AUTM’s invitation to delude yourself, 3

To show how clueless the universities have been about Bayh-Dole–look at this finding from the GAO’s 1998 report on university administration of Bayh-Dole inventions:

The policies varied among the universities in connection with how they determined whether the invention was created with government funds.

That’s nuts. Bayh-Dole’s definitions of “subject invention,” “funding agreement,” and “contractor,” along with the rules of “scope” at 37 CFR 401.1, make clear when an invention is a subject invention.

There’s no basis for a university to have a policy about it–other than to insist that people know the definition of subject invention and gather the information that permits a determination to be made. And if information cannot be so gathered, then that in itself is clear evidence that a given invention cannot be a subject invention–because subject invention requires a demonstration that the invention meets the definition:

An invention which is made outside of the research activities of a government-funded project is not viewed as a “subject invention” since it cannot be shown to have been “conceived or first actually reduced to practice” in performance of the project.

As auditors are fond of quipping, if it isn’t documented, it doesn’t exist.More from the half-cocked universities:

University officials said that the best resource for determining the source of funds is the researcher, who usually works on a specific grant or contract from which the invention came.

No doubt the GAO is accurate in its reporting. But the issue for determining whether an invention owned by a university is a subject invention is not the source of funds to make the invention. The issue is whether a given invention has been made in the performance of work in a project that has also received federal funds. The question is one of scope of work, not money used. And behind all this is left out the key point–the university has to have already acquired the invention for anything to matter as to scope of any given funding source. Bayh-Dole doesn’t operate until a university has acquired an invention and there’s a determination based on evidence that the invention meets the other elements of the definition of “subject invention.”

The universities held that if funding came from more than one source, the invention was considered subject to Bayh-Dole if any federal money at all was involved in the work.

Total nonsense. The Supreme Court threw this idea out in its Stanford v Roche decision. An invention is not subject to Bayh-Dole until it is acquired by a party to a federal funding agreement. All sorts of work may be done around an invention and not bring the invention within scope of Bayh-Dole’s standard patent rights clause. One may, for instance, seek to apply a discovery made in a federally supported project. The invention, then, might derive from the application of the discovery. The federal regulation on scope of subject inventions makes clear that the application of a discovery is not in the performance of work of the federal project if the federal project did not specify application of discoveries. It’s nonsense to claim that any federal money involved in “the work” means that any invention is “subject to Bayh-Dole.” Just nonsense. Don’t bother to try to defend it. Oh, actually, I’d love to see someone try–please, send in your best effort.

Officials at one university said that they presume an invention is subject to Bayh-Dole if anyone working in the same laboratory was getting any federal funds on any project.

Stark raving mad nonsense. It should be obvious these officials were out of their depth. But why would they make such a claim? One possible reason: because they believed that Bayh-Dole gave them ownership of any invention to which it applied–so they simply assert that Bayh-Dole applies and therefore they may claim ownership of anything, sort of like a Midas finger that turns everything that Bayh-Dole touches to bureaucratic gold. With this sort of thinking, they could ignore their own university patent policy (“we must comply with federal law”), assurances in policy regarding academic freedom, especially freedom of research and freedom to publish (“federal law enables us to force you to publish through the patent system for our institutional benefit”), and even contracts with companies (as was the case with Stanford’s effort to void a private but Stanford-approved visitor agreement with Cetus/Roche that gave a Stanford employee nine months’ access to Cetus’s PCR research). The Supreme Court set aside all such nonsense.

Upshot–the ten leading research universities questioned for the GAO report showed that they were clueless about what constituted a subject invention.


None of the universities visited had a specific policy in place to give priority to small businesses in licensing. However, the majority of the inventions they licensed were licensed to small businesses.

More nonsense. A Bayh-Dole assessment is based on the activity involving subject inventions–not on whatever a university official decides is an “invention” and the like. Further, the requirement in Bayh-Dole is not merely that there’s a “priority” to small businesses. Nonprofits must (37 CFR 401.14(k)(4)):

 make efforts that are reasonable under the circumstances to attract licensees of subject invention that are small business firms

Thus, it is not even a matter that a majority (more than half) of inventions are licensed to small companies. The Bayh-Dole requirement is that there’s an effort, for each subject invention, to attract small business licensees, and that for each subject invention, the university prefers the small business, all other things being equal. The question is, then, for the non-majority inventions–what happened there? Ah, don’t bother to look, since you might not like what you would find!

And for all that, consider what happens when a university exclusively licenses an invention (usually, actually, assigns the invention) to a small company and that small company is, a few years later, acquired along with that exclusive license. While the license is recorded as being to a small company, in practical fact, the license ends up with a big company that swallowed the small company. Either Bayh-Dole is drafted to be silly stupid weak or universities are ignoring the law–or, hey, both! What better reason to ignore Bayh-Dole than that it was designed to be silly stupid weak?

In the licensing agreements, the universities were requiring their exclusive licensees to substantially manufacture the products in the United States. However, the universities have no practical method for ensuring that this is done, other than requiring it in the licensing agreement.

Again, either rampant non-compliance with Bayh-Dole, or Bayh-Dole is silly stupid weak. We’ve gone on at great length elsewhere about the latter likelihood. Bayh-Dole does not require exclusive licensees to substantially manufacture products in the United States. Sigh. Bayh-Dole requires a preference that may be waived, and only for exclusive licenses in the United States–so foreign exclusive licenses don’t have to require US manufacture, and more than that, the exclusive licenses for which the requirement holds are those to “use” or “sell”–thus, an exclusive licensee to “sell” product in the United States must source that product substantially from US manufacturers. If an exclusive licensee has the rights to make, use, and sell, then it’s not a license that comes under this part of Bayh-Dole because it is an assignment of the invention at that point and must follow 35 USC 202(c)(7)(A). Moreover, Bayh-Dole requires only that the licensor get a letter of assurance from the exclusive licensee to use or sell. Bayh-Dole doesn’t require universities to ensure anything. The exposure is that a federal agency could decide to “march-in” and compel licensing to enable U.S. manufacturing–but why would a federal agency do so rather than simply waive the requirement? It’s not an idle question. You might take the time to work it through. I won’t tip you off here to the surprises and excitement that await!

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