Patent Exploitation Alternatives

A patent allows a patent owner to exclude others from practicing the invention claimed by the patent–including any of its variants. A patent owner thus has a limited monopoly on the practice of the invention–making the invention, using the invention, selling the invention (and offering for sale, and importing the invention). By granting the right to exclude others, a patent also therefore allows a patent owner to include others who are permitted to practice the claimed invention.

We might characterize the alternatives this way:

practice the invention (make, use, sell), exclude all others

This is the canonical use of a patent–the inventor practices the invention to his or her advantage, exercising the right to exclude others for a limited time in exchange for publishing the invention.

do not practice the invention, exclude all others

U.S. patent law has no working requirement. A patent owner is not required to use a claimed invention or permit others to use it. The social contract is publication in exchange for a limited monopoly. The public benefit is having an open record of the invention. The inventor’s benefit is having a limited monopoly, however the inventor chooses to make use of that monopoly. Why wouldn’t an inventor work an invention? The inventor may not have the funding or ability. The inventor may have ten inventions and works only some of these inventions. The inventor may use a patent to prevent competitors from making something that they would make but which would compete with something the inventor already makes. There are plenty of advantageous reasons not to work a patent.

practice the invention, allow others to practice the invention

In this alternative, a patent owner uses the invention and finds advantage in allowing others also to use the invention. A patent owner may do this to create an industry standard, or to participate in an exchange of research tools, or to limit the incentive for others to design around the invention and make it obsolete, or to gain access to improvements to the invention made by others, or to cross-license the patent to gain access to proprietary technology developed by others. There are variations on this alternative. For instance, an inventor could make the invention exclusively but authorize many others to sell the invention. Or an inventor could use the invention and allow many others to make and use the invention, but limit who may sell product incorporating the invention.

Tesla recently announced that it would make its entire patent portfolio available for use on the argument that if others used and developed battery technology (and other technologies), the technology would improve more quickly and overall costs would come down.

do not practice the invention, assign the invention (and patent rights) to another

Here, a patent owner trades on the patent right–giving up ownership of the invention and patent to another, who then decides what to do with the invention (and the patent). Assignment of an invention takes place when the owner transfers all substantial rights in the invention to another–the rights to make, use, and sell. This transfer may be done expressly, by the assignment of title to the patent in the invention, or implicitly by exclusively licensing each of the substantial rights. In this latter case, the patent owner might retain “title” to the patent (that is, the record in the PTO will continue to indicate title in the name of the patent owner), but the invention will be assigned to the new owner, who could record that ownership interest in the PTO.

do not practice the invention, allow others to practice the invention

While this alternative may appear similar to practicing and allowing to practice, it really is very different in practice. The inventor orchestrates use by others and does not use directly. This is a classic licensing approach to patent management. In one version, independent inventors obtain patents and then seek companies willing to make, use, and/or sell the invention, paying the inventor a royalty for the right. The patent troll is another version of this same approach, differing in that the troll waits until companies use technology within the scope of claims of the troll’s patent and then seeks a license with the threat of suit for infringement if the license offer is not accepted. In a third version, the inventor is simply indifferent to enforcing the patent for most purposes.

This alternative was the classic federal government position with patents that it obtained–that so long as companies built safe, quality products incorporating the inventions and made truthful claims about them, and contractors behaved in bidding for government work, and foreign companies and governments played fair with trade, then federal government had no particular reason to enforce patent rights in the domestic market. The federal government had no profit motive, no concern with competition, no need to hold a monopoly in the invention, and if the federal government did want a monopoly, it had no need to use the patent system to get it. The federal government would enforce a patent when doing so forced a company to build a safe product, or one with consistent quality, or one represented properly in advertising. The federal government might use its patent to block import of product produced by foreign companies if those companies weren’t playing fair (however the federal government might view “fair”), such as selling in the U.S. under cost and so damaging domestic industry.

do not practice the invention, allow only one other to practice the invention

Again, while this alternative looks similar to allowing others to practice the invention, it too is very different. Also, this alternative looks similar to assigning the invention to another, and in some circumstances this alternative may indeed involve assigning the invention, but with requirements attached.

This is the now dominant university “commercialization” approach–gain monopoly control of inventions made at the university, communicate that monopoly to a single company to be exploited, sharing financial benefits of that exploitation with the university. In this version, the patent monopoly is, by license contract, used to exclude all others, so that the exclusive licensee (or assignee) reaps maximal benefit (so the idea goes) for its own commercial use of the invention (market share, sale price, and the like).

Now the question for policy is–what forms of patent use should the federal government encourage for inventions made at nonprofits in basic research supported by federal money to advance science?

Bayh-Dole advocates argue that the federal government should let universities use any form of patent exploitation they want–any legal use of the patent system is in the public interest. Some university folks, however, argue that patent trolling isn’t acceptable–even though universities do troll and construct their licenses so that trolling is an acceptable outcome, such as for failed startups with exclusive licenses. The public covenant embedded by Bayh-Dole in federal patent law requires the patent system to be used to promote the utilization of federally supported inventions. That means a working requirement–not that a nonprofit patent owner has to use any given invention, but rather must use patent rights to promote use of the invention, presumably better use than would otherwise happen without patents and better use than would happen when patents are used for financial purposes and not primarily to to support use of inventions.

At one time the default public covenant for federally supported inventions was, for anyone other than a capable commercial contractor, dedication to the public or non-exclusive licensing. The special case was for nonprofits who would not use an invention but who might convey the invention (with monopoly patent rights) to a company that would develop the invention to the point of use, then get a few years of exclusivity for their contribution, and then non-exclusive licensing to all. But Bayh-Dole wiped out that idea, and advocates for Bayh-Dole then obscured the remaining bits of public covenant that really are still in Bayh-Dole.

Given that Bayh-Dole has been a dismal failure of a law–tying up research inventions behind bureaucratic paywalls, dropping commercialization rates by 80x over pre-Bayh-Dole non-federally funded inventions made at nonprofits–we ought to consider alternatives. Stuff gets done despite Bayh-Dole, not because of it. Perhaps stuff should get done without the burden of Bayh-Dole.

If getting patent rights to companies is so important, then a federal policy to consider is eliminating university ownership of inventions from the mix altogether. Allow inventors to assign patents in federally supported inventions directly to companies. It wouldn’t take much to modify Bayh-Dole in this way. Follow the same wording as the subcontracting clause in the standard patent rights clause–something not in Bayh-Dole anyway:

“Nonprofit contractors shall gain no interest in inventions made under a funding agreement.”

One might go further: why even fund research at universities, if the purpose is to get patent rights unbroken to companies. Why not fund companies directly to do the basic research? Let the companies manage the patent rights. It turns out that companies, on the whole, do a better job managing patents for the use of inventions than do universities, which fixate on making money by insisting on commercial products developed within a monopoly. Most companies are willing to let value move through other business dealings and not attempt to focus the value in single patents. They cross-license and contribute to standards and are selective about what to patent in the first place–all things foreign to most university patent operations. The federal government could move $40 billion of university basic research to companies matched to the desired commercial outcomes and eliminate entirely the mostly bungled university effort to exclusively license to those same companies.

The only reason that universities are involved in the movement of patents from government funding to industry activity is the appearance that universities would handle patents differently from the ordinary patent shark–they would license non-exclusively, even royalty-free; they would license to encourage collaboration and competition; they would look out after safety and quality and truth in advertising. But no. University administrators cannot help themselves and so fixate on monpoly-based “commercialization” and “infringement”–just the things that federal policy in the past thought inappropriate for the outcomes of federally supported research that was supposed to advance science in the public interest. Universities have turned that federal support into a public subsidy for speculative investors. This subsidy for speculators, the argument goes, is the apex of public policy, a thing so very inspired–even though the economic impact of this wonderful misrepresentation of Bayh-Dole rounds to about zero. If the universities behave as if federally supported inventions are ordinary inventions, then there the rationale for involving universities in research pretty much vanishes.

If “basic research” is important to national science, then conducting that research at companies rather than universities preserves the commercialization model so loved by university administrators and makes it even more efficient–by eliminating the university bureaucrats. If folks want to argue that there’s something important about funding research at universities, then those same folks have to repudiate the present dominate dual monopoly approach that university administrators have adopted for patent management.

We might say, then, that universities, to preserve a distinctive role in basic scientific research, should by policy allow only two forms of invention management–

for research tools:

practice the invention, allow others to practice the invention

for everything else:

do not practice the invention, allow others to practice the invention

If a university thinks that it might obtain inventions simply to re-issue the patent to a favorite company, then it should not deal in the invention at all, and allow the inventors to decide what to do with the invention.

What about the special case? Screw it. Leave the special cases to inventors to deal with. If a university wants a policy on the matter, it is to repudiate faculty inventor involvement in special case stuff–not, that university bureaucrats can be bigger patent traders and trolls than mere inventors might be and therefore should arbitrarily own all possible inventions. If a university cannot live with non-exclusive licensing, then it should get out of the research patent business altogether. If inventors want to do a special case deal–assign their inventions to companies–then leave the inventions with the inventors for that purpose, or let inventors hire invention management agents to do the deals for them. You know, like before Bayh-Dole. You know, like how things were done that made Bayh-Dole modestly appealing, so federally supported inventions might move through the same channels of invention management expertise as those privately supported inventions.



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