Only Bayh-Dole and University Research Enterprise, 5

We are working to explain a complicated scheme to circumvent federal policy and suppress a public discussion of the merits of doing so. Suppression of public discussion is a pretty good sign that the merits are lacking. Lack of evidence that things are happening in any way close to the aspirational rhetoric is another good sign. But no matter–we are trying to follow the logic and practice to understand the scheme. This stuff isn’t easy, just as any fraud scheme constructed by capable bureaucrats is not designed to be obvious. If it were obvious, it would not be such a successful fraud scheme.

Bayh-Dole may not quite be fraud, but it works on the same principles–sound too good to be true, flatter those in power, suppress reporting, report irrelevant stuff, deceive people with puffy language, disparage anyone who disagrees. If you demand a Bayh-Dole account be simple, so you can understand it without much effort or knowledge, then you are crying out for self-delusion and there are a number of people happy to service your need. Here, we are trying to characterize the canker and come to understand its policy physiology–the illogic by which it operates and what might be done about its dismal outcomes. If all you wanted was that Bayh-Dole sucks and we should shoo the rascals out, you need not have read this far.

It’s clear that Bayh-Dole does not provide a “uniform” approach to invention rights in federally funded research. Rather, Bayh-Dole offers an arbitrary, preemptive default patent rights clause that allows any contractor who gains ownership of an invention made in a project receiving federal support to preempt the purposes of everyone else involved in a given university research project undertaken (and judged by the federal government to be) in the public interest. That is–according to Bayh-Dole, the public purpose objectives of federal agencies in providing grant funding don’t matter. The objectives of university faculty don’t matter. The objectives of research collaborators don’t matter. The objectives of other sponsoring organizations don’t matter. The objectives of inventors themselves don’t matter. Once a university owns an invention made in a federally supported project, the only objective that matters, for Bayh-Dole, is that of the university administrator who controls the invention.

And look at the logic. If an open, declared public purpose should control the management of a subject invention, then there would be no particular need for a university administration to take control of it–the flexible, purpose-oriented Kennedy/Nixon patent policy easily handles the situation. Almost any public purpose one can imagine begins with making a patentable invention available to all involved in the research and all those who are intended to benefit from the efforts of the project. If a university administration comes to acquire ownership of any such invention, then it ought to do just what anyone else who comes to acquire ownership of that invention–manage it to achieve the public purpose of those engaged in the public supported project.

And that’s exactly what federal grant regulations require for intangible property acquired or improved with federal support. Look–here’s 2 CFR 100.316:

Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved.

The definition of “intangible property” includes patents and patent applications. Universities that acquire inventions made under a grant by claiming that federal funding requires them to acquire, or that the use of federal funds or resources paid for by federal funds requires inventors to assign come within the scope of 2 CFR 100.316. Patents on those inventions must be held in trust for the benefit of those who are intended to benefit. Ah, but, but, but go the Bayh-Dole advocates, Bayh-Dole also must preempt this requirement, since the requirement is not in Bayh-Dole. Stink about that argument, though. It’s as much as repudiating that university administrators must answer to acting as trustees for the beneficiaries of the project. “We don’t have to be no stinkin’ trustees! We don’t have to consider no stinkin’ beneficiaries of any stinkin’ project proposed and funded in the public interest.”

We might point out that Bayh-Dole’s standard patent rights clause has a number of provisions not in Bayh-Dole, but university administrators don’t care. We might point out that all the public covenant apparatus in Bayh-Dole is directed at constraining university administrators to act as trustees rather than as parties focused on institutional gain or worse, as henchlings for people aiming to co-opt public funding for private, profit-seeking exploitation of patent monopolies. It’s just that the Bayh-Dole public covenant apparatus does not operate, was not designed to operate. At every substantive point, there is no penalty for non-compliance, a waiver for non-compliance, no obligation for a federal agency to enforce compliance, and no requirement that a federal agency must act on the rights reserved for the public by Bayh-Dole. The role of the public covenant apparatus was to “reassure the public” that private, profit-seeking exploitation of patent monopolies really is the best objective of public funding.

Stink about it. Bayh-Dole authorizes the conversion of public money into a subsidy for private profit-seeking based on patent monopolies. Bayh-Dole subverts the fundamental justification for the involvement of the federal government in faculty-proposed and led research. University administrators call this conversion a public virtue, inspired, and claim it has been a wild success. Ghastly folk. In any other context, we would call it corruption of public purpose. According to university administrators, the entire federal grant program for funding faculty-proposed projects at universities is “really” there to funnel money to faceless bureaucrats speculating on the future value of the right to block everyone else from making, using, or selling any invention made in that publicly supported work. University administrators and their speculator friends play the grimy neighbor who wants to get at inventions when they are young, and will do so despite any appeal that those inventions should be cared for, not exploited.

Bayh-Dole normalizes a repudiation of the public purpose behind federal government subvention funding of faculty-proposed research. Bayh-Dole is the antithesis of Vannever Bush’s vision for the role of the federal government in expanding the frontiers of science through university research. If university administrators have their way, university faculty work in the service of patent monopolists, and if Bayh-Dole does not force faculty inventors to submit to demands to use the patent system, then university administrators change their patent policies to make the demand anyway. The public isn’t outraged, perhaps, because Bayh-Dole makes invention utilization information a federal secret, or perhaps it is because the public has come to expect next to nothing from university research. And if that’s the case, we can reasonably attribute the outcome to Bayh-Dole and to its advocates who have normalized private corruption by allowing patent monopolists to preempt public purposes of those involved in federally funded projects.

Bayh-Dole then provides a carve-out on the federal laws and regulations that otherwise establish the public purposes to which inventions made in federally supported projects should be dedicated. Both regimes operate: the flexible, publicly purposed regime and the arbitrary, preemptive regime. The passage from the publicly purposed regime to the preemptive regime is a contractor gaining ownership of an invention made in a project receiving federal support. Bayh-Dole makes it difficult for a federal agency to establish any public purpose that would override Bayh-Dole’s preemption, and makes it easy for federal agencies to ignore the public covenant apparatus that Bayh-Dole sets up to sell the public on the idea that preemption is a safe thing, if not a good thing.

“Uniformity” in Bayh-Dole does not mean that the law requires federal agencies to handle every invention the same way. Bayh-Dole offers only a default relative to contractor ownership claims. But given the practice–and this is crucial–Bayh-Dole makes it difficult for anyone in a federal agency to enforce the standard patent rights clause in the public interest. The result is that Bayh-Dole enables patent monopoly speculation without public accounting, without public intervention, without consequences. It doesn’t matter that 99% of federally supported inventions end up not achieving practical application–but most of them are held unlicensed and unavailable behind university patent paywalls (except where federal agencies force non-exclusive licenses, as in the case of NSF cooperative research centers).

At best, “uniformity” has to do with the administrative convenience of being able to ignore the public purposes of both federal agencies and university faculty investigators.

Now let’s chase through the “uniform” trope to university practice. That university administrators get a “uniform” treatment by federal agencies is pretty much meaningless in terms of the practical application of inventions made in federally supported projects. What matters is that inventions make it to people who benefit by using them, making them, and even selling them.

Consider a federal effort to develop a broad area of technology–nanotechnology, say. Federal agencies provide grants to many university faculty at many universities to explore all sorts of facets of a given area of study–carbon nanotubes, say. Inventions show up all over the place. But each university’s administrators then claim ownership of those inventions–ah, they have a uniform privilege, federal agencies and faculty be damned. But now what happens? Each university’s administrators hold out to license exclusively their bits of the overall project or not license those bits at all. Each exclusive license contains a poison pill that prevents the exclusive licensee from granting non-exclusive royalty-free licenses–so, no standards, no technology platforms, no patent cross-licensing. Any company wanting to practice the results of federally supported university research in carbon nanotubes would have to get licenses from ten or twenty universities–and each license would have to be exclusive. And each university will demand its full share of royalties, creating a royalty stack that would be impossible. And each negotiation will take six months to a year. And each university will have its own demands for the structure of royalty payments, for indemnification, for dispute resolution, for auditing and reporting, for milestones, for governing law and venue for litigation. For the company wanting to practice a technology, nothing is uniform, nothing is easy.

The only people who have an easy time are those who want to deal in patents on a single invention, and the deal they pursue is to speculate on the future value of just those patents relative to the value of the technology set of which they are a part. That is, the speculators seek to make products that don’t involve any other inventions, and to exclude anyone who does seek to make products that are composites of multiple inventions based on federally supported research. Do you see the fragmentation? Sure you do. But notice, too, that the claim that one can build a successful commercial product based on a single invention is all but empty. In fact, it is silly.

Speculators don’t expect to field a commercial product. They aim to sell out to someone who worries that they might or they aim to troll industry that runs past them and crosses their patent rights, or comes close enough that they can troll to get payments anyway. If a patent monopoly really were necessary to justify commercial use of a given invention, there never would be a threat of infringement of any patent on a subject invention. Universities would not sue for infringement, nor would their dog-company startups that almost always fail but also become potential patent trolls, giving a business opportunity for companies like Intellectual Ventures to mop up patents from failing startups, to neutralize the availability of these patents for patent trolls. University monopoly patent licensing is pretty much a speculative pyramid scheme enabled by Bayh-Dole. Anyone but patent speculators finds the licensing requirements unworkable, and certainly not uniform from one university to another. Uniformity would take the form of FRAND non-exclusive licensing programs–fair, reasonable, non-discriminatory. Uniformity would take the form of dedication to the public, royalty-free licensing, participation in standards–in effect, the programs offered by federal agencies under the Kennedy/Nixon patent policies. Perhaps universities could do a better job with those programs where they were motivated to reach out to companies and connect companies with faculty, student, and staff expertise.

Even if Bayh-Dole provided a uniform environment by which university administrators had it easy to keep the right to patent inventions made in federally supported projects, and allows them to preempt with uniform impunity public objectives of everyone else involved, Bayh-Dole does not make a uniform environment for access to those inventions where it matters–to those who would use the inventions in research, in their professional activities, in their internal company operations, or to those who would develop cumulative technology–developing inventions in the context of other inventions.

For this activity, which is the “networked, non-market” environment that, as Steven Johnson has so well documented, fuels the development of good ideas, Bayh-Dole is a total, entire, complete disaster. It’s not merely that Bayh-Dole is a corrupt spigot tapped into public money for public purposes–like curing diseases–it’s that Bayh-Dole creates an environment for that research that repudiates the very people that ought to most benefit from faculty-led research at universities. Skip the “metrics” propaganda put out by AUTM–the activity measures don’t matter. What matters is who is involved in the activity. What matters is what those people actually do. What matters is that the environment for using the discoveries and inventions and data and software and materials and tools responds to those who do the using, not to the speculators on the future value of excluding people from doing that using.

Bayh-Dole is not uniform. And where Bayh-Dole makes things easy for university administrators, it makes things impossible for everyone else. Sure, the flow of technology and commercial activity flows past Bayh-Dole and federally supported research. People avoid inventions covered by unlicenseable patents and by exclusively licensed patents. They ignore them, they design around them, they don’t use them, they undermine them, they advocate for ignoring them, they purposefully refuse to use the results of federally supported research that has come into the hands of university patent administrators dedicated to creating patent monopoly paywalls and profiting from those paywalls.

For federally funded projects–for subvention grants on behalf of projects proposed by university faculty–Bayh-Dole makes no sense at all. Absolutely absurd nonsense.

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