The AUTM CEOs Speech, Fitt 3

We are working through a recent talk by the CEO of the Association of University Technology Managers at a symposium hosted by NIST on “unleashing American innovation.” The AUTM CEO now turns to a deeper neurosis that has almost nothing to do with Bayh-Dole’s effects:

At the end of the day, it is the companies’ reliance on a predictable and fair patent process that encourages the company to license those nascent inventions from public sector research institutions like universities and hospitals.

This is twisted, and nonsense. Bayh-Dole deals with requirements after a contractor finds a way to acquire an invention made in work receiving federal support. Although Bayh-Dole is part of federal patent law, it does not alter the “patent process.” Not ownership of inventions. Not the patent application process. There’s nothing then for companies to rely upon that’s any different than otherwise. The “process” of patenting that comes into play has next to nothing to do with Bayh-Dole–which applies to federal agencies–and even next to nothing to do with the standard patent rights clause. The “process” that matters has to do with how owners of subject inventions behave. For that, Bayh-Dole asserts a public covenant that runs with each invention arising in federally supported research or development and includes a public interest apparatus in the law and in the standard patent rights clause–it’s just that no one bothers to comply with any of this but for the most superficial paperwork requirements.

Bayh-Dole does nothing to dictate the disposition of patents held by federal contractors, other than to create “uncertainty” about monopoly positions when a contractor doesn’t use an invention or is unreasonable in its exploitation of an invention. Terrible thing–sure is lucky that no federal agency has ever bothered to act in the public interest in breaking up monopoly positions for nonuse, unreasonable use, or for any other public interest reason.

A “predictable and fair patent process” might be a “fair, reasonable, and non-discriminatory license.” That would encourage *lots* of companies to “license” a given invention. But if there were no patent at all, then there would be no need to take a license at all. And if the federal government owned each invention and dedicated it to the public, then we’d have an expanded public domain for basic research results. Pretty good deal. Pity that the folks at AUTM have killed the research public domain.

I have yet to hear a company official say anything like “whew–it sure is great that I can get to negotiate for six months with university bureaucrats for a 35-page exclusive patent license that forces me to commercialize an invention rather than just gaining access to this invention from reading a published paper or talking with the inventor. Thanks be to Moloch for Bayh-Dole!”

Without the safety of intellectual property protection to safeguard their investment in the development of the product or service, the company will never license the invention in the first place.

Now the AUTM CEO is talking in the clouds: “safety” of intellectual property protection. What is that? “Safeguard” an invention? This is almost entirely disconnected from reality. A bit of history. When a nonprofit dealt with a federal agency without the benefit of the IPA program, the nonprofit, if it wanted to own an invention made in work receiving the agency’s support, had to petition the agency to be allowed to get assignment of the invention from the inventors. If a nonprofit got out ahead of the petition and obtained assignment anyway, then the nonprofit created an administrative “uncertainty” that it would be allowed to “retain” that ownership.

The federal agency could determine that the nonprofit’s ownership wasn’t in the public interest–the nonprofit was not competent to manage the invention; there was no purpose served in using the patent system; monopoly exploitation of patents ran against the purpose of the research; if every nonprofit engaged in a part of the research plan took a monopoly position, the eventual technology desired would be fragmented among nonprofit contractors behind patent paywalls; there should be no commercial “market” for monopolies on research inventions–such as in areas of regulatory control or matters of public health and safety; or the nonprofit had a horrible track record of managing inventions and ought not to be entrusted with more. Such a determination might take a while–delay–or might run against the nonprofit’s interest in doing a monopoly patent deal. Thus, “uncertainty”–both for the nonprofit and for any company that simply must have a monopoly patent license.

But consider: if the federal government declined to allow the nonprofit to exploit a patent monopoly position, any company could gain access to the invention via government dedication of the invention to the public domain or through a non-exclusive, royalty-free license. So companies that did not require a monopoly patent position could easily obtain access to any invention. For that matter, so could the inventors themselves, if they started a company or took a position in a company. Thus, the only uncertainty in the whole deal is for companies and investors who insist on a patent monopoly as a condition of working with a research invention.

The implication then in the AUTM CEO’s speech is that public policy exists to favor just these companies and investors, that they should have the opportunity to exploit patent monopoly positions against the interests of other companies and investors–as well as against the interest of nonprofits who might also use the inventions in their work.

A company that did not need an exclusive position would never take a license for an exclusive position other than that a university demanded that it wanted a licensee that would accept an exclusive position. Thus, universities set out to attract the patent speculators, along with the big pharma companies that were boycotting federally supported inventions in medicinal chemistry because they opposed the idea that these inventions could be made available to everyone–and thus, that organizations might develop the inventions in competition with big pharma; that people might develop compounds claimed within a given patent that differed from the compound adopted for development by a given big pharma company. It would seem that the boycott itself was a form of anti-competitive behavior. The NIH’s IPA program, and then Bayh-Dole, were both programs to enable that anti-competitive behavior rather than to ignore it or to create the competition with its patent-based model that big pharma wished to suppress.

Thus, the “safety” in the AUTM CEO’s speech, so nearly divorced from reality, is the “safety” of the monopolist speculator aiming to do a deal with a university to trade on the future value of a patent on an invention made in a project supported by federal funding.

Anyone who thinks there is “safety” in a patent itself as a justification to develop a product is, I’m sorry, a fool. Small companies learn this lesson all the time. It’s easier for a big company to infringe (and stay ignorant) and pay a reasonable royalty if it comes to that, than to bother with taking a license. And since universities for the most part refuse to offer a fair, reasonable, non-discriminatory license from the get-go (Stanford’s handling of Cohen-Boyer gene splicing inventions is a notable exception), it’s better for industry to infringe if it cannot avoid the invention altogether.

All this sounds like big industry disrespects patents. Not at all. It’s that universities, led by folks at AUTM, disrespect Bayh-Dole–or, more to the point, willfully refuse to comply. Bayh-Dole asserts that the patent system is to be used to promote the utilization of inventions arising in federally supported research or development. If industry is using such an invention, then the purpose of Bayh-Dole is already met. The university owner of a patent on such an invention has no standing to sue industry users of the underlying invention for infringement. Of course they do anyway, as Stanford did in Stanford v Roche, as Caltech is doing now to Apple and Broadcom.

Thus, AUTM’s recommended approach to patents is to encourage industry to avoid federally funded inventions. Design around them. Outlast them. Shift the work to countries that the university hasn’t filed in. Instead, universities license to their own startups with second- or third-tier speculators or worse, state subsidized “seed” funds, and these startups then run until the money runs out and then they or the universities become patent trolls–they call it “monetizing” their inventions. Whatever the licensing activity under such a model–even with lucrative royalties on a handful of deals–one can see that its overall effect is to move industry away from working with the results of university-hosted research.

Our AUTM CEO, however, indicates no understanding of any of this. Instead, we get a non-sequitor. He has been talking about “safety” in IP, and that meant that a university could rely on an arbitrary law that permits it to keep patentable inventions that it acquires, and so could do exclusive patent license deals with favored companies. Think of it as running a private patent system that resells federally issued patents. Takes inventions from inventors (to prevent them from releasing inventions to the public–to force them, rather, to use the patent system and publish in the patent literature), re-issues them (assigns them by granting an exclusive license to all substantial rights), and charges a fee and takes a share of the action for doing so. It’s a nice business. It’s called, depending on how one wants to see it, as engrossing–taking up inventions to drive up the cost of obtaining them. It’s strange, however, to discover that AUTM is a big advocate for engrossing as public policy, when the history of engrossing has generally been that it runs against public interest. Here we go with the non-sequitor:

So, my second take-home message is this: a strong patent system is absolutely necessary to commercialize the next generation of public sector research institution inventions. In the absence of strong patent protections, many inventions will die in the vine, never to make a difference in this world.

He was talking about “safety” of intellectual property–meaning “certainty of title” for nonprofits trying to get the jump on federal agencies that might otherwise require inventions as deliverables to be made available to the public. Now he is talking about something entirely different–a “strong patent system.” The “so” has no logical meaning here. Strong does not follow from safe. Beyond this, the AUTM CEO’s point is only true if we accept that public policy should be that nonprofits should engross research inventions to prevent public access in favor of assigning inventions to their favored companies and speculators for whatever value they can get.

We might add: a strong patent system, in the United States, would ensure that inventors owned their inventions, that inventors were not forced to use the patent system, and that the institutions that hosted their research on behalf of the federal government were not permitted to demand ownership of those inventions. It’s a weak patent system that precludes inventors from owning their inventions when they have not been hired to invent–as is the case with most university faculty inventors. In this regard, the unenforced Bayh-Dole truly sucks–by which I mean that AUTM folks advocating for not complying with Bayh-Dole’s standard patent rights clause truly suck. Take that how you may.

So, research leads to inventions, which are then licensed to companies to commercialize those inventions.

Here we have an unapologetic presentation of the “linear model” of innovation. Don’t bother that the model is widely disparaged as useless. This is the premise adopted by AUTM. People try to make this model work. They try to force inventions into this pathway. There’s never the idea that inventions might lead to more inventions, or that inventions might lead to research, or products might lead to inventions. Or that fifteen research projects strewed out over thirty years might lead to thirty inventions of which half aren’t in any of those projects and wouldn’t come into existence if the other half were patented and held for exclusive licensing. None of that exists even as possibility in AUTM’s linear model of invention management. It’s like Dunning-Kreuger syndrome made into an organizational virtue.

Not all inventions arise in research, and of those that do, not all of them are the result of that research or within scope of that research. People invent by moving laterally–to something else that exhibits a similar pattern, or presents an unexpected opportunity for use. People invent, too, by recognizing in research that something doesn’t work, and so use that awareness to invent something entirely different, that makes the present line of research uninteresting. Again, the AUTM CEO confusts the situation. “Inventions licensed to companies” is delightfully ambiguous. The reality is “each invention attempted to be licensed to only one company and as a result most inventions are never licensed and most of those few that are don’t result in anything.” Bluntly, university officials withhold inventions from use for two decades, while university officials recite their deep-seated sincerity in serving the public and repeating how very difficult it is to do these exclusive deals.

In 2016, we reported over six thousand licenses, each of which could represent the next Alzheimers therapy or traumatic brain injury treatment or the next solar cell technology.

The number of licenses is meaningless. Remember, AUTM counts every $1,000 deal for a mouse or biomaterial or piece of software as a “commercialization” license, regardless of whether there’s a patent involved. AUTM also counts all the licenses that universities are required to grant in NSF cooperative research centers and other such consortia–all these are non-exclusive, but that’s not the premise on which the AUTM CEO has just built a case for “strong” patent rights and companies that won’t develop products unless they have the “safeguard” of patent rights. As university directors of licensing have told me, they wouldn’t touch any invention that they would have to license non-exclusively. It may well be true that some licensed invention could “represent the next Alzheimers therapy.” It may also well be true that it’s a sad day when that therapy is hung up, assigned to a favored company to be exploited as a patent monopoly. The great likelihood is that while the university makes money, no product results, and if indeed there is ever a product, we the public will get it with monopoly pricing, in which the university will be happy to share. This, then, is the public interest, according to AUTM.

So, now you know more about the Bayh-Dole Act and the university technology transfer process and other public sector research institutions.

I sure hope so!

This entry was posted in Bayh-Dole, Bozonet and tagged , , , , . Bookmark the permalink.