Penn State University created one of the earliest university patent policies. That policy was revised in 1940. Let’s have a look, and then consider more recent policy statements at Penn State. Like many early university patent policies, Penn State’s policy is remarkably short. The policy distinguishes four situations:
- Research funded entirely by the university
(i) with a contract with the employee
(ii) without a contract with the employee
- Research funded collaboratively by the university and an external sponsor
- Research funded entirely by an external sponsor
- Research done by staff on their own time and with their own resources
Let’s work through these situations.
This first case involves “research workers” who are “engaged for or assigned to specific research projects.”These workers cannot be, generally, regular faculty, because the university does not have the right to assign faculty to conduct research. In the “engagement” or “assignment” the university can stipulate that the worker must patent inventions and assign the inventions to the university. If the university “disposes” of a patent for more than what it costs to obtain, then the university will provide “just compensation” to the inventor from the net. “Just compensation” is an interesting usage here, since it mirrors the 5th Amendment to the Constitution:
nor shall private property be taken for public use, without just compensation.
We might see in the Penn State patent policy, then, the idea that even though a worker is required to assign inventions to the university–at least those arising from assigned research–the university will pay for the assignment, based on what the university makes on the invention. The idea might be that if the university makes nothing, then the invention wasn’t worth anything and the university owes nothing to the inventor. Another idea is that this first idea is all wrong, since the university could derive value from an invention without making any money from selling or licensing it, or the university could squander a valuable invention by screwing up the patenting or licensing work. Overall, however, it is clear that the university intends to pay “compensation” to the inventor who is required to assign in addition to salary. The university does not merely “share royalties” with the inventor. The university pays the inventor for the assignment.
In addition, if the university doesn’t pay the costs of patenting within a year of disclosure, then the inventor does not have to assign the invention to the university. Practice under this policy, then, would be that an inventor would assign an invention to the university if and when the university commits to pay the patenting costs, not merely when an invention is reported to the university.
In a variation on the first case, the university wholly funds the investigation but does not require workers to assign inventions. “Law covering rights to patents shall prevail.” That is, federal common law that inventors own their inventions and have the right to apply for patents. Here, the policy places the burden on the university to show that title should be other than with the inventor. The wording is curious and, in its way, helpful.
The curious part is the use of “employed”: “a result of investigations on which the inventor was employed.” In the first variation, a worker is “engaged” or “assigned”–no use of “employed” though workers are identified as “employees.” Work the logic. In the first variation, an employee is engaged or assigned to an investigation with a contract that requires assignment of invention ownership. In the second variation, there is no such contract. Thus, “employed” must mean something other than a special contract specific to an investigation requiring assignment of inventions made in that investigation.
The policy here drives after what is called an “equitable” claim of ownership based on circumstances, not expressly on a contract–if the university employs, or directs, or provides time and facilities, then the university reserves the right to claim equitable ownership–if the university can prove the circumstances. Adding to the curiousness is the fact that employment is not a sufficient condition for an employer to assert a claim to equitable ownership in an invention made by an employee. (For a recent restatement of this position, see the Supreme Court ruling in Stanford v Roche.) The “employ” here must be along the lines of “direct”–actually specify the work to be done that results in the invention. University “time,” for faculty, follows this same reading, as only when faculty expressly agree to conduct an investigation under the direction of the university are they “on University time.”
“Employment” for intellectual property purposes is not “employment” for Human Resources purposes. For HR, anyone paid, short of independent contractors, is an “employee.” For HR, faculty are employees; faculty are employed. But for IP, this is not the case. For IP, faculty are employed only when they agree to be directed and assigned to an investigation by the university. Otherwise, even though faculty are called employees by HR, they are not employed with respect to patents and copyrights. Even though the scope of “employment” for faculty, according to HR, is roughly anything that faculty might do that administrators do not object to, the scope of “employment” for IP follows the law of agency. A university’s policy on academic freedom, for faculty, marks further the distinction between HR employment and IP employment. This is a tough concept for university administrators to grasp–and even for faculty to grasp.
In the second case, funding for research is shared by the university and an external sponsor:
With mixed funding, the university’s position is that it should own patent rights in any resulting inventions unless there’s an agreement to the contrary. This, too, is curious, as it is a policy statement, not law. Absent an agreement with a sponsor, and lying outside “wholly funded” university directed work, mixed work would appear to leave any inventions to claims of equitable interest based on the circumstances. How do university administrators move from this policy assertion to a claim of ownership without agreements with the inventors? That is, how does it become equitable that the university should own solely inventions made with mixed university and sponsor support but without any agreement on inventions either with the inventors or with the sponsor?
One might imagine that inventions in mixed funding cases would follow the first case–wholly funded by the university–and that the fact of sponsor funding doesn’t enter into the ownership unless the sponsor stipulates something in the funding agreement. Thus, if the sponsor is a donor (no contract regarding inventions), then the university would claim ownership of inventions made with the mixed funding as if it were university funding.
The third category involves research funded entirely by an external sponsor:
The policy is simple here–there needs to be a contract specifying publication and ownership of patents. What’s missing is what the university might require with regard to either publication or patent ownership, especially when the research is proposed by a faculty investigator–who presumably would have something to say about what patent provisions are acceptable.
Finally, research by “members of the University staff” (not simply faculty) “on their own time and at their own expense”:
This seemingly simple provision poses some challenges in interpretation. As one senior university administrator put it to me (I paraphrase), “Anything faculty do as professionals is on university time.” In this view, faculty do not have any “own time” unless they go out of their way to get approval to be released from university claims. In the context of the Penn State policy statement, however, this view is not tenable. “Own time” for a faculty member is any time not expressly obligated to the university. “Own expense” is any direct expense specific to an investigation not paid for by the university. Thus, the university has no claim on inventions made by a faculty member using the university’s library–there was no direct budget associated with that faculty member’s use of the library, and so there is no university expense–so the investigation is at the faculty member’s expense.
We might simplify Penn State’s 1940 patent policy in this way:
The results of research are obviously the private property of the investigator unless the investigator has agreed otherwise with the university or the equity of the circumstances indicates that the university should have an interest in such results, such as when the university allocates money or facilities to the investigation that otherwise would not be made available to investigators generally.
HR employment does not enter into the picture. If there’s IP employment, then there needs to be an agreement regarding results specific to that IP employment. If the university is to allocate special resources, then policy must require administrators to identify the allocations as special and establish the conditions on those allocations up front, in the form of agreement with investigators on IP.
The 1940 Penn State patent policy is interesting in that it does not extend an institutional claim to own all inventions made by faculty within the scope of their professional expertise or even as a condition of employment (or continued employment). If the university wants to own inventions that otherwise are owned by their inventors, the university has to enter into a contract with the investigators or has the burden to establish the circumstances that give rise to an claim to equitable ownership (perhaps “we directed you to do this,” or “the university allocated specially $10,000 so you could undertake this work with the expectation that the university would share in the benefit from the research”).