[Bayh-dole-regulations] Luis Gil Abinader NIST comments on the definition of Subject Invention, 26 March 2021

James Love james.love at keionline.org
Fri Mar 26 10:32:54 PDT 2021


These are comments by Luis Abinader, to NIST, on one of the issues in the
proposed Bayh-Dole regulations.   NIST is proposing to eliminate government
rights in patents when recipients of federally funding claim the
co-funder of a project paid for the invention.   Luis concludes his comment
by saying:

"The proposed change in the text of the regulation defining subject
invention may be the most consequential and impactful measure in the
proposed regulations, as it relates to a threshold issue of whether the
Bayh-Dole Act’s safeguards apply, and if enacted will predictably be used
to aggressively erode the public’s rights in inventions from
federally-funded contracts and grants."

The issue is technical, but really important.  Jamie

https://www.keionline.org/35722
Luis Gil Abinader NIST comments on the definition of Subject Invention, 26
March 2021
Posted on March 26, 2021 <https://www.keionline.org/35722> by Luis Gil
Abinader <https://www.keionline.org/author/luis-gil-abinader>

PDF version here:LGA-NIST-Subject-Invention-definition-26March2021
<https://www.keionline.org/wp-content/uploads/LGA-NIST-Subject-Invention-definition-26March2021.pdf>
More on the NIST proposed changes the Bayh-Dole Regulations.
https://www.keionline.org/35432
------------------------------

*Comments of Luis Gil Abinader of Knowledge Ecology International on the
redefinition of “Subject Invention” to Narrow the Inventions to Which
Government Rights Attach (Modify 37 CFR § 401.14)*

March 26, 2021

My name is Luis Gil Abinader. I’m a senior researcher at Knowledge Ecology
International (KEI). My comments focus on the National Institute of
Standards and Technology (NIST) proposal to change the definition of
“subject invention.”

*Summary of Changes*

The public interest safeguards under the Bayh-Dole Act only apply to
“subject inventions,” as that term is defined in the statute and
implementing regulations. 37 CFR § 401.14 defines “subject invention” as
follows.

“(2) Subject invention means any invention of the contractor conceived or
first actually reduced to practice in the performance of work under this
contract, provided that in the case of a variety of plant, the date of
determination (as defined in section 41(d) of the Plant Variety Protection
Act, 7 U.S.C. 2401(d)) must also occur during the period of contract
performance.”

NIST proposes to modify 37 CFR § 401.14 to add a new sentence stating that
“[a]n invention that is conceived and reduced to practice without the use
of any federal funds is not considered a subject invention.” This would
significantly narrow the current definition of “subject invention”, which
merely requires that an invention be made “in the performance of work”
under a government contract. Additionally, NIST proposes to eliminate the
scope discussion currently available at 37 CFR § 401.1. That section
includes several important clarifications about the scope of the
regulations, including, among other issues, that “[s]eparate accounting for
the two funds used to support the project in this case is not a determining
factor” when determining whether an invention is a “subject invention.”
NIST proposes to eliminate those clarifications.

*Detailed Overview*

The current text in 37 CFR § 401.1 on scope is 1077 words set out in nine
paragraphs and subparagraphs. The new version will have 277 words.

The *existing* section 401.1(a) includes the following text:

(a) . . . Notwithstanding the right of research organizations to accept
supplemental funding from other sources for the purpose of expediting or
more comprehensively accomplishing the research objectives of the
government sponsored project, it is clear that the ownership provisions of
these regulations would remain applicable in any invention “conceived or
first actually reduced to practice in performance” of the project. *Separate
accounting for the two funds used to support the project in this case is
not a determining factor.* [emphasis added]

All of the text quoted above in section 401.1(a) is eliminated in the
proposed revision of section 401.1. The proposed text for 37 CFR § 401.14
includes the following changes:

“(2) Subject invention means any invention of [delete: “the”] [add: “a”]
contractor conceived or first actually reduced to practice in the
performance of work under [add: “this contract”] [delete: “a funding
agreement”]; provided that in the case of a variety of plant, the date of
determination (as defined in section 41(d) of the Plant Variety Protection
Act, 7 U.S.C. 2401(d)) must also occur during the period of contract
performance. [add: *“An invention that is conceived and reduced to practice
without the use of any federal funds is not considered a subject
invention.”*]

Collectively, this is a massive change in the circumstances under which the
public obtains rights.

Note that while the current regulation text closely tracks that language in
the statute, the proposed regulation would eliminate the public’s rights
when there is a claim that non-federal funds were used. In contrast, the
current statute only provides that a subject invention is “any invention ….
in the performance of work under a funding contract.”

35 U.S.C. §201. Definitions.
(e) The term “subject invention” means any invention of the contractor
conceived or first actually reduced to practice in the performance of work
under a funding agreement: Provided, That in the case of a variety of
plant, the date of determination (as defined in section 41(d) 1 of the
Plant Variety Protection Act (7 U.S.C. 2401(d))) must also occur during the
period of contract performance.

*Impact*

The proposed regulation would eliminate the public’s rights in patents
“under a funding agreement” when claims are made that the non-federal
co-funders’ money was used for the invention, a distinction contrary to the
statute and existing regulation.

A significant number of research projects are co-funded with non-federal
and federal funds. If the modifications proposed by NIST are adopted,
contractors that received federal funds and can claim that a project
utilized a combination of federal and non-federal funds would be able to
eliminate the government’s rights, by claiming that the funding of the
patentable invention was from the co-funder, not the government This not
only changes the current system in a way that works to the disadvantage of
the public, it is also creates a system that is costly, difficult to
manage, and subject to obvious abuses.

Under the proposed change in the regulation, a contractor would be able to
strategically book most of the expenses prone to generate patentable
inventions under the non-federal funds; and most of the expenses unlikely
to generate patentable inventions under the federal funds. As a net result
many inventions would escape the public safeguards provided in the
Bayh-Dole Act.

Even if the contractor actually did fund the inventions with federal
resources, the language proposed by NIST would give them the opportunity to
argue that only non-federal money was used to conceive and reduce the
inventions into practice. Because contractors are typically untransparent
about the specific resources that were used to fund each invention, in most
cases it will be nearly impossible to prove them wrong. This will pave the
way for even greater under-reporting of subject inventions and even less
accountability of contractors.

The tendency of contractors to try to circumvent government rights in
federally-funded inventions is illustrated by an experience involving
Regeneron’s contract with the U.S. government to perform research and
development on a COVID-19 treatment.

Regeneron was working under a large funding award to perform R&D on a
COVID-19 treatment when it conceived an invention related to the treatment.
KEI determined that Regeneron did not properly acknowledge this funding in
a patented invention (https://www.keionline.org/34258). When asked about
the issue, Regeneron disagreed with the premise that the invention was a
“subject invention” on the grounds that the invention was not conceived
using federal funds. This illustrates how a company will claim that the
inventions only relied upon private funds, even though the project was
co-funded by the federal government. It’s also important to note that the
government was funding 80 percent of the development costs on this project,
and that the Rengeneron contract used an exception to the Bayh-Dole Act
norms known as Other Transactions Authority to weaken certain public
interest provisions in the Bayh-Dole Act.

If the Bayh-Dole regulations are modified to permit what Regeneron did for
its COVID contract, contractors will have a strong incentive to behave
exactly as Regeneron did, so that they can resist calls for “march-in
rights” and other exercises of public rights in publicly-funded inventions.

During a roundtable organized by KEI in January 2021, Fred Reinhart, Senior
Advisor for technology transfer at UMass Amherst and a Past President of
AUTM, offered his opinions on this particular proposed change. Reinhart
acknowledged that “a company could cheat that way,” and further suggested
that “the other abuse would be reaching in to claim government rights to
huge amounts of investment of time and money, over the next five or six
years, long after the federal grant is over.” [See video of the roundtable:
https://www.youtube.com/watch?v=6Wyd_qaQU34&t=1s]

Despite Reinhart’s second suggestion, however, there does not seem to be
evidence of over-reporting of government rights in inventions; on the
contrary, the problem that agencies are facing is under-reporting of
government rights in inventions that were funded with federal funds. KEI
has worked on numerous cases where we have provided evidence to the NIH of
under-reporting of government rights (
https://www.keionline.org/bayh-dole/failure-to-disclose) requesting the
government investigate these failures to disclose, and these instances are
probably just a handful of the actual number of cases where this occurs.
Narrowing the definition of “subject invention” and paving the way for
contractors to manipulate and game the system with a separate accounting
system, would exacerbate the issue of under-reporting of government rights
in inventions funded by federal agencies.

The proposed change in the text of the regulation defining subject
invention may be the most consequential and impactful measure in the
proposed regulations, as it relates to a threshold issue of whether the
Bayh-Dole Act’s safeguards apply, and if enacted will predictably be used
to aggressively erode the public’s rights in inventions from
federally-funded contracts and grants.

For these reasons, I oppose the proposed redefinition of the concept of
“subject invention.”
I can be reached for further information via email at
luis.gil.abinader at keionline.org
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