Finding the True Intent

I have been mulling over this sequence of statements from the court in the case of Shaw v. The Regents of the University of California:

The true intent of a contracting party is irrelevant if it remains unexpressed.

When a public employer chooses instead to enter into a written contract with its employee (assuming the contract is not contrary to public policy), it cannot later deny the employee the means to enforce that agreement.

We also reject the University’s argument that the Patent Policy is a mere personnel policy which it may modify unilaterally. Although the University is entitled to revise its Patent Policy, it cannot do so with respect to Shaw because of its written agreement with him.

In the Shaw case, the University of California argued that it had intended something in its patent policy that wasn’t expressed in the language of the policy.  The court was having none of it.   The court found that there was a contract between UC and Shaw, that the patent policy was incorporated into that contract even if UC hadn’t intended for that, and that while UC was at liberty to change its policy as it wished, it was not a liberty to change the contract it had with Shaw.  Shaw was as much entitled to enforce the contract as UC was.  Well now, this raises some interesting thoughts.

In the case of the University of California, the university requires faculty and staff to sign a “Patent Acknowledgement” (previous to the Shaw case, it was called a “Patent Agreement”).  That forms the basis for a contract, and that contract freezes the patent policy with regard to unilateral changes by the university.  It doesn’t matter that circumstances might change–that’s a primary purpose of a contract, to keep mutual promises despite changes (other than Acts of God, as they are called) that might happen.

Here is a simple form of making a contract on the matter;

Patent Agreement

I affirm that l have received and have read the Boston University Patent Policy/Charles River Campus.
For and in consideration of the provision by Boston University of support in the form of funds, space, personnel, facilities, instruction, supervision or other assistance, l hereby accept the aforesaid Patent Policy as determinative of my rights and obligations in relation to any discoveries or patentable inventions.
Name (Type or Print)

The question arises, however, what about universities that don’t have a separate written agreement?  There are two general versions of this situation.  In one, the university merely asserts an ownership interest in faculty inventions.  In the other, the university asserts the ownership interest as a condition of employment. A policy generally governs how an organization will conduct itself with regard to some area of activity.  It is something that guides, and may constrain, organizational actions.  Failure to follow policy may lead to a finding of a failure of due process, which in turn may result in challenges to actions that have been taken.  A policy on its own applies to those authorized to act in some capacity for the organization.  A policy has problems, however, when it aims to bind others.  For that, one generally needs written agreements–contracts if you will–by which someone agrees to actions in exchange for the benefits offered by the policy.

Thus, a university may have a policy of paying faculty for teaching and doing research, and a policy to stop paying if a faculty member leaves his or her position for other work.  The faculty member does not have to agree to such a thing.  It is simply a policy of the university.  No contract required.  A faculty member might desire a contract, however, if there’s a possibility that the university could unilaterally change its policy and stop paying.

When we come to intellectual property, however, policy statement on its own doesn’t do much.  A university can have a policy that it demands ownership of inventions, but that policy does not create an obligation for faculty to assign their inventions–their scholarship, their personal property–to the university.  If they do so when requested, it is because they choose to do so, not because they have promised (in a contract) to do so.  It does no good to claim that the policy forces faculty to do so.  That is merely a kind of blustery bullying–using the threat of administrative action to force someone to give up property that is assuredly theirs by the US Constitution and federal patent law.  For public universities, it amounts to eminent domain–taking private property for public purposes.  Such a taking requires due process and just compensation.  Those standards are not generally met by present public university practice, and in particular the royalty sharing schedules fail to provide just compensation because in many cases–the vast majority of cases, in fact–no compensation is paid at all.

A royalty schedule is perfectly appropriate in a policy environment of voluntary assignment.  If a university chooses to have a “take-it-or-leave-it” approach, fine.  If faculty want the benefit of the university’s licensing office, then they will take it.  One rationale for such a royalty schedule is to make it clear to everyone involved what the deal is–no special arrangements for faculty, no clever opportunistic takings by administration.  In that regard, it makes some sense to have a standard, and if there are going to exceptions, it makes some sense to post those exceptions as they arise, so everyone has notice of them, perhaps even thirty days before they go into effect, so if there are issues, they get dealt with.

So a patent policy that merely asserts a university claim does not have sufficient standing to execute that claim.   Consider (link here):

Cornell University requires inventors to assign to the university or its designee all rights and titles of their inventions and related property rights that result from activity conducted in the course of an appointment with the university and/or using university resources, including those provided through an externally funded grant, contract, or other type of award or gift to the university.

This is an assertion of a requirement to assign.  But there is no apparent contract to assign.  There may be, however, a contract with regard to employment.  If an inventor at Cornell refuses to assign, it is not clear at all that Cornell has a remedy with regard to the employment contract with the inventor.

Consider this policy statement (link here):

University employees shall report all inventions and discoveries to the University’s Office of Intellectual Property and Technology Transfer. As a condition of employment, and even if a specific patent agreement is not signed, University employees agree to assign all inventions in which the University has an interest to the University, to an invention management agency designated by the University, or to the sponsor if required under agreements governing the research. Employees shall execute documents of assignment and do everything reasonably required to assist the assignee(s) in obtaining, protecting, and maintaining patent or other proprietary rights.

This policy statement asserts that the policy requirement is a condition of employment–that is, if one doesn’t comply, one could be fired.  However, firing an inventor does not get the university any closer to obtaining ownership.  The remedy is right there in the policy–employment standing.  If the invention in dispute is worth more than what an inventor makes at the university, then it might be fine to be fired and continue to hold ownership.  That is, the policy does not create an obligation to assign, but rather makes it a condition of employment to agree to assign.  Employment is a threat.  But there’s no contract here, apparently, with regard to assignment.  The university might intend to acquire rights (or more to the point, certain administrators may be all hot and excited to acquire those rights), but intention is not the same thing as having an equitable interest.

The policy above has other defects worth noting.  The claim to inventions is limited to those inventions in which the university “has an interest”.  What inventions might those be?  The policy does not come out and say.  The presumption is, the claim will be established based on review.  Such an approach is a hold-over from the days in which a review would determine whether there was one or more of (i) a research agreement under which inventors had agreed to assign inventions to the university or the sponsor; (ii) an arrangement by which the university provided special support in exchange for an ownership interest; (iii) that the use of university resources was such that it was equitable that ownership be with the university; or (iv) the inventors desired the university to take ownership.  If one or more of these conditions held, then the university could expect to request assignment and get it.  It was all rather reasonable.

The problem for such a policy now, however, is one of scope rather than demand.  Just what, beyond the four reasonable conditions, could give rise to the “university’s interest”?  One view of this, taken by certain overheated administrators, is that the university’s interest is “anything they want”.  Another is, it’s only what can be established after review–either because the university and its inventors have made contractual commitments to a sponsor, or because the university has a special written arrangement with the inventors, or because the inventors want the university to own, and this, too, comes out in the review. The policy does not resolve this ambiguity, which is one of scope, not the firmness by which the claim is asserted.

I have left out condition (iii)–the use of resources involved in making the invention.  There are two points to make here.  First, that the university in question conducts no review for use of resources in its invention disclosure protocols (at least not that I can tell).  So how could resources be a condition for determining that the university had an equitable interest?  Second, the fact that an invention has been made does not mean that any resources were used to come to that invention.  An invention can be conceived in a discussion in a hallway or in a coffee shop.  The experiences and insights that might lead to such a conception could arise because of teaching, or personal curiosity, or an odd interaction with a company engineer on a bus or at a conference–any number of ways other than using university laboratories, equipment, and supplies to mess around with stuff that out of the blue sparks an inventive thought.  Generally the use of resources comes about when one attempts to actually reduce the invention to practice.

For an invention to be a patentable invention, it has to meet both tests–conception (all the parts present in the mind of the inventor, and recognized as an invention by the inventor) and reduction to practice (actual reduction, by building a prototype that practices all the elements of the invention and shows them to function for their intended purpose; or constructive reduction to practice, where all the elements are described, typically in a patent application, so that one with ordinary skill in the art could practice the invention without undue experimentation).  Until both conception and reduction to practice are met, one does not have a patentable invention.  One has ideas, and one may feel one has invented, but there is as yet nothing to own by means of patent law.  One could publish an account that shows someone with more than ordinary skill in the art how to come to the same idea, and not reduce the invention to practice, actually or constructively.  One could, for instance, publish ideas as they arise, so that by the time they are combined into something new, useful, and non-obvious, well, they aren’t *non-obvious* because everyone else has jumped to the conclusion, too.  Call it sharing the delight of discovery.

Thus, policies have to play with the problems of what an “invention” is.  The policy above gets clever:

The term “invention” means any invention or discovery which is or may be patentable or otherwise protectable as to ownership.

What has been dropped from this definition is “under title 35 USC or 7 USC 2321 et seq.”  That is, the “otherwise protectable” should mean “protectable by patent or patent equivalents (such as plant variety protections).  But here the university leaves this stuff off and makes it appear that an invention could be protected by, say, trade secret, or by copyright (in the case of computer software).  There would be “protection” of a sort, but it would not necessarily be by “ownership” of a “right”.

Here is a policy definition that tries to be ever more clever:

The term “discovery” or “discoveries,” as used in this policy, shall mean any inventive idea and/or its reduction to practice which relates to: new processes or methods of producing a new and useful industrial result; any composition of matter, including chemical and biological compounds; any new devices; any new plant; any new design in connection with the production or manufacture of an article, any new computer hardware and/or software programs; any knowledge supporting these inventive ideas, systems, devices, compositions, programs or processes; and any new use or improvement of existing systems, devices, compositions, programs or processes.

Gone is whether there is something patentable or even ownable.  The university claims ideas and knowledge are “inventions”–essentially, any idea one might have could be called “inventive” in a folklorish kind of way–if it seems new to the one having it, that might be enough.

Here is another definition of invention that aims to be clever, too:

Collectively refers to all technical contributions, including inventions, discoveries, processes, methods, uses, product/design improvements or modifications, or combinations thereof, conceived and/or reduced to practice during the course of research carried out for or at the University which are of a patentable nature.

Note the “conceived and/or reduced to practice” language.  The policy claims ideas, again, rather than patentable inventions.  This ambiguity is further enhanced by the restrictive clause at the end, “which are of a patentable nature”.  How does such a nature differ from, say, an invention that is or may be patentable?  It’s hard to know–and perhaps that is the intent of the policy drafters–to create a policy that only they can interpret.

You can see from this how useless a present assignment would be.  All it would do is assign title to inventions when the university has established its interest.  But first it has to establish the scope of its interest.

Some policies indeed aim to do that.  Here is one that is quite outlandish:

Intellectual Property made (e.g., conceived or first reduced to practice) by any person, regardless of employment status, with the direct or indirect support of funds administered by the University (regardless of the source of such funds) shall be the property of the University, except as provided by this or other University policy.

Here it is clear that the demand for ownership is not a condition of employment.  The scope is everything except what isn’t part of everything.  The university asserts that it owns even the work of non-employees, and even when the “support of funds” is “indirect”.  What could such indirect support mean?   Note as well this recurrent theme of “conceived or first reduced to practice”.  The university apparently claims ownership of ideas of non-employees who receive “indirect” support from the university.  Bizarre.

The “conceived or reduced to practice” language apparently comes from a fundamental misunderstanding of the standard patent rights clause authorized by Bayh-Dole.  Here it is:

(2) Subject invention means any invention of the contractor conceived or first actually reduced to practice in the performance of work under this contract,

The problem is that an invention is not patentable until it has been both conceived and reduced to practice, so the proper logic is first to have an invention (both conceived and reduced to practice) and then do a further examination as to whether the conception was within the “planned and committed” activities of the federal funding agreement and whether there has been an actual reduction to practice (that is, a working prototype has been built).   Thus, if one has an idea for an invention but has not reduced it to practice, under the federal patent rights clause, there is no subject invention.  However, under university policy statements working their cleverness, it would appear that we find a new definition of “invention” that comes into being when there’s a conception, even without reduction to practice.  I expect that the majority of university invention disclosure reports fail to include a reduction to practice step–which happens, generally, when there’s a prototype (actual reduction) or a patent application (constructive reduction).

Of course, no ownership is transferred by such a statement as in the outlandish policy statement above.   It is merely a statement of administrative intent.  Perhaps administrators would be disciplined for a failure by them to obtain ownership.  Again, making the claim is distinct from having a protocol by which that claim can be contractually enforced.

Why the insistence on making claims?  Of course, there is greed, and the love of the petty administrator for others to recognize their authority.  But in the history of things, the deal was, if the university had contracted for ownership, or contracted to assure a sponsor that the sponsor would have ownership or a non-exclusive license from the university, or the right to negotiate an exclusive license with the university, then the university had better obtain sufficient rights to comply with this contractual obligation.  Of course, the university could stop including such clauses in its sponsored research agreements, but that would be too simple, now, wouldn’t it?

If one thought that federal contracting rules required the university to take ownership to comply, then this part of the policy couldn’t be over-drafted enough.  But federal funding agreements with universities generally do not require the university to take ownership of inventions, nor of course do those agreements create some sort of magical vesting of ownership.  So there is no compliance issue in federal funding agreements.  Thus, a policy statement such as this one is wrong in multiple ways:

Unless otherwise stated in this Policy, the University is the owner, under federal and California law, of all intellectual property created by members of the University community which is:

  • created or developed during the course of an individual’s responsibilities to USC, including works made for hire; or
  • created or developed pursuant to a sponsored research agreement or pursuant to a written agreement to transfer ownership to USC; or
  • created or developed with the significant use of University facilities, funds, resources or supplies.

Intellectual property is defined as follows:

Intellectual property encompasses numerous forms of intangible personal property.  For purposes of this Policy, intellectual property includes but is not limited to copyrights and copyrightable materials, patented and patentable inventions, tangible research property, trademarks, service marks and trade secrets.

So intellectual property is broader than what is known as “statutory” intellectual property–patents, copyrights, and trademarks.  It also includes, here, trade secrets and chattels–junk in labs, essentially, like rats and circuit boards and cell lines, with the implication that the definition can be expanded to include “intangible personal property” of other sorts as well.  We can almost leave pass such things as “copyrightable” materials–as it is unclear what that could possibly refer to, post-Berne Convention.  Perhaps someone liked the parallelism with “patentable and patented” even though “patented” also makes little sense in this context, unless the university purports to claim inventions patented by others merely because the invention was “developed” with “significant use” of university resources–but what if the inventors aren’t the ones doing that development?

More important, however, is the claim that the university owns as a condition of federal and state laws.  Federal patent law does not provide employers with ownership, so that’s out.  Bayh-Dole does not provide universities with ownership, so that’s out, too.  California labor law (see sections 2870-72) does not assert ownership for employers but rather sets limits on what employers can claim (and this policy does not comply with that law).  So there’s not much this policy has to hang its hat on, other than making it appear that law supports its claims, when there’s really little for it, other than that works made for hire are owned by the institution as author when the institution exerts an authorial control over the preparation of a work.  Not much else here.

It is rather pompous of the policy to assert that “the university is the owner” of intellectual property, when all the policy really can do is assert that the university intends to claim ownership of everything it can, less works that it cannot legally claim or “traditionally” has not claimed.  To make a claim in policy is one thing.  To make it stick is another. For title to an invention or a work of authorship not made for hire to pass to another, there has to be a written assignment that transfers title.  What is the basis on which a university administrator can compel that assignment?

Some universities try to shortcut all this (link here):

All employees and others creating intellectual property in the
course and scope of employment are required to assign (and
do assign) to the Board all rights in intellectual property in
which the Board claims an ownership interest under this
policy. In addition, all employees and others creating
intellectual property (including students) with a significant
use of Board or university resources are required to assign
(and do assign) to the Board all rights in intellectual property
in which the Board claims an ownership interest under this

Here we find a policy trying to use a present assignment to obtain ownership of inventions and other intellectual property–again with a broad, custom definition:

“Intellectual Property” includes all forms of legally recognized intellectual property, including copyrights, patents, trade secrets, trademarks, and plant variety protection together with any associated or supporting technology or know-how. For the purpose of this policy, “intellectual property” also includes tangible research property such as research tools, prototypes, and records used or produced in the course of university research projects.

The statutory forms of intellectual property, plus trade secrets (not technically statutory intellectual property) and the great claim for “any associated or supporting technology or know-how”, along with “research tools” and “records”.  That’s quite an expansive claim–whatever can be owned in any way, even if it’s not within patent or copyright law.  And yet it is all just in a policy statement.   The university has no standing to make assignments for faculty or others.  It cannot assert that individuals “do assign” anything.  There is no “do” for which such an assignment operates automatically.  It’s pure administrative fiction, like plumping feathers.  It’s an impressive display in its way, but nothing that creates the contractual obligation that it seeks.

Here’s one more policy statement:

All inventions or discoveries to which this policy applies are owned by Northwestern University. The ownership rights to an invention or discovery are the exclusive property of the inventor if the University has contributed nothing substantial or essential (as, for example, funds, space, materials, or facilities) to the conception or development of the invention or discovery, and the invention or discovery is outside the scope of the inventor’s normal field of employment responsibility and activity within the University. Where the University has entered into an agreement for a project sponsored by a government agency or private firm, the terms of that agreement will govern the disposition of patents and licenses.

This policy statement puts a new twist on things.  The highlighted portion of the text has to do with a rule of precedence.  Typically one would expect something of the form “where there is a conflict between this policy and the terms of an extramural agreement, the terms of that agreement will prevail.”  But here we have the direct statement that the terms of an extramural agreement “govern the disposition of patents and licenses”.  That knocks out the entire policy.  Think about the implication for the Bayh-Dole standard patent rights clause.  That clause does not require university ownership, and it governs the arrangements.  The terms that are referred to are exactly those having to do with invention rights–that’s what the policy is about, and what the patent rights clause is about in federal funding agreements.  The effect of this policy statement is to release university inventors from the university policy’s ownership claims.

The policy later grapples with this issue in dealing with sponsored projects, asserting:

The University owns all inventions and discoveries made by Northwestern researchers arising from gifts or sponsored projects.

If the proposed contractual requirements of a sponsor are contrary to the University’s patent policy and cannot be reasonably negotiated, the Vice President for Research and Executive Director shall jointly determine whether to accept the proposed sponsorship.

But for federal contracts, in particular, the clear statement is that the terms of the federal funding agreement will “govern”–so presumably, those terms govern over the above stated claim of ownership, and aren’t contrary to the patent policy, because the policy does not assert a conflict but rather a substitution of interests.  Here as well we find the university’s claim put into the present tense, as if the ownership transfer has been completed by the simple statement of policy–not “shall own” or “is entitled to request ownership” or “will enter into a patent agreement with each participant in a sponsored project regarding the disposition of ownership, which may include a promise to assign and/or a present assignment pertaining to inventions made in the project.  Such assignment may be made to the university or to another agent as required by the terms of the sponsored project funding agreement.”

It would appear that the above policy ends up releasing federally supported inventions from university policy claims.   For the university to recover those claims, as a condition of policy, it would need to implement the (f)(2) arrangements required of the university by the patent rights clause.   Then, if the inventors choose to assign their rights to the university, the university can elect to retain title to those rights.  But if the inventors would rather deal with the government agency, then that’s their privilege under (f)(2).  Of course, the university could change its policy and seek to implement a claim to research inventions via a contract.

A few universities do that.  Here is an example:

To insure that all obligations attaching to contracts and grants will be met, faculty, staff and students who participate in programs having extramural support are required to complete a patent agreement which recognizes those obligations.

As we might expect, however, the policy then runs off the rails with regard to Bayh-Dole (which is described as a public law with a law that amends it):

These Acts give non-profit organizations, including universities or their designated patent management organization, a first right to title in inventions made in performance of Federal grants and contracts.

As I have demonstrated in numerous ways, Bayh-Dole does not give the university a first right to title.  It gives them–through the operation of the standard patent rights clause in each federal funding agreement–the right to retain title if they get title, just as it gives that right to any organization that has as a primary function the management of inventions.   The policy statement here essentially requires faculty to accept the misstatement:  it is the policy of the university that the university may misstate federal law, and faculty will comply with this misstatement.

In any event, the strategy of the policy is to assert claims in inventions at the point of participation in sponsored research, not as a condition of employment or as an outlandish general claim to everything.  In that regard, it is a better strategy, as it concerns only extramural research.  If it were restricted to only those sponsored research agreements in which the university is required to own, it would be even better.  Then we would be back to a policy that required ownership of inventions when ownership of inventions was a condition of the funding–essentially condition (i) of the four general rationales under which a university could reasonably request title to inventions.

In all of this, what comes through repeatedly is how poorly conceived and drafted most American university invention policies are.  They are sloppy, pompous, foolish, and fail in their purposes.  They are supplemented, apparently, by administrators who assert what the policies are to mean, and in some cases at least feel at liberty to change them unilaterally, as “orders” rather than “agreements” with creative folk.   One would think, after 30 years of Bayh-Dole, that we would find clear, well considered policies, kept up to date, not overreaching, respectful of faculty independence and judgment.  But we don’t.  It’s a mess.  There’s hardly a university that is immune from the failings of patent policies.  As the Shaw court held, what the university intends, but doesn’t state, doesn’t matter.   It behooves university invention policy drafters to get it right, or at least close, rather than hope to bully folks into giving up their inventions, misstating laws, and threatening employment or ethics actions for those that refuse.







About Gerald Barnett

I have worked in intellectual property management since 1991. I presently consult for various universities in the US and elsewhere, and for companies working with research innovation.
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