More bad Bayh-Dole advice in the wild

Here are “three important questions answered” by a company specializing in Bayh-Dole compliance. (I’m sorry, Nikki. Have your people up their game.)

1) If you report an invention after the 60-day deadline, can the Government take title?

Yes, the Government can come in at any time and take title if compliance is not completed.

What does “compliance not completed” mean? Dunno. The disclosure deadline is “two months” not “60 days.” See 37 CFR 401.14(c)(1). In Bayh-Dole, the deadline is “within a reasonable time.” See 35 USC 202(c)(1). The government may “request” title if a subject invention is not reported within the two month window. Bayh-Dole does provide, however, for contractors to appeal federal agency requests for title, and federal agencies must have procedures in place for such appeals. See 37 CFR 401.11.

Most agencies require that you report invention disclosures within 60 days of receipt, or as soon as you become aware of federal funding thereafter.

This part of the answer is strange. The standard patent rights clause establishes the reporting requirement. If an agency is going to change that requirement, it has to go through the procedure to determine exceptional circumstances and introduce a changed patent rights clause for a given funding agreement. Until it can be established that an invention has been made in performance of work under a funding agreement, that invention is not a subject invention and there is no disclosure requirement. If an invention has in fact been made in the performance of work under a funding agreement, only when that fact has been established by contractor personnel responsible for patent matters does the two-month disclosure deadline become effective.

If there’s no documentary evidence that an invention was made within the scope of a government-funded project, then there’s no way to establish that an invention is indeed a subject invention. It’s just a matter of assertions–whims backed by lawyers. See 37 CFR 401.1(a)(2):

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.

If one cannot *show* an invention has been made within a government-funded project, then it cannot be “viewed as” a subject invention. No disclosure obligation without documentation that the invention was made within a federally supported project. That’s why, in the Federal Procurement Regulations established just five years before Bayh-Dole to codify Nixon’s 1971 executive branch patent policy, federal contractors were required to keep records “that are reasonably necessary to document the conception and/or the first actual reduction to practice of Subject Inventions.” (See 41 CFR 1-9.107-5(e)(1)). Bayh-Dole curiously doesn’t bother with such stuff, even though Bayh-Dole clearly is derived from the Federal Procurement Regulations.

Regardless of when the disclosure is reported, it is critical to elect title upon the filing of the first U.S. filing (which is considered to be the provisional filing as of May 14, 2018).

This is nonsense advice–and easily misleading. Bayh-Dole’s “elect to retain title” has nothing to do with title practice around the filing of a patent application. If a contractor is dull witted enough to file patent applications on inventions the contractor doesn’t own, that’s on the contractor’s personnel. For an invention to be a subject invention, it must be owned by the contractor–and the contractor, if not an inventor, must acquire the invention in a conventional way, such as by assignment. Bayh-Dole provides that if a contractor acquires an invention made in performance of work under a federal funding agreement, then the contractor may “elect to retain title” by notice to the federal agency. The deadline for that notice is two years after disclosure of the invention to the federal agency, or sooner if there is a statutory bar to patenting (35 USC 202(c)(2)). Election to retain title has nothing to do with filing patent applications–it has to do with formally establishing a defense to a federal agency’s request to receive title from the contractor. See the Supreme Court decision in Stanford v Roche.

It is always better to report late than not at all.

No doubt, given that without disclosure, the federal government can request title, and that rather would blow up any licensing deal. But even then the problem is for the contractor more so than for any licensee. Is the federal government really going to terminate licenses granted by the contractor simply because there’s a problem in disclosure of the invention? Sure, the federal government might restate the terms of the license–its own indemnification clause and governing law and the like. But to cancel the licenses would appear to run counter to Bayh-Dole’s statement of policy at 35 USC 200. No–the problem with non-disclosure would be that the contractor might then miss out on licensing revenue.

In all of this, it is essential to keep clearly in mind that the requirement to disclose a subject invention does not come into effect until

(i) the invention is owned by the contractor

See the definition of subject invention (35 USC 201(e)). A subject invention is an “invention of the contractor.” The Supreme Court in Stanford v Roche made clear that “of” means “owned by.”

(ii) the invention is or may be patentable (or protectable as a plant variety).

See the definition of invention (35 USC 201(d)). If it has not been determined that an invention is or may be patentable, then the invention is not a subject invention.

(iii) the invention has been made in the performance of work under a funding agreement

One must establish the scope of experimental, developmental, or research work in which an invention has arisen, and establish that some part of that work has received federal funding. See the discussion of scope at 37 CFR 401.1. See the definition of funding agreement at 35 USC 201(b).

(iv) the invention has been conceived or first actually reduced to practice in performance of work under a funding agreement

Bayh-Dole defines “made” to be “conceived or first actually reduced to practice.” Both conceived and first actual reduction to practice have their own crazy meanings. The terms derive from now obsolete considerations for who has invented first and were adopted to decide whether the federal government had a claim to own inventions made by federal employees (see Executive Order 10096 and in re Eddie L. King), and from there was ported to Bayh-Dole via the Federal Procurement Regulations clause for domestic contracts (long form). The effect of using these terms is to broaden the scope of what constitutes a subject invention from the first point of idea to the last action of testing necessary to secure a patent.

(v) the invention has been disclosed to contractor personnel designated for patent matters

If the patent people have not received a disclosure from the inventor, then the contractor has no obligation to disclose the invention to the federal government. See 35 USC 202(c)(1). The obligation to disclose to the federal government is conditional on the receipt of a disclosure by the contractors’ patent personnel. A contractor could, were it somewhat bright, then designate its patent counsel as the personnel responsible for patent matters, not its technology transfer administrative staff. Patent counsel could determine, legally, if the contractor has properly acquired title to an invention, that the invention is or may be patentable, and that it can be demonstrated that the invention was made in the performance of work under a federal funding agreement. Anyone else is just guessing or farting things out–not providing a legal opinion. If a contractor is stone-cold stupid, of course, it could designate most anyone as personnel responsible for patent matters and start the disclosure clock ticking well before it ought.

The standard patent rights clause makes clear that the inventor must provide a written disclosure to the contractor’s patent personnel, and this disclosure is not conforming unless it includes all information necessary for the contractor to comply with its disclosure obligation to the federal government–that is, the disclosure must be “sufficiently complete in technical detail to convey a clear understanding to the extent known at the time of the disclosure, of the nature, purpose, operation, and the physical, chemical, biological or electrical characteristics of the invention.”  If the inventor’s disclosure to the contractor fails this standard, then the contractor has not received a conforming disclosure and has nothing to disclose to the federal government. Until the inventor produces a conforming disclosure, then, the contractor has no obligation to disclose the invention. It may well be that only when the specification for a patent application has been prepared, and its substance confirmed by the inventor, has Bayh-Dole’s disclosure requirement been met by an inventor. And that’s another reason to designate patent counsel as “responsible for patent matters” rather than some administrative clerk who might otherwise receive disclosure forms.

The compliance issues in this first question, then, aren’t whether the federal government can take title to inventions that have not been timely disclosed. Rather, the compliance issues have to do with determining when an invention is a subject invention, and when a contractor’s two-month deadline to disclose has begun.

Practice hints:

(1) designate patent counsel as “personnel responsible for patent matters.”

(2) delay receiving assignment of any invention made with federal support until one has decided to file a patent application.

(3) distinguish between a report that an invention has been made from the written disclosure of that invention that might trigger the contractor’s disclosure obligation

(4) don’t confuse any invention or a policy definition of invention with Bayh-Dole’s definition of subject invention.

(5) it is administrative nonsense to claim ownership of inventions or report inventions “just in case” they might be subject inventions and thus “to comply” with “Bayh-Dole.”

2) What happens if you are late in submitting utilization reports?

While we are not aware of any instances in which the Government has asserted rights to an invention based on missing utilization reports, it is possible that they could do so in the future.

Silliness. Nothing in Bayh-Dole provides the government with any right to request title to a subject invention based on a failure to provide a utilization report. Bayh-Dole sets out no remedy for a failure to comply on the matter of utilization reports. See 35 USC 202(c)(5). Utilization reports matter in Bayh-Dole (other than as evidence of the effect of Bayh-Dole’s policy at 35 USC 200) to establish whether a contractor has achieved practical application (see the definition at 35 USC 201(f)). If a contractor (or assignee, or exclusive licensee) has not achieved practical application and appears unlikely to even make the attempt, then a federal agency could “march in” and require the contractor (or assignee, or exclusive licensee) to grant licenses. See 35 USC 203. But no federal agency has ever done so. A late utilization report has no consequence with regard to government request for title, and if it were in the future, Bayh-Dole would have to be amended to create a new condition under which the government could request title, or a federal agency would have to determine exceptional circumstances for a specific funding agreement and assert late utilization reports as a basis for claiming title. Pigs will grow wings before.

Government agencies (and Congress) want to collect data on the licensing and commercialization activities for federally funded inventions.

I suppose. But in the original Bayh-Dole, utilization reports were material to the law for nonprofits. A nonprofit could grant an exclusive license to a non-small company for only a limited time–five years from the date of first commercial sale or eight years from the date of the license. The utilization report documented these two dates. In 1984, this benefit for small companies was removed from Bayh-Dole, and with it the only meaningful reason for utilization reports–other than federal whimsy. Given that Bayh-Dole has been amended to make utilization reports government secrets, there’s almost no reason to have them–just administrative waste that does not contribute to innovation.

Just recently NIH has targeted some institutions with a large number of outstanding utilization notifications.  The notification includes a deadline for remediating notifications within a short period of time, with a warning of loss of grant funding if compliance reporting is not completed.

And that’s something a federal agency might do if it chooses to enforce the reporting requirement. Of course, enforcing the utilization reporting requirement is about the least important thing the NIH could choose to emphasize, given that the NIH has shown no interest in enforcing practical application (including making benefits of subject invention use available to the public on reasonable terms) or U.S. manufacturing of inventions and products licensed exclusively for use or sale in the U.S.

Practice hint:

(1) File utilization reports on time.

3) If disclosure is rejected for lack of description, does that delay the 60-day reporting requirement?

The question is obtuse. Who is rejecting the disclosure? The contractor’s patent personnel? The federal agency?

Yes, if a disclosure is rejected for lack of description it will delay the 60-day reporting requirement.

If a contractor has not provided a disclosure that discloses what it is required to disclose, then that is not a disclosure. The two-month reporting requirement may, however, have already started–the contractor may have the conforming disclosure, but may have failed to send that conforming disclosure to the federal agency. The disclosure requirement does not depend on a federal agency rejecting an attempt at disclosure. A federal agency does not have to reject anything. See Campbell Plastics v. Brownlee. Rejection has nothing to do with it.

Often it takes time to gather the appropriate disclosure documents.  If this is the case, it is best to elect title if you have filed, enter the patent filings, and complete all other compliance while you work on clearing the disclosure rejection.

More silliness. If one has not got the disclosure documents, there is no obligation to disclose to the federal government. Until the contractor’s patent personnel have got the last little bit of information from the inventor necessary for them to meet the contractor’s obligation to disclose subject inventions–and acquire title, and determine that the invention was made in performance of work supported by federal funds–there’s no obligation to disclose the invention to the federal government.

The deeper silliness is that it makes no sense whatsoever to “elect title”–to notify a federal agency that the contractor elects to retain title–to an invention that the contractor has not disclosed to the federal government. There’s nothing defined to which the election to retain title specifies. Worser, a contractor has no right to elect to retain title until after the contractor has disclosed a subject invention. That’s the core of Bayh-Dole, the very essence of the law. Here (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

There it is. Acquire ownership first. Then disclose. Then elect to retain title. That’s how the law works. An election to retain title before disclosure (or acquiring ownership) is simply non-compliant. It’s void. Moot. Thick. If a contractor has filed a patent application without having ownership, that’s not a Bayh-Dole problem–that’s a dumbass fire your patent personnel problem. And what does it mean to “enter the patent filings”? I have no idea. Sounds technical, though. Maybe what is meant is provide a copy of the patent application to the federal government. Oh, wait–that would be pretty much a conforming disclosure. Why not just say that?

Keep in mind that if you have not filed a patent application and you need to waive the invention, it cannot be waived until the disclosure is accepted.

​Deep confusion. Patent applications have nothing to do with either disclosure or election to retain title. Let’s go slow. If a contractor does not acquire an invention, it cannot be a subject invention. If a contractor waives whatever right it might have to acquire the invention, then that’s the end of Bayh-Dole’s interest. Other laws may apply (Space Act, Atomic Energy Act, and 15 USC 2218(d) requiring the application of the Nixon patent policy of 1971 as amended but wait the codification of the Nixon patent policy was abandoned in favor the the Federal Acquisition Regulations which implemented only Bayh-Dole, ugh), but Bayh-Dole does not. If a contractor acquires an invention that is now otherwise a subject invention and chooses not to elect to retain title–i.e., “waives” its claim to the invention, even as it owns the invention, then (i) the federal agency cannot know to request title until the federal agency has notice that the invention exists; (ii) the federal agency does not have to request title and can leave it up to the contractor to unload the invention by assigning it or holding on to it until it is no longer patentable; (iii) a federal agency can request title to inventions that have not been disclosed, and the assignment document then must include a disclosure sufficient to establish what property is being assigned. See 35 USC 202(c)(1). 

A contractor can “waive” a subject invention it has acquired at any time. It may do so by assignment or through indifference. It may be that the contractor re-assigns the subject invention to the inventors. In doing so, however, it does not alter the fact that the invention is a subject invention, and there’s still a disclosure obligation if the contractor’s patent personnel have received from the inventor a conforming disclosure. If the contractor has not acquired a given invention, then it has nothing to waive. If the contractor has made its inventors parties to the federal funding agreement–and therefore also, by Bayh-Dole’s definition, contractors–then it is those inventor-contractors who own their inventions and have the obligation to disclose, and the right to elect to retain title. The standard patent rights clause requires contractors to make their inventors parties to the funding agreement. See 37 CFR 401.14(f)(2). It’s just that no one complies and the folks that make their living teaching Bayh-Dole compliance don’t bother with such compliance.

To date, government agencies have refrained from asserting title to inventions as a result of non-compliance.

Not true. See Campbell Plastics. And the verb is “requesting” not “asserting.” Bayh-Dole does not give anyone the right to “assert title.” It gives contractors the right to choose to keep title they have acquired. It gives federal agencies the right to request title if a contractor chooses not to keep title or fails to timely disclose, or (if institutional) fails to file a patent application, prosecute the patent application, maintain and defend an issued patent. Those are the conditions under which a federal agency can request title (but does not have to request anything).

However, in just the past two years we’ve seen a spike in interest by a variety of Non-Governmental Advocacy Groups (NGOs) in how institutions comply with the Bayh-Dole regulations.

Or, a spike in interest in the fact that contractors are not complying with Bayh-Dole’s patent rights clauses, federal agencies are not complying with Bayh-Dole and are not enforcing Bayh-Dole’s patent rights clauses. It’s not a matter of “how institutions comply” but rather the clear indication that institutions are not complying. And organizations that claim expert knowledge with regard to such compliance apparently cannot get things right. If Bayh-Dole is too difficult for those who are supposed to comply with it, it must go.

This increased scrutiny from outside of the research institution, in combination with the new regulatory changes, makes it even more important that tech transfer offices pay close attention to Bayh-Dole Compliance.

Yes, because if the public didn’t care, then heck universities could just do WTF they wanted and ignore the law, yo?

Practice hints:

(1) Read the law, the implementing regulations, the patent rights clauses and follow them.

(2) Don’t fail to comply just because other contractors refuse to comply or you pay for bad advice.

(3) If you work at a public university, you should welcome increased scrutiny–finally, someone cares about your work. Those people are your allies, not adversaries.



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