Mississippi State University misrepresents Bayh-Dole

Here’s Mississippi State University’s Office Technology Management answering the question “Why does the University patent technology?”

It is required under federal grants – The University is required to patent and commercialize the technology under terms of the Bayh-Dole Act. If the University elects not to patent the discovery, the sponsoring federal agency may request ownership of the patent rights.

Untrue and misleading.

Bayh-Dole doesn’t require patenting, and doesn’t require commercialization. Let’s examine the assertions here with some care to see the details of the corruption.

Let’s start with the big picture. “The University is required to patent” makes it appear that Bayh-Dole requires the university to own federally supported inventions. How else can the university be required to “patent” a “technology.” But in the Bayh-Dole regime, it is the university’s own doing to claim ownership of inventions made with federal support–and that choice has nothing to do with Bayh-Dole.

The “terms of the Bayh-Dole Act” that matter are in the patent rights clause in each funding agreement. Bayh-Dole sets out what must be in the patent rights clause unless a federal agency justifies a different set of terms. Whatever a university must do is set out in the patent rights clause, not in Bayh-Dole. The default patent rights clause has a number of requirements that aren’t in Bayh-Dole (sections (e), (f), and (g) among them), and funding agreements contain other requirements not in Bayh-Dole that pertain–2 CFR 200.315(a) and .316, for instance).

Mississippi State is not required  to “patent” its “technology” “under the terms of the Bayh-Dole Act.” The university is not required to take ownership of inventions, and if the university doesn’t take ownership, then it has no obligation to file patent applications. Of course, if a university does take ownership of an invention and does elects to retain title to that invention, then the university creates for itself an obligation to file a patent application under the terms of the standard patent rights clause in the federal funding agreement. Bayh-Dole stipulates what must be in that standard patent rights clause and how a federal agency can change the clause. But Bayh-Dole does not require the university to own any invention. At best, one might write “Under the terms of the standard patent rights clause required by the Bayh-Dole Act, the University is required to file a patent application on each invention made with federal support that it acquires.” Or, if one insisted on making things too simple: “Federal contracts require the University to file a patent application on each invention the University acquires.”

Furthermore, Bayh-Dole does not require commercialization. The standard throughout Bayh-Dole is “utilization” or “practical application”–use of an invention so that the benefits are available to the public on reasonable terms. “Commercialization” here means, roughly, “the development of commercial products based on an exclusive patent license.” In university licensing practice, “commercialization” means, even more roughly, “any licensing transaction that brings in money, whether anything is ever developed as a commercial product or not–with our default license being exclusive.”

Mississippi State continues its rationalization of patenting:

It is generally required for commercial utilization – Patented technology is a driver of regional economic development, an expected outcome from state and federally funded research. And, commercial utilization of the University’s research is an important factor in evaluating the success of our research programs. Without patent protection, companies generally will not invest the millions of dollars necessary to bring new products to the market.

There’s nothing to indicate the source for the claim that “patented” technology is the “driver” of regional economic development. Let’s consider Starkville, Mississippi:

If we look at patents issued to residents of Starkville as a first approximation of the situation, we find 438 issued utility patents since 1989. Of these, 139 show an assignee in the state of Mississippi, and of these 95 are assigned to the university. That means about 10% of the patents issued to residents of Starkville remained in the state and weren’t encumbered by the university. Another 10 show an assignee in Alabama, but of these, six derive from a single initial patent application and the other 4 are assigned to universities in Alabama. The vast majority of patents made by residents of Starkville are assigned to companies far from the economic region–California, Florida, New York. Of the 123 utility patents issued to Mississippi State since 1989, 61 cite federal funding, or about 15% of the total patents issued to residents of Starkville. Perhaps Mississippi State licenses most of its patents in the Starkville area–perhaps the university could produce the data.

Here’s a story about Vibe, a student-led startup that’s doing well in Starkville. The company makes cubes that glow in one’s drink or bathtub. It’s a great story. It’s just that it doesn’t appear that the company has bothered to file a patent application. And here is a story about People’s Choice, a Starkville startup that creates healthy meals. I’m not seeing the patent as a driver of chicken enchiladas here. It may be that some inventions do require a patent to be “commercialized”–but the success stories that make the local paper appear not to require patents.

Just on the face of it, the Mississippi State claim that patents are a driver of regional economic development doesn’t hold up–even with a “generally” thrown in. Perhaps the university means that in some other region, this is true, even if not in Starkville–but what is the point of expressing that point in such an awkward manner?

Unless the university can show that is licensing patents to companies in the state of Mississippi–and that these companies then develop commercial products–and that those commercial products lead to economic development–job growth, expanded facilities, investment in new projects, and the like–then the claim is really a bunch of hot air. And for a state organization, one would think, a breach of the public trust.

And what about the idea that patents are “an expected outcome from state and federally funded research”? No doubt there are people who do indeed expect patents, but who are they and why do they matter? The university’s own intellectual property policy puts it this way:

MSU personnel recognize as two of their major objectives the development of new knowledge and dissemination of both old and new knowledge to the public. Inherent in these objectives is the need to encourage production of new and useful devices and processes, the publication of scholarly and creative works, and development of computer software.

The claim is that university folk “recognize” as “two of their major objectives” developing “new knowledge” and “disseminating” that new knowledge along with “old” knowledge to the public. Like a bad introductory paragraph to a five-paragraph theme, the policy works its way toward the role of intellectual property. But here, on the face of it, even if we accept the claim that university folk have these two major objectives among others, it is the new knowledge that is the expected outcome, not patents.

Patentable inventions and patentable and copyrighted materials, which are defined later as Intellectual Property, often come about because of activities of MSU faculty and other employees through the use of University resources. It becomes significant, therefore, that MSU use all of its available resources to insure utilization of such inventions and materials for the public good and to expedite their development and marketing.

Even here, the emphasis is not on patents but on “patentable inventions” and the garbled “patentable and copyrighted materials.” Now, a high school worthy clause “often come about because of the activities of MSU faculty and other employees through the use of university resources.” Rebuilt, the point appears to be that faculty often use university resources to make inventions and prepare works of authorship. Even here, there’s nothing that suggests that patents are an expected result. Patents are the result of choices made by university administrators. This is the necessary result of the university’s patent policy, which demands ownership of intellectual property and reserves to the university the decision regarding “protection”:

The University has a responsibility to inform a disclosing employee in a timely manner regarding its decision to pursue protection via patent, or other means, of disclosed materials, devices, processes, or other inventions. The University will notify the employee in writing of its intent to pursue or decline to pursue protection. Such notification will be provided within 90 days of a written request from the disclosing employee

An inventor is reduced to making a written demand to be kept informed, and all he or she can expect back is a letter that discusses “intent” to “protect.” Not, say, that either a patent application gets filed in that 90-day window or the invention is waived to the inventor. Nothing that definite. The point: the university decides whether to file a patent application. At best, it is university administrators that might “expect patented technology” from university research. The researchers themselves have already been portrayed as developing and disseminating new knowledge to the public. If they had an expectation of patented technology from their work, that would be the place we would find the assertion: “MSU faculty devote their research efforts to the development of patented technology.” But surely that’s not true. They don’t. And they don’t suffer administrative discipline for failing to produce patented technologies.

And, commercial utilization of the University’s research is an important factor in evaluating the success of our research programs.

That’s an interesting idea–that an important factor in evaluating university research is whether it serves profit-seeking interests. There are definitions of “innovation” that require commercial exploitation. “If it’s not a commercial product, then it doesn’t count.” In this view, federally supported research is welfare for corporate new product development. Corporations cannot possibly come up with new products on their own–so the public should pay thirty or forty billion dollars a year to subsidize the effort.

Certainly there are research programs at the university that do expect “commercial utilization”–new varieties of crops, say–but there are many more that could care less and *ought* to care less. For those programs, however, in which “commercial utilization” is “an important factor,” why should patented technology be made a requirement? Commercial use is, after all, includes use by companies engaged in commerce–and this is distinct from the development of commercial products to be sold. There’s a difference, and for intellectual property management it is a huge difference. But the good folks at Mississippi State don’t appear to recognize it.

Without patent protection, companies generally will not invest the millions of dollars necessary to bring new products to the market.

Except that companies do invest all the time in developing products without “patent protection” for each and every feature. Plant “inventions” are this way. The development work is done on the research side. In information technology and with many sorts of methods, it is this way as well. Caltech is suing Apple and Broadcom for adopting stuff without a monopoly position. Stanford sued Roche for the same thing. How dare companies develop products without first taking a license from the university? The argument that companies won’t develop products–and that the products will cost millions–is untrue in the general case. Companies in industries highly sensitive to patents will expect patent positions, but companies in industries with less care for patenting don’t require patent positions. I once dealt with audiology device company regarding an invention a University of Washington faculty member had developed–my job was to find licensees. But audiology device companies were not much interested in licensing patents owned by others. One company representative told me (I paraphrase), “We would rather develop an 80% better solution and avoid dealing with you and your patents altogether than have a 95% better solution and be saddled with you and your nasty patent license.”

We might put things this way: most companies will use and develop new technology without patent protection if it advances their interests. The justification to spend millions on development of a new product rarely depends on a patent position, and even more rarely on a licensed patent position. Guy Kawasaki discusses patents for startups in Art of the Start:

Lie #7: “Patents make our business defensible.”

Patents do not make a business defensible. They might provide a temporary competitive advantage–particularly in material science, medical devices, and biotech companies–but that’s about it…

By all means, file for patents if you can, but don’t depend on them for much more than impressing your parents unless you have the time (years) and money (millions) to go to court…

When talking to investors, the optimal number of times to mention that your technology is patentable is one. Zero is bad because it implies that you don’t have anything proprietary. More than one mention means that you’re inexperienced and think patents make your business defensible.” (130)

The Harbridge House report, way back in 1968, found much the same thing. Some bits of industry were patent-sensitive, but most were not.

The argument is not that companies happily develop commercial products without some sort of advantage–though indeed they do, as all the imitative products that follow a successful product indicate. All most companies need is an opportunity to exploit. What they look for is a return on the investment they do make. Whether they have spent $20,000 on a patent is immaterial. Whether they have licensed in a patent, paid out $20,000 to a university and obligated the company to pay 2% of gross revenue to the university whether the product is profitable or not may give a company pause–they better be pretty sure of themselves or they have made their work that much more difficult (or they better have a sweet exit clause that allows them to design around the licensed patent but hold it long enough to be sure that the university can’t immediately find someone else to develop product within the scope of the patent claims).

Only in certain industries do patents matter for product development. For most everyone else, in-licensed patents are deadweight. The underlying claim made by Mississippi State is a general case that it is the university’s role to patent inventions and license them exclusively for “commercialization.”

Put it together then: “Bayh-Dole requires the university’s patent and licensing operation to take ownership of all inventions and attempt to license them exclusively for their commercial value without regard for variations in technology, industry, or the objective of the research.” The policy claim here is that the university is required to deal in inventions and transfer technology in just the way that the licensing office has set up shop. Federal law, so the claim goes, endorses a take-all-for-patent-monopoly approach. That’s the claim being made. It’s untrue. It’s misleading. It’s nonsense.

Some folks might argue that some other claim is being made. If so, what is the claim represented by Mississippi State’s language? Companies surely don’t need a non-exclusive patent license to justify spending millions of dollars–other than to avoid a lawsuit from a meddling university. And Bayh-Dole does not require institutional ownership, but the university claims that Bayh-Dole requires the university to “patent” things. And “commercialization” does not in general require patents, and does not require monopoly use of patents, but the conventional claim made by university licensing offices is that exclusive licensing is necessary for commercialization. If the university wanted to differentiate its claim from the conventional understanding, this would be the place to do so, but the university doesn’t attempt anything of the sort.

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