In 1963, President Kennedy created a government-wide federal policy to address when and how federal agencies might consider allowing patent rights to remain with a contractor–any contractor, not just universities, and under any contract–not just procurement but also grants-in-aid or subventions. From a federal public interest point of view, one might see that there is not so much difference between federal contract and grant if the concern is how the public interest is served by monopolies placed in private hands.
The Kennedy patent policy identified four conditions under which federal agencies should take title to inventions made with federal support, one condition under which federal agencies should allow a contractor to retain title, and a case in which a contractor lacked the capability or business position to justify allowing ownership but other factors might permit an agency to release its claim on patent rights–if doing so appeared to be in the public interest. The policy also allowed agencies to permit contractors to have greater rights than otherwise expected, subject to specific restrictions.
The four conditions where the government should take title are when funding:
(i) is to create products for public use or
(ii) directly concerns public health or welfare or
(iii) is in an area funded primarily by the government and a patent would give the contractor a dominant position or
(iv)) is to operate a government-owned facility or coordinate work of others.
The policy provides that there may be exceptions to the expectation that the government will require delivery of title to inventions in these categories. There are two alternatives. The first has to do with arrangements made at the time of contracting and the second has to do with handling inventions after they have been made. Upfront, an agency may allow a contractor to acquire title (or greater than non-exclusive rights)
(i) in exceptional circumstances and
(ii) where the head of agency certifies such action will “best serve the public interest.”
We will get to this part about the public interest soon enough. Otherwise, once an invention has been made, an agency may release its claim to title and allow a contractor to acquire a “greater interest” if
(i) the invention is not a “primary object of the contract” and
(ii) the acquisition is consistent with the policy and
(iii) is “a necessary incentive to call forth risk capital and expense to bring the invention to the point of practical application.”
A federal agency determines upfront–as a director-level decision–that it is in the public interest to allow a contractor to manage patent rights even when the federal funding is to create a product for public use or directly concerns public health or welfare, and the like. Or, after the fact, if an invention is made but does not affect the purpose of the contract. For instance, an invention that does not involve the product that was being made, or does not directly affect public health, although made under a contract with the purpose of directly affecting public health. Either the contract as a whole permits a contractor to acquire greater than non-exclusive rights (which is what the contractor would obtain from the federal patent commons, for instance), or in a contract that otherwise would not allow for a contractor to manage patent rights, agencies are authorized to permit such management if the invention isn’t central to the contract. Stuff done on the side–let it go, with restrictions.
The restrictions have to do with consistency with the patent policy (and its basic considerations, which we will also get to soon) and–especially–the contractor’s administration is necessary “to call forth risk capital” to develop an invention “to the point of practical application.”
For “to the point of practical application” we have:
(i) use of an invention
(ii) that can establish that
(iii) the invention is being worked and
(iv) its benefits are reasonably accessible to the public.
Not secret use, not handwaving claims of use or potential for use–the use has to be established so it is clear that the invention is being used–not something like the invention, but the invention itself, and not just that patent rights are being used–not licensing, not infringement lawsuits–but actual, demonstrable use of the invention. And the working requirement here is not just that there are benefits to the patent owner or to a licensee–there have to be benefits that are “reasonably accessible” to the public. Much rides on what is “reasonable” here. It would be a difficult argument to make that “reasonable” here means “whatever is reasonable to a patent owner or a monopoly interest pursuing its own self-interest.” An easier argument would be that “reasonably accessible” means that anyone exercising some diligence should be able to obtain a benefit and that a company does not restrict access (discriminating, playing favorites, pooling inventions) nor charge outrageous prices (relying on a monopoly position to do so, playing to the wealthy).
The one case in which the federal government should not demand title is when funding:
(i) builds on existing knowledge
(ii) for use by the government and
(iii) the contractor has technical competence and
(iv) has an established commercial position
For this case, the government should be content with a non-exclusive license for government purposes. Clearly, this won’t be the case under which anyone at a university is permitted to “retain” rights to a patentable invention. In the five situations we have just outlined from the Kennedy patent policy, the principal expectation is that the federal government should acquire title to inventions that arise with its funding and place these inventions for public use–through the public domain or through the use of the patent system. But the federal government’s use of the patent system is dictated by public interest, not by self-interest, and so does not concern money-making.
The reasons for the use of patents has, for the federal government, to be something other than making money for the government. Thus, the rationale to patent has to be something other than making money, and the rationale to offer exclusive licenses has to be something other than making money–and so too for the terms of any exclusive license. The underlying premise in all of this is that the patent system can be used for purposes other than making money for a patent owner. This is a huge intellectual leap for some people to make. But there it is. When we hit this bit in Bayh-Dole, the gulf stares us down (35 USC 200):
It is the policy and objective of the Congress to use the patent system to promote the utilization of inventions arising from federally supported research or development
This statement applies to all inventions made in federally supported research, regardless of who owns patent rights in these inventions. There is no active agent–the law doesn’t state that the objective of the Congress is for inventors to use the patent system or for universities to use the patent system or small businesses to use the patent system or patent brokers to use the patent system. The active agent is removed–all we have is a statement of policy placed in federal patent law, where it has statutory consequences, not merely to be read as “for your information, in case you were interested, here is a rationalization of what is to follow.”
The law restricts the use of the patent system to “promote the utilization of inventions” and not to other purposes. Now, if there were no other purposes, then there would be no meaning in the objective. Same if there were other purposes and the law here was just being illustrative in case folks had no clue whatsoever about what the patent system was for. What, then, might some other purposes of using the patent system be? Nonuse would be one such purpose–preventing others from using an invention. A patent owner can exclude all others from making and using an invention, and not make and use that invention either. Bayh-Dole makes it not possible for the owner of a patent on a subject invention to use the patent system to prevent the use of a subject invention. Sale may be a different thing, but the statement here is clear about use. Abuse of the patent system might be another–using a monopoly position to force others to give up on competing work (such as research) or charging prices so high that only the wealthy and desperate can afford the benefits of the invention. And we might throw in another other purpose–not developing a product but trolling everyone else who was trying to develop product and make them pay for their use. Such trolling would not in any way “promote the utilization of inventions”–it merely taxes that use. There is no promotion whatsoever in such dealings.
Now we come to the one remaining case in the Kennedy patent policy, where it’s not clear that a contractor meets the conditions for release of the government’s interest in federally supported inventions. In such cases, the federal agency should do what it “deems” to be “most likely to serve the public interest as expressed in this policy statement.”
Let’s look then at the concerns expressed in the policy statement. The statement seven “basic considerations,” of which two directly address “the public interest.” Here’s my paraphrase:
A. The government spends lots of money on research
B. Resulting inventions are a “valuable national resource”
C. Use of these inventions should
(i) stimulate inventors
(ii) meet the needs of government
(iii) recognize the equities of the contractor
(iv) serve the public interest
D. The public interest requires that efforts must be made to encourage expeditious development and civilian use, balancing incentives with competition
E. The public interest also includes sharing benefits with foreign countries
F. Foreign patent rights are becoming important to both US industry and government
G. There is a need for
(i) government-wide policy on disposition of inventions
(ii) reflecting common principles and objectives
(iii) consistent with the missions of federal agencies and
(iv) recognizing the need for flexibility in special situations
Paragraph D is the primary statement of public interest. Let’s look at it more closely:
The starting point is the placement of the public interest in a “dynamic and efficient economy.” This is a puzzle in contrasts. An economy that’s dynamic has room for all sorts of things that are not efficient. Efficiency comes about when folks know what they are doing and don’t want to bother with other things. Perhaps what’s meant is something more along the lines of “changing and not wasteful.” For both of these conditions, however, we have a mandate to “encourage the expeditious development and civilian use” of federally supported inventions. Inventions should not be left undeveloped, should not be developed only for government use, and if development is to be done, ’twere well that it were done quickly. That is, a “dynamic” economy is one that can take up new inventions and an “efficient” one doesn’t dwaddle around about it.
Then we get a second puzzle in contrasts: “the need for incentives to draw forth private initiatives” is contrasted with the “need to promote a healthy competition in industry.” Government cannot merely create private monopolies–that would not promote healthy competition. But what is a patent but a grant of a private monopoly? There are a variety of ways one can go in teasing out this puzzle. One would be to allow some inventions to form monopolies while others are made broadly available. Another would be to distinguishing making and use from selling. A third would be to limit the term of the monopoly. The Kennedy patent policy takes the first and third of these concerns. If a contractor has a demonstrated capability and established commercial position, then let the contractor run with a patent. But in any case, substantially limit the term of the monopoly.
The Kennedy patent policy also calls out another concern of public interest–sharing benefits of inventions with other countries. This is something that is ignored by Bayh-Dole and by university management of inventions–other than at a few universities, such as Carole Mimura’s efforts at UC Berkeley to promote socially responsible licensing. It is boggling how most universities fail to establish clear purposes with regard to providing the benefits of inventions under their management–whether federally supported or not–for the use in other countries. Institutional self-interest as imagined by administrators with hardened consciences doesn’t much allow for such forms of public interest.
Now we can consider this fifth case, the ambiguous case when a contractor doesn’t have both capability and commercial position. That would be the university case. In deciding what would be “most likely to serve the public interest,” federal agencies are instructed to take “particularly into account the intentions of the contractor to bring the invention to the point of commercial application.” The use of “commercial” here is interesting, because the Kennedy patent policy has a definition for “to the point of practical application” but nothing for commercial application.
The Kennedy patent policy provides, further, that an agency may “prescribe by regulation special situations where the public interest in the availability of the inventions would best be served by permitting the contractor to acquire at the time of contracting greater rights than a non-exclusive license.” That is, an agency can make uniform its practice of permitting a contractor to acquire greater rights at the time of contracting.