Unhelpful NIAID guidance on Bayh-Dole, 1

[NIAID had this document up for all of 2017, as far as I can tell. They have now removed it, and purged it from Google’s cache. But as far as I know, they have not corrected their misrepresentation nor broadcast that correction to reach anyone who may have seen or retained their 2017 misguidance. If NAIAD  ever decides to provide a correction, Research Enterprise is eager to publish it. This article provides a bunch of free help to anyone at NAIAD who wants to get to work on a correction.]

Previously, we have looked at a thoroughly misinformed NIAID document on Bayh-Dole. Let’s look at another document from NIAID, “Intellectual Property Considerations for Contracts,” published in Funding News, April 2, 2015. The document may come up “Access Denied” in a browser search, but it is still available via the Google cache. Perhaps by the Wayback Machine as well. The document provides guidance for the uninformed with regard to federal contracts for research, apparently with the intent to keep the uninformed uninformed:

When it comes to research and development (R&D) contracts and intellectual property (IP), there are a number of issues you should be aware of, such as rights, regulations, and responsibilities.

To help you acquaint—or reacquaint—yourself with the essentials, we’ll cover them in this and future issues. We begin with one key type of IP: inventions.

So far, so good.

According to 35 U.S.C. 201 of the U.S. Patent law as implemented by the Federal Acquisition Regulation (FAR) 52.227-11 Patent Rights-Ownership by the Contractor , an invention is “any invention or discovery that is or may be patentable or otherwise protectable under title 35 of the U.S. Code.”

Well, not quite. Here’s 35 USC 201(d):

The term “invention” means any invention or discovery which is or may be patentable or otherwise protectable under this title or any novel variety of plant which is or may be protectable under the Plant Variety Protection Act (7 U.S.C. 2321 et seq.).

Our NIAID document leaves out the PPVA extension for invention. PPVA protection is not within federal patent law. Bayh-Dole extends to PPVA apparently through a slip or cleverness with regard to the treatment of plants as patentable subject matter. In any event, the point of the definition is to limit the scope of “invention” in federal funding agreements to patentable elements plus the PPVA. An invention cannot be broader than its patentable elements. That’s interesting. And includes PPVA stuff which is not patentable. That’s interesting. But perhaps this is all just being picky. Read on. 

It’s also important to know about subject inventions, which you may not be familiar with. A subject invention is any invention of the contractor (only the contractor—not a different person) conceived or first actually reduced to practice in the performance of work under a funding agreement.

Here our document does get the elements of a subject invention down, but skips over the significance of any of them, starting with “of the contractor,” which after the Supreme Court opinion in Stanford v Roche means “belonging to” or “owned by” the contractor. The “only the contractor–not a different person” misses the whole point of the definitions of funding agreement and contractor in Bayh-Dole: a contractor is any party to a funding agreement, and a contractor can add parties to the funding agreement by any assignment, substitution of parties, or subcontract of any type. Thus, “the” contractor may be any party to a funding agreement. We can get into what “performance of work under a funding agreement” means, as well, as that, too, is not necessarily so obvious.

The government gets a license for itself and may exercise march-in rights in subject inventions.

The government license is to practice and have practiced. In the Kennedy patent policy, the Institutional Patent Agreement program, and the Nixon patent policy, practice meant “make, use, and sell.” That’s a much broader license than, say, the “use and manufacture” condition of 28 USC 1498 under which a patent holder has a remedy only in the Court of Federal Claims for “reasonable and entire compensation” for government infringement.

The exercise of march-in rights is very rare.

To say the exercise of march-in rights is “very rare” is an understatement, given that march-in has never happened, and according to one federal attorney involved in the development of the Kennedy patent policy, march-in was never used going back as early as 1963. The Public Health Service, however, did march-in (such as in the case of 5-FU) but it did so without the guidance (and perhaps the restrictions made in the form of a flourish of public concern) of a government-wide march-in policy.

The government wouldn’t automatically get the license and march-in rights if the invention was not a subject invention.

Not so. There are three regulatory regimes in play. The first is a set of federal statutes dealing with inventions made in specified areas of federal activity such as space, nuclear weapons, and water desalination. The second is executive branch patent policy, as represented by the Nixon patent policy as amended by Reagon’s executive order 12591 of 1987. The third is the Bayh-Dole Act, including its 1984 amendment that extended government license and march-in procedures to all federal contracts, notwithstanding statutory requirements. The specialty statutes do not depend on Bayh-Dole’s definition of subject invention–generally because those statutes do not care who owns an invention made with federal support, and Bayh-Dole’s definition does depend on contractor ownership.

Bayh-Dole does not repeal the federal statutes or executive branch patent policy. Rather, it preempts these laws and regulations whenever a contractor acquires ownership of an invention made in performance of work under a federal funding agreement. If a contractor does not own such an invention, it cannot be a subject invention. But the invention may still be subject to a government claim by statute or under executive branch patent policy. Or again, not, depending on how one read’s Bayh-Dole’s amendment requiring federal agencies to use Bayh-Dole’s government license clause (35 USC 202(c)(4) and march in clause (35 USC 203)–both of which depend heavily on the definitional and procedural apparatus of Bayh-Dole. In fact, one cannot implement both clauses without implementing nearly the entirety of Bayh-Dole as it applies to federal agency contracting for research or development.

Thus, here, our document’s guidance is nearly random. The simple points that ought to be made are

“subject invention” comes into play when a party to a funding agreement owns an invention made under contract.

there can be any number of parties to a funding agreement, based on the actions of an initial contractor to that agreement

the definition of subject invention is really broad, following the distribution of the patent rights clause across all parties to a funding agreement

Under the Bayh-Dole Act, businesses (large and small) and nonprofits (including universities) can elect to retain ownership of inventions made under federally funded research and contract programs.

This is not true. Contractors have the right to elect to retain ownership of subject inventions–inventions that they already own. Here’s 35 USC 202(a):

Each nonprofit organization or small business firm may, within a reasonable time after disclosure as required by paragraph (c)(1) of this section, elect to retain title to any subject invention:

Where (c)(1) requires timely disclosure of subject inventions to the federal government. It is not the case that contractors may elect to retain title to inventions made generally under federal contract–under Bayh-Dole, the contractor must also own the invention. But our document persists:

That means contractors have the right to elect and retain title to any invention made under an R&D contract. If a contractor doesn’t elect title, then the government can do so.

The use “elect and retain title” is nonsense. The usage is “elect to retain title.” There is no stand-alone “electing” title. Here we have that clever use of “retain” that the Supreme Court categorically rejected in Stanford v Roche. Like some antagonist in a science fiction movie, it just won’t die. From the majority opinion:

The Bayh-Dole Act’s provision stating that contractors may “elect to retain title” confirms that the Act does not vest title.

The Bayh-Dole Act does not confer title to federally
funded inventions on contractors or authorize contractors to unilaterally take title to those inventions; it simply assures contractors that they may keep title to whatever it is they already have.

Only when an invention belongs to the contractor does the Bayh-Dole Act come into play. The Act’s disposition of rights—like much of the rest of the Bayh-Dole Act—serves to clarify the order of
priority of rights between the Federal Government and a federal contractor in a federally funded invention that already belongs to the contractor. Nothing more.

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. We are confident that if Congress had intended such a sea change in intellectual property rights it would have said so
clearly—not obliquely through an ambiguous definition of “subject invention” and an idiosyncratic use of the word “retain.”

And yet here we have just what the Supreme Court said did not happen, but the NIAID offers it up as federal agency guidance nonetheless. Perhaps there’s a good reason why the “Access Denied” shows up now. But some folks apparently still have access–to thoroughly rotten representation of the law.

If you are awarded a contract and make an invention during the course of it, communicate with staff in your organization’s technology transfer office as soon as possible.

This is also strange advice. First, the “you” here apparently is an individual. Individuals are not awarded federal contracts. The contracts run with organizations. Thus, the “you” here is utterly off base. Second, under Bayh-Dole, inventors have no obligation to disclose inventions. The organization has an obligation to disclose inventions to the federal government, but even that obligation only kicks in after an invention has been disclosed to personnel responsible for patent matters. The standard patent rights clause contains a requirement not in Bayh-Dole that inventors must disclose subject inventions so that their organizations can fulfill their disclosure obligations–but there is no such obligation until an inventor does disclose an invention that is already owned by the organization (or by a party to the funding agreement). It’s not a technical oversight to be fixed by private rewriting of the law. It’s a policy directive, plain and clear.

You inventors have no obligation to report inventions made during the course of a federal contract unless your organization owns the invention and you have disclosed the invention fully to personnel responsible for patent matters–or your organization has made you a party to the funding agreement.

Timing is important, so promptly contact them once you think you have made a patentable discovery and before publicly disclosing such information.

Timing may be important. However, it may go the other way. Under Bayh-Dole, inventors have no obligation to use the patent system, to assign their inventions, or to disclose their inventions. Under the inventor patent rights clause in the implementing regulations (37 CFR 401.9), inventors, if they have been made parties to federal funding agreements (and 37 CFR 401.14(f)(2) requires that they are), do not have to file patent applications. Thus, if an inventor wants a given invention to enter the public domain, timing is certainly important, too–delay for a year after publicly disclosing the invention.

And, for what it is worth, most university policies on disclosure do not depend on whether an inventor thinks any given “thing” is patentable. Some policies go so far as to define invention as “anything that is an invention or is not an invention.” That’s broad. There is a vast difference between what an employer requires of an inventor and what Bayh-Dole requires. Conflating the two, to make it appear that an inventor’s obligations arise from Bayh-Dole when they don’t, is really bad advice.

That leaves time for you and your organization to discuss patenting your invention and filing a patent application if necessary.

“If necessary” is strange. When ever is it “necessary” to file a patent application? Further, while one may discuss patenting with one’s organization, most policies do not provide inventors with any final say in the matter of what will be patented–that is the organization’s decision.

Your organization typically has the initial right and obligation to patent under the Bayh-Dole Act, as implemented by FAR 52.227-11,

Total nonsense here. The organization has no “initial right” to “patent” relative to the inventor. That was Senator Bayh’s contention in his amicus brief in Stanford v Roche, and the Court gave him an indirect lecture on how wrong he was. Inventors have the initial opportunity to file a patent application. Bayh-Dole does nothing to disturb that right. Furthermore, organizations owning subject inventions do not have an obligation to file a patent application unless they elect to retain title in a subject invention. So any obligation is purely conditional.

but if it chooses not to,

Here we come to the great gulf between Bayh-Dole and the ruins of the Federal Procurement Regulation upon which Bayh-Dole has been built. In the FPR patent rights clause, both employer and employee are bound by the same requirements. The FPR is indifferent to whether the employee-inventor owns or the employer owns any given invention made under contract. Both are subject to the patent rights clause. The FPR’s concern is whether the employee owes a duty to the employer–either to assign a given invention to the employer or to refrain from patenting (as was the case in some university settings, for example). Thus, an employee-inventor seeking to retain title had to have a confirmation from his/her employer that confirmed that the employer had no claim on the invention or the inventor’s activity. The “if it chooses not to” in the FPR is “if the employer chooses not to exercise any claim that it might have on the assignment of or other disposition of the disclosed invention.”

In our NIAID guidance document, this “if it chooses not to” instead refers to a situation in which the employer has obtained ownership of an invention made under contract, has elected to retain title in that invention, and then has decided not to file a patent application after all–the brutes! When things have gone this far down the road, Bayh-Dole’s standard patent rights clause provides that the federal government may request title–there’s nothing there about inventors requesting to get title back from their employers by petitioning the federal agency.

A for-profit company could reassign the subject invention to the inventors and let them deal with things–but then those inventors are subject to the inventor’s patent rights clause, and federal agencies don’t have any say in the matter–inventors as contractors have the same right under 35 USC 202(a) to elect to retain title. For nonprofits, the problem is worse–they are required to make any assignee subject to the nonprofit patent rights clause. So nonprofit inventors are pretty much hosed if their nonprofit employer is brutish enough to go down this road only to pull out when it matters for more than bureaucratic paperwork.

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