We have worked over the Bayh-Dole Coalition’s account of the statute. Sure, Bayh-Dole is a complicated mess, but that’s no excuse for getting the law so wrong, with such a lack of consistency and careful distinction. But there it is. The folks associated with the Coalition would rather you believed their illusions and loose talk than give you a fair basis to assess what is going on and what might be done about it.
Let’s move on. What has the Coalition left out of its summary of Bayh-Dole?
Federal exclusive licensing and money interest. The law authorizes federal agencies to deal in patent monopolies with exclusive licenses and take a money interest in licenses. Both create huge institutional conflicts of interest and run against the Attorney General’s recommendations, which formed the basis for the Kennedy and Nixon patent policies. The federal agencies’ authority to grant exclusive licenses rather than release rights to all disenfranchises inventors from practicing their inventions. Once an invention is acquired by a federal agency, the inventors are pretty much screwed.
Development and marketing plans. The requires federal agencies to demand a development or marketing plan from anyone requesting a license. No one can receive a license merely to use an invention. Oh, and the plans become a government secret, so the public cannot see whether the plans are legitimate or have achieved their goals. This requirement eliminates the “dedication” of inventions to the public once a patent application has been filed. If inventors can’t come up with money and a development or marketing plan, they can’t practice what they have invented. This is a huge change over prior practice, in which inventors working at federal agencies could expect access to their inventions regardless of whether a federal agency, having acquired title, obtained a patent or not. In the prior regime, a federal agency patent was a kind of award of priority, recognizing inventive work. In the Bayh-Dole regime, a federal agency patent severs inventors from their invention and invites others to take exclusive control of such inventions.
Everything’s secret. When Bayh-Dole was first passed, the law provided that information provided to the government with regard to the utilization of subject inventions, and which was privileged or confidential, would be excluded from federal public disclosure law. Three years later, Senator Dole and Norman Latker amended the law to require that all information received would be treated as privileged and confidential–even if it wasn’t. Thus, the public has next to nothing with regard to the operation of the law. There’s no public reporting of practical application, of the terms on offer either to the public or to licensees, nor of the royalties or other payments received by contractors or by federal agencies. There’s no means, then, for public oversight, no way to evaluate claims made for the success of the law, and no insight available for how the law might be changed to improve performance or adapt to changing conditions. Given the organizational conflicts of interest created by Bayh-Dole–especially with regard to failure to utilize, failure to license, reasonable terms, exclusivity, and money interest competing with public interest–secrecy ensures that the conflicts of interest cannot be managed by the contractors or federal agencies. Without disclosure of the conflicts and recusal from taking actions when there are conflicts that are not managed or manageable, much of the present activity claiming authority from Bayh-Dole would shut down. That would not be a big problem because that activity is largely ineffective and noncompliant when it is not downright offensive. The Bayh-Dole Coalition plays off this secrecy by making its claims appear to be factual, when it’s just political bullspin.
Inventor contractors. A contractor is any party to a funding agreement. A contractor may make employees or other individuals parties to a funding agreement (by any assignment, substitution of parties, or subcontracting any duties). Those individuals are treated as contractors by Bayh-Dole. Those individuals, when they invent under the funding agreement, own their inventions, those inventions become subject inventions, and the inventors, as contractors, have the same right to elect to retain title as any other contractor. No other contractor–even their employer–has a right under Bayh-Dole to “take” title. Inventor contractors are to be treated as small business contractors, even if the inventors work at a nonprofit. Inventor contractors have their own patent rights clause, which does not require them to file patent applications or lose ownership of their inventions. Inventors are first in line for title to their inventions, not last after universities and federal agencies have picked over what they want. And if those inventors have not become parties to the funding agreement, their inventions cannot be subject inventions unless they assign those inventions to contractors, and nothing in Bayh-Dole gives those contractors any authority, mandate, or privilege to “take” title. Wow. Bayh-Dole supports inventor rights–but you would never know it.
Free competition. Throughout Bayh-Dole are requirements that if complied with create conditions for competition in the utilization of inventions arising from federally supported work. There is a working requirement not found otherwise in federal patent law. The patent system is to be used to promote utilization. That would exclude enforcing a patent to suppress utilization of an invention. There is an express statement expecting the patent system to be used to promote “free competition and enterprise.” That would strongly indicate that nonprofits, lacking their own basis for competing with private industry, should be granting non-exclusive licenses the vast majority of the time. The restrictions on federal agency exclusive licensing make clear the extent of Bayh-Dole’s concern with exclusive licenses as anti-competitive. The march-in provision–the requirement to grant licenses upon request by a federal agency for a failure to achieve practical application or satisfy health or regulatory needs or fail to obtain a waiver for US manufacturing in the context of exclusive licenses to use or sell in the United States–makes clear that it is considered entirely viable to operate under Bayh-Dole by granting non-exclusive licenses. The “on reasonable terms” requirement in the definition of “practical application” is at the heart of Bayh-Dole’s concern for free competition. Those “reasonable terms” are the terms, including price, that would be offered if there were free competition, even if there is not.
Government license. As a condition of electing to retain title to an invention arising from federally supported research or development a contractor has acquired, the contractor must grant to the federal agency a non-exclusive license to practice and have practiced the subject invention. The wording comes from the Kennedy patent policy via the NIH’s institutional patent agreement, on which Latker said he based Bayh-Dole (and he sort of did, but didn’t). In the Kennedy policy, “practice” is defined as “to make, to use, and to sell.” Thus, to practice and have practiced for all government purposes (“for or on behalf of the United States”) essential divides the invention rights between a contractor and the federal agency. The contractor cannot exclude the government and anyone the government authorizes to act on its behalf. This license then divides the use of the invention between what the Kennedy policy calls the “non-governmental market” (the contractor’s market) and a governmental market (everything within the authority of the United States–including state governments). Outside the governmental market, with restrictions, a contractor may choose what to seek to patent, when to enforce the patent, and when, if ever, to license the invention to others (or one other).
Nonprofit restrictions. Bayh-Dole requires the executive branch to create standard patent rights clauses implementing the requirements set out by the statute. Small businesses have one clause. Inventor contractors have a subset of this clause. But nonprofits have a clause that’s more restrictive than the small business clause. The nonprofit clause restricts assignments of inventions, and requires the nonprofit clause to apply to any assignee, even if the assignee is a for-profit company. The other nonprofit restrictions then come into play–anyone operating under the nonprofit clause must share royalties (if they ever license) with inventors and must use all income net costs of administrating subject inventions for scientific research or education. Any exclusive license that conveys all substantial rights in an invention–make, use, and sell–may operate as an assignment of the invention. An exclusive patent license may also assign the underlying claimed invention. Boom! Get it? Universities routinely use exclusive patent licenses to assign the underlying subject invention. The title to the patent stays with the university, but the title to the invention goes to the assignee, along with the requirement that the assignee comply with the nonprofit patent rights clause. If a company does not want to dedicate the balance of its income earned with respect to a subject invention to scientific research or education, then it would do well to not accept an exclusive license to all substantial rights. It must take a shorter term exclusive license, or an exclusive license to sell, or to use, but not encompass all rights in an invention, or take a non-exclusive license and run with it. The provision is never enforced, but there it is. Maybe if organizations purporting to be authorities on Bayh-Dole pointed this bit out, federal agencies would feel some pressure to enforce. And we’d see way more nonprofit non-exclusive licensing promoting free competition and enterprise.
Pseudo-uniform treatment. Bayh-Dole requires federal agencies to use default patent rights clauses unless they can justify custom clauses. And Congress can override Bayh-Dole at any time by citing the law and expressly providing for different treatment for a given class of inventions. Various parts of the patent rights clause may be waived, and there’s nothing requiring federal agencies to enforce any provisions of the patent rights clause. Thus, uniform patent rights clauses is pretty much a sham–yes, everyone starts with roughly the same clauses unless they decide not to, but waivers and enforcement are all over the place, as are agency actions to request title if a contractor fails in the bureaucratic bits of the law having to do with timely disclosure of inventions, electing to retain title, and seeking patents. Practice under the law is anything but uniform by both contractors and federal agencies.
The Bayh-Dole Coalition isn’t just doing its best to summarize a complicated statute. It is playing fast and loose with the law, swapping in pious visions and made up conditions for what’s there in the law. When it has come to litigation, as in Stanford v Roche, this kind of fast and loose changing of the law has been dismissed. Bayh-Dole is a mess of law. It’s not just a mess in how the law came to be, but the law itself is a mess. The Bayh-Dole Coalition glosses over the mess with a prophetic vision of what might be, presented as fact when there is woefully little–next to nothing–to support that vision. On the other side, we have 50,000+ university utility patents in the Bayh-Dole era citing federal funding. Most are unlicensed. Most of what’s licensed hasn’t met the standard of practical application. The law and practices under the law are a dismal failure. Start there. Work through what would happen if federal agencies were required to comply with Bayh-Dole, and were required to enforce the patent rights clauses, not turn a blind eye or stumble around like bureaucratic clowns fussing over the timing of a disclosure report or patent application and ignoring the public protection requirements that limit the patent property rights in subject inventions.
There you go. Now you have a better grasp on Bayh-Dole than the Bayh-Dole Coalition has ever got. I’m sure of it.