Taking Apart APLU’s Talking Points on Bayh-Dole, 4

One more bit about Bayh-Dole in the APLU Talking Points:

Before 1980, fewer than 250 patents were issued to U.S. universities annually; discoveries were rarely commercialized for the public’s benefit. By contrast, according to a recent survey by the Association of University Technology Managers (AUTM), in 2015 alone, U.S. universities garnered 6,164 U.S. patents, led to the formation of 950 new startup companies, and generated more than 700 new commercial products

More nonsense and gibberish. First, the numbers aren’t accurate. In the years before 1981, universities and related nonprofits were acquiring between 350 and 500 US patents per year, with Research Corporation acquiring 100 to 160 more. APLU doesn’t do history well. History, apparently, is not a friend of APLU’s Talking Points. Of these 500-600 patents a year, fewer than 100 recited federal funding. In recent years, universities have been acquiring patents at the rate of 6,500 to 7,000 per year, of which 3,500 recite government funding. The numbers are obviously larger–but then the federal research budget has also grown substantially, patent law has changed to make software, life forms, business methods, and the like patentable, and university administrators have dedicated themselves to be non-selective in what they attempt to patent. What’s changed, meaningfully, is the ratio of federally funded patents to others–from 14% in 1976 (when the IPA program was still active) to 47% in 2016. That means a much higher percentage of patents held by universities are encumbered by the bureaucratic nonsense required by Bayh-Dole’s standard patent rights clause–none of which has anything whatsoever to do with innovation, entrepreneurship, or commercialization.

The Talking Points reports a number for patents “garnered” by universities in 2015. It’s just that this number is not the number of patents on inventions made with federal support. That number is around 3300 in 2015 (my count includes nonprofit foundations which often are fronts for university patent ownership).

The bigger point, obscured by the Talking Points, is that before Bayh-Dole, other than in the NIH and NSF’s IPA programs, universities were generally not involved in the patenting–any patent work went to patent management agents such as Research Corporation or Battelle or University Patents. The agent obtained the patent, not the university. Where the university wasn’t involved, the patents were awarded to the inventors, or to the companies the inventors started, or the companies the inventors chose to assign their inventions to. Federal funding mostly didn’t figure–there wasn’t all that much of it, and most of what there was went to a couple of handfuls of universities. Licensing patents expressly for university revenue was largely an innovation of the University of California, MIT, and Stanford. (WARF licensed for money, but it was a non-university operation and made most of its money by using patent royalties to invest in the stock market, where it did quite well–much, much better than it did with its patent licensing).

The federal government’s new extramural research programs were based on the idea of subvention–that the government ought to support the work of university faculty to explore the frontiers of science. This funding was to be distinct from applied research in government labs or procurement research supplied by commercial contractors. The government would provide support to faculty through their universities, and compensate the universities as well for releasing faculty to work on these projects, and for the indirect expenses for doing so–including facilities costs and administrative costs. The government contracting expected that any inventions made in subvention research would be delivered to the funding agency, which would decide whether to dedicate the invention to the public domain or patent it (to publish it via the patent system, to control quality, to deal with foreign competition to domestic efforts) and license non-exclusively, royalty-free.

University patent brokers and pharmaceutical companies hated this approach, and hated especially that the Public Health Service followed the Kennedy patent policy that public health matters should not become a market for patent monopolies on inventions made in subvention research. If the research was in the public interest at the start, then even when inventions were made, these should continue to be in the public interest by being made available to the public. The federal government was not in the business of suing its citizens for practicing the results of the research they had supported by subsidy. Nor was the federal government motivated to authorize others to sue citizens on its behalf, nor was the government motivated to use the patent system to raise revenue for its own operations. In fact, the U.S. patent system was restricted to inventions on their merits, with exclusive rights reserved to inventors (not to employers or even more remote to universities that host subvention research) precisely to preclude the federal government from dealing in monopolies (issuing itself patents, say) for the money. That abuse had happened in England, and in some of the states, and the newly constituted U.S. was not keen to repeat it.

The claims behind Bayh-Dole are that the law legitimized university invention ownership (rather than agents or inventors or the federal government), that universities were to patent (and therefore–illogically–to promote private monopolies), and that the incentive for patenting was monetary gain. Here’s Joe Allen:

Prior to Bayh-Dole, when the federal government took invention rights away from their creators making them available to all through non-exclusive licensing (similar to the open source model), Congress found that not one drug had been commercialized from NIH funding.  About 28,000 federally funded inventions gathered dust in Washington, benefitting no one. This is not surprising since prior government policies destroyed the intended incentives of the patent system.

Almost nothing in this paragraph is true. But it gets recited as true, and that is apparently good enough. Check the end of the paragraph–the complaint about “prior government policies” is that they “destroyed the intended incentives of the patent system.” Well now, if those incentives for universities are directed to advancing the public good and not revenue generation, then just what are those incentives? But Joe Allen argues, apparently, that the incentives of the patent system that matter are those that exclude others to create monopolies by which commercial ventures can make loads of money–revenue generation. This revenue generation is, by Allen’s argument, the public good in Bayh-Dole, and that obtaining something at a monopoly price is a really good thing if one is dying and the only way the government has arranged things so that one can get the drug at all is if a pharmaceutical company has a monopoly on it and can charge that monopoly price. That must be the public good in Bayh-Dole. Universities deserve a share of this monopoly income as their take for compelling inventors to give over their inventions and the cost (treated as an investment) of patenting. Inventors get a share of this monopoly income to shut them up and induce them to participate in the “program.” As Michael Young put it, “Uh, it doesn’t hurt to have a couple of extra Porsches in the faculty parking lot, I don’t deny that for a moment….”

The APLU should denouce Joe Allen’s representation of Bayh-Dole’s incentives as counter to the APLU’s statement of principles on the matter. But will APLU do so? What do you think? Where do they butter their bread?

discoveries were rarely commercialized for the public’s benefit.

APLU argues that commercialization of discoveries is the public benefit. Why do the Talking Points then append “for the public benefit”? In Bayh-Dole, there’s a public covenant–that inventions are to be used so there’s a public benefit on reasonable terms. The public benefit in Bayh-Dole is that there can be patent monopolies but not monopoly pricing or monopoly denial of access. The APLU ignores the Bayh-Dole public covenant. Folks like Joe Allen denounce such things as “destroying the intended incentives of the patent system.” The institutional taking of inventions from inventors destroys the Constitutional foundation of the patent system. That might be a good APLU talking point. Make that a virtue–

Universities have cleverly and systematically undermined the Constitutional foundation of the patent system by ensuring that no university inventor will ever hold personally the exclusive rights to any invention he or she has made.

Now, about discoveries. First, discoveries are rarely commercialized anyway, university discoveries especially. However, the Harbridge House study, looking at two years of federally supported inventions, found that the highest and fastest commercialization rates took place when inventions were made and patented by commercial contractors with experience in the area of the invention. If Congress wanted to increase the rate of commercial use of inventions made with federal support, then it should shift research funding from universities to capable commercial companies. It is that simple. Put $30 billion a year directly into company research. Skip the nonsense and waste of university research, ineffectual and often incompetent university patent brokers, the bother of ghastly licensing agreements, the clever non-compliance with Bayh-Dole, and all t hat. But of course, doing so would cause the APLU to shed huge tears of turnip juice. If the APLU really cared about commercialization for the public benefit, it would advocate for federal funding to shift to companies.

The problem for the APLU with the new discoveries rarely commercialized claim is that whatever the rate was before Bayh-Dole (or before the IPA program restart in 1968, or before the ramp up of federal funding to universities), the rate is undoubtedly much lower now. Universities are indiscriminate in claiming ownership of inventions, sit on massive piles of them like covetous dragons, and do woefully little to license them–and even those exclusively licensed rarely come to anything. APLU has no evidence that inventions licensing is resulting in a higher rate of commercialization or even that what does rarely meet a threshold for commercial product has much public benefit, let alone on reasonable terms, let alone contributes much of anything to economic development, or that any of this gets along so much the better because the university has inserted yet another layer of bureaucracy in the process by creating a shell startup company to receive the exclusive license. It’s all rot. Consider then:

in 2015 alone, U.S. universities garnered 6,164 U.S. patents, led to the formation of 950 new startup companies, and generated more than 700 new commercial products

These figures are based on a survey result–not audited, not consistent, not verified. In 2014, the University of Washington was outright fabricating startup numbers to supply to the survey. Utah had been doing the same thing for years before. And where a startup licenses inventions from multiple universities, they each count the startup as their own, so AUTM inflates the number of startups. It is not at all clear where the 700 new commercial products figure comes from–but it is clear that those products are not the result of patents issued in 2015. Notice, however, that APLU has slipped from talking about Bayh-Dole, which concerns only federally supported inventions, to all inventions managed by universities. We have seen that half of those inventions don’t involve federal funds and have nothing to do with Bayh-Dole. But APLU doesn’t have any information for the portion of inventions that have been made with federal support. If they did, and that information supported their claims, don’t you think they would trot it out? They don’t have it, and if they did it wouldn’t support their claims, and so they are afraid to even try to get it. To paraphrase the good state senator in Utah, APLU and its member institutions are “unwilling to spend the funds necessary to investigate that their patent management programs are effective.”

Even if one is impressed with 6,100 patents, keep in mind that if these patents are not licensed, then each one represents an important research finding that has been kept from public use. That’s all. Same with 950 startup companies. If each has taken an exclusive license to a patent, that’s one patent (and a broad swath of inventive work) that is not available to anyone else to practice. Unless that startup company produces products based on that licensed patent, again, the effect of the exclusive license is to prevent the public use of the invention. Again, the 950 startup companies–many likely shell operations–is a measure of how the most important inventions of all have been kept from the public. And why? So that speculative investors can attempt to make money, and so the university can share in their profits when they do. Back to revenue generation. If any university administrators truly believed that the creation of speculative monopolies around university patents was itself a public good, then they would license their patents at no charge–in fact, they would assign them at no charge to best enable those monopolies to operate as intended, exploiting the patent system to exclude all others, to troll industry if product development failed, whatever.

And even if one persists in being impressed by 6,100 issued patents and 950 startup companies–in terms of economic development, these are rounding errors. In 2015, about 300,000 utility patents were issued. University patenting is 2% of the total. Bayh-Dole patenting is 1% of the total patents issued. It’s just that the university patents block the flow of research to the public domain, to commons, to standards. If it is good public policy to ensure there’s no public domain–if that’s the route to innovation–then Bayh-Dole is doing a great job. If university research should not contribute to the public domain, or to commons, or to standards–then we are doing great. In 2015, there were 679,000 new companies formed in the United States. The university contribution is .0013 of the total, and the Bayh-Dole total even much less. These are not impressive figures for university patenting and startup activity, especially given the $60 billion or so expended each year on university research (about $35 billion coming from the federal government). We might find, then, that the government handing out $35 billion a year for research does more by way of economic contribution–money that gets spent–than does the universities’ gawd-awful patenting programs, that bottle up key findings, prevent the inventors from practicing their own inventions, and create private speculative monopolies–which are all about revenue generation, even though they infrequently generate anything but bitterness and delays and barriers to use of inventions made with federal support.

University technology transfer and commercialization, since Bayh-Dole, has been built on a culture of “untruth and lies.” That is the legacy of Bayh-Dole. That is the dominant rhetoric. That is what APLU repeats, what AUTM repeats. If it’s politics, then we can expect the lies, because that’s what political staffers are accustomed to doing. But if folks want to communicate to the public the importance of their work, then they owe the public something other than the political untruth and lies that they have grown accustomed to repeating. Repealing Bayh-Dole won’t stop the untruth and lies, but it will force folks to change their untruths. Legislating public universities out of the patenting business would go a lot further than repealing Bayh-Dole. Perhaps we should start initiative campaigns to get laws that prevent public universities from dealing in patents. That would be a good start to implementing Bayh-Dole the way it is drafted.

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