The 7 Obligations of Highly Effective Bayh-Dole Compliers

Here is a list, with comments of course, of what is required for a university to comply with Bayh-Dole. In its most stubby form, the university is required to report inventions made with federal support to the government. If the university elects to retain title to any of those inventions, its obligation is to use the patent system to promote the use of the inventions so that the benefits are available to the public. Put another way, the university acts as a steward to protect the public from non-use and unreasonable use of inventions.

To comply with Bayh-Dole, a university must do at least these things:

1) Require by written agreement a commitment to (i) report inventions so the university can comply with its reporting obligations and (ii) execute documents necessary to establish the government’s rights in inventions.

For research employees. Written agreements are required of all employees other than non-technical and clerical employees. The law does not address other university personnel, such as volunteers, visiting scholars, students who are not otherwise employees, and informal collaborators, such as research personnel in other organizations.

Directed at disclosure and government rights. Written agreements commit research employees to do those things necessary to allow the university to comply with its disclosure obligation to the government, and to establish the government’s rights in inventions. These rights may be of ownership, a non-exclusive license for government purposes, or the right to waive title to the inventors with certain conditions, or to cause the invention to enter the public domain.

Not specifically about ownership. The written agreement required by Bayh-Dole does not speak to university ownership claims. While the university may elect to retain title, the university is not required to own the invention or patents issuing on the invention. Bayh-Dole provides an apparatus for how title is managed, but does not dictate any one outcome.

Government privity. Furthermore, the written agreement requirement does not specify that the agreement is a contract with the university, or if it is solely with the university. It may, rather, be construed as a commitment to the government to permit the university from fulfilling its obligations to the government, as well as fulfilling obligations directly to the government with regard to government rights. Alternatively, one might say the government has privity as a third party beneficiary under any contract between the university and its employees compliant with this requirement in Bayh-Dole.

2) Suggest a format for reports of invention.

Clear understanding of the invention. An invention report must be provide a clear understanding of the invention at the time of disclosure, including its nature, purpose, operation, and characteristics. Bayh-Dole does not require such report to speak to commercial potential, market value, stage of readiness, companies that may be interested, or other matters pertaining to the disposition of the invention.

Statutory bars. The invention report must also identify any publication, public use, or on-sale bar to obtaining a patent, and any manuscripts submitted for publication, and anticipated publication date. To determine what agency to report the invention to, the university also will need to identify the federal grant under which the invention has been made.

3) Designate contractor personnel responsible for patent matters.

Not restricted to employees. The designation is not restricted to a single person, office, or organization. At this point, Bayh-Dole uses “personnel” not “employees”, suggesting a broader reach, which might reasonably be anticipated to include outside legal counsel, employees of an affiliated foundation, or employees of an organization contracted to provide invention management services. Any of these may be construed as “contractor personnel” for the purpose of receiving reports of invention.

Not restricted to a single office or service provider. A university may designate different personnel to address different needs, such as by administrative unit (medical school or others) or technology area (software-related or conventional).

4) Instruct employees on the importance of timely reporting of inventions.

Protecting the government’s interest. The instruction may be through employee agreements, such as the written agreements identified above, or through a suitable educational program. The purpose of the instruction is to protect the government’s interest in the inventions. This illustrates a recurring theme, that university interest in an invention is, as far as Bayh-Dole is concerned, in fulfillment government interest and objectives.

5) Manage certain Bayh-Dole obligations in contracts and due to lapses.

In subcontracts. Bayh-Dole requires that obligations under Bayh-Dole flow down to subcontractors under federal awards. The university is responsible for taking this action. If the subcontractor is also a nonprofit firm or small business, then the flow down is of Bayh-Dole in the form the university accepts it. If the subcontractor is otherwise, then the flow down takes the form of the appropriate contract provision in the Federal Acquisition Regulation as implemented by the awarding agency. Thus, Bayh-Dole compliance conditions in a subcontract vary as a function of who ultimately performs the work, not who receives the federal award initially.

In assignments to invention service providers. Similarly, a university may assign Bayh-Dole rights to a subject invention to any organization which has as one of its primary functions the management of inventions, but on the condition that the university also flows down Bayh-Dole obligations to the assignee. The language in Bayh-Dole recites “rights”, which is broader than “title”. Use of “title” would suggest perfection of an ownership interest, while “rights” encompasses as well the standing to file patent applications. “Rights” is furthermore distinguished from the “provisions” of Bayh-Dole incumbent on the university. Here, the flow down of obligations in an assignment do not vary as a function of who performs the work to manage inventions. It is worth noting that the university may therefore assign rights in a subject invention prior to receiving an invention report or determining whether to elect to retain title. In such a case, the assignee undertakes such obligations. The universities obligations, however, are not suspended with such an assignment: both organizations are operating under the same provisions.

Assignment with approval. A university may also with agency approval assign rights to an organization that does not have a primary function in managing inventions. Bayh-Dole is silent on whether that approval is a simple yes or no, or whether the agency can include additional conditions to protect the government’s rights in the invention and to further the government’s objectives under Bayh-Dole.

Conveyance due to decision or failure. If a university fails to disclose or elect title to a subject invention, or chooses not to elect title, then the university must convey title to the agency upon request, if that request is made within sixty days of notice not to elect title or upon learning of a failure to disclose (after at least two months) or elect title (after at least two years). This conveyance of title is an additional compliance obligation within this category of ways in which title may be passed by the university other than following election of title.

Consultation with agency. If the university elects not to retain title to inventions, then the inventors may request that the funding agency permit the inventors to retain title to subject inventions. Agencies are required to consult with the university prior to granting any such request. Thus, a university must maintain a point of contact for such consultation.

6) Timely report subject inventions to the government.

Determination of proper reporting. Reporting inventions involves determining the proper agency to receive a given report and conveying to that agency the written report compliant with the requirements specified, including technical detail and status of patent bars. To determine whether a report is required, a university must have the capability available to it (via personnel responsible for patent matters) to determine that a given report discloses a patentable invention, that the invention is a subject invention (that is, made within the planned and committed activities of a federal funding agreement, or otherwise diminished or distracted from such activities), and that the report is sufficient to permit the university to comply with its reporting obligation (technical detail, status of bars, agency and grant identification).

Disclosure and publication status. The university has two months from receipt of an invention report to convey it to the appropriate federal agency. The university thereafter has a continuing obligation to report the status of any manuscripts submitted for publication that would create a patent bar.

7) Decide whether to elect to retain title to subject inventions, and notify the government of the decision.

Decide on title. The university also is required to decide whether to elect to retain title to subject inventions. Bayh-Dole does not specify who makes this decision. It may be the personnel designated as responsible for patent matters. A university, however, may distribute the responsibilities for the various aspects of Bayh-Dole compliance, designating personnel to receive invention disclosures, but other personnel to report inventions to the agency, and still other personnel to decide whether to elect to retain title. Why might a university distribute work in this fashion? First, information pertaining to a potential subject invention might best be reviewed directly by university counsel. Doing so preserves attorney-client privilege and permits an expert legal review of any issues arising with regard to the invention and its disclosure. Actions responsive to reporting may be best done by an office with a clerical function, reducing legal costs and ensuring communication of properly validated information to the government. Finally, election to retain title is a decision that has the potential for consequences for scholarship, research, financial and business interests, legal and risk matters, reputation with the public, and relationships with industry. These matters may be best represented by a principal investigator, a dean or other senior administrator, or an advisory committee. Bayh-Dole provides for this flexibility in compliance.

Two years or less. The university has two years from the date of disclosing a subject invention whether or not to elect to retain title. This period is shortened to 60 days prior to a statutory bar, if one arises. Election to retain title in Bayh-Dole is not equated with obtaining ownership of an invention. Similarly, obtaining title to an invention is not exactly equivalent with owning a patent issuing on an invention. These are clearly all related to one another, but it is important that they be distinguished to make clear the compliance steps from those discretionary actions that follow from compliance.

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If a university takes care of these seven items, then it has a good chance in complying with Bayh-Dole. There may be other considerations, such as when an agency declares exceptional circumstances and requires handling of inventions with other protocols, or when a funding agreement with a university involves a contract rather than grant and an agency adds additional requirements. Similarly, there are particular obligations when operating a Department of Energy facility. We will consider next compliance with Bayh-Dole when a university does elect title.

We may add that it is entirely possible for a university to comply with Bayh-Dole and not elect title to any subject inventions. Further, that doing so may be in the broadest interests of meeting the objectives of Bayh-Dole and furthering opportunities for innovation and cultivating a creative class research culture. For instance, Bayh-Dole provides under 35 USC 202(d) (and 37 CFR 401.9) that invention rights may be retained by the inventors, subject to federal agency approval. To pursue this approach as a primary strategy, a university would maintain these compliance elements to ensure timely reporting of inventions and agency decisions granting inventors the right to retain title.

An open question is just how much 202(d) activity would constitute an effective approach to Bayh-Dole compliance by a given research university. One approach, perhaps implicit in many university practices, is that the university should elect title in all inventions with judged to have commercial potential, waive title in all others, and resist inventor requests to retain title to those judged to lack commercial potential on the general grounds that the inventors will be wasting their time and money, and on less visible grounds that if inventors know the practice is not favored, time-consuming, and difficult to navigate, they will be less tempted to undersell the importance of the invention in the hope they can keep title to the invention and not be compelled to work through the university’s invention management program.

If a university does not have the resources to file on all subject inventions it judges as having commercial potential, it may cede a greater share than otherwise to the funding agencies, expecting that some portion of these will be accepted for management by the agency, which then will request various assignment and other written instruments from the inventors directly, relying on the written agreements put in place by the university to effect such compliance by research employees.

One might think, however, that allowing some portion of 202(d) inventor ownership might make for more effective outcomes in overall innovation activity. Doing so, especially where an invention is judged to have some commercial importance, may empower inventors already well positioned to develop the invention through their own breakthrough networks, may relieve the university office from taking on the responsibilities, especially if the university agrees it is less prepared for the work, and may better serve broader innovation interests, which will also advance the university’s reputation when its inventors achieve successful deployment, even if the university is not the owner or the primary decision-maker.

A number of arguments conspire to limit use of the 202(d) pathway: desire to make money for the university (and inventors); efforts to encourage participation in the university-designated system; desire to make the univesity-designated as successful as possible; efforts to prevent competition with the university system; concern for consistency in making ownership determinations; advancing the idea that in general the university is better prepared to manage inventions; worrying potential conflict of interest, misuse of resources, and generally poor decisions that might be made by inventors; a natural desire to assist; a desire to be recognized in association with important events. Such arguments might be placed in the context of the basic question: how, for any given research-originated invention, might a breakthrough network be formed that would promote the use of the invention? That is, how best to support innovation? Politically, the answer might always be “through the systems in place that rely on the technology licensing office”. But honestly, might we expect that the ways to support innovation are much more diverse than this? Do we expect innovation to serve the status quo, or challenge it?

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