The Bayh-Dole Dissatisfaction with the Patent System
According to its advocates, starting with Sen. Bayh, the idea of behind Bayh-Dole was to require federal agencies to pre-assign their ownership interest in invention contract deliverables to university contractors. It’s a clever argument.
We might say that Bayh-Dole arises as a dissatisfaction with the patent system. It uses the federal government’s right (established by federal contract, as a condition of providing funding) to inventions as deliverables to transfer this right to contractors who host the research–even though the contractors in the case of universities receiving subvention funds on behalf of faculty investigators have absolutely nothing to do with proposing the work, directing the work, or employing (in the sense of an employer) faculty to do the work.
University patent brokers did not like that patents issued to inventors, not to employers, and especially not to institutions that weren’t even employers but just organizations handling federal money on behalf of investigators. University patent brokers also did not like seeing the federal government move inventors from industry problems to federal problems, or from independent research to federal research–and thus forestall the market for university patent brokers. University patent brokers also did not like to see federal agencies use patents in ways that did not involve a profit motive and did not play favorites to achieve the best profits. Bayh-Dole, made a part of federal patent law, expresses these dissatisfactions in the form of restrictions on what federal agencies may contract for by way of inventions made in federally supported research.
Inventions are to issue to contractors, not to inventors and not to the federal government. Contractors may then trade in patents for money and to play favorites without federal agency intervention. What made Bayh-Dole exciting to university patent brokers was the idea that Bayh-Dole created new patent law that made inventions owned by universities rather than by inventors. Sen. Bayh insisted that this was in the law, at the foundation of the law. The Supreme Court in Stanford v Roche disagreed, and ruled that nowhere in Bayh-Dole is there any indication that Congress intended to change federal common law that inventors own their inventions. There is nothing in Bayh-Dole that vests inventions made with federal support in contractors, gives contractors a mandate or first right or incentive to acquire these inventions, and nothing that authorizes any federal agency to require as a default funding condition that contractors must acquire ownership of such inventions to comply with Bayh-Dole or with the terms of any funding agreement.
But overwhelmingly, contractor ownership is what advocates of Bayh-Dole have wanted. This is not even an invent-for-hire matter. The university advocates for contractor ownership aren’t even employers–don’t direct or control the federally funded work. They just handle the money. A federal agency could do the money handling for all university projects and end the horrible redundancy and overhead of sponsored projects offices at universities. It would be rather like a research investment bank, all online.
And advocates for Bayh-Dole also wanted the right to play favorites and have a money interest in each patent–they wanted to be able to re-issue patents. It was this failing that advocates accused the federal government of. All those 28,000 patents (mostly for weapons-related technology) weren’t being used by the federal government to play favorites and gain money positions in monopolies delivered to those favorites. That’s the argument that the federal government wasn’t “commercializing” these inventions–it wasn’t trading on the monopoly patent right, it wasn’t keeping together this monopoly patent right. The public could not benefit, so this argument goes, unless someone steps up to keep monopoly patent rights together for private exploitation. That would be, then, the private patent broker. The genius of Bayh-Dole, then, is to create a pipeline that takes invention rights from inventors, hands these to universities, who in turn then hand control to patent brokers, who then may play favorites with a financial upside where federal agencies have declined to do so. And the favorites the patent brokers had in mind are the pharmaceutical companies and anyone aiming to speculate on the future value of patent rights–startups backed by risk capital, especially, but also those same startups, having failed, who troll industry for the value of licensed patents. These behaviors, advocates for Bayh-Dole argue, are a good thing, the result of an inspired federal policy.
Allowing Non-practicing Contractors to Trade in Monopolies
Thus, we can ask a variant of the basic question: What should the federal government do with patents that it has the opportunity, by means of federal research contracts, to have issued to itself?
Is it good public policy that the answer is: to mandate that contractors without a commercial position or capability own and trade on patent rights to these inventions, playing favorites, taking a financial interest, and imposing obligations, all outside of federal control and with no opportunity for inventors or the public to intervene?
In the case of Bayh-Dole, it is clear that there was an effort to construe the law to mean that inventors had no rights in inventions unless university contractors and federal agencies said they did. That construction was shown to be false to the law, though it persists to this day in university policy and guidance statements, and in the claims by university administrators that to comply with Bayh-Dole (or the “spirit” of the law, or the “intention of the law”) inventors cannot own their inventions.
Unlike the situation for commercial contractors with employees, the situation for subvention research does not involve employment relationships and a basis in business activity or foreseeable future business to require a patent agreement with those involved in the research. Nothing in Bayh-Dole requires or authorizes such a patent agreement, and Bayh-Dole stipulates that it is the only authority on the matter, taking precedence over all other regulatory statements unless expressly pre-empted by statute. The only way that Bayh-Dole’s circumvention worked, then, was that university contractors gained title to inventions in which the federal government had a right of deliverable. The government, as it were, assigned to the contractor the right the government had to issue patents to itself. This was the sneak in Bayh-Dole, but made to appear to the uncareful reader as if Bayh-Dole vested ownership of such inventions outright in universities.
Should the federal government have such a policy? Should the patent system be used by the federal government to play favorites, and for a money interest? Bayh-Dole expressly authorizes the federal government to do exactly this with inventions made by federal employees and any inventions that the government obtains from contractors. Yes, there is an apparatus that makes it appear that any licensee must have a plan for developing the licensed invention. That plan substitutes for the merit of the inventor’s work. Somehow, plans about an uncertain future can be evaluated objectively in the same manner that claims that something is new, useful, and non-obvious can be evaluated. But Bayh-Dole makes the plans a government secret, makes the evaluation of plans a government secret, does not require plans to be enforced, does not require the terms of any government license to be enforced. Thus, the effect of Bayh-Dole is to clear a pathway through government practices and regulations to allow federal agencies to deal in patent monopolies, choose favorites without accountability, and participate in the financial upside available to those favorites in exploiting their monopoly.
Is this good innovation policy? Are we better off with the federal government trading in this fashion in patent monopolies–issuing patents to itself in order to deal in patents? commissioning others to have patents that could have issued to the government issued to those others–to be dealt with in the same fashion, as monopolies with favorites, for a money share, that recognizes the private exploitation of the patent monopoly?
And even if we are better off in some way–is this how we want our government to operate? That is, slave plantations may have been productive and efficient and well managed, but this is not a way we choose to live. Is the operation of research plantations any less disgusting? Is government dealing in monopolies any more desirable? It is a necessary discussion, one we haven’t had, one that the rhetoric around Bayh-Dole has worked to disable.
Consider: we have little evidence that Bayh-Dole has produced the prophesied prosperity (even where Bayh-Dole is present at the scene of a claimed success, we don’t have good accounts of how it is that Bayh-Dole was necessary, or that its role was one of contributor rather than diminisher and delayer). Federal agencies are all but prevented from exploring any alternatives. Universities allow themselves to be controlled by the patent monopolists, who suppress most alternatives to their practices of favoritism and trading in patents for financial return.
We have plenty of evidence from university patent policies that we are running a plantation system for university research, that the consequences are adverse, that we are circumventing the federal patent system with a shadow system that trades in monopolies rather than in encouraging broad availability and use. But the present system is covered with a claim of public interest, of productivity.
It’s just that the present system is also operated in secret, without public accountability, without an obligation by federal agencies to enforce their patent rights clauses or their licensing arrangements. Do WTF–if you are an institution prepared to trade in patent monopolies. For inventors, for academics who would prefer to publish openly and not be forced to apply for patents, there’s no support. For companies that would use inventions but have zero interest in monopoly positions on that use or in making commercial product versions as a condition of that use–again, no support at all in the present system.
Answering the Question
If we answered our question: The federal government should not circumvent the federal patent system and trade in patent monopolies, nor should it permit any subvention contractors or contract research organizations to do so.
Then we might stipulate that other than inventors, dealing voluntarily with their inventions, no contractor nor federal agency can have a patent issued to itself and then trade on the patent rights. The patent right has to be broken up in any transaction–term limited, non-exclusively licensed, dedicated to the public.
We might argue, as well, that imposing working requirements on the trade in patent monopolies does not make up for the problem of allowing the federal government or state governments working through public university proxies to circumvent the patent system with institutional monopolies, favoritism, and financial interests.
We might argue, finally, that there’s a fundamental problem in the expansion of federal government research funding as subvention and to contract research organizations, where doing so has the effect of drawing inventors away from independent activities and turning them to government-approved work, to be owned in turn by institutions. It is this expansion, the mispriziing of Vannevar Bush’s idea, that creates the conditions for the circumvention problem, for which Bayh-Dole is the current exploit, created by federal agencies in cahoots with patent brokers to service the pharmaceutical industry and anyone else who wants to speculate on patent monopolies.
It is this system that must be shut down. One point of attack–make its information public. Audit performance and compliance information. Inspection will show that as an innovation system, it is unproductive, that its advocates have misrepresented its success and that university administrators are complicit in allowing the advocates to make these misrepresentations. Hold universities accountable for the actual performance of patent to practical application. Disregard the proxies thrown out to distract from this fundamental purpose.
A second point of attack–require compliance with Bayh-Dole’s statement of policy and with the standard patent rights clause, require federal agencies to use fully their government license to practice and have practice and confirm that this license extends to state and municipal governments. Enforce, as it were, the public covenants that run with patent property rights on subject inventions.
A third point of attack–streamline march-in procedures for nonuse of subject inventions–and any nonused but claimed elements of patents on subject inventions–so that such nonused portions become openly available, unless the term is expressly extended by the federal agency after a public review which an agency does not have to undertake, six years after a subject invention is reported by inventors to a contractor’s personnel designated for patent matters.
A fourth point of attack–prohibit federal agencies and non-practicing contractors from trading in patent monopolies. No assignment for financial value of any subject invention. No granting of exclusive licenses that actually are assignments. No government–federal, state, or municipal–playing favorites or accepting plans that then are not enforced in licensing arrangements.
But beneath it all, the deeper problem, the one that has slept in its warm winter bed for all these decades, is that of whether the federal government should so perturb independent research as it has, and whether the regulation that we need is one that limits institutions from having access to the work of individuals freely pursuing frontier science as they will. Whatever the broader demands that might surround federal procurement contracting–when it comes to subvention funding for independent researchers, the protection has to be focused on allowing those researchers to decide for themselves what role the patent system will play in their work–whether to seek patents at all or if patents are sought, how those patents will be deployed. If researchers wish to receive additional funding, then that future funding will depend in part on what the researchers have done with their research, including patentable inventions.
How might researchers be evaluated based on what they have done with their research? That’s another question for federal policy that arises once we decide that the federal government should be involved in subvention research, with research outside the government’s defined procurement needs. That’s a key question that Bayh-Dole shuts down–making it appear that researchers have no responsibility for their work, that institutional patent brokers are responsible–and yet Bayh-Dole does not make these brokers responsible at all. They can do WTF they want, without accountability.
The Problem of the Public Covenant
It may be, then, that the idea of a “public covenant” that runs with subject inventions–working requirements, limitations on nonprofit assignment, restrictions on nonprofit use of income from exploiting patent positions–are just haphazard cover for the deeper failures:
expansion of federal funding for research used to destroy independent academic invention;
circumvention of the patent system by federal agencies and institutions prepared to deal in patent monopolies with favoritism and for a financial share of the monopolies.
If so, then it is understandable that the apparatus of public covenant is not intended to operate and that explains why it is ignored and not enforced. Bayh-Dole is a creature born to exploit both expansion and circumvention. For the expansion part, Bayh-Dole recognizes that the federal government was eating up the market for discoveries and inventions as it expanded its research funding. A robust public domain is antithetical to the monopoly patent broker’s idea of the world, a waste of patent monopolies on openness and independence. The circumvention exploits the expanded federal government interest to redirect that interest to institutions that permit the operation of ad hoc patent offices. By authorizing federal agencies to operate such ad hoc patent offices as well, Bayh-Dole makes it all but impossible for a university to decline to operate such an office and not leave federal agencies able to do so.
Thus, Bayh-Dole like a virus attacking the patent system’s own immune system, turns the problem of federal expansion of research into a circumvention of the patent system itself, stealing from inventors their rights and making governments once again dealers in monopolies, favorites, and the money that can be made from monopolies and favorites.
Is this how we choose to live? Is this a desirable “national innovation system”? Is this what other countries envy the United States for doing to itself? Is this what federal research funding exists to fuel? It’s hard to believe. Yet that’s what we have done, what we have.