The Alt Narrative that Refreshes

In Ash:  A Secret History, we get a slant narrative of a history that is almost our received view, but not quite.  The narrative takes place on lands we recognize, with place names that are almost the ones we expect, but with social mores and core histories that are just enough off to be unsettling, or interesting.   Todorov, too, reminds us that there are no primitive narratives in history.  There’s no one set of facts that all defective narratives converge to as the final truth.  Any claim to such truth is a work of fiction.  Useful in its way, but not the single true history.  Lyotard argues for the weak rhetorics that may carry important value but are swamped out and displaced by socially dominating rhetorics.  Thus, a demand for the “bottom line” can overwhelm a line of reasoning focused on intangible value even if it cannot disprove the argument. So it is that narratives compete, and challenge.  So it is also with narratives of innovation, of technology transfer, of economic vitality.

I have been working to construct narratives that make present how we have changed patent management practice at universities over time.  There is a tendency to make the past look archaic and select out those few things that lead to the things becoming the way people are taught to see them now.  In the conventional treatment, universities were doing nothing much and the federal government was doing terrible until the Bayh-Dole Act sparked the universities into a buzz of activity, resulting in a huge uptick in the number of patents, and all sorts of public benefits. 

As David Mowery and others have repeatedly pointed out, there was plenty of activity before Bayh-Dole.  One can argue that Bayh-Dole shifted patent work that had been with agents into the university, and led universities to be less selective about what patent work they took on, and that a handful of universities with ready sources of revenue, such as from a couple of big-hit patent licenses, could file a lot of patent applications without worrying so much about the quality of the patent or having one or more companies at hand to take licenses.  One could also argue, as does Rebecca Eisenberg, that the federal government’s patents were not of the commercializable kind, were held for reasons other than monopoly investment, and the government on the whole was doing a decent job.  One might also argue that the concerns federal agencies had with universities dealing in patents were legitimate.  Yet beyond one statement in The Economist on Bayh-Dole, there’s not all that much that recommends it, and there’s a growing body of academic literature that challenges it, especially in the context of whether other countries should adopt a similar law.  All this is compounded by the university patent brokers’ determined, persistent misrepresentation of Bayh-Dole and refusal to implement the requirements of the standard patent rights clause as written.

I have put together various accounts of university patenting that draw on my work with the history of patent policies, and my experience in the business of university IP management since 1990 or so.   What follows is another iteration that follows the history of research foundations as external agents, which are then gradually drawn tighter to universities, and eventually mostly replaced by in-house patent licensing programs.  In this history, Bayh-Dole is a turning point:  Bayh-Dole guts public accountability for the private exploitation of inventions made with federal support.  Bayh-Dole is then used by the single-university invention management agents to destroy Research Corporation and its network of contracts with universities.  Having destroyed Research Corporation’s network, the patent brokers then used Bayh-Dole as a club to change university patent policies from successful and academic-compatible invention equity approaches often using an invention management agent to compulsory ownership requirements (federal law requires it!) on a portfolio approach where just one or two inventions every decade or more makes for a “successful” office.

You won’t find this account in any AUTM or COGR document.  Allowing the defeated to have a word, or even a minority report, would sully the accomplishment.  University administrators now use university licensing as a rhetorical front to claim that federal research funding equates to economic development with an aim to induce the federal government and state legislatures to divert money to whatever is trendy–research clusters, entrepreneurship training, incubators and accelerators–as long as the money ends up expanding university programs, buildings, and administration.   So technology transfer gets flashed as this wonderful thing that justifies a lot of money getting thrown at university infrastructure for research, because research = new products = jobs = prosperity and all of it will be local, regional, in-state.  That, for instance, is how the STARS program in the state of Washington set up its rhetoric, even though the new companies that it championed were building their manufacturing plants in Oregon, the stinkers, and faculty that left for other schools took their startups with them.  The state’s public universities, of course, suppressed this information in their reports, as it didn’t fit with the desired narrative.

So consider this alt narrative.  In its way, it is also supportable–perhaps more so than the prevailing narrative that you know and love.  If you have thoughts about it, or corrections, please let me know.

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University faculty created the non-profit external agent approach to patent management, starting with Frederick Cottrell at the University of California who in 1912 set up Research Corporation as a non-profit foundation, one of the first such foundations in the country, to manage a portion of his patent rights in an environmental invention, the electrostatic precipitator.  WARF was created in 1925 to manage patents related to the irradiation of milk to produce vitamin D, and was a variation on the Research Corporation theme.  Rather than providing services nationally, both in terms of assisting faculty with their inventions and providing funding for further research, WARF chose to focus on University of Wisconsin only.  WARF sparked a number of such research foundations, including those at Purdue, Washington State University, and Kansas State.  By 1962, according to Archie Palmer, there were over 50 such foundations, each focused on an individual campus.  In addition to Research Corporation, Battelle Development Corporation began to work with university faculty and their institutions.  Other agents, such as University Patents, were also supporting faculty work.  It was this activity, led mostly by external agents, some national and some focused on a single university, that provided the licensing statistics that underscored the arguments for passage of the Bayh-Dole Act in 1980.

During the 1970s, Research Corporation, which had contracts for management with many universities and their affiliated research foundations, had advocated that universities create what it called “technology transfer” offices.  David Mowery et al. give an account of this activity in Ivory Tower and Industrial Innovation.  The purpose of such offices was to assist faculty in identifying inventions, preparing the necessary information for evaluation for management by Research Corporation (or any other agent), and assist in obtaining the necessary signatures should the agent accept an invention for management.  In this way, what was transferred was the responsibility to manage patent rights, independent of whether that management took the form of a non-exclusive licensing program (as WARF’s programs had largely been) or an effort to seek a single commercialization partner, as was indicated in some biomedical licensing situations.

These technology transfer offices had no licensing function.  At the time Bayh-Dole came into effect, only a handful of major universities had an in-house patent licensing office, including MIT, the University of California, and Stanford.  A minority of universities had formal patent policies.  Of those, many did not claim ownership of faculty inventions but rather referred faculty to external agents.

Thus, for about 70 years, external agent-based, non-profit management of faculty inventions was the norm, was successful, worked well with university values, and laid the groundwork for the federal legislation.  Universities generally used an invention equity approach, recommended external agents for invention management, and limited their own claims to inventions to those arising in work expressly assigned or supported with institutional funds.  Otherwise, a grant of ownership arose from a review of what equity the institution and others may have in a given invention, given the circumstances.  Such reviews were typically led by faculty committees rather than administrators.   A typical university policy provided that if the faculty inventor assigned to Research Corporation or another agent with which the university had a contract for services, then the equity issue was satisfied, since Research Corporation would share a portion of its income, after costs and paying royalties to the inventor, with the contracted university that had hosted the work.  University administrations typically did not claim inventions made with the support of the “normal academic environment.” The University of Southern California went so far as to argue in policy that reputation gain from successfully developed inventions was sufficient consideration.   Of course USC doesn’t have such a policy now.

Research Corporation used the remainder of licensing income after expenses to support faculty research at universities nationally.  Early in Research Corporation’s existence, such research support was tremendously valuable to university faculty.  Indeed, after the creation of the NSF in 1950, some university faculty treated government funding of research with suspicion, as a political intervention in independent inquiry.  In his farewell address to the nation, President Eisenhower worried the effect of federal funding on the independent researcher.   How times have changed.  The rapid expansion of federal funding into university work shifted more work to federal agencies, which varied in their approach to inventions.  Their approach was based on a series of presidential executive orders recommending flexibility in contracting.  Some agencies, such as NSF and the Department of Defense, allowed contractors to own inventions made with federal support.  Others, notably DOE and NIH, did not.  The NIH situation, however, was not by choice, but rather was dictated by legal counsel for the HEW, now PHS, its parent agency, in the early 1960s.

The expansion of federal research funding to dominate all other sources of funding for faculty research gives one pause.  What was lost by creating such a ready supply of money, but serving government agendas?  What happens to private research in a small companies when the government moves into the same area with tens of millions of dollars?  What happens when it is easier to get government grants, if one plays the game right, than it is to show people how to use what has been discovered or developed?  The Bayh-Dole Act addresses not merely the relationship between the university patent brokers and federal agencies funding research, but also the fact that the federal government had effectively bought out most of the top faculty researchers and diverted them to government approved areas of research.   Thus, the government’s patent policies, flexible as they were, were blindsided by the fact that the government had essentially taken control of university research by having way more money to spend than anyone else.  One wonders if once the government had bought up the top tier researchers, and then the second tier researchers, and then the newly degreed researchers, whether that might have been a good time to restrain their funding and see what they were getting for their expenditures.

NIH and some other federal agencies had worked out a scheme that could shake loose federally supported inventions for non-federal management on a case-by-case basis or for some universities with “approved” policies and licensing programs, using master agreements called Institutional Patent Agreements (IPAs).  The scheme did not necessarily handle well the volume of inventions being reported, was slow to execute, and left inventions in limbo as to whether an agent could manage the patent, or whether the federal agency would decide to request assignment.  Sometimes an agency would refuse to allow non-federal management.  That’s where the “title certainty” argument arose.  Title certainty had nothing to do with taking title expediently and potentially against the will of faculty inventors.  Rather “title certainty” had to do with retaining that title when the inventors had already decided to assign it to an agent, and the agent agreed to take management, and all this happened before an agency had made a decision.  Obviously, if no agent wanted an invention, there was no need to worry anything with the government.  This was essentially the University of Arizona’s policy in 1962:  the inventor selected what agents to send an invention to for management.  If agents wanted the invention, then the inventor picked one to work with.  If none of the agents wanted the invention, then disposition was the inventor’s choice.  Title certainty was only an issue when an invention was made with federal support from an agency that did not have a routine practice in place that allowed an agent to retain title once assigned.

The Director of HEW, however, decided to end the IPA program.   NIH’s patent counsel, Norman Latker, who had developed the IPA approach, worked to set up federal legislation that would make his approach federal law and thus prevent agency directors from changing patent policies in federal contracting at their discretion.   Latker thus fought a guerrilla action within his own agency to make what he wanted to do the law of the land.  That legislation became the Bayh-Dole Act.

While the bill was being debated, another issue was festering.  This was the competition between the national agents represented by Research Corporation and the university-affiliated agents, represented by WARF, MIT, and the University of California, among others.  The university affiliated agents competed not only for access to inventions made by faculty but also for space in university policy statements.  If university administrations were made the first point of control for faculty inventions, then the local foundation would have a better chance at managing a “big hit” invention.  Again, these big hit inventions have been few and far between.  In 36 years, Stanford saw 3.  In 80 years, WARF saw a handful.  Most universities that have had one big hit have not had another.   So Bayh-Dole was shaped so that it gave visibility to university administrator control over faculty inventor choice for inventions made with federal support, even though faculty inventor choice was technically still operative.   WARF, UC, and MIT advocated for Bayh-Dole.  As I have heard it, Research Corporation’s board of directors asked its leadership to take no position, despite stuff around that it was a big supporter, too.

The shaping was done by omission.  Bayh-Dole does not address how assignment of a federally supported invention gets from the inventors to anyone else.  It’s not there.  Instead, once Latker had got Bayh-Dole passed, he moved (or was moved, or was pushed) to what would become the Department of Commerce to oversee drafting the implementing regulations.  That was a contentious effort among the agencies to agree on common language for a standard patent rights clause.  It is in that clause that Latker had to deal with ownership matters, and there he had no way to force ownership from inventors to universities.  The requirement for university ownership was not in the statute, as it had been in the IPAs, and the patent rights clause was part of a federal contract that did not reach directly to each university employee who may work on a grant.  Further, most universities did not require ownership, a majority had no formal patent policy, and it would be a huge administrative burden if they were all required to adopt a policy that changed substantially the arrangements under which faculty were engaged to do research.  The solution that was devised was to require the university to flow down the first obligations with regard to any invention to potential employee inventors, just as the university was required to flow down obligations to subcontractors and to assignees and exclusive licensees of subject inventions.  It was up to the universities individually to decide what style of program to pursue, based on their policy and contracting preferences.  This worked pretty well for everyone, at least in theory.  Internal licensing shops could get inventions by asking for them; external agents could get inventions by having an arrangement with the host university.  And inventors could still deal directly with the funding agencies if they did not assign to either their host university or to an external agent.

What happened next, however, was not anticipated.  Bayh-Dole was represented not simply as a means to assure title once title was assigned by limiting agency claims to title, but that the law somehow vested title outright in the university, or that federal law required universities to take title as a matter of compliance, or prevented inventors from assigning to anyone but the university, or at least required inventors to give universities right of first refusal.  None of this is in Bayh-Dole or in the standard patent rights clause.  But this interpretation was given vocal support by organizations like AUTM.  Thus, “elect to retain title” was shortened to “elect title” meaning “take title by notifying the government.”

As a result, universities that had “technology transfer” offices were pushed to transform them, along the lines of UC, Stanford, and MIT, into patent licensing offices.  Once there were a few big hit deals, like Cohen-Boyer at Stanford/UC, and Axel at Columbia, the envy index skyrocketed and other schools started to make the change with the expectation they would get similar deals, and get a greater share of income when they did.  University-affiliated research foundations with significant licensing income, like WARF, could hold their own, but shell foundations set up on the model of WARF or Purdue Research Foundation were replaced by university-based TLOs.

The losers in all this were the national patent management agents, and especially Research Corporation, which sought to reposition itself with a focus on startups with Research Corporation Technologies.   The drivers, beyond the misreading of Bayh-Dole, or perhaps which made the misreading attractive, were the prospects of local control, access to an increasing stream of inventions supported by the government as government funding came to dominant university research, and especially the claim that there would be a better return on investment if Research Corporation was not in the middle taking a share of income for nationally sourced research.  University administrators were attracted by the idea that they could retain all the proceeds after expenses for local university use and share with no-one.  Economic development folks were sold on the idea that university ownership would keep inventions and their wealth-creating potential local, and state governments were persuaded to put money into the deal on the same premise, and were instrumental in expanding research facilities so their public universities could compete for a greater share of the federal pork pie of research funding.  This strategy is a form of institutional “capture” in which an organization adjusts its efforts so it gets as much of available funding as it can, regardless of the effective use of the funds in doing so.  One now hears of this strategy as “research as an industry” in which the economic contribution is primarily the distribution of money expended on research into the regional economy, not the use and development of the actual research results, which are too “early” to be meaningful to anyone.

It has only been through the US Supreme Court’s ruling in Stanford v Roche in 2011 that the apparatus of the Bayh-Dole Act has been clarified, though not restored.  The Supreme Court rejected the contention of university patent administrators that Bayh-Dole vested ownership of federally supported inventions with the universities that hosted the research.  Administrators were stunned by the decision, and even now most universities have refused to change policy statements and guidance documents that claim federal law requires assignment to the university.  Indeed, many administrators have moved to change the premise on which the university demands ownership from that of federal law to employment or use of resources, even when it is clear that faculty request a release from official duties to participate in federally funded research and universities agree under funding agreements to provide the resources the faculty use in that research, and the universities are compensated for doing so through indirect costs.

Other premises supporting compulsory institutional claims to ownership of faculty work appear to be those of “because we can” or “because we intend to preserve the system we have constructed.”  None of these rationales addresses, however, either innovation or academic freedom.  Vannevar Bush valued university faculty for their independence, not because they might be a source for institutional seeking of profits from patent licensing.  Those advocating for compulsory university invention ownership policies would do well to consider the foundations of creating a national policy for university research innovation that requires a university administrator to approve, subject to a payment expectation, of each use an inventor or anyone else might make of an invention.

There are other serious, even critical, problems with university internal licensing offices, especially at public universities, but these problems have taken a complete cycle of a patent portfolio–about 25 years–to become evident.  These include administrative inefficiencies in public university offices caused by laws and regulations, institutional failure to reinvest in patenting and licensing resources, a policy preference for process over judgment, adoption of an exclusive licensing approach to the detriment of non-exclusive programs (even though Cohen-Boyer and Axel patents, both pre-Bayh-Dole, had been non-exclusive), and starting without a significant “big hit” patent that ensures an initial revenue stream.  For those institutions with one big hit deal, it has been nearly impossible to replicate the “success” with more.  In part, this is simply a failure to recognize luck rather than process.  In part, this lack of repeat success also is the result of the fixation of licensing practices in university policies on a particular version of biotech licensing that followed the first wave of biotech discoveries.  These licenses were exclusive to venture-backed biotech companies and to big pharma at a time when there was a spectacular investment window–speculative, well funded, aggressive.

As that window closed in the mid-1990s, rather than look for new speculative windows, and hiring licensing officers who knew these emerging areas of innovation, and adopting licensing practices that would be compatible with practices in these areas, university licensing offices for the most part attempted to force the biotech model on everything new.  For those with biotech backgrounds, this was all they knew how to do, and armed with the hammer of their experience they wrote policies that demanded things present as nails, or pegs, or bubble wrap.  For better or worse, their livelihoods were at stake, and best practice was ubiquitous practice, and ubiquitous practice was trying to license biomedical inventions to biotech firms, and if existing firms did not want the inventions, then to biotech startups with venture, then angel, then seed, then government backing, as deals dwindled.

Meanwhile, investment windows opened and closed in areas such as semiconductors, software, internet, nanotech, web, synthetic biology, on-line learning, energy, and mobile communications, with university TLOs making little effort to hire appropriate expertise, change licensing models, and focus on the areas receiving speculative investment.  In these areas, university arbitrary claims to invention ownership, combined with a demand for an exclusive license to develop product meant that areas in which platforms preceded products were forced into the biotech model, in which product came first, at great expense, followed, when the patents expired, by a generic platform.  University TLOs as result were seen as obstructions to platform development, innovation, and even commercialization because they fragmented rights, blocked the assembly of common platforms and standards, and favored increasingly speculator investors ready to turn to patent assert to recover their investments.

All of this increased the overhead of dealing with university TLOs heightened distrust and uncertainty, and shifted industry away from university collaborations, especially collaborations with smaller companies unable to enlist the advocacy of a dean to protect desired relationships.  The recent spate of university litigation is but the playing out of the patterns of TLO badly aligned licensing undertaken for the past decade in non-biotech areas.  As the big hit patents of the mid-1990s expire, university licensing programs will have to accept that they will have to reduce their program size or find other sources of support.  One direction is to beg public funds on the argument that inventions represent the potential for income or jobs, even if there’s nothing at present to show for a decade or more of holding patents for their monopoly value rather than, say, to serve as platforms for competitive development, standards, and quality assurance.

We arrive, then, at the present, with the federal government dominating university research directions and talent, universities refusing to implement fully the Bayh-Dole Act’s standard patent rights clause, a broad effort to turn universities into corporate masters claiming all faculty work but the most worthless and personal, and a stagnation of research outputs, looking every day more like the problems that the federal agencies were accused of causing by stockpiling patents.  Far from being a proven success, the present system is an accumulation of thirty years of consolidated bureaucratic controls, with isolated financial successes, that has become increasingly desperate to find funding, to spin its work as important and successful, while withholding a full accounting of the status of the inventions the universities have taken ownership of.

What keeps such a dysfunction, non-compliant, inflexible, bureaucratic, anti-innovation, collaboration-disrupting system in place?  Clearly, it is a key piece of the rhetoric universities rely on to claim research relevance and justify huge losses in their research programs–it could be on the order of 15 cents for every dollar of extramural funds received.  At a research university with $5oom in annual funding, that would be $75m that has to come from other sources to make up for losses in direct funding, failure to recover full indirect costs, inefficiencies in research administration, liabilities for breaches, disputes, and damage, and blown investments and bridge funding that never come to anything.  No one wants to even gather the data that might show that university outputs are not nearly where the spin would place them, as huge potential that is just another year or two from being realized.

Check out the press releases from universities, and those articles in the science blogs and magazines–the genre is well established–a finding with huge potential, and hardly ever an announcement of a finding becoming widely used, or introduced in a commercial product form.  And even though a shocking proportion of university published findings are shown within two or three years to be unfounded, no one publishes corrections, retractions, or apologies for misleading folks.  The genre persists, as the rhetoric of potential is all that has been necessary to keep the federal research dollars coming and the state subsidies to cover the losses and expand research programs and facilities, even if that means diversion of funding from, say, undergraduate instruction.

At the end of the day, the current tech transfer edifice relies on an appearance of success, a sincere statement of desire to benefit the public, and a whole lot of stuff that is just months or a few years, and another $100K or $1m from commercial success and economic bounty for all.  Meanwhile, on the backside, the patents accumulate, the licensing programs stagnate, the efforts to squeeze juice from the banana skins intensifies, and administrators lock up more faculty and student creative work.  Something has to give out.  Someone has to get fed up.  I expect it will happen soon.  It will be so much better for universities if they begin the change themselves than have to deal with a public that realizes how much they have taken, for so little return, for so long, with so little honest accounting.

There are good opportunities for universities to provide infrastructure support for faculty and student work.  There are plenty of reasons for there to be licensing expertise on campus, just as there are reasons for there to be licensing expertise available in the form of invention management agents.  There are good reasons for there to be more open source, open hardware, open data programs that feed the commons, create platforms, and lead to commercial opportunities after use is established, rather than as a pre-condition for use.  Technology licensing and brokering won’t go away with a broader approach to inventions and discoveries made at universities.  If anything, it will flourish, with more opportunities for faculty, students, staff, companies, investors, entrepreneurs, governments, alumni, practitioners, and coffee shops to do interesting things, make money, and contribute to civic life, if not directly, then with the help of the unseen hand.

The conventional narrative of Bayh-Dole holds in place a bureaucratic vision of patent monetization that runs counter to the great strengths of universities, their faculty and students and staff and collaborators.   That narrative is a dream of the supremacy of the patent broker, controlling everything until it is worthless, and becoming the critical cog in the engine of economic development.  It is a sweet vision, but it is wrong.  It is sincere but lacks substance.  It touches on things we value, but it is hurting those very things.  Time for change in the narratives.  Time to refresh rather than retrench.

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