Bayh-Dole, the bureaucratic solution to massive federal funding of faculty research

Prior to 1912, university faculty generally did not seek patents. Cottrell at the University of California created Research Corporation to act as an external agent to present his and other faculty members’ inventions to industry. The Board of Research Corporation included many key industry people, so the prospect of forming working relationships was good. Royalties earned by Research Corporation would be shared with inventors as part of the deal to assign patent rights to Research Corporation, and the remainder after costs would be used as grants to support research in America, with the Smithsonian Institution as a primary designee to manage the research grants.

This approach kept patenting out of the university, and put a buffer between faculty and industry. It was an insightful approach that was soon imitated with variations that were not so insightful. First came local “research foundations” focused on only one university campus–inventions from that campus, and money going back only to that campus. Immediately, the idea became one of being provincial, that an invention made at one university should not benefit researchers at any other university. Not Cottrell’s vision. But further, these new research foundations were staffed by university alumni and other affiliated people, not with senior industry representatives, so these provincial research foundations set up a different opening relationship–more about a power move in licensing and less about distribution of opportunity.

Before World War 2, what research that was done at American universities was funded by companies and by foundations. Only a handful of universities did significant work with federal funding. At the end of the war, Vannevar Bush, based on his experience leading federally funded research with specific goals in mind, envisioned a similar approach for civilian objectives, led by funding that expanded basic research at universities.His proposal for a National Research Foundation led to the creation of the National Science Foundation in 1950. Along with other federal programs, the NSF rapidly expanded the role of the federal government in supporting research, especially at universities. University extramural funding went from mostly foundations and companies to mostly federal money in a matter of a few decades.

Bush’s vision was set out in a number of works. “Science the Endless Frontier” as one. “As We May Think,” another. Yet a third, little read these days, was Modern Arms and Free Men. If you read these works carefully, you find that Bush, like Cottrell, had a vision for what was possible. During the war, Bush had assembled teams led by expert scientists working with industry engineers and what Bush called “gadgeteers”–people who knew how to build things. These teams picked up on problems the military had, and went about creating useful technology that went after the problems outside the conventional wisdom. They played with the available science, not the available presumptions.

From this work they created advances in radar, sonar, monte carlo modeling, atomic bombs, digital computers. The keys for Bush were: ace leadership, team of experts extracted from their day jobs, focus on doing something useful and new using available technology and new science, presented at a high level to an established order in competition with that order’s own agenda. The military leaders could not imagine monte carlo modeling as a solution to how to deal with bombers flying erratic paths over a target. They could not have proposed anyone do the research. And if they had, they would not know whether the people they paid to try to figure it out had the math smarts to actually figure it out. No, it took people outside the establishment, way ahead of the game, who already knew the tools. In short, Bush had them *select* the problems the establishment had, rather than let the establishment tell people what the establishment wanted next.

Bush imagined that a similar approach could take on other established orders, starting with medicine and libraries. His argument was that basic research created the tools available to the best, most insightful scientists, who if they were drawn out for a time could lead the construction of things that would benefit the medical community, well beyond what the medical community could do for itself if it commissioned research on its own. The inventions that would matter in medicine, Bush argued, would come from outside medicine–from chemistry or physics. The inventions that would matter for libraries would come from physics and electronics and information theory, not from libraries or from advances a better card stock for filing systems.

In sum: build teams led by experts to take up available science and combine it with the ability to prototype, and present the results to an established order via top level people–leaders to leaders. To fund this effort, Bush proposed a National Research Foundation–remarkably like Research Corporation, which was also a foundation–except that the new NRF would use public money to fund research rather than rely on royalty income from patent licensing. The NRF would be like his own skunk works during the war, making independent efforts to develop new areas of science and then combining those results with the existing knowledge to introduce significant changes into established orders–in short, to “innovate” an establishment, not by offering an improvement already on the establishment’s road map, but rather a change that made obsolete a range of practices, both desired and problematic.

But Bush did not get quite what he asked for. Instead of the National Research Foundation, Congress created the National Science Foundation, and rather than seeking out individuals to lead projects, the NSF solicited proposals in areas that established orders thought important, and the money went to universities, for the most part, and not to groups that were pulled from universities, industry, and workshops to work on focused problems. The NSF idea was that basic science would lead to applied science which in turn would be adopted as needed by some establishment and “commercialized” for the public’s benefit. This wasn’t Bush’s vision at all, and not really the NSF’s at first, but later, after this “linear model” surfaced, it was quickly adopted as useful public rhetoric. It sounded true, at least.

It’s just that history does not support the linear model as a primary method of innovation. Much innovation in technology started in the shop, and moved to engineering to be regularized and included in products, with science coming along later to explain why things were happening. Even with something as recent as warfarin, the shop and engineering work in identifying compounds–a kind of natural history of mold toxins and their analogues–came three decades before science figured out how the toxins worked to prevent blood from clotting.

As far as I can tell, science would never have got to considering the compounds in the exudate of sweet clover molds. Science would not have asked the question–or even made the observation. No. It took a farmer driving a hundred miles in his flatbed truck through a Wisconsin snowstorm with a dead cow and a bucket of blood to ask the question of university researchers–who, had they been federally funded in some big multi-year, collaborative project, could not have been bothered with dealing with a farmer and his dead cow. Science is a fine way of dealing with questions, but science has no lock on coming up with the questions to ask, especially when it comes to practical things, stuff of innovation.

In industry, a hundred years ago, there was a great debate regarding the proper function of an industry research center. Should it start with basic science, and try to get the attention of company engineers? Or should it start with the problems the engineers have, and if those couldn’t be solved, turn to science as a last, long-term alternative? There was no reason, actually, to choose one approach over the other, but that did not stop federal policy makers from doing just that. “Science” rather than “Research” came first–the difference between a form of study (“science, scientific method”) and a commitment to study (“research, finding something out”).

So just as Cottrell’s idea was altered to a provincialism run by administrators rather than by industry representatives, so also Bush’s idea of a national research effort running outside established order became a government funding source aimed at supporting established orders. Where Bush wanted block grants to allow research to pursue ideas independently, the NSF offered competitions for proposals of its own design. For Bush, the idea of innovation was its own motivation. For the NSF, it was science for science’s sake. Instead of teams pulled from their regular duties to focus for a few years on something big, study was broken down into bits and farmed out to an increasing number of investigators. The idea would be that these people would publish, and other, practically minded people would read those publications and do further work to find practical applications, and then yet other people would take those applications and make products of them. Other agencies followed, but with more emphasis on practical applications and less on the science–but other than perhaps DARPA, mostly forgetting Bush’s idea of working with the best people outside the establishment.

Think about it–before the huge increase in federal funding, university research invention was mostly a matter of curious faculty engaged with observations made in industry and in the community. Private sponsors, in turn, took an interest in this curiosity and were mostly focused on problems that they thought, if solved, would help them in some way–cure a disease, create a new product, understand what was killing their cattle. The federal government came along with way more money and basically took over and changed the research enterprise. Federal grants went from being suspect (witness Eisenhower’s concerns in 1960) to being the standard that showed one had outcompeted other scientists for a grant–bragging rights that directly translated into career advancement. But federal grants also then set the directions for research, attracted the best researchers to those directions, and often gave the federal government the right to claim ownership of inventions made in that research.

Since Vannevar Bush’s first two targets for NSF research were biomedical and information technology, it is interesting to see how these two areas developed by way of invention rights. Bush’s idea was that basic research, spread across the sciences and humanities, would produce new knowledge, and that new knowledge would then be available as tools for scientist-leaders who could imagine new things and assemble the teams to build these new things, to be presented to the status quo as challenges (or gifts) that obsolesced the conventional problem statements and objectives within established orders, such as the medical profession.

While the NSF and DARPA focused on information technology, the HEW and its NIH division focused on biomedical. NSF and DARPA took a largely hands-off approach to patents. Researchers could retain rights to patent inventions if they wanted, but the researchers had strong reasons not to patent. As a result, the digital computer’s fundamental architecture was deliberately not patented, nor were the communication protocols that enable the internet, nor the mark-up systems that created the web. While there are now plenty of patents on information technologies–so much so that information technology companies routinely lead the world in the most patents issued each year–the core elements of many information technology inventions have started in the public domain. The result is a robust body of new technology, a strong culture of establishing standards and cross-licensing new technology, an open source/open architecture mindset that expects others to build on what one has done without obligation other than, in academic settings, attribution or perhaps an obligation to share back any improvements.

At the HEW, things went differently. The HEW aimed to claim patent rights in biomedical inventions, and hold those rights on behalf of the public, ensuring equal access for new ideas that improved public health, without any one company holding a monopoly. On the face of it, this makes a lot of sense. Why should any company be able to prevent doctors from offering better care to patients? Across the country, university faculty in schools of medicine and dentistry agreed. In a number of universities, policies were written to forbid the patenting of medical (and dental) inventions. The few “big hit” patents of the period 1912 to 1981 were based in chemistry and electronics–ways to remove soot from smoke, sneaky ways to circumvent federal regulations about adding things to milk by irradiating the milk to increase the vitamin D rather than adding vitamin D, and a compound derived from mold in sweet clover hay that made rats slowly bleed to death. But biomedical stuff was largely off limits.

The odd thing that happened, however, was that the pharmaceutical industry did not like the idea of the federal government essentially creating a competitive research enterprise to its own drug discovery efforts. Now the federal government was sponsoring research at universities and taking out patents on many new compounds that appeared to have beneficial biological effects. The drug companies played a monopoly game (and it’s a wonder there’s never been a Monopoly board based on the pharma industry), and the PHS’s idea of holding patent rights in compounds for use by any company willing to take a patent license just rankled. The federal government was getting there first, claiming rights, and making companies subservient to federal licensing requirements and pay a royalty (on top of paying income taxes).

The pharmas at first tried a boycott–they refused to license patent rights from HEW. That contributed to a backlog of unlicensed patents at the HEW, and made it difficult to show that the federal research was having a beneficial effect on the average American. Something had to be done to get federally supported biomedical inventions out into use. The workaround that the patent folks at the NIH came up with was Institutional Patent Agreement. The IPA was a master agreement between the NIH and select universities under which the university was required to make its employees assign rights in federally sponsored inventions to the university, and the university in turn was to license the inventions to the pharma industry. There were protections in the IPAs for non-use and limits on the length of an exclusive patent license (eight years max, generally). Essentially, universities (and their affiliated research foundations) were recruited as brokers to break the boycott (or, put another way, build a backdoor to circumvent the HEW position on government ownership and non-exclusive access to biomedical patents. Eight years was better than nothing, and paying a university a percent royalty was better than dealing with the HEW directly (and non-exclusively, at that).

The IPA strategy worked for a while, but it only worked for NIH work. What if a university project was funded by the NIH and by some other agency, such as the Department of Energy, that did not accept the IPA strategy. Well, then there was a problem of whether a university could take ownership of patent rights (the IPA said they could) or not (another agency could refuse to allow university ownership). For the universities involved–irritation, uncertainty. The question riding on top, however, was what was in the public’s interest? The brilliance (if you want to look at it that way) of the Bayh-Dole Act was to make private ownership of federally supported inventions appear to be an unqualified public good. Private owners would be motivated to license patents for the greatest value, and the licensees would be motivated by the monopoly rights to invest money, make product, and benefit the whole country with the results of federally supported research.

This rhetoric was baked into the arguments for Bayh-Dole. There’s no way, really, to unbake it. Any challenge to any part of this assertion is met with stiff opposition. Private ownership of inventions is better than government ownership. Universities have the public’s interest at heart and so will choose good licensees. Exclusive rights are necessary to attract and motivate those good licensees. Money from the sale of new products will pay for more scientific research and education.

Even simple questions open the nut up. If private ownership is so good, why shouldn’t inventors own their own inventions–since that form of private ownership is insisted on by federal patent law? What makes university administrators good judges of a company’s qualifications to develop a new product? What about exclusive licenses to companies that don’t develop product, or which use their license position to improve their own value for a future sale or merger–and still don’t develop product? What about new products that aren’t as good as other new products that could be made under the same patent, but never will be because the company choose the easiest path, or the most profitable path, or the path that got to market soonest–but never gets around to building the better product, and won’t let anyone else build that better product either?

What about the idea that good companies might compete on something other than exclusive product positions–on price, quality, availability, brand? What about the history of fragmenting the parts of a product so that an industry simply cannot form–as happened to the American aerospace industry in the 1920s?

Monopoly is one danger, but creating hundreds of local monopolies on bits of new industry’s tools and products creates the opposite of monopoly–standoff, gridlock. And that’s what happened to the nanotech industry emerging in the 1980s and 1990s. It was patented out of rapid progress by universities for two decades or more. Same for 3d printing. What if the prospect of exclusive rights attracts a greater share of speculators and schemers, and not legitimate companies at all? After all, b-grade speculators and schemers have little interest in getting non-exclusive rights. So perhaps the prospect of exclusive licenses offered by universities is just one big flea attractant. None of this gets discussed much these days–but it should.

So the government raced ahead of industry research, grabbed patent rights–to be held on behalf of all–and allowed some universities special deals that backdoored biomedical inventions to the pharmaceutical industry. The massive ramp up of federal support for university research (note–not for industry-based research) led directly to the federal government interloping in industrial and foundation research directions and taking a big slice of what was discovered–and patenting it, whether or not those in industry would have done so if they had gotten there first. In a way, the government declared eminent domain on the near research future.

It was this workaround response to the federal intervention in university-hosted research that led to the Bayh-Dole Act imposing the biomedical backdoor on all federally funded projects, for all manner of invention. As a result of the Bayh-Dole Act, the matter of how to treat federally supported inventions in a given area of research was no longer a matter of federal policy and not a matter of individual inventor choice: it was presented to the public, and to the faculty, and to licensing professionals, as a matter exclusively for university patent administrators, and the baked-in rhetoric said that universities shold own federally supported inventions outright, and exclusive patent licensing was the way to make the most money on them, and thus here we are.

There is nothing in Bayh-Dole that requires university ownership of patents–there is even a patent rights clause for federal agencies to use with university inventors when they don’t assign their patent rights to anyone–they get treated as if they are a small business (and with better terms than small businesses get–which in turn are better terms than nonprofits get–nonprofits get the most restrictive treatment under Bayh-Dole).

Despite the gesture, the package of rhetoric ruled the day–universities were told that federal law gave them ownership of federally supported faculty inventions (or a first right to take ownership, or a limitation on faculty inventors assigning to anyone other than the university, or whatever story happened to get pulled out of the air–none of them were in the law, even if some bits of them had been in some IPAs). Universities were also told ownership was a good thing (better the university than the federal government, so the argument went; better the university than individual faculty inventors, who could not be trusted to look out for the public, er, university good). Universities were also told that exclusive licensing was the whole point of Bayh-Dole–pick a winner, make a fortune (unlike the federal government, with its silly ideas about helping everyone and creating a level playing field).

This account of the Bayh-Dole Act is unlike the one you will read in the standard university publications about Bayh-Dole. The Bayh-Dole Act has dealt with the massive increase in federal research funding to university faculty by diverting publicly supported inventions to be claimed by each university’s administration, fragmenting rights, preventing platforms of common technology from forming easily, creating administrative overhead and delays, and blocking industry access to new research for its use–only those willing to make an exclusive commercial product need apply. Everyone else is denied use–they must wait for a commercial version, if it ever gets developed, if it ever works as advertised, if it is any good in its implementation of the underlying invention, if it is cost-competitive.

The premise of Bayh-Dole is not so much a uniform policy by which federal agencies are to manage inventions made with federal support but rather is more of a “bureaucrat’s thumb in every possible discovery.” Look at the “metrics” published about Bayh-Dole–they are all about the growth of bureaucratic operations: the number of technology transfer offices, the number of patents, the number of licenses, the number of startups taking licenses. If these metrics show the “success” of Bayh-Dole, then clearly the law is all about enabling bureaucracy. There is absolutely no causal relationship between the number of patents a university holds and its role in promoting the use of inventions. There is no causal relationship between the number of licenses granted and commercial innovation based on research discoveries. Universities don’t report the status of each invention to which they assert ownership–the metrics are disconnected by design, to give the appearance of economic activity, or at least the “potential” for such activity. In reality, in practice, Bayh-Dole is a bureaucrat’s dream and an innovator’s nightmare.

Provincial, university-centric, money-focused bureaucrats, each sincerely trying to make a fortune on behalf of his (or her) university, all the while repeating the core tenets of the Bayh-Dole package of rhetoric: outright university ownership of faculty-made inventions is a public good (and ownership by others isn’t), monopoly licensing is the only way to attract private investment in commercializing these inventions, universities deserve as much money as they can get from licensing patents.

The flip side of this rhetoric is also clear, but unnannounced. Faculty inventors–it is implied–are inept and greedy, corporations are greedy and cheap, federal agencies are clumsy and conservative, and non-exclusive licenses are a waste of time. If you believe even a few of these things, then what’s happened under Bayh-Dole looks pretty good. But Bayh-Dole is something of a hysteria regarding innovation–a useful, political hysteria, one that justifies federal funding for university research and creates a nest for well-paid patent administrators.

If one looks beyond the rhetoric, it is apparent that the Bayh-Dole Act helped bureaucrats destroy a modestly effective approach to university-hosted invention that used external agents and a general disinclination to use patents, and where there might be commercial activity, looked at the equity of how the university had contributed support beyond the ordinary. Bayh-Dole has created instead a new bureaucracy, one that stockpiles more patents than the federal government ever did; and has undermined the collaborative efforts of university faculty and industry to develop research-based platforms for scientific and technological developments.

If you are hired into a university technology transfer office, you have little way of fighting any one bit of the standard rhetoric. Now it is a matter of faith, or hysteria, and “settled,” beyond debate. There are enough faculty inventors who themselves believe patenting means wealth that they will demand that the university–you–make the model work as advertised. As one faculty member told me flatly, “I only show you my inventions because it is your job to make me rich.”

Other faculty members who believe the model, oddly enough, are non-inventors, mostly in the humanities–where they think that the medicine, engineering, science, and technology (“MEST”(see the Dutch)–not “STEM”) faculty members are gaming the system, getting extra perks (that perhaps they don’t deserve), and that more of all that wealth should be going back to the central administration, to be distributed in the support of instruction and research across campus (meaning, a share to the humanities, too). So the humanities faculty turn out to want the model to work, and think that it’s pretty much okay that the central administration come down heavy on the science, engineering, and medicine faculty trying to get wealthy off their inventions. Since the humanities faculty don’t realize that they can invent, too, despite the protestations of the AAUP, they don’t see the harm in giving up a right that they don’t think matters if it will make their fusty MEST colleagues behave and share all that wealth to be had with the rest of the university.

One advantage of the external agent/university equity approach to invention management is that a university does not have to subsidize the program–that’s a matter for the external agents and the faculty inventors. Using external agents then introduces a tremendously powerful filter to decide what inventions are actually worth patenting. If a university decides what to patent, the choice becomes political: “everyone should be treated equally, so everything that can be patented should be patented, and every patent should be licensed for maximum value–that is, exclusively.” I once was told that I was being criticized by some faculty because certain (non-exclusive) licensing projects were earning good money and others weren’t. The licensing program had to be chopped down to size if everyone couldn’t make the same money. Yes, really. It was unfair that some projects resulted in income and others didn’t. It was not a matter of markets, or timing, or technology, or luck–it must have only been that I chose unfairly to help some projects and not others. The naive belief in the Bayh-Dole package of rhetoric knows no bounds:

If invention management is a system, and it “works” at other schools (just read their success stories and look at the number of patents and startups they have!), then any bozo should be able to haul in the wealth for the university and its inventors, creating economic vitality for the region.

If, however, invention management is not a system, and does not work as advertised, and fragments research results, and delays adoption of new things, and the attempt at a system costs more money than it is worth, and is useful primarily to prop up an illusion about the benefits of subsidizing sponsored research, then things need to change.

 

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