If you’ve ever
licensed a technology out of a university, you would know “Bayh-Dole Act.” The Bayh–Dole
Act, 35 U.S.C. §§200-212, titled “Patent Rights in
Inventions Made Under Federal Funding Agreements, codified the rules in dealing
with intellectual property rights on
inventions funded by federal government grants. The act is implemented by 37 C.F.R. 401 titled
“Standard Patent Rights Clauses.” In essence, Bayh-Dole permits a university,
small business, or non-profit institution to elect to pursue ownership of an
invention in preference to the government.
The Bayh-Dole Act authorizes the Department of Commerce to create
standard patent rights clauses to be included in federal funding agreements
with nonprofits, including universities, and small businesses. The standard patent rights clause is set
forth at 37 CFR 401.14(a). The clause is
incorporated into federal funding agreements through a number of contracting
instruments, including grants made to universities and contracts (such
as SBIR grants) made with for-profit companies.
- Include the patent rights clause in any
subcontracts;
- Report subject inventions to the sponsoring agency;
- Elect in writing whether or not to retain title;
- Conduct a program of education for employees
regarding the importance of timely disclosure; and
- Require certain employees to make a written
agreement to protect the government's interest in subject inventions.
- Grant to the government a nonexclusive,
nontransferable, irrevocable, paid-up license to practice or have practiced
for or on behalf of the United States the subject invention throughout the
world;
- File its initial patent application within one year
after its election to retain title;
- Notify the government if it will not continue
prosecution of an application or will let a patent lapse;
- Convey to the Federal agency, upon written request,
title to any subject invention if the organization fails to file, does not
continue a prosecution, or will allow a patent to lapse;
- In each patent, include a statement that identifies
the contract under which the invention was made and notice of the
government's rights in the invention;
- Report on the utilization of subject inventions;
- Require in exclusive licenses to use or sell in the
United States that products will be manufactured substantially in the
United States; and
- Agree to allow the government to "march
in" and require licenses to be granted, or to grant licenses, in
certain circumstances, such as if the organization has not taken effective
steps to achieve practical application of the invention.
- Assign rights to a subject invention only to an
organization having as a primary function the management of inventions,
unless approved by the Federal agency
- Share royalties with the inventor
- Use the balance of royalties after expenses for
scientific research or education
- Make efforts to attract, and give preference to,
small business licensees
The Bayh-Dole Act has a
growing body of case law interpreting the statue. The most well-known is the case of Stanford v. Roche, decided by the Supreme Court on June 6,
2011. The case addresses the question
whether the Bayh-Dole Act automatically assigns the title of an invention by a researcher
at a federally funded lab to the university.
The answer is no.
Here is the fact of the case: a
Stanford employee, who was under obligation to assign inventions to Stanford,
spent time at a biotech company to learn a technique, and signed an agreement
with that company agreeing to assign inventions to it. The company was later purchased by Roche. Stanford filed patents on work the employee
did after returning to Stanford, and the company (and later Roche) introduced
products based on the work the Stanford employee did at the company. When Stanford sued Roche for infringing its
patents, Roche countered that it had an ownership interest in the patents due
to the agreement that the Stanford employee had signed. Among the arguments Stanford was one that
stated that the Bayh–Dole Act gave grant recipients a "right of second
refusal" subject to the Government's right of first refusal, based on the
following language of the statue: "If a contractor does not elect to
retain title to a subject invention in cases subject to this section, the
Federal agency may consider and after consultation with the contractor grant
requests for retention of rights by the inventor subject to the provisions of
this Act and regulations promulgated hereunder." The Court disagreed holding that title in a
patented invention vests first in the inventor, even if the inventor is a
researcher at a federally funded lab subject to the Bayh–Dole Act. The
justices affirmed the common understanding of US Constitutional law that
inventors automatically own their inventions, and contractual obligations to
assign those rights to third parties are secondary. Needless to say, after Stanford v. Roche, universities across the nation changed their employment contract language from requiring a university employee to “agree to assign” to “hereby assign” any invention done in the university context to the university tech transfer office.
Thanks for reading.
Connie
cwan@patentonomy.com
