Equity in an invention arises in a number of ways under the university patent policies of the pre-Bayh-Dole misconstruction. Generally, the premise of equity has to do with support beyond the normal activities and salary of the work, unless someone is expressly hired to invent. If a university, or others associated with a university, helps someone to invent, or develop an invention, it is by means of the concept of “equity” that those supporters see something in return–reimbursement, a share of proceeds, permission to use, a shop right, acknowledgement, or even ownership if that was part of the bargain for support.
There are some key concepts associated with how equity protocols work that are worth noting.
- Equity arises when there is a patent application, not simply an invention
- It is up to the inventors to decide whether to pursue a patent
- Equity is established by a review of the circumstances
- Equity allows for generous use of resources with accounting later
- The sharing under equity may be in the patent, or income from the patent, or both
- University equity is established by a committee of peers
- If one wants certainty, then get an agreement in place up front
- If an inventor uses an agent the university has designated, then equity is satisfied
A number of university policies disclaimed the provision of the “normal academic environment” as giving rise to a finding of equity. In a few cases (Fairfield University, University of Portland, Polytechnic Institute of Brooklyn) university policies considered “auspices” of the university–an association with the university, doing the work with a public appearance of the work being university work–was sufficient to find an equity in inventions. Otherwise, equity arose because an inventor made use of significant resources beyond those of the normal academic environment–the labs used for teaching and departmental research, special expenditures, funding, or release time to work on an invention rather than instruction or academic research. Princeton, for instance, considered that it was the subsequent development of an invention, not the work leading to the conception of an invention, that gave rise to an equity interest:
The University will consider it has no equity in inventions which are patented by the inventor on his own initiative and which are not developed (even though intellectually conceived) in the course of research supported by funds or utilizing facilities administered by the University. The payment of salary, scholarships and fellowships or similar stipends will not of themselves constitute any basis for an equity by the University in an invention.
In the case of sponsored research, some policies (Loyola University (LA), Clarkson College of Technology, Drexel) held that if a sponsored paid the full cost of the research, then the university had no equity in any inventions. The reasoning here is that the university is fully compensated for any use of its facilities, and thus has nothing to claim by way of contributing to the research leading up to the invention or its subsequent development. In this way, faculty consulting and faculty-led contract research with companies is pretty much the same thing. One can make the case that the primary difference between faculty consulting and faculty work for companies via a university contract is in how the university gets its reimbursement for administration of the activity. In the now-conventional approach, the university administration requires that all “sponsored project” contracting go through the university–that is, the contract is with the university.
Personal consulting these days is largely reduced, especially in public universities, to a requirement that the consulting take place outside of the university (the strange legal fiction of “own time”) and without use of university facilities (under some equally strange fiction regarding “personal” vs “public” use). In an invention equity environment, however, such a restriction is not required. If a faculty member used university resources in working with a company, the university expectation is not to object but rather to be reimbursed for those resources as a matter of course. It is not the use but the sharing of payment that matters. If a restriction on use of facilities is to be imposed, one would expect it to arise because of priorities of use or the nature of the use, not because of some idea that some work is personal and some public or “official”: all faculty research is personal unless it is commissioned and directed by the institution. When faculty investigators collaborate with a company or government, their work is still personal. The collaborating organization–donor, sponsor, partner, patron, beneficiary–gains access to inventions because (i) such access is already provided for prior to any financial or contractual arrangements; (ii) they contract for those rights as part of the collaboration; (iii) they negotiate for rights independently of the collaboration, as rights of interest are created; or (iv) through reporting and delivery, where the investigators and inventors do not seek patents and therefore there is no barrier to access.
Faculty research is not turned into “official” or “public” duties merely because a university administrator also approves of it, or allows some portion of a faculty member (or staff member’s) salary to be paid from a grant budget rather than an institutional budget, or allows the use of university facilities. Indeed, by formally “releasing” a faculty member for such work by allowing a portion of the faculty member’s compensation to be paid by a sponsor or donor, university administrator reduces any appearance that such work is somehow “official” or “for the university.” If a faculty member’s investigations are personal if there is no sponsor, even when receiving a salary from the university as part of a “normal academic environment” then that same work, with a sponsor paying instead of the university, is clearly even further from anything “official” or otherwise required by the university.
It is administrative fiction to claim that when a faculty member requests a release to assist another organization, that really what is happening is that an administrator is specially commissioning the faculty member to do for the university what the faculty member proposes to do for or with the other organization. That is just nonsense. But it is this sort of nonsense that underlies university administrator claims to university ownership of inventions. If one really likes the idea of institutions owning what creative people do, quite apart from any reasons for that liking, then fine. It’s a kind of bullying assertion that can be made, and with the proper applications of threats can be made to stick. But if one is going to reason, then reason all the way, not to some half-witted, self-satisfying justification. If one gets beyond the half-witted and self-satisfying, one finds that university compulsory invention ownership is not strongly aligned with innovation, or with economic development, or with academic freedom, or with broad access and use of research results, or with the nature of employment as established in patent law and practice, or with the actual circumstances under which faculty collaborate with others to pursue investigations.
As I have chased down the various claims put forward for compulsory university ownership of faculty inventions–and invention taken broadly in that also nonsensical but frequently used definition of “whether or not patentable”–which all but amounts to “whether or not an invention” or “whether or not ownable”–I have yet to find a reasoned argument for compulsory university ownership. I can accept that a faculty collectively may decide that their institution should own their work. I can see specific contracts for work in which an investigator agrees with a sponsor that the institution should own the outcomes. I can see that an institution could commission work for its own use and benefit and bargain for ownership of the results. I can see investigators or inventions unilaterally desiring institutional ownership so they may gain access to funding for patent work, or help with licensing, or to shift liability to the institution–all that is fine. But none of that is compulsory, based on a claim made by administrators.
Instead, what I find is a defiant misconstruction of Bayh-Dole, a misrepresentation of the arrangements under which faculty are appointed and employed, and foolish arguments that don’t hold up based on things like “use of facilities”–an argument so empty that even university “invention disclosure” forms don’t bother to ask what facilities might have been used, or even what it means to “use” facilities to “conceive” an invention. If the invention ownership discussion involves actual reasoning, then the compulsory institutional claim fails many different ways. The compulsory invention ownership claim appears to survive only because administrators have created more fallacious arguments for it than most people are willing to contest. If the ownership discussion is about preserving entitlements for well paid licensing officers, or ensuring that bureaucrats finger every creative thing, or just the pleasure of being part of an organization that dominates those it supports–then we are not reasoning, just holding out for special privileges. That’s not a good way to manage the transfer of university-hosted new technology, or to promote the public good. Of course, in very twisted thinking, management self-interest is the public good.
By contrast, a university policy based on invention equity does not particularly care whether a given result is owned by an inventor or assigned to a sponsor, or whether the work is performed under a sponsored research agreement or a personal consulting agreement. The ownership of research results is independent of the university’s possible equity in those results. Furthermore, it does not matter that the university served as the administrator of accounts, or even handled the contracting–such things are covered in the indirect cost charge. The indirect cost charge, essentially, eliminates a university claim to equity based on use of funds or facilities. It is double billing to make an invention ownership claim and also charge for indirect costs.
How then has the university administrative claim to ownership of all research results made in sponsored research come about as an entitlement? There’s an obvious answer after the Bayh-Dole misconstruction fiasco: university administrators used Bayh-Dole to make it appear that federal law required, and approved of, university ownership. Clearly, Bayh-Dole does not require university ownership. What is consternating is not so much that some scheming folks would put out such a misconstructed claim–or even that some otherwise very competent front organizations would accept that claim uncritically–but rather that so many university administrators and university attorneys welcomed it, did not object, did not seek to mitigate the requirement, did not–and still will not–speak out about it. They really wanted federal law to strip faculty investigators and inventors of personal rights established in the US Constitution and hand those rights to administrators for profit-seeking. They wanted this without regard for the history of faculty leadership in finding stuff worth managing and the ways to do that management and benefit their universities; without regard for the history of innovation, which points not to bureaucratic controls but rather to organizational restraint; without regard for academic freedom and the importance–even the distinctive societal role–of the independence of the faculty from the impositions of government, companies, or the university administration; and finally without regard to all the alternatives to compulsory institutional ownership of inventions offered by the equity approach to inventions. Administrators loved the cleverness of the Bayh-Dole misconstruction because they did not even have to make a coherent argument to the faculty or to the public for why bureaucrats should step in and take control over all research results, and dedicate that control to profit-seeking, preferably in league with speculators. Federal law required it, mandated it, blessed it. Or so the misconstruction has held.
There is nothing wrong with investors doing their thing. And there’s nothing wrong with universities finding some benefit in the activity of investors. And there’s nothing wrong, even, with university administrators, when asked to assist in the development of an invention, to decide to do so. That’s all good stuff, worth discussing. But none of that is the same as the assertion that university administrators by right of policy (or federal law), should control all research results for such purposes.
It appears that a toxin-spewing bacterium rode in on a tick that rode in on the neck of Bayh-Dole. Bayh-Dole was directed at federal agencies. Whatever came to universities was to be a matter of federal agreements with those universities, incorporating a patent rights clause. The patent rights clause, if you wish, is the neck.
The tick that came along for the ride is a vision of institutional control of all inventions made by faculty. The aim is not merely the opportunity to hold rights in preference to a claim by the federal government if faculty inventors decide to pursue a patent and offer the university the chance to assist. The aim is, rather, to get everything, regardless of the inventors’ wishes and choices. You can tell that you are dealing with a tick the moment someone cites “Bayh-Dole” as applying to universities, rather than referencing the patent rights clause for a given funding agreement. You can tell you have a tick when administrators claim that the requirement to assign inventions to the university is necessary to comply with Bayh-Dole or with the federal funding agreement. Such assignment is not necessary.
The bacterium in the tick is the vision of bureaucratic control of faculty work on behalf of administratively organized rainbow-chasing for profits. That vision is one of managers ordering inventions–processing each into a “portfolio” or database, efficiently identifying commercial partners for each, signing licensing deals left and right, raking in money, with continuous applause (even if mostly self-produced) for all the public-do-good.
The toxin in the bacterium is inventor-loathing: university inventors are a hazard to the public and the university, for which the remedy is bureaucratic ownership and control of faculty work. University inventors are inept, gullible, selfish. University inventors are unable to make arrangements for others to assist them in the management of patents or the development of their work. Therefore (that is, because such an inventor-loathing claim has been made), the university must own everything, keep what is profitable, and keep what is unprofitable, too, because there’s no point in giving the unprofitable stuff back. (If someone wants stuff, then it is profitable, because one can make someone pay to get it; if no one wants the stuff, then there is no reason to force it back on anyone; besides they could just be pretending not to want it back to trick folks into giving things back. So, no. Keep everything). That’s the toxin, that’s the inventor-loathing. That’s what has infected university administrators and their front organizations. It’s a bitter combination of rationalizations that create a nest of administrative entitlements at the expense of federal law, academic freedom, and innovation. It really is time to get over all this.
But let’s look elsewhere as well for how this administrative research entitlement has developed. Consider the claim for “university administered funds”. This claim has now been generalized at some institutions to take in any funds–budgeted, sponsored, donated–as if the administration of the funds also not only makes those funds somehow “owned” by the institution, but turns their use for their designated purpose into a form of commissioning, as if the funds, regardless of source, were transmogrified into institutional funds. That is, that the university “invests” these funds in research, when rather the university receives the funds on the condition that they will be used for the sponsor-designated purpose. There is no institutional “investment” at all. It is bacterial bunk. There is no question that, in a form of power play, an institution can use such a claim as a rationale, and it may be that university faculty would have a difficult, or at least expensive, time trying to argue against the rationale. Indeed, one might posit that any administrative rationale for ownership that is too costly to contest will persist, regardless of its legal, philosophical, ethical, management, technical, or innovation appropriateness. Witness how many universities have refused to revise their patent policies after Stanford v Roche, when those same university administrators argued a position that the Supreme Court rejected. They are on notice that their view is wrong. They must change their policies. But they won’t. Apparently, someone will have to sue them first. That’s how such “costly rationales” are intended to work. Only in an eminently ethical, equitable administrative scheme might one find folks willing to revisit a policy claim to invention ownership purely on the basis of a reasonable request to do so.
In the context of university research agreements, if a sponsor or donor is paying the full costs, then a university arguably has no invention equity in the results. If the university is to benefit from some success pertaining to the results, it has to be because the principal investigator (the faculty member who negotiates the agreement–not even any inventor) and the sponsor choose–are not forced–to provide to the university an invention equity interest. Assigning invention ownership to the university in such a case would arise from a decision regarding university benefit, not from an entitlement claimed by the university for handling (and being compensated for) matters of accounting and other back office matters. That is, in research where the university does not provide support, or is already compensated for that support, the benefit arises through goodwill, not a policy claim to ownership, not even an equity claim to a share. The true financial metric of a university’s role in supporting creative work is how much others award to the university beyond the demands it makes for itself.
As it stands, faculty are not allowed to participate in extramural research unless they agree to assign inventions to the university. This is because university administrators demand that university ownership of inventions be a material condition of the funding agreement (and thus, faculty must agree to assign to comply with the contract–even though the sponsor has not bargained for such an outcome, and may even object to it. Such a policy, from an equity perspective, is plainly inequitable. The authority to contract on behalf of faculty has been exploited to impose administrative requirements on faculty that should not be imposed.
In the university patent policies of fifty years ago, inventors were encouraged to make use of arrangements established by the university–often with Research Corporation, but in a number of cases with a university-affiliated foundation that might also contract for some management services with Research Corporation, Battelle Development Corporation, or other such agents. If the inventors made use of such invention management resources, then any equity the university might have was addressed through the standing arrangements the university had with these organizations. However, in a number of cases, inventors were not required to use such resources (for instance, University of Delaware, University of Georgia, University of Iowa). Inventors could make their own way, in which case, a faculty committee would review the circumstances and assign to the university an equity interest along with the manner in which that equity interest should be realized. The purpose of policy was to bind faculty (and other personnel) to the outcome of this equity-finding process, one in which peers reviewed the circumstances and ascribed to the university a fair share of the benefits from the exploitation of the patent. It was the review, not a pre-determined outcome (such as institutional ownership of all faculty work), that was the subject of policy agreement.
Invention equity based policies are highly consistent with innovation outcomes, academic freedom, and the operation of open, publicly spirited research. Invention equity based policies greatly reduce administrative overhead, remove bottlenecks and expense, allow for much greater informal collaboration and exploration, and provide for a diversity of choices regarding the disposition of research results–whether or not to be owned, and if owned then with an agent or not, and if with an agent whether to disseminate or to exclude, and if to exclude whether for investment or competitive advantage, and if for investment whether with multiple companies or only one, and if only one whether backed by speculators or investors or not, and in any case whether involving the inventors as owners or not. All that sort of diversity–and more–is available in an invention equity policy without having to make any expansive definition of invention, or claim to ownership, or hype about the ability of university administrators to make money from licensing.
It does not matter, in an invention equity policy, who owns, or what they own, or who manages, or for what purpose they manage. If the university has supported the work in a way that goes beyond what is normally provided and already compensated for, then there’s a reason to review the circumstances when a private ownership position is taken, or money made from that position, and allow an assignment of invention equity that reflects those circumstances. If folks prefer to work within an existing arrangement, then it is even easier. But the neat thing is, it is a choice, not a compulsion. For innovation, this makes all the difference, because by and large innovation comes from the outliers, the weak signal, the emerging pattern rather than the established one, the exception, the strange, the goofy. Rather than force all of these into a university ownership position, an invention equity policy lets them be what they are. If the university does not own, then it does not have to be responsible for the ownership, for the patent work, for the expense, for the liability, for the logistics, for the strategy, for the reporting, for the outcomes. But the university can have an equity in such inventions, based on circumstances, awarded by others rather than based on an institutional demand. It may be that in the great speculative shape of things, winners pay for losers. Why then should a university make it policy to insist that it pay for the losers? And that, in a nutshell, is what an invention ownership policy does: it makes the university pay for the losers, even if the university has never got a winner.
It’s time to get the tick off the neck of Bayh-Dole. It’s time to light a little fire under the tick’s tail end and get it interested in something other than sucking and poisoning the creative life at universities. Nothing would be more liberating to faculty-led research than to have a release from the debilitation of compulsory university invention ownership policies. These policies exist primarily due to misconstruction of Bayh-Dole and a set of rationalizations and claims that on examination don’t hold up. There is no reasonable basis in innovation, academic freedom, economic development, or public benefit for universities to adopt a compulsory ownership policy for inventions.
If there is one revision to Bayh-Dole to be made, it is for the federal government to do what will tick administrators off (so to speak): make it a condition of the standard patent rights clause that no nonprofit contractor may claim ownership of inventions made with federal support as a condition of allowing personnel to participate in the research undertaken with that support. That is, make it clear that the (f)(2) agreement is the exclusive arrangement with regard to inventions made with federal support. Make it a condition of federal support that universities do not abrogate academic freedom and the independence of the faculty. The universities may provide preferred pathways, and loads of support ready to assist, but it cannot be that they require assignment as a condition of employment, use of facilities, or participation in federally funded research–especially when the university in accepting such federal support has agreed to employ, allow facilities use by, and permit the participation of the personnel identified in the federal award–and has been compensated for this agreement with the payment of indirect costs. That would be the vaccine against institutional invention borreliosis.
