Bayh-Dole’s method of operation
The IPA did not disturb patent law–it imposed its public convent requirements on the use of patents as a matter of federal contract. Bayh-Dole was different in two ways. First, Bayh-Dole dictated executive branch contracting policy. It expressly preempted (35 USC 210) all existing federal laws regarding inventions made in federally funded research:
This chapter shall take precedence over any other Act which would require a disposition of rights in subject inventions of small business firms or nonprofit organizations contractors in a manner that is inconsistent with this chapter, including but not necessarily limited to the following: [a long list].
Notice the wording–“rights in subject inventions of small business firms or nonprofit organizations contractors”–yes, garble of course (it is Bayh-Dole, after all), but there’s that “of” again–a double of, as it were, since “subject inventions” are defined as inventions “of a contractor” and now we have subject inventions “of contractors”–that would be inventions of a contractor of a contractor. It’s clear that the precedence applies only to inventions once they are owned by a contractor. Without any other guidance, Bayh-Dole does not preempt any statute with regard to non-small for-profit companies (that comes with Reagan’s executive order). Does Bayh-Dole also preempt the Kennedy-Nixon executive branch patent policy, with its public covenant? Yes. Does it preempt federal agency regulations with regard to the obligations of principal investigators? That’s not so clear. Bayh-Dole does stipulate that federal agencies may permit inventors to retain ownership (35 USC 202(d)), and thus Bayh-Dole preempts any federal agency regulation that does not allow for inventors to retain ownership of their inventions.
But there’s more. Bayh-Dole works in two ways, by new policy and by a contracting apparatus. First, it establishes a new statement of executive branch patent policy, as the “policy and objective” of Congress. This statement is more than just an explanation of the purpose of the law. The statement uses “policy”–and as policy it has the standing that the executive branch statement of policy had, except now that policy is placed in federal patent law and applies to any invention made with federal support, including subject inventions. “Subject invention” becomes a new category of patentable invention in federal patent law, subject to the policy statement in 35 USC 200.
Second, Bayh-Dole lays out a new apparatus for management of inventions when a university (or other contractor) has acquired ownership. But it does so by setting out what must go into a default patent rights clause in every funding agreement, and then setting up rules for how federal agencies can change the default clause, and rules for how contractors can appeal if a federal agency tries to enforce a patent rights clause or rely on the public covenant apparatus. There’s nothing in that apparatus that requires inventors to assign their rights to universities or to the federal government for that matter. The Supreme Court in Stanford v Roche did not find anything and concluded that there was nothing there that upset federal common law on the matter–inventors own their inventions until they assign them. And if Bayh-Dole displaced all federal agency regulations on assignment, then federal agencies don’t even have a direct federal contract to rely upon.
And that, apparently, is just what people understood to be the case when they came to draft the standard patent rights clause. Though there was no authority for doing so in Bayh-Dole, and Bayh-Dole expressly took precedence over any other Act with regard to disposition of subject inventions (of a contractor of a contractor), the folks drafting the standard patent rights clause included the (f)(2) written agreement requirement (37 CFR 4o1.14(a)(f)(2)). (Deep breath; forgive the pile of requires–it’s in the nature of Bayh-Dole.) That requirement requires contractors to require potential qualified inventors to make a written agreement to protect the government’s interest–to report inventions (to personnel designated by the contractor), to sign papers to allow patent applications to be filed, and to sign papers to establish the government’s rights in inventions. There would be no need for (f)(2) if the federal agencies could require assignment by inventors as a condition of the funding (as the PHS had done in 1963)–another instance of how regulations form a federal contract. But (f)(2) makes all such regulations “uniform.” At the same time, however, (f)(2) appears also to preempt any federal agency claim to ownership by regulation. While there is a provision allowing federal agencies to allow inventors to retain ownership of their inventions, there’s no comparable statement that requires inventors generally to assign to the federal government upon request. Well, actually, there is only one such requirement, at 35 USC 202(c)(1):
(1) That the contractor disclose each subject invention to the Federal agency within a reasonable time after it becomes known to contractor personnel responsible for the administration of patent matters, and that the Federal Government may receive title to any subject invention not disclosed to it within such time.
If, by making the (f)(2) agreement, an inventor becomes a contractor, then if the inventor fails to report an invention “within a reasonable time,” then the standard patent rights clause must contain a provision by which the government may “receive title.” But if there’s no (f)(2) agreement in place, then inventors aren’t contractors and Bayh-Dole’s standard patent rights clause doesn’t affect them. Here’s the responsive provision of the standard patent rights clause:
(1) If the contractor fails to disclose or elect title to the subject invention within the times specified in (c), above [two months for reporting; two years from reporting to elect title; one year from electing title to file a patent application–less if there’s a statutory bar], or elects not to retain title; provided that the agency may only request title within 60 days after learning of the failure of the contractor to disclose or elect within the specified times.
Thus, there’s a window in which a federal agency may request title to an invention–if the inventor fails to report or the university fails to report; if the inventor fails to elect title or the university fails to elect title (having obtained title); if the inventor fails to file a patent application, or the university fails to do so. But for two of these conditions, the agency has only sixty days (not two months, for some reason) to require assignment from the time of learning of the failure. Of course, if patent rights have been blown by then (such as by public disclosure or use), then there’s no title to request. The demand for title only operates reliably if a patent application has been filed without reporting or election of title. Even though there is no time frame for requiring assignment of an invention for which no patent application has been filed, we are talking then about something held as a trade secret–so it will be difficult for a federal agency to learn of it.
What’s missing from Bayh-Dole, and Bayh-Dole appears to force to be missing from executive branch contracting for inventions made in research, is a simple general statement that the standard patent rights clause (which all agencies must use unless they make proper modifications) must require that all inventions arising from federally supported research or development be assigned to the federal government unless other disposition is otherwise permitted by the standard patent rights clause. That is, the requirement to assign must be in the standard patent rights clause and no other disposition is permitted except in the standard patent rights clause, or in a modified version of the standard patent rights clause. But Bayh-Dole doesn’t do this, and instead we get the weirdly clever (f)(2) requirement that turns inventors into contractors, makes every invention arising from federally supported research or development a subject invention, and expects inventors to have sufficient rights to establish the federal government’s rights in their inventions (by licensing or by assignment). It’s just that the federal government’s rights only arise by failures of contractors to report, elect, and file, and for reporting and electing, there’s only a sixty-day window to request title.
It’s also sort of funny that if present assignment language truly is magical wording (the dissent in Stanford v Roche made clear it isn’t, if a case ever gets to the Supreme Court to test it), then why not just insert that language into Bayh-Dole, to be required in the standard patent rights clause? “Inventors hereby assign any invention arising from federally supported research to the federal government.” A university contractor could then request title from the federal government, and Bayh-Dole could provide that it would be a godfather kind of request, that could not be refused. Doing this, of course, would make Bayh-Dole into a vesting statute for all federally supported research. On top of that, it would allow the government to issue patents to itself or choose a favorite (a university that hosted the research or a designee of that university) to issue patents to.
Similarly, Bayh-Dole could stipulate a present assignment clause for all inventors to convey rights to a favorite: “Inventors hereby assign any invention arising from federally supported research to the contractor that hosts the research, or to that contractor’s designee.” That would get rid of inventors from the situation, and the federal government could deal with universities and designees without the bother of worrying about inventors. Bayh-Dole could then do away with 35 USC 202(d) regarding inventors retaining rights, since inventors would never have any rights (just as what NIST is proposing to do by changing (f)(2) to become an assignment requirement). But it would appear that there is no authority in Bayh-Dole for (f)(2) to become an assignment clause, nor is there any authority in Bayh-Dole for federal agencies to require assignment of inventions other than for a lapse in reporting or electing or filing.
If there were no (f)(2) provision, then federal agencies would have no rights by federal contract in any invention arising from federally supported research until it had been acquired by a contractor and become a subject invention. That’s an oversight? or is it a feature? What might Congress have intended? It’s difficult to know, as a matter of policy. Even for university patent brokers, the answer doesn’t much matter, so long as the patent brokers get unimpeded access to whatever inventions they want–and generally now that is all inventions, patentable or not, and anything that can be called an invention even if it is not an invention (yeah, it’s all there in the university patent policies, ugly as sin but drafted by people who think of themselves as skilled).
Comparative anatomy of the IPA and Bayh-Dole
We can now sketch the outlines of how the IPA and Bayh-Dole handle inventions:
Non-IPA
Under federal contracting regulations, both the university and inventor have an obligation to report inventions to the federal agency and assign those inventions to the government. The agency can release either the university or inventor from the obligation to assign, but executive branch policy requires the agency to require a public covenant along with the release of rights. The university or inventor acquires “principal rights” in the invention–but not, apparently, the entire right since there’s a compulsory license to the government and other limitations on the patent property right.
IPA
In the IPA approach, the agency’s regulations still govern the relationship with the university and inventors, but the IPA alters those regulations with regard to inventions that the university decides to patent. The IPA requires the university to require inventors to assign those inventions that the university will patent to the university; all other inventions the inventor is obligated to assign to the government unless agreed otherwise.
Bayh-Dole without (f)(2)
Statutory Bayh-Dole requires federal agencies to use a standard patent rights clause (SPRC) in every funding agreement, unless they can justify something else. The SPRC requires universities to assign title to inventions they acquire from inventors only if the university fails to report the invention (as WARF failed to do), fails to elect to retain title (why would a university obtain title and then decide it doesn’t want title after all?), or fails to file a patent application (having obtained title and perhaps also having elected to retain title). But the SPRC without (f)(2) has nothing to do with inventors, and Bayh-Dole displaces whatever regulations an agency might have had with regard to inventors. And Bayh-Dole has no provisions with regard to inventors, other than that federal agencies may allow inventors to retain rights (35 USC 202(d)). There’s nothing that gives federal agencies the right under a funding agreement to require inventors to assign inventions to the federal government or requires them to assign to the university that happens to host their research or to any favorite organization designated by university administrators. Bayh-Dole creates its own mess. What a disaster of a statute, even if one wanted to deprive academic inventors–those independents so valued by Vannevar Bush–of their inventions. At least we could have a law drafted by competent folk. But perhaps it is in the nature of competent folk that they would refuse to draft such a law, and so we get what we get.
Bayh-Dole with (f)(2)
The SPRC includes the (f)(2) requirement. That requirement requires universities to flow down reporting, signing papers for patent applications, and signing papers to establish the government’s rights. Once (f)(2) has been complied with, inventors become contractors subject to the SPRC as well, at least for reporting inventions and signing papers. They thus have the same obligations with regard to reporting inventions, electing to retain title, and filing patent applications that universities have. All inventions become subject inventions, but there’s no requirement that inventors as contractors must assign their rights to the university as contractor.
This same principle is at work in the the SPRC’s subcontracting clause (also not in Bayh-Dole)–the prime contractor is forbidden from having any interest in a subcontractor’s inventions as a condition of federal funding. Universities (arguably, since most university lawyers will argue) are precluded by requiring the (f)(2) written agreement from having at the same time an interest in inventions made by inventor-contractors. If the university is to have an interest in such inventions, it must be an interest established outside federal funding–outside the salary paid by federal funding, outside the use of resources committed to enable the project that’s federally funded. Small businesses can navigate this requirement with their inventors by hiring them to invent, employing them to conduct research, and referencing their interest to the business of the company and its future business. Universities don’t have those same circumstances at their disposal with regard to faculty or business directions (unless they violate their charters and non-profit standing).
This account, of course, is not how universities deal with Bayh-Dole. They don’t implement (f)(2) and instead seek to circumvent it by claiming ownership of all inventions, making every invention then a subject invention outright. Thus, they prevent 35 USC 202(d) from operating and remove inventors from consideration. Thus APLU and AAU can publish a fakographic in which there are no inventors that matter. Inventors are hens that lay eggs to be collected each morning by farmers Jane and John, who take them to market for sale. Inventors are nothing; the eggs are golden and when sold drive innovation and transform society. It’s not Bayh-Dole, but a faux version of Bayh-Dole that gets practiced. Bayh-Dole is just cover for looting–but looting, you see, in the public interest, so it’s okay looting. Just don’t give inventors the idea that they ought to have a say in what happens.
Now, just for the sake of considering alternatives, how should Bayh-Dole have been handled? University folks were sure it was a vesting statute and were shocked by the Supreme Court, who couldn’t find any vesting in the text. All the university folks could come up with was a “presumption of title”–gosh, we just assumed we had title and then interpreted bits and pieces of the law like high school students to find confirmation of our biases. So it’s not vesting. We might point out that the Constitution doesn’t give Congress authority to make a law that gives exclusive rights in inventions to other than inventors. So Bayh-Dole can’t do that. Thus, all the cleverness to get as close as possible, with happy presumptions and self-serving misrepresentations and convenient misreadings and stultifying requirements for anything else–tailoring the patent rights clause, getting use reports, marching in, enforcing anything.
But there are interesting ways to go about this, if depriving inventors is one’s goal. Consider the situation in which a federal agency requires universities and inventors to assign all inventions made with federal support to the government. That’s straightforward contract research. Companies that provide contract research services accept such a provision all the time. That the government would use the same provision is entirely uninteresting from a procurement point of view (set aside any bother about federal subvention, university subvention, academic freedom and tenure, and the “free play of free intellects”–we are up to dark arts here).
Instead of giving up rights in inventions, the government instead offers contractors an option in the government’s rights. That is, rather than waiving its rights to inventions in favor of a contractor, on the condition of a license and public covenant gestures, the federal government insists on its rights, but then offers to transfer those rights to the contractor. The contractor then elects an option in the government’s rights to title rather than an option to retain title to an invention under whatever claims it might have made. Under the contractor’s option, the contractor can require the assignment of rights that otherwise would go to the government but now are directed to the contractor. It is as if the government’s funding agreement stated “the university and its inventors will assign all inventions arising from federally supported research or development to the federal government or its designee.”
The university and inventor are obligated to assign inventions to the government, but the agency gives the university (or any favored entity) the option to acquire the government’s right to require assignment–thus, the inventor has to assign to the university to fulfill his or her obligation to the government.
All a uniform statute has to do specify who can be the designee. “The government’s default designee is the university that hosts the research or its designee.” Thus, inventors are then required by federal contract (that is, by the federal regulations that form the contract) to assign their inventions to the university or whomever university administrators choose to favor. If the university decides not to take assignment or retain what it has obtained by way of assignment or file a patent application, then the default fails and the university and inventors assign to the federal government on request.
Drafted this way, Bayh-Dole would not be a vesting statute. Inventions would be owned by their inventors, as is the convention. And inventions would be deliverables under the funding agreement, consistent with standard contract research provisions. It’s just that the federal government offers private parties an interest in the federal government’s side of the contract. Thus, the university that hosts the research is offered the opportunity to obtain what the government is entitled to obtain. The university elects to exercise an option in the government’s deliverables. The government then assigns its right to those deliverables to the university, along with the inventor’s obligation to assign inventions to the government. The right to a deliverable, not a patent property right, is the asset that is traded. In return, the university agrees to whatever conditions come with the assignment of the government’s rights–call that a public covenant (if it is that, if there are any conditions).
Under this approach, the government could also offer its rights to any party, not merely the university that hosts the original research. If that university does not exercise its option, the government could its “designee” authority to designate whomever it wanted–an invention management organization, perhaps, or a favored company, or a company that wins a competition for the right to manage the patent. This procedure avoids for the government the expense of filing patent applications to issue to itself and the bother of negotiating a license agreement with a company. The government just designates an organization to do all that work, subject to whatever conditions one decides–arbitrary or adapted to the circumstances and public policy.
There is absolutely no reason why, to meet the condition of “certainty of title,” that title to inventions arising from federally supported research or discovery should have to end up in the random university that happened to host the research. Why not designate a university that has a great licensing practice, or that is located in a big area of active venture capital, or at the center of an industry cluster? Or an invention management organization in such a situation? Or a company with a commercial position and capability to rock and roll? Any of these alternatives would also provide “certainty of title.” Oh–the inventor needs to be “close” to aid in “transfer”–that’s easy–moving inventors around is easy, especially for inventions important enough for patents and commercial products to transform society, and oh, have you heard of Facetime?