That special special case 1: A bureaucratic urge

The special special case is special in a number of ways. That’s what makes it so special. Here’s the base form of the special case: a federally supported invention that:

(1) cannot be beneficially used except as a commercial product–DIY is not possible;

(2) requires substantial expense to develop–more than ordinary expense;

(3) is relatively cheap to copy or imitate–most anyone could do it once there’s a product;

(4) is readily ascertainable how to copy it;

and let’s add a fifth requirement:

(5) must be developed at private expense by a single entity–as an investment with an expected return based on the monopoly position.

Under these conditions, so the special case goes, a patent monopoly is essential or no company will make the required investment to produce the product–if it did, then others would step in and copy it, and the first company would not make all the profit that it otherwise would make.

The special special case is that of a prescription drug, a compound invented to prevent, mitigate, manage, heal, or cure a medical problem. If you want to think clearly about federal patent policy, the starting point to clear one’s head is to separate this special special case from everything else–even from any other special case. Until that’s done, you’ll remain in a fog of virtuous-sounding, brain numbing rhetoric. Not even patent loathing will provide the policy relief you crave.

We might include variations on the special case–the company attempting to make the initial investment is small, and doesn’t have all the money at first, and would not be able to raise the money without a monopoly patent position. Investors might choose to fund another company seeking to be first to make the product. Or, under the logic of the special special case, no investor would fund any company to make the new product unless there was a monopoly available. It is not just that no company would make the investment, but that no investor–no private person seeking a return on capital–would invest without a patent monopoly.

Or, even, that the company attempting to make the initial investment is small, and so large companies could easily “steal” the invention and make it themselves, beating the small company to the market or taking the market from the small company if it happens to get there first. In this version of the special case, why would a small company invest in developing an invention if large companies could easily copy the invention and steal the market and profits using their economies of scale, better equipment, and supplier and distribution chains? In this version of the special case, we have a David and Goliath narrative–the patent monopoly allows a small company to stand its ground against the big, well capitalized companies. That’s the theory, anyway–that a patent, a piece of paper granting the right to sue in federal court, is all that’s necessary to prevent competition and ensure the profit income for the small company. The theory barely conforms to the roughest outline of the world we live in. Perhaps for folks who don’t know anything, the theory sounds reasonable.

There are things about the special special case that are just plain stupid, but the case has been a remarkably successful claim in the history of debate regarding the disposition of inventions arising in federal funded research. So, while stupid, the special special case is also worthy of acknowledgement for the role it has played in getting federal officials, legislators, university administrators, and especially patent brokers to descend on academic inventors with the argument that the special special case is essential to translating federally supported research into public benefit. Without patent monopolies, no one will invest; without investment, there will be no new products; without new products, all that research has been wasted. And if there must be patent monopolies, then the patents should be issued to institutions, not inventors, and the institutions should re-issue the patents as monopolies to favored companies–ones who will invest but only if they have a monopoly for the duration of the patent.

Thus, the core practice of the special special case is that institutions operate private patent offices to re-issue government patents in the form of “exclusive license agreements” (which are in essence assignments). Inventors do not figure in this new regime, other than as producers of invention rights who must be kept productive and willing to participate in the “system” of technology transfer. Call it an “inventor loathing” approach. Or think of inventors as caged hens laying eggs for market. Make the operation as efficient as possible.

Circumventing the Patent System

This then is the public policy agenda of Bayh-Dole. If one cuts through the apparatus and the happy-talk, Bayh-Dole stipulates that the patent system is to be used to create company monopolies on inventions made with private support, using private patent offices established for the purpose. Patents are to be re-issued based not on the merit of inventions (new, useful, non-obvious) but rather on the merit of the company seeking the monopoly right (plan, capability, payment). Bayh-Dole sets up a private system of patent offices that trade in re-issue of patent monopolies under a different vocabulary. Bayh-Dole uses the patent system to circumvent the purpose of the patent system.

Bayh-Dole endorses two key circumventions of the patent system. The first is that patents issue to institutions, not inventors. The second is that the institution is in it for payment, not publication of the technical details of the invention. These circumventions are both presented as virtues. It is proper and right that institutions, not inventors, obtain patents. It is proper and right for the institution, holding monopoly power, to grant the monopoly to any favored person in exchange for a share of the action.

This was the state of the patent franchise before the U.S. constitution restricted patents to inventors, based on the merit of their inventive work, in exchange for publication of the invention. A patent was any monopoly franchise created by a sovereign power as a favor, to generate income for the government, even to motivate others to produce income and so share it with the government (thus, miners of gold and silver in England paid a share of their ore to the Crown–a royalty). Bayh-Dole’s circumvention re-establishes payment as the basis for a patent monopoly, not merit. Or, rather, the merit is being able to pay. If the merit was in producing a product for public benefit, there would be no need to negotiate a royalty, would there? A nominal fee would do. $1.

There are variations on the theme of virtues: inventions vest with institutions by federal law; federal law requires institutions to own inventions; federal law mandates institutions to commercialize inventions; to comply with federal law, institutions must own inventions, or have a right to own inventions; institutions have a right to own inventions because the inventors are employees; institutions must own inventions to prevent ethics charges against inventors; institutions must own inventions to preserve the value of inventions; institutions must own inventions to ensure that patents can be obtained; institutions must own inventions because patenting and licensing is expensive and complicated and inventors cannot do these things on their own; institutions must own inventions because they can generate money for research through licensing; institutions must own inventions to ensure that they can comply with sponsored research agreements; institutions must own inventions because they hold these inventions in the public trust; institutions must own inventions so that companies willing to invest will have confidence that the title to the invention is “certain.”

Whew. With all those virtuous reasons, how could anyone disagree? Of course, once we see that federal law does not vest, require, or mandate institutional ownership, then a bunch of virtue slips away. When it becomes clear that patent law does not give employers a right to own inventions by virtue of employment, and that university faculty are not, for much of their research and inventive activity, even employees, more of the virtue slips. And when it becomes clear that inventors could use any number of qualified agents to assist with complicated work of patenting and licensing, and so there’s no ready argument why the institution hosting the research should be the arbitrary owner of inventions, regardless of its capability or practices, then there’s no virtue whatsoever left. Invention title is just as “certain” when held by an inventor as when held by an institution.

An Animal Urge

We are left, then, with the idea that institutional ownership of inventions made with federal support is an animal urge. The reasons given do not motivate the decision to own; rather, they serve to prevent others from questioning the urge. If the urge is given the appearance of virtue, then to oppose that virtue is to be, well, unvirtuous, not with the program, even spiteful and given over to vice and sin and unclean hands. University administrators desire institutional ownership of faculty work–not just patentable inventions made in assigned work for the benefit of the institution, but all inventions, whether patentable or not, most anything that an administrator can call an “invention.”

A quick look at the definition of invention in university patent policies shows what is up. Administrators see institutional ownership of inventions as a good thing–so why not, Augustine-style–compel those inventions to come in, to save their monopoly souls? It is this hunger for institutional ownership that typifies the Moloch state. Call it “institution building” if you want, but it is not creating infrastructure where there was none. It is rather creating a bureaucratic nest where there otherwise would be personal initiative and responsibility. A bureaucrat’s thumb in every innovation pie. That, too, is a simple restatement of Bayh-Dole. Why anyone would think it is desirable public policy is beyond me–unless, of course, one cares more for bureaucrats than, say, inventors. Then it is all understandable.

Bayh-Dole is a law that makes legal a bureaucratic urge. It is the love monster of patent brokers, university administrators, and pharmaceutical companies seeking monopolies on federally funded inventions–or rather, these folks sought to prevent the formation of a robust public domain or commons or DIY or research uses of inventions made with federal support. The premise of federal support for university faculty research is subvention, grant-in-aid, to expand the frontiers of science. The premise of Bayh-Dole is that everything that can be owned by patent should be owned by institutions and re-issued to favored companies as private monopolies to ensure that there will be no public domain, no commons, no DIY, no research uses, no competition. That’s the flip side of the special special case.

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