NIST’s Chief Counsel on Bayh-Dole, 5

Unlike the other various fakographics and misguidances and misrepresentations of Bayh-Dole that we have reviewed, this slide deck by NIST’s chief counsel is distinctive, since NIST has primary responsibility for Bayh-Dole’s implementation and patent rights clauses. Thus, a failure to be clear, to be accurate, to be sensible to the law and its effects is a deep failure, something fundamentally wrong with the legal guidance shaping the law. Reform of Bayh-Dole starts with repealing the layers of attorneys that misrepresent the law, turning it into their own vision of public policy rather than the public policy that the law itself expresses. If Bayh-Dole were implemented and enforced on its own terms, and not on the substituted terms put up by attorneys because no one is there to stop them, Bayh-Dole would make be an experiment in public policy worth the attempt. As it is, there’s no hope for it but repeal with a determination not to allow the pharmaceutical industry to shape the entire framework of federal invention management policy.

The definition of practical application in Bayh-Dole includes “for the benefit of the public”: practical application is the use on an invention so that “benefits are available to the public on reasonable terms.” Only in the department of redundancy department does one have to tack on the extract “for the benefit of the public.” But here the chief counsel is talking loosely, in the abstract. Of course we expect that the federal government justifies any action it takes as “for the benefit of the public.” Patent monopolies benefit the public, no doubt. At least, who can argue in the abstract? And there’s a subtle difference between a definition of practical application meaning use of inventions owned by federal contractors “with benefits to the public on reasonable terms” and a broader claim that government-funded research should “achieve practical application . . . for the benefit of the public.” In the first instance, we look at each subject invention and ask, “Well, where’s the practical application for this one?” In the second instance, we might look at “research” in general and ask “Has there been practical application?”–of course, here and there–and rhetorically then add, “Did we not set up this system to benefit the public? Shall we not then take credit?”

In loose talk, these are all the same thing–so generalized that any differences disappear into a general assertion that all government activity is intended to benefit the public. That’s not the issue. The issue is not an abstract intent, but what actually happens, who actually benefits, and whether the terms of that benefit are reasonable. Yeah, we are talking about Bayh-Dole the statute, not the warm assertions of intent by attorneys. We are talking about how the law operates, not a proxy, faux version of the law that the Supreme Court dismantled, only to leave the scene and allow the same attorneys back on site to rebuild the fauxness once again. What the chief counsel puts as a “highlight” of Bayh-Dole and what the law says are different–really different.

Look again:

NIST: achieve practical application of government-funded research for the benefit of the public

Bayh-Dole: the invention is being utilized and that its benefits are . . . available to the public on reasonable terms.

In the NIST version, the practical application of research is “for the benefit of the public”; in the Bayh-Dole version, practical application requires the benefit of the use of inventions to be available to the public on reasonable terms. In the NIST version, a patent may be licensed exclusively to a favored company, which produces, say, a new drug, priced at $100,000 a year. In the lawyerly world, such a new drug can be said to “benefit the public” because the FDA determines that it has a statistically significant therapeutic effect.

In the Bayh-Dole version, practical application is not achieved unless the benefit of using that new drug is available to the public “on reasonable terms.” In the context of a broader patent law that otherwise does not set any requirement on either utilization of a patented invention or the pricing of products covered by a patent claim, Bayh-Dole clearly intends that “reasonable terms” be terms more favorable than those available at the outer limit in which antitrust law would operate, more favorable than those that would be available if one exploited one’s full rights in an ordinary patent–favorable, as in what would be the case if one didn’t rely on a patent monopoly to establish price or availability, but rather were motivated by a desire to help others–any others–the public, as it were.

“Reasonable terms” in Bayh-Dole’s definition of “practical application” cannot mean “to exact for the patent owner the maximum benefit available as if each patent on a subject invention were a patent on an ordinary invention.” There would be no need whatsoever to mention “reasonable terms” in the definition of practical application if a patent on a subject invention were merely a patent on an ordinary invention with a bunch of paperwork and clocks ticking with regard to how a contractor wrests ownership of the invention away from both the inventor and the federal government.

There would be no particular meaning, either, to Bayh-Dole’s statement of policy (35 USC 200) that a purpose of government rights in inventions arising in federally funded research or development is to protect the public from “unreasonable use” of such inventions. If the only unreasonable use were the uses already prohibited by patent law and antitrust law, there would again be no need for the government to be provided anew with a right that it already has. To depict Bayh-Dole in this way is to represent it as an empty gesture, but for the fussy paperwork and clocks ticking. Instead, it’s clear that Bayh-Dole limits the patent property rights in subject inventions and provides the government with new rights to enforce those limits, and states a new standard for the use of patents on subject inventions, one involving reasonable use and unreasonable use, and this standard is packed into the definition of practical application.

Bayh-Dole does not on its own provide for a patent monopoly pipeline from nonprofits to pharmaceutical companies, turning federal funding for publicly directed university research into a subsidy for speculators hoping to profit from the future value of inventions to alleviate suffering. But NIST can shape the law so Bayh-Dole appears to permit just such a thing, and that such a thing is “for the benefit of the public”–and all without so much as pointing out the agenda. It is not “OMG, we did not intend that!” so much as it is “WTF, we didn’t want you to realize that!” Lawyers choose their clients, choose who to serve. Even NIST’s chief counsel chooses who to serve, how to represent the law that NIST is charged with implementing and administrating.

Put it this way: “for the benefit of the public” apparently means–and this is essentially doublespeak–Bayh-Dole is to be understood to imply that it is a really great thing to take ownership of inventions made under federal R&D from inventors and give those inventions to institutional contractors, who if they do the fussy paperwork while avoiding the ticking clocks, will commercialize inventions by finding exclusive licensees. That’s where things end. What the exclusive licensees do with the inventions is, well, the hazards of making the most money one can. So merely having federal contractors try to find exclusive licensees *is* “for the benefit of the public.” That’s the import of “achieve practical application of government-funded research for the benefit of the public,” when

  • practical application is conflated with commercialization and
  • commercialization is another term for exclusive license, and
  • the effect of the attempt to hold patent rights for exclusive licensing is
  • take inventions from faculty inventors and
  • to exclude from public access and research use and internal use
  • nearly all inventions made in government-funded research,
  • while claiming all of this is for the public benefit
  • if some handful of inventions become products
  • even if those products are priced at monopoly rates and without competition.

In the lawyerly world, of course, NIST’s chief counsel does not out and make this claim express. Wixon talks around his meaning. His highlights of Bayh-Dole are technically true only in twisted ways his audience could not possibly follow unless they already knew Bayh-Dole and had no need of the chief counsel’s slides. Even his statement of the overarching objective of Bayh-Dole isn’t helpful. If we draw upon Bayh-Dole itself, we find this (35 USC 200):

use the patent system to promote the utilization of  inventions arising from federally supported research or development

If we hold this to be the overarching objective of Bayh-Dole (and it apparently is for federally owned inventions–see 37 CFR 404.2), then the fundamental highlight of Bayh-Dole is that it places a public covenant on all US patents on inventions made with federal support, so that these inventions are not ordinary inventions, and that patents on these inventions are not ordinary patents. To be sure the paperwork and ticking clocks also are not ordinary, but they are the bureaucratic basement of Bayh-Dole, not highlights.

The paperwork and clocks are the one aspect of Bayh-Dole that could go away and nothing would be adversely affected.

Even Bayh-Dole has an objective “to minimize the costs of administering policies in this area.” That’s been interpreted by NIST, apparently, to mean that the bureaucratic basement should be illuminated, that the cost of taking inventions from inventors should be minimized; that the cost of enforcement of the patent rights clause should be minimized by not requiring federal agencies to enforce anything.

The highlights of Bayh-Dole are that it minimizes the cost of administrating federal invention policies to

  • give faculty inventors the choice in whether any invention made in a project with federal support should be patented or assigned to anyone else,
  • protect these inventors from predatory university demands for ownership, and
  • require any nonprofit owner that acquires such inventions that it break up the patent monopoly right or
  • require the new owner of that previously non-profit owned patent monopoly to use any income earned with respect to any such invention–less only the costs incidental in administrating subject inventions–for scientific research or education.

That’s the core of Bayh-Dole. Those are the highlights. NIST has no clue about them. NIST no doubt would deny that Bayh-Dole does any such thing. NIST no doubt would argue against the idea that Bayh-Dole ought to do any such thing–even when Bayh-Dole does indeed do such things.

What I have stated is the representation of the law that gives effect to what the law provides. Expanding the scope of the law to all companies–as has been done by executive order–obscures the operation of the law. Companies don’t have to bother with licensing out subject inventions–they can use or abandon such inventions as it serves their business purposes. Their public purpose, we might say, is to make a profit. If all Bayh-Dole intends is that the patent system be used by companies to make a profit, and now with more federally supported inventions than before–such as ones directed at excluding anyone else from addressing matters of public health–there’s no point to the law at all.

To use the patent system to make the benefits of using an invention available to the public on reasonable terms means to use the patent system against itself, to use the patent system to obtain a monopoly right that then is used to make available rights to many participants for their use. That’s the point of using the patent system to promote the use of inventions, not to exclude that use. That’s using the patent system against itself. To use the patent system to promote free competition and enterprise is to act to permit broad access to each invention, not to suppress competition and opportunity by holding an invention (even for one’s own use) or by granting only an exclusive license (unless that exclusive license is for only a short term, or requires non-exclusive sublicensing, such as dedication to a standard). To make sure that the use of the patent system does not unduly encumber future research and discovery means that research uses of a patented invention cannot be suppressed, though they might be regulated.

These are highlights–how Bayh-Dole creates a new vision for patents on publicly directed inventions. For these inventions, Bayh-Dole creates a new patent system within the patent system. That is an inspired thing, in its broad outline.

Bayh-Dole’s implied premise is that the US patent system is not adequate to the purposes of federally supported research and development. The problem with federal patent policy was not so much the delays created by some federal agencies (DOE in particular, not NIH or NSF) in making determinations that a nonprofit should be permitted to deal in any given potential patent monopoly, but that the patent system itself was poorly designed for shaping how a nonprofit might choose to exploit a patent on an invention arising in a publicly directed, federally supported project.

The ordinary patent system allows a patent owner to enforce nonuse. Unacceptable. The ordinary patent system allows a patent owner to suppress competition. Unacceptable. The ordinary patent system allows a patent owner to disrupt research by others. Unacceptable. The ordinary patent system allows a patent owner to move manufacturing to other countries. Unacceptable. The ordinary patent system allows a patent owner to charge monopoly prices and manipulate availability and suppress the development of new applications or improvements. Unacceptable. The ordinary patent system allows organizations to pursue maximum financial gain in areas of public health in which the federal government has a responsibility to alleviate suffering. Unacceptable.

You get the picture. Bayh-Dole creates a new patent system within the existing patent system. NIST’s chief counsel doesn’t make this a highlight. Perhaps he has never bothered to think about the law, or perhaps the clients he has chosen to work for have asked him not to think about the law in this way, but rather to repeat political talking points from three and a half decades ago that misrepresented the law then and still do. Especially after Stanford v Roche, NIST’s chief counsel should know better and give better, informative, helpful talks on the subject.

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