NIST smokes Stanford v Roche

Posted on May 9, 2018 by Gerald Barnett

I don’t know what NIST folks were thinking (fortunately). But here’s what may have happened. They may have in fact read Stanford v Roche, but that clearly has not helped them. They are still clueless.

Supreme Court:

Bayh-Dole applies only to subject inventions. Inventions (patentable, made in federally funded work) become subject inventions when they are acquired by a contractor. Bayh-Dole does not “displace” an inventor’s title to his invention. Bayh-Dole then does not give contractors any special privilege to acquire any invention.

But the Supreme Court adds this helpful bit at the end of its decision:

Stanford contends that reading the Bayh-Dole Act as not vesting title to federally funded inventions in federal contractors “fundamentally undermin[es]” the Act’s framework and severely threatens its continued “successful application.” Brief for Petitioner 45. We do not agree.

The Supreme Court rules that Bayh-Dole does not vest title–and then goes further to argue that not vesting title does not undermine the Act’s framework, does not threaten its continued “successful application.” By contrast, the faux Bayh-Dole contention, led by Stanford with scores of legal representatives from other universities in tow, is that the true “framework” of Bayh-Dole is that contractor-organizations should own the patentable results of federally funded research–even must own, or the law fails. The Supreme Court rejects that point. Repeat: the point is rejected by the Supreme Court. Anyone should reject the point anyway. It’s a stupid point.

Oh, let’s put it in discrete bureaucratic euphemisms: “There is no support for the contention that arbitrary institutional ownership of patentable research findings made in public interest research results in improved benefits to the public arising from the use of those findings. Rather, the overwhelming evidence is that non-selective, compulsory institutional ownership of such research findings works against utilization, against rapid dissemination and uptake of results, against further research, against free competition, against cumulative technology development, interoperability, and standards, and against public benefit–especially public benefit on reasonable terms.”

Or, put in terms of federal patent law: “Congress did not intend Bayh-Dole to displace an inventor’s title to his invention. It does not matter, then, what anyone desires of patent law. Institutional ownership is simply not there as an objective, as vesting, as special privilege, or as mandate.”

In short. It’s a stupid point. No evidence for. Lots of evidence against. And even if there were evidence for–it’s not a function of Bayh-Dole. Stupid.  Continue reading →

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“the same provisions as the contractor” in (k)(1)

Posted on May 8, 2018 by Gerald Barnett

Here’s a follow-up note on the nonprofit assignment restriction in 37 CFR 401.14(k)(1). With the NIST changes in the standard patent rights clauses, we might ask again about the interpretation of “such assignee shall be subject to the same provisions as the contractor.”

Let’s say the reading is, “such assignee will be subject to the same standard patent rights clause as the contractor.” Well, that makes no sense, because there is only one standard patent rights clause now, since NIST rolled up the clause at 37 CFR 401.14(b) into (a) and then disappeared (a) in favor of notational simplicity. If there is only one standard patent rights clause, then “the same clause” is always going to be that one clause.

But this proposed reading also makes no sense another way. The point of the nonprofit restrictions are to highlight that universities and other nonprofits exist with the tax standing they have because they operate in the public interest. That’s why, in part, they receive their federal grants–through granting procedures, not procurement procedures. If a nonprofit could simply assign a subject invention and the assignee could operate without the nonprofit restrictions, then there’s no point in the nonprofit restrictions, really. They would become an incentive for the nonprofit to assign every subject invention to a for-profit and so rid subsequent invention management decisions of the nonprofit requirements–there would be no further restrictions on assignment, no obligation to share royalties with inventors, no obligation to use the balance of income earned from subject inventions for scientific research or education, and no requirement to make an effort to attract small business licensees. Continue reading →

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NIST’s other changes to Bayh-Dole’s implementation, 2

Posted on May 8, 2018 by Gerald Barnett

We are working through NIST’s other changes to the implementation of the Bayh-Dole Act. It’s a rather strange exercise, since the standard patent rights clause required by Bayh-Dole as a default is not enforced and universities comply only with the paperwork requirements and not with the substantive provisions. For that matter, federal agencies do not act on their rights under the standard patent rights clause–don’t exercise their license, and don’t march-in to protect the public from nonuse and unreasonable use. So it’s all rather sad to watch NIST “fine-tune” such a disastrous situation, arranging deck chairs on the Titanic.

Let’s look at a third significant change NIST has made.

3/The 60-day window for government requests to own

Bayh-Dole section 202(c) sets out the conditions upon which the federal government may “receive title” to a subject invention. These conditions come at the end of paragraphs setting out provisions that are to be placed in each federal funding agreement with a small business or nonprofit contractor. Each reads as [provision]; [remedy]. Thus, the contractor will be required to disclose each subject invention within a reasonable time; the government “may receive title” to any subject invention that is not so disclosed (202(c)(1)). This pattern repeats for election to retain title, and filing a patent application. There is no such remedy for failing to report on invention utilization, failing to include in patent applications a government funding and rights notice, preference for US manufacture, or any of the nonprofit-specific requirements, such as restrictions on assignment of subject inventions and on use of income earned with respect to subject inventions, as well as a preference in licensing for small businesses. Continue reading →

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NIST’s other changes to Bayh-Dole’s implementation, 1

Posted on May 7, 2018 by Gerald Barnett

NIST’s new rules for the implementation of the Bayh-Dole Act go into effect in May 2018. I have worked through the assignment provision for federal contracts that has been added to the (f)(2) written agreement requirement and how nutty that is–contractors must require inventors working under federal contracts (but perhaps not grants) to assign to the contractors those inventions that the contractors already own. Sigh.

I tried to make some sense out of that with an argument that equitable ownership is a form of ownership and the requirement to assign inventions that a contractor-employer already equitably owns is a matter of perfecting the contractor-employer’s ownership rights. Still, it’s nutty in the sense that the federal government now forces contractors to own inventions that contractors may not have any desire to own in the first place. But now the contractors have to take title to those inventions and then notify the government that they do not wish to retain that title, and then the government can do what it usually does and ignore the whole business.

The likely upshot of the assignment clause is that university administrators will claim that Bayh-Dole has been fixed and now surely does require universities to require their inventors to assign all inventions made with federal support. That’s not the case, but university administrators often engage in patch thinking for complicated things and assert the most foolish things.

NIST has made other changes, however, and these may matter more. So let’s look at a few of those. Here an overview:

1/NIST puts multiple patent rights clauses into a single omnibus patent rights clause loaded with conditionals and then renumbers.

2/NIST notes that by executive order Bayh-Dole is expanded to apply to all companies and so drops in a number of places references to small businesses.

3/NIST removes the 60 day window in which a federal agency must act to request assignment of title in the event that a contractor fails to disclose a subject invention or fails to elect to retain title in the time required.

Each of these changes carries with it consequences. We will discuss each in turn. Short answer. Don’t waste your time. Nothing changes that will undermine Bayh-Dole’s ineffectiveness and murkicity. Things will remain as ineffective and murky as before. But if you have way too much time on your hands, or really do want to understand Bayh-Dole, then read on at your peril.  Continue reading →

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What has NIST done, actually?-3

Posted on May 4, 2018 by Gerald Barnett

The start of this article is here.

We have been working through what NIST’s introduction of an assignment requirement for subject inventions actually does. In one view, nothing. In another, a technical if not prissy requirement that inventions a contractor already owns must be assigned to the contractor. From that, we have worked through the idea of equitable ownership–what’s  fair from the circumstances–as a possible explanation for NIST’s new rule requiring contractors to require inventors to make a written agreement to assign inventions to the contractors that the contractors already own–to protect the federal government’s interest.

D. C. Toedt III, an attorney, has a helpful diagram and discussion of when an employer owns an invention. If an inventor uses an employer’s resources, the employer generally can expect to have a “shop right” in any invention–much like a non-transferable, non-exclusive license to the invention. Otherwise, look to see whether the employee was “hired to invent,” or “set to experimenting,” or there were “special circumstances” (such as, the employee is a senior officer of the company with an equitable duty to assign inventions to the company). In any of these situations, a company may have equitable title in an invention made by an employee. The result can be characterized various ways, including (as Toedt points out in his helpful notes) courts can construe an “implied in fact” contract between the employer and employee with regard to assignment of any inventions within the scope of the claim of equitable title.

To underscore this line of development. An employer (in general, any employer) has no claim on an employee’s inventions merely because the employee is employed. No equitable title claim there. Similarly, there’s no equitable title claim based on the use of an employer’s “resources.” While an employer and employee can enter into an agreement that the use of an employer’s resources (made available so the employee can do whatever the employee has been hired to do, short of inventing or assigned to conduct experiments) in fact is the consideration for assignment of inventions made with those resources, the employer and employee have to actually enter into that agreement. The agreement is not implied by what is “equitable.” What is equitable, in situations of employment or use of an employer’s resources is that the employer have a “shop right” to use the invention in the employer’s business. Any other outcome depends on a voluntary agreement with its own offer, acceptance, and consideration.

Put it another way, the value of the “resources” provided may well be tiny compared to the value of either an invention or a patent on that invention. Only the stupid, desperate, and indifferent among inventors would give up ownership like that for next to nothing. They would publish openly before they would accept a deal that would doom their work to being excluded from broad availability. If an inventor gives up ownership of an invention, and the employer obtains a patent, then even the inventor cannot practice the invention independently without the employer’s approval. Graduate students cannot graduate and practice what they learned in the lab–even their own inventions–without a bureaucrat’s permission and that isn’t likely if the bureaucrat is unwilling to grant to those graduate students royalty-free non-exclusive licenses.

For inventions that are already closely tied to an employer’s proprietary products and related IP, perhaps that is not a big deal. But if the invention is something that stands alone from the employer’s assets, it can be a big deal that the employer takes ownership anyway. Continue reading →

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What has NIST done, actually?-2

Posted on May 3, 2018 by Gerald Barnett

Let’s work through what NIST has done with its new rule on assignment of subject inventions by written agreement.

The Supreme Court in Stanford v Roche (2011) ruled that Bayh-Dole’s contracting provisions apply only to subject inventions, and that subject inventions are inventions owned by the contractor. The Court made it clear that Bayh-Dole did not vest ownership of inventions with the contractor, did not compel inventors to assign inventions to the contractor, did not prevent inventors from assigning other than to the contractor.

The Court was adamant that Bayh-Dole’s contracting provisions dealt only with the priority of ownership of an invention made in a research project with federal support only after a contractor had acquired title to such invention. Here, read for yourself. The Court starts with a reference to section 210, which asserts Bayh-Dole’s precedence over all other statutes with regard to subject invention but for Stevenson-Wydler (which concerns federal laboratories):

But because the Bayh-Dole Act, including §210(a), applies only to “subject inventions” —“inventions of the contractor”—it does not displace an inventor’s antecedent title to his invention.

There–Bayh-Dole applies only to inventions a contractor has come to own, not to inventions that an inventor has invented. Remember, Stanford’s argument was that Bayh-Dole vests ownership with the contractor. The Supreme Court rejected that argument. Continue reading →

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What has NIST done, actually?-1

Posted on May 2, 2018 by Gerald Barnett

NIST has made an attempt to turn Bayh-Dole into a vesting statute. From all appearances, that is what a casual reader would think has happened with NIST’s new subject invention assignment language. With help from inept (if not complicit) university patent managers, a casual reader might even think that all NIST has done is provide a technical “fix” to what was intended by Congress all along, if not for a “mistaken assumption” (as Sean O’Conner calls it) that universities always obtained invention assignment agreements from their employees. But all this–the assignment, the true intention, the mistaken assumption, the fix–is hogwash.

The folks in charge of Bayh-Dole are clueless as to how the law operates and attempt to substitute their own public policy for the one expressed by the law, and in doing so make an even deeper hash of the implementing regulations. It’s like bad software programmers adding their own buggy patches to an already failed code base.

What has NIST done, actually? It’s tempting to say “nothing.” But that wouldn’t be true. And it’s tempting to say that NIST has addressed a “technical flaw” in the reasoning behind Bayh-Dole, that somehow the folks drafting Bayh-Dole overlooked the fact that universities might not require inventors to assign. But that would be a stupid temptation, since the folks drafting Bayh-Dole knew the university situation through and through–they were from universities and did business with the universities. They were crappy draftsmen, but not stupid crappy draftsmen. Continue reading →

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NIST’s Chief Counsel on Bayh-Dole, 5

Posted on May 1, 2018 by Gerald Barnett

Unlike the other various fakographics and misguidances and misrepresentations of Bayh-Dole that we have reviewed, this slide deck by NIST’s chief counsel is distinctive, since NIST has primary responsibility for Bayh-Dole’s implementation and patent rights clauses. Thus, a failure to be clear, to be accurate, to be sensible to the law and its effects is a deep failure, something fundamentally wrong with the legal guidance shaping the law. Reform of Bayh-Dole starts with repealing the layers of attorneys that misrepresent the law, turning it into their own vision of public policy rather than the public policy that the law itself expresses. If Bayh-Dole were implemented and enforced on its own terms, and not on the substituted terms put up by attorneys because no one is there to stop them, Bayh-Dole would make be an experiment in public policy worth the attempt. As it is, there’s no hope for it but repeal with a determination not to allow the pharmaceutical industry to shape the entire framework of federal invention management policy.

The definition of practical application in Bayh-Dole includes “for the benefit of the public”: practical application is the use on an invention so that “benefits are available to the public on reasonable terms.” Only in the department of redundancy department does one have to tack on the extract “for the benefit of the public.” But here the chief counsel is talking loosely, in the abstract. Of course we expect that the federal government justifies any action it takes as “for the benefit of the public.” Patent monopolies benefit the public, no doubt. At least, who can argue in the abstract? And there’s a subtle difference between a definition of practical application meaning use of inventions owned by federal contractors “with benefits to the public on reasonable terms” and a broader claim that government-funded research should “achieve practical application . . . for the benefit of the public.” In the first instance, we look at each subject invention and ask, “Well, where’s the practical application for this one?” In the second instance, we might look at “research” in general and ask “Has there been practical application?”–of course, here and there–and rhetorically then add, “Did we not set up this system to benefit the public? Shall we not then take credit?”

In loose talk, these are all the same thing–so generalized that any differences disappear into a general assertion that all government activity is intended to benefit the public. That’s not the issue. The issue is not an abstract intent, but what actually happens, who actually benefits, and whether the terms of that benefit are reasonable. Yeah, we are talking about Bayh-Dole the statute, not the warm assertions of intent by attorneys. We are talking about how the law operates, not a proxy, faux version of the law that the Supreme Court dismantled, only to leave the scene and allow the same attorneys back on site to rebuild the fauxness once again. What the chief counsel puts as a “highlight” of Bayh-Dole and what the law says are different–really different. Continue reading →

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NIST’s Chief Counsel on Bayh-Dole, 4

Posted on April 30, 2018 by Gerald Barnett

One last slide from NIST’s chief counsel’s talk from 2013. Much to discuss.

How to unwind this assertion? The Bayh-Dole Act requires federal agencies to use an arbitrary default patent rights clause. In the absence of Bayh-Dole, executive branch patent policy permitted nonprofits and small businesses to deal in patents on inventions made with federal funding. Bayh-Dole did not enable anything new that way. Bayh-Dole changed the process of making a determination whether, for any particular invention, that it was in the public interest for a nonprofit to deal in patent monopolies.

Before, the nonprofit had to make a case. After, the nonprofit had an arbitrary right to keep ownership, and federal agencies could (but are not required to) act to correct any of the nonprofit’s failings.

Before, a federal agency could wait to see what was invented before making a determination. A given grant could give rise to very different sorts of invention. Some inventions might be better served as standards rather than as enticements for speculative investors; some inventions might be better managed as research tools available to all rather than given over to any one organization to exploit for profit; some inventions may only be meaningful if a number of other inventions are also always available and on common terms, rather than permitting ten or twenty or thirty nonprofits to each claim a tiny portion of the whole and attempt to license that tiny portion exclusively. After, federal agencies must declare an alternative patent rights clause before an award is even granted, and face a lengthy review and appeals process if they try this approach. Continue reading →

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NIST’s Chief Counsel on Bayh-Dole, 3

Posted on April 27, 2018 by Gerald Barnett

NIST’s chief counsel gives, let us say, a unhelpful representation of the law. Let’s continue with his second slide titled “Bayh-Dole Highlights.”

The government does not “retain” a license. The government is entitled to receive that license. The law uses “shall have” (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

The difference in wording matters. “Retain” implies that the government has broader rights and “keeps” some of these rights while giving up others. But under Bayh-Dole, the government is forced to use a standard patent rights clause which requires the contractor to establish or confirm the government’s rights (37 CFR 401.14(a)(f)(1):

The contractor agrees to execute or to have executed and promptly deliver to the Federal agency all instruments necessary to (i) establish or confirm the rights the Government has throughout the world in those subject inventions to which the contractor elects to retain title,

A contractor would have no need to either establish or confirm anything if the government “retained” rights. The mindset here is all wrong, and gives the wrong impression, and again is not helpful. Continue reading →

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