We are working through Drexel’s bogus badness about Bayh-Dole, hoping in the process to learn something not bogus about Bayh-Dole–and to see just how sloppy, loose, and confused Drexel folks are about Bayh-Dole, and by extension about technology transfer.
Drexel’s account of Bayh-Dole turns from general banalities to present “Key Provisions” of Bayh-Dole. We will work through these. Yes, we have to.
The University is entitled to retain ownership of any inventions created as a result of federal funding, unless the funding agency informs the University up front that the agency will retain title to inventions derived from the funded projects because of specifically identified “exceptional circumstances” or other specified conditions.
“Retain ownership of any inventions.” Not true. Bayh-Dole’s provisions on keeping ownership apply only after a contractor has obtained ownership. “Retain” here is used in the sense of “take,” but the Supreme Court expressly rejected this usage of “retain.” The university gains no special privilege from Bayh-Dole to take ownership of any invention. “Entitled” here is entirely misleading. Furthermore, Bayh-Dole’s provision to allow contractors to retain title to inventions that they have gone out and acquired is conditional, and it is the conditions that ought to follow the main clause–compliant disclosure to the government and proper patenting practices. What follows instead in the Drexel statement is another problematic statement. The reference is to Bayh-Dole’s provision for a determination of “exceptional circumstances” (35 USC 202(a)) under which a federal agency may use an alternative patent rights clause, which may then involve–but need not–a claim by the federal agency to own any inventions made under a given funding agreement. However, federal agencies do not “retain title” in such situations because they never have title until they have received assignment of the invention from whomever holds title–the inventor, the contractor (by assignment), or some other (also by assignment).
Drexel’s use of “retain title” here points to an incompetent understanding of patent law and that part of patent law called Bayh-Dole. Bayh-Dole does not vest title to inventions made in federally supported work with contractors, nor with federal agencies. Drexel sets up the idea–thoroughly rejected by the Supreme Court in. Stanford v Roche–that before title to an invention made in federal work may vest with the inventors, it first must attempt to vest with the contractor, and if the contractor refuses to keep title, then the title attempts to vest with the federal agency, and only if the federal agency also refuses title does the title eventually vest with the inventors. Former senator Bayh argued exactly this in his amicus brief. This, Bayh claimed, was what he intended. The Supreme Court ruled, essentially, that this fantasy of title is plain nuts. If Congress–not just one senator, privately, had intended such a “sea change,” they would have made that express. Congress did no such thing. Title to inventions vests with inventors. Title does not move but by conventional, non-Bayh-Dole processes, such as written assignment. The government has nothing to “retain” until after it has obtained assignment.
A university contractor has no obligation under Bayh-Dole to obtain assignment of any invention made in federally supported work. If a university does not obtain assignment, then (but for a fun special case that universities deny exists) the invention cannot be a “subject” invention and Bayh-Dole’s requirements for disclosure and patenting and the like don’t apply. Since Bayh-Dole cancels past federal policy and regulations requiring federal agencies to request ownership of inventions made under federal contract, the only statutory means by which a federal agency may compel acquisition of an invention is after a contractor has obtained title and failed to disclose the invention to the government or chooses not to retain title or screws up its patenting of the invention.
If the university does not obtain title to an invention made in federal work, title remains with the inventor and the federal agency has nothing to say about it. The inventor is free to whatever the inventor wants with the invention–just as federal patent law has it. Nothing in federal patent law requires an inventor to use the patent system at all, or with any special requirements.
If the university complies with Bayh-Dole’s standard patent rights clause (this is the fun special case and no university complies), then according to 37 CFR 401.14(f)(2), the university must make its research inventors parties to the funding agreement. As such, inventors become contractors (by the definitions at 35 USC 201(b) and (c)). As contractors, inventors are subject to their own patent rights clause, 37 CFR 401.9. They don’t operate under the university’s patent rights clause, 37 CFR 401.14. They have rights akin to subcontractors, which after a fashion they are. The (f)(2) requirement–a written agreement between the inventors and the federal government as an extension of the patent rights clause of the funding agreement–requires the university to divest as it were any interest in inventions made under the funding agreement that the university would otherwise have as a condition of the grant or permitting its researchers to participate in the grant-funded work or allowing them to use university resources made available for the grant-funded work. Most university TLOs refuse to accept this result. They put their hands over their eyes, and with the questionable intelligence of the Ravenous Bugblatter Beast of Traal believe that if they can’t see the regulatory wording neither can anyone else.
Or, and this is seriously worse, they do see what the regulations require but choose to misrepresent it to their faculty and to the public. And that misrepresentation is what we are concerned with here.
We can rewrite Drexel’s first key provision, then, as follows:
The University, if an inventor chooses to assign an invention made in work receiving federal funding, and the University notifies the funding agency that it chooses to keep title to that invention, then the funding agency will not request assignment of the invention unless the University fails to disclose the invention to the funding agency or fails to pursue and defend any patent that might issue. In cases of “exceptional circumstances” a federal agency may specify other requirements regarding ownership of such inventions.
When a University innovator discloses the creation of an invention derived from federally funded research, the University has two months from that date to disclose that information to the appropriate federal agency. The University also must patent all inventions it elects to own and commercialize.
There’s a bit of truth here. Under Bayh-Dole, a contractor must disclose each subject invention “within a reasonable time after it becomes known to contractor personnel responsible for the administration of patent matters” (35 USC 202(c)(1)). The implementing regulations specify “reasonable time” as “two months.” So far so good. The rest of Drexel’s statement is gibberish. The requirement applies to inventors, not to “innovators.”
Inventions to be disclosed by the university are ones the university has obtained–inventions “of the contractor,” meaning owned by the contractor, and the standard patent rights clause limits how a contractor may come to own such inventions. So it’s not just any invention “derived” from federally funded research. And “derived” is wrong. The scope specified is “arising from” (35 USC 200) and “conceived or first actually reduced to practice in the performance of work under a funding agreement” (35 USC 201(e)). “Derived” misses the point altogether. Inventors don’t disclose the “creation” of an invention–that would be like a birth announcement. Bayh-Dole requires the university to disclose the invention itself, not merely report that an invention exists. The standard patent rights clause gets into all the details (37 CFR 401.14(c)(1))–essentially, the personnel responsible for patent matters must gather the information on which a determination of a patentable invention is made, and convey this information to the funding agency so that if the contractor doesn’t want to keep owning or screws up the patent work, the agency can take over with the necessary information in hand.
The second sentence is almost pure gibberish. The university is required to file patent applications, not to patent. The university has no right to “elect to own.” It has a right to “elect to retain title” to those inventions that it has otherwise acquired outside of anything to do with Bayh-Dole or federal funding. There’s nothing in Bayh-Dole about electing to “commercialize” inventions. Drexel here misrepresents the law, making it appear that Drexel’s decision to “commercialize” inventions is a requirement of Bayh-Dole. It isn’t. Bayh-Dole does not mandate “commercialization.” The standards are “utilization” and “practical application”–use of an invention with benefits available to the public on reasonable terms, including sufficient availability to reasonably satisfy health or safety needs or regulatory requirements. Nowhere is commercialization mandated. Even in 35 USC 200, Bayh-Dole’s statement of policy, the one use of “commercialization” is parallel with “public availability” and subordinate to the primary objective of using US “industry and labor.” To mandate is to use US industry and labor, however one goes about “practical application,” not to “commercialize.” And what do you think “commercialization” means? Is it “to produce and sell product on reasonable terms to meet public needs”? Or is it rather “to attempt to find less reluctant licensees, and every so often succeed”? Does “commercialization” describe an outcome of the use of the patent system or a TLO’s administrative process of taking ownership of inventions in order to seek licensing revenue? If you guess the latter, you are closer to Drexel’s meaning than to Bayh-Dole’s.