Patents and the Bayh-Dole Act

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The Bayh-Dole Act, enacted in 1980, permits universities to claim patent rights in inventions created at the university with federal funding. The university may license these discoveries to private industry—a practice some critics have likened to corporate welfare.

As a result of Bayh-Dole, university patent acquisition and licensing has expanded dramatically. Before 1980, U.S. universities acquired fewer than 150 patents per year. However, 20 years later, the University of California alone obtained 324 patents (and earned $261 million in licensing revenue). Regulations for the Bayh-Dole law (35 United States Code, Sections 200-212) can be found at 37 C.F.R. Part 401.

The key regulations are as follows:

  • The university must have written agreements with its faculty and technical staff requiring disclosure and assignment of inventions.
  • The university has an obligation to disclose each new invention to the federal funding agency within two months after the inventor discloses it in writing to the university.
  • The decision whether or not to retain title to the invention must be made within two years after disclosing the invention to the agency.
  • The university must file a patent application within one year, or prior to the end of any statutory period in which valid patent protection can be obtained in the United States.
  • Any company holding an exclusive license to a patent that involves sales of a product in the United States must substantially manufacture the product in the U.S.
  • In their marketing of an invention, universities must give preference to small business firms (fewer than 500 employees), provided such firms have the resources and capability for bringing the invention to practical application. However, if a large company has also provided research support that led to the invention, that company may be awarded the license.
  • Universities may not assign their ownership of inventions to third parties, except to patent-management organizations.
  • Universities must share with the inventor(s) a portion of any revenue received from licensing the invention. Any remaining revenue, after expenses, must be used to support scientific research or education.
  • Under certain circumstances, the government can require the university to grant a license to a third party, or the government may take title and grant licenses itself (these are called “march-in rights”).

In 2004, in a demonstration of federal government’s power under Bayh-Dole, the Court of Appeals for the Federal Circuit invalidated a patent because the patent owner, a recipient of federal funds, failed to make adequate disclosures regarding its invention as required under the Act. (Campbell Plastics v. Brownlee 389 F.3d 1243 (Fed. Cir. Nov. 10, 2004).)

In a 2011 case involving Stanford University and the Roche pharmaceutical company, the Supreme Court was faced with two agreements signed by a university scientist: one in which he promised to assign rights to the university; and another in which he actually assigned rights to a company that was later purchased by Roche. The Supreme Court ruled that the agreement in which rights were actually assigned took precedence over the agreement in which rights were promised. Stanford's position was that the inventor's rights automatically vested in the university under the Bayh-Dole Act. The Bayh-Dole Act, enacted in 1980, permits universities to claim patent rights in inventions created with federal funding at a university. The university may then license these discoveries to private industry—a practice some critics have likened to corporate welfare. Curiously, one of the prerequisites for the university to claim these rights is that the university must have written agreements with its faculty and technical staff requiring disclosure and assignment of inventions. The ruling won't invalidate past assignments. But problems may occur in cases like this one, where two assignments appear to conflict. In addition, you can expect that universities will stop using language in which inventors promise to assign and instead automatically assign inventions. Stanford v. Roche, 563 U. S. ____ (2011).

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