Why universities might fail to report subject inventions

James Love asks why universities fail to report subject inventions.

The question might seem rather odd, because in practice Bayh-Dole has been construed to give university administrators incentives to expand the definition of subject invention and so claim anything and everything they can. University administrators viewed Bayh-Dole as giving them an end-run around university research policies. Those policies generally state that research contracts take precedence over patent policy inventor ownership rules–which at the time often favored faculty inventors. Thus, according to these university administrators, Bayh-Dole happily also preempted academic freedom, freedom of research, and freedom of publication–all things otherwise assured by university policy. University administrators did not have to change any policy–they just asserted that federal law required them to take ownership of any inventions with a whiff of federal support. Then they went back and made changes in university policies to bring the policies into compliance with federal law. It was all bogus–incompetence and clever malice all rolled up into one slime ball of self-interest. But that’s what we have. You can see why university administrators are pretty much the only folks in love with Bayh-Dole–oh, along with much of the pharmaceutical industry.

But Love reports that his organization (KEI) is finding numerous instances of non-reporting of what appear to be federally supported inventions made at universities. Here is a KEI “Briefing Note” that provides a bunch of information with regard to Bayh-Dole invention reporting.

So if Bayh-Dole offered incentives for university administrators to expand the definition of subject invention and report everything as a simple way to claim institutional ownership with the apparent power of federal law, why would administrators under report?

Here are some possible reasons why: Continue reading

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Nonprofit assignment of subject inventions in the standard patent rights clause 37 CFR 401.14(a)(k)(1)

Universities ubiquitously claim as a matter of formal policy to handle patentable inventions in the public interest. That expectation forms a basis for the federal government to award grants–subvention funding, grants-in-aid–for faculty-proposed research hosted by these universities. That’s also the basis for the requirement in Bayh-Dole that federal agencies must require in their funding agreements that nonprofits  include the nonprofit patent rights clause in any assignment of a subject invention. See 37 CFR 401.14(a)(k)(1).

Again. Universities swear they will manage inventions in the public interest. Bayh-Dole agrees and requires federal agencies to use a patent rights clause specific to nonprofits in funding agreements with nonprofits. That nonprofit patent rights clause requires that when a nonprofit assigns a subject invention, the nonprofit patent rights clause is included. The nonprofit patent rights clause requires nonprofits to use income with respect to any subject invention, after allowable costs, to support scientific research or education. The same goes, then, for any assignee of a subject invention. If you are a company, then unless you are a big-hearted, publicly spirited sort of company, you really, truly do not want to receive assignment of a subject invention from a nonprofit.

Here is the original version of the nonprofit patent rights clause (my emphasis), as a required by clause (35 USC 202(c)(7)):

In the case of a nonprofit organization, (A) a prohibition upon the assignment of rights to a subject invention in the United States without the approval of the Federal agency, except where such assignment is made to an organization which has as one of its primary functions the management of inventions and which is not, itself, engaged in or does not hold a substantial interest in other organizations engaged in the manufacture or sale of products or the use of processes that might utilize the invention or be in competition with embodiments of the invention (provided that such assignee shall be subject to the same provisions as the contractor)

Here’s the amended version, circa 1984, after the university patent brokers finished removing the restriction that an invention management organization could not have a conflict of interest by holding stock in companies that also might compete with others for licenses: Continue reading

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GAO reports Bayh-Dole is a do WTF you want law

Bayh-Dole is a do WTF you want law. Don’t take my word for it. You don’t even have to go read the law to see what I have been talking about. Here, check out this report from the GAO, for 1998.

The repeated theme of the report is that “we talked to someone” and “they think Bayh-Dole is doing wonderfully” along with “but they don’t have any way to check that their thinking is accurate.” And of course, the university thinking about Bayh-Dole is mostly inaccurate, except for one key point–universities can do pretty much whatever they want to, as long as they insist they are complying with Bayh-Dole. Here’s a major heading:

Check out that left column summary: “The administration of the Bayh-Dole Act is decentralized and relies heavily on voluntary compliance by the universities.” Of course, the Bayh-Dole Act applies to patents on inventions made with federal support and to federal agencies, and dictates how federal agencies must contract for rights to inventions made with federal support. But what happens if the universities haven’t bothered with compliance? Nothing, apparently. Universities haven’t bothered with the (f)(2) written agreement requirement, routinely assign inventions under the cover of exclusive patent licenses, fail to (knowingly) require their assignees to accept the nonprofit patent rights clause, and spend the income from licensing and from other exploitation of subject inventions however they wish, disregarding the standard patent rights clause. Continue reading

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Xtandi demonstrates how Bayh-Dole is a do WTF you want law, 3

The first part of this article is here.

The exclusive license that UCLA granted to Medivation meets the requirements for an assignment of the subject invention. The license grants substantially all rights in the subject invention (to all compounds for use in treating disease), grants the right to grant sublicenses (including exclusive sublicenses), and grants the right to sue for infringement. The license reserves educational and research uses, reserves rights to use for Howard Hughes Medical Institute (based on the inventive contribution of one of its employees working as a faculty member at UCLA), and reserves rights for the U.S. government. That is, courts have ruled that such a license instrument constitutes an assignment of the invention. This, too, is prohibited under Bayh-Dole, unless the federal government approves, and regardless, the assignee has to accept the nonprofit patent rights clause (see 37 CFR 401.14(a)(k)(1)).

What does it mean that Medivation, Montreal (Pfizer’s subsidiary), and Pfizer must accept the nonprofit patent rights clause that UCLA invented under? It means that each the new assignee must pass on the nonprofit patent rights clause in any subsequent assignment of the subject invention, must share royalties with the inventors quite apart from anyone else who is sharing royalties with inventors, must have a preference for small businesses in licensing the invention, and–and this is the poison pill–must use any balance after expenses incidental to administrating subject inventions for “scientific research or education.” If KEI wants to go after Xtandi, the finger down the throat of rights is right here, not in the march-in provisions. If UCLA has assigned the invention, then the assignee must use any income with respect to that invention for the public purposes of scientific research or education. Nothing else.

If Pfizer does not want to be exposed to the financial liability of allocating not only its profits but all of its income less those administration of subject invention expenses to public purposes, then it will cough up the assignment–of all substantial rights–like a hairball. No doubt Pfizer would be happy (in the circumstances, relatively speaking) with a non-exclusive license to make and use with an exclusive license to sell. Medical insurance companies might then fund companies to give away enzalutamide to their patients, so there would be no sale involved. Continue reading

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Xtandi demonstrates how Bayh-Dole is a do WTF you want law, 2

The first part of this article is here.

To explore these issues, let’s take a look at Xtandi, a prostate cancer drug that has received press recently in the debate over high drug prices. Xtandi sells in the U.S. for $88 a pill, and a patient takes 4 pills a day. Things add up–over $120,000 a year, per patient. No wonder Xtandi has racked up over $2B annually in sales. But in Canada, Xtandi sells for just $12 a pill. And a Canadian generics drug manufacturer, Biolyse, says it could make the drug for $3 a pill–a cost to a patient (or patient’s insurer) of $4,000 a year. So the U.S. price is 8x the Canadian price, and 30x what the drug would sell for with competition.

If one is a shareholder in Medivation (or, now, Pfizer, which acquired Medivation through its subsidiary Montreal for $14B), then these are happy times. If one is a shareholder in a medical insurer, then things are dire as usual. If the federal government is willing to pay the higher price, then taxes go out to the corporation that has fronted the clinical development of the drug. As far as the taxes go, then, there is a civic discussion regarding how we spend our collective money. At present, the decision is that it’s really great to see shareholders getting such a return on the risk they took buying shares. As a result of their risk-taking, a beneficial drug is on the market and people’s lives are being helped. It’s all good.

Similarly, if one is a patent owner and has licensed the patent to Medivation for a royalty on sales, equity, and other milestone payments and reimbursements. And that’s what UCLA is, since enzalutamide–the compound Xtandi is based upon–was identified for clinical use at UCLA, with federal funding. So the UCLA invention is a subject invention under Bayh-Dole. There is plenty of complexity behind the scenes to get at what has gone on, and I have tracked down only some of it. But it’s worth taking a look to see how things have developed, and how Bayh-Dole has been used, or, as it were, exploited or ignored. Continue reading

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Xtandi demonstrates how Bayh-Dole is a do WTF you want law, 1

There is a big divide regarding what Bayh-Dole was supposed to accomplish with regard to the use of patents on publicly funded research. On one side is the view that publicly supported research should be freely or otherwise reasonably available to all, with exclusivity used only to “call forth private capital” that otherwise would not be made available or where a contractor already has an established commercial position and capability and it would be inequitable to require the contractor to give up that position simply because it undertook research for the government. Bayh-Dole codified these goals and protections for all federal agencies.

On the other side is the idea that the goal of public support for research is the development of commercial products, and that essential to that development is the freedom of patent owners on inventions made with federal support to exploit their patents however they choose, so long as products based on federally supported inventions are available for sale to the public. In this view, the incentive to secure monopoly prices is one of the primary features of the Bayh-Dole Act, which by law limited how the federal government could interfere with the private exploitation of patent rights.

The debate has taken focus around the idea that Bayh-Dole march-in procedures can be used to regulate the price of drugs that were discovered with federal support. Perhaps. Jamie Love at Knowledge Ecology International requested that NIH and DoD “march-in” to deal with the high cost of the drug Xtandi, which was “invented” with federal support, patented by UCLA, and licensed exclusively (in fact, assigned) to a company set up to prospect for new drugs, which eventually sold itself and the UCLA license to Pfizer. Continue reading

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The devils in the details: Bayh-Dole supports academic freedom, 2

Part 1 of this article is here.

By requiring the contractor to require “technical” employees to make a written agreement, (f)(2) does some fundamental things within the framework of definitions set up by Bayh-Dole. Watch the devils tumble out in the details.

First, this written agreement transfers rights and obligations from the contractor to the “technical” employees–these employees must report inventions and must sign papers to establish the government’s rights. (f)(2) requires the contractor to “substitute parties” for the purpose of inventors actions to protect the government’s interest. This is a required contractor action.

The definition of funding agreement at 35 USC 201(b) expands to including such contractor actions:

“Funding agreement”

includes any assignment, substitution of parties, or subcontract of any type entered into for the performance of experimental, developmental, or research work under a funding agreement as herein defined.

It is clear that (f)(2) is working the apparatus of Bayh-Dole to deal with a basic problem in the statute. If federal agencies no longer have any standing right to claim ownership of inventions made with federal support, and have only limited rights to claim ownership in inventions after a contractor has acquired ownership–then, O Devil!–if a contractor does not acquire ownership of a given invention, then there is no way at all for the federal agency to have any rights in that invention–not a license, not a right to request title, nothing, nothing, nothing at all. The government has the right to acquire title to subject inventions–inventions owned by a contractor–and only when the contractor fails at certain things. You  must see it now. Big hairy red devil. Continue reading

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Enforce Bayh-Dole To Reform Bayh-Dole

I posted the first half of an article that lays out how Bayh-Dole, if university adminstrators complied with the law and its patent rights clause, would support the academic freedom of faculty inventors. I also pushed a related tweet thread to Twitter, and a reader there requested a white paper. Well, white papers are sort of dying, so instead I used another dying medium, the slide deck.

PDF   Enforce Bayh-Dole to Reform Bayh-Dole

Click on the link above to get a pdf version of the slides.

Here’s a link to a ppt slide show all packaged up for your use.

PPT Show Enforce Bayh-Dole to Reform Bayh-Dole

Repealing Bayh-Dole feels good because it has made such a mess of things. But it’s not all Bayh-Dole’s fault. Yes, the law is awfully drafted. Yes, the folks drafting the law and the same folks drafting the implementing regulations were determined to undermine public policy to route publicly funded inventions in health care to speculators and monopolists. Yes, the law lacks protections for inventors and third parties, which the Supreme Court was ready to find “deeply troubling.” Yes, there is a ton of misinformation and misbehavior around. Yes, university administrators simply refuse to comply and make up fake history and faux law to justify their non-compliance. Yes, Bayh-Dole has become a monster, a failure, a destroyer of opportunity and public benefit, all so that a few hundred inventions in over 50,000 patents might become lucrative for speculators and monopolists and for the university administrators who have enabled them. This is their idea of serving the public interest–serving themselves.

But for all that, Bayh-Dole has within its statutory framework the power to work for good, not evil. Bayh-Dole is our little Darth Vader of university research. Having served the evil empire, it is now time for a moral reckoning. Does our Darth-Vader law have what it takes to repent and live up to its original potential? Perhaps so.  Continue reading

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The devils in the details: Bayh-Dole supports academic freedom, 1

Bayh-Dole supports the academic freedom of faculty inventors. University administrators refuse to comply. Here, we walk through the law, the implementing regulations, the various patent rights clauses to show the result. Fair warning to university administrators reading this piece. I will call some of you turdly and boogerish later on. Those of you who recite the faux Bayh-Dole deserve name-calling worse than this. Those of you who want to change things at your university, who want to implement Bayh-Dole as rule of law that preserves academic freedom–which it does–well, get on with it. It’s not federal law that is stopping you. This article shows you what you need to do.

Bayh-Dole is often described as a law about invention ownership, when the invention has been made with federal support. But university administrators do not understand. The Supreme Court, in Stanford v Roche, made it clear that Bayh-Dole concerns only the disposition of rights in an invention between the federal government and a contractor after the contractor has acquired rights in the invention:

The Act’s disposition of rights—like much of the rest of the Bayh-Dole Act—serves to clarify the order of priority of rights between the Federal Government and a federal contractor in a federally funded invention that already belongs to the contractor. Nothing more.

We can therefore set aside as misinformed those claims that Bayh-Dole vests ownership of inventions made with federal support in the universities that host the research, or gives those universities any special right to claim those inventions–the only right that Bayh-Dole insists that federal agencies offer to contractors in a funding agreement is the right to retain ownership of an invention ahead of the federal government if they come to own that invention. Here’s the clause, from 35 USC 202(a):

Each nonprofit organization or small business firm may . . . elect to retain title to any subject invention

This is statutory–patent law, even–it’s not part of any funding agreement. That is, a nonprofit or small business may choose to keep title (ownership) of an invention made with federal support and acquired by the nonprofit or small business, and not assign title to the federal government.

But we have to be clear, not turdly, like many university patent administrators and erstwhile advocates for Bayh-Dole. Continue reading

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The IPA and Wisconsin’s 1969 Patent Policy, Table of Links

In May 2017 I wrote a series of articles that traced the development of the University of Wisconsin’s patent policy, how the Wisconsin Alumni Research Foundation shaped federal policy to disenfranchise faculty inventors in favor of its own money-making ventures that favored exclusive licensing to the pharmaceutical industry. This behavior led to changes in Public Health Service patent policies, resulting in a pharmaceutical industry boycott of PHS supported inventions–whole classes of compounds that the pharmaceutical industry would not touch without assurance of a patent monopoly. The boycott was noted by the Harbridge House report, which concluded a single arbitrary federal patent policy was not workable. The NIH in response created the Institutional Patent Agreement program as an end-run around the Kennedy patent policy, which the PHS followed. Bayh-Dole is the successor to the IPA program.

Through it all, a few clever tricks used by WARF became a shadow claim on federal patent policy. Expanded scope for federal interest in inventions (to be made available to everyone) became expanded scope for university administrators to claim ownership of inventions (to be excluded from everyone in favor of a hoped-for future patent monopoly deal). A contract with the federal government which no Wisconsin faculty member could negotiate then could control all inventions in federally funded research without changing Wisconsin’s patent policy. The changes in policy followed Wisconsin signing the IPA agreement. Other universities used this same strategy with Bayh-Dole–claiming Bayh-Dole required something, then changing policy to comply with this requirement–even though the requirement itself was fake. Once policy was changed, the fake federal requirement didn’t much matter.

Anyway, the articles work through a range of topics illustrated by WARF. There are turtles and pigs.

Here is a table of links to this series of articles, with a brief summary of each. Continue reading

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