Assignment of subject inventions, not assignment of patents

Posted on November 22, 2017 by Gerald Barnett

Let’s make something really clear about inventions and patents.

Courts have repeatedly held that an assignment of an invention is made when all substantial rights in an invention are conveyed, whether by assignment or exclusive license. The rights to make, use, and sell are the conventional substantial rights. Courts have also held that reserving non-commercial rights or rights for the federal government do not affect the analysis. Transfer all substantial rights = assignment of the invention. A key test of assignment is whether the entity obtaining the rights also has standing to sue to enforce a patent on the invention. If so, then there’s been an assignment of the invention.

Bayh-Dole’s treatment of federal research contracting concerns required provisions for subject inventions, not for patents. An invention is anything that “is or may be patentable.” A subject invention is an invention owned by a contractor and made in the performance of work under a funding agreement for research.

Bayh-Dole requires a provision in the standard patent rights clause that forbids nonprofits from assigning subject inventions except to an organization that has as a primary function the management of inventions, unless the nonprofit gets federal agency approval. In any case, any assignment of the invention must carry with it the patent rights clause the nonprofit has agreed to. The patent rights clause by law must run with any assignment of a subject invention.

Now look at typical university patent licensing practice. Universities use template license agreements labeled “Exclusive License.” In those agreements, universities grant an exclusive license to “make, use, and sell” the subject invention. They further generally grant the right to sublicense and to pursue claims of infringement. Such a transaction amounts to assignment of the invention. It does not matter that the instrument is labeled “Exclusive License”–it operates as an assignment. Continue reading →

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Even the $100K/yr drugs don’t much work

Posted on November 21, 2017 by Gerald Barnett

Advocates for Bayh-Dole make a great deal over the number of drugs that involve university patents that have been approved since the passage of the Bayh-Dole Act. One of their measures is the number of drugs that have been developed. But there’s a catch–not only are many of the drugs outrageously priced, but the sad fact is, many of those high-priced drugs don’t actually provide much benefit in exchange for the suffering they cause. Let’s have a look-see.

Here’s BIO:

$1.3 trillion in economic output. Support for roughly 4.2 million jobs. The creation of more than 11,000 start-up companies. More than 200 new drugs and vaccines. This is the legacy of the Bayh-Dole Act, which for more than 35 years has empowered universities, small businesses and non-profit institutions to take ownership of innovations discovered through basic federally-funded research.

Here is Joe Allen, the Al Gore of Bayh-Dolism:

The successful integration of public research institutions into the economy is based on the Bayh-Dole Act, which inserted the incentives of patent ownership into the government R&D system. Not a single new drug had been developed from NIH funded research under the patent destroying policies preceding Bayh-Dole.

These folks don’t even attempt to show which of these drugs actually involved subject inventions–inventions made with federal support and thus subject to the standard patent rights clauses authorized by Bayh-Dole. Instead, we are to believe by association–that the number of new drugs that involve university inventions is somehow an indication of the success of the Bayh-Dole Act, and we should accept then most everything else that has been done in the name of Bayh-Dole without question–compulsory ownership policies at universities, refusal of universities to comply with the standard patent rights clause, indifference at key federal agencies to enforcing the standard patent rights clause or practicing the inventions licensed to the government. Continue reading →

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Taking Apart APLU’s Talking Points on Bayh-Dole, 4

Posted on November 20, 2017 by Gerald Barnett

One more bit about Bayh-Dole in the APLU Talking Points:

Before 1980, fewer than 250 patents were issued to U.S. universities annually; discoveries were rarely commercialized for the public’s benefit. By contrast, according to a recent survey by the Association of University Technology Managers (AUTM), in 2015 alone, U.S. universities garnered 6,164 U.S. patents, led to the formation of 950 new startup companies, and generated more than 700 new commercial products

More nonsense and gibberish. First, the numbers aren’t accurate. In the years before 1981, universities and related nonprofits were acquiring between 350 and 500 US patents per year, with Research Corporation acquiring 100 to 160 more. APLU doesn’t do history well. History, apparently, is not a friend of APLU’s Talking Points. Of these 500-600 patents a year, fewer than 100 recited federal funding. In recent years, universities have been acquiring patents at the rate of 6,500 to 7,000 per year, of which 3,500 recite government funding. The numbers are obviously larger–but then the federal research budget has also grown substantially, patent law has changed to make software, life forms, business methods, and the like patentable, and university administrators have dedicated themselves to be non-selective in what they attempt to patent. What’s changed, meaningfully, is the ratio of federally funded patents to others–from 14% in 1976 (when the IPA program was still active) to 47% in 2016. That means a much higher percentage of patents held by universities are encumbered by the bureaucratic nonsense required by Bayh-Dole’s standard patent rights clause–none of which has anything whatsoever to do with innovation, entrepreneurship, or commercialization. Continue reading →

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Taking Apart APLU’s Talking Points on Bayh-Dole, 3

Posted on November 17, 2017 by Gerald Barnett

We are working through APLU’s Talking Points on the cash cows of Bayh-Dole, commercialization, entrepreneurship and whatever else the federal government can be induced to fund.

The APLU Talking Points turn next to what the federal government should do to support universities with such commitments to intend to nurture and promote programs to advance the public good through startups that take exclusive patent licenses to the results of publicly funded research. More money for research, obviously. But then Bayh-Dole:

2) Support and Preserve the Bayh-Dole Act of 1980

Bayh-Dole, one of the most poorly drafted, pernicious, damning bits of legislation to come along, the love monster of the pharmaceutical industry and university patent brokers, made to extend their monopoly model of drug development to all inventions and industries as cover for turning federal research money into a private subsidy for pharma and the speculative investors hoping to share in pharma’s success in exploiting public health as a source of profits. In this, the NIH is complicit, since the NIH produced the draft of Bayh-Dole after it failed to extend the IPA program government-wide. Even if Congress believes that monopoly control of publicly supported biomedical inventions is a really good thing (and then quit complaining about those $100K a year medications), Bayh-Dole should be repealed for all other areas of government research activity.

Bayh-Dole destroyed the university patent agent network, destroyed university patent policies that favored inventors, destroyed the university role in contributing to the public domain, destroyed the university role in staying out of commercial entanglements. Bayh-Dole is a vile law, a cancer that should be eradicated. Where’s the 3-bromo-pyruvate to rid us of Bayh-Dole? Ah, but the APLU has embraced its cancer: Continue reading →

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Taking Apart APLU’s Talking Points on Bayh-Dole, 2

Posted on November 16, 2017 by Gerald Barnett

We are working through APLU’s Talking Points on the cash cows of Bayh-Dole, commercialization, entrepreneurship and whatever else the federal government can be induced to fund.

We reach a talking point in bold. It must be more important than the others:

Supporting and enhancing the commercialization of university research through technology transfer is a critical facet of universities’ public missions.

Again, an assertion. How does a public university come to change its public mission? Some universities have modified their policy statements to add “economic development” as a “mission.” It’s not clear however what such a thing means. What does it mean to have such a “mission.”? Why is this a mission and not a consequence of carrying out the other “missions” of teaching, research, and public service? That is, why isn’t “technology transfer” already part of teaching and public service? Why should “technology transfer” involve only those bits of technology invented at the university? Why not transfer whatever technology is most needed by those desiring instruction? Again, note the weasel wording:

supporting…enhancing… commercialization… through technology transfer… a critical facet

Nothing is presented to show how or why commercialization of inventions is so “critical” for universities. Why should universities be involved rather than specialist companies chosen by inventors? Why should commercialization be more critical than, say, public access or use? That is, for a given research invention, why should turning that invention into a commercial product be more important than teaching others how to use it? For most inventions–especially methods–there is simply no reason to put a commercial product ahead of direct use. But APLU wants us to believe that without someone making money–a lot of it via a patent monopoly–there can be no public benefit from research inventions. It’s utter nonsense, but told to us with a straight face. That’s got to mean a scam. Continue reading →

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Taking Apart APLU’s Talking Points on Bayh-Dole, 1

Posted on November 15, 2017 by Gerald Barnett

The APLU has published a set of talking points about a bunch of things (original spelling retained):

TALKING POINTS: UNIVERISTY TECHNOLOGY COMMERCIALIZATION, FEDERAL RESEARCH FUNDING, THE BAYH-DOLE ACT, AND FEDERAL SUPPORT FOR ENTREPRENURSHIP/GAP FUNDING PROGRAMS

Let’s call them “cash cows” for lack of a better organizing principle. The primary point is that the APLU is committed to making the case for continued (if not expanded) government money provided to universities. The talking points serve the role of ensuring that political appearances will substitute for fiscal accountability–that is, so long as the activities being supported are made to appear good, that’s sufficient. Whether the supported activities are really doing anything beneficial for the broader community is rather immaterial. What counts is the persistent message that they are.

Talking points, of course, have that delightful overtone of helping people who cannot think for themselves at least repeat what someone aiming to control the discussion wants to have circulating. That way the appearance can be given that most everyone has the same experience–university programs across the country are delivering technology transfer successes in the form of startup companies that vitalize regional economies, create new products, and benefit the public. But the stark reality is that the university administrators are reciting the “talking points” rather than looking at their own activity. Just no one will admit it. The justification is that sticking to the talking points is for a “good cause”–all those public benefits that universities intend by their technology commercialization programs. If intent were truth, we would all be millionaires. The actual “good cause” however, as the APLU document makes clear, is getting more government money to pay administrators to operate technology commercialization programs, especially ones that involve “entrepreneurship” and startup companies. Continue reading →

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Bogus intended incentives of the patent system

Posted on November 14, 2017 by Gerald Barnett

Here is an article espousing the virtues of the Bayh-Dole Act: “Shooting Ourselves in the Foot” by Joe Allen, posted by the University of Rochester’s Office of Technology Transfer with a head note about how terrible it would be to amend Bayh-Dole [Rochester’s tech transfer office is now rebranded URVentures, and the WordPress site has since been deleted sometime after August 2018, but Allen’s article is available via other means]. Here’s one bit:

Prior to Bayh-Dole, when the federal government took invention rights away from their creators making them available to all through non-exclusive licensing (similar to the open source model), Congress found that not one drug had been commercialized from NIH funding.  About 28,000 federally funded inventions gathered dust in Washington, benefitting no one. This is not surprising since prior government policies destroyed the intended incentives of the patent system.

This is rubbish. Prior to Bayh-Dole the NIH operated the Institutional Patent Agreement program. Under the IPA, a university could own inventions made with NIH support and seek to commercialize them. The federal government did not “take invention rights away” from “their creators”–the government allowed universities to “take” the rights away, on the condition that the universities did something beneficial with those rights. The universities argued they could do better than the federal government. It’s just that under the IPA program, they did much worse than the federal government, with a 5% commercialization rate, while the government’s biomedical commercialization rate was 23%. Where federal agencies did support research on the condition that patentable inventions were deliverables, such as in the Department of Agriculture, the commercialization rates for non-exclusively licensed new products was nearly 100%, according to the Harbridge House report. Continue reading →

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The Bayh-Dole implications of “big” projects created by university policies and practices

Posted on November 13, 2017 by Gerald Barnett

In the usual depictions of the Bayh-Dole Act, the emphasis gets put on university ownership of inventions made with federal support. What is not pointed out is that Bayh-Dole not only allows (but does not require) such ownership, but makes this allowing a required default in federal contracting for research, and then tops it off by making it nearly impossible to alter the default or even to enforce anything having to do with the default.

But even less commented upon–meaning never, as far as I can tell–is Bayh-Dole’s handling of the scope of the government’s interest in inventions made with federal support. This scope matters, as it is the scope of the government’s rights in inventions that lies at the base of how the government might respond to monopoly pricing of prescription drugs discovered, invented, and made with federal support.

Let’s look at this in outline form. I will try not to oversimplify, and will keep the snark to a minimum. Here is a typical scenario:

A university investigator starts an inquiry. Call it a project.

The investigator requests federal support for part or all of the project.

The request includes a written account of the project and the proposed work to be funded by the government.

The government, however, provides the funding to the university that hosts the project, using a funding agreement. This is where Bayh-Dole’s standard patent rights clause comes into play.

The university, moreover, has written policies that require inventors to assign inventions to the university and to commercialize those inventions.

The university files patent applications on the inventions with claims that are directed to commercial applications.

In practice, the university assigns inventions to commercialization partners using an instrument labeled “exclusive license” and making a show of withholding formal title to licensed patents.

In this scenario, the project started by the investigator is expanded at each step. Continue reading →

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Let me come in again. Three ways an invention meets the definition of “subject invention.”

Posted on November 10, 2017 by Gerald Barnett

Here are the three basic ways to make an invention made with federal support meet the definition of “subject invention.” I said there were two ways when there were really three, but hey, this is the advanced course.

  1. Accept assignment of the invention when offered
  2. Make each employee participating in a federally funded project a party to the funding agreement
  3. Compel each employee to assign each invention

The first approach is the one authorized by Bayh-Dole. Bayh-Dole provides no requirement that federal agencies require universities or other research hosts to obtain assignment or compel assignment of inventions made with federal support. Since Bayh-Dole preempts all other laws on the matter unless they expressly reference Bayh-Dole, there’s no way under Bayh-Dole to change the approach short of amending the law. The Supreme Court in Stanford v Roche was adamant this was the case. Anything that a university might do to compel assignment has nothing to do with a requirement authorized by Bayh-Dole.

The second approach is the clever addition made by the standard patent rights clause authorized by Bayh-Dole. The standard patent rights clause requires universities to make each employee a party to the funding agreement. It does this by requiring universities to require each employee to make a personal written commitment to take three actions under the funding agreement to protect the government’s interest. When a university complies with this requirement, it makes each employee a party to the funding agreement, and by the definitions in Bayh-Dole, therefore also a contractor. When an employee-contractor invents, the employee-contractor owns the invention by federal common law, and thus the invention becomes a subject invention without any assignment to the institution that hosts the research, or anyone else. No university that I know of complies with the standard patent rights clause on this point.

The third approach is the one followed by most universities. Continue reading →

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Continued Employment as Consideration

Posted on November 9, 2017 by Gerald Barnett

Here is a nice article that worries whether continued employment is sufficient to create an enforceable obligation to assign inventions to an employer: “Is Continued Employment Enough to Uphold Invention Assignment Agreements?”

The brief answer is, yes.

Add the qualifications: under Wyoming state law, for at-will employees.

The distinction in a footnote:

The Wyoming Supreme Court distinguished its previous ruling in Hopper v. All Pet Animal Clinic, Inc., 861 P.2d 531 (Wyo. 1993), which required separate consideration, other than continued at-will employment, for a non-compete agreement, noting “there is a fundamental difference between non-competition agreements and intellectual property assignment agreements,” and that the stability of the business community is served by not requiring additional consideration for intellectual property assignments. Preston, 277 P.3d at 87.

I am boggled to understand what the “fundamental difference” is between non-compete agreements and intellectual property assignment agreements. The whole point of an invention assignment agreement is to enable an employer to prevent inventors and others from exploiting an invention in competition with the employer’s own interest in exploiting the invention. Continue reading →

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