Institutional patent derangement syndrome

The discussion of university ownership of patents on inventions made in faculty-led research invariably adopts the singular. Consider one invention at one university. Now, doesn’t it make sense that university administrators should take over that invention for the good of the people? Shouldn’t they, not some poor inventor, file patent applications? Shouldn’t these administrators, not some foolish inventor, decide who should receive the benefit of a patent monopoly and thus be induced to spend their money on making beneficial products for the people and not for whatever other wasteful thing they might do with their money? Shouldn’t these administrators, and not some greedy inventor, take the lion’s share of whatever–if any–money gets made from their university research results, so that administrators have ever more money with which to finance more patent applications and thus serve the public with more and more beneficial products? Should not inventors be pleased with these results and not desire to have control of such inventions, given that they work for the public good and administrators, not inventors, are best positioned to represent that public good?

Somewhere in this mess of questions, you see the argument. Institutions that host research will do a better job managing patents on research inventions than will anyone else–better than the inventors, better than the investigators in the project, better than outside invention management organizations, better than companies squarely in whatever lines of business for which the inventions might have application, better than a professional society or standards organization or nonprofit foundation. The argument does not depend on an institution making an effort to have the specialized resources necessary to deal with any particular research invention–the argument is general. Institutions that host research should control the inventive results of that research–because they will be better at it (without regard to their administrators’ talents and resources) than anyone else.

Now, having been in university IP management for fifteen years and having to deal with it from the outside for another ten, I will say that it is impossible for a university to hire enough talent to deal with even a small portion of the inventive work that gets reported to it. “You must have a Ph.D. in the biological sciences.” Laughable, even for biomedical inventions. “A JD is preferred.” Sure, let’s lawyer up that invention with an institutional attorney who will surely manage it better than some nameless graduate student who happens to know more about something than most anyone in world (her invention).

The general shape of the argument remains–institutions will (so the assertion goes) do a better job managing research inventions than the people that do the inventing, or anyone else that they might choose to work with. So what is this argument, really? Faculty investigators should have no right to choose who they collaborate with the moment they invent or discover. Faculty investigators should have no right to decide not to patent an invention. Faculty investigators should have no right to decide whether a patented invention should be licensed openly or exclusively. University administrators will decide all this for them. Ones with PhDs and JDs and MBAs. Credentialed experts. You know. How could this go wrong?

Even if one goes this far and accepts the argument for any given university, consider the effect as this argument makes its way to every university in the country, as it pretty much has. It means every university has administrators who claim ownership of every invention made by faculty in their area of expertise. Every university’s administrators file patent applications and hold back inventions from use in favor of a hoped-for exclusive licensing deal. Often–very often–that deal never happens. Over 80% of the time, it appears. The University of California estimated that only 1 in 1,000 of its inventions made it to “commercial” product–and that’s not even asking that the product become widely available, popular, profitable, or beneficial.

Now consider federal funding. A federal agency–let’s say the NSF–decides to fund research into carbon nanotubes. It spreads the work around among various universities. Each university’s administrators then claim ownership of each bit of carbon nanotube invention or discovery or application or possible product or method of production that they can. There are 3,167 US patents with “nanotube” in their abstract. 1,300 of these are assigned to a university, institute, or foundation. 225 identify government funding. 108 identify NSF funding.

Here’s a partial list of early (filed 1996 and later) patent titles:

Over the next 50 patents, Rice has 19, Stanford 5, and Northwestern, Northeastern, Clemson, Tulsa, Oklahoma State, Princeton, U Mass, Delaware, Central Florida, Florida, Renssalaer, SUNY, Caltech, Pennsylvania, Michigan, Illinois, and California all have one or more each. That’s 19 universities and their research foundations holding 50 patents funded by the NSF, just on nanotubes in various configurations, applications, and methods of production. A sample of ten of these patents average over 30 claims per patent. That suggests that for the 108 NSF-supported, university-owned patents, we are looking at around 3,000 claims held by 33 different universities. That’s just for NSF-funded research having to do with carbon nanotubes. Each of these universities (and their research foundations, research corporations, and whatever) has a practice of licensing patents exclusively–thus we are looking at 33 different universities all holding bits and pieces of a bit of emerging nanotechnology. If any one of them licenses exclusively (as, for instance apparently Rice has done), then what happens to the licensing efforts of any of the other universities with patents in the same area? Do they all license to the same company, creating a single company beneficiary of NSF research? No, of course not. Instead, rights are fragmented across universities–patent gridlock–rights essentially unavailable for use for two decades. Sure the rights are *available for license* (exclusive license, generally), but what good are available rights if one needs ten other patents in order to actually do any one useful thing?

[Look at this cascade of speculation on the Rice carbon nanotube patents. Rice licenses them to inventor Smalley’s startup, Carbon Nanotechnology, sometime before 2001. In 2007, CNI merges with Unidym, founded in 2005, which in turn is owned by Arrowhead Research Corporation, a patent accumulator. It is a good assumption that the Rice license to CNI transfered to Unidym, and therefore to Arrowhead control. Here’s an account of Arrowhead’s nanotech portfolio from 2004:

Arrowhead Research Corporation (Nasdaq:ARWR)(Nasdaq:ARWRW) announced today that CHI Research, a worldwide leader in intellectual property analysis, recently conducted a review of Arrowhead’s patent portfolio. The final report stated: “In general, it appears that Arrowhead’s nanotechnology IP already locks up, or is well on the way to locking up, those areas of nanotechnology that it has set out to control. Furthermore, we find that Arrowhead’s entire nanotechnology patent portfolio is more broadly distributed across invention art classifications than that of its main competitors. In other words, among its main competitors, Arrowhead has the most diversified portfolio of patents in the nanotechnology space.” Arrowhead has exclusive rights to 33 issued U.S. patents and, in total, over 180 U.S. and international patents and patent applications.

Here’s from the 2007 press release:

As a result of the merger, Unidym will hold the leading portfolio of intellectual property on carbon nanotubes (also known as buckytubes) and be strongly positioned in the broad array of markets for the enabling material.

Unidym, it appears, is also based on a university startup, this one from UCLA–though the patents are assigned directly to Unidym, not licensed through UCLA. Unidym is also acquired by Arrowhead.

Then in 2011, Arrowhead sells Unidym, and (presumptively) the Rice patent license to Wisepower Corporation, a Korean company.

Unidym was owned by Arrowhead Research Corporation prior to 2011 at which point it was acquired by Wisepower Corporation, a Korea-based electronics company that produces battery packs and charging devices for mobile phones among other electronic devices for consumers (1). Today, Unidym remains a subsidiary of Wisepower focusing on the development of CNT-based technology for use in electronic applications (1).

According to Crunchbase, Unidym has 1-10 employees. That is, it is a holding company more than a development company. Rice gave PR to the initial license to a startup company–and that’s the impression left on the web. But in fact Rice licensed to a patent accumulator that speculated on the value of tying up a key portion of emerging nanotechnology, and eventually turned that speculation into a sale to a Korean company. So, in effect, Rice licensed exclusively to a series of speculators who eventually flipped the exclusive rights to a foreign company. Do you think Rice bothered to obtain the required agreements from Unidym, Arrowhead, and Wisepower to manufacture substantially in the United States for the United States market each time their exclusive license changed hands?

Rice effectively “locks up” key nanotechnology inventions–federally funded ones–with patent speculators. Rice makes money (presumably) and the speculators make money (apparently). But where’s the use with public benefits available on reasonable terms? University technology transfer is like the Colorado River, disappearing before it ever reaches the ocean. No public benefit from use of the invention necessary. All that’s needed is the “use” of the patent rights to speculate on future value, on down the chain until some last foolish speculator acquires with nowhere left to go. Meanwhile, no one else has access–especially at the outset, when there is plenty of incentive to build on what has just been done, but for universities stepping in and fragmenting the ownership of each new little bit of inventive work.]

And we are talking here only of a subset of a subset of a subset–NSF funded university patents reciting nanotubes in their abstract. There’s all federally funded university nanotube patents. All university nanotube patents. All industry nanotube patents. And then all the patents that don’t use “nanotube” in their abstract but cover the same ground–“fibrils” and “hollow carbon molecules” and the like. Patent everything up. Wait 20 to 30 years. Then start to mess around with development. That’s the effect of FOIL technology–“fragmented ownership, institutionally licensed.”

If an invention were a rare thing, and only one university got involved, and obtained patents even more rarely, and those patents were pretty much the only ones required to make a new product, and the product was expensive to develop but cheap to copy, and the federal government for some reason didn’t care to pay for development because, say, the benefit wasn’t all that great, then perhaps we could talk the value of patent monopolies to attract private risk capital. But to treat all university research inventions in this manner is administrative madness.

Administrative patent madness–spread across hundreds of universities and related nonprofit research organizations–fragments ownership of new inventions; withholds inventions from immediate use in industry (such as for research purposes); prevents or delays the development of cumulative technology; prevents standards development. Exclusive licensing undertaken by administrative patent madness does worse–preventing cross-licensing, preventing pre-market collaboration among competitors, preventing access for internal uses (where a company can implement an invention without having to wait for a commercial version).

The idea presented for a single invention at a single university–the poor, foolish, greedy inventor ought to be working in the public interest, so the university as representative of the public has good right to take that invention and license it to a company that will develop the invention for public good, and that effort–university ownership, exclusive license, company willing to attempt development–that effort is the public’s benefit, whether there’s a product or not, and whether the product is available on reasonable terms or at a monopolistic price.

But multiply that idea–even if you find it acceptable if not attractive–by hundreds of universities, each demanding that its bit of patented invention is the necessary starting point for a product–multiply by 120,000 patents and a third of a million claims–and there’s nothing but madness. Total administrative patent madness. Institutional patent derangement syndrome.

Now consider what the case might be if we had followed the Kennedy and Nixon executive branch patent policies and 99% of those federally supported inventions (now 50,000+ university patents) had been acquired by the federal government and made available royalty-free, non-exclusively. That would be hundreds of thousands of claims that would not be caught up in administrative madness, available to industry and to the investigators and inventors alike to do with as they wished–for further research, to use as research tools, to improve upon, to develop common technology platforms and ad hoc standards. That does not sound so very awful. For 500 patents, where a special case might be made, perhaps a university or inventor gets ownership with a blessing to go play with a patent monopoly for a few years. That’s not so very awful either, especially if those 500 patents are closely monitored to see that folks are being diligent and not just messing around with speculating on the future value of the patent rights to screw over industry when industry gets tired of waiting and stumbles into infringement.

Bayh-Dole unleashed institutional patent derangement syndrome. The first symptom of IPDS is an inability to understand Bayh-Dole. Thus we get faux Bayh-Dole with all its misrepresentation, non-compliance, predatory behaviors, agency non-enforcement and inaction even on federal government rights. Compound this utter failure of anyone involved to comply with Bayh-Dole’s public covenant or its patent rights clauses with the administrative madness of adopting at each of hundreds of universities the same patent-monopoly-exclusive-license-product-commercialization approach, and we get FOIL technology–fragmented, owned, institutionalized. Madness. Madness of the bozonet. Madness that damages research enterprise. Madness that silently destroys the promise of federally supported research.

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