A New Guide to Bayh-Dole–Outline Version

Here’s an alternative guide to Bayh-Dole and its doppleganger faux Bayh-Dole. There’s a whole book in here, but I’ve left out the chapter and verse documentation and the historical evidence and interviews and the like. This is not the version of Bayh-Dole you will read in university technology licensing office brochures. But how much do you believe of anything written by institutional administrators in a brochure?

Short form, if you don’t have the time:

Bayh-Dole: kittens on the carpet with a ball of string!

faux Bayh-Dole: kittens and bricks in a gunny sack!

The Purpose of Bayh-Dole

The purpose of the Bayh-Dole Act was and still is to enable pharmaceutical companies to gain monopoly control over discoveries in medicinal chemistry made at universities and supported by federal government grants.

An Inside Job

Bayh-Dole was an inside job within the NIH, with the help of university patent brokers, especially WARF. To give pharmaceutical companies such monopolies, the NIH and WARF had to disable PHS patent policy and the executive branch patent policy on which the PHS policy was based. They had to put their changes out of reach of the PHS. So they drafted Bayh-Dole to supersede executive branch patent policy by federal statute. Norman Latker at the NIH had someone else type the final draft of the bill to prevent it from being traced to his own typewriter.

An Arbitrary Patent Policy

Bayh-Dole replaces a uniform executive branch patent policy with an arbitrary one, making a single approach to research inventions general across all federal agencies, all forms of research contracting, all contractors (but for large companies), all industries, and all approaches to the use of patents.

Universities as a Front

Universities are used as a front because they appear to be acting in the public interest and (it was argued, against the evidence) will do a better job than the federal government in promoting the use of inventions made with federal support.

Dual Monopoly Scheme

NIH and WARF aimed to strip university inventors of their rights and hand these rights to the universities rather than to the federal government. They could not afford to let inventors make their own choices–since they might not choose to grant monopolies to pharmaceutical companies. NIH and WARF couldn’t quite do this, so they did the next best thing–use ambiguous wording and figure they could interpret it in the implementing regulations or in later amendments.

University patent brokers would then convey monopoly patent rights to pharmaceutical companies in exchange for 1% or thereabouts of sales (if there ever were sales) and would be also free to impose the same approach for any other inventions, for any other industries, with any other speculators in the future value of patent rights.

Bayh-Dole requires universities to share royalties with inventors to induce them to accept the scheme. Bayh-Dole prevents universities from using licensing income to support humanities research or public service because WARF did not allow its money to be used for such things. The idea was that patent royalties should be used to create more research that might lead to more inventions, to fuel the licensing scheme.

Covering the Scheme with Generalizations

To cover their work, the NIH and WARF made Bayh-Dole government-wide rather than specific to the medicinal chemistry grants program at PHS. They made it appear that monopoly institutional ownership of inventions, to be licensed for commercial product development, was the only way by which federally supported research inventions might benefit the public. They made it appear that private speculative investment to create commercial products was the only way to put research inventions in a condition to be used. They made it appear that such monopoly control of inventions for speculative commercial development was essential to national technology competitiveness, across all areas of research and all industries.

If you accept any of these general propositions, then you will resist any change to the law and thus help to defend the monopoly pathway by which federal research discoveries became the property of pharmaceutical companies. If you believe your livelihood as a patent broker depends on any of these general propositions, then you also will resist any change in the law. That’s by design, anticipating your self-interest.

A Crappy Job of Drafting Leads to Faux Bayh-Dole

The NIH and WARF did a crappy job of drafting the law, and did more crappiness later drafting the implementing regulations and standard patent rights clause. To cover their crappiness, they went around the country spreading claims about what the law does that weren’t in the law. That Bayh-Dole applies to universities–doesn’t, applies to federal agencies who must use a default patent rights clause in funding agreements unless they can justify an alternative–each patent rights clause, however drafted, is what universities agree to. That Bayh-Dole vests ownership of inventions with universities, or the university has a right to “elect” title or a first right of refusal or a mandate to take title, or there is a “presumption of ownership”–doesn’t, isn’t, Bayh-Dole changes nothing with regard to invention ownership and deals only with inventions made in projects with federal support after a university has acquired them, and then sets the default priority of claims to ownership between the contractor and the federal government . That universities must change their policies to comply with Bayh-Dole–no change in policy is required, the patent rights clause is self-implementing in each funding agreement. The law is what they say it is, what they intended for the law, not what the law actually says or does–actually, here, they have pretty much duped everyone. Thus, faux Bayh-Dole.

One key claim–perhaps the key claim–that Bayh-Dole vested ownership of inventions made with federal support in the institutions that hosted the research was rejected by the Supreme Court in 2011.

Sadly, almost everything written about Bayh-Dole by its advocates cannot be substantiated–mostly because the history they tell is fake, the metrics of performance are made a government secret by Bayh-Dole, and the account of innovation that provides the cover story happens less than 0.5% of the time. Even most criticisms accept faux Bayh-Dole as a starting point.

The most amazing thing is that faux Bayh-Dole, which purports to strip some of the top scientific and medical investigators in the world of their personal interest in their inventions and hand these rights arbitrarily to institutional bureaucrats without any assessment of their policies, practices, and outcomes, is seen by people as a really, really good thing. They want faux Bayh-Dole or they would object, and loudly. They don’t want the world’s top scientists to decide whether any given invention or discovery should be patented or just published, or if patented to shape the strategy for the use of the patent. Why do people have such confidence in the capabilities and judgement of university bureaucrats and take such delight in loathing the capabilities and judgement of investigators and inventors? Why is faux Bayh-Dole so well received, when it amounts to kittens and bricks in a gunny sack by the river?

Working Requirements

Bayh-Dole is placed in federal patent law, not in federal research contracting law, where it should have been. As part of federal patent law, Bayh-Dole creates a new category of patentable invention, the subject invention–an invention made in a project receiving federal funds and which has come to be owned by a party to a federal funding agreement. Bayh-Dole sets forth a policy that limits the patent property right in subject inventions. Bayh-Dole then defines a standard–practical application–by which the use of patent rights on these inventions is to be judged.

Bayh-Dole also introduces a working requirement into federal patent law with regard to patents on subject inventions–the patent system is to be used to promote the utilization of inventions arising in federally supported research or development; to promote free competition and enterprise without unduly encumbering future research and discovery; to promote the use of United States industry and labor; and to provide the federal government with the rights it needs and to protect the public from nonuse and unreasonable use. This working requirement–especially the requirement on free competition and enterprise–requires nonprofits to break up the monopoly patent right in subject inventions. Once Bayh-Dole was passed, however, specific guidance that implemented the new policy on working an invention and working nonprofit patents was removed by amendment. The policy is still there, as law–but it is ignored in practice.

Changes in Federal Contracting For Research

Bayh-Dole stipulates provisions that federal agencies must use in all funding agreements for research with universities and small businesses. Bayh-Dole preempts all other laws on the same subject matter and prescribes provisions that must be included by default in any funding agreement for research at a university or small business.

Bayh-Dole does not require federal agencies to enforce the terms of the default patent rights clause nor to act on the federal benefits reserved by that clause. Bayh-Dole provides a means for a federal agency to waive contractor compliance. At the same time, Bayh-Dole provides means for contractors to challenge and appeal attempts by a federal agency to alter the default patent rights clause or to take title or to exercise march-in rights. And any reports of contractor use (or nonuse) of inventions is made a government secret.

A Show of Public Interest Without Substance

For each of these two moves–changing patent law, requiring a standard patent rights clause–Bayh-Dole creates an appearance of public interest and then walks back that interest while enabling federally supported research discoveries to be conveyed as patent monopolies to companies and private speculators. Thus, university patent brokers fixate on exclusive licenses, just as they had under the IPA program, which was drafted by the same people who drafted Bayh-Dole, for the same reasons.

No Protections for Inventors or Third Parties

The Supreme Court noted that Bayh-Dole has no protections for inventors or third parties. Senator Bayh submitted an amicus brief to the court arguing that inventors were intended to be last in line for ownership rights. Bayh-Dole was intended to be inventor loathing as much as it was institutional monopoly loving.

Circumventing Federal Patent Law

Bayh-Dole establishes as federal policy that patents should be owned by institutions based on hosting investigators submitting research proposals having merit, not by inventors based on the merit of their inventions and their request for patent rights. According to faux Bayh-Dole, institutions should own patents regardless of their capability to manage those inventions or on their ability to negotiate acceptable arrangements with inventors. Institutions, so goes faux Bayh-Dole, should own patents merely as a result of agreeing to host research proposed by individual investigators and supported with federal money. This circumvention runs against the Constitutional limitation on the federal government to grant patents only to inventors. Faux Bayh-Dole uses federal patent law to make the federal government grant patents to institutions, but not based on the institutions’ merit.

Bayh-Dole also establishes universities as shadow patent offices, to re-issue patents in the form of exclusive licenses that convey all substantial rights in an invention–in effect, assignments of the invention and the patent right that runs with the invention. This is the fundamental purpose of the law. Unlike the US patent office, these shadow patent offices then may re-issue patents as favors or with an expectation of revenue–both practices that U.S. patent law was meant to preclude.

Subvention Becomes Welfare for Speculators

By operating shadow patent offices, universities turn federal research support to university investigators into a commercial subsidy for speculative investors. University administrators don’t, of course, openly announce this practice, but that is what takes place.

The Federal Government Ignores Its Rights and Obligations

Bayh-Dole reserves for the federal government various rights. Federal agencies may create additional patent rights clauses by determining “extraordinary circumstances”–anything not anticipated by the default patent rights clauses. But agencies don’t create new patent rights clauses, in part because the regulations make changes next to impossible.

Federal agencies have a broad right to practice and have practiced each subject invention. “Practice” meant for executive branch patent policy and in the IPA program “to make, use, and sell.” But agencies don’t exercise their licenses and therefore waste the rights reserved for them.

Bayh-Dole provides for “march-in” rights for failure to work an invention or where an invention has not been made reasonably available or where U.S. manufacture has not been required under an exclusive license in the U.S. But agencies have never used march-in to protect the public interest in any of these situations, in part because the march-in procedures in the implementing regulations make march-in next to impossible.

A Cleverly Crafted Scheme

An amicus brief in Stanford v Roche called Bayh-Dole a “cleverly crafted scheme.” Indeed it is. Bayh-Dole is a clever scheme to get pharmaceutical companies monopoly rights in inventions made at universities and with federal support. To work, the scheme created a federal law to undo a uniform but flexible executive branch patent policy with an arbitrary, government-wide law, made a part of federal patent law.

Thus, the law draws off attention from the pharmaceutical industry and makes it government-wide federal policy that speculative investors should have monopoly access to any inventive results of federally supported research at universities–ahead of open publication, ahead of inventor initiative, ahead of federal agency commons, ahead of inventors’ choice of agents and strategies, ahead of principal investigators’ objectives and commitments.

A Do WTF You Want Patent Law for Institutions

Despite the apparatus that appears to require compliance, most of Bayh-Dole’s standard patent rights clause is unenforced relative to institutional contractors. Contractors can do WTF they want–from nothing at all to trolling industry, and even sometimes granting non-exclusive licenses. But there have been no consequences for non-compliance, failure, ineptitude, or open disregard for the law or the standard patent rights clause. We might call Bayh-Dole a law that gives freedom to institutional owners of patents on subject inventions, at the expense of inventors, investigators, industry, entrepreneurs, federal agencies, and the general public. One can see why university patent brokers are so enraptured with Bayh-Dole.

A Government-Subsidized, University-Enabled Speculative Attack on Industry

Despite the working requirements in Bayh-Dole, most subject inventions are not used and patents on these inventions are treated as ordinary patents. Thus, university administrators have no problem trolling industry for infringement (actual use) and for granting exclusive licenses that give licensees the right to troll industry for infringement.

Evidence? What Evidence?

Bayh-Dole makes reporting on invention use a government secret. Universities do not report on their outcomes. Instead, they report proxy metrics that describe the work volume–number of inventions reported, number of patents obtained, number of licenses granted, number of startups. But never how many of these numbers involve subject inventions, and never for each subject invention when it has achieved practical application and how its patent monopoly right has been broken up to promote free competition and enterprise.

Bayh-Dole, Love Monster Disaster

Bayh-Dole is the love monster creation of university patent brokers mating with the pharmaceutical industry. Their tryst is has been generalized to all inventions and industries as the primary, best, only, first form of innovation arising from federal research (or university research or university creativity), and turned into a virtue by university senior leadership.

Rather than promoting use of research-originated inventions, Bayh-Dole destroys the opportunity for most uses in favor of attempting to trade on monopoly rights, using the pharmaceutical industry as the model. The biotech industry–mostly operated by speculative investment ready to sell out to the pharmaceutical corporations–is just a sophisticated proxy for the same scheme. Anything that cannot be licensed exclusively is held for future trolling or left to die. Bayh-Dole is designed for these outcomes.

The informal evidence we have is that less than 1% of university inventions makes it to even the most marginal commercial product, and that’s at top-performing universities. Prior to Bayh-Dole, university patent brokers claimed a commercialization rate of 25%. The PHS commercialization rate was 23%.

Commercialization Despite Bayh-Dole

Have you ever seen an infographic that attributes the growth of any industry other than biotech to the Bayh-Dole Act? No, you haven’t. There’s a reason for that.

A reasonable proposition is that most subject inventions that do become commercial products do so despite of Bayh-Dole, not because of it. These products did not benefit from a bureaucrat’s thumb in the pie.

In medicinal chemistry, the proposition may be modified to state that inventions have become commercial products by means of a patent monopoly because the Bayh-Dole scheme precludes any other method of development. Bayh-Dole is designed (despite its apparent but non-operative public interest apparatus) to prevent companies (and nonprofits and the government) from collaborating in drug discovery and development. If they were to do so, they might eliminate the profit opportunities available with a patent monopoly that runs for nearly two decades. What’s a speculator to do if such a thing were to happen?

Does Bayh-Dole Matter? 

While great claims are made for the impact of university research, when these claims are examined for the actual impact of the love monster’s clever scheme of dual monopoly control of patents on subject inventions, it appears that the impact rounds to about 0 in terms of the U.S. economy. We might argue, then, that Bayh-Dole does not matter–but if we do so, then we are also led to the idea that federal support for university research also does not matter.

Just as it is worth asking whether it is good federal innovation policy to subsidize the speculative investments by pharmaceutical companies in creating prescription medicines, so also it is worth asking whether federal funding to universities is delivering on its promise. Even if one holds the belief that federal funding for basic scientific and medical research is essential, how does that belief translate into the present approach of fragmented university research and fragmented, institutional patent ownership, and monopoly licensing or else trolling or nothing?

Time For a Change?

Perhaps the cleverly crafted scheme of Bayh-Dole has exhausted the university opportunity to demonstrate the value of moving federal funds for basic research through their hands. Perhaps it is time to explore other approaches to funding basic research, such as non-institutional science (fund investigators directly) or funding companies directly to conduct contract research (as Medivation did to produce Xtandi), with rights held by the federal government. And if Bayh-Dole is good federal policy, then an even better federal policy is to subsidize pharmaceutical companies directly to conduct exploratory research and own patent rights in the results–and by-pass the painfully ineffective apparatus set up by Bayh-Dole to circumvent just this policy decision.

It may be that public health needs are best addressed by subsidizing with public money the development of commercial patent medicines, making billions for the investors in pharmaceutical companies. I don’t see it, but then who am I? That’s a matter of public policy and ought to be addressed in the open, in specifics, about how we expect to produce medicines and what priority medicines ought to have among our other health care concerns (such as, say, prevention or cure). High prescription drug prices are not caused only by Bayh-Dole–though Bayh-Dole does appear to be a contributor. We may as well then have an open discussion without having to treat a clever scheme as if it is necessary or even true or good policy.

There’s a good argument that Bayh-Dole has caused a disaster for medicinal chemistry just as that area of inquiry came to be supported by federal funding. As for most everything else that’s not medicinal chemistry, Bayh-Dole has been a disaster by foisting the love monster’s clever scheme for pharma onto all other areas of university research, whether with federal funding or otherwise.

Even if folks cannot free themselves from the idea that Bayh-Dole is essential for the translation of medicinal chemistry into public benefit, can we not release all the other areas of research, collaboration, industrial use, entrepreneurship, and commercial product development that have been stymied and suppressed by the love monster?

Keep Bayh-Dole, if that’s the best thinking anyone can come up with, for the pharmaceutical industry and its biotech proxy, but repeal it for everything else.

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