Bayh-Dole and the Keys to the Gates of Heaven, Part 2

There are plenty of people who have not adopted the usual narrative regarding Bayh-Dole. They may not have heard of Bayh-Dole, and they might not know much about university research, other than that there sure seems to be a lot of it, and something ought to come of it that benefits us folk generally. And there are science policy experts who ought to be disciplined enough to stand apart from service to the status quo and question the usual narrative, if only to present alternatives and show the possibilities of choice. To some extent, that is what is happening with the present flurry of statements denouncing Vannevar Bush’s ideas about the role of “basic” research. My dispute with the pundits is not that Bush was infallible, but rather that they are getting wrong what he was trying to get at–and thus, their attacks tend to preserve the status quo rather than show an alternative to it–and one of those alternatives is what Bush proposed and did not see happen.

The important thing about science policy in a democracy is that it is a matter of public choice. This consternates some people who want science policy to be the domain of elites, or at least scientists, especially when it comes to the uses of science–the technology–which Feynman describes as one of three popular accounts of science (the other two are the methods of science and the knowledge produced by science). The problems of the use of science–of technology arising from the work of science–are not quite themselves science:

I think that to say these are scientific problems is an exaggeration. They are far more humanitarian problems. The fact that how to work the power is clear, but how to control it is not, is something not so scientific and is not something that the scientist knows so much about.

And thus, we find space for arguments that the scientist doesn’t know about patents, and patents control the use of science, and therefore it is fitting and expectable that others, not scientists, ought to take up how scientific discoveries (and inventions) might be developed for beneficial use–something that companies, for instance, might know how to do. The reasoning then goes, who ought to select the companies to develop the power discovered by scientists for beneficial public use? And how will those companies be motivated to develop these new things? Ah, patent brokers working with university administrators to secure patents and use the profit motive that may attach to patent monopolies to give companies (meaning, company executives and shareholders) the incentives they need to “invest.”

Again, this narrative sounds pretty good, reasoned even. A few confirming facts and it’s true in its essence and anything that might count against it is defective, extraneous, noise at the edges. Yet, there are other narratives, and there are other choices, and others that might be involved. For instance, it is common that those with technological expertise are more willing to adopt something new than are company executives handling money. Geoffrey Moore makes this differential adoption the central feature of “crossing the chasm.” The chasm is itself the gulf between early adopters and a mainstream market populated by conservative buyers–buyers who want a choice (not a monopoly) and want to choose the strongest supplier (or make that supplier the strongest, to justify their choice and to reduce the risk, get the best service, and perhaps to get the most favorable price).

Moore’s chasm is distinctly different from the “funding gap” that university administrators and patent brokers talk about. That “funding gap” has to do with the funding to discover and a second round of funding to create a commercial product–funding that typically these days does not come from the government or foundations. Moore’s chasm, by contrast, is about a change in adoption and use patterns. Visionaries and technologists, argues Moore, adopt because they want to mess around with new technology. They need no profit motive, they don’t care directly about ROIs. They adopt to acquire new capability, like engineers do, like scientists do, like hobbyists do. They can implement any new technology they have the capability for, for their own uses and even for their companies’ use–without ever worrying commercial product.

In Four Steps to the Epiphany, Steven Blank argues that for technology startups not embedded in major corporations, the challenge is not to find the money-bags conservative buyer of infrastructure technology, but to find the earlyvangelist customer, the savvy customer who already recognizes the problem, has messed around with solutions, and sees that your solution is better than anything else that’s been tried. The earlyvangelist will acquire your solution before you have finished the product. The earlyvangelist is Moore’s version of “visionaries and technologists.” Geeks acquire, Moneybags buy.

Moore’s account of the chasm also differs from the “funding gap” in another significant way. To cross the chasm, argues Moore, one has to appeal to conservative buyers, ones beyond the “early adopter” market–in the “early majority”–that is, pragmatists rather than geeks.  Get the pragmatists to adopt, and the conservative middle will follow like lemmings. For the pragmatists, Moore argues that monopoly is not one’s best bet. The pragmatist buys faster with choice. The pragmatist does not want to be stuck with a sole source, one that can ramp up prices on improvements and services once the base product has been adopted. A patent monopoly might sound good to some investors or executives, but having a competing source sounds really good to pragmatist buyers. The challenge, then, as proposed by Moore, is to create competition–but be clearly the stronger choice. The pragmatists will then make you even stronger.

The “funding gap” argument, however, drives toward the claim that the way to move “through the valley of death” is to patent an invention and offer exclusive rights (i.e., create a private monopoly) to induce a single company to fund where the original sponsor (often, now, the federal government) has left off. What the patent brokers won’t acknowledge, however, is that the “valley of death” is itself a creation of the monopoly licensing model. But for a patent dedicated to a future exclusive license with a company motivated by a monopoly position, visionaries and technologies would in all likelihood adopt the new discovery or invention. But they won’t do that if they are excluded by a patent claim (or if they do, they do it covertly, to design around or to be ready if the patent doesn’t issue, or botches its claims, or they file applications for improvement patents that block the original invention down interesting lines of development and wait for the eventual standoff by which they twist rights free with a cross-license). That is, the “funding gap” approach stifles adoption by visionaries and technologies, who frequently adopt without a profit motive and don’t need to spend the money to develop a commercial product version, don’t care about a money-making “market” for the invention. They derive their benefit from use, not from sales.

One might see, then, why commercialization rates under Bayh-Dole are so abysmally low–0.5% or worse. Monopoly treatment at the earliest stage puts off early adopters who then seek alternatives–they find ways not to use the discovery in its patented form. They design around, they isolate, they reverse exclude. The “funding gap” approach aims to by-pass the early adopters and speculate that an early majority will buy a new product from a monopoly vendor. In pharma, at least, this appears possible, because the government certifies the product (after extensive and expensive testing, because all that testing is done by a single company) and the government then becomes a major payor for the resulting drugs, which are acquired by doctors who make decisions not on behalf of their own companies, but on behalf of their liability to patients–and picking a government-approved thing appears pretty safe. It’s a weird market all around, but there it is. The issue is whether this same strategy works with any other market–or, as the premise behind the usual narrative regarding Bayh-Dole claims, for all inventions in all markets. The answer here must be that it does not. But that can’t unseat the usual narrative at this point. Reason nor evidence are not sufficient to make a voluntary change.

The “funding gap” arises not as a matter of the natural history of technology change but as the result of enforcing monopolies on discoveries before they can reach early adopters. The “funding gap” is deepened further by the refusal of universities to grant FRAND licenses for use. The best most universities will do is a non-exclusive license for educational and research use only at other universities. Not any such use in other nonprofit settings, and most certainly no such use in companies, and absolutely no use that would be routine, for other than research purposes. In essence, the “funding gap” model requires–depends on–the creation of a funding gap, denying access to early adopters, denying the collective investment in exploring and varying and improving a new discovery, and thereby driving up the cost for any one company, as a monopolist, to create a product that can jump directly to the early majority–that is, to a big, sure market without allowing early adoption.

So you see slides with the “funding gap” and the “valley of death.”  And these slides are true, in their way–but only once one has already adopted the approach that produces them. The appeal for ways to “cross” this “valley of death” does not point out that the death was created by the approach itself. The demand that governments (state if not federal) fix the problem is an appeal to save the approach itself from a criticism that would greatly limit its application. The system might come crashing down and all folks would be left with was a narrow set of special cases such as pharma where the market is so disrupted by regulation that it exists only for big company monopolies.

That is, pharma is a special case, an exceptional circumstance. And here’s where the public policy debate ought to be. Focus here, not on innovation generally or monopolies generally and the wonders of the patent system generally. Focus down. Should the federal government be in the business of creating private monopolies set up to exploit human suffering or other such public welfare? Do we make a capital-seeking industry out of helping the poor or those in poor health? Even if there are business opportunities to do so, should we give those opportunities special status under the law, or should we compete with capitalist speculators–you know, like we do with education, say. Is exploitation of suffering for profit the opportunity for speculative capital that we, as a society, want our public money to go to? We might say no, even in the face of data that sometimes speculative capital does produce a beneficial product. We might even go so far to wonder whether the same beneficial product would have come about without the involvement of such speculative capital, or perhaps a different beneficial product would have been created had there been more sharing of early characterization, variation, and adaptation of the original compound rather than sealing everything up in a monopoly for the entire 20 years of the patent. That’s a discussion for us, not for just for elites, and especially not for patent brokers to lead or decide.

Even, then, in pharma, where the argument for success is grounded, we might decide that especially here the usual narrative presents an inappropriate choice. We might decide that we would rather go without, or pay even higher prices, and perhaps get more innovation faster, if we removed the speculative profit motive from creating monopolies on compounds that might have (in some variation, in some combination, in some dosage or formulation or method of delivery, for some particular condition) a beneficial biological effect. But we won’t have the possibility of that choice unless we challenge the usual narrative. There are good reasons for the challenge–in history (different narratives support other pathways to innovation, even for drugs), in reasoning (based on the methods available now, and whether drugs should have such primacy in the treatment of human disease and injury. After all, the profit sweet spot for drugs is making acute conditions chronic, not prevention and not cure, and little attention at all if the disease is rare or even if common, not acute.

Pharma was ground zero for Bayh-Dole. Bayh-Dole has been made to appear as a reform of federal patent policy for research inventions generally. But it is really a law to give patent brokers business dishing patent rights from universities to drug companies. Everything else is people trying to figure out how to practice using that same model (since the patent administrators who engineered the work around to federal policy then embarked on a campaign to get universities to change their patent polices to “comply” with Bayh-Dole–it was nonsense, but it worked). It was exactly here that HEW disagreed–that it was not in the public interest for HEW funds to assist in the creation of private monopolies set up to speculate on public health. There were other ways to develop drugs, if drugs were the thing at all. That was, and still is, a legitimate thing to discuss. Bayh-Dole removed the Surgeon General from the discussion and made it the law of the land that university patent administrators could appropriate from inventors whatever they wanted and pass control of these inventions to profit-seeking companies, and this practice would be considered “uniformly” to be “in the public interest.”

Well, Bayh-Dole doesn’t actually mandate such behavior, and in fact it restricts that behavior. But the usual narrative does not acknowledge these things in the law and folks went to some lengths to preclude public accountability or federal oversight of the practices university administrators and their patent brokers might engage in. All that mattered was that there were “success stories” in the present and a usual narrative, repeated until believed true (even by those repeating it), that before Bayh-Dole, all was darkness cause by government bureaucracy. Bayh-Dole doesn’t require private monopolies. And it does limit the scope of property rights in subject inventions. But for practice to change, given there’s no mechanism to enforce the law, university administrators must have the courage to take a public policy position that runs against the usual narrative, against the apparent “success” of Bayh-Dole, against the claim that nothing worked before Bayh-Dole or could now possibly work as well as Bayh-Dole.

I know from my own experience in licensing IP that monopoly practices have their place, and for many research discoveries, it is a small place and a place that shows up much later than the initial discovery. Creating private speculative patent monopolies early and often is no way to construct a “uniform” patent policy, not for the federal government, not for universities, not for inventors, and not for industry.

Richard Feynman goes to a Buddhist temple in Hawaii. There

a man said, “I am going to tell you something that you will never forget.” And he said, “To every man is given the key to the gates of heaven. The same key opens the gates of hell.”

Feynman compares that idea to science, which may do much the same thing. What we discover may be used for good or for evil. The decision itself what we do is not science. In the 1960s, however, back at the time of the Kennedy patent policy (advocating for flexibility, consideration of the public interest, and recognition of contractor equity (where the contractor made investments, had the capability to develop, and a commercial position in doing so)), the discussion was about how science should be used. No one doubted the uses were all around us.

Now, some fifty years later, the discussion is about how to induce any sort of innovation from scientific research at all. There’s been on the order of a trillion dollars of public money invested in university research in those fifty years. For much of it, the IPA system, and then Bayh-Dole, has dominated university research. And we have seen an increase in the metrics of monopoly–patents acquired (early and often), exclusive licenses signed (excluding all early adoption and local use), and for 99.5% of such inventions, no commercial product at all–just 20 years of excluding all use, creating the necessity of not using, of finding alternatives. Bayh-Dole gave patent brokers the gates of heaven. But it appears they found that the keys opened other gates as well–the gates of speculative monopoly patent licensing. The question that remains is whether they should continue to have such keys for federal funded inventions, and if so, who checks their work?

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