9 things Bayh-Dole does not require universities to do, part 3

We have worked through nine things Bayh-Dole does not require. Let’s come back around and work through in detail the disclosure requirement that Bayh-Dole does not require.

Bayh-Dole has a disclosure requirement that is to be placed in the default patent rights clause included in each funding agreement (35 USC 202(c)(1)). That disclosure requirement, however, is narrow and conditional. First, only subject inventions are to be disclosed–ones owned by a contractor, that is, a party to the funding agreement. For an institutional contractor, these are inventions that are or may be patentable, made under contract (and that’s another complicated story), and acquired by the contractor (by conventional means, without any special privilege bestowed by Bayh-Dole). Second, the university is required to disclose a subject invention to the federal government only when personnel designated by the university for patent matters have received a compliant disclosure of the invention from the inventor. If those patent personnel do not receive such a disclosure, then under Bayh-Dole’s standard patent rights clause, the university has no obligation to disclose.

Of course, if a university does not disclose, then it cannot choose to keep ownership, but on the other hand, the federal agency has no knowledge that the invention exists so it cannot request title. And even if a federal agency did know about a subject invention, if the university’s designated patent personnel have not received a compliant disclosure, the university has not breached its disclosure obligation and the federal government cannot request ownership. It’s stupid. But that’s the law. Face it, Bayh-Dole is all-around stupid.

Why are things this way? One reason: Bayh-Dole originally required universities to actively monitor research for inventions. The disclosure obligation arose when an invention taken by the university was made in work receiving federal support. If the university owned the invention, then it had to be disclosed to the federal government. That made university-designated patent personnel responsible for identifying inventions claimed by the university and disclosing those inventions to the federal government. If the university claimed ownership, then it had better promptly identify what it owned and disclose it. In that original form of the law, the university had a disclosure obligation, but its inventors did not. It was up to the university to secure from its inventors a disclosure of any inventions made under contract that the university claimed to own (or had acquired ownership of, or had an equitable ownership interest in).

You can see that if universities claimed to own everything outright–without a disclosure–then Bayh-Dole, as it was originally passed, required those universities to out and find what they had claimed. If a university chose not to claim anything until it had been satisfactorily disclosed and the university made the decision that it was in the public interest (say) for the university to receive ownership of the invention, then the federal disclosure obligation was no big deal–disclose to the federal government only what one chose to own *after* one had received disclosure and *then* made a decision to acquire. But university administrators with a desire for complete control, along with the mercenary attorneys willing to help them, didn’t want to do things in the order of inventor disclosure-evaluation-ownership-federal disclosure. Instead, they wanted ownership-inventor disclosure-federal disclosure-evaluation. More stupid, but rather than being learned up to less stupid, they got the law changed to endorse more stupid. So it goes.

When Bayh-Dole was amended in 1984, before the law had had a chance to operate, patent personnel got things changed so that they were required to disclose inventions to the federal government only after inventors had properly disclosed those inventions to the patent personnel (and then only if the university owned the inventions so disclosed). The change made it the case that inventors have no obligation to disclose any invention made with federal support unless either (i) the university owns the invention or (ii) the university does not own the invention but has has made the inventor party to the funding agreement by assignment, substitution of parties, or subcontract.

Even then, under (i), just because the university claims ownership of a given invention, the inventor does not then have an obligation to disclose the invention. Bayh-Dole requires only that the standard patent rights clause require that the university disclose inventions owned by the university (and made under contract, etc) that have been disclosed by inventors to the university’s patent personnel. And this disclosure requirement is entirely conditional. If a university does not disclose, then the federal government can request ownership–but does not have to. And here, let’s emphasize, that the federal government’s ownership interest is only in inventions that the university has acquired–not just any invention, not even just any invention made under federal contract.

Under (ii), things get even weirder. Bayh-Dole’s definition of “funding agreement” allows contractors to add more parties to a funding agreement by any assignment, substitution of parties, or subcontract of any type. Thus, a university may make inventors parties to the funding agreement at will (so long as the inventors agree). There is precedent for such a thing. The Public Health Service policy in the 1960s made university investigators parties to the funding agreement for matters of invention. If inventors are parties to the funding agreement, by Bayh-Dole’s definition, they are contractors.

As individual “contractors” (again, contractor is defined by Bayh-Dole to be any party to a funding agreement), inventors have an equal right to the benefit of Bayh-Dole’s basic provision at 35 USC 202(a)–if they have title to their inventions (which they almost always do under common law), then they have the right to elect to retain that title, subject to their personal disclosure obligation, which kicks in when they designate someone responsible for patent matters and disclose their invention to that someone. That is, inventors have a disclosure obligation under Bayh-Dole when they take their invention to, say, a patent attorney or to anyone else they choose to be responsible for their patenting of the invention. If inventor-contractors don’t take their invention to any patent personnel, they have no disclosure obligation under Bayh-Dole. They can publish freely. They can sit on the invention. They can make, use, and sell. No obligation to disclose, and patent rights get blown in a year from any public disclosure, use, or offer for sale.

[Why would inventors do such a thing–blow up patent rights? What would make academic inventors blow up patent rights? Many reasons, all unfathomable to the speculator on patent monopolies: to preclude the ability of anyone to exclude others from use of a discovery; to prevent university administrators from excluding others or playing favorites or being their expected incompetent selves; to prevent government administrators from being as bad as university administrators about patents; to contribute to a scientific commons; to avoid disputes with regard to inventorship or what to do with the invention or who should get more money from licensing than others; or–and this is a big one–because a patent on the invention is simply not worth the cost or time or bitterness that would be involved to document it, legally wrangle over it, use it as TNT to blast away at industry access to it, or otherwise strut around with it on one’s CV as if having the right to exclude others makes one’s discovery go to 11 and be that much better than everyone else’s discoveries.]

We can assert, further, that federal law here preempts state-enforced contracts. If federal patent law (i.e., Bayh-Dole) permits inventors to elect to retain title in their inventions, then how does a university have standing to demand title? It makes perfect sense that a university would not have such standing if federal policy has been constructed so that federal funding does not disturb an existing state of affairs. And for university faculty, that state of affairs was (and is) freedom of research and publication. Congress did not intend that federal funding should provide university administrations with leverage to undermine faculty freedom of research, which is enshrined in many universities’ formal policies–the “free play of free intellects” that Vannevar Bush so valued. If you think federal policy should ensure that inventors who were free (before federal funding was offered to assist their work) remain free when they have that federal funding, then this is exactly the right policy outcome–inventors who are parties to a funding agreement own their inventions, so those inventions are subject inventions, and it is the inventors (acting as small business contractors, sole proprietors as it were) who have the right to elect to retain the title they have, subject to a disclosure obligation if they take their inventions to patent personnel.

This inventor ownership is not the issue addressed by Bayh-Dole at 35 USC 202(d):

If a contractor does not elect to retain title to a subject invention in cases subject to this section, the Federal agency may consider and after consultation with the contractor grant requests for retention of rights by the inventor subject to the provisions of this Act and regulations promulgated hereunder.

For “contractor” substitute the definition “party to a funding agreement.” Now substitute “inventor” for “party to a funding agreement.” The clause then reads, “if an inventor does not choose to keep title to a subject invention that the inventor owns, then the federal agency may (after consulting with the inventor’s employer) allow the inventor to retain title anyway.” If an inventor doesn’t want to own what the inventor owns, the federal agency may allow the inventor to keep owning it, so long as someone requests it. Huh? Yes, you see, here “contractor” must mean the employer not the inventor and subject invention must refer to an invention that the employer has acquired.

The Supreme Court in Stanford v Roche cited this provision’s use of “retention” to mean that an inventor may have some residual rights even if they have assigned an invention to the university, and that these rights may be retained even if the university did not elect to retain title to the invention that the university had acquired.

But there may be situations where an inventor, by the terms of an assignment, has subsidiary rights in an invention to which a contractor has title, as §202(d) suggests.

The “rights” an inventor retains under 202(d) is not a synonym for “title.” Those rights may be a right to receive a royalty, for instance. Or, it may be that the assignment contract (incorporating, say, university policy) requires the university to file a patent application or offer the invention back to the inventor. The inventor, then, has rights in the invention but does not have title. If the university, by contrast, were to assign an invention back to the inventor where a federal agency agrees to permit such a thing, that invention is still a subject invention because the inventor now is expressly–by assignment–per Bayh-Dole’s definition of funding agreement a party to the funding agreement.

This is not stuff that most university administrators can easily follow. And it is not stuff that many of them want to follow. They don’t want inventors to own their inventions. They do not want faculty to have freedom of research or publication–even if their university policies formally and fundamentally assure faculty of such freedoms and assert these freedoms are the foundation of university inquiry. They want Bayh-Dole to be a law that enables a central bureaucracy to take control of inventions made in work funded by an even greater central bureaucracy. This, to them, is Bayh-Dole’s inspiration–your big federal bureaucracy must cede control to our (by comparison) little, often pathetic bureaucracy. “Our common cause is to make sure inventors don’t have any rights until our two bureaucracies have determined that no value remains in any invention.” This, in essence, is what Senator Bayh argued in his amicus brief in Stanford v Roche, and the Supreme Court disregarded it.

Bayh-Dole does not quash inventor rights. Bayh-Dole is not some ugly tool of petty bureaucracies triumphing over central government or the public domain. But that’s how the law gets used. That’s how the law was designed to be used by those that did the drafting and those that have done the “advocating” for the law. That is not the “intent of Congress” unless Congress intended a law under which a few self-appointed individuals could go around the country making the law into whatever they wanted by announcing what they personally intended the law to be.

Let’s push it further. Bayh-Dole’s implementing regulations provide that when inventors own their subject inventions, as parties to the funding agreement–as contractors–they have their own default patent rights clause. This clause is set out at 37 CFR 401.9. There we find that inventors have no obligation to file patent applications on their subject inventions. That is, they have no obligation to disclose their inventions to personnel designated as responsible for patent matters. This makes sense. Otherwise, Bayh-Dole as part of patent law would require inventors to use the patent system if they wish to retain title to their invention, even if they prefer to publish their invention freely for all to use. In that otherwise case, an inventor who wished to publish an invention freely would have to first obtain a patent (there’s $10K to $15K) and then grant a free license to everyone. Otherwise, the federal government could demand title to the invention and hand it over exclusively to a government favored company for exploitation as a monopoly, frustrating the inventor’s objective. Put another way: a faculty investigator proposes a project in which she intends the results–including discoveries and inventions–to be made broadly and openly available. The federal government chooses to fund some portion of the project. Under real Bayh-Dole, the investigator may do so without interference from either the federal agency or the university, as if there were no federal funding. Under the fake version of Bayh-Dole, that funding comes with the stipulation that the investigator must give up the objective of open publication of inventions and instead accept control of access to the invention by the university administration or by the federal agency. More stupid Bayh-Dole.

The standard patent rights clause, at 37 CFR 401.14, applies to organizational contractors, including those contractors who are the initial parties to a funding agreement. In the standard patent rights clause, we find a provision that is not authorized by Bayh-Dole but is there anyway. This is the (f)(2) written agreement requirement. The contractor is required to require certain of its employees to make a written agreement to protect the federal government’s interest in subject inventions.

The employee is to agree to disclose inventions to permit the contractor to comply with the contractor’s disclosure obligation. That made sense when the contractor had a disclosure obligation, as in the original 1980 version of Bayh-Dole. But when Bayh-Dole was amended to make the contractor’s obligation to disclose conditional on an inventor providing a disclosure to the contractor’s patent personnel, the inventor disclosure requirement was made conditional, so the contractor has no disclosure obligation to the federal government until an inventor discloses to the contractor.

The employee also is to agree to sign papers to permit patent applications to be filed (without specifying who it is who does the filing of a patent application) and to sign papers to establish the federal government’s rights in the subject inventions (which is not possible unless the inventors have the right to assign the invention or grant a license to the invention–that is, the inventors have to own the subject invention). Inventors do indeed own their inventions unless they have otherwise assigned them. But those inventions the inventors own cannot be subject inventions unless the inventors are parties to the funding agreement. Thus, the written agreement requirement necessarily compels a university to make its inventors parties to the funding agreement. Then inventors can indeed establish the government’s rights in subject inventions.

We then will mention once again how unbearably stupid NIST has been in amending the (f)(2) requirement so that contractors must now require inventors to assign subject inventions to the contractor. Those subject inventions to be assigned must be subject inventions that the contractor already owns (or at least has a claim of equitable title to) and not the inventions that the inventor owns. If the inventor owns an invention and is not a party to the funding agreement, the invention is not a subject invention and the inventor has no obligation under NIST’s stupid change to assign the invention. If the inventor owns the invention and is a party to the funding agreement, then the inventor has the benefit of 35 USC 202(a) and may elect to retain title in the invention and 37 CFR 401.9, the inventor patent rights clause, which controls.

Furthermore, if inventors were forced by NIST’s stupid change to assign their inventions to the contractor, then they would have no standing to establish the government’s rights in those same inventions. Bayh-Dole would become a vesting statute–exactly what the Supreme Court ruled in Stanford v Roche that Bayh-Dole was not. If a federal agency is too stupid to understand Bayh-Dole, and so incredibly antagonistic to university inventors, it ought not continue to have any delegated responsibility for Bayh-Dole’s regulations or patent rights clause.

The reasonable interpretation of the (f)(2) written agreement requirement, even with NIST’s added assignment language, is that inventors must assign to the contractor only those inventions that the contractor already has–entirely independent of federal funding or Bayh-Dole–acquired ownership of or equitable title to. Otherwise the rest of (f)(2) becomes nonsense, as does 37 CFR 401.9. No wonder NIST is in denial that it cannot comprehend the purpose of 37 CFR 401.9. NIST cannot fathom a federal patent law in which inventors own their inventions, and federal funding should not change that outcome. Heck, even *employment* funding does not change that outcome–why should procurement contracting change the outcome? Why should grant-in-aid subvention where those doing the work aren’t even *employed* by the host organization to do the work change the outcome? No, only crass ignorance or disregard for the federal patent system would lead someone at NIST to propose that Bayh-Dole should be a vesting statute even after the Supreme Court said it was not.

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