Patent Law

Constitutional Inventors, First-Possession, and the Confusion of Bayh-Dole

By Dennis Crouch

Property law courses generally begin with the concept of first-possession as an originator of property rights. In patent law, the first-possession principle leads to a rule that potential patent rights are owned by the inventors unless and until they are assigned to another entity. See Crown Die & Tool Co. v. Nye Tool & Machine Works, 261 U.S. 24, 35-37 (1923). The legal basis for inventor rights is derived from constitutional principles that give Congress power to enact patent laws that grant exclusive rights "to inventors." US Constitution, Article I, § 8, cl. 8.

In Stanford v. Roche, Both Stanford and the US Government argue that that the Bayh-Dole Act of 1980 alters this original formula in the special case where an invention was either "conceived or first actually reduced to practice" with the use of US federal funding received by a university, non-profit, or small business. In that situation, the Bayh-Dole Act suggests that the funded-entity, the "contractor", automatically holds patent rights with a right to "elect to retain title to any subject invention." 35 U.S.C. § 202(a). If the contractor decides not to retain title, then, the funding federal agency "may receive title" or "may ? grant requests for retention of rights by the inventor." 35 U.S.C. § 202(d). The Bayh-Dole Act includes a comparative-law clause making its provisions superior to those found in any other Act. "This chapter shall take precedence over any other Act which would require a disposition of rights in subject inventions of small business firms or nonprofit organizations contractors in a manner that is inconsistent with this chapter."

The Bayh-Dole language is somewhat confusing when examined through a first-possession framework. Namely, the statute indicates that the university might "retain title" and also that inventors can request "retention of rights." It is unclear from these provisions whether it is the university or the inventor that first holds rights. The US Constitution helps break this seeming conflict by focusing on inventors as the original recipient of rights. With this Constitutional backstop, there is no way that the university can be the original rights-holder. Rather, that designation must remain with the inventors.

This result may be important for the Stanford v. Roche case that was recently granted a writ of certiorari. Under a Constitutionally limited Bayh-Dole Act, Stanford cannot automatically claim first-possession rights to every invention & first reduction-to-practice that was materially supported by federal funding obtained by Stanford. At most, the Bayh-Dole law requires a transfer of rights from the inventor to the university. In the property framework, the question then focuses on the timing of the Bayh-Dole transfer (is it immediate or does it only occur upon the university's election of rights?) and on its impact on a prior transfer of patent rights to a third party.

Full post as published by Patently Obvious on November 03, 2010 (boomark / email).