LES undermines Bayh-Dole for Congressional staffers

Brian P. O’Shaughnessy, the president of LES, has a little puff piece out purporting to defend Bayh-Dole–“Why Bayh-Dole?” In the piece, O’Shaughnessy sets up a straw man argument about open innovation and anti-patent advocacy and then strings together more logical fallacies about Bayh-Dole to, as one commentator has put it, “deftly refute” any contention that Bayh-Dole isn’t a good law.

It’s a bad sign when the leading advocates for a position can’t read the law they so admire, can’t cite evidence, and can’t work with higher order thinking such as basic reasoning. I know, I know–they think it’s all politics, and lying, bluffing, and bullshitting is all to be expected. There is a method to O’Shaughnessy’s madness. But it is madness.

Let’s take this thing apart and see what it has been eating recently. Half-digested nonsense, mostly, along with some dangerous toxins.

O’Shaughnessy is in bold:

“nascent technologies rarely find their way to market without incentives”

Under Bayh-Dole, nascent technologies even more rarely find their way to market. The university commercialization rate is under 0.5%, 1/10th of the federal rate before Bayh-Dole. A technology is not an invention but rather a collection of materials and methods. Bayh-Dole prevents these collections from forming, fragments rights across universities, which then cannot find a way to collaborate to put the fragments back together.

But the construction here is nonsense anyway. Technologies don’t “find their way” anywhere. They don’t respond to incentives. They aren’t sentient. O’Shaughnessy wants you to read this statement to be along the lines “inventors need incentives” or “those developing inventions need incentives.” But what he actually means–and this becomes apparent as we get into this–is that university administrators need monetary incentives to take inventions from inventors and try to license them to monopolist speculators. That’s a really difficult proposition. Most monopolist speculators don’t like to share. Most university administrators aren’t that good at finding markets. Inventors divorced from their inventions at birth by decree of the state doesn’t make for a good outlook. It’s a trash proposition, but it’s hard to see it in the abstract, where the “incentives” are detached from any particular agent that might need incentives. What sort of agent would that be, who needs incentives to bring something to market, and isn’t the inventor?

“To encourage individuals to tread that path, there must be the prospect of reward.”

This is not true when it comes to science or health care. People care for the sick and injured without incentives from the government and without the prospect of reward. People develop scientific instruments and software without the prospect of reward. It’s just that corporate folks might need incentives to displace those who don’t need incentives. We might quibble about reward–that nothing good happens unless someone has a reward in mind, if only a will to power. But there’s a huge difference between an incentive introduced by government and a personal motivation. See Michael L. Michael or Micheal J. Sandel, among any others. Money vs. “the pleasure of finding things out,” as Richard Feynman put it. Perhaps we’d have better “basic” science if more scientists were motivated by the pleasure of finding things out, of being recognized for contributions, of being sought out for assistance and fewer scientists were in it only for the money.

Bayh-Dole is a law of perverse incentives. Take people working at universities, having made a decision to pursue science for discovery without the constraints of commercial focus, and try to force on them financial incentives to publish or assist others or to develop what they have invented. If folks revising Bayh-Dole wanted to do something useful in the way of incentives, they would do what Vannever Bush recommended: forbid federal agencies from claiming ownership of federally supported inventions for basic science (they get a non-exclusive license) and do one more thing to address a problem that Vannevar Bush did not anticipate: forbid the organizations that host federally supported research for basic science from having any ownership claim on any inventions that result–not by employment or by appointment, not by use of resources, not by participation in federally supported projects, not arising from “auspices” and not because in an area of one’s field of expertise. Not an ownership interest. Not a financial interest. Not a right to approve transactions. Nada.

The makings for this approach are already in Bayh-Dole’s standard patent rights clause. First, there’s the requirement on subcontracts–the host university is forbidden to have any claim on inventions made by a subcontractor. Second, there’s the flow down requirement–the host university must require potential inventors to make a written agreement to protect the government’s interest, just as subcontractors must. That written agreement makes potential inventors parties to the funding agreement–contractors! And the implementing regulations recognize this. If an inventor retains ownership of their invention, then federal agencies are to treat them as small business contractors, but with fewer restrictions than small business contractors.

The greatest freedom in Bayh-Dole–the greatest incentive to use the patent system at all–is buried in 35 USC 202(d), 37 CFR 401.14(a)(g), 37 CFR 401.14(a)(f)(2), 37 CFR 401.9. Put them together and you have the makings of a law with the fundamental incentives for inventors working in basic science–free of claims from every predator who would take patent rights if they could. That would be a great start. Bayh-Dole almost got there. It may even have got there entirely–but folks like Bremer and Allen made sure that Bayh-Dole appeared to vest title with universities instead. It doesn’t. There is a read of the law that puts subject inventions squarely in the hands of inventors. The Supreme Court followed that reading. But universities have conspired to prevent inventors from having the benefit of the patent system (and any other system available to them). The “incentives” that O’Shaughnessy refers to are imposed “incentives”–a share of royalties, but only if a university licenses the invention, and that’s unlikely and in any event, for most universities, it’s a minority share and by rule (at most state universities) inventors cannot attempt to influence university management decisions (it would be a conflict of interest to do so–ha!).

“John Locke proposed that one may take title to property by virtue of the labor one invests in turning it to productive use.”

Too funny! Here’s Locke, in his chapter on “Property” in the Second Treatise of Government:

Before the Appropriation of Land, he who gathered as much of the wild Fruit, killed, caught, or tamed, as many of the Beasts as he could; he that so employed his Pains about any of the spontaneous Products of Nature, as any way to alter them, from the state which Nature put them in, by placing any of his Labour on them, did thereby acquire a Property  in them: But if they perished, in his Possession, without their use; if the Fruits rotted, or the Venison putrified, before he could spend it, he offended against the common Law of Nature, and was liable to be punished; he invaded his Neighbour’s share, for he had no Right, farther than his Use called for any of them, and they might serve to afford him Conveniencies of Life.

Locke makes an argument for individual labor creating a property right in what the labor produces. The productive use is to meet the needs of one’s life. Anything in excess that is wasted, Locke argues, is a crime against common law. Thus, the introduction of money to allow others to use what one has created with one’s own effort. From this little story, we can look at university practice under Bayh-Dole.

The government supports individuals, using universities to manage the money and agreement formalities. The government compensates the universities for salary, expenses, and overhead. Universities release their personnel to work on federally funded projects. The results of the labor are those of the individuals. If there’s a discussion about who should own inventions, it ought to be between the inventors and the government. Universities have no labor in the mix.

Universities have taken all inventions–not just patentable inventions but inventions lacking any theory of IP ownership. They take all, though they have done none of the work. They take more than they need, and most of what they take rots. University administrators–and patent brokers and licensing executives–offend against the common law. They cannot even sell what they have in excess to others. Most stuff rots the moment their fingers touch it.

Individual ownership is important. That’s Locke’s theory of the origins of property. Government adjudicates disputes over property. But Bayh-Dole makes it out that government should take personal property and hand it to institutions–in many cases, right back to government in the form of state universities. That’s hardly Locke!

“In the absence of organized laws, institutions, and land registries, one acquired title through discovery, notice, and continuous use.”

More funny! Universities don’t use the inventions that they take, for the most part. There’s no continuous use. There’s just a mine field of patents waiting for anyone else to wander across the area previously explored by research. Universities should lose patents on subject inventions at the first maintenance fee due date unless they submit an affidavit that establishes practical application–use with public benefit on reasonable terms. Otherwise, the university has failed, and the patent should revert to its inventors, without formalities, just as copyright law has had a termination right for assignments.

“As James Madison wrote, ‘The public good fully coincides…, with the claims of individuals.'”

Here’s the full quote. Madison is talking about the Constitution’s clause on patents and copyrights:

The copyright of authors has been solemnly adjudged, in Great Britain, to be a right of common law. The right to useful inventions seems with equal reason to belong to the inventors. The public good fully coincides in both cases with the claims of individuals.

We can see Locke’s argument for property and common law in the background. Authors and inventors by the labor produce goods that should be theirs by common law. The federal government provides through copyright and patent then the means to preserve what they have created against the use by others for a limited time.

Note: “the claims of individuals.” But Bayh-Dole asserts the claims of institutions. The priests would have everyone’s souls, on the premise they know more about good souls and bad souls than the souls themselves. This isn’t Madison’s argument. What nerve! citing Madison to defend institutional and government taking of personal property. Bayh-Dole as it is presently practiced is one of the greatest attacks on the patent system we have got. What nerve! If the public coincides with the claims of individuals, then let inventors own their inventions. Bayh-Dole actually permits this outcome–35 USC 202(d); 37 CFR 401.9. But universities prevent this outcome from happening. Anti-Madisons! Anti-patent! Inventor loathing!

“Bayh-Dole advances that premise. “

We enter the Orwellian world in which a law that strips inventors of their rights in favor of universities that didn’t even employ them to invent, using money provided by the federal government into somehow advancing the idea of the “claims of individuals.” Laughable. Sad. Bullshit.

“Just as market-based incentives bring disclosure of inventions out of the shadows of trade secret protection, we likewise bring the fruits of basic research out of the hallowed halls of academia and into commerce by affording exclusive rights, and by making those rights transferrable.”

Move to flowery style. University scientists are not engaged in trade. There is no trade secret protection. Even crappy old Bayh-Dole ignores trade secret protection in attempting to exclude information from FOIA. Basically, here, the argument is that we take the personal property from inventors and sell it as monopolies. But the fallacy is in the word “bring”–this bringing isn’t happening. One in 200 or 1 in 1,000 inventions get “brought into commerce.” No, what the weasel words here mean is that “university administrators sell off patent rights in monopolies to speculators and that’s sufficient.” Not “bring … into commerce” but “sell into slavery.” What a weasel!

“In the innovation ecosystem, there is the phenomenon of the Valley of Death: a stage in the start-up lifecycle where funding evaporates.”

Bayh-Dole monopoly practices create a “valley of death”–with no shepherd for help. Most innovation moves through networked, non-market “ecosystems.” Bayh-Dole stifles this network, prevents inventions from contributing to technology platforms that in turn create the foundation for commercial ventures. Bayh-Dole delays innovation. Bayh-Dole diverts inventions from this ecosystem. Admit it, you watched Madagascar 2. That damn dam is Bayh-Dole. Let’s destroy it and restore the flow of inventions to inventors, to the public domain, to commons, to anything but into the hands of moralizing university administrators in the service of monopoly speculators and patent trolls.

Now, another punch line:

“The Bayh-Dole Act does not eliminate the Valley of Death, but it makes it less wide and deep.”

Monopolies in scientific inventions make funding even more difficult. Almost no one but speculators wants a monopoly in such stuff. Almost no one wants to spend alone to try to assemble from a patent on an invention as technology that might become a commodity product. Even the pharma industry doesn’t like doing this. But especially they don’t want anyone else to show it can be done any other way. Bayh-Dole exists entirely to serve the pharma industry. That’s the origin of the law. That’s what all the cover is for. First the IPA at HEW as an end-run around the Kennedy patent policy. Try to make it government-wide to hide the fact. Blocked by the Senate. So go for Bayh-Dole. Make it government-wide to hide the pharma drivers. Find a test case outside pharma. Expand to small businesses. Make it sound like this is about innovation in general. Cite 28,000 government patents–mostly weapons systems and atomic energy stuff that the contractors passed on patenting–ignore the fact that the IPA system operated for decades, was focused on the special interests of pharma, did almost exclusively exclusive licenses, and had a 4% commercialization rate. The only industry for which nothing much changed was pharma–but for getting rid of government oversight, expanding the term for exclusive licenses (and getting rid of the term altogether four years later). Bayh-Dole is Pharm-Mole.

If we are going to hand the development of therapeutic drugs to monopolists, and treat health care as a gold rush, as O’Shaughnessy suggests, replete with mining claims and money-lust, then let’s create a law specific to monopolies in inventions with therapeutic value. Strip inventors of those rights. But skip the middlemen. Hand the rights directly to companies. Let them bid themselves silly. Who needs “university tech transfer” to do that? We have the frickin’ internet. Uber for therapeutics.

But perhaps we don’t have to live this way. We don’t have to treat health care as a gold rush. We don’t need the mindset more attracted to huge financial incentives than to participate in community, for  a reasonable livelihood. Bayh-Dole, a law to inspire a mania of hysteria around the prospect of making millions from human suffering. Neat. What a society we live in, that values such a thing. But if that’s what it is, then declare it as federal policy and quit hiding it in abstractions that claim this approach must work, as a matter of federal law, for everything.

“By permitting universities to take possession of the exclusive rights inherent in the patent grant, universities can transfer those rights, in whole or in part.  By converting intangible rights into commercial assets, they can be independently monetized, and thus justify investment.”

The Supreme Court ruled that Bayh-Dole does not permit “taking.” O’Shaughnessy hasn’t figure that out yet. But this passage is abstract, ungrammatical babble. Slavery can be described in the same terms. Here O’Shaughnessy is so taken with his own truth he doesn’t need to bother with making sense. Let’s put it out there in plain langauge:

Bayh-Dole permits university administrators strip inventors of their personal property rights and sell off patents to speculators and trolls. They do this because they believe they will make enough money to keep doing this.

Reality: most university licensing operations lose money. They say “investment” when they mean “trying to sell to gamblers.” I ran one of the few that consistently brought in 3x the expenses. We used a range of methods, starting with open and commons. We made millions–because companies wanted us to, because our inventors chose the services we offered.

And now, a love message for patent trolls:

So, we explain that even if our enterprise it were to fail, we retain a valuable asset – a license in the underlying patents.  This enables us to prevent others from expropriating the technology.  Worst case, we monetize the license. 

Let’s put this in plain speak: If we can’t get the company to go, then we have an exclusive patent license we can use to shake down industry. 

This is the fundamental incentive–trolling. And it’s the thing that Bayh-Dole forbids.

  1. Use the patent system to promote use of subject inventions. (35 USC 200)
  2. Practical application is use with public benefits on reasonable terms (35 USC 201(f))
  3. Nonprofits cannot assign subject inventions without including nonprofit requirements. (35 USC 202(c)(7).

But if a startup company has the right to sue for infringement–or to offer licenses–then it must have an ownership interest in the patent, and that means there’s been an assignment. Can’t happen. O’Shaughnessy defies Bayh-Dole with his worst case. “Monetizing the license” means “shaking down for money those that have adopted the invention without the need for the use of the patent system to promote use. The argument here is entirely against the stated objective and requirements of Bayh-Dole. These folks have eaten the brain of Bayh-Dole. Bayh-Dole zombies crying “patents, patents…. ”

The only way that a startup company could legally “monetize” the license is for the university to have breached the standard patent rights clause (and thus, Bayh-Dole), by assigning the patent under the guise of an exclusive license. But then, Bayh-Dole is a do WTF you want law without enforcement or accountability. No wonder LES loves it.

“The Bayh-Dole Act rightly provides those incentives.  But, it can do so only within a robust and reliable patent system.”

The whole premise of Bayh-Dole is a trade of exclusive rights in subject inventions for a limited form of patent and patent practice. Patents on subject inventions are not normal patents. They weren’t under the Kennedy patent policy, and weren’t under the IPA system, and Bayh-Dole is built Frankenstein monster-like out of wording collected from the graves of the Kennedy patent policy and the IPA system. But even a franken law with its later amendments to become more monstrous still shows the basic trade off: limitations on exclusive licensing, on licensing to big corporations, on assignment, on use of royalties. A patent on a subject invention is an abynormal patent. It is not a normal patent. Bayh-Dole is part of federal patent law. Bayh-Dole changes the property right in patents on subject inventions. Bayh-Dole places a public covenant on such patents, limiting their use.

O’Shaughnessy makes it appear that Bayh-Dole patents are ordinary patents. They aren’t. Whatever the problems that IT companies have with patent trolls, the problems that universities have in failing to comply with Bayh-Dole are separate. Trying to tie university ownership of federally supported inventions–with the justification that trolling is the backstop for failed investment–is indefensible. It’s like terrorists using human shields. When did universities start carrying the water for the patent trolls? Oh, yeah, when they sold out to patent brokers cozy with big pharma.

If Bayh-Dole were enforced on its terms, folks like Shaughnessy and Allen would have less foundation for their weasel words. Better, restore Bayh-Dole’s basic bargain–rescind the 1984 amendments that lifted restrictions on exclusive licensing, mandated that use reports were government secrets, limited assignments to patent management organizations with conflicts of interest, and added strange language that allowed monopoly licenses to encumber future research and discovery. Add in a requirement that federal agencies enforce the patent rights clause according to its terms. And rewrite the march-in procedures to restore the burden of proof to the patent owner dealing only in monopoly–no license, assignment, exclusive license. And require a published inventory on the status of every subject invention acquired by an institution or employer. Let Shaughnessy speak to that version of Bayh-Dole–the one that originally passed Congress.

“Our university system is the envy of the world.  This is in part due to the facility with which universities commercialize publicly funded research.”

Nonsense. The world envies a story that’s told about commercialization. The story is true in a moralizing sense–it sounds like what should happen. But the story has no backing evidence. It is a poetic story for a golden world. Eden. Who wouldn’t envy that? But it’s not a story for the real world. There, it fills the purpose of self-congratulation. Or, simply “fraud.”

“Bayh-Dole encourages private sector investment in university research; and it encourages the private sector to further fund university research, to enlarge the public store of knowledge, and to improve the human condition.”

There’s nothing in Bayh-Dole that speaks to private sector “investment” in university research. If anything, federal funding has driven out private sector funding. As one university grants director told me, “I wish industry funding would just go away.” A good curse for a company CEO is, “May you try to fund research at an American university and think it will be easy or reasonable.”

Universities, claiming that Bayh-Dole compliance requires a uniform patent policy that applies to all inventions, have modified their patent policies to prevent industry access to research results. Universities have modified their faculty consulting policies to create uncertainty with regard to what a faculty member could agree to with a private company. Universities have made it difficult for students to work with companies. Bayh-Dole has made simple startups into convoluted messes in which inventors have to assign to the university which then must impose all its institutional intestinal contents into a forty page licensing agreement that demands multiple forms of payment (upfront, patenting costs, milestones, insurance and indemnification, late payment and under payment penalties, audit, equity, sublicensing income…).

O’Shaughnessy represents licensing executives. They are the folks, along with patent attorneys, that are assured of work if universities continue their present practice of taking everything and trying to license it to monopolists for profit. Their work begins and ends with complicated, as it were, “prescription” licenses. They aren’t paid when there’s a commercial product that benefits the public. They are part of the house infrastructure. They always make their money, whether the customer wins or loses. No wonder they don’t want anything to disturb the flow of business.

The tick gets into a vein and can’t let go. Time to get out the gasoline and matches.








1) If individual rights are so important, then why do universities take institutional control of inventions? Citing Locke on private ownership is goofball when universities–government in many cases–strip inventors of what they have made.

2) Nonprofit commercialization rates under Bayh-Dole are 1/10th the rates under a commons-first regime. It’s just that no-one is willing to announce the fact. The word trickles out, though. 1 in 200 to 1 in 1000 commercialization rates. For non-federal university-hosted inventions, the claimed rate was 1 in 3 to 1 in 4.

3) Even the SBIR program commercialization rates stink. The NSF can’t figure out how to get small businesses past repeat Phase I and Phase II grants. Gosh, wonder why.

4) Bayh-Dole’s fundamental trade off is private rights for limited exclusivity–but the big money is made by ignoring the limited exclusivity. Result is monopoly pricing for drugs. This was the original end-run around federal policy–first in the IPA program, which had results no better than federal rates (about 4%); then in Bayh-Dole. The law exists for pharma to get exclusive access, to prevent any other business model from operating. Everything else is to cover the tracks–making it government wide, adding small business.

Bayh-Dole is going to go down, not because of the law, crappy but workable as it is, but because of the behaviors that ignore the law and hide poor performance.

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