AAU, APLU, and others aim to “bolster” federal technology transfer, 3

A set of higher education associations–front groups for a bunch of research universities–has published their advice in response to NIST’s call for ways to improve federal technology transfer. AAU, APLU, AAMC, COGR, and ACE all signed on to the statement that we have the opportunity to review.

Here’s the gist of NIST’s call:

NIST requests information from the public regarding the current state of Federal technology transfer and the public’s ability to engage with Federal laboratories and access federally funded R&D through collaborations, licensing, and other mechanisms.

Instead of providing anything of substance that might contribute to a discussion of federal lab and agency technology transfer, the AAU, APLU, and other HEAsses instead submit a tome about themselves and claims they make for and about their university members. It’s like they can’t read. No matter, we have worked through their statement of “priorities.” Now let’s work through the details of what these HEAs think is important for federal lab technology transfer.

In the first two parts of this article, we looked at the the HEAs’ statement of “priorities.” Now let’s deal with their discussion. We will quote bits and comment.

The HEAs assert that Bayh-Dole is working “as intended.” This is all very well, but the primary statute dealing with federal laboratory technology transfer is Stevenson-Wydler, which Bayh-Dole acknowledges takes precedence. Of course, Stevenson-Wydler has been amended to point back to Bayh-Dole at various points, so it’s all a fine bit of spaghetti code. Wouldn’t it be great if attorneys had to learn a structured programming language before they could practice law?

The HEAs assert that Bayh-Dole is working. Surely it’s not “working as the law provides” since universities don’t comply, federal agencies don’t enforce, and federal agencies don’t act on the rights reserved for them. Surely it’s not working “as intended by Congress” because no one bothers to comply with what Congress set out as Bayh-Dole’s policy at 35 USC 200–that is, unless Congress intended for everyone to give the law lip service and then do WTF they wanted, deceive about impacts, and generally screw things up. Thus, it would be nice to get clear from the HEAs just what they think the intention for Bayh-Dole is, and who it is who has that intention, since clearly it’s not the express statement of Bayh-Dole’s policy and objectives.

Bayh-Dole makes reports about invention use a government secret by purporting to exclude reports from FOIA disclosure. Bayh-Dole violates FOIA to make those reports secret, but that would take a big law suit to prove it. So *that part* of Bayh-Dole sure is working. There’s no evidence that more than a very few subject inventions reach practical application, while there is good evidence that the rest get caught behind university administration patent paywalls. Was that intended? If so, then again, why yes, Bayh-Dole is working as intended. For NIST, however, the question is not whether everything about use of subject inventions should be a government secret, but rather whether preventing public accountability does anything beneficial for federal technology transfer.

If what’s “intended” is sky-high, monopoly-backed prices for drugs discovered with public support, then Bayh-Dole certainly is a wild success! Perhaps the HEAs and their member universities have invested in pharmaceutical stocks and that keeps them sucking up to pharma interests. That would explain a lot–institutional conflict of interest leads to advocacy for patent monopolies that give pharma companies 10x the profit on inventions made with public support than they would see otherwise. Pharma without monopolies, or with much narrower monopolies, would still be profitable–just not wild-ass speculator-licking profitable.

These  HEAs all march to the same pipers–patent brokers and pharma chanting the same disinformation about Bayh-Dole and silly nonsense about how inventions come to be used only by commercialization attempts wrapped around patent monopolies. Shills. Blistering blue barnacles. Why not just out with it?:

Bayh-Dole was created in the NIH to enable the conversion of public funding into subsidies for for-profit pharma product development, and university administrations get involved to attempt to make money from brokering pharma access to the patent monopolies. The administrations use lobbying fronts like AAU and APLU to persuade the public that this “brokering” serves a public purpose.

Mostly, the patent monopoly pipeline approach doesn’t work, even for pharma. The standard of success is that each federally supported invention for which an institution acquires ownership gets used,  resulting in benefits available to the public on reasonable terms. That standard is not being met for the vast majority of subject inventions. For Bayh-Dole to “work as intended,” university administrators must persist in taking ownership of everything biomedical that they can and prevent anyone but pharma or the investment community aiming to sell out to pharma to have access to those inventions. It’s  good enough that no one has a good opportunity to compete with the pharma patent monopoly business model or with the university administrators’ patent monopoly pipeline.

That’s right–two models, both of which Bayh-Dole is used to protect. The pharma industry insists on patent monopolies. University administrations have dedicated themselves to providing patent monopolies, with the claim that unless public research is packaged into patent monopolies, then the pharma industry won’t use that research and the public won’t benefit from it. That is, there won’t be “commercialization.” You  have to believe that “commercialization” is the only way new science can be used. You have to believe that “commercialization” will only happen with patent monopolies. You have to believe that “commercialization” via patent monopolies must be unconstrained by public protections, although it is fine to have the appearance of public protections, so long as in practice they are never allowed to operate.

In one sense, the university administrations state a tautology–an industry willing to boycott new science because some company within that industry cannot corner the market on it indeed won’t bother with new science that they cannot monopolize. There’s an appropriate response to such an industry, with regard to publicly funded research projects addressing public health-disregard it.

In another sense, however, the university administrations put forward a self-fulfilling prophecy–they refuse to allow any new science to be openly available, on the fear that the new science will actually get used, but not by the pharma companies that occasionally are willing to pay sizable amounts to secure a monopoly position.

If it could be shown that beneficial drugs could be developed without the need for a single monopoly-backed investor, that would not only compete with pharma for business–it would undermine the pharma claim that patent monopolies are essential for public benefit from federally supported research addressing public health. And it would undermine the more audacious university administrator claim that the pharma claim is true for all inventions, not merely for those in medicinal chemistry. Similarly, if university administrators permitted approaches other than a patent monopoly pipeline to operate in areas other than medicinal chemistry, those approaches would undermine the claim that without patent monopolies, university research in general will not be used to benefit the public.

The idea of a pharma patent pipeline based on publicly supported research would benefit from an open public policy debate. The further idea that patent pipelines must be forced on all industries and all professional practices is an additional topic to debate. It’s difficult to understand who would actually take such a position, but that is the default practice at most university technology licensing offices. Most of them simply do not release inventions to the public or into a non-exclusive licensing program unless they are forced to do so. Only if neither the university nor a federal agency can see a way to profit from a patent monopoly does a publicly supported invention have a chance of entering the public domain.

It is not strange, then, to find that mostly none of these university licensing operations makes money from their subject invention patent monopolies. It’s a hapless model. One “big hit” invention might generate royalties from sales–and that invention can make a licensing program look good for two decades while its underlying fundamentals are ineffective, even rotten, with almost all subject inventions festering behind university patent paywalls.

Is that Bayh-Dole working as intended? Apparently. We are supposed to believe that because universities don’t make money from their patent monopoly business–their costs are greater than their income–that universities must be doing all this in the public interest? “Don’t judge us based on royalties from sales of commercial product”–even though it is just such a royalty that estimates the value of achieving practical application. But if one thinks about it at all, it’s clear that if a university complied with Bayh-Dole’s requirements, royalty income would be less than the maximum available if deals were done only for the money and patent monopolies were used to support the highest possible price on the version of product easiest to manufacture with the least possibility of competition. While royalty income is a measure of the value of commercial sales, more royalty income does not mean better success for Bayh-Dole.

Put it another way. Royalty income has structure. In the case of the Cohen-Boyer patents, Stanford made the gene-splicing technology available to industry on a very-low-cost non-exclusive license and generated about $260m. That income represents a ready availability of the inventive work and a broad uptake of that work, including in the newly emerging biotech industry. In the case of Emory’s management of an HIV-directed antiretroviral drug, Emory licenses the invention exclusively to a company that is acquired by another company which then does a deal so that Emory sells out its future royalty revenue to yet another company. Emory gets $525m in the transaction, but the invention is bound up in a single company, and Emory itself no longer even has a financial interest in how the invention is further exploited.

These are very different royalty transactions. For gene-splicing, the price of access was set low, and many institutions participated. For the HIV drug, the price of access was displaced to an exclusive licensee (purchased by another company, with the future royalties purchased by yet another company) who set a price based on the monopoly position rather than to facilitate broad access. In the HIV drug case, Emory, the putative representative of the public interest, sells even its royalty interest–Royalty Pharma, the company that purchased that interest, presumably wants Gilead to maximize its sales of Emtriva–anything goes, there. While Emory might be expected to manage the licensing relationship “in the public interest,” there is no same expectation for Royalty Pharma.

Maximizing profits is, in this way of thinking, in the public interest, even when the profits come at the expense of the public suffering from, say, AIDS. There’s good reason to believe the Emory transactions violate multiple provisions of Bayh-Dole’s public protections–but if the public protection apparatus is designed not to operate, then it is for appearances only, and the primary public policy is that anyone who obtains ownership of an invention made in a project with public support should be free to exploit that invention for maximal profit. Anything less would be “chilling” to the use of the model–and, well, the public would not ever benefit from all that federally supported research. It’s so much hoo-haw, but it is hoo-haw that has managed to survive on fake history and deceptive metrics for fifty years at least.

Most university patent licensing shops deal in granting exclusive patent licenses–essentially assigning the underlying inventions (despite Bayh-Dole’s prohibition of the practice and requirement to pass through the nonprofit patent rights clause). If the university licensing operations don’t make money, it’s because those licenses that cede control to private interests, also don’t result in sales–products are not reaching the market. That is, practical application is not happening within the model. However, the money that is reported by universities comes from a number of sources that do not track sales–repayment of patenting costs, licensing fees, milestone payments, annual license maintenance fees, sublicensing fees, realized equity, settlements–anything but a royalty earned based on sales of product.

Of course, a university could assign a publicly supported invention for no royalty whatsoever. And why not? Would not that represent the optimal balance of institutional altruism and maximal freedom to seek profits by the new owner? If you are not comfortable with that approach, how is that approach made any better by insisting that the new owner may retain the maximal freedom to seek profits, but the university must get a percentage share of those profits? It’s the same deal, except that in the latter case the university insists on being complicit in the pursuit of maximal profits. Only if the university exercises control through the license that restricts the pursuit of maximal profits does the deal actually change. The public covenant apparatus in Bayh-Dole sets out the ways that a university can act to advance the public interest in licensing patents:

35 USC 200: promote free competition and enterprise–

license non-exclusively or limit the term of exclusivity

35 USC 202(c)(7)(A): any assignment of a subject invention by a nonprofit must flow down the nonprofit patent rights clause, including the requirement that any income earned with respect to a subject invention, after allowable incidental expenses, must be used for scientific research or education–

nonprofit exclusive patent licenses that also assign the subject invention cannot produce a private profit

35 USC 203(a): the government may march-in and compel licensing if the owner of a subject invention or exclusive licensee has not timely achieved practical application (nonuse, or use without benefits to the public, or with benefits to the public but not on reasonable terms)–

include a requirement to work the invention in all exclusive licenses

timely downgrade to non-exclusive or revoke the license to parts of a claimed invention that are not worked

require reasonable terms for commercial products

If anyone wanted to improve Bayh-Dole, they would require each federal agency, for each subject invention, to require the nonprofit owner of that subject invention to report, each year, whether the invention had been licensed, and if so, whether exclusively or non-exclusively, the date of first commercial sale or use, and the amount of income received prior to the date of first commercial sale, and the amount of income received after. My expectation would be that we would see a lot of front-loaded nonprofit income–money received without any commercial sale or use. Universities make money, speculators make money, but public benefit from use on reasonable terms with free competition and enterprise?–meh.

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