Working through an old misrepresentation of Bayh-Dole, 1

I was doing some work to find a broken link and ended up at the web site of the University of Rochester Offices of Technology Transfer, as of July 6, 2011. Here’s a bit from their information “For Inventors: Commercialization Process”:

The University is also mandated under Federal Law to report the creation of inventions from federally sponsored grants to the Federal Government and grant the U.S. Government a royalty-free, irrevocable, worldwide license to the invention. The Invention Disclosure Form serves as a vehicle for the University to comply with these regulations.

This account of Bayh-Dole (“Federal Law”) is wrong in many ways. Rochester has in the intervening years removed this text–but it was around for a good while. Rochester’s intellectual property policy, however, still makes ugly Bayh-Dole assertions, such as

Federal research agreements generally require that universities take title to resulting inventions and discoveries, subject to certain obligations concerning exploitation in the public interest.

Which is dead wrong. Nothing in federal research agreements require universities to take title to “resulting inventions and discoveries”–even with NIST’s stupid addition of an assignment requirement in the written agreement requirement, since that assignment requirement is specific to subject inventions, which are inventions that a university has already taken title to. Alas.

It is important to look at these old, stinky documents to see how badly and for how long Bayh-Dole has been misrepresented to university faculty (and misused to deprive faculty, staff, and students of their rights to inventions, including the right to practice their inventions without university administrator permission). Let’s examine.

There is no law that universities must report inventions made “from federally sponsored grants.” Bayh-Dole does not mandate reporting of inventions. It mandates a patent rights clause make disclosure of subject inventions a condition of a contractor’s right to elect to retain title to such inventions. 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 . . .

This bit is the only bit in Bayh-Dole that applies directly to universities and other nonprofit and small business federal contractors, and it is a big conditional. If a contractor has obtained title to a subject invention, then if the contractor timely discloses the invention, the contractor may choose to keep title to that invention (against any claim that otherwise may be made on that invention by a federal agency, with some additional distant conditionals). This is the heart of Bayh-Dole.

Here’s Bayh-Dole’s definition of subject invention (35 USC 201(e)) (my bold):

The term “subject invention” means any invention of the contractor conceived or first actually reduced to practice in the performance of work under a funding agreement: Provided, That in the case of a variety of plant, the date of determination (as defined in section 41(d) [1] of the Plant Variety Protection Act (7 U.S.C. 2401(d))) must also occur during the period of contract performance.

A subject invention–as the Supreme Court ruled in July 2011–is one that has been acquired by a federal contractor (and which otherwise meets Bayh-Dole’s definition of invention). That’s the meaning of “of the contractor.” Thus, only *after* a university has acquired an invention that is or may be patentable and conceived or first actually reduced to practice under a federal funding agreement does an invention become a subject invention. Even if a university claims to own all inventions made in sponsored research–as Rochester does–a university does not own title to those inventions until it has obtained assignments from the inventors.

Even then, there is no requirement in Bayh-Dole’s patent rights clause that any such invention must be disclosed to the funding agency. The disclosure requirement comes into effect after the university has received a compliant disclosure in writing from the inventors. Here’s 35 USC 202(c)(1), laying out what must be in a standard patent rights clause:

That the contractor disclose each subject invention to the Federal agency within a reasonable time after it becomes known to contractor personnel responsible for the administration of patent matters, and that the Federal Government may receive title to any subject invention not disclosed to it within such time.

That disclosure must provide the technical documentation that would be necessary to determine that the invention is or may be patentable with sufficient detail on which to base a patent application, and must be received by personnel designated by the university as responsible for patent matters. There is no time requirement on when inventors must disclose any invention to the designated university personnel. Merely reporting that an invention may have been made is not sufficient to create a university obligation to disclose that invention. There must be a compliant disclosure made to the proper university personnel.

Bayh-Dole’s implementing procedures and standard patent rights clause at 37 CFR 401.14 lay out the requirements for disclosure. Here is (c)(1):

The contractor will disclose each subject invention to the Federal Agency within two months after the inventor discloses it in writing to contractor personnel responsible for patent matters.

This repeats Bayh-Dole’s requirement, substituting “two months” for “a reasonable time.” Then, details:

The disclosure to the agency shall be in the form of a written report and shall identify the contract under which the invention was made and the inventor(s).

The “written report” requirement was used by the federal government to take ownership of an invention from a small company that reported an invention in a variety of ways to a federal agency–by notice, in the form of a patent application–but never as a “written report.” Such pickiness apparently is vital to the government’s support of innovation. Anyway:

It shall 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.

These are the requirements for what’s needed in a patent application. It’s the core of why an invention is disclosed to the government, not merely reported. The government then has the information necessary to file a patent application if the contractor does not do so.

The disclosure shall also identify any publication, on sale or public use of the invention and whether a manuscript describing the invention has been submitted for publication and, if so, whether it has been accepted for publication at the time of disclosure. In addition, after disclosure to the agency, the Contractor will promptly notify the agency of the acceptance of any manuscript describing the invention for publication or of any on sale or public use planned by the contractor.

These things have to do with whether a bar has been created to patenting in the US or any foreign country. Again, this is information that is necessary to determine whether an invention still may be patentable, regardless of its technical characteristics.

So where are we? Rochester claimed that federal law requires the university to report inventions created from federal grants. But no–the law requires federal agencies to require a contract clause that requires the university to disclose only those inventions made in performance of work under a funding agreement that the university has acquired, that have become “of the contractor” and therefore subject inventions, and only then as a condition necessary for the contractor to elect to retain title to such inventions. The requirement to disclose becomes effective for a university only when its personnel designated for patent matters receive a compliant disclosure from the inventors.

Rochester also claimed that it must grant to the US Government a license. Yes. But that grant of license, too, is a conditional in the standard patent rights clause. It is not a requirement of Federal law–it is a condition upon which a contractor may elect to retain title. Here’s the first part of 35 USC 202(c)(4):

With respect to any invention in which the contractor elects rights, the Federal agency shall have a nonexclusive, nontransferrable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States any subject invention throughout the world

Put it in simple terms: “If you choose to keep ownership of any given invention that the federal government could otherwise require you to convey to the federal government, then you must grant the government its license.”

The license is specific to subject inventions, not any invention created “from” federal grants, and is a condition of electing to retain title. Thus, even if a university obtains an invention, and discloses it, there’s still no requirement to grant a license. The requirement to grant a license comes only when a contractor elects to retain the rights it has acquired in the invention. The license comes later in the string of conditionals under which a contractor might keep ownership of a given invention–it is not a direct, free-standing requirement of Bayh-Dole. The university has to take an action (acquire), wait for another event (inventor disclosure to designated patent personnel), take another action (put the disclosure into the form of a written report), and another (send the disclosure report to the funding agency), and another (notify the funding agency that the university will retain title). Only then does the university have an obligation to grant a license to the government. Nothing about *any* of the events and actions taken by the university are required by Federal law. There’s no law requiring inventors to invent, no law requiring them to disclose their inventions to the university, no law requiring the university to take ownership, no law requiring the university to elect to retain ownership after it has gone to the bother to take ownership.

Rochester was not just making a convenient short hand of the law–it misrepresented the law and its obligations, to make it appear to inventors that they had to disclose inventions and Rochester had to own them, as a matter of federal law–when all along whatever inventors had to do was in reality a matter of Rochester’s own choices.

The university requires inventors to disclose, not because federal law requires it, but because university administrators require it. The issue then is the basis on which university administrators require disclosure–some version of policy and employment agreement and patent agreement–but has nothing to do with federal law or federal grants.

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