The Public Research Patent Covenant–Narrative Version

The Institutional Patent Agreement approach to patent rights arising from federally supported research carried with it what we may call a public covenant, a set of conditions that run with each patent on a subject invention that place limits on the property right represented by the patent. Over 70 research universities eventually adopted the IPA scheme before Bayh-Dole dismantled it. If we made the argument in prose rather than in the form of legal clauses in a master agreement, the IPA public covenant looks something like this:

The federal government supports research at universities which may result in patentable inventions and discoveries. That research may expand the frontiers of science or solve problems faced by the public, such as in public health or national security. The public interest is generally served when the results of such research are published and made broadly available for use and development, including the creation of commercial products.

The federal patent system is based on the premise that inventors, if they enjoy for limited times exclusive rights to their inventions, will promote the progress of the useful arts by developing their inventions and introducing them into public use. Thus, it is expectable that patents may play a beneficial role in the development of inventions supported with federal funds designed to improve the capacity of universities to support research in the public interest.

The patent system, however, is not perfectly suited to the specific objectives of federal funding. The patent system permits exploitation of patent rights that, while legal and profitable, do not advance the objectives of federally supported research. For instance, a patent owner may use a patent to prevent all use of an invention, such as to favor other technology or products. A patent owner may be indifferent to developing the invention claimed in the patent or fail to make diligent efforts to find companies that would assist. A patent owner may refuse to collaborate with other organizations that have complementary technology or research capabilities and thus find it impossible to finance the development of an invention in isolation. In such cases, researchers and companies are forced to design around the claimed inventions, working exactly opposite to the intent of federal funding for university research, which is that such inventions are broadly used.

Furthermore, a patent owner may create a monopoly with such power that other inventors find their inventions cannot be used and therefore are of little value or are forced to give their inventions over to the dominant patent owner on lousy terms or are limited in how they may develop their own inventions. With a powerful monopoly, a patent owner may charge unreasonable fees for the use of an invention–especially egregious when the invention would improve public health, care of the environment, or national security. The wealthy and powerful may still afford the benefits of the invention, but not the general public. And a patent owner may refuse to make an essential invention available to competitors, preventing the formation of standards and the development of an industry as a whole. While all these uses of a patent are arguably legal, and may even be viewed as somehow miraculously beneficial in the long run, they do not conform to the specific purposes for which federal funding is made available to universities to support faculty-led research.

The federal government does not fund university research so that inventors, companies, or the universities themselves may obtain patents that are exploited against the public interest that motivates (and justifies) the federal funding in the first place. The government expects that the results of publicly supported research will be made broadly available for public use using a variety of methods that will accomplish this aim, whether open publication with no claim to rights; or royalty-free, non-exclusive licensing but favoring qualified applicants and those willing also to contribute their technology to a commons; or with a reasonable royalty used to recover costs and support further development, or in some few cases, for limited times, an exclusive position to recover substantial investments that otherwise are unlikely to be acknowledged or recouped but should be.

The effort to create commercial products is not in itself sufficient reason to establish monopolies on federally supported research, nor is royalty income to an inventor, or company, or university to be a primary measure of the successful outcome of federally supported research. Reasonable incentives for developing an invention–not incentives beyond reasonable (such as the full set of monopoly rights available to a patent owner)–are appropriate. Neither universities that host research nor the faculty that conduct research need monopoly financial incentives to seek the use and development of federally supported inventions in the public interest. For universities and faculty, their already-declared public mission includes making discoveries available through publication and instruction. If patents–a form of publication–contribute to this mission, university faculty will use their best judgment about when to do so. If a university chooses to provide resources to assist with such publication, as universities may do for other kinds of publications, there is no need for a financial incentive to provide a motivation beyond that of service to the public.

It is of course possible, even expectable, that an inventor of a subject invention or a patent broker obtaining rights to a subject invention may choose to pursue the development of an invention for a financial reason rather than a public interest one. But there is no reason that federal policy should attempt to make such a financial motivation become dominant over other motivations that are already present and strong within the university research community–the pleasure of finding things out, the commitment to helping people with new or better information, the reputation gain of priority in discovery, the attraction of talent to one’s efforts, leadership within an area of inquiry, access to supplemental resources to conduct one’s work.

The active pursuit of significant wealth, whether for oneself or one’s institution, need not be conflated with the creation of wealth within society, whether financial in the form of income for an innovator or in the form of lower costs and better services for the public. The expectations of federally funded research are directed toward the creation of opportunity for others, not for universities and their faculty. This is a primary reason why universities receive federal funding in the first place. If universities and faculty desire pursuit of wealth as the primary objective, or even as a primary motivation, they can avail themselves of other funding sources to do so without distorting or diverting federal support for that purpose.

For federally supported inventions, any desire for personal or institutional rewards or recognition must be subordinate to the overall goal of making research findings available broadly, allowing diverse and competitive development whenever possible, and doing so on reasonable terms–reasonable terms asked by inventors, reasonable terms asked by universities or other intermediaries, reasonable terms asked by the companies involved in developing the inventions as commercial products.

Federal funding is not provided to enable (or encourage, or permit) self-interested, unlimited profit-seeking, speculation, monopoly-building, or vast unlimited returns. Not by inventors, not by universities, not by the companies that participate in developing federally supported inventions. Only when a monopoly position created by a patent is the only means to developing a federally supported invention is the use of a patent to create a monopoly acceptable, and then only for limited times, and in limited ways, and then only when the monopoly really does result in a demonstrable benefit reasonably available to the public. This, then is at the heart of the public covenant that governs patents on federally supported inventions.

Nor is it acceptable that a university or any invention management agent accumulate patents to forestall, regrate, or engross a market–by making companies and the public pay more to use federal research than they would if that research were openly published, or by changing the market in which an invention is presented from one of general access to results to one of bidding for speculative interest in patent rights (where such value may arise from forestalling or otherwise disrupting a market based on access) or by accumulating patents so as to create a monopoly on research results to gain a competitive advantage over other organizations or researchers seeking federal support.

A speculative portfolio approach to subject inventions is unacceptable. Inventors of subject inventions and any university or other intermediary act as agents for the government’s interest until released from such duty, and they will not be permitted to accumulate many inventions on the prospect of finding financial success with only a handful. Although assembling a patent portfolio while forestalling, regrating, engrossing, or merely speculating on future value is in general a legal form of market exploitation, it is not appropriate to the objectives of federally funded research and universities, invention management organizations, and companies that participate in such practices are not eligible to receive federal support for research in the public interest.

To make it clear, then, for the clever-minded: the standard of success is the use of federally supported inventions with benefits reasonably available to the public. Maximum university or company profit from exploitation of patents is not in itself in the public interest, even if that profit is used for further research or education. The primary objective is to benefit the public, not the university nor companies nor inventors–even if the university claims special status as servant of the public interest. Thus, any agreement on the sharing of royalties among inventor, university, and companies must first be subordinate to the fundamental requirements–that inventions are made broadly available for use and development, that monopoly is used only when it is necessary to achieve development and only then for limited times–even if the time limitation results in less profit for the company and less royalty income for the university and its inventors.

In this endeavor, university inventors are “free riders” on the subvention of the federal government to support their work. Universities themselves are also “free riders” on that subvention in that universities are compensated by the government for the use of their personnel and facilities. Invention management organizations are “free riders” in that through federal funding the flow to them of inventions to be managed is potentially increased, to their benefit, without additional cost. And companies are “free riders” in that the risk and expense of the research–much of which would not be otherwise undertaken in companies–has been borne by the government and the public. Finally, then, it must become apparent even to the university administrator with a hardened conscience (to use Vannevar Bush’s term) that the public is intended to be a “free rider” of the government funding, the research results, and any patentable inventions within those results. A public “free ride” on the expansion and development of the scientific frontier and the solution to problems of public health, security, and welfare is the primary goal to which all other free rides are subordinate.

The research personnel, the universities, the invention management organizations, and the companies involved–including entrepreneurs and investors–are stewards of the public interest in participating in the administration of patents on inventions made with federal support. They may each expect a reasonable payment for their participation, but this is not an unregulated market. As for universities, they need no such incentives, as they are established to work in the public interest, not their own. Similarly, research personnel choose to work at a university and seek government support because they have made a commitment to do good, not necessarily to do well.

These participants are explorers sent to open up new territory. They are not sent to claim that territory for themselves or to reap the profit from the threat to exclude others subject to payment. They are not sent to make the territory available only to the wealthy or powerful or their best buddies. It is the integrity of the explorer and supplier of civic infrastructure to create the conditions for settlement, not for self-interested empire-building, even if the result of their work is a prosperous society.

These participants are first responders. They are not sent to exploit the resources made available to them to obtain the wealth or servile obedience of those in dire need. The ambulance driver at the scene of an accident could charge much more the service–but does not. The provider of blankets after a tornado has struck could charge much more for those blankets, but does not. The warrior sent to defend a town from attack could turn his weaponry on the town itself and so come to rule it–but does not. It is the integrity of the first responder to do everything in their power to aid, to mitigate, to restore–even if the value of doing so far exceeds their personal monetary compensation.

The impulse to exploit an opportunity is ever-present and part of human nature. But humans also recognize that delayed gratification, service to others, and performing duties that benefit a community at large are also crucial to the progress of society. We invest in our collective future. We provide opportunities for others, expecting that in turn they, too, will provide opportunities. The discoveries of research also participate in this effort, and those that choose to accept public funding also accept the public trust that comes with that support for their work. The public covenant of the IPA reflects this trust and provides for the enforcement of practices when it is apparent that private administration of patents on inventions made with federal support does not live up to this trust.

Anyone is free to pursue research for private gain, to enjoy the benefits of legal monopolies for any and all financial advantage that may be had. This federal research support is not for such purposes. It is not provided as a subsidy for personal, institutional, or corporate profit-seeking, even if profit-seeking is a perfectly acceptable endeavor that may have its own benefits to society. If a university patent administrator does not understand this public covenant, the university is not fit to receive federal support for research.

Thus, in providing funds to universities in support of research proposed by faculty investigators, the IPA places conditions on the administration of inventions made with federal support to ensure that a public covenant runs with each patent and that all involved–inventors, universities, invention management organizations, companies–keep the primary objectives firmly in their practices, that for these inventions they are all free riders and they serve the public interest in the work they do. In return, the public allows them a reasonable return for their services, even if that return is not so great as the opportunity otherwise would afford.

That is the public covenant bargain of the IPA. If it is unacceptable, find your research support elsewhere. If it can be improved, any reasonable proposal will be considered–but the burden is on you to demonstrate it.

The IPA, then, implements this narrative. This not quite the narrative of the 1963 Kennedy statement of government patent policy–rather, it is one that implements the COGR memorandum on the Kennedy policy within a contracting framework permitted by the Kennedy statement. And, of course, I have embellished the narrative with examples in an effort to put imaginative edge and meaningful substance to habitual abstractions that once had active meanings.

As with any document translated into rules or legally enforceable promises, the IPA narrative is necessarily over-determined (and thus demanding more than it requires, or with less flexibility than is necessary) or under-determined (and thus easily circumvented by someone wishing to cheat or take short cuts or exploit the trust of others). It is no sacred text; it is pragmatic text, made within a framework of other pragmatic texts. Whenever there are rules, there are people–call them pragmatists–who recognize the necessarily pragmatic nature of the writings that guide their practices and explore the rules for the best interpretations of those texts that achieve their goals. Both the goals and the methods then are in play. There are other people–let’s call them authoritarians–who demand that rules be followed as narrowly and literally as suits their own exploitation of power and sense of identity. And there are yet other people–sneaks–who figure out how to game the rules for their own benefit, the purposes of the rules be damned so long as one gains and doesn’t get caught. These practices might also be called the simple model of rational crime. If the rules are badly written or their administration is dominated by authoritarians who exploit the rules for their own power, then sneaks might also be conveniently confused for reformers, rebels, innovators, or activists. If, however, the rules are decent and their administration is wise, then the sneaks are merely frauds, defectors, traitors with happy, self-serving rationalizations about self-interest and right and wrong (“it’s not really wrong, everyone does it, the borg deserves it, they cheat me so this is payback, the only victims are the wealthy, they have insurance”…).

An IPA cannot begin to defend itself from authoritarians and sneaks, or especially from the worst case of all–the authoritarian sneak. Vannevar Bush had no ready answer. He argued that a free society had to depend on confidence in the integrity of people rather than create a fear that cowered people into compliance. Machiavelli argued that fear was the better tool for the despot, er, the prince. A people can decide not to love much easier than they can decide not to fear. For the administrator with a “hardened conscience,” compliance is much preferred over trust. Sanctions are better than incentives. Control is better than freedom. Yet for what Bush was proposing–government funding of research to expand scientific frontiers and prepare those frontiers for possible public benefit, often in ways that no one on the frontier could anticipate–a distance from institutional control, yet with access to institutional-scale resources–was crucial, if not the crucial part of his vision.

Stuart Kauffman proposes that life exists “in the ordered domain, on the edge of chaos.” It may well be that some frontier research is productive when it goes “into chaos, with the help of an ordered domain.” But if those in that helpful ordered domain try to seal off every new opportunity and attempt to profit from that sealing off, claiming what’s good for the institution is good for society, then Bush’s vision of frontier research is perverted into an exercise in predatory exploitation rather than one that creates public access. It may be that there’s an argument that opportunistic predatory exploitation of monopolies on discovery is the proper role for university bureaucrats, and that everything else is “seductive lies” about values and integrity and common good.

The IPA does not make an argument for opportunistic predatory exploitation. It makes one for a public covenant, for a basic integrity of the explorer or first responder supported with public resources, where the potential for mediocrity and grandiose schemes is great, and without diligence–and trust–resources and discoveries alike can be turned to private monopolies for private profit without any commensurate public benefit. The IPA acknowledges a role for private monopolies built around publicly supported research, but that role is very limited and those involved are expected to give up profits in favor of public opportunity. And that goes for everyone involved–inventors, universities, invention management organizations, and companies.

It may be that it’s not possible to fund research at this scale and sweep back the greed of the middlemen. David Teece, in “Profiting from Technological Innovation” argues that imitators and infrastructure both seek to claim increasingly greater shares of the benefits created by innovators. Teece’s interest is in how innovators might defend against suchteecepieencroachment. From the perspective of the Kennedy patent statement, the government’s primary goal is to provide customers–the public–with broad access to inventions arising from federally supported research while recognizing that inventors and companies need stimulation and recognition of equities, respectively. The companies in Kennedy’s statement become the “innovators” in Teece’s development. Universities show up as “suppliers”–of patent rights that run with the inventions that the innovators make use of to develop their new products. Again, from the Kennedy patent statement perspective, the preference is to allow all companies access unless there is an equitable or public policy reason to permit the exploitation of a patent monopoly. The effort of the university pitch for the IPA is to align the university as a supplier of a monopoly right that gives an advantage to a single “innovator” company, with the university sharing in the profits from this arrangement. The IPA, following the Kennedy patent statement makes a show of pushing back–making non-exclusive the default but allowing a range of exceptions while restricting the term of exclusive licenses but allowing exceptions to the exclusive license term limits as well.

Certainly there is a question whether in all cases we are better served with a single innovator staving off imitators or whether competition from the start is “healthy” as the Kennedy patent statement puts it. And if there’s a single innovator, is there any purpose served in having it drag along a university as the supplier of the patent license? Representative Kastenmeier, in the hearings leading up to Bayh-Dole, put that question to Howard Bremer (as quoted in an article by Rebecca Eisenberg):


In other words, Bremer argues for allowing universities to obtain rights first because transfer of patent rights directly to large companies is contentious. That much was true. And the strategy did work–Congress passed Bayh-Dole to enable universities and small businesses to retain patent rights they acquired in subject inventions. And a few years later, President Reagan extended the law to large companies as well by executive order, without a vote in Congress. But companies and universities stand in starkly different relationships to federal funding. Companies are positioned to directly commercializing inventions, while universities function principally as middlemen–as brokers for rights.

It is difficult to believe that Bremer actually means to agree that direct transfer of rights to industry without university intervention is the more beneficial. Perhaps “philosophically” covers more ground than we might imagine.

In a statement to a Senate subcommittee in 1978, Bremer makes it clear that Bayh-Dole is to be a law of middlemen. Describing the “technology transfer process,” Bremer argues there must be inventions, patents, and middlemen for there to be innovation:


It’s a view of innovation that a patent broker could fall in love with. There is no basis for the “must.” Inventors recognize their inventions as patentable–indeed, that is a criteria of patentability in federal patent law. And there’s no need for an inventor to use a “middleman”–he or she can work directly with a company or may be happy to assign rights to the federal government. And even if middlemen are desirable in some odd sense, there’s nothing in that “must” that requires an inventor to work with the university that happens to host the federal grant (and which under Bayh-Dole does not have to have an approved patent policy or any capability whatsoever to manage patents) or an invention management agent imposed by the university. If there is to be a “middleman” agent why should university bureaucrats have any special position to choose it? What do they gain except the opportunity to claim a financial stake in any invention, prevent or delay access to the invention while they fuss with trying to create a monopoly, and when they do find a willing monopolist partner, they impose pages of restrictions to “protect” the university, not the public. If a university cannot find a monopolist partner, and later industry adopts the invention anyway, universities feel at liberty to sue to stop the use when their property rights in subject inventions should be exhausted–by time, by laches, by emergent practical application. In the federal public covenant, use = success. Bayh-Dole–at least in its faux version–settles for cash and 1 commercial product in 1,000 inventions.

The IPA system depended on the existence of a university public patent covenant that tracked the Kennedy patent statement but required additional restrictions in order to provide for the government to allow universities to acquire ownership of patents on federally funded inventions before any invention had been made and even before any particular research contract had been awarded. The IPA was therefore conservative in its apparatus, but provided a pathway to securing ownership of inventions that relied on the government’s claim to ownership of subject inventions, which passed under the IPA to universities when they chose to patent a subject invention, and which also was then subject to the public covenant of the IPA.

In the IPA version of the public covenant, universities choose inventions to patent only when they can achieve practical application within three years of a patent issuing and grant exclusive licenses for no more than eight years–and for shorter times if commercial use happens more quickly. The burden is on the universities to justify their monopoly positions or give them up, their assignees or exclusive licensees included. There is, then, a narrow window in which to exploit a monopoly to “commercialize” inventions for significant financial return. Otherwise, stuff is to be made open. The IPA created, as it were, a new form of patent property–one in which the government had a substantial interest and the owner of the patent was left with a greatly reduced practice to exploit.

The work of the Bayh-Dole Act was to unwind the IPA public covenant while appearing to replace an awkward apparatus with a more efficient one that retained the same protections. Bayh-Dole instead replaced a flexible policy that focused on building a common platform of new technology while respecting company commercial positions and allowing for special situations in federal contracting with an inflexible (“uniform” now meaning “arbitrary” rather than “consistent”) law that restricts the public objectives behind federal contracting for research in favor of “middlemen” and speculative monopolies, gutting public oversight and the IPA public covenant in the process. Under Bayh-Dole, commercialization–exploitation of monopoly patent rights for profit–becomes a virtue of the explorer or first responder, and the university receives the opportunity of dividing monopoly profits with speculators and commercializers.



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