What about inventions made on equipment purchased with federal funds?

How does the Bayh-Dole Act apply to inventions made using equipment purchased with federal funding?

Here’s the thing–Bayh-Dole applies to inventions owned by a contractor–a party to a federal funding agreement for research or development. If the inventor is not a contractor and does not assign an invention made using contractor equipment purchased with federal funds to a contractor operating under a federal funding agreement, the invention cannot be a subject invention. Bayh-Dole doesn’t come into play. See the definition of subject invention, 35 USC 201(e). See the Supreme Court decision in Stanford v Roche.

Furthermore, nothing in Bayh-Dole requires a contractor to demand assignment of inventions, even inventions made on equipment purchased with federal funds. Even if those inventions were made under the same funding agreement through which the equipment was purchased.

There’s no assignment requirement in Bayh-Dole. In the standard patent rights clause authorized by Bayh-Dole, NIST has placed an assignment clause, but it is directed only to subject inventions–inventions a contractor already owns! Figure that. And no matter, no university I know complies with the standard patent rights clause on this point.

As for inventions made on equipment purchased for a given grant and which are also “made in performance of work” under that grant, the “made in performance of work” part controls and it really doesn’t matter what equipment was used or what funds were used to purchase it.

If the federal grant was purely for the purchase of equipment, then Bayh-Dole does not apply, since Bayh-Dole’s scope is funding for developmental, experimental, or research work (see 35 USC 200 and 201(b)). Buying equipment isn’t within scope. Same for funding that is primarily for education–training grants and the like. Even if there’s research involved, Bayh-Dole forbids federal agencies from making any claims with regard to inventions (see 35 USC 212).

Similarly, if an invention is made on equipment purchased for a given grant and the invention is not “made in performance of work” under a funding agreement, then the invention is still not a subject invention. For this part, see the implementing regulations at 37 CFR 401.1. The standard there is whether the use of the equipment falls outside the “planned and committed” activities of the federally funded projects. Planned and committed activities are those activities that can be documented–that is, there has to be a record, presumably written, with regard to the work to be performed under the federal funding agreement. If the use of the equipment is not within those documented activities, even though closely related, then the invention is not a subject invention–yet.

The regulations give the example of a federally funded project to expand scientific knowledge and a related industry project to apply that knowledge. Equipment used to expand scientific knowledge, then, would fall within the planned and committed activities, but equipment used to apply that knowledge would not.

The issue becomes whether the use of equipment purchased with federal funds “diminished or distracted” from the performance of work under a funding agreement. If the funding agreement is already completed when the equipment is used and an invention made, then the answer is clear–the invention is not a subject invention when it is acquired by a now ex-contractor. If the funding agreement is still in effect, then one has to consider the work still to be performed–if the work gets done on time and with the scope proposed, then there’s no diminishment–such as diversion of significant budget–and no distraction–such as a loss of time allocated to the planned and committed work.

The implementing regulations are clear, too, that accounting is not determinative. It is not a matter of keeping separate accounts for federally funded work and other work. A project can use non-federally acquired equipment and the invention, if acquired by a contractor and within the scope of planned and committed activities, is still a subject invention and subject to Bayh-Dole. And people can use equipment purchased with federal funds to invent or develop an invention, even while the federal contract is in effect, and not create a subject invention (if acquired by a contractor). More so, there’s not even a claim to be made if the use of the equipment includes expenses paid from a federal grant account–the standard is not whether money was used but whether the use of the money causes the planned and committed activities of the federally funded project to be diminished or distracted. If not, no harm, no foul.

The Supreme Court decision in Stanford v Roche commented on this aspect as well:

What is more, Stanford’s reading suggests that the school would obtain title to one of its employee’s inventions even if only one dollar of federal funding was applied toward the invention’s conception or reduction to practice.

It would be noteworthy enough for Congress to supplant one of the fundamental precepts of patent law and deprive inventors of rights in their own inventions. To do so under such unusual terms would be truly surprising.

If even one dollar of federal money had touched the invention, and that made a difference, the Supreme Court would not have been so ready to dismiss the prospect that had Stanford acquired title to the invention, it indeed might have been a subject invention. As it was, Stanford did not acquire title to the invention in dispute, and so that invention could not be a subject invention anyway.

University administrators have a great deal of broken practice on the matter of subject inventions. Some of them treat any invention made with federal funds as a subject invention, as if all such inventions are “subject” to Bayh-Dole. Even the NIH does this. But it’s not the law. Some administrators go so far as to assert that any invention made by anyone in a lab receiving federal funds must be a subject invention. This is doubly nonsense, not only because an invention must be owned by a contractor before there’s even an obligation to disclose it, let alone anything else that Bayh-Dole requires, but because such an assertion simply ignores the standards for scope established by Bayh-Dole’s implementing regulations.

The stark reality is that university administrators often have an incentive to overstate Bayh-Dole and its standard patent rights clause. Doing so, they believe, brings more inventions within scope of the university’s claim of ownership, and therefore gives the university more inventions to attempt to profit from. And doing so, they know in their hearts, gives them more power over academic researchers, and that feels good. Finally, claiming everything they can limits the opportunities for anyone to demonstrate that they can make inventions available in beneficial ways without having a university bureaucrat’s thumb in every transaction. University administrators hate it when someone shows that they and their technology transfer office and its bothersome procedures and often mind-numbing views on innovation simply aren’t necessary to serving the public interest.

Despite what Bayh-Dole says, university administrators are more than happy to ignore the law when it serves their interest. Thus, even if you, a happy inventor, believe that what you have invented using equipment purchased with federal funds is your own invention and not within the scope of Bayh-Dole, if you have the misfortune to work at a university where administrators don’t give a flying fig what the law says, they will give you grief about it. They will insist that the invention has been made with federal money; they will insist that federal law requires you to disclose it to them; they will insinuate that federal law requires you to assign it to them; they will assert that university policy created to “comply” with Bayh-Dole requires you to assign your invention. You will be in for a fight, even if you know in your heart you are right.

And don’t expect any help from the federal agency that provides the funding for the equipment. Most federal agencies don’t have a grasp of Bayh-Dole either, and most repeat what they hear everyone else repeating. Sort of NPC in its way. Thus, you will end up being screwed over one way or another unless you happen to work at a university with an enlightened director of technology licensing and a competent legal counsel who actually understands Bayh-Dole. Rotsa Ruck!

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