Getting at the truth about Bayh-Dole’s impact, Part 4

We are looking in on a student blog post at the Rice University McNair Center for Entrepreneurship and Innovation. The article is useful for reciting in the wild a number of arguments that claim Bayh-Dole has had a positive impact. I have lived, professionally, with these claims for decades, so they aren’t new to me, nor do I have much reason to believe any of them. But I have met people who truly have wrapped their careers around these claims, almost as if they represented a prophecy about Bayh-Dole. When claims rise to the level of prophecy, of course, no amount of disconfirming fact or reasoning will cause someone to alter their position–instead, they are likely to double down on it and become all the more evangelistic.

Here’s another sentence for discussion:

Before 1980, only 5% of government-owned patents were ever utilized in industry.

This is a nonsense factoid that’s been repeated without context or even backing data since before Bayh-Dole became law. Rebecca Eisenberg ripped it apart decades ago, but like a zombie, it continues to half-live, though lacking any reason to live, except to devour the brains of the unsuspecting. The original metric wasn’t “utilized”–it was “licensed.” The reason patents weren’t “licensed” by the government was often that the government didn’t care whether folks used the inventions or not. Patenting by the federal government was intended to publish the invention and formally notice advances and perhaps to hold a card in case there was something serious, such as a foreign government aiming to unfairly subsidize the manufacture of a product based on a federally funded invention to be imported into the U.S. to undermine U.S. industry. According to Eisenberg, of the 28,000 patents owned by the government, most were defense related, and the defense contractors had passed on the opportunity to patent these inventions (perhaps, in part because there was no domestic commercial market for weapons of the sort the government was developing).

Corporations found it difficult, risky or unappealing to receive licenses for government patents.

The Harbridge House report is perhaps the best account of this issue. Outside of the problem with medicinal chemistry, where big pharma had mounted a boycott of compounds discovered with federal support because companies could not get a monopoly position over the compounds, it does not appear that companies found government licensing a problem. Non-exclusive licenses, especially, are not difficult and if royalty-free are hardly a problem with appeal, and the risk is about the same risk one would have if an invention were in the public domain, but perhaps less because one doesn’t have to worry quite as much about foreign competitors entering the U.S. market with subsidized products or having exploited unfair labor conditions. I’d say the claim is nonsense made up to cover pharma’s exploitation of public research funding for monopoly gains. In that form, the claim has been pretty darned effective. What do you think?

By the time we reach the end of the paragraph, we are biting our tails:

As it was easy for any company to procure licenses, the system did not incentivize companies to purchase licenses; most wanted exclusive rights.

First licenses were “difficult” but now they are “easy.” And the problem is that companies weren’t “incentivized” to pay for licenses. What could “incentivized” possibly mean? That companies weren’t threatened by the federal government? And private industry could do this threatening way more effectively? Or that companies would have an incentive to pay for the right to prevent the public and other companies from enjoying such “easy” access to federally supported inventions? That is, that the money interest gets created by being willing to deny public access to what was developed with public money, for a public purpose, at institutions that make a big deal out of their “public” missions. Ah, that’s a heck of an incentive. Firefighters could offer to sell the exclusive right to fight fires to a private corporation. The private corporation then might have an “incentive” to sell protection to the homeowners in the fire district. If you pay, then you’ll get expedited fire fighting services, and if you don’t pay, you might stock up on buckets. That sounds like a good market created from the monopoly control of publicly created assets. Why not? Golly gee whiz.

The Bayh-Dole Act enabled institutions to keep control of patents invented using federally funded research.

Nope. The institutions generally didn’t have control in the first place. The matter of inventions was between inventors and the federal government. Thus, “keep” is the wrong  verb here. “Take” perhaps. “Appropriate.” And of course, patents aren’t the thing invented these days (patents were invented in what, ancient Greece? 15th-century Venice?). “Using” doesn’t work here either–the inventions are not ones that use federally funded research, but rather arise within the scope of that research. What may be meant is “patents on inventions made with federal support.” And for all that, the nonprofits that mattered had used the IPA program from 1968 to 1978 to take control of federally supported inventions. And they had done a lousy job with what they took–no better than the 5% commercialization rate they criticized the government for (and their inventions were largely biomedical, where the government’s rate was 23%–sigh). So this sentence is a problem in all sorts of ways.

The university or business could then grant licenses on its own terms.

Yup. Meaning that Bayh-Dole for all its apparatus doesn’t enforce most of it. Patents on inventions made in public interest research are just ordinary patents to be monetized however a university patent broker might choose, without public accountability (it’s all a government secret, per Bayh-Dole) and without federal agency oversight (agencies don’t have to enforce any terms of the standard patent rights clause, and marching in means beating their fingers with hammers).

The act also required universities or businesses to have clear patent policies and encourage development of inventions.

This is just made-up stuff. Bayh-Dole does not require anyone to have a patent policy, let alone a clear one. Gawd, if Bayh-Dole required clear patent policies, most universities would be way, way, way out of compliance. Wouldn’t that be something–to make a clear patent policy a requirement under Bayh-Dole, and if a university comes up short, then it’s not eligible to receive federal research funding. Hooboy! But no, the bitter reality is that Bayh-Dole does not require a university to have a patent policy or even to have any capability in managing inventions. Crazy. The IPA program did have a requirement that a university submit both its patent policy and its licensing practices and outcomes for review prior to gaining access to the IPA program. So Norman Latker’s contention that Bayh-Dole codified the IPA program is also just made-up stuff. Politically expedient, but not true.

As far as patent policy is concerned, Bayh-Dole is self-implementing. Bayh-Dole requires provisions in federal funding agreements–the provisions of the standard patent rights clause. Those funding agreements are federal contracts, which pre-empt contracts made under state law. Thus, the standard patent rights clause, when agreed to by a university, pre-empts any policies or contracts that the university may have that conflict with the federal contract. In particular, universities are to require inventors to make a written agreement to protect the government’s interest–including ownership interest–in subject inventions. That agreement, once required, displaces whatever (usually unbelievably crappy) patent policy a university might have with regard to ownership of inventions. Except, of course, university administrators don’t comply with this requirement–or with much else in Bayh-Dole’s standard patent rights clause other than meeting the time frame for reporting inventions, meeting the time requirement for electing to retain title, filing patent applications, and including a federal funding statement in those applications. Everything else is do WTF you want, so long as you do it discreetly.

As for encouraging the development of inventions, this too is not in Bayh-Dole. Bayh-Dole does require universities to educate inventors on the importance of timely reporting of inventions. Nothing, however, about encouraging invention. Perhaps, though, the thrust of the idea is that Bayh-Dole, in encouraging university administrators to strip faculty inventors of their property rights in invention and preventing inventors from publishing their inventions (and so burn rights) or assigning their inventions to the federal government (to be made available to all, but with a formal notice of having made an inventive advance) somehow has led inventors to the idea that this stripping is so pleasant that they should go forth and invent early and often, so the stripping of rights can be repeated more frequently. Likely, this was not the intended meaning.

Perhaps what was intended was the “Porsche Effect”–that inventors seeing other inventors getting rich and spending lavishly to parade their fortune will be encouraged to submit their inventions to universities to get a share of the same scheme of enrichment. That, no doubt, did happen. But mostly inventors have found that their inventions go to university licensing offices to die. They may be patented (and that might be good for a C.V.) and they may even be licensed (good for a jolly and perhaps a tiny payment on the order of a couple days’ consulting, but without the interesting conversation), but those big paychecks just don’t roll in, despite the glossy information pieces, the press releases full of potential, and the pure green envy of seeing evidence of ostentatious wealth. Of course, there’s nothing about the Porsche Effect in Bayh-Dole. It’s a concoction of university patent brokers as another way to “encourage” participation in their scheme to split the upside of monopoly exploitation of inventions made in the public interest with federal support.

For Part 5, click here.

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