The full title is:
Bayh-Dole, the franken-sausage god
that destroyed private initiative and the federal research commons,
eliminated subvention from university research policy
and failed to create a public covenant
to use research inventions to develop new products and
create new industries
but did a super-duper job of building a new bureaucracy and creating many profitable opportunities for speculative monopolists
Bayh-Dole was all but written by the folks running the university research foundations–especially Howard Bremer at WARF. They knew exactly what the deal was with university patent policies, how assignments to research foundations worked, and how the IPAs operated–and what they liked about the IPAs (ownership) and didn’t like (federal review of their licensing capability and programs, limits on exclusive licensing, march-in).
Alienation of inventors
The problem the university folks had in shaping Bayh-Dole was how to move from a negotiated contract position in the IPAs that allowed universities or their designated invention management organizations to take ownership of just those federally supported inventions a university chose to patent and instead make university ownership of all federally supported inventions simply a condition of federal law–changing patent law to require inventions simply to vest with the federal contractor outright, no assignments or university choices necessary.
The university patenting people wanted to be told by the government that they, rather than inventors, should own inventions made with federal support. They wanted to grant licenses to the government rather than allow inventors to do so. They wanted to decide whether patents should be sought. They didn’t want inventors or federal officials to do so. They wanted to decide when a patent should be licensed exclusively, and for what payment, and they didn’t want federal agencies asking them to account. And they wanted the practices they preferred for biomedical technology to be endorsed as uniform policy for all inventions, regardless of industry or market or public policy. So they had to find a way to put these things into the appearance of Congressional intent, rather than their own intent.
It’s not that there weren’t problems with federal administration of research inventions before Bayh-Dole. There were. It’s just that Bayh-Dole was not built to remedy these problems–it was built to exploit the perception of problems in order create a huge private entitlement that harvested the ideas of university faculty and fed them into new a patent licensing bureaucracy that in turn developed a preference for speculative monopolists and troll litigation. Of course, they would use different words, involving the awakening of the entrepreneurial spirit at universities to develop research inventions in the public interest by creating incentives for the private sector to invest in developing federally funded discoveries and so bring them to market to create jobs for Americans and benefits for Americans, restoring America to a leadership position in innovation, envy of all the world. Or something like that.
Senator Bayh in his amicus brief in Stanford v Roche was adamant that the drafters never needed an assignment requirement because they intended for inventions to vest with contractors and that is how the law actually works. It’s just that Bayh-Dole never comes out and states this–a fatal flaw in the drafting. So Senator Bayh in his amicus brief was reduced to claiming the law creates a “presumption of title” passing to federal contractors, “by operation of law.” Bayh argues that universities don’t need anything from inventors to secure title:
As if faculty are “employed” when they are released from their official duties by their universities to write proposals for federal support for the projects that they–the faculty–have envisioned. Furthermore:
As if somehow university administrators are responsible for the inventions made by faculty and students. And to hammer it home:
Vesting inventions with contractors
Senator Bayh makes it clear that Bayh-Dole is not built on an assumption that universities routinely require assignment. He knows they don’t. Bayh-Dole is built on the assertion that inventor assignments aren’t needed. The AUTM et al. amicus brief goes on at length about vesting statutes:
They end up reciting rules pertaining to government employees, a short-lived claim on atomic weapons technology in the 1950s, and a claim on NASA-funded inventions, also dating from the 1950s and directed at inventions “with significant utility in the conduct of aeronautical and space space activities,” for which there was not, at the time, a domestic market. The claim made by the Space Act is broader than patentable inventions–the government claims all inventions regardless of whether they are patentable. So the Space Act was essentially working a claim of secrecy and non-competition, not directly a theory of patent ownership–though that is indeed there, too. Indeed, chunks of Bayh-Dole, including the definition of a “funding agreement” and “made” are remarkably similar to the NASA Space Act language (see Section 305(h)):
(2) the term “contract” means any actual or proposed contract, agreement, understanding, or other arrangement, and includes any assignment, substitution of parties, or subcontract executed or entered into thereunder; and
(3) the term “made”, when used in relation to any invention, means the conception or first actual reduction to practice of such invention.
The trick that the advocates for Bayh-Dole had to work was to make a claim by the U.S. government that the work of its employees, and for the work of contractors in certain situations–making atomic and nuclear technologies, rockets and the like–belong to the federal government end up becoming a grant of ownership to a contractor, as if these are simply different versions of the “presumption of title.” But in the case of federal employees, law is used to establish the rights of the federal government as employer in that relationship. So that’s no more vesting than any patent agreement. It’s just that the government puts its patent agreement into law and regulation. State governments at times do the same thing with their employees–see Ohio or Florida. Look at “ethics laws”–which are essentially employment requirements cast as law by the legislative branch rather than as contract by the executive branch.
The presumption of title in a contracting party is also one that follows from employment and expectation of beneficial gain by the one doing the contracting. To require ownership of the results of contracted work is standard treatment for “contract research” activities. The Space Act states that all inventions are deliverables under NASA contracts and by extension all rights in inventions, and so also patent rights. Further, it appears NASA’s rights to make a claim extend beyond contracting to anything that NASA considers within the scope of “aeronautical and space” activities. Same for DOE with regard to atomic/nuclear. In essence these laws exclude these technologies from the scope of any private claim to a patent. The law restricts the scope of patentable subject matter that any inventor or contractor or anyone else can request from the government. The law amounts to “the government will not grant a letter of patent to any invention within these areas of exclusion, unless the government determines that it is in the public interest to do so.” One might make similar exclusions for life forms, methods of surgery (mostly already there), and even life-saving drugs (as distinct from, say, fantasy-inducing ones).
It’s an entirely different thing to take this same set of laws, directed at what the federal government can claim of its own employees and can exclude from the proper domain of private patent rights, and turn it into a statute that gives to mere contractors ownership of inventions that are otherwise entirely a matter of non-federal matters–made under subvention, not procurement, no less. That’s a huge jump, and it’s not at all merely a matter of shifting “presumptions.” That, too, is political talk.
The interesting thing is this. Here’s what the PTO requires of applicants when they make a claim under the Space Act and other similar laws. They have to obtain the following, in the form of a declaration or oath, from the inventors:
If universities were going to rely on vesting, then they should have been sending in patent applications without assignment documents–unnecessary, confusing, contrary to law–and instead should have had to supply this declaration by the inventors that establishes that an invention is indeed subject–that the inventors are willing to go on record with regard to the full circumstances of the invention, not merely that they are the “inventors.” Instead, university use invention disclosure forms, often with guidance that is wrong or deceptive–with the expectation that by casting a broad claim for the use of federal funds, the university gains outright ownership of a much larger swath of private work than otherwise. Of course, all this is backed up by deep, unquestioned administrative moralizing rather than, say, reasoning and attention to the authority under which they work.
So one thing is that contractor vesting was intended, so there is no oversight regarding assignment in Bayh-Dole. Assignment procedures, however, are not there, in this faux version of Bayh-Dole, because there’s no difference between the Space Act assertion of property rights in rocket stuff and Bayh-Dole’s assertion of private rights to university contractors to anything their faculty and research staff might think up and propose that the federal government help them work on.
If you don’t like these bureaucrats, we have others
Now look at the shape of Senator Bayh’s argument. The federal government had a bunch of patents that were not being licensed exclusively (except of course in biotech, where the federal government rate of 23% was comparable to the university foundation reported rate of 25% for non-federal inventions, and much better than the university foundation rate of 5% for federally supported inventions, mostly biotech). Federal bureaucrats were not up to the task of licensing exclusively, so the claim went. So the scheme became for Bayh-Dole to change patent law and make universities the owners of these inventions–outright, without any requirement that the universities have any licensing capability, and with the bare minimum of federal or public oversight or ability to protest university actions or the behavior of any university assignee or licensee.
To comply with this version of Bayh-Dole, universities first had to create their own bureaucracies. Then they had to try to use these bureaucracies to license patents to monopoly speculators. Bungling, indifferent academic inventors, so the argument goes, will take delight in this–their work will get patented, and rather than have that work wasted by becoming openly available to all (including themselves), university inventors will instead get a share of the profits from licensing, a share that according to Senator Bayh they can “negotiate” with their employer if their invention is ever “commercialized.” But since the inventors don’t own and never did own these inventions, that royalty share is more like a random administratively granted windfall if it happens. And if nothing is licensed, things are almost the same anyway–just that inventors don’t have any expectation of being able to practice their inventions outside the university unless they show up as an “entrepreneur” who has raised the money to pay the ransom required by the university bureaucrats.
In this version of Bayh-Dole, the only thing that might motivate an academic inventor to support development of a subject invention is money–and money obtained from participating in mostly monopoly deals. So much for academic mores of publication and open exchange. So much for any entrepreneur who finds value in making work broadly available, so that widespread adoption creates a market that might support a commercial version or other commercial products that depend on that new market.
Senator Bayh can with a sober line claim that separating an inventor from his/her invention is “catastrophic”:
He can then turn around and say it is a good thing to hand ownership of their inventions to university bureaucracies–and those bureaucracies do not have to even demonstrate that they have any capability to handle any given invention. What still connects the inventor to his/her invention? Ah, it is getting a share of the loot when the university bureaucracy or its designated mercenary research foundation shakes down industry. For that money, then, academic inventors will be motivated to work to develop their inventions. That’s the argument.
Attacking the federal commons
The government obtained lots of patents and only 4% were “licensed for development.” What he means is “licensed exclusively” and “not the ones in biomedical.” But he doesn’t bother with such nuances. Senator Bayh is shocked that the federal government would make inventions available non-exclusively and royalty-free:
Open access, to Bayh, is horrifying. Bayh-Dole represents an attack on the both the public domain and on the federal commons. Bayh-Dole strips federal agencies of the ability to create federal commons–inventions held for open domestic use but guarded against foreign imports–and the public domain–by inducing universities to patent up everything they can and hold it for ransom or for the first monopolist speculator that shows up. This is deep befuddlement, and happily unthinking political rhetoric at its finest.
As Rebecca Eisenberg has shown, the standard line about 28,000 federal patents moldering on the shelves is political deception. Those patents were mostly Department of Defense inventions, and DoD had a policy of allowing contractors to own patents–and the contractors chose not to. These were weapons-related things. The only legitimate purchaser was the federal government. No one was going to “develop” these inventions to sell into a domestic market. The federal government did not want foreign companies trying to import these same inventions into the U.S. to sell in a domestic market (“now you can get your in-weapon radar-tracking unit from the best Russian defense manufacturer using the same technology invented by American contractors”).
And these 28,000 were mostly inventions that the federal contractors had passed on–there was no domestic market to pursue, no “dual use” opportunity that put a rocket booster on automobiles, and what opportunities there may have been to move an invention laterally to some other market meant the invention was not in the market that the contractor was good at. The problem wasn’t ownership, wasn’t monopoly rights–it was that the contractors stuck to doing what their companies were good at, and that was making stuff that the DoD wanted, not selling bomb sights to lumberjacks. Many of those 28,000 inventions were commercial rejects or outside the business interests of the contractors.
No assignments needed, we’re speculators!
Senator Bayh was an attorney by training. He was not befuddled by the Biddle Report, as Sean O’Connor has suggested. Senator Bayh believed (or wanted to believe, or wanted others to believe) that the reason there was no assignment requirement in Bayh-Dole is because it wasn’t needed. Rather than require employees to assign, Bayh-Dole simply denied inventors any rights until the universities and federal government had pecked at them.
Forcing inventors to assign their rights by operation of law is something arguably beyond the scope of federal patent law–the federal government can secure for inventors rights to their inventions and so cannot compel inventors as a matter of federal law to give up those rights. It is hard to see how a university can become an inventor–unlike the less strange case of copyright and work made for hire. But Senator Bayh recites the Constitution in support of the vesting of rights not in the inventor, not in an employer that somehow could be deemed to be an inventor, but in any mere contractor to the federal government. It’s not even invent-for-hire–it’s invent for someone given the incentive to create monopolies for profit. That is a clever scheme.
If Bayh had any fuddlement, it was that he appears to have believed (or, at least he confidently represents) that prior to Bayh-Dole, federal law had vested ownership of inventions made with federal support directly in the federal government. This, too, the drafters referred to as “presumption of title”–but as far as I can tell, the federal government obtained assignments from inventors when a federal agency requested title to such stuff–outside of DOE and NASA. The federal agencies did not just go the USPTO with a claim of ownership based on the operation of law.
The “presumption of title” in past federal practice was a matter of federal contracting cast as federal agency policy. There was indeed a cascade of rights claims in inventions made with federal support, and if there was a presumption, it was that inventors would assign their rights when requested to do so, from whomever was authorized to request those rights. The first in line to do so was the federal agency. When Purdue Research Foundation got out ahead of all this and induced an inventor to assign to PRF without first clearing that with the Department of Energy, PRF got into a pissing match with DOE and went scampering off to Senator Bayh.
Subvention or procurement?
What, then, should be the nature of federal subventions for privately proposed and conducted research? Should all federal contracting be conflated with subvention, creating a plant with carrot tops and cabbage roots–a useless compromise vegetable? Or should there be a distinction between subvention and procurement?
Bayh-Dole conflates all such distinctions. Subvention and procurement are one and the same. The government gets a procurement-style delivery of the right to practice any subject invention. The inventor gets subvention-style treatment for title to inventions. The government is not specifying inventions, contracting for inventions, expecting inventions to be made for its benefit. In a subvention, the government provides assistance when individuals come to it for help. As Vannevar Bush put it:
This is a hazardous thing that we do, the giving away of public monies, and we need to surround it by safeguards for the many years ahead. With the Federal government plunging into the support of research on an enormous scale there is danger of the encouragement of mediocrity and grandiose projects, discouragement of individual genius, and hardening of administrative consciences in the universities. (Modern Arms and Free Men, 247)
Bush advocated that the “ultimate control of policy” for scientific research be in
the hands of a representative body of citizens, selected and confirmed with care, bound to justify their program annually to the Congress, and supplied with a well-paid, competent executive to manage their contracting and business affairs generally within the framework of government and subject to all its checks and controls.
This was to be the National Science Foundation, but clearly Bush did not get his way. Bayh-Dole goes further and destroys any prospect that “ultimate control” might be in the hands of a representative public–instead, as a matter of law, university bureaucrats–same as the federal bureaucrats?–dictate policy and have chosen to own everything they can, hold it back for monopoly licensing for profit, and what can’t be licensed (because there are no readily available monopolist speculators who also like to share) might be used later to shake down industry.
Inventors will be attracted to the patent money, regardless of how the university folks make it, whether by flipping rights for speculation, licensing for commercial development, or suing the socks off companies later, when the companies create products that come within the boundaries of any one claim in the happy “claim thicket” created by clever patent attorneys. Notice–those companies are creating product without any need for an exclusive position, and even potentially at risk of getting sued later by university bureaucrats spurred on by the now suddenly moral need to find some money for their poor, waiting, expectant inventors, and of course to teach those nasty, selfish companies something about the importance of taking an exclusive license from the university first, to protect them not so much from competition as from the value-sapping wrath of jilted bureaucrats.
The federal money comes to universities as a subvention, to support the work proposed by faculty investigators. Bayh-Dole and its doppleganger faux Bayh-Dole version–which Senator Bayh so eloquently expressed in his amicus brief–turns the federal subvention into a unilateral private procurement. Gift becomes graft. The university gets to use its political position–as a contractor–for its own private gain. What’s good for the university is good for the public. That’s about as sophisticated as it needs to get.
Bayh-Dole dismantled private research invention infrastructure
The network of invention administration that had developed since Frederick Cottrell created Research Corporation in 1912 was showing moderate promise in supporting the development of faculty inventions. For universities, external agents allowed for a great deal of administrative efficiency. Universities need consider only if they were entitled to an equitable financial interest in inventions that were patented and placed in commercial use. They did not have to consider patentability, patent prosecution, commercialization strategies, licensing, money, litigation, settlements, securitizations, or hiring folks and making policies and paying insurance and lawyers to deal with all of this. The success of Bayh-Dole–clearly–is that it induced universities to take on all of this extra work, cost, liability, policy, and bureaucracy anyway. Oh frabjous day!
The infrastructure that was created after Bayh-Dole all but shut down the privately developed infrastructure. Federal inventions swamped out private inventions. Compliance with federal invention management swamped out all other compliance. Federal inventions took precedence over all other inventions, research contracts, licenses–federal law, you know. And therefore all other activities must be made to comply with federal funding. Private sponsors of research are told that the university might decide to use federal funds, and in doing so will own inventions and must grant a license to the government. So much for certainty of title for sponsors and inventors alike. University policy must be made uniform, so the federal requirements become also the private requirements–the faux Bayh-Dole policy of university outright or automatic ownership of inventions must control all inventions–to be uniform, to comply, to be efficient, and to be fair (all inventors must be damaged by university bureaucrats equally).
As a consequence, universities moved from an agent model of invention support to a portfolio model. With so many incoming subject inventions, it was a Charlie Chaplin pie factory. The model became one of sales–with funnels and the idea that winners paid for losers. What mattered was the portfolio as a whole. A few big deals made the whole patenting and licensing program “worth it” and a “public benefit.” Look at the success stories–that’s all there is. That’s the portfolio model. There’s never a look at the stuff that’s not licensed because it was lousy stuff to patent and ill-suited to exclusive licensing and devastating to early development to charge anything for access. There’s never a look at the stuff that’s been licensed exclusively and isn’t being developed–and there is a lot of that, too. If the figures reported by a few universities–Stanford, University of California–are any indication, 80% of subject inventions aren’t licensed, and of those that are, only 0.5% result in a commercial product with even moderate distribution. That means, in a successful portfolio model (and I haven’t seen a tech transfer office yet announce that Bayh-Dole has been a failure), a university needs just 1 invention in 1000 to become a reasonably successful commercial product. Once every five years. Four patents total per portfolio of 4,000 inventions.
From a public policy perspective, the portfolio model of invention management is madness. The argument that the university folks made to Congress was that the federal bureaucrats were fools in thinking that making inventions available to everyone would result in public benefit. The government licensed for commercial development only 4% of their patents. The conclusion the universities drew was that federal workers were incapable of managing inventions for commercialization. And yet here we are, 35 years later, with universities making a virtue out of a “portfolio” approach, where the standard of success is merely the money and a 0.1% success rate. It would appear that the portfolio approach is 40x less effective than the approach used by the federal government prior to Bayh-Dole, and 100x less effective than the private network of agents that university administrators dismantled in their haste to be greedy pigs–but only greedy pigs in the public interest.
So, is the portfolio model so much better than the agent model? How well are subject inventions fairing? How well are private inventions fairing, burdened with all the controls and fetishes of the subject invention model? It would appear that here the Bayh-Dole Act has been an utter disaster. That academics can’t find the evidence is beyond my comprehension. That academic lawyers continue to hunt for answers in tomes rather than life is understandable. What’s not understandable is why so many of them come out of the closet as happy with invention fascism–the state knows better how to seek advantage than any mere dope of a faculty researcher, and here are the laws to make sure researchers don’t have any say in the disposition of their work (why, to do so would be to attempt to influence a transaction involving the state for their own private gain!).
Hardening of university administrative consciences
At one time, universities existed as a charitable cause. The university proper provided the financial, facilities, and administrative support to permit faculty to focus on teaching, professional development, and public service without having to worry about money or parking. Finding support for equipment and research help was another thing, for donors or helpful foundations or companies. The university appointed faculty. They became members. They were provided with resources. They were paid stipends. The university made a subvention in support of their work, and in return they agreed to do their work assembled at the university, where students could assemble to be taught and special facilities could be built to assist with research–labs, shops, libraries, museums, cafes, and bars.
The term “employee” is actually relatively recent. See the ngram.
“Employee” lags the rise in the term “employer” by half a century or so. Both terms appear to track the rise of the public stock corporation, reaching a crest around 1920:
As it is, there appear to be more “employees” than there are “employers” to employ them. That is, workers and servants and faculty members have all been turned into “employees” on the analogy that whatever they work for is a corporation or ought to be run like a corporation.
Why? Perhaps because corporations are things of power, proxy people, paper robots. They operate for shareholders (or, to moralize their importance, “stakeholders”), and therefore have “fiduciary” duties to make shitloads of money (and give some of it to the stakeholders), and must relentlessly focus therefore on management, efficiency, and tweaking law and custom to maximize income and eliminate waste–and other such rationalizations, the public and its commons and its silly values be damned. Just like everything became “scientific” after science did some cool things, everything becomes corporate after the gilded age of the robber barons.
In any event, Bayh-Dole gave incentives for university administrators to turn faculty and students and visitors and collaborators into “employees.” Bayh-Dole refers to research personnel as “employees”–and given that the law was drafted by university-side folks (or, their foundation dark selves), the push was to turn all affiliated folk into “employees.” If employees, then directed, if directed then it’s only equitable that the employer enjoy the fruits of the employee’s labor, and all Bayh-Dole does is memorialize this obvious fact as the law of the land, so no employee can “hold out” on the public and attempt to gain more for her/himself than she/he deserves. It’s a sweet pill containing the poison necessary to kill off the idea of subvention. While the universities pounded on the federal government that the federal money was a subvention to support university research, they turned it around to make the research itself a university procurement–bought and paid for, and directed by–university administrators on behalf of the public. Almost any poseur can get away with something by calling it “for the public good.” There’s something here about the surface compositions of highways to hell, not canonical to AC/DC.
It was a stroke of genius, therefore, for the universities to throw small businesses into Bayh-Dole. Small businesses had employees. Small businesses did direct research. Small businesses expected to enjoy the fruits of those employees’ labor. When the government contracted for research with small businesses, the argument went, the federal subvention was directed for the benefit of the business, that paper robot treated as a person by the law.
If the federal subvention was then demonstrably on behalf of small businesses and not any employee who happened to invent, then for consistency, that’s what must be happening with universities, too. They are employers, their research personnel are employees, the universities submit the proposals and sign the contracts and receive the money. The federal subvention must be made for the benefit of the university, not for any mere faculty employee. So university administration is the proper owner of any invention. This is the federal policy change implicit in Bayh-Dole’s conflation of university and small business–and conflation of university and nonprofit. (The “nonprofit” in Bayh-Dole is a clever abstraction for “invention management organizations desiring more inventions from universities without having to do the work of securing title from inventors.” The research foundations were the leaders in seeking Bayh-Dole and adding the universities and small businesses were the political candy to make the poison go down more readily.)
Once Bayh-Dole was passed, the fight turned to the implementing regulations. The federal agencies, it appeared, were trying to find ways to restore flexibility and public oversight–that is, to have more control over inventions and therefore require universities to be accountable for any private actions they took with subject inventions. By his own account, Howard Bremer was a leader of the efforts to beat back the federal agencies. Here’s an excerpt from a letter he wrote from WARF to COGR:
Bremer argued that the implementing regulations should take a subvention point of view–but that the subvention was not in support of faculty investigators but rather their universities. While the federal government was subventing, the universities were procuring. Or, another way, the subvention in Bayh-Dole required university procurement of inventions as a matter of federal law. Faculty were mere employees dutifully serving their employer. Their ideas and the inventions that might come from those ideas are merely the expected fruits of employment. The proper owner and disposer of rights to profit from those inventions is neither the federal government (who has given a grant, not paid for delivery of anything) nor the investigators or inventors (who are doing what they are told to do, in the public interest, of course). The proper owner is the employer, the administrator acting for the employer, the patenting and licensing officers working on behalf of the employer (and only in the public interest, yes).
This framework of procurement and employee then undercuts everything about university-side subvention. Not only does the university procure faculty ideas for its technology licensing program, any use of university resources–funds, facilities, equipment, money, staff, information, name–for any purpose other than to convey all work into the hands of bureaucrats (“working in the public interest”) is misconduct, unethical, evil. Even attempting to do work outside the university is misconduct. Consulting in an area of one’s expertise and thinking consulting work product is not the university’s is misconduct. Not reporting an invention in the hope of placing it in the public domain (and thereby denying the university a chance to seek profits from it) is misconduct. The university graciously waives its right to pursue misconduct charges, but reserves the right to go after anyone at any time.
Bush called this the “hardening of the consciences of administrators.” The poison that does the hardening is called Bayh-Dole, and the poison was put there by our friends at the research foundations.
The “core incentive” for subject inventions
For every bit of argument that the federal government and its open access ways were antagonistic to profit-making deals over patent rights, the research foundations were not arguing for the freedom of faculty to decide if and when to seek a patent, or what to do with a patent once it issued–they were arguing that inventors and investigators should not have any right in the matter. Perhaps a “voice,” but nothing with veto power over the will of the patenting and licensing folk to do whatever deal they pleased–license, litigate, bungle, or bury.
The argument that university patenting specialists know more than federal bureaucrats is a deception. The question is whether the university patenting specialists know more than anyone else in the country.
The argument that university patenting specialists know more than the poor university inventors is also a deception. The question is whether university patenting specialists know more than anyone else in the country.
Finally, the argument that exclusive licensing is the only or best or default way to use subject inventions is unsupported and unsupportable. In some few instances, an exclusive license for limited times is workable. But Senator Bayh believed that the whole purpose of the patent law was to provide inventors the means to offer exclusive licenses. Here’s his take in his amicus brief:
The “core incentive” of the patent system was the “limited exclusivity.” That exclusivity was the right to exclude others who were not working on behalf of the patent owner. The purpose of the patent law was to “promote the progress of the useful arts.” Progress means diffusion of new practice. The premise is that individuals–the inventors–when they request a letter patent, best know what will advance their own interests. The patent provides them “limited exclusivity” to do that–that is, a right to exclude all others that do not advance the inventor’s interests. An inventor might refuse to allow anyone to practice the invention (and not practice the invention personally, either)–nonuse. An inventor might exclude others and practice–direct use. An inventor might partner with another, such as a company, and assign or exclusively license the invention–a flip. Or an inventor might wait until other companies practice the invention and then sue them for royalties–troll. Or an inventor might make the invention available for development and use by anyone qualified, for a fee or for free (as a common platform or in exchange for access to other technology or as a standard)–share.
The federal government adopted a policy of sharing its patent rights domestically, and rarely providing an exclusive license. Think about it–if the government acquires a patent, and then licenses that patent exclusively, it is in effect reiussing the patent, but with potentially a different covenant than the original patent. The attributes of personal property subject to the conditions of federal patent law are also constrained by the conditions of the federal license–and those conditions likely forbid nonuse and trolling in favor of direct use and sharing.
When the government moved into funding university research on “an enormous scale,” it faced the problem of how it dealt with inventions that otherwise would have been made with private funding, and may well have been dedicated to the public domain by their inventors. University research contributed predominantly to the public domain of science. Vannevar Bush aimed to increase the amount of discovery in the public domain available to anyone seeking to create new things for the benefit of the general welfare. Patents might play a role in the practical application of various scientific discoveries, but they weren’t the basis by which every new thing could be used, nor was the goal to ensure that universities got paid for holding patent rights.
The federal interest in research patents
Here’s what Bush has to say in Science the Endless Frontier about federal interest in patents that come about as the result of the new funding he proposed:
The public interest will normally be adequately protected if the Government receives a royalty-free license for governmental purposes under any patents resulting from work financed by the Foundation.
The government should not be sued for the use of inventions that it has supported.
There should be no obligation on the research institution to patent discoveries made as a result of support from the Foundation.
Discoveries may be productively used without any need for a patent. Commercialization may take place without a claim to monopoly rights or a demand for payment or an attempt to “pick a winner” and make one company hold monopoly rights over the others in the same industry.
There should certainly not be any absolute requirement that all rights in such discoveries be assigned to the Government,
A recommendation that federal agencies ignored, and Bayh-Dole did address, but on a different premise, ignoring other of Bush’s recommendations…
but it should be left to the discretion of the director and the interested Division whether in special cases the public interest requires such an assignment.
Those “exceptional circumstances” that also show up in Bayh-Dole. The question is the public interest–and what might that mean?
Legislation on this point should leave to the Members of the Foundation discretion as to its patent policy in order that patent arrangements may be adjusted as circumstances and the public interest require.
The members Bush refers to are the citizens he envisions will run the National Research Foundation, which will look more like the board of the Research Corporation and less like another executive-branch federal agency. Again, Bush gets ignored. The NSF allocates money, but it is hardly a citizen-operated organization. Bush also envisions adjusting patent policy “as circumstances and the public interest require”–again, a flexible patent policy, managed by citizen representatives on behalf of public interest, not a uniform patent policy that leaves it to profit-seeking university administrators attempting partnerships with speculative monopolists, unconstrained with regard to whether they derive their profit from nonuse (so long as the portfolio is profitable), from monopoly abuse (higher prices means higher royalties), from flipping rights (licensing to startups for equity that does not track use of the invention), or from trolling industry (nonuse until the submarine assertion and failing that, litigation).
Bush has confidence that the patent system has a role to play:
It is important that the patent system continue to serve the country in the manner intended by the Constitution, for it has been a vital element in the industrial vigor which has distinguished this nation.
Bush raises the question of how a patent system should operate in the context of federally funded research to support new inventions and new industries:
Research is also affected by the patent laws. They stimulate new invention and they make it possible for new industries to be built around new devices or new processes. These industries generate new jobs and new products, all of which contribute to the welfare and the strength of the country.
The patent system might help to connect research with practical application–by stimulating new inventions and building new industries. The research patent then aims to stimulate new inventions, not to try to control or constrain them. And it aims to place inventions in a position that new industries arise. That’s not the same as using a patent to create a new market–one that is monopolized by a single “commercialization” partner. A good measure, then, of any federal patent policy is whether the inventions patented under the policy lead to either i) more inventions or ii) new industries with common access to a research invention–or both. Any “incentives” ought to recognize these two outcomes as practical measures of “success” of the policy.
If we ask these questions of Bayh-Dole, however, there is no answer. No one knows or cares whether patents on research inventions have led to new inventions, nor can we see whether common access to a patented research invention has led to the formation of new industries. The faux Bayh-Dole public policy runs directly against both of these goals. The aim of university administrators is to use one’s patent position to get more patent positions. I’ve had them tell me as much. And any review of their patenting strategies reveals it–“thicket of claims” means someone will likely have to pay. Same goes for common access. University administrators fight it. They don’t believe or understand how common access can be a value proposition. “A non-exclusive license is just a tax,” they huff, unthinkingly repeating something they have heard. They can’t imagine the value of escrow, of standards, of exchange, of networked externalities. They don’t understand the mechanical advantage of forming a peloton. They talk about profits but don’t want to think about all the ways one can make profits without being a pig.
Bayh-Dole guts accountability for research inventions
More from Vannevar Bush:
Yet, uncertainties in the operation of the patent laws have impaired the ability of small industries to translate new ideas into processes and products of value to the nation.
The problem is not that there aren’t enough monopoly positions taken out by research organizations demanding payment from businesses in emerging industries or denying them access while a single company attempts to make a product that will monopolize the industry from the start. The problem is that the patent laws themselves are too complicated and expensive to be useful to be beneficial to companies operating in small industries–including new industries.
When was the last time anyone discussed how Bayh-Dole provided advantages to small industries? No, Bayh-Dole only concerns small businesses. There is one point in the regulations where it almost appears that Bayh-Dole might suggest that universities should prefer to offer non-exclusive licenses to small businesses over offering an exclusive license to anyone and especially to a large company, but the regulations never get there. Look at this awful debate, fossilized as 37 CFR 401.14(a)(k)(4)–a provision that applies only to nonprofits:
It will make efforts that are reasonable under the circumstances to attract licensees of subject invention that are small business firms
Read that slowly again. Attract multiple licensees for a single subject invention. That’s the primary obligation of nonprofits. That is not “multiple small businesses to bid for a single exclusive license.” It is a fundamental statement to license non-exclusively to small businesses. The problem is in the qualifying (surely added) language “reasonable under the circumstances”–who decides what is reasonable?
and that it will give a preference to a small business firm when licensing a subject invention
Now the moment has passed, and the requirements pick up with “a preference” [singular] to “a small business firm” [singular]. What “give a preference” means relative to, say, “prefer” or “choose” is not clear. What is “a” preference? We will never know until this “a” goes to court with pockets of cash to find out. But the sense here is that of a context of the offer of an exclusive license, in contrast to the initial mandate to offer non-exclusive licenses. But there’s more to this fossilized debate:
if the contractor determines that the small business firm has a plan or proposal for marketing the invention which, if executed, is equally as likely to bring the invention to practical application as any plans or proposals from applicants that are not small business firms;
The preference for small businesses depends on a conditional–that the small business has a marketing plan that is as good as any non-small business. Thus, it is a battle of marketing plans, rather than someone’s discretion or even a commitment to non-exclusive access. Also packed into this clause is an implicit requirement that universities must have in hand a marketing plan from any exclusive licensee, and preferably at least one marketing plan from a company that did not get the exclusive license, showing that that plan was not as likely to result in practical application–that is demonstrable use with public benefits on reasonable terms. More:
provided, that the contractor is also satisfied that the small business firm has the capability and resources to carry out its plan or proposal.
So even if there is a battle of marketing plans and the small business wins, it doesn’t matter, because it comes down to the happy whim of the licensing officer. “Pooh–you don’t have the capability and resources to do what you propose. Be off, sucker! You waste our time.”
The decision whether to give a preference in any specific case will be at the discretion of the contractor.
These are the university research foundation here, surely, pounding the point. The contractor has discretion. So this whole section comes down to this.
However, the contractor agrees that the Secretary may review the contractor’s licensing program and decisions regarding small business applicants,
But the discretion in aggregate is subject to review. The Secretary of Commerce can review the program as a whole, but cannot contest any particular licensing decision. Again, another way that Howard Bremer gutted public accountability provisions to give WARF and other foundations a free hand to go off however they wished. Why? Well, for one, WARF had been sued by the federal government twice for antitrust offenses and lost both times. Perhaps this was Bremer’s way of building an apparatus to prevent the federal government from ever again challenging a specific licensing decision.
and the contractor will negotiate changes to its licensing policies, procedures, or practices with the Secretary when the Secretary’s review discloses that the contractor could take reasonable steps to implement more effectively the requirements of this paragraph (k)(4).
(I fixed the typo, okay?). So the contractor is exposed to the full force of a … negotiation… with the Secretary of Commerce over licensing practices if after a review finds that folks have gone off half-cocked and ignored small businesses. The hope of non-exclusive licensing passes. Compare the IPA:
and exclusive licenses are limited to three years from date of first commercial sale or eight years from date of the license, with non-exclusive licensing to follow as a positive obligation:
And failure, er, contractor discretion, is not an option:
If there’s no practical application in that 3/8 year window, and as a result the university hasn’t offered everyone a royalty-free license (or other reasonable terms–reasoning away from royalty-free), then the government can come marching in:
There’s no procedure here under the IPA except that the university can request a hearing before being taken to the woodshed. Bremer fought against such requirements, and gloated that he weakened the march-in procedures essentially to prevent their use.
It’s clear, then, how the fossilized debate in (k)(4) further guts public accountability for nonprofit licensing of subject inventions. The best an agency can do is march-in on a particular subject invention. All the Department of Commerce can do is negotiate changes in an overall licensing program to favor a preference for small businesses. This is so far afield from Vannevar Bush’s concern that all the angels that might dance on the head of this pin won’t change the dead bug of an argument that it’s stuck into.
Special concern for small companies in new industries
Bush was concerned with how patent laws appear to serve the interests of powerful companies in established industries, not small companies in new industries built around research inventions, which themselves might be patented. Here’s Bush:
These uncertainties are, in part, attributable to the difficulties and expense incident to the operation of the patent system as it presently exists. These uncertainties are also attributable to the existence of certain abuses, which have appeared in the use of patents. The abuses should be corrected. They have led to extravagantly critical attacks which tend to discredit a basically sound system.
The complications of the patent system and abuses of the patent system have brought attacks on the patent system. The complications should be simplified. The abuses should be corrected. What is left to be considered is how a working patent system should operate when applied to research inventions intended to spark new inventions and new industries with small companies in them. What public covenant, not already in the patent system, should go with the patenting of research inventions, whether that patenting is done by the federal government, university contractors, or the investigators themselves.
Clearly that public covenant on research inventions includes a prohibition on non-use and trolling–both abuses of the system in the case of new inventions and new industries. That public covenant also limits the scope of exclusively holding rights, whether directly or flipped. If a university hasn’t licensed in 3 years from patent issue or 8 years from report of invention, then something should happen. If a company the university has flipped rights to hasn’t got to practical application in the 3/8 window, something should happen. A public covenant on research inventions defaults to non-exclusive royalty-free licensing, allows a reasonable royalty for non-exclusive licenses, shortens the patent life for the exploitation of exclusive rights, and after that time requires positive efforts at non-exclusive licensing.
When the federal government takes ownership of research inventions and makes them available non-exclusively for domestic use, it acts as a trustee on behalf of the public domain. Patentable inventions can be removed from the public domain. The federal government through its subvention creates many more opportunities for such inventions to be made. Thus, the opportunities for the expansion of scientific knowledge also carry with them opportunities for private exploitation of monopoly positions before anyone has had a chance to evaluate and try out the new findings. So the federal government creates a public commons of such rights, restoring as it were, a version of the public domain, but now with a public covenant that rides on top of the exclusive rights of any exclusive licensee of the government–a second-order patent owner, owning as it were a letter patent in the form of a federal license to exclude but only for limited reasons and a shorter time than the property rights provided generally in the patent law.
The non-exclusive licensing program used by the federal government also served to create a domestic commons. Foreign countries seeking to enter the U.S. market with competing products had to move through the U.S. government for approval. Rather than use trade duties on such products, the federal government could charge a royalty under its patent rights–fair game–or simply deny the foreign company the right to import the competing good. For that, the federal government could license exclusively the patent in question to a U.S. company and let that company deal with competitive imports–either working a deal with the company or objecting in court.
Bayh-Dole effectively destroyed both the public covenant that had developed on federally funded inventions and the domestic commons that the federal government had created around selected domestic industries. Gone as well was any vestige of Bush’s concern for how research inventions, properly handled, might stimulate more inventions and the creation of new industries. In their place came a claim that a university could use any means of exploiting patents on research inventions, that institutional money positions were the motivating factor, that fragmented monopolies were the “core expectation” of the patent system, and that academic inventors would go along with all of this for the money they might get from royalties.
Bayh-Dole, the franken-sausage god
The statement of Congress’s policy and objective for Bayh-Dole is encoded into law, rather than left as legislative history. That opening section of 35 USC 200 reads like the start of a hopeful book on how to construct a new public covenant for federally funded inventions while relieving federal government agencies of the complications of acquiring and managing so many inventions. But from then on, Bayh-Dole becomes a sausage, a Frankenstein’s monster of used body parts from IPAs, old laws, regulations, and brain-dead debates.
Rather than boldly and successfully ushering in an age of prosperity, Bayh-Dole has dismantled both the private infrastructure that had developed expressly to support research inventions and the federal domestic commons that managed a public covenant for the exploitation of patents on research inventions that could otherwise disrupt the public domain. Repeal of Bayh-Dole won’t repair the damage–billions and billions of dollars of lost infrastructure and opportunity and expertise and initiative. Tweaking Bayh-Dole to make it “work better” only makes its poison more efficient.
The fundamental issues are left unaddressed. How to construct a public covenant for subject inventions? What covenant will stock the public domain while providing incentives for private initiative? To what extent is a domestic commons important to support American exploitation of its own research inventions? How should the patent system be deployed to spark the move from research inventions to applied inventions, and from research inventions to new industries, and from research inventions to opportunities for small companies in those new industries before the big companies move in on the territory?
Bayh-Dole answers none of these questions. Bayh-Dole aims to destroy these questions as talking points. The general idea behind Bayh-Dole is federal agency indifference and alienation of university inventor interest in the development of their scholarly work will put private invention managers in the best position to profit from patents, through any use of their choosing. Success for the universities means the success of the financial portfolio. Success for inventors means that some very few of them get wealthy. Success for the federal agencies is that many, many patents are issued to show the productivity of their research programs (so they can pitch for more funding from Congress), and success for the public is that they get to read the “success” stories of the 1 of every 1000 research inventions that makes it through this grasping bureaucracy that worships that most franken-sausage god called Bayh-Dole.