Today, many universities own large patent portfolios and earn substantial royalties from them. To keep those royalties flowing, most universities seek to obtain ownership of inventions created by their employees. Moreover, if the research leading to the invention was federally funded, they are required by law to obtain ownership under the Bayh-Dole Act, discussed below.
Written Agreement or Not?
Universities usually require that faculty and others who might create inventions sign separate formal pre-invention assignment agreements granting the university rights to all discoveries made by the employee. If you have such an agreement, read it carefully. It must comply with the same rules as any other pre-invention assignment. If it does, you must live with its provisions. If it doesn’t, it could be invalid.
However, other universities don’t use formal assignments. Instead, they rely on invention ownership policies set forth in bylaws, manuals, employment letters or similar documents. An assignment contained in such a document might not be legally enforceable. This is something to discuss with an intellectual property attorney.
If you never assigned your rights to the university or the purported assignment is found invalid, the default ownership rules regarding employer ownership would apply. Under these rules, the university would own the invention if you were directed to (1) invent the specific item, or (2) perform inventive work in a particular field and the invention came from that work.
Normally, when an invention or discovery is successful and results in a licensing deal, the school pays some portion of the revenues to the inventor. Some schools are quite generous. At one major university, for example, inventors get 50% of the first $100,000 of net revenue, 40% of the second $100,000 and 30% of any sums after that. However, other schools are far stingier.
Federally Funded Inventions and the Bayh-Dole Act
A substantial portion of all university research in the United States is funded by the federal government. How much varies from university to university, but federal funding reaches 90% or more at some schools. If a university accepts federal funding, a law called the Bayh-Dole Act (35 USC §§ 200-212) applies.
The Bayh-Dole Act works like this:
- First, a government agency decides to sponsor (pay for) research by a university’s faculty, with the university acting as the contractor.
- The university must have written agreements with its faculty and technical staff requiring disclosure and assignment of inventions.
- If faculty develop an invention arising from the research, they must disclose it to the university and the university must disclose it to the federal government within two months.
- The university then has two years to decide whether to retain title to the invention; if it keeps ownership, the federal government gets a shop right in the invention.
- If the university keeps title to the invention, it must patent it.
- The university may then license the invention, giving preference to companies with 500 or fewer employees (however, if a larger company helped fund the invention, it may receive a license).
- The faculty members who developed the invention must receive a percentage of the royalties the university earns.
If the university doesn’t want to keep ownership of the invention, the federal government may elect to take it (something it does relatively rarely). If the government doesn’t want it, you can petition the federal agency involved to let you have ownership. These requests are usually granted.
Stanford v. Roche (2011): The Supreme Court Weighs in on Bayh-Dole
A 2011 Supreme Court case illuminated the power of the Bayh-Dole Act and cleared up some issues regarding assignments: specifically, the difference between a promise to assign a patent, and an actual assignment. (Board of Trustees of the Leland Stanford University v. Roche Molecular).
The Supreme Court reviewed 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 actual assignment agreement took precedence over the promise-to-assign agreement. The ruling won't invalidate past assignments. But problems may occur in cases like this one, where two assignments appear to conflict. In addition, universities (and employers) should stop using language in which inventors promise to assign and instead use language that automatically assigns inventions.
Portions of this article are derived from What Every Inventor Needs to Know About Business & Taxes by Attorney Stephen Fishman.
For assistance with the preparation and filing of a provisional patent application, see Nolo’s Online Provisional Patent Application.