Why Universities Are Afraid of JOBS

If you’re under the impression that we’re one step away from reinventing ourselves as Blogging Bayh-Dole, it’s perfectly understandable.  We have spent a good amount of time analyzing the Act and its related issues.  However, Bayh-Dole, and Intellectual Property in general, is one of the most important issues of any award, so it stands to reason that we’d write about it with some frequency.

That all being said, as we mentioned in a recent post, recently signed legislation will have a significant impact on a University’s tech transfer initiatives, and more specifically on how a PI moves forward with any IP created during a government-funded project.  Deemed the “Jumpstart Our Business Startups Act” (or “JOBS Act”), the bill, among other provisions, shifts the responsibility of commercialization of subject inventions from the owning entity (i.e. the University) to the named inventor(s) of a patent application.

Currently, when a PI develops a patentable technology through his or her University under a government-funded project, he or she is almost always beholden to that University’s Tech Transfer office when it comes to marketing the patent and finding licensees who will commercialize it appropriately.  (This is presuming that the University has properly perfected its ownership rights.  Stanford University says Hello.)

Under the JOBS Act, this “automatic” right of Tech Transfer will disappear, and instead government-money recipients must allow the PIs themselves to choose the entity that will help bring their idea(s) to market.  Even though the assignee will still retain ownership of any such patents or patent applications, they will lose the ability to control the direction of any related commercialization projects.  As such, unless the PIs elect to utilize their University’s Tech Transfer office, the University will be beholden to the PIs for efforts directed to reaping financial rewards.

In theory, the Act is intended to open up avenues for commercialization that previously were closed off and increase the number of marketed technologies.  However, there are many resultant issues that could severely hinder this occurrence, with two particularly standing out.

First, if there are multiple inventors for a given invention, all of the inventors have to agree on a licensing agency before any related efforts can commence.  What happens when an inventor group cannot reach a consensus as to whom to use?  The likelihood of stagnation increases exponentially.

Second, and perhaps most importantly, who will pick up the tab for protection?  When the inventors elect to hire the esteemed patent firm of Dewey, Cheatum & Howe, someone will have to pick up their stratospheric legal bills, especially if foreign patent rights are requested.  Out of whose pocket, or pockets, will payment come?  Will these costs be addressed via carve-outs in any related royalty agreements?  If so, all of the parties will have to agree on a rate-sharing contract, the negotiation of which is never a joyful endeavor.  And what if the inventors choose to pay attorney’s fees themselves?  Will the University feel confident that the most competent representative has been hired, or simply the most affordable?

Needless to say, while the JOBS Act was trumpeted as a piece of bipartisan legislation that will win fans the world over, University-affiliated organizations such as AUTM were less than pleased at its terms and potential impact.  The day may come when the law’s proponents are proven correct in their exhortations, but, for the time being, Universities are concerned as to its ramifications and are scrambling to ensure that any future licensing activities are not compromised.