Bayh-Dole is a dismal failure. Here’s why.

At IP Watchdog, Gene Quinn has published an opinion piece on the virtues of the Bayh-Dole Act–“Patent policy is just too important for subterfuge and academic folly.” The impression he leaves is that anyone critical of Bayh-Dole is irrational, teaching “poison.” Mr. Quinn writes:

Critics, who are not averse to making provably false claims, seem to believe that if they repeatedly say something that is false enough times it will miraculously become true. Hard to pin down, these patent critics will deflect reality with thought experiments based in fiction and fantasy. They demand what we know to be true is actually false, as if we are in some parallel, bizzaro universe where up is down and white is black.

But let’s look at Mr. Quinn’s claims regarding Bayh-Dole. Mr. Quinn appears to suffer from much the same problems he ascribes to his critics:

“There is no doubt that Bayh-Dole has been an enormous success.”

“Either Bayh-Dole is a success, or it is not a success. Bayh-Dole cannot be a failure because it has been so wildly successful.”

“By any fair and rational review of the facts, Bayh-Dole has been remarkably successful.”

“We know what happened prior to passage of Bayh-Dole — absolutely nothing!”

“Newsflash — we know what happened before universities were patent owners and from an innovation standpoint that marketplace was a barren wasteland.”

“Despite all of the scientific and economic evidence that objectively demonstrates the success of Bayh-Dole, the attacks will continue.”

Yet Mr. Quinn oddly cites no evidence for the success of Bayh-Dole. He does not show that there was no discovery of candidate drug compounds at universities prior to Bayh-Dole. Can he remember warfarin? Fluorouricil? Cisplatin? How about the hepatitis B vaccine? Oh, yeah, not a drug. But even so, is the dismal Bayh-Dole Act really there specially to destroy thousands of opportunities for collaboration and technology platform development just to support a few speculators producing a few score drugs over thirty-five years? Mr. Quinn does not bother to show how many of those new drugs he claims were invented at universities were federally funded discoveries.

Here’s a chart of FDA drug approvals from 1945 to 2012. Quick, spot the effect of Bayh-Dole. Other than a wild year in 1996, it’s all pretty much the same, year to year. The 1990s were up 10% over the late 1940s. The 2000s were 10% or so lower than the late 1940s. Where’s the “remarkable success”? Again, no evidence that Bayh-Dole is doing anything to promote more drugs on the market. And let’s not get into whether the drugs on the market based on subject inventions are making a meaningful contribution to our overall health.
moleculesMr. Quinn also does not show there is a connection between university “startups” and subject inventions. He doesn’t have any data on that. He just cites a statistic about startups reported as if all those startups are based on subject inventions. Who can say? I’m betting not. Many university “startups” are shell companies. Utah and Washington both grossly inflated their startup numbers. Washington’s startup reporting in recent years is simply fraudulent. Utah’s claims for economic impact were found in a legislative audit to be the product of a culture of “untruths and lies.” That’s not quite success. How many other universities have gotten away with such nonsense? Meanwhile, AUTM over-reports university startups anyway because it does not check to see whether multiple universities are counting the same startup–as happens when a company licenses inventions from more than one university or licenses an invention jointly owned by more than one university. Inflated figures don’t imply success–they just indicate convenient indifference to the truth.

Mr. Quinn might take a moment and re-read the arguments put forward in support of the Bayh-Dole Act when it was being debated. The invention management agents who contracted with universities or who were designated in university patent policies claimed they were licensing 25% to 30% of the inventions they brought under management. This, the argument went, was good enough that the federal government should allow inventors the choice to place federally supported inventions into this same stream of management, regardless of the funding agency or the purpose of the funding. Despite Quinn’s claim that absolutely nothing was happening with federal inventions, the cited rate for federal agency commercialization was on the order of 5%–and that includes in the denominator, apparently, thousands of weapons-related patents for which one might question the rationale for trying to create commercial products. As for biomedical inventions, the federal government licensing rate was 23%–on par with what universities claimed to be doing with non-federally supported inventions. And for all that, federally supported inventions could be managed privately before Bayh-Dole and were. A number of agencies had liberal policies, including the DoD and the NSF. The NIH used master agreements, called institutional patent agreements, with select universities prior to 1968, and then with many universities and nonprofits after.

Spin to the near present. The University of California recently estimated that only 0.5%–1 in 200, not 60 in 200–of its inventions ever became a commercial product–and that’s counting all the strawberry varieties, which aren’t federally funded. Quinn could at least explain how Bayh-Dole is not responsible for this apparent huge drop in productivity.

Mr. Quinn may be right about some academic critics of Bayh-Dole. Some university folks don’t appear to have any idea how Bayh-Dole operates, the history of university research and patent policies, or what is wrong with Bayh-Dole. Many–most, even–university administrators are in this category. Stanford v Roche made it clear that university administrators, even at elite universities, were utterly clueless with regard to Bayh-Dole, and after the Supreme Court decision, they showed they had learned nothing from the case and went back to mess further with their compulsory patent policies rather than comply with the requirements of the standard patent rights clause. I have yet to see a university patent policy changed to comply with the ruling in Stanford v Roche. Isn’t that contempt of court? Perhaps Mr. Quinn could comment on such behavior of universities once a Supreme Court decision goes against them.

Rather than referring obliquely to unnamed critics of Bayh-Dole, perhaps Quinn could take up carefully the evidence presented by David Mowery and Rebecca Eisenberg. Work through their accounts and show where they went wrong. Neither is a moron, Mr. Quinn.

What has Bayh-Dole done? It’s shifted invention management from dedicated, external agents to university administrators. Bayh-Dole has destroyed the infrastructure for external agents; has expanded the claims made by university administrators on faculty research and creativity; has made a double-selection process (faculty choose to patent, an agent chooses to manage) into a compulsory monopoly bureaucratic process (university demands to patent, takes everything, gives back nothing). Check it out Mr. Quinn. Prior to Bayh-Dole, “technology transfer” offices worked with external invention management agents to identify new inventions and get them to the agent–especially Research Corporation. That’s all changed. Now technology transfer offices do their own licensing, bringing universities into institutional conflicts of interest.

Worse, Bayh-Dole has given university administrators the freedom to sit on all the inventions they have claimed, unlicensed, with impunity. There are thousands of unlicensed inventions, and millions of dollars of patent work moldering in university patent portfolios. Patent attorneys have had a wonderful run with Bayh-Dole, what with universities patenting indiscriminately without much of a plan for how to deploy their assets.

These are clear effects of the Bayh-Dole Act. Actually, these are the effects of university administrators exploiting the Act, advertising patent royalties as a new source of income, destroying the external invention management ecosystem–the one that federally supported inventions were to step into–and tying up thousands and thousands of faculty discoveries, inventions, software, data, materials, and ideas all for the sake of what turns out to be creating shell companies pitched to third-rate speculators.

If Bayh-Dole is a wild success–prove it. Show the evidence. Show that destroying the independent invention management ecosystem–itself a faculty-led innovation–was a wonderful thing. Show that the licensing rate for commercial products now is way more than the claimed 25% to 30% of the 1970s. Show that most university-claimed subject inventions are getting licensed and the licenses are resulting in public use and commercial products on reasonable terms. Otherwise, quit repeating assertions as if they are facts.

Proposition: Bayh-Dole has been a horrible failure as public policy. It has induced university administrators to claim ownership of inventions that they should never have claimed. It has kept 99% of claimed inventions behind paywalls where the inventions are unavailable for research or production use in industry–because someone has to come take an exclusive license to “commercialize” the invention first, and that rarely happens. Bayh-Dole has failed to protect university inventors from the greed and foolishness of university administrators. Pin that on Bayh-Dole. That will be the law’s legacy. When Bayh-Dole is repealed, bells will ring across the country.

 

 

 

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