Guide to Bayh-Dole by the Layers, 7

Eighth layer: Outcomes

We reach the eighth and final layer of Bayh-Dole: outcomes.

We can consider four elements of outcomes: activity, cost, practical application, and the effects of patent monopoly exclusion on research, rapid industry and professional uptake of research inventions, the development of cumulative technology and standards, and collaboration between industry and universities.

Activity is broadly tracked by the Association of University Technology Managers (AUTM) through its annual licensing survey. However, AUTM’s survey does not break out subject inventions for separate reporting. Given that universities and affiliated nonprofits hold over 70,000 U.S. utility patents that do not carry federal funding notices, and only 50,000 U.S. utility patents that are based on subject inventions, and that AUTM’s survey requests information on all commercial deals, even ones that do not involve patented inventions, not nearly half of the activity reported by AUTM’s survey appears to be related to be Bayh-Dole related. Maybe only a third. But AUTM and advocates of Bayh-Dole routinely report total university activity as if it stems from Bayh-Dole.

In any event, activity–inventions reported, patent applications filed, patents issued, even licenses granted–have little meaning for the purposes of Bayh-Dole. Senator Bayh argued the law was intended to restore U.S. leadership in technology. The law itself provides a statement of policy and objective that emphasizes use of inventions, free competition, and American manufacturing, along with university-industry collaboration and the participation of small businesses in federal contracting. None of these objectives are tracked by measures of activity. Nor does the AUTM survey show what activity is connected to subject inventions.

Further, patent administration comes at a cost to the participating organizations. Yet AUTM does not report what its organizations spend on subject invention administration, even though the nonprofit patent rights clause all but requires universities to track those costs to comply with (k)(3). To determine the success of the law, we must weigh the cost of activity with the outcomes of that activity–both the benefits and the problems.

The anchor objective of Bayh-Dole is set forth in the standard of practical application. Practical application has been the cornerstone of federal patent policy since the Kennedy patent policy of 1963. The measure of Bayh-Dole’s “success” is not how many patents have been acquired, nor how many licenses have been issued, but rather how many subject inventions placed in under contractor administration meet the standard of practical application, how patents have been used to promote free competition and enterprise, how patents have been used to promote university-industry collaboration (and not merely university-exclusive licensee collaboration), and how patents have been used to promote American manufacturing.

The answer here is simply that we do not know. AUTM does not even ask for this information in its survey; if federal agencies ask, they don’t report the results. For a law’s core standard of success to be unaddressed after more than three decades strongly indicates a systemic problem in the law. Given that universities and their lobbyist organizations repeatedly substitute activity proxies that not specific to subject inventions and not responsive to practical application indicate that Bayh-Dole administration is not accomplishing anything close to the claims that have been made for the law. One would think that if universities in particular were meeting the objectives of the law, they would be eager to report the fact. But they don’t report anything with regard to the outcomes of their administration of subject inventions. Their silence is also evidence.

These layers of Bayh-Dole then provide an account of the law, its implementing regulations, the standard patent rights clauses and how patent rights clauses end up in federal funding agreements, how those patent rights clauses are misrepresented and misunderstood by university administrators, and complied with only on the paperwork side and not much at all on the substantive side. We have seen, too, how federal agencies have opportunities throughout Bayh-Dole, its implementing procedures, and standard patent rights clauses to decline to receive reports on invention use, to waive non-compliance, to take no action to enforce compliance, and to take no action with respect to government licensed rights or to protect the public interest.

The overall conclusion we arrive at from working through these layers of Bayh-Dole is that whatever it is that universities are doing with what they self-identify as subject inventions, it has next to nothing to do with Bayh-Dole the statute. Law professors can reason all they want from what the law says and get nowhere close to the patent rights clauses, and with compliance with those clauses. Without compliance, university activity metrics, even if specific to subject inventions, do not track the law or the patent rights clauses. And activity measures are nothing unless there is a clear report of outcomes of that activity.

The number of patents acquired by universities is a measure of the inventions excluded from research use, from immediate industry uptake for internal uses, from standards, from cumulative technology and commons. Without an accounting that connects patents to outcomes, there’s no basis for reporting the number of patents as anything at all positive for any of the goals stated by Bayh-Dole.

The number of licenses, too, is nearly meaningless. One invention may result in fifty or more licenses, and still not result in a single product made available to the public on reasonable terms. An exclusive license is even more damaging for public access to a subject invention, as the invention then leaves the control of the nonprofit organization and is unavailable for development by anyone else, unless the nonprofit terminates the exclusivity of the license.

University exclusive licenses routinely prevent dedication of subject inventions to standards, cross licensing of subject inventions, or other typical industry practices to avoid needless disputes and to cooperate to provide all industry players with access to technology needed to make products. A car may involve hundreds of patents, an ink-jet printer scores of patents. A patent in medicinal chemistry typically covers hundreds if not thousands of compounds. A company holding an exclusive license, even if it develops one of those compounds into a successful product, suppresses all the hundreds of other compounds from being developed–even if for non-competing products and uses.

A university that licenses a research invention exclusively is more likely to fragment a developing technology base, resulting in gridlock as every university involved in research in the same area follows suit, than it is that the patent attracts the private risk capital required to create a commercial product so the public may benefit.

Without an account of outcomes, the evidence we have for Bayh-Dole’s effects include changes in university patent policies based on misrepresentation of the law; exclusion of research and industry use of inventions pending university efforts to secure exclusive licensees (or more often assignees); denial of university inventors a first right to the administration of their inventions under the inventor patent rights clause; and the suppression of subject inventions entering the public domain or used in standards or protect cumulative technology commons.

These are outcomes of exclusion, and the evidence for such exclusion is found in the same activity measures used to promote the idea of Bayh-Dole’s success. Follow this evidence with the realization that universities do not comply with Bayh-Dole’s nonprofit patent rights clause and federal agencies have no obligation to enforce the patent rights clauses and may waive substantive contractor obligations–even those made central to Bayh-Dole–or may simply decline to act, even to protect the public from nonuse or unreasonable use (such as pricing based on holding a patent monopoly rather than on free competition and using the patent system to break up patent monopoly rights in favor of use, competition, and American manufacturing).

The conclusion is that Bayh-Dole has never worked–because universities fail to comply with the nonprofit patent rights clause and federal agencies have looked the other way. It may be that existence of Bayh-Dole, misrepresented and uncomplied with and unenforced, has indeed given courage to university patent administrators, speculators, and companies in certain industries–especially the biomedical industry–to exploit patent positions for profit. But their activity appears to have next to nothing to do with the law or the patent rights clauses it authorizes. Bayh-Dole does not operate, but its existence provides cover for exploitation of publicly funded research that runs counter to Bayh-Dole’s statement of policy and to the expectations that the public–or industry, or even law professors–would reasonably have from reading the law and the patent rights clauses.

If we wanted to see what Bayh-Dole actually can accomplish, we would insist on Bayh-Dole compliance with FOIA–only those portions of reports on use of subject inventions that contain privileged or confidential information may be excluded from FOIA. Then we could see what federal agencies are requesting, and what universities are reporting, specific to subject inventions.

We would insist that federal agencies enforce the (f)(2) written agreement and furthermore make clear that contractors may have no interest in inventions made by inventor-employees as a condition of their participation in federal funding. Bayh-Dole has never been a law that made institutional ownership of inventions a fundamental requirement. Instead, Bayh-Dole’s implementing regulations were crafted to preserve faculty inventor academic freedom in the face of the possibility of institutional predatory behaviors. But universities have refused to comply with (f)(2) and have changed their policies in a mostly successful attempt to prevent Bayh-Dole’s inventor patent rights clause from ever operating.

Third, we would advocate for the creation of additional patent rights clauses to address the need for inventions to move into standards or to work as a small part of complicated, developing systems of technology or to be made broadly available for research and industry use without suppressing such access in favor of exclusive licenses to the entire invention, for speculation on the value of the patent to support a commercial product.

We would consider separating federal procurement patent policy from federal subvention patent policy. These two forms of contracting serve distinctly different purposes, as Vannever Bush observed in Science the Endless Frontier. The use of the patent system in support of nonprofit-based, faculty-initiated research differs markedly from the use of the patent system in matters of federal procurement of products and services to meet federal government requirements for use. Untangling Bayh-Dole’s arbitrary policy and conflation of procurement and subvention will be challenging, but necessary.

Vannever Bush thought there was no need for a public covenant for patents on federally supported inventions beyond a government license. But Bush did expect that universities were the domain of “free play of free intellects” and university demands to own patents on faculty work is not consistent with “free.” Thus, we have work to do to push back on what the faux Bayh-Dole, the non-compliant and misrepresented Bayh-Dole has done to university patent policies and social role in the administration of research on behalf of faculty investigators supported by federal subventions.

As it is, Bayh-Dole does not operate. What we witness as effects stem from a faux version of the law and its standard patent rights clauses, not from the statute or the patent rights clauses, were they enforced and the government acting on its license and obligation to protect the public from violations of the public covenant that Bayh-Dole requires to run with subject inventions.

Finally, we would get the federal government out of the patent monopoly business. Bayh-Dole allows federal agencies to set up shadow patent offices. First the government issues patents to itself based on the merit of inventions, and then, under Bayh-Dole, the government may re-issue those patents to private companies in the form of exclusive licenses based on federal agency preference, not the merit of the invention. This was just the system in use in the states before the union that the framers of the Constitution sought to avoid–the federal government suing its own citizens for infringement, seeking to profit from patent monopolies, and choosing favorites to benefit from monopoly franchises.

The federal government and the public were better served by the Kennedy patent policy’s expectation of federal agency dedication to the public, non-exclusive royalty-free licensing, and rarely, exclusive licensing for no more than three years. Such a policy would be especially valuable again in areas such as public health, despite the objections that may be made by the pharmaceutical industry. What is good for big pharma is not necessarily good for America. Bayh-Dole’s patent rights clauses ought to be enforced according to their terms, and federal agencies should be required to act on their government licenses and march-in obligations. Then we would see Bayh-Dole in action, and we could assess whether the law works to achieve its stated objectives.

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