What should the federal government do with patents it issues to itself? Part 4

The question of who ought to control inventions made by independent investigators is at the root of Bayh-Dole. Without federal funding, such investigators would give up rights in inventions only according to their own interests. They would be free of institutional claims. Even universities back in 1945 didn’t make claims on inventions–other than that medical faculty argued there should not be any patents on medical inventions. If a university did agree to take ownership of an invention, it was to see that the patent right was broken up. But Bayh-Dole makes it appear that institutions should own inventions made by independent researchers. Independent researchers should not be independent. They should serve whatever institution manages the federal funding on their behalf. They should not get to decide what is inventive, what is worth patenting, or how patents might be used. They must be forced to publish through the patent literature and they should be forced to take a back seat with regard to whether a patent is licensed, on what terms, and with what payment and enforcement of terms.

Bayh-Dole’s fundamental statement of policy is that the patent system is to be used to promote the utilization of inventions arising in federally supported research, but Bayh-Dole leaves it entirely open how such patents might be exploited. One could use patents to create the situations involving investment capital and innovation diversity, as Gordon Lister has it; one could use patents to trade on the value of patents, without working any invention; or one could use patents to break up the patent monopoly while doing other things to promote the use of the underlying inventions. Bayh-Dole authorizes any and all of this–so long as Bayh-Dole’s statement of policy is taken as surplusage and not as a substantive limitation in federal patent law on the use of patent properties with regard to subject inventions. 

In the Kennedy patent policy and in the NIH IPA program based on it, the expectation was that the monopoly in a government-supported invention, if retained by a contractor, would be broken up before the term of the patent expired–within three years under the Kennedy patent policy; or the sooner of three years from first commercial sale or eight years from the date of an exclusive license under the IPA program that worked to circumvent the Kennedy patent policy while creating the appearance of complying with it. Under the original Bayh-Dole, it was the sooner of five years from first commercial sale or eight years from the date of exclusive license, but only for nonprofit licenses to unsmall businesses, and by 1984 the limitations had been removed entirely (and so small companies got no more than a handwaving gesture of benefit from nonprofit licensing).

The policy under Bayh-Dole is that the government should not decide how to exploit patent rights in inventions made with federal support until institutions have made a decision not to exploit a given invention. And within Bayh-Dole, the federal government is given an express authorization to undertake a trade in patent monopolies through exclusive licenses that in essence assign the inventions to private parties and thus re-issue, as it were, the patents to those parties, subject to a review of the merits of a plan regarding exploitation of the invention, such plan subject to later revision.

The problem Vannevar Bush faced was what to do if the federal government expanded its research funding beyond its procurement and programmatic needs–to fund independent research for the sake of the benefits of independent research. For Bush, writing in 1945, independent research meant individuals exploring and owning what they might invent, subject to the expectations of academics anywhere, to publish or act on their inventions, granting the government a license if they chose to patent their inventions. Virtually no university handled its own patent work in 1945–inventors were sent to Research Corporation or to a university-affiliated research foundation–and many of those foundations sent the inventions on to Research Corporation. Thus, in Bush’s formulation, if the federal government funded more “free play of free intellects,” the only thing the government ought to bargain for is not to be sued from practicing what might be invented.

But things went south quickly. Instead, the title policy dominated–government should own inventions. And where the “license” policy countered, the argument was made by institutions, not by inventors or on their behalf. That is, the government should be satisfied with a license from the company or institution that acquired the rights to an invention made with federal support. As Lister noted in 1947, once the government became involved as a potential owner of inventions as research deliverables, the patent system function of rewarding inventors was no longer relevant. Bush’s idea of an independent National Research Foundation also was no longer relevant, to be replaced with its doppleganger, the National Science Foundation.

One can see how problems might develop. The federal government justifies funding in non-procurement, non-programmatic areas of research on the premise that private funding is inadequate to cultivate that area. Look then at medicinal chemistry. Pharmaceutical companies provided bits of funding–significant for the faculty researchers involved, but not particularly robust funding–and offered to screen discovered compounds for biological action at no charge (except for an option to an exclusive license in any compound that proved interesting). Was such funding inadequate to cultivate the area? Should the government extend its interest to support much more research in medicinal chemistry, with a premise that the results should be “made accessible for development by all American citizens” and not just as patent monopolies for drug companies, subsidized by public funding?

Bayh-Dole answers that subsidizing the pharmaceutical industry through government research funding is an appropriate function of government. That’s the law. No wonder folks like Bremer and Latker were ecstatic that they got things through Congress to make the answer not merely PHS policy, not merely government-wide executive branch policy, but baked into statute. Baking the statute meant cutting off the debate with regard to title vs license. Asserting for three decades without evidence that Bayh-Dole has been a success has served to prevent the discussion from regrowing.

But the problem remains, and it starts not with patent rights but with the move of the federal government into private research activities on the premise that these activities are inadequately cultivated by the general public and its various resources–companies, foundations, investors, bank loans, accident, and the like. Bush tried to craft that move to keep investigators free of government claims or the institutional exploitation of those government claims. In that, Bush failed almost entirely, but his work was used to justify the expansion, and with the expansion the procurement contracting, and with that, the title vs license debate, and within the title debate whether there should be some special public covenant that restricted what a patent owner might do with a patent on an invention made with federal support. Early policies acknowledging that private risk capital might be required imposed a public covenant. Bayh-Dole does way with nearly all express statements of a public covenant, while retaining the language that stipulates such a public covenant in its statement of policy (35 USC 200) and related definitions (such as 35 USC 201(f)) and basis for action to remedy covenant failure in the private market (35 USC 203).

The effort of Bayh-Dole has been to implement not merely a “license” policy, but to cut nonprofits into the mix as brokers for conveying patent monopolies unbroken to private companies, starting with the pharmaceutical industry. That is, the government should allow universities–many instruments of state government–to trade in patent monopolies on the argument that these universities can do a better job than the federal government in trading on monopolies. That is, states should run shadow, ad hoc patent offices to convey monopoly rights to companies because the federal government has not been effective at doing so–primarily because the federal government had a policy of not doing so. The irony is that once Bayh-Dole authorizes federal agencies to run their own ad hoc patent offices (35 USC 209), there is no particular need for universities to have the benefit of the “license” policy. The federal government could take title and re-issue patents nationally, avoiding the hit-and-miss incapability of most university patent licensing offices, the fragmentation of ownership, and the utter lack of uniform institutional standards for determining who to grant monopolies to, and how to enforce those grants.

Bayh-Dole, as a creature of political rhetoric, still retains within it the elements of inventor ownership (soon to be eradicated by NIST without any statutory authority for doing so), of public covenant (though mostly disabled by a tangle of procedures), of government prerogatives (which federal agencies refuse to enforce or act upon), of uses for patents that break up the patent monopoly (and which most university administrators refuse to choose until forced to do so). But Bayh-Dole is designed to destroy these very things, even while it must carry the scars as it were of their presence in past discussions of the government’s role in funding private research but without a governmental purpose in procurement or program operations.

If we accept Vannevar Bush’s argument that funding “science” is a “proper concern” of government, then we might ask how government might determine whether any particular area of science lacks adequate non-federal “cultivation.” Are there areas of research that the government would do well to stay out of? For these areas, government money might chase out private money rather than augment it. For these areas, too, the promise of government money might invite in people who make their careers chasing government money rather than doing something independently useful–and thus also swamp out the privately supported investigators.

We might also ask what the government should do with regard to funding arrangements and inventions when it does choose to cultivate an area of science. Should such funding look like procurement (as now) or like fellowship (which even Bayh-Dole disclaims an interest in)? It may well be that the way to deal with Bayh-Dole is to leave it on the books but move federal funding for subvention research to fellowships. There would be huge immediate gains. Fellowships do not carry the same indirect costs that sponsored research does. Fellowships do not require wasteful reviews of proposals, most of which are rejected. Fellowships to not require people to cater to whatever happens to be the consensus trendy topic for research. Fellowships do not require the horrible overhead of Bayh-Dole or even an expectation of institutional ownership of inventions.

For all of those folks arguing that government funding for basic research is essential to innovation and national prosperity, what could they say if the federal government shifted its subvention funding for research from procurement to fellowship? Perhaps they would argue that doing so was unfair as it cut institutions out of their indirect costs and their patent ownership claims–as if institutional administrative costs and patent licensing business was actually what’s essential to innovation and national prosperity. That would be good for a laugh.

With a fellowship approach, the federal government could leave inventions as they happened, neither taking title nor demanding a license. What would matter, for an investigator to receive any additional fellowship support, is what the investigator had done with the support already provided, including what the investigator (and any inventors working with the investigator) had done with any inventions they had made. One might then review past decisions and actions to reveal the potential for independent science, rather than review statements of intentions and future work. If one can state future work with sufficient detail to be reviewable as prospective science for government grant review committees, then that work is already pretty dull stuff. As I’ve been repeatedly told, to win a federal grant, one has to have already pretty much done the work to be able to write the proposal with sufficient clarity to be competitive.

It may be, then, that the federal government should not have moved into medicinal chemistry as an area of research, and should have left that area to the pharmaceutical industry to support. Given that the federal government did move into medicinal chemistry, it ought to have made a commitment to follow on from exploratory work to screening to development of product ready for commercial distribution–as it had done for leukemia and malaria. Why not for other areas? Why just fund exploration, but then demand to own whatever might be discovered, only to give the discovery away to everyone? I’m not ready to believe that monopoly rights are the only, best, or most effective way of developing compounds that prevent disease, cure disease, or repair injuries; but it is a worthwhile to ask whether the government botched its entry into medicinal chemistry research and thus created a situation that it was reasonable for the pharmaceutical industry to resist–and even for NIH insiders to undermine PHS policies. The NIH funding program appears as scorched earth for private investment. The NIH flooded an area of research with funding and so made private initiatives that involve substantial expense unattractive, if not impossible within the business framework of pharmaceutical companies.

We arrive then at the idea that Bayh-Dole is a patch on a botch. The patch turns public money into a subsidy for pharmaceutical company investors, giving them a better betting game as they play for other people’s money and support a monopoly approach to drug development and pricing. The patch also requires institutions to strong-arm inventions from inventors to ensure that no one has any opportunity to find alternatives to the monopoly model.

In Bush’s scheme, a university inventor, being a free intellect allowed free play, would have decided what inventions to recognize, what inventions to publish and which to patent (and therefore publish through the patent system). Inventors would then have controlled the quantity of proprietary claims on their work. They also would have the choice of how to manage patents if they wished to obtain patents. They could manage patents to document priority and technical expertise; to control quality or safety; to preserve a commons against those who would use patents to block or disrupt it; to commercialize an invention to their own advantage (or to that of a company). They could break up a patent right and permit use by all while controlling the right to sell. Or they could trade in patents as monopolies, producing monopolies from their inventions and selling off the right to re-issue the monopoly to others. Any of this. But at least it would be decisions made by individuals free of institutional controls; free of institutional demands to patent everything and institutional demands to operate as ad hoc patent offices, dispensing monopolies to favorites for a share of the action.

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