The Vampire at the Neck

Consider the three elements of the simple mantra I outlined in my last post.

  • Take IP
  • License IP
  • Make Money

Let’s work through these three imperatives.

Take IP

Administrators have expanded the definition of “IP” from patents and copyrights to just about anything that might have “commercial” value–know-how, biomaterials, software, data, information, “unpatentable inventions.”

Administrators have expanded their time interest from the narrow “patentable inventions that the inventors have chosen to exploit for commercial value, at the time inventors make that choice” to just about anything at the time it is “invented” (meaning, in addition, “made, created, thought, imagined, assembled, collected, identified, conceived, built”).

Administrators have expanded the scope of their claim from employees doing their “official duties” to anyone who uses university resources or facilities or who does something within the scope of their academic training, and to anyone who volunteers under the “auspices” of the university, to anyone involved in any grant or contract with the university, to “collaborators” of those anyones.

Private ownership of IP–a right granted to individuals by federal law following on the Constitution’s grant of power to the federal government–is made to appear a conflict of interest, conversion of university property, misappropriation, unethical, greed, incompetence.

Administrators have made university ownership of such “IP” compulsory, and have recently moved to make the commitment of that “IP” upfront, as a universal, unbounded present assignment of any and all future “rights” in such “IP.”

Administrators claim all such obligations to assign arise as a condition of employment, or a condition of any use of university resources, or as a requirement of federal law, or a necessity in order to comply with federal law, or to avoid double licensing, or because university monopoly control over all “IP” is critical to the university’s mission, or because such control will make the inventors more money than if they retained their personal ownership and control over their work, or because such control is what the public desires, or because it is just the right thing to do, a good thing to do, the only thing to do.

From a practice point of view, this is the bad implementation of a sales funnel scheme. Reach millions of potential customers. Some will become leads. Some will be qualified leads. Some of the leads will buy. Some of the buyers will become repeat customers. One starts with a big number and hopes for a few sales. Internet spam offers work this way. Just hit reply to become a lead. Except for university IP management, they have mistaken IP assets for potential customers. The idea is, get as much IP as you can, and some of it can be licensed, and some bit of it might make money, and here and there–once a decade or two–for a single deal there may be lots of money. And that single deal will be the success of the model. All the rest of the “IP” can be flushed down the toilet if there’s a billion-dollar payout every twenty years.

The result of this scheme is that IP is funneled through a bureaucratic operation. Each asset must be documented (some forms run multiple pages), processed, databased, summarized, posted in “non-confidential” form, assessed for commercial potential, assessed for patentability, and patent applications drafted (first provisionals, then utility applications, then divisionals, then continuations and continuations-in-part). The cost to process all such required reports of “IP” is tremendous and does next to nothing for most of the pathways by which underlying work might be published or used–or even developed into product.

The practice cost is much greater. Attention is spread over hundreds–even thousands–of assets at any one research university. Budget is spread thin over all these “technologies,” too–patenting budgets run to a million dollars a year now (as “investment”) where pre-Bayh-Dole universities did not pay anything–expenses were handled by external invention management agents or companies who upfront wanted the university to file the applications and were ready to pay for them. Only one or two assets will matter a decade in this model, but every one of them has to be “treated equally” as a condition of university policy. A licensing office cannot appear to exercise judgment–they have to try to find licensees for everything. But they cannot. It is not possible (at least not in their approach).

There are further implications for practice. In a voluntary approach, inventor and invention management agent agree to work together and set the terms for their collaboration. In a compulsory approach, no such relationship exists. In a voluntary approach, both the inventors and university can be selective–expectations for the management of the invention match the skills and resources and connections available in the IP management office. In a compulsory approach, the university is programmed to receive everything, claims everything, cannot be so easily selective. In a mutually selective approach, a great many things are ruled out from the start and attention is focused on what can be done together, still at some risk of failure, but with goodwill and shared ground rules to start.

Taking IP means disrupting inventor relations. Taking IP means defocusing on all inventions rather than focusing on inventions that are a match for the strengths of the licensing office. Taking IP means preventing anyone else from getting that IP first. Taking IP means damming the flow of valuable findings from the university, pending schemes by administrators to take a cut. Taking IP means creating IP gridlock. Taking IP means disrupting innovation.

The inventions that make it through this bottleneck do so despite the bottleneck, not because of it.

License IP

A broad compulsory university IP ownership policy creates a broad, complicated expectation that a university will also license. If a university did not claim ownership, then it would have no need to license. By asserting the exclusive right to allow others to use or benefit from an asset, a university creates the overhead to promise, contractually, not to sue people for that use or benefit.

“License” is used liberally, not technically, in technology transfer circles–it means to “agree not to sue, to sell, to assign, to bail, to lease, to permit, to quit claim, to settle claims” but mostly it means “to attempt to find an exclusive licensee willing to pay a premium.” University lawyers think of a license as a document. To grant a license is to negotiate and sign a document that implements a license. At the University of California, one could give a company permission to use the results of a sponsored research project in a single sentence in a research agreement, but university attorneys required the use of a 30+ page patent license agreement document if one were to license rights in those results to the same company.

University administrators generally will refuse to consider a non-exclusive license unless they are desperate (such as if a big research sponsor demands it) or driven to it by the criticism leveled at them university faculty, often involving open source software. An exclusive license means giving up the chance to license exclusively. (In a technical quirk in AUTM metrics, any “license” worth more than $1,000 is considered a “commercialization” license and counted toward the total licenses granted by a university. So one piece of software can be distributed to 100 users, each paying $1,000 and the university will report 117 licenses for 200 patents when it is actually 17 licenses for 200 patents and 100 licenses that were not for anything patented at all–and were only for one piece of code. But universities are happy to conflate patent licensing and all the rest and point out how many non-exclusive licenses they grant, as if they do such a thing, generally, for all their patents.)

The spin on “license” is that each license is given out to represent a company or investor encouraged by an exclusive position to invest private money in the development of a beneficial new product that otherwise would have sat “on the self” or “in the attic.” But internally, “license” means “any transaction we do involving an ‘IP’ position.” It does not matter whether a technology that’s licensed is ever used, let alone developed into a product, or a product that is commercially successful. A license is promise not to sue. It does not transfer anything beyond, perhaps, a right to grant sublicenses or to sue–and it does not mean anything will come from the transfer. A company may use its license position to keep product off the market, to raise money from investors to develop a different product, to fluff up its appearance to exit to a new round of investors, to create the impression of disruption in order to be bought out by a market leader that has more to lose from competition than gain by holding the university’s technology. A company may use its license position to shake down industry, to disrupt a potential standard, to play the troll.

Universities often claim they do not sell or assign IP, but that’s not generally true. Copyright law is express–an exclusive license is an assignment of ownership. Patent practice holds something similar–an exclusive grant of substantially all of a patent owner’s rights is an assignment, regardless of how the written instrument is labeled. University exclusive patent licenses for all rights, in all fields and territories, with the right to sublicense, and with a first right to sue for infringement, subject only to a non-exclusive right for the university to use the invention for educational and research purposes is an assignment with a grant-back. Such assignments, under Bayh-Dole’s standard patent rights clause, are restricted and may require federal agency approval. But universities ignore all these “technicalities.”

Bayh-Dole’s objective is to use the patent system to promote the use of inventions made with federal support. The focus throughout is on the use of inventions–practical application–on sale or use, the benefits of which are available to the public at a reasonable cost. But university “licensing” puts the emphasis on the exploitation of the IP rights–use patents (or any other claim to “IP”) to make money and create the impression of potential for benefit. That is, licensing focuses on exploiting the IP position, not on using the underlying ideas and materials.

If the emphasis were on use, a university would report the number of workshops taught to industry and investors, and the number of people attending, and the number of organizations represented, and the number of new technology information kits downloaded. They would report the number of conference sessions and entire conferences devoted to the IP they had made available. And they would report how often their researchers were keynote speakers at such conferences. But they don’t report such stuff–and don’t even collect such stuff, and don’t care about such stuff. But they could make more, technology to technology, by offering workshops than by patenting and holding for an exclusive licensee that may never arrive. That memo has not got to the planet Clarion yet, and may never.

Licensing is a direct result of ownership and displaces instruction and publication.

Make money.

Skip all the statements in preambles of university patent policies. Those statements are mostly garble, don’t parse and certainly don’t operate. The policy requirements that follow such statements generally do not follow from the statements. There is a disconnect, not merely a matter of poor wordsmithing or bad logic–it is a practice disconnect, an ethical disconnect.

Put it this way, if the purpose of the IP program was for any other purpose but making money, then universities would not demand royalties for licensing inventions. Companies would offer royalties as a means to make contractual what otherwise would be an uncertain promise. Don’t laugh. That’s the basis of Cohen-Boyer. That’s the basis for the Drug Interaction Database. Universities would not fuss over exclusive licenses, would not build poison pills into exclusive licenses to prevent sublicensing or cross-licensing or standards. Universities would report success in terms of access, of use, regardless of whether the use was “commercial” or whether there was a lucrative return to anyone.

No, the standard, and the bragging rights, and the “when do I get mine?” question dominate the internal university evaluation of IP licensing operations. One big hit deal every two decades is the minimum goal. Stanford had three such deals in 36 years. Crazy excellent. UW had one in thirty years, but played it to the public as the success of the licensing program for most of those years until now. After each big hit is announced, administrators at other universities ask when their ship will also come in. They think it is a system, a process, a matter of giving the right name and administrative structure to an operation. They refuse to accept that it may be luck, a black swan, or good will, or an opportunity created entirely outside any system or policy. After all, most of the “big hits” prior to Bayh-Dole were not the result of a university system of licensing, but rather one of systematically avoiding getting involved in licensing. What geniuses walked the earth then!

There’s no doubt money is a necessary part of any IP management program. It costs money to hire good professionals to assist inventors, deal with companies, work the IP rights, negotiate agreements, serve as a sounding board. But the money left over is net from income less expenses. Lower expenses by reducing the disclosure load. Lower expenses by reducing the complexity of management. Lower the expenses load by pushing patent management to external agents willing to carry the costs of patenting. Lowering the expenses side of an IP operation greatly reduces the need to make money on licensing to cover those expenses, and reducing the need to make money allows a licensing operation to be more creative, to focus on mission goals rather than money goals, to use non-exclusive positions–or no ownership position whatsoever–to place new technology for use and development.

Seeking money does not necessarily result in more money. “Bulls make money, bears make money, pigs get slaughtered,” as the Wall Street saying goes. University pigs are among the worst pigs. When a public institution is in it “for the money” then money and morals conflate, and most any dread action can be supported as “in the public interest.” Take the IP from the faculty. Fascism starts this way–a sign of hope, perhaps, if one is into fascism. The difference between “holistic” and “totalitarian” is not all that great, once one invokes the power of government to enforce one’s belief in what’s “good” and “orderly.”  Just take the IP from the faculty, for their own good, for the good of society. It’s, um, holistic, yeah, holistic and equitable.

It appears, from inspection of the history of university licensing deals, that for seventy years, the really big money came to universities because those involved in doing the deals–inventors and their external agents (such as Research Corporation) and the companies involved–wanted the universities to benefit that had hosted the research leading to the inventions. When a university changes this up and demands the money, the social situation changes remarkably. When a university uses the money it makes from licensing as a sign of the excellence of its programs overall–research included–it works against public support. If universities are making all that money on their own, then why should taxpayers pump more money in to them? Why not turn our attention to more pressing societal needs, given that university research is doing fine with its patent licensing programs well positioned to make money?

If money is the goal, then it really does not matter whether an invention is ever used, so long as the IP covering that invention is exploited for value. License IP for the income, not for the result. Move IP to those willing to pay (or at least promise to pay), rather than to those most able to use, when they are ready to use. The value of IP to speculators rests in what industry or investors might have to pay to gain access to that IP, later, when it turns out (and that’s the speculative risk) that the IP has value. That is, the value of IP run this way is in the opportunity for future exclusion–and people who are desperate for access and cannot find a way to design around or delay until the patents expire have to pay. That’s a method to make money, to be sure, but it does not transfer technology–it impedes the transfer of technology, it makes university technology undesirable, it leads companies to advise their research scientists to ignore the academic literature, it leads the academic literature to be unreliable, it leads away from innovation based on government funding, it undermines the premise of government funding.

Making money the goal, even if you pretend otherwise, is a sure way to debase the activity.

*****

We might then restate these three imperatives as follow:

  • Take everything
  • End freedom
  • Feed and replicate

This is a mantra for a parasite that doesn’t much care for the host other than as a supply of life blood. The tick in the neck, say. Tech transfer, run this way, the vampire at the neck of the university.

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