Bayh-Dole Basics, 8: Reasonable Terms Comments-4

Posted on June 10, 2019 by Gerald Barnett

We are working through the details of prior treatments of what becomes “reasonable terms” in Bayh-Dole’s definition of “practical application.” This definition in turn becomes the threshold for federal agency march-in under 35 USC 203(a)(1)–the first of the four march-in conditions. One of the precursors to Bayh-Dole march-in (Latker said Bayh-Dole was based on it), is the Institutional Patent Agreement program revived (by Latker) in 1968. Using the IPA, the NIH could contract with nonprofits to circumvent Public Health Service policies on inventions and feed inventions to the pharmaceutical industry packaged as patent monopolies, using nonprofits as the intermediaries. Genius, if that is what one thinks ought to be done.

The IPA master agreement asserts that the nonprofit must administrate subject inventions in the public interest, should default to non-exclusive licensing, but then walks back that default with various easily adopted excuses, and then spends a great deal of effort on laying out the requirements for exclusive licensing–much like Bayh-Dole does for the exclusive licensing of federally owned inventions (and strangely what Bayh-Dole does not do for contractor-owned inventions).

Section (e) of the IPA master agreement deals with other terms of nonprofit licensing. Section (e), too, is strange:

(e) Any license granted by the Grantee to other than the Government of the United States under any patent application or patent on a subject invention shall include adequate safeguards against unreasonable royalty and repressive practices. Royalties shall not, in any event, be in excess of normal trade practice. Such license shall also provide that all sales to the U.S. Government shall be royalty free.

Why is this provision strange? Continue reading →

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Bayh-Dole Basics, 8: Reasonable Terms Comments-3

Posted on June 7, 2019 by Gerald Barnett

We are working through the NIH’s Institutional Patent Agreement master template to establish the context for Bayh-Dole’s use of “reasonable terms” in its definition of practical application, which in turn establishes the march-in threshold for 35 USC 203(a)(1), one of the four Bayh-Dole march-in conditions. Since Bayh-Dole is based on the Nixon executive branch patent policy, the implementing regulations for Nixon in the Federal Procurement Regulations, and the IPA, it’s worth seeing how these various instruments dealt with “reasonable terms” and affiliated gestures. Section (d) of the IPA provides the framework for when a contractor, having obtained ownership of a subject invention (the definition of subject invention is not the same as Bayh-Dole), may offer the invention under an exclusive license. In usual fashion, the IPA makes the default to be non-exclusive licensing (section (c)) and then walks it back (section (d)), leaving one with a first impression of openness and burying actual practice in a lengthy treatment of exclusive licensing.

Section (d) continues with its walk-back on the limits on exclusivity:

provided that the licensee shall use all reasonable effort to effect introduction into the commercial market as soon as practicable, consistent with sound and reasonable business practices and judgment.

We will go on a roundabout here. It’s important. The basic gesture here in the section (d) walkback is that despite exclusivity, the exclusive license should require diligence–so that the invention gets used sooner rather than later. That’s the gesture of Kennedy’s prefatory statement of policy: “The public interest in a dynamic and efficient economy requires that efforts be made to encourage the expeditious development and civilian use of these inventions.” Kennedy’s gesture is directed at defense-related inventions and recognizes the “dual use” concern of the day–since the great majority of federally held inventions at the time were indeed defense related. Why would anyone need to “encourage” development “for civilian use” other than that contractors ought to be pushed to find civilian applications for technology developed for military use–so sonar for fish finders rather than to detect submarines.

The theme repeats in the Kennedy patent policy. Continue reading →

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Bayh-Dole Basics, 8: Reasonable Terms Comments-2

Posted on June 6, 2019 by Gerald Barnett

Now we get to government rights under march in.

Here we have complications. In 1968, Norman Latker, NIH’s patent counsel, revived the Institutional Patent Agreement program, under which the NIH (and later the NSF) contracted with nonprofits so that a nonprofit could (was required to, actually) take ownership of any invention made with NIH support when they decided to apply for a patent on the invention. The IPA program was in its way a circumvention around both the Kennedy patent policy and the Public Health Service implementation of the Kennedy patent policy for research directed at public health. The Nixon changes to the Kennedy patent policy are driven by the IPA program workarounds–legitimizing the IPA program, as it were. So let’s look next at how the IPA master agreement handles “reasonable terms,” licensing, and march-in. Continue reading →

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Bayh-Dole Basics, 8: Reasonable Terms Comments-1

Posted on June 5, 2019 by Gerald Barnett

This will be longish. It’s a document of the details. In a world where people spout TL;DR for most any issue of substance, and want a sound bite to gulp instead, this ain’t it. Perhaps we can get all brief and political about it later. Here, the effort is to use the details to show how the thinking around executive branch policies and regulations pertaining to invention march-in informs an understanding of Bayh-Dole, so we can get at just what “benefits . . . available to the public reasonable terms” in 35 USC 201(f)’s definition of practical application might mean.

We start our commentary on “reasonable terms” by noting that the public interest apparatus in any executive branch patent policy, regulation, or government contract has not been used–but for the strange, twisted case of Campbell Plastics–and that was a failure to disclose a subject invention in the form of a written “report”–disclosure in all other respects, but someone was out to make a point about proper paperwork being more important than a small company gaining the benefit of a patent for the creative work it had done. So, this stuff is never used. Keep that in mind. Anyone who argues that some part of the public interest apparatus in Bayh-Dole was “not intended” to be used in some way, such as “reasonable terms” was “never intended to be used to control price” is true in the broadest sense because nothing in Bayh-Dole’s public interest apparatus was intended to be used. Continue reading →

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Bayh-Dole Basics, 8: Reasonable Terms

Posted on May 29, 2019 by Gerald Barnett

Bayh-Dole policy (35 USC 200) that the patent system is to be used “to promote the utilization of inventions arising in federally supported research or development.” That “utilization” is then set forth in the definition of “practical application” (35 USC 201(f)):

The term “practical application” means to manufacture in the case of a composition or product, to practice in the case of a process or method, or to operate in the case of a machine or system; and, in each case, under such conditions as to establish that the invention is being utilized and that its benefits are to the extent permitted by law or Government regulations available to the public on reasonable terms.

We can make this definition clear by removing the variations on forms of invention practice and various qualifications:

The term “practical application” means to [practice the invention] and, in each case, under such conditions as to establish that the invention is being utilized and that its benefits are . . .  available to the public on reasonable terms. Continue reading →

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Patents, Medicines, Public Funding–2

Posted on May 28, 2019 by Gerald Barnett

We have distinguished four sorts of medical interventions–prevention, cure, facilitation, and alleviation. We have also argued that from a public health point of view, prevention and cure are tops, and facilitation and alleviation are great when they support prevention and cure, and less interesting if they serve to make acute conditions chronic. A vaccine that prevents tetanus is great. A vaccine that is facilitated by a better injection system is even better. An injection that doesn’t hurt so much is nice, too. No doubt anesthesia in its various forms is one of the great facilitators of all sorts of medical interventions.

Absolutely there’s still interest in making acute conditions bearable. Dialysis keeps those with kidney failure alive. And insulin is critical for treating diabetes. Such alleviators are tremendously important–it’s just that they are not cures, and so those suffering from kidney failure or diabetes are dependent on the interventions for the rest of their lives. They are rescued but also become a reliable “market” for for-profit products. Dialysis, for instance, runs about $89,000 per year, according to UCSF’s “The Kidney Project.” At 750,000 patients in the US, that’s a “market” worth $42 billion a year–7% of annual Medicare expenditures. As for diabetes, the American Diabetes Association estimates the cost of diabetes treatments in the US in 2017 were $237 billion. That’s also, er, a “market” value. The drug portion of that total is 15%. The rest is hospital care (30%), doctor’s visits (13%) and medications to treat complications (30%). If one thinks about the multipliers for estimating company valuations based on revenues in a “market” growing by 5% a year–say 9.36 for healthcare services or 15.42 for healthcare products or 22.87 for biotechnology–call it 10 because we can be lazy–we are looking at combined biomedical company valuations in the trillions that would be severely depressed if diabetes as a market just went away because of the reckless and untimely introduction of an effective prevention or cure.

Another thing. If acute conditions become bearable, then also there’s less pressing need for prevention or cure, no? If a drug can extend suffering life another six months, then there’s hope that a better drug in the future, with research, will be developed to extend life twelve months, maybe more. Once there’s a market in alleviation–fewer symptoms, lesser symptoms, longer time of response, slowing the progress of disease–then it would be a great shame if not injustice to make the private investment in that market vanish with a prevention or cure. For public policy–for where our governments choose to support programs for prevention or cure, say, relative to alleviations and facilitations. Continue reading →

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Patents, Medicines, Public Funding–1

Posted on May 14, 2019 by Gerald Barnett

Let’s look at four areas of health “technology”: preventions, cures, facilitators, and alleviators. A prevention does just that–prevents an adverse health condition. A vaccine, for instance, prevents a disease (for many, and sometimes with adverse reactions, even deaths). Or, regular exercise may prevent cardiac disease. A cure heals or restores an adverse health condition. An infection clears up with antibiotics or a cancer goes into remission. A facilitator permits other medical interventions to take place–anesthesia, for instance, facilitates surgery and anti-nausea medication facilitates chemotherapy. Alleviators reduce symptoms or slow the progress of disease. In a sense, alleviators turn acute conditions into chronic ones.

In this list of “health technologies,” we might also consider priorities. Clearly, prevention is pretty neat. If one doesn’t get an adverse health condition in the first place, then all the rest of the medical interventions are not needed. Imagine, if you will, that we already have protection from many diseases and injuries–our immune systems, or gut biota or even the Earth’s magnetic field may prevent us from health adversities that would be caused by cosmic rays not getting deflected–just we don’t even think about these things much because we never suffer from them. Imagine–there could be a whole cloud of health adversities circling just beyond our ken that never appear because something we also don’t bother to know about keeps them at bay. Our little cocoon of not knowing. Similarly, the vitamin has cured and reduced the frequency of many deficiency diseases, just as the vaccine has eliminated some really nasty diseases from our immediate imagination–polio, say, or tetanus. Continue reading →

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Bayh-Dole is thin soup when it comes to federal innovation policy

Posted on April 18, 2019 by Gerald Barnett

NIST wants march-in for Bayh-Dole’s section 203(a)(2) and (3) to be for “national emergencies” only. Section (a)(2) concerns health or safety needs that are not “reasonably satisfied.” Section (a)(3) concerns regulatory requirements that are not “reasonably satisfied.”  But the *price* element is in 203(a)(1). Only (a)(1) relies on the definition of practical application–use with benefits available to the public on reasonable terms.

If an invention is not used or the benefits of use are unlikely to be made available to the public on reasonable terms, no practical application has been achieved. If there’s no practical application, then a federal agency has the right under the standard patent rights clause to march in and require licensing of the subject invention. Compulsory licensing is the remedy for a failure to offer the benefits of using an invention to the public on reasonable terms. At least there’s the appearances of an apparatus in Bayh-Dole to protect the public interest. In practice, it’s not that way. In practice, no federal agency has ever “marched-in.” In practice, federal policy is not to protect the public interest with regard to practical application.

An NIH attorney–Norman Latker–drafted Bayh-Dole to reestablish a patent monopoly pipeline from the NIH to pharma. Latker had previously restarted the Institutional Patent Agreement program and drafted the master IPA. The IPA had the same effect as Bayh-Dole–to place federally supported inventions behind  patent monopolies to be served out by nonprofits to the pharmaceutical industry. The IPA also had a public interest apparatus–but in practice that apparatus was ignored and nonprofits sought exclusive licenses for the biomedical inventions they claimed to own (and the IPA, unlike Bayh-Dole, provided a legal foundation for nonprofits to assert ownership of inventions made with NIH funding).

One argument for doing so is the monopoly meme. The claim of the monopoly meme is that without a patent monopoly, no one will use or develop a research invention. That’s nonsense, but there are people who love nonsense. Continue reading →

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More bad Bayh-Dole advice in the wild

Posted on April 15, 2019 by Gerald Barnett

Here are “three important questions answered” by a company specializing in Bayh-Dole compliance. (I’m sorry, Nikki. Have your people up their game.)

1) If you report an invention after the 60-day deadline, can the Government take title?

Yes, the Government can come in at any time and take title if compliance is not completed.

What does “compliance not completed” mean? Dunno. The disclosure deadline is “two months” not “60 days.” See 37 CFR 401.14(c)(1). In Bayh-Dole, the deadline is “within a reasonable time.” See 35 USC 202(c)(1). The government may “request” title if a subject invention is not reported within the two month window. Bayh-Dole does provide, however, for contractors to appeal federal agency requests for title, and federal agencies must have procedures in place for such appeals. See 37 CFR 401.11.

Most agencies require that you report invention disclosures within 60 days of receipt, or as soon as you become aware of federal funding thereafter.

This part of the answer is strange. The standard patent rights clause establishes the reporting requirement. If an agency is going to change that requirement, it has to go through the procedure to determine exceptional circumstances and introduce a changed patent rights clause for a given funding agreement. Until it can be established that an invention has been made in performance of work under a funding agreement, that invention is not a subject invention and there is no disclosure requirement. If an invention has in fact been made in the performance of work under a funding agreement, only when that fact has been established by contractor personnel responsible for patent matters does the two-month disclosure deadline become effective. Continue reading →

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Research Enterprise Policy Issues: fragmentation of noisy research

Posted on April 10, 2019 by Gerald Barnett

We have looked at noisy research and quiet research. Policy folks don’t much care, but it appears to make a difference whether research is conducted quietly or noisily. In quiet research, variations are explored, applications considered, data assembled, evidence checked before anything is announced. In noisy research, topics and areas are announced in advance, with proposals submitted as a kind of competitive boast in the hope of obtaining funding, with many other researchers turning their attention to whatever is announced as available for funding. The result of noisy research is that it attracts participants–if that is where the funding is, then that is where proposals are directed, awards are granted, and new IP created.

If we add in that the organizations that host research insist on claiming ownership of results and furthermore intend to hold ownership as an intellectual property monopoly in the hope of finding an exclusive business partner to “develop” the results into commercial products (and pay for the right to do so), then the necessary result is that the area of research fragments into the ownership positions of the organizations whose researchers have all been attracted to the noisy research.

The upshot is that when ten or fifty or two hundred researchers and their organizations each think this way about approximately the same area of inquiry, the work itself fragments into many pieces, each controlled exclusively and independently of the others–tens, to fifties, to hundreds of little IP portals. If each IP position is held for exclusive licensing, then it rapidly becomes impossible for anyone to acquire sufficient licenses to exploit the research results being created–whether to use those results (as in research or professional activity) or to make and sell products based on those results. Continue reading →

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