Equity Policies and Ownership Policies, Part II

Part I is here.

The shift from equity to ownership in university patent polices reflects a substantial change in the approach to innovation.   An equity based policy does not require a claim of ownership.  It is based on the circumstances established after an inventor decides to seek a patent.  If the inventor does not seek a patent, then there is no further interest by the university:  its equity is in the proceeds from the invention accruing to the inventor.  An ownership policy, by contrast, is based in conditions–employment, use of facilities–that might give rise to a claim of ownership.   Such an ownership policy need not consider whether an inventor wants to file an application or not (though some policies, such as Stanford’s, does), and further does not need to concern itself with whether the inventor might receive income from the exploitation of the patent.  The ownership claim is established independently of local circumstances or prospective value, with as general claim as can be made–and in some cases, a claim that goes beyond what can be made.

Ownership policies are based in administrative and legal power moves, in making enforceable claims to ownership, seeking a contractual basis for such claims, or at least threatening future employment if a policy claim to ownership is not honored.  Ownership shows up as a legal question, a question of how to compel an inventor to assign title to an invention to the institution.  Ownership policies are make-work opportunities for attorneys.

Equity approaches are based in local circumstances, reciprocity, acknowledgement of special support, acknowledgement of obligations to one’s peers and profession.  Ownership of inventions may have little to do with a discussion of equity.   Equity is about the sharing of proceeds based on circumstances.  Such sharing can be done by disclosure of circumstances and discussion among those involved, with arbitration in the case of disputes, all without reaching to change the ownership of the invention and associated patents.  Decisions regarding equity can be made by peers, by individuals who understand the university and its purposes, and who have little need to deal in the details of patent ownership.  By contrast, decisions regarding ownership, other than those made voluntarily, anticipate legal wrangling over the scope of the imposed claim, the mechanisms by which ownership is taken, and the subsequent control of the invention by the institution, which still may need the cooperation of the inventor to prepare and file patent applications.

In ownership policy approaches, the institution states an administrative self-interest.  Inventions are not welcomed:  they are required to be reported and assigned.  Various rhetorics are deployed along with such claims–statements of law, mis-statements of law, threats, demands, summoning of force, analogy with the practice of unlike organizations, and in associated statements of guidance and “education,” implicit disparagement of inventors’ capabilities, motives, and character with regard to the exploitation of any invention.  The implication being that  patent work is so complex that only a university has the resources to carry it off (i.e., inventors are incapable of identifying qualified agents to handle the work), or that the institution takes ownership to ensure that the public interest is served (i.e., inventors will not serve the public interest).  And all of this assumes that inventors would undertake the same work as the university bureaucrats choose to take on.

The resolution of equity in invention can take a number of forms:  delight in reputation (USC notably had such a policy); reimbursement of significant expenses from proceeds; a sharing of proceeds; a shop right or free use of the invention; a license to the invention; assignment of the invention to an agent that manages sharing under a contract with the institution and a negotiation with the inventor; ownership of the invention with sharing proceeds with the inventor and others;; or assignment of the invention to the institution or agent or sponsor with no sharing of proceeds with the inventor.

Equity considerations, then, were often premised on success, while ownership claims are based on the claim that institutional ownership and control is a necessary pre-condition to success.  This difference, too, is huge.   In an equity discussion, the issue is what should be given back to the supporting institution, based on what it has done, and what it has committed to sponsors, and more so, what those involved in the research have committed to the public that would expect to benefit from their work.

In an ownership discussion, none of this matters.  The claim is, before anything can happen, administrators must be satisfied with their ownership claims.  The imposition of such an administrative claim at the outset of any discovery or invention or software effort, at just the point that things are getting interesting, has to be one of the most devastating gestures one could think to make.  Quite apart from all the value that goes with the psychology of ownership, the movement of ownership and control to the institution separates the invention from its native academic environment, from the direction of those most closely associated with it and with all the other things going on in the research effort (including variations, workarounds, alternatives, and reasons why the invention simply sucks).   The transfer of ownership creates a huge new cost to the management of the invention–replacing the native creative environment with an administrative and legal environment that must start from scratch to get up to speed, and then has to add the invention to its inventory of such inventions, which in a number of universities now looks like the warehouse at the end of Raiders of the Lost Ark:  just one more lost invention among hundreds for a licensing organization staffed and resourced with a realistic carrying capacity of twenty to fifty.

Indeed, a primary change in the movement from no policy, or from a policy using an equity approach, to a policy fixed on ownership of inventions is the significant increase in volume of mediocre work for the administration of inventions.  Under an equity approach, the university need only see the inventions for which a patent is applied for; that is, where a decision has already been made that the conditions are propitious for the use of a patent to develop an invention.  Under an ownership approach, the university has to review every invention before any action is taken, and it is the university administration that is expected to take some action with regard to each invention–if  nothing else, to document that the university has the invention, to deal with the formalities of assignment, to enter the invention in a database, and to go through the motions of discussing the invention’s “commercial” prospects with the inventors.  This university review takes place regardless of the value of the invention.  So long as the work meets the policy definition of “invention”–and that often is “anything an administrator regards as an invention”–the invention must be disclosed and processed.

The ownership model is a magnet for mediocre invention, for the invention that meets a technical definition of “invention” but has little profile for using the patent system to advance anything but perhaps institutionally endorsed troll positions parasitic on practice.  The work that gets through a compulsory ownership system is usually (i) rogue, and circumvents the system; (ii) strong enough to endure the system, even though it does not need the system’s “help”; or (iii) mediocre and propped up by the addition of institutional reputation and resources to “create value” by applying patenting and denial of access to otherwise non-descript research outputs.  It is not that these research outputs have no value–indeed, they can be very valuable,  just as can negative results–but that they have little value in a system dedicated to patenting for commercialization.  In such a system, they are indeed mediocre.

Imagine all the inventions made at a university over a one year period becoming visible, say on an omniscient map.  Further, imagine that one could sort all these inventions into a list, starting with the ones of greatest value and on down to the ones of least value.  Now imagine further sorting for the ones with value that an office handling them for inventors could support, so looking at the cost, the expertise, and the contacts relative to the value.  For some with really high value, but requiring huge expenditures, substantial expertise, and deep industry or investor contacts, they simply can’t be handled in the normal way.  For others, the costs are acceptable, but the value might not be so great.  For others, the value might be greater handled elsewhere or otherwise, but there’s still sufficient value that doing the deal via the university licensing office is still a nice return.  And for some, the value actually might increase as the invention is associated with institutional ownership, on the strength of the idea that the institution wouldn’t get involved if the invention didn’t work or was too complicated for its own good or required other technology that no one had realistic access to.

If one imagined thus, then one would want a policy that attracted for sure all the inventions that were in the sweet spot for handling.  That is, a kind of high middling invention, one that could be handled without undue expenses or expertise demands, that could be “marketed” to industry or investors, by way of letters or cold calls.  One would not want to see everything, and one would not want to deal with the far upper end of the list, if the costs and exposure were out of range.  Certainly one would not want to see the tail of the list, where stuff had no value in a patent-licensing approach to commercialization.  One would not say, “having got these really good inventions to work with, I would now like to overwhelm my workload with a ton of other inventions that have no prospects whatsoever but I have to process to ensure compliance with a policy.”  That would be a terrible policy, would it not?

The aim of an innovation policy, like a marketing policy, is not to get every customer, but rather to get those that are likely to form the basis for deals, the qualified lead, the repeat or loyal customer, the low-overhead customer that can be readily supported, the profit-making customer.  To market to everyone, to bring in a majority of non-paying, non-helpful, time-wasting, resource-wasting, reputation-damaging, irritating, complaining folks–well, that is a failure of marketing altogether.  Inventions are much the same way, and have profiles and personalities and deal-making propensities of their own, often bound up in the social fabric of the research environment in which they arise.

Mediocre inventions serve to bolster institutional metrics of how much work it is handling–the number of inventions disclosed, the number of patent applications filed–and how that workload points to the growing need for centrally placed, institutionally controlled technology transfer services, and how the financial and policy support for such services highlights the institution’s dedication to innovation and entrepreneurship, and thus, implicitly, advocates for the importance of more and more research funding.   In an IP licensing program for the purpose of promoting innovation, one does not want as many inventions as possible.  One wants those inventions well matched to what one is able to do, what one is set up to do, within one’s carrying capacity.

The differences are remarkable:  an ownership approach creates a huge increase in work load, without any indication that the increase in work has anything at all to do with advancing the availability of inventions for development, commercialization, use, or much of anything.  When an organization like AUTM reports increases in its metrics, it is reporting the success of the ownership model in expanding work loads, and not much of anything having to do with impact of the management activity, either on the creative environment of the university, or on the lives of us folks comprising the general public.

An ownership-first policy separates inventive teams from the control of their work, and makes anyone seeking to use that work ask permission from administrators–undermining instruction, publication, collaboration, and consulting by making it impossible for inventors to deploy their inventions.  Yes, the inventors may publish and teach all they want, but no one in the audience can afford to act on those publications and instruction without a license from the host institution–and if the host institution is public, essentially a license from the state.  And as has become clear, university administrators are not in the habit of granting patent licenses without payment, and without a commitment by the licensee to make a commercial product.  Such policies are made much worse when they are also of the “hairball” variety, claiming everything and then releasing only what is forced out of them.   Such policies are worse than the corporate-style approach that these policies apparently aim to imitate:  they damage both academic involvement and public access to research developments.

Next up, in Part III, how Bayh-Dole got used to transform a working, diverse, largely equity based approach into a monoculture of compulsory ownership practice.

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2 Responses to Equity Policies and Ownership Policies, Part II

  1. Pingback: Equity Policies and Ownership Policies, Part I | Research Enterprise

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