Historically, there have been three areas of concern for the limitation of university involvement in patenting: (1) the monopoly effect of IP, (2) worrisome commercial behaviors, and (3) the problem of money as an apparent motivation. In the past, when university inventors routinely retained rights to their inventions, these concerns were raised in the context of the inventors’ interests and behaviors. Inventors might block research; inventors might run a business from their university office; inventors might be biased by the lure of riches; inventors might not share their riches with the public.
Now, when universities claim ownership of inventions and pass control to administrators, these same concerns apply to the administrators, and to the behaviors that they make the university (as a fictional person-thing-golem) do. Oddly, what was seen as worrisome in individual inventors becomes virtuous in the hands of an institution.
The burden of university patent policy then, typically written by administrators for administrators, is to relieve administrators of the burden of these concerns, even while justifying the policy of ownership as the proper approach to resolving the concerns that arise with personal ownership of inventions.
Let’s look at each of these concerns, then. First, the monopoly aspect of patents.
Robert K. Merton, in “The Normative Structure of Science” (1942), describes four primary “ethos” of science–universalism, communism, disinterestedness, and organized skepticism. With regard to communism–what we might today call communalism or collaboration–Merton argues that the scientific norm is that what one discovers is contributed to the work of the whole. What one gets in return is recognition:
Property rights in science are whittled down to a bare minimum by the rationale of the scientific ethic. The scientist’s claim to “his” intellectual “property”” is limited to that of recognition and esteem which, if the institution functions with a modicum of efficiency, is roughly commensurate with the significance of the increments brought to the common fund of knowledge.
This, of course, is a statement of a norm. It doesn’t mean that everyone practices the norm, or even accepts it. But seventy-five years ago, I expect Merton captured a sense of what was driving the discussion of inventions in university research, and is worth considering for that reason, at least.
Merton continues his discussion of “communism” in science (citation removed):
The communism of the scientific ethos is incompatible with the definition of technology as “private property” in a capitalistic economy. Current writings on the “frustration of science” reflect this conflict. Patents proclaim exclusive rights of use and, often, nonuse. The suppression of invention denies the rationale of scientific production and diffusion, as may be seen from the court’s decision in the case of U.S. v. American Bell Telephone Co.: “The inventor is one who has discovered something of value. It is his absolute property. He may withhold the knowledge of it from the public.”
For Merton, patents were aligned against the ethos of “communism” in science–that what was discovered was available as the common tools of scientific work, that those making discoveries and inventions benefited from the contributions of others, and that they then owned the community the same commitment of their work to the commons. Patents represent the “suppression of invention” and work against “scientific production and diffusion.” Whatever other claims might be made for patents in a commercial setting, in a university setting, the patent is not an obvious friend.
One can see, then, how university administrators (and faculty) may have felt the need to draft a patent policy–to ensure that patents were not misused in the context of university research and the conduct of science. Thus, medical faculty at a number of universities large and small swore off patenting–as formal policy. Harvard went so far as to offer financial assistance to anyone challenging medical patents. The mere presence of a patent claim, without an open license for all to practice (subject perhaps to publicly spirited conditions), represents a suppression of the invention. A patent is designed to exclude use, making, and sale. Without a license, these actions are excluded, suppressed. As long as a university makes a claim of ownership on inventions, then, without licensing them, the university by policy suppresses those inventions. It does not matter what the stated institutional intent is. What matters is the effect of the action.
One might also see how, in the presence of the idea of communality, university administrators and faculty alike might have argued that no academic inventor should hold personal rights in inventions–academic inventions should be contributed to the community. How this contribution should be done would then be a second proper role of university patent policy. One finds, here, the seeds of a claim for institutional ownership of inventions, where the institution then gives itself the mandate to manage any patent rights to prevent monopoly claims. Some early university patent policies expressly go this direction. The idea even shows up as late as the Bayh-Dole Act, where one objective of using the patent system is to promote “free enterprise and competition without unduly encumbering future research and discovery.” Under Bayh-Dole, one is directed to use patents to promote free enterprise and research, not to encumber either. For that, non-exclusive practices rise to the surface, and monopoly practices are suppressed. Such a change is worth not merely of mention–it is a regulatory expectation.
Merton continues the thought (again, I’ve removed the footnote markings):
Responses to this conflict-situation have varied. As a defensive measure, some scientists have come to patent their work to ensure its being made available for public use. Einstein, Millikan, Compton, Langmuir have taken out patents. Scientists have been urged to become promoters of new economic enterprises. Others seek to resolve the conflict by advocating socialism. These proposals – both those which demand economic returns for scientific discoveries and those which demand a change in the social system to let science get on with the job – reflect discrepancies in the conception of intellectual property.
Not much has changed in seventy-five years since Merton wrote, except that no-one takes out patents now to ensure public use, and university administrators for the most part think scientific entrepreneurism is a pretty new, trendy thing. For Merton, however, the problem gets focused on what is understood by “intellectual property.” Is it a system of ownership exploited for financial and competitive advantage, or is it the reward of recognition for priority and publication, certified by disinterested others? One can answer this question either way, of course–and that sets the agenda for what actions are prescribed, and what ones are proscribed.
Merton argues that the social institutions of science place controls of individual motives:
It is rather a distinctive pattern of institutional control of a wide range of motives which characterizes the behavior of scientists. For once the institution enjoins disinterested activity, it is to the interest of scientists to conform on pain of sanctions and, insofar as the norm has been internalized, on pain of psychological conflict.
Here, too, the university may be recruited to reflect a social norm–that a university policy might require disinterested science, and thus argue that patents are properly institutional, not private, and to be used by the institution in particular ways. One might add, not the ways that a privately held patent would be used. The motivation to claim patent rights from academic inventors was not because the university can make more money than the inventors might, that the university can do a better job creating monopolies for value than can individuals. Rather, the motivation was to preclude the use of patents in their commercial embodiment, as excluders of practice. For whatever investors in the commercial world might find of value in patents, the world of science identified by Merton expects free access.
Thus, from the early discussions of the role of patents in science, there’s an argument that universities differ from corporations, and thus should approach the matter of patenting differently from corporations. The patent is not merely the tool of exclusion to prevent competitors from practicing an invention, nor a tool of extortion to extract the maximum possible payment from industry, nor a tool of competition to keep researchers at other universities from access to an invention and thus limit their ability to obtain federal grants. The patent is furthermore, then, not for the university simply a tool to pass the right to do these things to another person or organization, which pays a portion of its income in exchange for the privilege of exclusion, extortion, or suppression of competition. For universities, patents are different–or should be. But now, generally, are not. One might say, universities have abrogated their role in shaping the norms of science and have adopted the approach of speculators. Science is not so much something to be managed for integrity as it is something to be bet on.
Patents held by universities are to be held in trust for the benefit of all. That’s the thrust of federal grants regulations, anyway, for patents and patent applications acquired with federal money. Clearly, even in federal regulations, there remains an expectation that university management of patents will differ from that of other owners of patents. It’s just that I don’t know a university administrator these days who gives a donkey’s knuckles about 2 CFR 200.316.
A second area of concern regarding patents in the university is that of commercial behavior. Universities have been set up to avoid commercial behaviors. In education, universities avoid the “sale” of instruction–students pay a “tuition” and degrees are “conferred” or “earned” not “sold” or “delivered as contracted.” A university does not sell teaching services, but rather charges a “tuition”–which is cast more as the cost of obtaining a privilege (such as a degree, an honor) than the sale of a service.
Most universities have a policy statement limiting commercial activities on campus. Students are not allowed to sell stuff without administrative approval; faculty cannot run a business from their office. As public institutions, universities are expected to serve the public generally and not attempt to compete with the private sector nor to pick “favorites” among companies and discriminate against all others.
Numerous commentators have argued that universities should not be run “as businesses”–even though a part of the business mindset appears to be the one that appeals to university administrators (treat faculty as semi-skilled workers in need of management efficiency; hire and fire at will; control the workplace and assign the work; own the results of work, attempt to profit (“to generate more revenue”) by reducing costs and raising prices; and the like). A recent essay by John Traphagan, a professor at the University of Texas, makes the case against commercial thinking:
A customer-oriented model at a university is the death knell of that institution. It changes the atmosphere from one where students are challenged to succeed to one in which they view their education as a process of purchasing grades so that they can get a good job. And that, in turn, leads to the dangerous mind-set that students (or, their parents) should be able to negotiate and manipulate their way to better grades, even when they do not do the work.
Should universities be efficient? Of course. But thinking in terms of customer service deflects attention away from what we are — a community interested in learning and creating knowledge that promotes the improvement of society.
Traphagan’s argument, however, doesn’t get much attention these days, with many voices arguing that somehow universities would be better if run “as a business”–though most of those voices don’t appear to have a clue what they mean by “as a business.” It appears they mean that a profit motive permits decisions that will make a university better, just as a profit motive (apparently) makes a business better. Milton Greenberg’s title of a 2004 article in Educause shows the pattern of reasoning–just call it a “fantasy” that a university isn’t a business: “A University Is Not a Business (And Other Fantasies).”
Jim Collins, in Good to Great and the Social Sectors, blasts that sort of thinking. As he puts it, “business thinking is not the answer.” The best city symphony orchestra is not necessarily the most profitable one. The best university is not necessarily the one making the most money. Profit from trade, basing expenditures on making money, pricing for what the market will bear, besting one’s competitors, keeping wages as low as possible, replacing skilled workers with less skilled workers and relying on management to control the workplace–these are the very practices that university folk were once concerned should not be introduced into the university.
As Michael J. Sandel argues (in What Money Can’t Buy), there are some things that money shouldn’t buy because turning a thing–such as, say, honor or friendship–into a commodity that displaces the moral foundation of the thing. If a university ran its operations like a company, it would sell honorary degrees. As Sandel suggests the blunt statement would be, “we award you this degree in thanks for the $10 million you gave us to build a new library.” But even Sandel retains the old diction–an honor made in exchange for a donation, when it actually is just the purchase of an honor with the profit going to pay architects and construction contractors. Jane Jacobs, too, makes the case (in Systems of Survival) that there are good reasons why a “guardian class” should avoid commerce. If a judge offers services to the highest bidder, then what happens to justice? If a university prices education based on demand, then doesn’t it select for those who are wealthy, or who are favored with government-backed loan programs so they can be treated as if they are wealthy, when in fact they are just getting deep into debt?
Trade is important. Division of labor and specialization create economic advantages over everyone having to do everything for themselves. Commerce places value on trade, and for-profit commerce aims to accumulate advantages. Put for-profit commerce in a corporation, a social engine built to accumulate profit for the benefit of owners who bear no liability beyond their investment for the acts of the corporation, and one has the idea of how a modern university ought to be operated, according to the pundits that want this sort of thing. In a commercial university, one prices things–assigns a value and demands that value in exchange for the things. What value, then, a degree (rather than, say, the value of instruction), or a patent on a research result (rather than, say, the value of the insight that motivated the research)?
The for-profit university folks argue that money-thinking will produce the changes that they desire to implement, and to put prices on things they want to profit from, but these folks aren’t willing to change where the value is greatest–and so end up with the self-serving but seductive idea that management can replace a worker’s skill and so retain more profit from labor for the owners of the company. Worker’s skill becomes an abstraction–“knowledge”–and “knowledge” can be priced and sold if packaged in the proper forms for more profit than people with skill teaching others can generate. In a properly “priced” university, administrators would make less than the most junior faculty member. That change alone would likely drop tuition by half, eliminate the need for extensive “financial aid” operations–and further reduce tuition.
Universities have imposed rules that university resources are not to be used for commercial purposes. It’s odd, then, to have administrators aiming to exempt themselves from such rules. Yes, it’s true that the administrators aim to run businesses to make money “for the university,” but often much of that money is recycled back to pay for the administrators’ salaries. Call it “self-sustaining.” But actually, it’s just a business running under the cover of the university, with most of the profits returned to expand the business.
Tax regulations (such the guidance of Rev Proc 47-2007) limit the amount of floor space in facilities built with tax-free bonds that can be used for “private” purposes. If an invention is owned by the university rather than a sponsor or an individual, then, somehow under the tax rules, the research leading to the invention is not a “private use.” However, there is apparently no further concern by the tax authorities for what the university does with patents on those inventions–any use, even participation in the creation of commercial monopolies–is apparently free of concern about “private use.” One would think that the tax experts would be smart enough to follow the activity around patents and determine whether a use is “private” or “qualified” based on how the university managed those patents. If the university licensed exclusively to a private concern, then it would be reasonable to argue that the research was conducted for the benefit of that private concern, and so is a “private” use of the facilities financed with tax-free bonds. Alas, tax experts are not yet that smart, but here’s to hoping that one day they will sort it out.
Thus we find incentives for university administrators to take ownership of inventions from inventors or require that inventors take the development of their inventions out of the academic environment, along with any patent rights. This is “thinking like a business”: find “assets” and find a way to make money from them. But it is a shabby idea of business, even, to make money at the expense of goodwill, of friendship, of principles. I know, it’s done. But that doesn’t mean we must accept it in all aspects of our living. The university idea was–and is–that what’s taught isn’t commodified, isn’t simply sold, isn’t priced for a market, isn’t conveyed by brokers. The outputs of university research, as well, participate in this same notion–the research is to be taught, not commodified and priced. Yet this is what university “technology transfer” now purports to do, to make money–at least enough money to make technology transfer “self-sustaining.”
In the early development of Research Corporation and the host of university-affiliated research foundations to act as the “trustees” for the management of patent rights. Whether inventors took their inventions to an agent directly, or assigned to the university which then assigned rights to an agent, the primary idea was to get the commercial activity outside the university. Any number of reasons might be given–that patent work was complex, that universities were not suited to commercial development, that faculty should not use the university’s non-profit status to compete with private industry, that commercial work carried liabilities that universities were not funded or suited to undertake. But the overall norm was that universities should not be involved in commerce, even if the discoveries and inventions at universities could provide companies with opportunities for new products and profits.
As Pink Floyd puts it, “Money so they say is the root of all evil today.” The idea of tokens of value to retain the memory of value is ancient and has taken many forms, including marks of reed in clay, shells, and bits of metal. In the 14th-century English work Piers Plowman, “mede”–pay for work–is contrasted with “mede measureless”–of seeking much more than one needs or what one’s activity is worth. Locke, in The Second Treatise of Government, works through the relation of labor to property:
Before the Appropriation of Land, he who gathered as much of the wild Fruit, killed, caught, or tamed, as many of the Beasts as he could; he that so employed his Pains about any of the spontaneous Products of Nature, as any way to alter them, from the state which Nature put them in, by placing any of his Labour on them, did thereby acquire a Property in them: But if they perished, in his Possession, without their due use; if the Fruits rotted, or the Venison putrified, before he could spend it, he offended against the common Law of Nature, and was liable to be punished; he invaded his Neighbour’s share, for he had no Right, farther than his Use called for any of them, and they might serve to afford him Conveniences of Life. (Chap V, Sect. 37)
It is money in the form of “Gold and Silver, which may be hoarded up without injury to any one” that allows for unequal possession of property–not, say, the threat of physical force or respect for nobility or bestowed honor or the dictates of a divine being.
There was a time in Western Civilization in which most transactions took place without money–barter exchanges, or tribute payments, or rents were paid in things, not money. One traded wood for food, or gathered wood to pay the rent, or shared a portion of the wood with the laird, whose wood it was. Money was a different sort of thing. Merchants came to rely on it–they sold commodities and had no use for trading cloth or cookware for a couple of goats or a pile of wood. Universities arose in this time, and were more the estate than the merchant-house, closer philosophically and socially to St. Paul’s than to Smithfield Market.
In the university, money has been used, but also constrained. The prospect for money changes motives, perceptions, decisions. We recognize the problem in laws regarding bribery, corruption, fraud, and sports betting. We find our ideas about family and friendship affected by money. As Dan Ariely points out in Predictably Irrational, we refuse money when doing things for family and friends because our sense of social norms dominates. We help a friend move, and we might accept pizza, but not payment. Ariely argues that money incentives turn out to be much more expensive than social norm incentives. How much does one have to offer to get a friend to do something on a market basis rather than a social basis? How much does one have to pay to get employees to do something strictly for the money, rather than because they believe it is the right thing to do?
University folk have had to deal with all of this concern about money as well. In the pursuit of knowledge, in deciding what to teach, and what to study, and what to report, the concern is that money can bias choices. If one takes money from industry to do research–and needs the money to survive–then one expects that the money will influence the research. For all that, the money appears to influence the research anyway. We become blind to our own motivations, and adapt to please our sponsors, donors, and customers. The idea behind faculty pay was not, then, whatever the lowest possible pay a “market” for faculty might permit, but rather enough money that the offer for money from others would not entice, would not distort faculty choice of work, instruction, or publication. If the “ivory tower” meant detachment from the influence of money looking to buy out authorities on a subject, perhaps that was a good thing. Just as we don’t want our judges doing business on the side, we prefer our faculty to reduce the prospects that they will sell out “for the money.”
In such an environment, then, monetary “incentives” become a problem. The late Michael L. Michael, in “Business Ethics: The Law of Rules,” cites a number of studies that indicate that when money is introduced as an incentive, people change their behaviors. What they did out of respect or duty turned to what they did for pay. Sandel points to similar studies, as does Ariely. When a senior housing organization offered rewards for tenants to make their own beds, the tenants did so for the rewards, and stopped doing other things that they otherwise had been doing to keep their rooms tidy. Same for sanctions: when a daycare started fining people for picking up their kids late, the parents treated the fines as payment for extra care, and increased their late pickups.
What the folks who value money don’t value is an environment in which social relationships depend on something other than money–on respect, on history, on friendship and goodwill, on common purpose, on freedom of choice, on integrity, on mutual exchange without the prospect of hoarding. Universities worked to limit the role of money in their operations, even though it is clear that universities also use money in all sorts of ways (just as do governments, churches, and even businesses).
When it comes to patent policies, the issue of money has to do with the use of the patent. In its primary form, a patent is granted to promote the progress (the diffusion) of the useful arts. In this form, a patent is a publication of an invention tied to a limited franchise to use the invention exclusively. In this form, the patent gives the inventor an opportunity to make, use, and sell. In early forms of patenting, the expectation was that the patent-holder would make, use, and sell. Thus, a state franchise for operating a steamboat on the Hudson meant that the patent-holder would indeed operate a steamboat on the Hudson, meeting the needs of the people.
But patents have a property side, as well. A patent owner can “license” the patent right to others, who might make, or use, or sell. For that “license,” the patent owner can receive money–a royalty, say, a share of the proceeds arising from making, using, or selling. But a patent owner can also receive money from another who intends to prevent the use of the invention, or who intends to re-license the patent for more than it cost to obtain it, or who is incompetent and will be unable to make, use, or sell products based on the invention, or who intends to sue others who are practicing the invention and meeting a public need in the absence of the patent owner’s own activity to make, use, and sell products based on the invention. In any of these cases, the value of the patent-as-property exceeds the value of the patent-as-franchise. That is, the rents from licensing the patent for money regardless of subsequent use exceed those from practicing the invention directly or limiting the activities available under license or expanding the number of those licensed to practice the invention.
Universities were concerned that patents could be then used for the money rather than to teach and diffuse new practices that supported research and public uses of research. Patent policies aimed to place patent work with agents that were dedicated to the appropriate exploitation of patent rights, or retained patent ownership for the university with the expectation that a university administration would do the right thing and hold the patent for common use, to defend against abusive uses, and to prevent even the appearance that faculty inventors were publishing to hype their own inventions rather than to report honestly what had been done, with what effects, and with what limitations and uncertainties.
Of course, things haven’t worked out that way. As long as external agents were involved, and were vetted for their approach to collaborating with industry to create new products, things were nominally acceptable. But as MIT and then the University of California called for patents to be used to “generate money” to support research, the move to treating patents as money-assets rather than social-assets had begun. The success of Research Corporation and then WARF in licensing a few inventions to industry and generating substantial income changed the administrative thinking–why encumber university patents with social norms about public benefit when one could cut directly to the chase and pursue money–charge what the market will bear, industry rates, to the highest bidder, to the company that has the best profile for paying the university.
A current university administrator argument against inventors choosing their own patent management agent is that administrative professionals can make more money for the university than most any selfish, foolish, know-it-allish faculty inventor can make. It’s a silly argument, good only for exchanges among administrators. It may well even be true–it’s just that it’s not the relevant comparison. The relevant comparison is whether university administrators can make more money than any other agent in the world that a university inventor might engage. There, the answer is generally flipped–there are often much better agents than the university’s own administrators, especially if the goal is making as much money as possible.
But even here, all the relevant comparison does is show how silly the idea is that faculty inventors must use the university’s licensing program. The actual issue is who is set up to manage patents for the social value of the use of the invention, not for the money-making potential of the patent. This is a hard concept for university administrators to grasp, especially those imprinted with the rhetoric of “technology transfer” in its present form–owning patents on university research to “commercialize” the research to “generate new sources of revenue” to “support the research and educational missions” of the university. In such abstractions, plantation slavery becomes “using the power of human resources to deliver quality agricultural products to the nation at a reasonable price.” We would do well to suspect abstractions for which no one wants to say what is going on in concrete terms.
University patent policies, then, sought to limit the effect of money on the diffusion of inventions, but over time, pressed for the need for money for research, the value of the patent came to mean more than the value of the underlying invention. Now we are at the stage where university administrators insist that the value of the patent must be as great or greater than the value of the underlying invention, and are more than happy to sue companies that practice an invention, loaded up with the idea that it is their right to make money from the patents they have obtained, and it is only industry’s refusal to take licenses that creates the necessity of litigation for infringement.
I have argued that university patents are different from other patents. When faculty and others enter the university, the social meaning of their work changes, and as well the social standing of their “rights” in work products. The same is true for university administrators. Their handling of patents is conditioned by the university–they are not at liberty to do just anything with a patent that might make money. They are not at liberty (unless they have written for themselves a policy like Yale’s) to sue anyone for infringement, or license exclusively for the money rather than the use, and the like. Bayh-Dole and federal grant regulations in turn place other restrictions on university patents when federal money has been used. Universities must act as trustees, not mere owners; universities must meet the requirements of the standard patent rights clause and further are limited by the objectives of Bayh-Dole in their exploitation of patents on subject inventions.
Universities have a distinctive role when it comes to research and the property rights that attend to that research. They have no pressing need for more money for research, as they might have had in the 1930s or even the 1960s. Federal and foundation funding is more than adequate (despite the complaints that there is never enough). University patent royalty income is a tiny drop, often not worth the effort to even document. Certainly most university financial statements don’t have a separate line item for patent royalties. Patent royalties are in “other” along with the sale of surplus property and income from photocopying services and library fines. Universities, then, can (and should) manage patents for something other than the money, even if at times money does come to them for their efforts. University research enterprise is best when built around this mandate.