The Basic Policy Question Behind Bayh-Dole

There’s one simple issue:

Should the federal government subsidize with public funding for nonprofit research the creation of patent monopolies?

There it is. The answer that has dominated for thirty-five years is “Yes.” How comfortable are you with that? Gut-level? Reasoning? If the answer is so obviously “Yes,” then why doesn’t anyone come out and state the proposition bluntly? What’s to fear? Why hide it? Why not out and say, “The best thing the federal government can do is to provide public funding that offsets the expense and risk of private speculation on the future value of patents to exclude competition and enable maximum pricing, especially in areas of acute public need, such as healthcare”? Why not call it “federal welfare for patent speculators”? Why not add, “And it is an inspired idea for nonprofit institutions to become part of this speculation on patents”?

I want to put an edge on this policy issue because it is frequently obscured in abstractions, truisms, and fantasy history. In its obscured form, the policy issue comes across as something more like this:

How can the public benefit from the results of federally supported research if those results are made available to all and therefore provide no incentive for private risk capital to develop them into useful and beneficial products?

That is, without speculation on the future value of patents on federally supported research inventions to attract private investment capital, the public cannot benefit and all that investment by the public in research is wasted. Without commercialization, public research funding is wasted. Without nonprofit institutions taking ownership of patentable inventions to secure patents to be offered to attract private investment capital willing to pay the nonprofits a fair market value for those patents, public research funding is wasted. Nonprofit patenting for the enticement of speculative investors on the future value of those patents–speculators who would otherwise not invest–becomes the reason-for-being for federally sponsored research.

This is the world view that dominates the university patent administration community. You find it at their technology transfer office web sites, in their guides to inventors, in their accounts of Bayh-Dole, in their invention disclosure forms, in their patent policies, in their lobbying groups, and in biotech industry lobbying groups. What alternative points of view there may be are called “contrarian” or “disruptive” or “clueless” or “not revenue-generating” or “idealistic” and suppressed. With this much consensus, what do you think? Is this world view a good thing?

Let’s add some additional assertions:

  • The present approach fails to produce outcomes for 95% of all research inventions
  • Universities and AUTM refuse to break out metrics for federally supported inventions
  • Bayh-Dole makes invention use reports optional and a government secret
  • Universities do not comply with Bayh-Dole’s nonprofit patent rights clause
  • Federal agencies do not enforce Bayh-Dole’s patent rights clauses
  • Federal agencies do not act on the government’s rights provided by Bayh-Dole

We might say: Bayh-Dole fails in its goals, fails in its implementation, fails in its public accountability, and fails in providing the government with any benefit.

Still Bayh-Dole is represented as creating a wildly successful, institutionally virtuous, public-benefiting practice.

According to the scheme, the public’s investment in research is not wasted if universities sequester most inventions and discoveries, assign a tiny share of those inventions and discoveries to private parties, and of those assigned a tiny share results in a commercial product, and of those commercial products, the ones that are advertised are those that rely on the patent monopoly to suppress competition and to ensure maximum prices. This is the shape of success.

Let’s test our progress. Here’s the basic question again:

Should the federal government subsidize with public funding for nonprofit research the creation of patent monopolies?

Answer:

Yes!

Reasoning:

We don’t comply with the law, the federal agencies don’t enforce it, we don’t have to account to the public for our practices, and we get a share of any private upside, but in reality most of us don’t make much money for years and the scheme doesn’t work for the great majority of our patents, but when it does work, we are floating in money for twenty years, so it’s well worth the effort to be part of a commercially valuable patent monopoly! Thanks to the government for allowing this scheme to flourish!

Let’s add some additional questions:

Should the federal government subsidize with public funding for research the creation of patent monopolies as an arbitrary default?

How about without any special conditions?

How about without any public oversight?

How about without any regard for the purpose of the funding or the capabilities or intentions or past practices of the organizations funded?

How about without regard for the involvement of investigators and inventors?

How about on basic research?

The answers given to these by the purported advocates of Bayh-Dole and the law itself are remarkably different.

And let’s narrow it down:

Should the federal government subsidize with public funding for research the creation of patent monopolies in areas directly related to public health?

This is the fundamental policy question driving Bayh-Dole. The NIH created the Institutional Patent Agreement program to circumvent executive branch regulations that had answered this question with “No–federally supported inventions should only in rare instances be used to create private patent monopolies that suppress access, prevent competition, and manipulate prices, especially in matters of public health.” When the IPA program was shut down for doing sweetheart exclusive deals with pharmaceutical companies, the people behind the IPA program came up with Bayh-Dole.

The strangeness is that Bayh-Dole, as passed, does answer the narrower question with “Yes,” Bayh-Dole also asserts that there should be special conditions, public oversight, and regard for the involvement of inventors–even though Bayh-Dole also asserts that the subsidy should be an arbitrary default, should disenfranchise investigators who are not inventors, and everything should be done with an inadequate apparatus for reporting, enforcement, and exercise of government rights.

The sad thing is that we can’t even get at the basic policy debate. Present practice is to treat public research funding as a subsidy to offset the costs of organizations speculating on the future value of monopoly patent positions in areas of public health, and especially anything having to do with the treatment of life-threatening disease. Here, the gold standard is not prevention, not cure, but rather to make acute conditions less acute and preferably chronic. That’s the money position. Federal patent policy under Bayh-Dole states (and this is pretty much an exact quote):

“It is in the public interest for the federal government to offset the expense and risk of speculative investors so that they can have access to an expanded supply of patent monopolies with which to bet their own private capital in an effort to make a huge return from payments by the public and the capital of others, including the federal government, who have made a commitment to helping people who suffer from catastrophic diseases.”

Health insurance does not insure against disease–it insures against the catastrophic cost of treating the disease. The primary driver for the catastrophic cost of disease is an industry that can control the price of essential resources for the treatment of disease. The present policy of the federal government is not merely to tolerate that industry, but to subsidize it with billions of dollars of public funding for research in the hopes of patentable inventions.

Bayh-Dole gets blamed for this state of affairs, and there’s a good argument that it should bear that blame, and should be repealed, and some good-for-nothing people chased out of positions of influence, and universities required to restore academic freedom for research–including inventions–before they get any more federal funding for research.

But I want to make a different good argument–that Bayh-Dole has been misrepresented, with the assistance of federal agencies, to make it appear to follow the argument that the federal government should subsidize research so that nonprofit institutions can sequester patent rights and sell these rights exclusively to any company willing to pay, and this should especially be the thing for biomedical research, that here of all places the only way, the best way, the primary way, the Congressionally endorsed way for the public to benefit from publicly funded research is for there to be institutional speculation on the future value of patentable biomedical inventions.

According to the misrepresentation, nonprofits should take ownership of inventions and attempt to convey these inventions exclusively to companies willing to attempt to create commercial products but only if backed by a patent monopoly and expecting to enjoy the full benefit of that monopoly to exclude competition and to set prices as high as the market will bear. The nonprofits, according to the misrepresentation of Bayh-Dole, are invited to be complicit in this scheme for a tiny share (typically 1 or 2% of adjusted gross sales) of the upside potential.

For this scheme to be wildly successful for any given nonprofit, only one patent monopoly deal is needed every two or three decades. For the scheme to be made to appear successful across all nonprofits, 200 or so universities and some $30 billion in annual federal research expenditures need produce only 5 new commercial products a year–even if those commercial products fail quickly or provide only marginal benefit, or are priced so high few customers (or patients) can afford them. For the scheme to operate in practice, only a few universities need to be financially successful with their patent licensing–administrators (and many faculty) view the success of the few as a sign that if they build a comparable licensing program, they too will have such a success–in two or three decades. That’s all that is required to make the misrepresented Bayh-Dole policy a wild success.

95% of patentable inventions arising from federally supported research can be withheld by patent for two decades from public access to preserve the scheme–to assign a handful of inventions to “commercialization partners” for speculative product development (or speculative patent monetization). Research that is distributed by federal agencies to multiple universities can in this way be fragmented into patentable bits owned and withheld by those universities, fragmenting what otherwise would be a common, cumulative technology development effort.

The scheme that misrepresents Bayh-Dole is called “complex” and “specialized” and “high risk” rather than grasping and bureaucratic and ineffective. No public reporting need take place with regard to the withheld inventions. Only the potential for success needs to be advertised.

Again, the scheme diverts federally supported research into patent monopolies held by nonprofit institutions to be exploited–however rarely and by whatever means–by pharmaceutical companies and others speculating on the future value of those patents in matters of public health.

This is current federal policy. May we discuss it?

 

This entry was posted in Bayh-Dole, Bozonet, Policy, Sponsored Research, Technology Transfer and tagged , , , , , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *