The Arizona Commerce Authority Guidance on Bayh-Dole, 3

Posted on July 24, 2019 by Gerald Barnett

We continue with our review of the Arizona Commerce Authority’s account of Bayh-Dole. The ACA has made these points [our comment]:

Bayh-Dole is really broad [yes–but its breadth is not just in the scope of what’s patentable, but also in everything done that comprises a project receiving somewhere, at least in part, federal money]

Invention is anything made in federally supported research [no; Bayh-Dole’s focus is subject inventions–ones that a contractor acquires and made in work supported at least in part by federal funds]

The government gets a license [yes, if you choose to keep title]

The government has no right to commercialize your invention [because it doesn’t need to do that to screw you over]

You have the right to make money from your invention [no; you have the obligation to use the invention so that the benefits of that use are available to the public on reasonable terms]

Now a long section of problematic bullet points, ending with a confusion between nonprofits and small companies and a weird discussion of march-in. Sigh. Here’s the ACA header to what follows:

Small businesses and non-profit organizations can retain title to intellectual property in a federally funded “subject invention.” In exchange for this title, the organization is required to:

No. It’s title to the subject invention–a right to patent or seek plant variety protection, not “intellectual property” generally. Bayh-Dole outright permits contractors to elect to retain title to subject inventions (ones they already have acquired) after disclosing those inventions to the federal government. That’s 35 USC 202(a). Sequence: acquire, disclose, elect to keep. Continue reading →

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The Arizona Commerce Authority Guidance on Bayh-Dole, 2

Posted on July 23, 2019 by Gerald Barnett

We are working our way through the Arizona Commerce Authority’s unhelpful misguidance to small businesses regarding Bayh-Dole. Our first article worked through the ACA’s fake law and fake history, culminating with its note about Stanford v Roche, a case important enough for ACA to add a note, but ACA was too dull or indifferent to bother correcting its account of Bayh-Dole in response.

Now we get to ACA’s effort to rub small business noses in fake law. Worse, watch as the ACA flips from talking to small businesses to talking to universities about how to exploit small businesses, using Bayh-Dole.

Companies using the SBIR/STTR program must understand the implications of intellectual property (IP) rights and the limitations and restrictions caused by contracting with the government.

Again, we are only talking patentable inventions, not IP. The government’s interest in subject inventions certainly must be understood. But it’s not what the Authority makes it out to be. The short answer for small companies is: Don’t do it. Don’t contract with the government under SBIR or STTR. You will get overwhelmed with administrative demands that have nothing to do with your success. You will get distracted trying to comply. You may even get addicted to getting more federal funding, like a phase 2 grant. You will turn into an SBIR junkie rather than develop any product. You will go back for more phase 1 and phase 2 grants. Don’t go there. It’s not worth the energy, the hassle, the exposure. Continue reading →

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The Arizona Commerce Authority Guidance on Bayh-Dole, 1

Posted on July 22, 2019 by Gerald Barnett

Here is the Arizona Commerce Authority providing advice about IP and the Bayh-Dole Act in the SBIR/STTR programs to small businesses. The article was apparently written a decade ago, updated with a note after Stanford v Roche (2011), and apparently abandoned to blink out its obsolete and mistaken message to Arizona small businesses since, just to hammer home the point of how much the Authority really cares about small businesses and these issues, which according to the Authority, are among the most important ones a small business ought to understand. Let’s work through this lingering, unattended bit of bad guidance from the Arizona Commerce Authority.

The Bayh-Dole Act (also called the University and Small Business Patent Procedures Act) is United States legislation dealing with intellectual property developed as part of federal government-funded research.

A poor opening. Bayh-Dole deals only with patentable inventions and (non-patentable) plant varieties–and only then when such inventions (i) have been acquired by a party to a federal funding agreement and (ii) have been made in the performance of work under that agreement. Bayh-Dole does not concern not intellectual property generally. Bayh-Dole does not concern inventions made in work receiving federal support until those inventions are acquired by a party to the federal funding agreement–a contractor. If a contractor does not acquire, Bayh-Dole does not apply.

The opening is then just plain sloppy, and in misleading and potentially damaging ways. Here is a less sloppy revision:

The Bayh-Dole Act deals with patentable inventions (and nonpatentable plant varieties), when acquired by company contractors, that have been made in research or development work receiving federal support.

Folks really shouldn’t just make things up about the law when offering guidance.

Bayh-Dole stipulates the provisions for a standard patent rights clause for every federal research or development funding agreement unless a federal agency can justify a different patent rights clause. This standard patent rights clause becomes effective when there’s an invention made under contract that is acquired by the contractor. Bayh-Dole defines such acquired inventions as subject inventions. A subject invention is not just any invention (or intellectual property) developed in federally funded research–the distinguishing condition is that the invention has been acquired by a contractor. If a given invention has not been acquired by a contractor, then there’s no subject invention, and Bayh-Dole at least does not apply. Other federal laws may apply–but not Bayh-Dole. This is all laid out in detail by the Supreme Court in Stanford v Roche. An invention “of the Contractor” is one owned by the Contractor: “of” means owned by.

Continue reading →

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More Discussion of “Reasonable Terms” Nonsense

Posted on July 19, 2019 by Gerald Barnett

Or, why certain Bayh-Dole pundits are wrong and how federal march-in might be something that companies might really want!

There is absolutely no way that “reasonable terms” as a standard for march-in means “licensing terms” and does not concern “price.”

In Bayh-Dole, the standard for march-in under 35 USC 203(a)(1) is a determination that a contractor has not achieved practical application and is not expected to do so. Practical application is, essentially, use of a subject invention so that the benefits of that use are available to the public on reasonable terms.

This has nothing to do with licensing terms unless the licensing is to the public, such as a royalty-free non-exclusive license available to anyone, resulting in public use.

Exclusive licensing by a university to a company has nothing to do with practical application. A license is not an “effective step” toward practical application. It doesn’t even change who is on the hook to achieve practical application. An assignment of the subject invention does change who is on the hook–but starts the effective steps issue all over again.

Offering terms that are claimed to be “reasonable” for a license also has nothing to do with practical application. Offering license terms cannot possibly even be considered taking an “effective step” to achieve practical application. Continue reading →

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Department of Education Open Licensing and Bayh-Dole Goofiness

Posted on July 18, 2019 by Gerald Barnett

We have looked at fresh worthlessness of Bayh-Dole march-in in the context of Bayh-Dole’s defaults on required background invention licensing when a contractor licenses a foreground subject invention. We noted that 35 USC 202(f) provides for federal agencies to include a requirement to grant licenses to background invention rights–but only, apparently, before the agency has formed a contract, any research has been done, and no inventions made and disclosed–so how would anyone know whether to include the background invention licensing requirement?

The background invention right requirement should be in the default patent rights clause, especially for nonprofits. But it is not. We have to assume that’s by design. As a result, any march-in action that involves contractor background invention rights is doomed to failure. And contractors are free to deal in subject inventions for the money without bothering with practical application–wait for people to use the invention, and then sue them. Why be proactive about it when one can play the pig?

Let’s look at one example of how federal agencies refuse to use the government and public interest rights available in Bayh-Dole. Continue reading →

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Contractor Background Rights and March-in

Posted on July 17, 2019 by Gerald Barnett

Bayh-Dole’s march-in provisions (35 USC 203) are worthless. They were designed to be worthless, except for creating a show of public oversight and intervention that allowed Bayh-Dole to get through Congress and be signed into law. Bremer bragged about how he had to step in and make sure the march-in procedures wouldn’t operate by making them so ungainly and difficult that no federal agency would dare to use them. Which is just how things have turned out. But just how worthless is march-in?

Consider background inventions. Under Bayh-Dole (35 USC 202(f)), a funding agreement cannot require a contractor to license any invention that’s not a subject invention unless that requirement has been approved by the head of the federal agency along with a written justification. Furthermore, even if a funding agreement adds such a provision, a federal agency still cannot use that provision without determining that

the use of the invention by others is necessary for the practice of a subject invention or

for the use of a work object of the funding agreement and

that such action is necessary to achieve the practical application of the subject invention or work object.

This is all so strange. Let’s work through it. Continue reading →

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Bayh-Dole Basics, 8: Reasonable Terms Comments-9

Posted on June 28, 2019 by Gerald Barnett

We can now–finally–oh gawd this is painful–turn to the place of “reasonable terms” in all of this mess of Bayh-Dole march-in. Simply, Bayh-Dole march in concerns itself with benefits of use available to the public on reasonable terms, not licenses that allow private use available on reasonable terms. Surprise! Bayh-Dole authorizes march in to terminate non-exclusive licenses.

In Kennedy and Nixon patent policies, the standard for march-in is

either:

(i) a failure to bring an invention to the point of practical application within three years from patent issuance, where practical application is defined as establishing that the invention is being “worked” and the benefits of the invention being worked are “reasonably accessible to the public.”

As an alternative, the owner of principal rights in a federally supported invention could make the invention “available for licensing royalty-free or on terms that are reasonable in the circumstances.” The terms of such licensing clearly and primarily involve the financial consideration–the price of the license

or:

(ii) a public use regulatory requirement, a health need, or a public purpose stipulated in the contract.

Here in (ii), there is no concern for practical application. It’s a policy matter, having nothing to do with what a contractor may have done with regard to producing commercial product or making benefits of an invention’s use reasonably accessible to the public. Continue reading →

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Bayh-Dole Basics, 8: Reasonable Terms Comments-8

Posted on June 26, 2019 by Gerald Barnett

In Bayh-Dole the march-in for health or safety needs is drafted to prevent the government from breaking up private patent monopolies on supported inventions merely because there are health or safety needs. The default public policy in Bayh-Dole is that the patent holder should be allowed to keep the exclusive right to “alleviate” those health or safety needs so long as those needs are “reasonably satisfied.”

What might it mean to “reasonably satisfy” a “health need”? On what basis might the government determine that an individual’s need has been “reasonably satisfied”? Does the individual get any say about it? Would it be that a medicine doesn’t work very well or has unwanted side effects or costs so much that the individual must be bankrupt before it can be supplied? Or are all these things just reasonable adjuncts to alleviating that health need?

Now consider a bunch of people who all have roughly the same health need–they have a cancer, say. If a medicine out there sort of helps some of them and doesn’t help others, with the usual mix of potentially awful side effects, is that a “reasonable satisfaction” of the health need? Some folks sort of benefit and others don’t. Too bad, that’s reasonable? Or are we only talking about scarcity? That if there’s plenty of product for sale relative to the “demand,” then has the need been “reasonably satisfied” regardless of the price of the product, say, or the method of delivery, or the particular formulation? Continue reading →

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Bayh-Dole Basics, 8: Reasonable Terms Comments-7

Posted on June 25, 2019 by Gerald Barnett

Now let’s look at Bayh-Dole’s treatment of march-in (35 USC 203(a)) and “reasonable terms”:

. . . the Federal agency . . . shall have the right . . . to require the contractor . . . to grant a . . . license . . . upon terms that are reasonable under the circumstances . . . if the Federal agency determines that such —

(1) action is necessary because the contractor or assignee has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention in such field of use;

This is the failure to achieve practical application prong one of Kennedy–the paragraph (f) of the Nixon patent policy–and the only reliance on the definition of practical application in Bayh-Dole. Bayh-Dole march-in adds that the march-in must be “necessary”–as if other march-in might be simply governmental whim. The point of Kennedy march-in was that if an invention was not promptly brought to the point of practical application–with benefits reasonably accessible to the public–then the government should march-in. The failure to work an invention or to make the benefits of working the invention reasonably accessible to the public was sufficient. There was no need to add a further determination of necessity to the action. Bayh-Dole also adds the “is not expected to take” language, which further distances the march-in determination from actual practical application–no expectation that a contractor (et al.) will soon start to take effective steps. At some point, adding qualifications ends up turning a requirement into vapor. Continue reading →

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Bayh-Dole Basics, 8: Reasonable Terms Comments-6

Posted on June 24, 2019 by Gerald Barnett

Now let’s look at the transmogrification of the definition of practical application from Kennedy to Bayh-Dole. In doing so, we also will see how the usage of “reasonable terms” arises, along with Bayh-Dole’s introduction of “reasonably satisfies.” This gets detailed. Anyone suffering from TL;DR syndrome with regard to complicated policy will have difficulty. But the Bayh-Dole tricks are in the details. If you want the outcome only, skip to the end of this installment, where I promise you, there’s a simple statement to slurp up.

Here’s the Kennedy definition of “to the point of practical application”:

To the point of practical application–means to manufacture in the case of a composition or product, to practice in the case of a process, or to operate in the case of a machine and under such conditions as to establish that the invention is being worked and that its benefits are reasonably accessible to the public.

Nixon retains this definition unchanged. The Federal Procurement Regulations then implement the Nixon patent policy in 1975, and parse the march-in with a significant variation–the FPR treatment (1-9.107-5) makes it clear that march in can take place for either a failure to achieve practical application or for public purposes. The wording is subtly screwed up.

With respect to each Subject Invention to which the Contractor retains principal or exclusive rights, the Contractor: . . .

Agrees to grant to responsible applicants, upon request of the Government, a license on terms that are reasonable under the circumstances:

(i) Unless the Contractor, his licensee, or his assignee demonstrates to the Government that effective steps have been taken within 3 years after a patent issues on such invention to bring the invention to the point of practical application, or that the invention has been made available for licensing royalty-free or on terms that are reasonable in the circumstances, or can show cause why the principal or exclusive rights should be retained for a further period of time; or

(ii) To the extent that the invention is required for public use by governmental regulations or as may be necessary to fulfill public health, safety or welfare needs, or for other public purposes stipulated in this contract; . . . .

Let’s look at two subtleties. Continue reading →

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