Federal agency patent enforcement under Bayh-Dole, 6

Bayh-Dole devotes two sections to federal disposition of patents, 35 USC 207 and 209. These sections are then codified at 37 CFR 404. There, the regulations limit the scope of Bayh-Dole (37 CFR 404.2):

It is the policy and objective of this subpart to use the patent system to promote the utilization of inventions arising from federally supported research or development.

In Bayh-Dole, the policy and objective are that of Congress, but here, the regulations are scoped to what the regulations themselves assert. Oddness. It is the policy and objective of the codification of Bayh-Dole for federal licensing of inventions to select only a portion of the policy and objective set forth by Congress. Or, another way, the other policy and objectives of Bayh-Dole are not implemented for federal agencies (though they are, in a half-assed way, implemented anyway).

The patent system is set forth in Title 35 of the United States Code. Bayh-Dole is made a part of the patent system as Chapter 18 of Title 35. The binder between the patent system generally and Bayh-Dole is the first sentence of 35 USC 261:

Subject to the provisions of this title, patents shall have the attributes of personal property.

A patent has the attributes of personal property–but those patents are “subject to the provisions of this title”–that is Title 35. For patents on inventions “arising from federally supported research or development”–whether that support is by means of a funding agreement or provided to federal employees–Chapter 18 of Title 35 necessarily applies. A patent on an invention arising from federally supported research or development is not an ordinary patent. It has the attributes of personal property as established by the federal patent system but also as constrained by Chapter 18–Bayh-Dole.

We have already seen the collision between 35 USC 200–“use the patent system to promote the utilization of inventions” and this bit in 35 USC 271(d):

No patent owner otherwise entitled to relief for infringement or contributory infringement of a patent shall be denied relief or deemed guilty of misuse or illegal extension of the patent right by reason of his having done one or more of the following:

. . .

(4) refused to license or use any rights to the patent;

Bayh-Dole establishes a working requirement and sets use of inventions as its fundamental policy–a fundamental policy of federal patent law for federally supported inventions. 35 USC 271(d) claims that nonuse is not a barrier to seeking relief from infringement. It would appear that any owner of a patent on a federally supported invention would have to demonstrate use, or practical application, or the likelihood of taking effective steps to achieve practical application to have standing to enforce a patent. Another way: if someone else, without a license or benefit of the technical relationship that often comes with a license, has achieved practical application–that is, is infringing the patent–then how can the patentee show, without its own use, that it has taken effective steps to achieve that same use? Sure, there’s an argument that one might muster, but on the face of it, someone else, at a significant disadvantage, has got something done, so why hasn’t the patentee? In ordinary patent law, it doesn’t matter. A patentee doesn’t have to use a claimed invention, or license it. But Bayh-Dole changes all that for federally supported inventions. No one holding a patent on a federally supported invention has an ordinary patent. There’s a broad working requirement. And there’s no authorization for federal agencies to enforce their patents. And here in Bayh-Dole is where we would find it, where it would have to be, and where if it isn’t, it cannot be anywhere else.

There’s a long history of executive branch patent policy remedies for a contractor failing to do at least one of using the invention (bringing it timely to the point of practical application) or licensing non-exclusively on reasonable terms. See, for instance, the Kennedy patent policy (1963):

unless the contractor, his licensee, or his assignee has taken effective steps within three years after a patent issues on the invention to bring the invention to the point of practical application or has made the invention available for licensing royalty free or on terms that are reasonable in the circumstances, or can show cause why he should retain the principal or exclusive rights for a further period of time, the government shall have the right to require the granting of a license to an applicant on a non-exclusive royalty free basis.

If an owner of a federally supported patent has not worked the invention and cannot give a good reason why not, then the government grants non-exclusive, royalty free licenses. The owner cannot enforce the patent beyond three years from patent issuance without leave of the federal government. If the owner tries, then the litigation defendants come to the federal government, the government requires the owner to show use or licensing on reasonable terms or cause. If the owner cannot do so, then the infringement case dies because the government gives out free licenses. A patentee might have the right to bring a civil action for relief from infringement, but not if subject to a working requirement or federal march-in restrictions.

In ordinary patent law a patentee can enforce patent rights even if the patentee has not worked the invention. But Bayh-Dole establishes a working requirement for the use of the patent system–“use the patent system to promote the utilization of inventions.” Bayh-Dole would not have to state this policy if it were already baked into the federal patent system. But the federal patent system is predicated on promoting the progress of the useful arts–and progress means “dissemination” of inventions not necessarily “using” inventions. For contractors, Bayh-Dole provides march-in for nonuse, just as did executive branch patent policy. But the same policy establishing a working requirement applies just as much to federally held inventions. Just, there’s no march-in for federally owned inventions!

There’s no public right to march-in if a federal agency refuses to use an invention or refuses to license it. There’s no federal oversight of federal agencies in which such a function resides.

But the lack of march-in does not mean that 35 USC 200 and its selective codification 37 CFR 404.2 have no effect on patent enforcement. Surely they do, and must. The most apparent effect is that for non-ordinary patents–ones within scope of 35 USC 200, patents on inventions arising from federally supported research or development–there is a working requirement. A non-ordinary patent must be used to promote use of inventions, not to suppress that use. An action for infringement potentially works against the promotion of use–injunctive relief might bar use of an invention. A demand for compensation might cause users to abandon that use.

In other words, a holder of a non-ordinary Bayh-Dole patent ought to be expected to show that a demand to enforce a non-ordinary patent promoted the utilization of the claimed invention. The stipulation in 35 USC 271(d)(4) cannot apply. If a holder of a non-ordinary patent is not using and has not offered to license the invention on reasonable terms, then that holder may be denied relief and exposed to a charge of misuse or illegal extension of the patent right. We might go so far as to argue that without use or offer to license on reasonable terms, a non-ordinary patent holder’s property rights in the non-ordinary patent do not extend to suppressing use (seeking injunctive relief, say, under 35 USC 283 or damages in the form of compensation or a “reasonable royalty” under 35 USC 284.

Bayh-Dole fundamentally reshapes how federal agencies may dispose of patents on federally owned inventions. Bayh-Dole withholds authorization for federal agencies to enforce patent rights. Even if patentees are in general permitted to do so by ordinary federal patent law, federal patent law excludes patentees that are federal agencies. Where Bayh-Dole could have authorized enforcement, where it authorized most everything else, Bayhj-Dole refrains from authorizing enforcement. The only means by which a patent on a federally owned invention may be enforced is through an exclusive license and even then such exclusive licenses are narrowly authorized. If a company is already using a federally owned invention, then a federal agency has no authority to grant anyone an exclusive license, as doing so would violate the conditions upon which such licenses may be granted. Any such license would have to be granted prior to any use–necessarily infringing–of the federal invention. And even then, the license would have to meet Bayh-Dole’s conditions as necessary to raise capital for development or necessary to promote public utilization.

We come back around to my assertion: Bayh-Dole does not authorize federal agencies to use the right of enforcement. Bayh-Dole, by laying out what it does authorize, in effect denies federal agencies the right of enforcement. Whatever right of enforcement federal agencies had before Bayh-Dole, when Bayh-Dole came into effect, they lost that right. And it gets no better if federal agencies attempt to use exclusive licensing to push the right of enforcement to a non-federal licensee-assignee. That way is narrow and even once the right of enforcement has been granted, it is still subject to Bayh-Dole’s policy and objectives along with the terms and conditions required for the exclusive license.

Without the right to enforce, federal agencies’ house of cards collapses. We are back to open licensing of federally owned inventions. That’s what Bayh-Dole requires. It is not so much that the public protection apparatus for federal agencies is non-existent (there is no march-in, to be sure) but rather that such an apparatus is not necessary because federal agencies lack the standing, post-Bayh-Dole, to bring infringement actions. And that, in its way, is cool.

This entry was posted in Bad Science and tagged , . Bookmark the permalink.