Getting off your UFRDA

In 1981, Senator Harrison Schmidt introduced a bill to replace Bayh-Dole with a more general law regarding inventions made with federal support, the “Uniform Federal Research and Development Act of 1981.” It doesn’t appear that the university patent brokers had much fondness for the bill, and it failed to pass, despite being co-sponsored by a number of senators.

Much of the UFRDA is plucked from Bayh-Dole, but often with a slight twist, and sometimes the slight twists are rather significant. The strategy of the law is to state those situations in which the federal government can require assignment of inventions, and for all other situations allow the contractor to own inventions made with federal support. Thus, here are some situations in which the government can require title:

(2) the restriction or elimination of the right to retain title to any subject invention is necessary to protect the national security nature of such activities;
(3) because of exceptional circumstances, acquisition of title by the Government is necessary to assure the adequate protection of the public health, safety, or welfare, recombinant DNA research being considered an exceptional circumstance;
(4) the principal purpose of the contract is to develop or improve products, processes, or methods which will be required for compliance with Government regulations;

This set does not show up in Bayh-Dole. In Bayh-Dole, the contractor has a right to elect to retain title in all inventions, and the government may obtain title if the contractor fails to perform as required–fails to disclose, fails to elect to retain title, fails to file patent applications, fails to continue prosecution of patent applications. Otherwise, the government may march-in and require licensing if the contractor fails to achieve utilization, fails to require U.S. manufacture for exclusive licenses in the U.S. to use or sell, or fails to make reasonably available the invention as required by regulation or to alleviate public health and safety needs (see 35 USC 203).

Notice that in the proposed law, what is march-in material in Bayh-Dole is elevated to things that the federal government can invoke in contracting for research and so preclude contractor ownership of inventions rather than marching in when things go wrong. For march-in, Bayh-Dole sets up a prolonged cat fight between contractors and federal agencies, where the contractors get to have their claws out and federal agencies have to strip off all protective clothing. The UFRDA would have removed these areas from march-in.

Section (4) is responsive to the fact that in some federal agencies–notably the Department of Agriculture and the Department of the Interior, nearly all of the inventions created with federal funds and owned by the government were developed successfully to the point of practical application. That, at least, according to the Harbridge House report in 1968. While the NIH may have had problems, other federal agencies were doing just fine. The travesty is that the NIH had to metastasize its fuss with the increasingly regulated (because continually misbehaving) pharmaceutical industry into all other federal agencies, making it appear that the NIH vision of patent monopolies created by federal funding and handed in sweetheart deals to companies that desired monopolies was just the greatest thing, not only for health care but for all forms of research-based innovation.

Section (3) calls out recombinant DNA research as an “exceptional circumstance.” It would be interesting to consider how the biotech tools industry would have changed if the federal government had made Cohen-Boyer and Axel inventions, along with thousands of other genetic tools inventions (such as disease assays) available royalty-free and non-exclusively. Even Neils Reimers argued that the Cohen-Boyer inventions did not require patents–the techniques were going to get used, regardless. Was it a good thing that Stanford received over $250m for managing the patents? Perhaps. But if UFRDA had been in effect prior to Cohen-Boyer, things may have been very different.

Section (2) deals directly with national security areas. These were previously in DoD, Department of Energy, and NASA statutes dealing with weapons systems, atomic energy, and space technologies. Again, Bayh-Dole does not address such things other than to assert that it pre-empts these statutes.

In section 305 of that proposed law, we get an interesting requirement when a contractor does acquire title:

(3) require, where the contractor elects to retain title—

(A) the filing of a patent application within a reasonable time; and
(B) the filing of a declaration of the contractor’s intent to commercialize or otherwise achieve the utilization of the invention by the public;

It’s the declaration in (B) that’s interesting. Bayh-Dole does not require any such declaration. Instead, Bayh-Dole relies on the statement of policy and then does its best to detach the patent rights clause requirements from requiring specific compliance with the statement of policy. Under the UFRDA, a contractor would have to make a declaration of intent. That might make for interesting times if the contractor then fails to commercialize or achieve public use of any given invention.

Notice as well that the UFRDA does not mandate commercialization only–the aim is either commercialization or public use. Bayh-Dole carries similar wording but only with regard to what may be included in utilization reports–“The right of the Federal agency to require periodic reporting on the utilization or efforts at obtaining utilization that are being made by the contractor or his licensees or assignees.” No mention at all of commercialization. The definition of “practical application” also does not mention commercialization: “. . . in each case, under such conditions as to establish that the invention is being utilized and that its benefits . . . available to the public on reasonable terms.” Bayh-Dole’s only use of “commercialization” is in the statement of policy:

to promote the commercialization and public availability of inventions made in the United States by United States industry and labor

Here, the emphasis is on the use of inventions by U.S. industry, not on how universities seek to license inventions. Industry may use or may commercialize inventions–that’s the scope of the property right established for patents on subject inventions. If the owner of a patent on a subject invention (a “posi” owner) attempts to use the patent system to prevent the use of a subject invention by industry, we might think that such a use falls outside the established property rights of a patent on a subject invention as established by Bayh-Dole.

With a declaration required for each invention a university chose to manage, we might be better able to hold universities accountable for the patents they choose to own. At present, it appears that university administrators have accumulated on the order of 30,000 U.S. patents (about half federally supported subject inventions) and have got to practical application with about 0.5%–or 10x below the historical average for patented invention use. It might be that something as simple as a public declaration of intent, identifying a specific invention, might then serve as a basis for accountability. Inventors then would have a clear statement that acquisition of a specific invention is based on this intent, and not merely on the operation of policy, or a hope to make money, or whatever–but rather to commercialize or achieve public use.

This concern is buried in Bayh-Dole. It’s in the definition of practical application. There are traces in the reporting requirements in the standard patent rights clause–date of first commercial sale, for instance. But that date is just a leftover from the original Bayh-Dole, in which there was a time limit on exclusive licenses granted by nonprofits to large companies, and one starting point for that time limit was the date of first commercial sale. And there’s the march-in procedures, which ignore practical application and use “utilization”–which gets back to Bayh-Dole’s statement of policy but ignores the apparatus that controls federal agency patent rights clauses.

Perhaps Bayh-Dole should be amended to take advantage of the UFRDA’s approach. Introduce a new section to 202 that elevates some federal agency research purposes so that the government may acquire title outright. Require contractors to make a public declaration when they acquire title that they intend to commercialize or achieve public use of each invention they acquire. Then hold them to it. No more sitting on inventions. No more taking in more inventions than one can possibly manage. No more trolling. No more exclusive licenses that don’t result in anything. No more taking equity interests in companies to participate in speculation rather than restricting one’s consideration to earned royalties on sales and focusing on the primary requirement–commercialization or public use of the invention.

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