Bayh-Dole’s only purpose is to exploit public suffering for profit

The Bayh-Dole Act was created to permit the pharmaceutical industry to gain patent monopolies over inventions in medicinal chemistry made with federal government support. I have been through the history. I have worked through law for a decade. I practiced for fifteen years under the standard patent license. I have listened to the shop talk of university licensing officials, having been one. I have listened to the talks at AUTM meetings and read the “guidance.” I dealt with these issues in the Stanford v Roche proceedings, helping to shape the amicus briefs that the Supreme Court followed in its decision. The outline of this conclusion is clear from the evidence.

Disregard the bluster about national competitiveness, the market failure of American innovation, or the mythic 28,000 unused government patents. Disregard the bluster about the cost to develop publicly supported inventions for public use, or that inventions available to all will be used by none, or that the government is ineffective at promoting use of the inventions it owns. Disregard the bluster about reversing a presumption of title, or implementing a uniform patent policy. Disregard the bluster that no drugs were developed from federally supported inventions before Bayh-Dole. Disregard the bluster about the wild success of Bayh-Dole. All of this bluster is demonstrable rot. Some of it is usual political posturing. Some is outright lies. Some of it is self-serving illusion. Some is theatrical hand-waving. All of it is intended to deceive.

There was and is only one purpose behind Bayh-Dole: to feed patent monopolies created with public subsidies to pharmaceutical companies who then exploit public suffering as a market using monopoly pricing on new prescription drugs.

The bluster is to rationalize this outcome, to distract from it, and to make it appear that there are public protections in place to limit any problems. To make it appear virtuous, desirable. But it is rot. Bayh-Dole is a dismal failure with regard to research progress, innovation, collaboration, competition, and public benefit. It has failed on its premise of practical application. Its side effects are even worse, blocking the use and development of many research discoveries behind incompetent or barely competent university-created patent paywalls. 

Among the illogical rationalizations for Bayh-Dole is the implication that since nonprofit organizations work in the public interest, whatever they choose to do by way of patent licensing surely must also be in the public interest. Another rationalization is that the only (or best or fastest) way that new therapeutic compounds may be developed for public use is through the agency of a single corporation providing the risk capital for the effort, unavailable through any other means, for which the corporation and its investors should be rewarded with a two-decade patent monopoly control of the market for any drug that might alleviate suffering–but better to make acute conditions chronic than to prevent or cure. The corporation and its investors, in turn, will devote their profits to funding the development of additional drugs, and the nonprofit patent owner to more research, in a virtuous cycle of public-private collaboration. Sounds almost nice. It just doesn’t happen that way, folks.

The “only way” is a problem. There are other ways, but those ways run against the business proposition of big pharma. A “single corporation” is a problem. In other industries, companies share common technology platforms, distribute the development costs, and compete on other factors. Even the idea that an invention finds its only or in the alternative best use as a mass-produced proprietary commercial product is faulty. Many research inventions have immediate application as research tools; many method inventions may be practiced by anyone without significant “development” costs and without the need for the intervention of a “mass produced” method. Same for many compounds and devices–there is an immediate practice use available for anyone with an ordinary or better skill set and modest resources. The large development cost arises only where a large company must act (large companies are often much more expensive) or there are years of clinical testing necessary to prove safety and efficacy (as in the government regulation of the patent medicine industry).

The business proposition behind Bayh-Dole is that the pharmaceutical industry should obtain patent monopolies from nonprofit organizations and from the federal government directly, provided that the nonprofits and federal government get a share of the private patent monopoly upside. That is, the proposition in Bayh-Dole is that private patent monopolies created with public money are acceptable so long as a nonprofit or the federal government gets a piece of the monopoly action. Bizarre? Yup. Successful as rhetoric? So far, apparently.

Now look at the prescription drug price debate. Folks want the federal government to use Bayh-Dole somehow to rein in prescription drug prices. This is nuts, because Bayh-Dole is designed to do just the opposite. Or, rather, Bayh-Dole was set up so that it would never be implemented according to its statutory and contractual terms, and so would preclude efforts to control monopoly pricing.

Bayh-Dole’s standard patent rights clause has never been complied with in its substantive parts by universities. They don’t comply with the written agreement requirement with their inventors; they don’t comply with the restriction on assigning subject inventions and instead include invention assignment with their exclusive patent licenses; they don’t comply with the preference for small business licensing; they don’t properly account for their use of income earned with respect to subject inventions; they don’t properly identify subject inventions; they don’t work within the restrictions on patent property rights for subject inventions. And where they don’t comply, federal agencies have no obligation to enforce the patent rights clause required by Bayh-Dole.

Oh, and the federal agencies are required by Bayh-Dole to keep any reporting about the use (and non-use) of subject inventions a government secret. And even where Bayh-Dole requires government agencies to secure rights to make, use, and sell subject inventions (and authorize others to do so as well), federal agencies don’t use those rights. The government practice license has been wasted for nearly all of the some 30,000 publicly supported inventions patented by universities in the Bayh-Dole era.

And of course, for the entire run of Bayh-Dole, its advocates have misrepresented the law. First, they said that Bayh-Dole vested ownership of federally supported inventions with the organizations that hosted the research. Total fabrication. Or, because lies have no common story, the advocates claimed that Bayh-Dole gave the host organizations a first right of refusal, or prevented inventors from assigning to anyone else, or a second right of refusal, or a right to take ownership upon notice to the federal government, or a mandate to take ownership. All piss-lies. The Supreme Court laughed the advocates off in the Stanford v Roche case–including Senator Bayh, as reckless as the rest of the advocates, which included scores of university attorneys who willingly signed up for the exercise in malpractice.

After the Supreme Court ruling in 2011, the advocates pivoted to the equally debased claim that to comply with Bayh-Dole (or gain the benefit of Bayh-Dole, or to carry out the federal mandate implicit in Bayh-Dole, or to compensate for the technical defect created in Bayh-Dole by the misguided Supreme Court–pick your next set of lies), universities had to obtain an assignment upfront from every participant in federal research–before any invention was ever made. The present assignment claim was just another version of the vesting claim.

The advocates have even agitated for NIST to change the written agreement requirement–which protects the federal government’s interest in inventions–to become an assignment clause to protect the host organization’s interest in those same inventions. Awful folks. It’s just that Bayh-Dole provides no authority for such a requirement in the standard patent rights clause, and the Supreme Court ruled as much. Bayh-Dole, one would think, forbids just such a vesting clause from being included in any standard patent rights clause without a determination of exceptional circumstances. The advocates for the faux version of Bayh-Dole, however, have no interest in following the protocols of Bayh-Dole–after all, those protocols were designed not to operate, as Howard Bremer crowed about afterwards with regard to march-in procedures.

Whatever is happening during the Bayh-Dole era has next to nothing to do with Bayh-Dole the statute or the patent rights clauses created under its authority.

Bayh-Dole is an example of the failure of the rule of law. What’s happening is a sucker punch thrown while there’s an appearance of regulation. Inventors have no standing to oppose actions taken in the name of Bayh-Dole. Nor do companies cut out of access to inventions while nonprofits and federal agencies feed patent monopolies to big pharma and to the speculative investors in startups that hope to sell out to big pharma. The Supreme Court noted this absence of protections and called it “deeply troubling” but for the fact that Bayh-Dole applied only after a research host had obtained ownership of an invention by conventional methods. The flaw in the Supreme Court’s reasoning, of course, was that the court assumed that Bayh-Dole’s patent rights clause was being complied with, that federal agencies were enforcing the required contract provisions. But even Stanford in the Roche situation did not comply with the patent rights clause in its funding agreements. But no one cared, apparently. They all took Bayh-Dole to apply directly to universities–and clearly it doesn’t, it applies to federal agencies and to inventions arising in federally supported research and development.

To cover for Bayh-Dole’s only purpose, the law was made to be government-wide, as if all inventions must suffer the same pathway to public benefit that those in medicinal chemistry were doomed to under Bayh-Dole. While speculative investors have gotten involved in non-pharma startups, the outcomes have been at least just as bad as they are with medicinal chemistry–and arguably much worse, since many non-pharma inventions do not require significant “development” to be used or used even as mass market commercial products. Indeed, many such non-pharma inventions are much more suited to make contributions to cumulative technology, common technology platforms and libraries, research tools, standards, and skilled technology practice in which a commercial product version is often late, expensive, and less effective.

Bayh-Dole creates a hole in government policy that permits the creation of private monopolies at public expense, especially for new prescription drugs. But Bayh-Dole is not enforced. The hole therefore is even bigger than one might imagine. The public policy under Bayh-Dole is that no one should care whether nonprofits team up with pharmaceutical companies and speculative investors hoping to create pharmaceutical companies or sell to pharmaceutical companies to exploit patent monopolies in areas of public suffering. We might say the public policy of Bayh-Dole is to use public money to encourage predatory exploitation of public suffering. Or, the public policy of Bayh-Dole is to encourage nonprofits to participate in such predatory exploitation, and so make it a virtue, make it a necessary outcome of prescription drug development. Make the announcement that a university has received $750 million from a patent monopoly drug deal appear as a wonderful public benefit, when the public is getting screwed by prices on that drug 10x to 25x higher than the rest of the world–and the pharma company involved is reaping billions of dollars a year. It’s a crap deal for the public, for inventors, for lab directors, for small companies, for anyone not involved in medicinal chemistry and big pharma.

Since Bayh-Dole’s patent rights clauses are not enforced, repealing Bayh-Dole won’t in itself do a damned thing. The crap deal would just continue–the rationalization would just change to a new thing, such as “this is clearly the best way to ensure the public benefits from federal research expenditures” or some such other unsubstantiable nonsense.

Bring everything to a head–start by repealing Bayh-Dole for nonprofits dealing in inventions in medicinal chemistry. That’s where Bayh-Dole struck. That’s where to strike back. One doesn’t even have to repeal. Just enforce on nonprofits Bayh-Dole’s patent rights clause for medicinal chemistry. Require the NIH, in particular, to enforce the patent rights clause for nonprofits. Better, move enforcement out of the NIH, since it is an agency that cannot be trusted with enforcing Bayh-Dole’s patent rights clause, since it was the original author of Bayh-Dole and sent its guy to draft the patent rights clause, too.

Further, require public reporting of subject invention use in the area of medicinal chemistry, including making public the terms on which the invention is made available to the public–and that includes the diligence clauses in any licensing agreement, the scope and duration of the license, the royalties and other payments, and pricing. It cannot be that in such matters what is claimed to be “in the public interest” cannot be revealed to the public.

And the government should act on its non-exclusive license to practice such inventions–everywhere that a patent monopoly is created around a drug discovered or developed with public money, the government should authorize others to make the drug for all patients served by government health care. Since that government license in Bayh-Dole is broad–including inventions made *in part* under a funding agreement, that license includes all downstream inventions made by any organization that is a party to that funding agreement. That includes downstream inventions by the organization that hosted the inventive research even if that downstream work was funded by the corporate licensee–the new work was supported in part by the initial work. Further, any organization receiving assignment of the invention from a nonprofit is by the terms of the patent rights clause made to accept the patent rights clause–and thus becomes a party to the funding agreement, on the same terms as the nonprofit. Thus, any inventions made by that new party to the funding agreement are also subject inventions, supported in part in the performance of work under the funding agreement. The government needs no additional licenses to authorize companies to make supported drugs as generics.

If we looked at the Bayh-Dole Act public policy as it would be if enforced in the patent rights clause and the Bayh-Dole statement of patent policy with regard to subject inventions, that policy would state, put baldly, that every prescription drug developed with public money would become generic immediately upon FDA approval unless that drug is offered to the public at no greater price that would be charged by generic drug manufacturers working in a non-proprietary market.

No doubt these policy moves would be opposed by the advocates of the faux Bayh-Dole Act. Bayh-Dole is, after all, positioned to oppose such public access. The claim is that the public won’t benefit. Untrue. Salk vaccine for polio. Penicillin. Oh, digital computer. Internet. World wide web. Yeah, even WordPress.

The public policy permitted under Bayh-Dole is that the federal government should subsidize big pharma to exploit public suffering. We should all be grateful to pay monopoly prices to reward the exploitation, since it involves private risks and expense.

This exploitation, it is argued, creates a wonderful speculative, volatile “market” for investors, and this “market” is the public good. BIO argues as much when it promotes Bayh-Dole as having created U.S. “leadership” in the biomedical industry. Yes, revenues go up when the federal government helps speculators exploit public needs. The genius in Bayh-Dole was to give the federal government these same rights–federal agencies could do exclusive deals just as universities could, with the same secrecy, the same financial interest in the patent monopoly conveyed, the same lack of oversight or accountability. What a crap situation for public research, for innovation, for local entrepreneurs, for industry practice, for standards, for collaboration, for public health.

The failure to enforce Bayh-Dole’s patent rights clause has created a speculative bubble in biomedical inventions. That has driven up prescription drug prices. That has all but eliminated competition where the public should expect competition–multiple sources, multiple formulations, multiple methods of gaining access. Competition does not merely protect against price gouging. Competition encourages availability in the case of any single company failure or failure of quality control in a given production facility.

While we are at it, let’s get public pension funds out of big pharma before we drain this rotten Bayh-Dole boil? Or at least have them take a big short position as we move to set things right.

With monopoly patent practices out the way for medicinal chemistry, we can consider enforcement of the patent rights clause for other areas. In the area of medicinal chemistry, we can revisit how research discoveries directly affecting public health are screened, are tested, are developed, and made available. There are plenty of approaches that do not require a private patent monopoly or monopoly pricing or the crushing of thousands of inventions behind institutional paywalls to justify seeking a handful of private patent monopolies.

Enforce Bayh-Dole’s patent rights clause, act on the government’s broad rights to authorize generic products, and chase out the faux Bayh-Dole poseurs and exploiters. It doesn’t have to be this way, and it doesn’t take an act of Congress to deal with Bayh-Dole. Everything that needs to be done can be done with executive orders. It is a matter of will. Bayh-Dole–faux Bayh-Dole–gives speculators a hunting license to exploit public suffering, subsidized by public money. It is time to end that policy. University officials won’t do it on their own. They are all-in on the exploitation for their financial share. So the federal government must hold them accountable for compliance.

This entry was posted in Bayh-Dole, Policy, Stanford v Roche and tagged , , . Bookmark the permalink.