Q. Under Bayh-Dole, if a contractor requires inventors to assign all inventions made with federal support to the contractor, doesn’t that requirement comply with Bayh-Dole?
A. No.
Bayh-Dole applies to federal agencies, stipulating how agencies may contract for patent rights in funding agreements for research. Contractors see the effects of Bayh-Dole in the standard patent rights clause (or a variation) included in each funding agreement. Thus, what a contractor does with regard to inventors has nothing to do with Bayh-Dole directly. Though it may seem counter-intuitive, given all the “guidance” about Bayh-Dole that’s out there, it’s simply not possible for contractors to “comply” with Bayh-Dole. Federal agencies must comply with Bayh-Dole.
Q. Well, then does a contractor requirement that inventors assign inventions made with federal support to the contractor comply with Bayh-Dole’s standard patent rights clause?
A. No. A promise to assign to the contractor (or even a present assignment of future interests) does not comply with the SPRC requirement that contractors require potential inventors to make an agreement to protect the government’s interest.
The Bayh-Dole standard patent rights clause at (f)(2) requires contractors to require certain employees to make a written agreement to protect the government’s interest in inventions made with federal support. Essential to the (f)(2) agreement is that inventors have an obligation to sign papers to establish the government’s rights in subject inventions–inventions made with federal support and owned by a contractor, by a party to the funding agreement.
Inventors have no obligation even to report inventions under Bayh-Dole if those inventions are not subject inventions. Unless the (f)(2) agreement is required, contractor inventors are not parties to the federal funding agreement and thus no invention they make is owned by a contractor and cannot be a subject invention.
This interpretation of “of a contractor” was made by the Supreme Court in Stanford v Roche. Bayh-Dole’s apparatus comes into effect when a patentable invention (or plant variety development) made with federal support is owned by a contractor. Not otherwise. Nothing is “assumed” or “presumed” otherwise.
Q. But if inventors agree by private contract with the contractor to report inventions to the contractor and to assign those inventions to the contractor, then how does the (f)(2) agreement matter?
A. The SPRC is applied every time a federal funding agreement is entered into with a contractor. That federal funding agreement has the form of a federal contract, which supersedes contracts formed under state law. The federal contract, whether or not later in time, supersedes the contractor’s private agreements on the same subject matter. In a given funding agreement, a contractor agrees to require the (f)(2) agreement.
The (f)(2) agreement, once in place, displaces any agreements regarding the same subject matter. A contractor and inventor can have other agreements, but those agreements must be compatible with the (f)(2) agreement, not in place of it.
There is nothing in Bayh-Dole or the standard patent rights clause by which a contractor can unilaterally choose not to comply with the standard patent rights clause.
Q. Geez, this is tough to pin down. Let’s try again. If an inventor has already assigned all future interest in inventions made with federal support to the contractor, then an invention becomes the contractor’s–at least by equitable title–when it is made by the inventor, and thus all such inventions will be subject inventions. So in that case (f)(2) isn’t needed. Isn’t complying with (f)(2) when there are alternatives just a waste of everyone’s efforts?
A. Sort of, but not really.
Sorry about the squishy answer here. I’ll explain.
The Supreme Court in Stanford v Roche noted that there were no protections for inventors or third parties in Bayh-Dole. The lack of protections, the Court observed, would be troubling if Bayh-Dole was anything other than an arrangement between the federal government and a contractor with regard to inventions that the contractor by whatever means had come to own. The Court was adamant that nothing in Bayh-Dole changed federal common law on ownership of inventions or vested title in inventions with contractors or created a first right to such inventions or limited inventors to assign only to contractors or any other such variation.
The Supreme Court noted that Bayh-Dole does expect that inventors own their inventions, as indicated by 35 USC 202(d), which provides that inventors may “retain” rights in their inventions. They could not “retain” those rights unless they had those rights already under federal common law.
The (f)(2) agreement acts in a small way to protect inventors from contractor claims in the case of subvention funding–to nonprofits and to small businesses to stimulate innovation (via what would become the SBIR and STTR programs). Section (f)(2) does this by requiring the contractor to require the (f)(2) agreement–that is, a contractor cannot require (f)(2) and at the same time have another fingers-crossed agreement that runs to the same subject matter. (f)(2) displaces everything else. In this way, Bayh-Dole’s standard patent rights clause is self-implementing and does not require a contractor to have any other policy or agreements with inventors on the matter.
The contractor and inventor can have another agreement regarding inventions–it’s just that this other agreement comes into effect logically *after* (f)(2) requirements have been satisfied. The inventor becomes a party to the agreement. The obligation to report inventions is a federal obligation, as is the obligation to sign papers to permit patent applications to be filed and to establish the government’s rights in inventions. These are not obligations that the inventor owes to the contractor, for which the contractor has paid consideration. These are obligations that the inventor has made to the federal government under (f)(2).
One might argue that contractors have no standing to enforce (f)(2) agreements–these are federal agreements, made as part of federal funding agreements. It’s up to the federal government to enforce the inventor’s obligation to report and the obligation to sign papers.
But the Supreme Court did not review the standard patent rights clause and its (f)(2) requirement. There’s nothing in Bayh-Dole that expressly requires the presence of the (f)(2) written agreement requirement. It’s not in the list of provisions to go into a funding agreement with a contractor–that list is at 35 USC 202(c). One might argue, then, that (f)(2) (like (e)) should not be there at all.
The problem with Bayh-Dole is that in drafting the definition of “subject invention,” someone included “of a contractor” as a restriction on what inventions were subject. Without something like (f)(2), so the thinking must have gone, there would be a huge “gap” in Bayh-Dole–no invention would be subject until an inventor assigned the invention to a contractor. And if an inventor assigned to anyone else, then that would be that–neither the contractor nor the government would have “rights” in the invention and Bayh-Dole’s apparatus would not come into play.
So (f)(2) was devised to fill the (apparent) gap created by the definition of “subject invention.” With (f)(2) agreements in place, inventors became parties to the funding agreements and therefore contractors (in much the same way that subcontractors to a funding agreement become parties to the funding agreement, too). Thus, their inventions are subject inventions immediately, regardless of what they might otherwise do, and the government, then, has a direct relationship with each inventor with regard to signing papers for patent applications and signing papers to establish the government’s rights–either granting a license or conveying title to the invention. (And under the patent rights clause specific to inventors at 37 CFR 401.9, the government does not even have a default right to require a license from the inventors).
But there’s a good argument that there is no gap at all, that Bayh-Dole never was intended to sweep up all inventions that might be made in federally funded research at nonprofits and in support of small business innovation. The only inventions it cares about are those that end up with contractors, by whatever means. Thus, if inventors hold their rights, and a contractor hosting research with what amounts to subvention funding–grant-in-aid–does not somehow obtain the rights to the invention, Bayh-Dole has no interest whatsoever in the invention. The government has not contracted to obtain rights in such invention and has not mandated that the research host–the contractor, the party to the funding agreement–obtain rights in such invention either. Inventors are free and clear to do whatever they want. Sounds radical, but only if one thinks that the patent system operating free of institutional intervention is radical.
Bayh-Dole doesn’t require (f)(2) and operates fine without it. In that sense, (f)(2) is a waste of effort. But (f)(2) has an effect that a patent agreement to assign between an inventor and a research host does not get to, and that has to do with what’s a subject invention. (f)(2) greatly expands what is a subject invention in the standard patent rights clause. (f)(2) makes inventors parties to the funding agreement and therefore contractors. (f)(2) makes the obligation to report and sign papers federal rather than private. (f)(2) preempts private requirements having to do with the same subject matter, including initial ownership of inventions. One might go so far as to argue that despite general arguments that a present assignment creates an equitable assignment of title, in the context of (f)(2), such an equitable assignment with regard to the research host cannot operate, because it is precisely this research host who must substitute the (f)(2) agreement for any other agreement the host may want on the same subject matter.
Q. Do universities do a good job of implementing their alternatives to (f)(2)?
A. No, of course not. Most of their implementations are total garbage. They screw up in multiple ways. They place the obligation to assign and even present assignment language in policy statements that don’t necessarily form contracts with inventors. Often the policy statements are scoped so broadly to include visitors, students, volunteers, and other non-employees. The policy statements also are so nebulous as to what’s included in the present assignment to make it impossible to know what is assigned–what’s included can include stuff that’s not patentable and not even inventions and not even ownable.
Even when there is arguably a contract, universities direct assignment obligations to “employment” and “scope of employment” and “course of employment” or “field of employment”–without acknowledging policies on academic freedom, security of employment, and tenure. A patent is a publication, and faculty are assured the freedom to publish. A patent restricts the research one can do, and faculty are assured freedom of research (without restricting that research only to university facilities or for the future financial benefit of the university). So even here, university claims on inventions are iffy.
And what about federally supported research? For faculty, federally supported research comes outside regular duties. No one is required to participate in federally supported research. The university does not assign faculty to federally supported research, does not direct them, does not control the research, does not dictate who may collaborate, does not restrict publication. While faculty may be characterized as employees of the university (even the SPRC at (f)(2) does this, though Bayh-Dole does not), they aren’t employees with regard to their federally sponsored research activities unless they voluntarily give up their academic freedom. Thus, there’s a good argument that any inventions they make in federally supported research are outside of their scope of employment. A university fixated on acquiring these inventions will have to reach to something other than employment, such as use of university facilities.
And even with claims on the use of facilities, there’s still plenty of room for university officials to screw things up. What facilities are encumbered with an institutional claim to ownership of inventions and which are not? If a faculty member makes an invention in a university cafeteria or library, is that a use that gives rise to an institutional claim of ownership? Remember, to “make” an invention involves both a mental step (“conception”) and an action (“reduction to practice, either by description or construction and testing) plus a recognition step (if the inventor does not recognize something as patentable, then it’s not a patentable invention, at least not for that inventor). Thus, one can “make” an invention–think it and describe it–without using any university facilities. One might use university facilities to build a prototype or conduct tests–but these activities may be after the fact of invention, similar to what researchers may do if they work with inventions made by others (and they do that all the time).
Beyond all this, when a university agrees to receive federal funds on behalf of faculty researchers, it also commits to provide the facilities for that research. The university is compensated for the use of those facilities, for any supplies and equipment that can be directly accounted for, and for salaries of all those involved. One can argue that the university’s facilities, to the extent they are used, are already obligated to that use by the university in its federal agreement and therefore the use of facilities cannot also be held to be “consideration” for the assignment of inventions to the university.
In short, university policies and agreements for (i) faculty to (ii) assign (iii) inventions (iv) made in (v) federally supported research are pretty much garbage. What these policies and agreements do is to create the appearance of a university claim, which then pushes the burden to the inventor to somehow overcome–and overcoming a university claim takes somewhere north of $200K.
Q. Is it ethical for university administrators to create amateurish patent policies full of garble and gibberish for the purpose of making it appear the institution has a claim to own stuff that it has no business owning without a clear agreement that respects academic freedom, acknowledges the special conditions for federal funding, and complies with the federal funding agreement all the way down to (f)(2)?
No.
It’s unethical for universities to draft patent policies that are garbled messes and which aim to shift the burden to inventors to overcome an otherwise illegitimate administrative claim to ownership of inventor’s personal property–invention and right to apply for a patent.
Such policies should carry a requirement that the university will pay the full legal costs for any inventor challenging the policy or demands by university administrators. Of course, there’s no assurance that university administrators could draft even that requirement without gumming it up.
Q. Then what about 35 USC 202(d), where Bayh-Dole provides that agencies can permit inventors to retain title?
A. If you read carefully, you’ll see that even 202(d) is directed to subject inventions:
(d) If a contractor does not elect to retain title to a subject invention in cases subject to this section, the Federal agency may consider and after consultation with the contractor grant requests for retention of rights by the inventor subject to the provisions of this Act and regulations promulgated hereunder.
In the absence of (f)(2) compliance, 202(d) covers only the situation in which a contractor obtains title, and then decides not to retain title, and assigns title to the inventors. The agency then may permit the inventors to retain this title, subject to whatever regulations happen to be in place. It’s just that those regulations don’t reach to the inventors.
Because Bayh-Dole is a law stipulating provisions that must be used by default in federal contracting, there’d have to be some regulation that stipulated a means by which the government contracted with inventors rather than merely with contractors who employed inventors (in the case of small businesses) or who released inventors to work outside their regular duties on a federal grant (in the case of university faculty). That means ends up being (f)(2). It’s not required for federal funding agreements, but it is required to enable 35 USC 202(d) and its counterpart 37 CFR 401.9. 37 CFR 401.9 stipulates that federal agencies should treat inventors holding rights in subject inventions as small business contractors, but with obligations less restrictive than those placed on small business contractors by the standard patent rights clause applicable to small business contractors.
This, of course, is something of a mess, too. There is nothing in the Bayh-Dole provisions for contractors that creates a federal relationship with inventors. There’s not a law about it–that would involve vesting and the like–and there’s no specification of a contract for it, other than that Bayh-Dole authorizes the creation of standard patent rights clauses. But for there to be such a clause, there has to be an agreement that the clause runs with, an agreement that turns the clause into a contractual requirement. Otherwise, it is just a clause in space.
Follow? In Bayh-Dole, there’s no contract with inventors. There’s no requirement that a contractor have a contract with inventors. There’s no requirement that inventors do anything with their inventions. There’s no statutory provision by which the government can confiscate their inventions, or assign their confiscatory right to a contractor in exchange for public covenant stuff and a non-exclusive license to practice and have practiced. There’s no apparatus at all, but for 202(d) which applies only to subject inventions that contractors don’t want after all and have assigned back, now as subject inventions, to the inventors (which, apparently, if the contractor is a nonprofit, can’t be done without federal agency approval, and if done must include the standard patent rights clause including its nonprofit-specific requirements).
So the only way that the government gets access to a relationship with inventors in regular ol’ Bayh-Dole is when a contractor assigns back to inventors subject inventions that the contractor doesn’t want, and includes (to comply with the standard patent rights clause) assignment as well of the standard patent rights clause.
Other than that, if there’s no (f)(2) agreement, then inventions are not subject inventions until a contractor comes to own them. There’s a good argument that this outcome makes perfect, reasonable, objective sense. The apparatus in Bayh-Dole is there to deal only with the problems encountered when nonprofit contractors got ahold of inventions made with federal support. The apparatus does not deal with the situation in which contractors don’t get ahold of those inventions.
Well, except for 35 USC 200–which applies anyway, as a matter of federal patent law and does not depend on any particular funding agreement. And 35 USC 200–the statement of policy and objective–can be read entirely consistently with inventors owning their inventions made in federally funded research. Congress, this reading goes, finds that the patent system works quite well if inventors are free to decide when to use it, free of claims by either research hosts or government agencies, so long as the inventors’ patent property rights are constrained by the policy and objective of 35 USC 200, as a matter of federal patent law. (Notice that 35 USC 200 does not rely on a definition of subject invention and instead uses “inventions arising from federally supported research or development.”
The law is what it is, read objectively and with regard to principles of statutory interpretation. It’s one thing to argue that Congress must have intended something different, something self-serving for institutions at the expense of inventors and the federal government. Sure, go ahead and argue that. But the problem is–that stuff isn’t in the law. When a bunch of university attorneys tried to argue just this thing–that Bayh-Dole is a vesting statute because well there’s a presumption among university attorneys that it is, the Supreme Court scolded them that that’s not how the law reads, that if Congress wants to do something so radical as vest ownership of inventions not in inventors and not even in commissioning parties but rather in organizations that happen to host the research, well, then Congress had way more work to do to make that intention express.
It might be argued that “of a contractor” is a total mistake and what Congress meant was “any invention made with federal support.” But that’s just what the Supreme Court said wasn’t a winning argument.
In a similar way, it might be argued that “subject invention” in 202(d) is a total mistake and what Congress meant was “any invention made with federal support.” Except that’s not what’s written in the law, and without asserting that Congress made a mistake or that one’s private reading of the law takes precedence over the objective, clear, non-contradictory expression of the words, there’s nothing to indicate that Congress meant anything other than what’s there. If there’s no subject invention, then the apparatus of Bayh-Dole, but for 35 USC 200–which creates a public covenant with regard to inventions made with federal support even if they are not subject inventions–simply doesn’t operate.
Q. Isn’t that answer sort of like Lucky’s speech?
A. Yes.
Q. So what university patent brokers, attorneys, and law professors think of as a “gap” in Bayh-Dole is actually a kind of freedom?
A. Exactly. What Congress did is not a failure to totally screw over inventors in favor of bureaucrats with a fixation on monetizing monopolies and calling it public interest. Rather, Congress laid down rules for when the bureaucrats did get ahold of inventions made with federal support. Otherwise, Congress cut inventors free of government requirements that they assign to the federal government or to the organizations that host their research. No doubt university patent brokers like Howard Bremer didn’t want this outcome and did everything they could to build up the idea that there was a secret fingers-crossed presumption of title. It’s just this presumption, however, that the Supreme Court mocked in Stanford v Roche.
The (f)(2) agreement requirement in the SPRC aims to restrict inventors’ freedom by turning all inventions made with federal support into subject inventions. But that only goes so far in enabling a federal requirement for disclosure of inventions and assistance with patent applications and establishing government rights. If inventors retain ownership of inventions, under 35 USC 202(d) and 37 CFR 401.9, the government still has no express contractual basis for requiring either assignment or a government license. It’s just not there. Yeah, I know, that’s not how folks “interpret” the law and the SPRC and the implementing regulations. But “interpret” here means “how they puff things out of their, um, behinds and claim that’s their puffery is the law. No matter how they, um, buttress their arguments, they still don’t have the text of the law to cover them. We might say their arguments fizzle.
Q. Why then would any contractor create private agreements requiring inventors to assign inventions and so make the inventions subject inventions, when they could leave the inventions with the inventors, take a financial interest in any upside, offer to help in the case that inventors wanted to assign to an external agent that manages inventions, and generally by-pass Bayh-Dole and its cumbersome, amateurish apparatus?
A. Dunno. Some desire for self-inflicted bureaucracy perhaps.
Q. So what happens if NIST turns (f)(2) into an obligation to assign inventions?
A. Dunno. Depends. Here’s the first part of (f)(2), which presently concerns disclosure:
The contractor agrees to require, by written agreement, its employees, other than clerical and nontechnical employees, to disclose promptly in writing to personnel identified as responsible for the administration of patent matters and in a format suggested by the contractor each subject invention made under contract in order that the contractor can comply with the disclosure provisions of paragraph
The clause is presently directed to subject inventions. That’s the definition that the standard patent rights clause has to work with. NIST would have to expand the scope of the (f)(2) agreement to any “invention arising from federally supported research or development” (from 35 USC 200) or “invention made within the planned and committed activities of a government-funded project” (from 37 CFR 401.1). But Bayh-Dole lays out the definitions that Congress intends to control the law. There’s no authority to start to mess with the definitions to achieve a new result however it is desired by university patent brokers. What’s required is an amendment to Bayh-Dole to change the definitions. But such a change in definition would be material, not merely a technical clarification, and should open up a discussion of just what it is that the law should be doing–and then add protections for inventors, third parties, and the public that are not there now and the absence of which the Supreme Court would find “troubling” if Bayh-Dole forced all inventions made with federal support to contractor ownership.
As it stands, the law gives inventors a great deal of freedom that university patent brokers conspire to take away–first by asserting that the law gives them the right/mandate to do so (which is itself a federal offense under 18 USC 242), and then by contracting any way they can to force the issue, arguing that institutional ownership is what the law really intended to do, but for the technical detail that it didn’t.
No doubt NIST will change the (f)(2) agreement to require contractors to require assignment by inventors. No doubt this change won’t follow the IPA program, which is long forgotten and will be an outright requirement for assignment. Such a change will turn Bayh-Dole back into a vesting statute, even though the Supreme Court expressly ruled that it was not the intent of Congress that Bayh-Dole should be a vesting statute. If NIST does this, it will be without authority, and perhaps in contempt of the Supreme Court ruling, which was directed to the statute and not to the standard patent rights clause. But to stop NIST once it starts will take lots and lots of money. So until the change crosses someone wealthy, it will be what it is, a change to take out the little inventor in favor of bureaucratic control of inventions. Call it “institution building.”
Q. Is any of this legally grounded?
A. No, of course not. Even if I were an attorney, this wouldn’t be legal advice, and if it was, it wouldn’t be authoritative. The legal stuff is for judges. Until there’s a dispute that makes it to a court–that is, when attorneys for wealthy folks disagree–we’ll never know. And there was such a dispute–Stanford v Roche–and as a result, universities ignored the core of the ruling and adopted a practice–present assignments–that was the subject of a dissenting opinion that argued exactly the opposite of what university attorneys said it meant. So, contempt, in its way, for the Court.
So I’ll modify my answer. Even if there’s a dispute and a court rules on the matter, we still won’t know because there’s no indication that university patent brokers will change their practice, or attorneys change their advice, until they are fined/jailed for persisting in their practices in defiance of the court.
Bayh-Dole gave university patent brokers cover for doing WTF they wanted, and what they wanted had nothing to do with inventors having freedom under the patent laws to pursue their own interests, including conforming to the commitments they have made as scholars to the research community and to the public. For this reason alone, Bayh-Dole should be repealed. At some point freedom with all its risks and hazards and inefficiencies is vastly preferable to tyranny by bureaucrats building an institution based on their own strange self-interest. Who knows, perhaps innovation is constrained by such bureaucratic institution-building and Bayh-Dole has been the single greatest contributor to this constraint in the area of federally funded research at universities.
Q. So nothing about Bayh-Dole is simple?
A. No, not really. Bayh-Dole is an amateurish law drafted to be indirect, inconsistent, and unworkable for everyone other than university patent brokers. Bayh-Dole is a law drafted by a patent attorney for the benefit of other patent attorneys. One has to work at it to get past all the smoke and see what is going on. Not many people want to do the work. So Bayh-Dole reduces to its faux version–that it is about institutional ownership, commercialization, monopoly licensing, generating money, and stimulating innovation in the public interest. A nice story, but total crap in practice, like pretty much anything that’s a racket taking advantage of public funding.