longer control it with patents and the like).
Vannevar Bush wrestled with this problem in Science the Endless Frontier. He was convinced that the federal government had a role in providing a source of funding as an alternative to companies and foundations, and distinct from government procurement. Most all of such funding ended up serving established orders–the status quo’s ideas of what new things would be good. Lions, one imagines, want more lions, and stuff for lions to eat, and stuff for lions to do. What is good for lions is, well, good for lions–do you have a problem with that? Bush tried to distinguish research directed at expanding the frontiers of science–that is, what goes on in people’s heads with regard to expectations about how the natural world works–from the procurement of what the established order imagines is possible and good for lions. The military wants the weapons it can imagine, just that new ones should be faster, bigger, badder. Medicine wants more drugs, especially ones that make acute conditions at least chronic. But what if one didn’t care about what the lions wanted, and did care about exploring what no one was imagining as happening? Who ought to fund that? And how?
Bush proposed a National Research Foundation, that was something of a cross between Research Corporation and a federal agency and a private foundation. Like Research Corporation, it would fund research across the country, but would not need patent royalties to do so. Like a federal agency, it would have funding provided by Congress and accountability to the president. And like a private foundation, it would be independent of both commercial interests and governmental politics, run by a capable director and advised by a board of citizens who know science and have a nose for supporting people looking to explore really interesting stuff. Not just theory for theory’s sake. Not just what established orders want. Not just practical things. And not just to line one’s pockets making a show of exploring.
But this vision–way cool, if you ask me–was just too complicated for the likes of politics, whether in government or universities, and in any event if there was going to be research money up for grabs, then there was an agency feeding frenzy to deal with as well. So instead we got the National Science Foundation, with its gesture to foundation, its agency status, and its scientific advisors, and in its way, it has done some good things. But the NSF is far from Bush’s NRF. Maybe it’s more than just the middle letter in the acronym. Maybe Bush was focused on something about research that breaks institutional science, and politics turned it into something about the institutions of science domesticating research. Joan Roelofs gets into this sort of thing for charitable foundations in Foundations and Public Policy: The Mask of Pluralism.
In Contact, Carl Sagan offers a critique of the current federal funding situation. In some ways, that’s what the book/movie is actually about. Finding alien life–that’s crackpot science for the status quo. But federal funding just keeps on giving, and what one has to do is adjust one’s career expectations to milk as much of that funding as possible. Thus, Ellie Arroway, so direct and purposeful to do crackpot science, gets booted from NSF funding and ends up funded by a not so crackpot industrialist who funds based on a sense about what’s possible. Of course, the narrative is all fiction. But Sagan’s point, perhaps, is that people can and do fund activity based on criteria that sensible administrators of the public trust could not for a moment permit–or if they do, it has to be under the cover of scoring proposals and stacking review committees so the scoring comes out as desired, so lions get more things to eat, at least, even if exotic things.
And that’s why Bayh-Dole is so damning in all of this. It takes the federal nonprofit-grant-project complex, which could tip toward assistance without any institutional fussing or could tip toward contracts and government procurement, if only procurement of rights to any inventions, and turns this effort–grants for assistance to nonprofits on behalf of individual investigators proposing their projects–into a research enterprise by which institutions take the outputs and seek investment to make commercial products. Put it another way: institutions hold back the outputs until institutional scale investors have first (and perhaps the only) shot and profiting from speculation on the value of the outputs to companies.
And with that we are back to grant programs that have as their ultimate purpose trying to make more lions and feed lions and make lions happy, but now the lions are investors looking to make their money by betting with other investors about what outputs might be valuable. Bayh-Dole creates a derivative market in social purpose–using patents to bet on the outcomes of projects funded in the public interest. Call it the fantasy patent league. The betting gets done by yet another establishment–the “investment” community of wealthy individuals, venture capital funds, private equity funds, and large companies. Patents get passed around like collectors’ wine bottles in warehouses in Hong Kong, rarely actually used, just moved from one institutional holding to another, while speculative investors make and lose money and brokers consistently earn a good living.
It’s not that there isn’t something fond to say about the idea that institutional control of patents on research discoveries might not result in public benefit by attracting risk capital to make products that otherwise would never be made. Dandy. It’s just that it doesn’t happen all that often–rarely mostly, and when it does happen, it’s often inconsequential stuff, and when the stuff that happens with institutionally controlled patents turns out to be important, it also turns out that products would have gotten made anyway, and perhaps faster and with greater variation, if institutions had not gotten in the way with their patents and monopolies.
In a very real way, Bayh-Dole’s standard patent rights clause is like the heart plug in David Lynch’s movie version of Dune. It’s something that every grant gets fitted with, eventually, allowing easy access by institutions that have been recruited to serve the status quo.
[And, for all that discussion, the implementing regulations for Bayh-Dole indicate that “contractor” is a default term throughout, but that the term changes its meaning depending on the kind of funding agreement (37 CFR 401.5(c)):
Agencies may replace the italicized words and phrases in the clause at § 401.14 with those appropriate to the particular funding agreement. For example, “contractor” could be replaced by “grantee.” Depending on its use, “agency” or “Federal agency” can be replaced either by the identification of the agency or by the specification of the particular office or official within the agency.
If a funding agreement is a grant, then the organization on the receiving end is a “grantee” even if the standard patent rights clauses uses “contractor” as its default.
There’s something greasily political about the default to “contractor.” Bayh-Dole was directed at universities, nonprofit research organizations, and their external patent management organizations–and all but a handful of universities and other nonprofits tried to do their own patenting and licensing. Small business contracting was vestigial, as the SBIR program was not yet established, and the advocates for Bayh-Dole worked hard to keep the law from expanding to include non-small businesses. The target beneficiaries were the nonprofits, and the primary funding mechanism was the grant. The default term in Bayh-Dole should be grantee and the default expectation is that grantees receive federal funds on behalf of, and to be expended under the direction of, individual investigators that have proposed the work. That is, in the grants approach, the primary agent is the individual investigator, working independently but with the use of an organization’s resources, for which the organization is compensated by the federal government (the “F&A” payments).
“Grantee” suggests organizations act in support of individuals proposing projects in the public interest that the government then provides grant in aid–a subvention. “Contractor” suggests organizations directing employees to undertake projects in the contractor’s interest, that the government subsidizes–a contract with deliverables. To make a grant appear as a default contract imputes–if only for the patent rights clause–to the nonprofit/investigator relationship a master-servant relationship, when it is, in the default, not. Misconstruing Bayh-Dole then to require the contractor to take ownership of inventions made under federal “contract” then is an attack on the independent standing of nonprofit investigators under the federal grant approach. Bayh-Dole, then, we might say, has been used to help people attack freedom of research. Freedom of research, in turn, might be a key element in how exploration takes place, meaningful discoveries are made, and results are taken up, evaluated, used, and adapted. To the extent that Bayh-Dole uses default terminology that suppresses freedom of research–even turns it into a virtue of compliance to suppress freedom of research–then Bayh-Dole casts a shadow over not only the federally supported 60% of university research but rather on the whole of it.
(And think of that–what actually happened when Reagan amended executive branch patent policy to require the use of Bayh-Dole’s standard patent rights clause in funding agreements with large businesses? Are large businesses now required to promote the maximum participation of small businesses in federally supported research and development efforts, as 35 USC 200 expects? One might say, “Hah hah, hardly!” but only because nothing in Bayh-Dole gets enforced.) ]