NIST’s Chief Counsel on Bayh-Dole, 2

Posted on April 26, 2018 by Gerald Barnett

As further evidence that NIST’s chief counsel does not properly describe Bayh-Dole, consider this point in his first slide of Bayh-Dole “highlights”:

This point is accurate only in an obscure technical sense. Bayh-Dole does not preclude a contractor, having obtained title from an inventor, from re-assigning that title back to the inventor. It is less true, however, that a federal agency having received title to an invention made by a contractor’s employee may assign that title back to that inventor. The rights to federally owned inventions are controlled as well by Bayh-Dole. Nothing in 35 USC 207 or 209 authorizes the federal government to assign inventions to inventors. Federal agencies are authorized to assign inventions as part of an exclusive license (section 207(a)(2)), but then the inventor has to do all sorts of things, first, including developing a marketing plan for the invention.

But all this is technical gyration to save the chief counsel–work for lawyers gaming language, not for us. Continue reading →

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NIST’s Chief Counsel on Bayh-Dole, 1

Posted on April 25, 2018 by Gerald Barnett

In 2011, the Supreme Court provided a clear interpretation of the Bayh-Dole Act in Stanford v Roche. Bayh-Dole applies only to subject inventions. A subject invention is a patentable invention made in work funded by the federal government and owned by a contractor–a party to the funding agreement. Thus, Bayh-Dole applies only to such inventions after a contractor has acquired ownership of the invention. And then, Bayh-Dole decides the priority of ownership between the contractor, who now owns the invention, and the federal government, which may have an interest in acquiring that ownership. That’s it.

Here’s the Supreme Court:

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.

Bayh-Dole does not deal with inventions before they are owned by a contractor. There is nothing in Bayh-Dole that vests title in inventions with a contractor. Nothing in Bayh-Dole that requires a contractor to take ownership, gives the contractor a right of first refusal; nothing that forces an inventor to assign only to the contractor or the federal government; nothing that gives a contractor any special privilege, mandate, or encouragement to take title to inventions made in work funded by the federal government. Why? Because Bayh-Dole does not apply to any such inventions until a contractor owns them and they become “subject inventions.” Continue reading →

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Guide to Bayh-Dole by the Layers, 7

Posted on April 24, 2018 by Gerald Barnett

Eighth layer: Outcomes

We reach the eighth and final layer of Bayh-Dole: outcomes.

We can consider four elements of outcomes: activity, cost, practical application, and the effects of patent monopoly exclusion on such things as research, rapid industry and professional uptake of research inventions, the development of cumulative technology and standards, and collaboration between industry and universities.

Activity is broadly tracked by the Association of University Technology Managers (AUTM) through its annual licensing survey. However, AUTM’s survey does not break out subject inventions for separate reporting. Given that universities and affiliated nonprofits hold over 70,000 U.S. utility patents that do not carry federal funding notices, and only 50,000 U.S. utility patents that are based on subject inventions, and that AUTM’s survey requests information on all commercial deals, even ones that do not involve patented inventions, not nearly half of the activity reported by AUTM’s survey appears to be related to be Bayh-Dole related. Maybe only a third. But AUTM and advocates of Bayh-Dole routinely report total university activity as if it stems from Bayh-Dole. Continue reading →

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Guide to Bayh-Dole by the Layers, 6

Posted on April 23, 2018 by Gerald Barnett

Sixth layer: Government rights

Seventh layer: Enforcement of patent rights clauses

We must also consider the flip side of contractor non-compliance with Bayh-Dole’s standard patent rights clause–federal agency enforcement of the patent rights clauses, waiver of these clauses, and federal agency indifference. Federal agency enforcement, waiver, and indifference then form the sixth and seventh layers of Bayh-Dole.

Bayh-Dole the statute is largely complied with, because that’s a matter of federal agency compliance. But Bayh-Dole is a law that establishes the terms of federal contracts. Bayh-Dole has its effect through those contracts. If the patent rights clauses are not enforced, then Bayh-Dole fails in its purpose, even though federal agencies comply with the law by including the patent rights clauses required by Bayh-Dole if they don’t bother to enforce those patent rights clauses. Bayh-Dole does not require federal agencies to enforce the patent rights clauses. Talk about a gaping assumption made by the law. Once the agencies have properly placed the patent rights clauses in their funding agreements, their obligation under Bayh-Dole is apparently over. They don’t have to request reports on utilization, they don’t have to take ownership for failure to disclose or file patent applications, they don’t have to march-in to protect the public, they don’t have to require U.S. manufacture for exclusive licenses in the U.S. They don’t have to act on the rights they have under the government license to practice (make, use, and sell) and have practiced.

Continue reading →

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Guide to Bayh-Dole by the Layers, 5

Posted on April 20, 2018 by Gerald Barnett

Fifth Layer: practice

On to the next layer of Bayh-Dole, actual practice. We will restrict our discussion here to university practice, but things are much the same for other nonprofits. Small business practice has its own peculiarities, including the oddness of the SBIR/STTR IP agreements, but we will not work through those issues here.

It’s one thing to read the law and follow through the implementing regulations to the patent rights clauses. It’s another thing to assume that universities and other contractors actually comply with the patent rights clauses. The reality is that much of the time they don’t. Whatever is happening under Bayh-Dole does not result from contractors complying with the patent rights clauses. Something else is happening. And that something is not Bayh-Dole or its patent rights clauses.

We have worked through the statute, the implementing regulations, the various patent rights clauses, and how those clauses end up in federal funding agreements surrounded by other requirements on intangible assets. Now let’s look at another characteristic of Bayh-Dole that’s essential to any account of how the law operates or its outcomes.

Bayh-Dole operates through patent rights clauses placed in federal contracts. The enforcement of “Bayh-Dole” really involves the enforcement of the patent rights clauses in the federal contracts. But Bayh-Dole provides no provisions for enforcement. Federal agencies are not tasked with enforcement, nor is the Secretary of Commerce. As a GAO report from 1998 repeatedly observed, Bayh-Dole is not enforced: Continue reading →

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Guide to Bayh-Dole by the Layers, 4

Posted on April 19, 2018 by Gerald Barnett

Fourth layer: Funding agreements

We have looked at Bayh-Dole the statute, the implementing regulations, and the standard patent rights clauses. These are all apparatus that are disconnected from contractors and inventors–just laws and regulations and templates. The apparatus gets connected to contractors by means of funding agreements. It is to funding agreements that patent rights clauses attach, creating obligations for contractors such as universities and establishing rights in inventions for federal agencies.

Funding agreements are an important layer of Bayh-Dole as it is the funding agreement that establishes the scope of the definition of subject invention. This scope is subject of much goofiness on the part of university administrators, so it is worth considering in some detail how this scope is defined. Like most everything about Bayh-Dole, the scope of a funding agreement is not presented in a straightforward manner. We will have to work through it to show the structure.

Funding agreements to nonprofits are established by 2 CFR 200. These agreements are often called “grants” or “awards.” 2 CFR part 200 refers to the funded party as a “non-Federal entity” or “awardee” or “recipient.” Besides the desire for bureaucratic generality, the usage stems from the idea that federal awards to universities were considered subvention–grants-in-aid–rather than procurement, in which deliverables were specified. In turn, 2 CFR 200.315(c) incorporates the whole of 37 CFR part 401 by reference into each funding agreement. Continue reading →

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Guide to Bayh-Dole by the Layers, 3

Posted on April 18, 2018 by Gerald Barnett

[The default patent rights clause authorized by Bayh-Dole is the inventor patent rights clause at 37 CFR 401.9, a subset of 37 CFR 401.14. The default is enabled when contractors comply with 37 CFR 401.14(f)(2)–except they never do. Under the default, inventors if they disclose their inventions and elect to retain title, become small business contractors but have no obligation to file patent applications–patent law does not require inventors to use the patent system.]

Third layer: Patent rights clauses, continued

We are still working through Bayh-Dole’s third layer, the patent rights clauses. We finish up the discussion of the (f)(2) written agreement requirement with another look at subject invention reporting and assignment, the parallels to the (f)(2) requirement in the subcontracting requirement at (g), and the result: the inventor patent rights clause at 37 CFR 401.9 is in fact the primary patent rights clause required by Bayh-Dole. This is true even with the 2018 NIST rule change that requires organizations hosting federally supported research to require inventors to assign their inventions to the host organization. We finish with a look at the special requirements of the nonprofit patent rights clause.

The apparatus of the contracting section of Bayh-Dole is directed entirely at subject inventions. The US Supreme Court made it clear that an invention must be a subject invention to be within the scope of the law:

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.

As the Supreme Court also ruled, an invention is not a subject invention until it is owned by the contractor. The result: inventors have no obligation to disclose their inventions under Bayh-Dole, unless a contractor complies with the (f)(2) written agreement requirement. Continue reading →

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Guide to Bayh-Dole by the Layers, 2

Posted on April 17, 2018 by Gerald Barnett

Second Layer: Regulations

Third Layer: Patent rights clauses

The second layer of Bayh-Dole involves the implementing regulations. We will consider only those that have to do with the contracting section, 202-204. These regulations are found at 37 CFR part 401.

We can differentiate four parts to these regulations. The first part works to establish the scope of the patent rights clauses. The scope is established by an express discussion–an invention is subject to the patent rights clause when it is made in “the planned and committed activities of a government-funded project” or “diminish[es] or distract[s]” from that those activities. The definition of funding agreement in Bayh-Dole (201(e)) makes clear that the government funding for a government-funded project may be just “in part.” Put another way, a project in which the federal government provides at least some of the funding. The implementing regulations make clear that separate accounting for funds does not matter, nor does the chronological sequence of funding. Whether money is mixed or kept separate, whether the federal funds come before or after or simultaneous with other efforts or funding does not matter. What matters is whether the federal government has supported a project in which an invention has been made.

The implementing regulations then set out four default patent rights clauses. Continue reading →

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Guide to Bayh-Dole by the Layers, 1

Posted on April 16, 2018 by Gerald Barnett

[4/30/18: fixed an editing artifact, bringing together text on “housekeeping” into a single section where it belongs]

A helpful way to look at Bayh-Dole is as a set of layers of law, regulation, contracting, enforcement, and outcomes. There are at least eight such layers, not counting the historical situation and the legislative context. Let’s work through these layers.

First Layer: Statute

Let’s start with the statute.

Bayh-Dole is part of federal patent law. Bayh-Dole is not part of federal procurement law, where it ought to be, at least for research and development contracting. The statute layer may be divided into four parts: policy, housekeeping, contracting, and federal ownership.

Policy and objective

1. Bayh-Dole the statute provides a statement of “policy and objective” (35 USC 200) which along with definitions (section 201) establishes the scope of the law and shapes the property right in patents on inventions made with federal support. The fundamental policy of Bayh-Dole is that the patent system is to be used to promote the utilization of inventions arising from federally supported research or development.

Patents on inventions made with federal support are not ordinary patents. Or, another way, the patent property rights on inventions within the scope of Bayh-Dole are not ordinary patent property rights.

Bayh-Dole’s policy restricts the use of the patent system. In its broadest expression, the patent system offers inventors a basic exchange: publish a complete account of your invention in return for exclusive rights to that invention for a limited time. There is no requirement for ordinary patents that inventors use their inventions, or let anyone else use their inventions. For ordinary patents, as well, there is no requirement that inventors must attempt to make money from their patents or develop “commercial” products, or must enforce their patent rights, or even defend their patents from claims of invalidity.

By contrast, Bayh-Dole’s policy to use the patent system to promote the use of inventions introduces a working requirement into federal patent law for inventions covered by Bayh-Dole. Bayh-Dole inventions carry a public covenant that runs with any patent property right covering any such invention. In the implementation of Bayh-Dole’s federal ownership section, this “policy and objective” is called out as the only objective–see 37 CFR 404.2).

In addition to constraining owners of Bayh-Dole inventions to use the patent system to promote the use of inventions arising in projects receiving federal support, Bayh-Dole’s policy also establishes three other elements of its public covenant. The patent system is to be used to promote free competition and enterprise; is to promote United States industry and labor in the manufacturing of products based on inventions made with federal support; and is to provide the federal government with the rights that it needs and to protect the public from nonuse and unreasonable use of these inventions. These four elements are called out expressly in the federal acquisition regulations restatement of policy (see FAR 27.302(a) for a list of six elements to the statement of policy and objective and FAR 27.304-1 for the list of four as above). Continue reading →

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The Faster Cures FAQ on Bayh-Dole, 5

Posted on April 13, 2018 by Gerald Barnett

We are working through the Faster Cures FAQ on Bayh-Dole. This is the last bit.

7. What have the impacts of Bayh-Dole been?

Bayh-Dole has both passionate supporters and detractors. Advocates argue that it has brought the results of federally funded research out of the laboratory and into the clinic. Critics say it has increased the time and cost of research because it “has negatively affected the practice and norms of science, created “anticommons” problems, contributed to patent hold-ups, and led to unnecessary increases in consumer prices.”xiv

Supporters and detractors are not the issue. The supporters mostly misrepresent the law and make a bungle of the patent rights clauses and ignore compliance and make a virtue out of things that Bayh-Dole does not authorize. Detractors mostly complain about the supporters’ claims, but accept the supporters’ representation of Bayh-Dole. So it’s a love and bitch fest over a shared misrepresentation of the law and wholesale non-compliance with Bayh-Dole’s patent rights clauses. Whatever is happening, it is not Bayh-Dole. 

The issue is that there is almost no public evidence that shows that Bayh-Dole has met its stated objectives. Bayh-Dole has no objective to ramp up university bureaucracies. Nothing about creating hoards of patents to prevent broad public access to inventions. Nothing about substituting measures of activity and statements of hopeful intent in place of outcomes. Nothing about conflating Bayh-Dole related work with all university inventions (where Bayh-Dole patents are about 40% of the total university hoard).

The critics recited here are mostly academics. We don’t hear from industry, from inventors, from university faculty. We don’t see actual evidence. The proponents are patent attorneys, and university patent administrators, and university lobbying fronts, and biotech lobbying groups determined to keep the patent monopoly pipeline open to the pharmaceutical industry and to expand the pipeline if possible to other industries and so expand the potential opposition to any change in public policy. There are no public data to support a positive assessment of Bayh-Dole. Bayh-Dole does not require federal agencies to collect data. The GAO reported in 1998 that federal agencies don’t do anything with the data they do collect. And Bayh-Dole purports to exclude all such reported data from FOIA disclosure.

The Association of University Technology Managers (AUTM) reports that in 1979, one year before Bayh-Dole was passed, only 30 universities had a technology transfer office; by 2013, data released by AUTM indicate that more than 200 U.S. institutions with tech transfer offices responded to its annual survey.

This is most strange. Continue reading →

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