Administrative lupus

Posted on January 19, 2019 by Gerald Barnett

I while ago I wrote an article on some suggestions for changing Bayh-Dole. The first suggestion was to add a research “exemption.” The authors–one a former senior university patent administrator from a very big university–were well meaning, and perhaps there ought to be such an exemption, perhaps added to 35 USC 287 as a limitation on the right to sue for infringement. But there’s a bigger problem than that, and without the bigger problem solved, no one will go for a limitation on the rights of patent holders, not even university administrators. And if the bigger problem is solved, then there really isn’t any need to amend Bayh-Dole because, well, the amendment would address a problem that no longer exists.

University ownership of inventions combined with an insistence on “commercialization” is the Jonah on the ship. In Madey v Duke, the court reasoned that university research was commercial in nature given the university interest in making money from research contracts and commercializing the results. Given the court’s observations regarding university “commercial” interest, even if there were a new research exemption in patent law (including Bayh-Dole) for “noncommercial” research, it could not apply to universities that owned inventions and sought to commercialize them or make money from them. You see why. So it is fantasy for university administrators to insist on ownership and commercialization of inventions and then beg to be released from obligations to other patent owners.  Continue reading →

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These are not the investors Congress was looking for

Posted on January 18, 2019 by Gerald Barnett

Universities routinely assign federally funded inventions to companies. They do so under the cover of an exclusive patent license, expecting that they won’t get caught.

There are two kinds of exclusive license. In one, a true exclusive license, the licensee gets an exclusive license in less than all substantial rights in an invention–less than an exclusive license to all of make, use, and sell. In a true exclusive license, the licensor (in our case, a university) is responsible for enforcing the patent. Universities almost never use true exclusive licenses these days.

There is a second form of exclusive license, in which the licensor grants all substantial rights in an invention to the licensee. This form of exclusive license transfers ownership of the invention. It acts as an assignment. Yes, it is an exclusive license of the patent, but it is an assignment of the invention covered (perhaps only in part) by the patent. In such exclusive-license assignments, the “licensee” (really, the assignee) has the right to enforce the patent and sue for infringement. This is the form of license you find in almost all university exclusive licenses.

Why does it matter? Well, in one way, it doesn’t at all. No one cares. Continue reading →

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Peace measures

Posted on January 17, 2019 by Gerald Barnett

In 1917, in the United States, six million people suffered from syphilis. The only drug that offered some relief at the time was an arsenic compound made in Germany called salvarsan. The United States entered the first world war against Germany in the spring of 1917, and the supply of salvarsan–the tradename for asphernamine or “606”– and related compounds (such as neosalvarsan) was greatly limited. The German company also held patents in the United States on asphernamine and its variants, so Congress was asked to cancel those patents.

A physician, George Walker, who was a faculty member at Johns Hopkins University was among the first to testify before a Senate committee. Dr. Walker was in charge of the Johns Hopkins syphilis work. It has been over 100 years since Dr. Walker testified. It’s time to give his effort renewed visibility.

Dr. Walker’s first point is that the German patent system did not permit the patenting of compounds. One could patent the method to produce a compound, and could trademark the compound one produced–but not the compound itself:

The German idea in not patenting the chemical substance is to give an incentive to other expert chemists and ingenious men to perfect another process of manufacture. In that way they can use and sell the same substance, provided it is made by an entirely dissimilar method or way.

This is an intriguing point–quite apart from whether Dr. Walker was accurate about German patent law at the time or whether German patent law is the same way still if it ever did have this limitation. If one wanted to “unleash” American “innovation” with regard to drugs, might not the thing to do be to eliminate patent protection for chemicals and compounds, at least when directed at medical uses? If the invention is restricted to the method of production, then there is an opportunity for others to find new methods of production. Put another way–if there is nothing inventive about the method of production–then the result, too, ought to have nothing inventive about it. Anyone could do it. A patent should not take away from people what they could already do–rather, the justification for a patent is that it grants exclusive rights in something that people could not already do (and thus, they are not prevented from doing anything that they would do). I know, I know–bureaucrats want to unleash American innovation–but not in any known way, but only through regulatory tinkering.  Continue reading →

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Bayh-Dole inventor disclosure summary

Posted on January 16, 2019 by Gerald Barnett

Let’s summarize.

Bayh-Dole does not require inventors to disclose inventions arising in federally supported research or development.

It’s just not there. Go look. I’ll wait.

Bayh-Dole does not require inventors to give up rights to their inventions. 

It’s not there. The Supreme Court in Stanford v Roche looked. The justices did not find anything. Bayh-Dole applies only after a contractor has acquired ownership.

Bayh-Dole does not require inventors to use the patent system. 

Nothing in Bayh-Dole compels inventors to file patent applications. Federal patent law does not require inventors to use the patent system. Bayh-Dole is part of federal patent law. If Congress had wanted to upset things this way, they would have had to make their intentions abundantly clear. Not there.

Contractors, if they acquire inventions made under contract, must disclose them. But contractors do not have to acquire any inventions made under contract.

Contractors, if they elect to retain title to the inventions made under contract that they acquire, must file patent applications. But contractors do not have to elect to retain title to inventions made under contract if they have gone and acquired them.

But that’s contractors, not inventors. A difference. Continue reading →

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When to disclose inventions? Part II: Bayh-Dole, 2

Posted on January 15, 2019 by Gerald Barnett

We are explaining why, despite widespread insistence by folks who set themselves up as experts, there’s no obligation in Bayh-Dole for inventors to disclose inventions made under a federal contract. The first point to be made is that if one looks at the statute, there’s no disclosure requirement at all for inventors, only for contractors, after inventors do disclose–and the contractor has acquired title.

The standard patent rights clause authorized by Bayh-Dole includes a provision addressing inventor disclosure that’s entirely outside Bayh-Dole (there is no statutory authority in Bayh-Dole to require inventors to disclose anything to their employers–but what’s to stop meddling?). But even the standard patent rights clause provision does not actually require inventors to disclose inventions–disclosure is conditioned on a contractor’s compliance with the contractor’s disclosure obligation, and the contractor’s disclosure obligation only shows up after an inventor has disclosed the invention to the contractor. And a contractor is not required to get disclosures. With no inventor disclosure, there is no contractor compliance problem. So the patent rights clause in Bayh-Dole totally messes things up–unless its purpose is to keep inventors free (somewhat) from bureaucrats forcing them to use the patent system or to give up their rights to inventions.

A part of my brain, at this point, tells me that those drafting Bayh-Dole simply did not have a full deck. Continue reading →

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When to disclose inventions? Part II: Bayh-Dole, 1

Posted on January 14, 2019 by Gerald Barnett

When to disclose a subject invention under Bayh-Dole? It doesn’t matter. Really. Let me explain.

The Bayh-Dole Act applies to subject inventions. A subject invention is an invention (i) owned by a contractor (ii) that is or may be patentable (iii) and which has been made in the performance of work under a federal funding agreement. See 35 USC 201 and the Supreme Court decision in Stanford v Roche.

Bayh-Dole has this to say about invention disclosure at 35 USC 202(c)(1), in the list of things that must be in the standard patent rights clause unless a federal agency determines exceptional circumstances:

That the contractor disclose each subject invention to the Federal agency within a reasonable time after it becomes known to contractor personnel responsible for the administration of patent matters, and that the Federal Government may receive title to any subject invention not disclosed to it within such time.

Remember, a subject invention is one that the contractor has somehow acquired. Continue reading →

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A century of reaping enormous profits at the expense of sickness and misfortune, 3

Posted on January 13, 2019 by Gerald Barnett

The Mayo doctors, having made their specific arguments with regard to salvarsan in their 1917 letter to Congress, end with a full scale plea, not only to cancel the patent for salvarsan but also for other German drugs, and for patents on drugs in general:

We beg to urge upon you that you use every influence which you can bring to bear in favor of an immediate abrogation by Congress of the patent rights on this drug and incidentally on other drugs necessary to the public health whose usefulness is curtailed by German patents.

Then their expanded plea, for a “radical revision of our patent law”:

We urge that such an abrogation shall not be merely for the duration of the war but shall be permanent, and that furthermore, there shall ultimately be a radical revision of our patent law, looking to the prevention of private monopoly of remedial agents indispensible to the public health.

The letter is signed (by my count) 86 members of Mayo Clinic including both Mayos.

What follows, then were two bills introduced into the Senate, one that canceled the salvarsan patents (S. 2178) and the other authorized the United States to make and distribute for use any drug “that cannot be procured at a reasonable price” (S. 2363). Not quite what the Mayo doctors wanted, but something.

In this day and age, when the NIH and NIST officials claim to be confused by what “reasonable terms” might mean in 35 USC 203 of the Bayh-Dole Act, we might start with usage a century ago. Eighty plus Mayo doctors were clear on the idea–the terms that mattered for public health were quantity, quality, and price. Those are the terms that must be reasonable, or the United States should take action to make and permit the use of the “drug, medicine, or other remedy or device” and any patent or trademark owner can recover “reasonable compensation” through a court of claims. Continue reading →

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A century of reaping enormous profits at the expense of sickness and misfortune, 2

Posted on January 12, 2019 by Gerald Barnett

Mayo’s research publication Discovery’s Edge recently ran an article on “The Power of Patents.” In the article, Mayo Clinic wonders about patent royalties from a famous past invention:

When Mayo Clinic colleagues Edward Kendall, Ph.D., and Philip Hench, M.D., along with Swiss chemist Tadeau Reichstein, won the Nobel Prize for Physiology or Medicine in 1950 for demonstrating how cortisone was capable of reversing inflammation, Mayo Clinic did not patent this discovery nor participate in its commercialization. The invention was a breakthrough in treatment for patients with rheumatoid diseases, but Mayo Clinic did not receive a share of the revenue generated by pharmaceutical companies from this innovation. If Mayo had received such funds, they could have been used to further research to benefit patients.

Mayo Clinic did not patent the invention, but Kendall certainly did, working through Research Corporation, which made a deal with Merck, all under the auspices of Vannevar Bush’s war effort to study adrenal gland extracts as a possible benefit for pilots flying at high altitudes. (See the story here).

In the Mayo Clinic article, perhaps unintentionally, is a clue to the problem of introducing a cap on income earned with respect to a patented medicine made with federal support–the “mede measureless” of the royalty income could be used for further research “to benefit patients.” The tag is telling, because most research, while it may be proposed to benefit patients, largely and most immediately benefits the organizations involved in conducting the research. The larger argument, however, is that to achieve a maximal amount of income from a “share” of sales revenue, the sales revenue itself cannot be capped. For a Mayo Clinic to get its 1%, it is essential, so the implicit logic goes, for the manufacturers to get their unlimited 99%. Continue reading →

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A century of reaping enormous profits at the expense of sickness and misfortune, 1

Posted on January 11, 2019 by Gerald Barnett

In June 1917, the United States had just entered the first world war against Germany, and a German chemical maker through its American subsidiary Farbwerke-Hoechst held U.S. patents on salvarsan, a medicine used to treat syphilis. Along letters written on behalf of the seven hundred members of the Connecticut Society of Social Hygiene and with the Center Congregational Church of South Manchester, doctors at the Mayo Clinic wrote a letter to Congress, asking that the patents be canceled.

Mayo doctors complained that

During the course of the European war the supply of salvarsan in this country has been insufficient and precarious. The drug has been manufactured in German, imported when circumstances permitted, and doled out to the medical profession at prices which have largely prevented its use to the extent or in the type of cases which the interest of the public health demands.

The Mayo doctors pointed out that an American lab was permitted to make salvarsan by the German company for a time when importation was not possible, but “at a price dictated by their conception of commercial expediency.” Once imports resumed, the American lab was ordered to cease production. The Mayo doctors then turn to the price:

The price of salvarsan as regulated by the Farbwerke-Hoeschst Co. is a glaring example of a commercial monopoly reaping enormous profits at the expense of sickness and misfortune.

Continue reading →

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“Promote” in Bayh-Dole, 4

Posted on January 8, 2019 by Gerald Barnett

In arguing in Public Citizen v NIH that secret exclusive deals were the only way the NIH could fulfill its public mission–or at least the mission of its patent licensing office–the NIH produced some interesting metrics. In 2000, the NIH negotiated on 43 inventions, and for only two of these inventions was there a second interested company. What do we make of that? Perhaps it is that the NIH fails to broadcast availability sufficiently broadly. Perhaps it is that because the NIH is open to secret exclusive deals, once a company shows up to request a license, the NIH shuts off announcing availability of the invention under negotiation. Perhaps more potential licensees would appear if an invention was made available non-exclusive, royalty-free. The Court has this to say:

Thus, forty-one of the applications had no competition.

Now, if one were to assess the NIH patent licensing program relative to the expectation on exclusive licenses set out in Bayh-Dole (35 USC 209(a)(4)), one would conclude that the NIH had failed to comply:

granting the [exclusive] license will not tend to substantially lessen competition

NIH, no doubt, would argue that if there was no competition for a license, then granting the license could not tend to lessen competition. Nothing from nothing leaves nothing, as the song goes. Continue reading →

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