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WARF’s Charter and Antitrust
WARF’s charter was designed to prevent the University of Wisconsin from using its money for non-scientific research–social sciences, humanities, and the like. The charter also prevented WARF from funding as well as university public service. The idea was that research in the sciences would produce more inventions, and the inventions when patented would produce licensing income, and that income could then be invested in stocks, and each year this financial engine could turn a profit while accumulating capital, and that capital could then be used to generate more inventions. WARF was designed as an engine to accumulate capital, use that capital to make more capital through investment, and return a portion of the profits to the University. In that, by any estimate, WARF has been wildly successful.
In WARF’s focus on natural sciences research, we find Bayh-Dole’s requirement that nonprofits use any balance of licensing income for “scientific research or education.” The provincial interest of WARF founders became, when WARF officials worked alongside Norman Latker at the NIH to expand the IPA program government-wide (and therefore nation-wide), a national provincialism. Each university was set up to compete with other universities to gain a share of patent royalties from the inventions from research each university hosts. As hosts to federally supported subvention research, universities are generally not employers and ought to have no interest whatsoever in the inventions made by personnel working with their resources. But with the WARF model, university administrators have come to believe that each of their universities is distinctly entitled to the lion’s share of proceeds from the exploitation of any invention made at their universities.
One can see the dispute over CRISPR between the University of California and the Broad Institute of MIT and Harvard as another working out of this competition among universities for patent income–and it goes directly back to WARF’s revolutionary idea that patents should serve a local money-making interest of institutions rather than to create a rich public domain from which all companies might draw (or, alternatively, to provide resources for funding science nationwide, or to allow inventors to pursue their own interests or to choose their own invention management strategies, agents, and gestures toward supporting research or innovation or community–all of these alternatives are foreclosed by the revolutionary WARF approach of the “captive venture.”
WARF was founded to manage an invention involving generating vitamin D in milk. The term “vitamin” itself emerged from research at the University of Wisconsin in the previous decade. Essentially, Steenbock figured out a way to irradiate milk to produce vitamin D, thereby by-passing federal regulations that limited placing additives into milk–a clever end-run, if you will, of federal regulations. But there was more to it than this. Here’s how Cronon and Jenkins describe the invention:
This position came back to haunt WARF some years later, when WARF was sued for antitrust violations in its licensing of Steenbock’s invention. Here’s a bit from the court decision against WARF (1945):
This raises the question, not argued, whether the effect on the public health of refusing to the users of oleomargarine, the butter of the poor, the right to have such a food irradiated by the patented process is against the public interest. As seen, the general business manager of the Wisconsin corporation testified that it is the poor people suffering with rickets who constitute the principal market for appellee’s monopolized processes and products. The evidence and appellee’s briefs are replete with well verified statements of the great boon to humanity of Dr. Steenbock’s scientific discoveries for the prevention and cure of rickets. The truth of such statements make the stronger the contention that it is a public offense to withhold such processes from any of the principal foods of the rachitic poor, or, indeed, from those of any such sufferers.
In other words, WARF managed Steenbock’s invention not to make the invention publicly available for use in all areas in which it might help the health of those in need of it, but rather to prop up the Wisconsin dairy industry in its competition with margarine, the buttery-like spread of the poor. The court goes on to point out that Steenbock reports that European countries require vitamin D to be added to margarine for just this reason–to improve the health of the poor. Thus, WARF commits what the court calls a “public offense” by using its patent monopoly to prevent the use of Steenbock’s process in the making of margarine. The court invalidates WARF’s Steenbock patents–the ones used to start WARF. The premise that WARF starts on is a work-around on federal regulations involving additives to milk, using a patent monopoly that turns out to be invalid, and using that monopoly to make milk product better compete with margarine, at the expense of the health of the poor. That’s the intellectual tradition that leads, eventually, to Bayh-Dole.
The WARF antitrust court’s reasoning gets at another problem side-stepped in the drafting of Bayh-Dole’s “march-in procedures.” In Bayh-Dole the procedures make an effort to focus march-in on the “reasonable availability” of each subject invention. There’s nothing that indicates that a monopoly on one area of use might create a limitation in another area of use that could trigger a federal march-in. All that’s needed to preclude march-in is that an invention is being used with public benefits and is reasonably available. What’s not considered by the march-in procedures–or, better, what is carefully omitted–is exactly the problem of how a patent may be used to prevent many uses in favor of a few. Thus, with Xtandi, only one of hundreds of compounds has been developed for clinical use, while the rest are made by the patent(s) unavailable for public use. No march-in, technically, because “the invention” is being used–but it is the use of the patent that is the issue when it comes to public access and benefit.
A Patent’s Attributes of Public Interest
The WARF antitrust court, citing other cases, asserted that a patent carried with it an element of public interest (I’ve omitted the citations):
It is now well established that a patentee may not put his property in the patent to a use contra to the public interest. The grant of a patent is the grant of a special privilege “to promote the Progress of Science and useful Arts.” However, as stated in Mercoid Corp. v. Mid-Continent Inv. Co., it is not the private use but “the public interest which is dominant in the patent system. . . .”
While it may be that courts are relatively disinterested in antitrust behaviors now (and thus university patent administrators are happily embolden to sue for infringement and to include language in exclusive licensing agreements that gives incentives to licensees to sue for infringement), one can see in the WARF antitrust court decision a form of public covenant that is inherent to the patent system. While a patent may have the “attributes of personal property,” it also has attributes of public interest. The court quotes from the same case as above to bring this home:
“Respondents ask the equity court for an injunction against infringement by petitioner of the patent in question and for an accounting. Should such a decree be entered, the Court would be placing its imprimatur on a scheme which involves a misuse of the patent privilege and a violation of the antitrust laws. It would aid in the consummation of a conspiracy to expand a patent beyond its legitimate scope. But patentees and licensees cannot secure aid from the court to bring such an event to pass, ‘unless it is in accordance with policy to grant that help.’“
One thinks, then, about the use of the term “policy” in Bayh-Dole’s statement of “policy and objective” at 35 USC 200, which is made a part of federal patent law. The addition of “policy” has import–“policy” is not merely an intensifier for “objective.” The “policy” set out in Bayh-Dole displaces executive branch patent policy, to be sure, but it does more than that–it also sets out the public policy to be considered in any action to enforce patents on subject inventions. Again, the primary policy is “to use the patent system to promote the utilization of inventions arising in federally funded research.” Any court asked to rule on a claim of infringement of a patent on a subject invention must consult this statement of public policy. How does stopping the use of a subject invention or demanding an accounting for such use promote the use of the invention? It would appear that Bayh-Dole sets a high standard for what can pass as a legitimate enforcement of a patent on a subject invention in the public interest.
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