Exceptional Circumstances in Bayh-Dole, 1

In 2008, Dr. Jeffrey W. Thomas, then a senior advisor to the Technology Transfer Center at the National Cancer Institute, gave a talk on Bayh-Dole’s exceptional circumstances. The slide deck is still up at a federal laboratory consortium web site. The talk comes three years before the Stanford v Roche decision, so it’s a given that it will be wrong about some things, but it is useful (especially since it is still up on the web) as another insight into NIH thinking about Bayh-Dole.

The purpose of Thomas’s talk is to discuss NIH’s protocols for invoking “exceptional circumstances” under Bayh-Dole. The “exceptional circumstances” provision is one of the chinks in the claim that Bayh-Dole establishes a “uniform” treatment of inventions by federal agencies. In that regard, Thomas’s talk will be most informative.

Thomas starts his talk with the popular faux version Bayh-Dole Act and some fake history. Stanford v Roche won’t excuse the fake history. Let’s examine the faux and the fake first, and then look at how Thomas shows how the NIH exploits the faux and fake to preserve a patent monopoly pipeline from public funding laundered through university patent brokers for the benefit of private pharma.

Here’s Dr. Thomas’s summary slide on Bayh-Dole:

First thing we encounter is fake history.

Prior to 1980 inventions made by Federal funding recipients were owned by the Government.

Prior to 1980, inventions made at most nonprofits funded by the NIH and the NSF were covered by the IPA program and the nonprofits could own the inventions. For any others, inventions were subject to a request for determination and a federal agency could release claims on any invention if doing so was judged to be in the public interest. It was the uncertainty of this federal agency review outside the IPA program that rankled invention management organizations such as the Purdue Research Foundation in its dealings with the Department of Energy. As for for-profit companies, they had little need for Bayh-Dole because the Kennedy and Nixon patent policies provided for company ownership of inventions when the company had an established commercial non-governmental market position. So, fake history. May as well say that before Bayh-Dole, dragons inhabited the land, and the people were sore afraid to set foot outdoors for fear of losing their inventions.

Even when the federal government did receive ownership of inventions made with federal support, those inventions were generally made available to the U.S. public, either by dedication or less often by royalty-free non-exclusive license. Thus, even “ownership” here is deceptive. Federal ownership of inventions was not anything like contractor ownership of inventions. Prior to Bayh-Dole, federal agencies only rarely dealt in patent monopolies. Most federally supported inventive work was available to all. That, too, rankled people who wanted to defect on shared development and exploit patent monopolies for their future value–including the future value of disrupting any common effort to discover and develop new technology. So the defection argument went–for any publicly directed common effort, a private interest ought to be able to see what is going on, come in, gain ownership of key inventions, take over, and in exchange for funding whatever of the remainder of the work privately, or at least make a show of attempting to, have an exclusive right for two decades to suppress all other access to those key inventions (which could, in the case of medicinal chemistry, involve thousands of compounds each)–no matter if that effort fails. That’s the main concept behind Bayh-Dole: allow speculators, and organizations giving priority to speculators, to disrupt common development and public use whenever a contractor gains ownership of a key research or development invention made with federal support, regardless of the public purposes that justified funding for the work in the first place.

Put it another way: anything inventive that might prove beneficial to the public through collaborative development or availability for use should, if federal funding gets involved, be also be made available to be co-opted for exclusive control by any organization that can obtain ownership in any invention made in that collaborative development. Any contractor should be permitted to defect on any collaborative effort, no matter the premises of that effort, unless a federal agency goes out of its way in advance to determine “exceptional circumstances.”

Or, yet another way, if there’s public funding:

  • divest inventors of their invention rights and withhold public access
  • preempt any public objectives of faculty investigators or federal agencies in favor of private organizational patent owners asserting exclusive rights
  • deal in the future value of patent monopolies

Keep in mind that there is no compelling reason for any non-federal party to a federal funding agreement to take a patent monopoly position in any invention made under that federal funding only to release the invention to all if that is what the federal government would do anyway. (There *is* a reason to keep ownership of inventions away from the federal government under Bayh-Dole, however–and that is to prevent federal agencies from themselves dealing in exclusive rights and defecting on their own research collaborators.)

If the involvement of inventors is critical to the adoption of any given invention, then those wanting to adopt can engage the inventors directly or through research donations or sponsored research. But they cannot do so if the inventors’ inventions are held back for exclusive licensing. In such cases, they might engage inventors to design around the inventions that have been put behind a patent-exclusive paywall. Yes, this really does happen. Even exclusive licensees have been known to engage university inventors to design around a licensed invention. Cash payment or a company position or a share of equity in the licensee might be a better value than a minority share of royalties for a product that may never see the light of day.

There is no particular advantage for innovation (or for inventors) to running any benefit to inventors through a royalty-sharing formula. In fact that was potentially much worse–inventors then would receive compensation for their time and effort only if a product made it to the marketplace and the license produced royalties. By contrast, any other form of compensation was immediate and did not shift the risk of successful development to the inventors. While there could be a huge upside to having a share of royalties from commercial sale of a product covered by a patent held for exclusive rights, the chances of that happening at the top research universities are on the order of 1 in 2,000 inventions or one invention every decade or two.

But, yes, create a fake history and fake metrics to make it appear this approach is “successful.” Dr. Thomas, who has won merit awards from the NIH for his work in technology transfer, uncritically repeats the fake history. His slide then turns to the faux law:

The Bayh-Dole Act allows recipients of Federal funding to elect right and title to inventions.

Not true. Many people were told this line prior to Stanford v Roche–and still get told this line after the Supreme Court decision. Bayh-Dole applies only after a party to a federal funding agreement acquires ownership of a patentable invention made in work under the funding agreement. Bayh-Dole does not “allow” recipients to “elect” title. Yes, the word “elect” is used in Bayh-Dole–but there it is used with regard to the decision to keep what one already has–“elect to retain title” not “elect right and title.” Even NIST’s recent effort to add an assignment provision to the already non-statutory (f)(2) written agreement requirement–to make NIST’s own general counsel’s confusion over Bayh-Dole come true rather than be withdrawn as mistaken–cannot get around the fact that the assignment requirement is directed to, and limited to subject inventions–to inventions that the recipient must already own.

So Dr. Thomas gets Bayh-Dole very wrong on a key point and the rest of his talk, while illuminating for how the NIH screws up Bayh-Dole, is a kind of expert hallucination. Bayh-Dole did not change much of anything for university-based federally supported research. Most universities that received NIH funding were in the IPA program. The IPA program did require university administrators to make inventors promise to assign inventions whenever the administrators decided to file a patent application. And university administrators did choose to enter into this master IPA contract without faculty approval and even in breach of university policy. That’s worth pointing out about Bayh-Dole, but not at the NIH apparently.

Dr. Thomas omits as well the key change that Bayh-Dole brought to federal agencies like his. Bayh-Dole expressly authorizes all federal agencies to deal in patent monopolies on inventions owned by the federal government. No agency head could argue, after Bayh-Dole, that federal law or regulation does not permit dealing in patent monopolies–federal agencies are greenlighted to grant exclusive licenses, including exclusive licenses that assign the underlying invention–in effect, running a shadow patent office that obtains patents from the real patent office and then as a government agency re-issues the patents and the inventions to whatever company the federal agency finds most pleasing. The effect has been to ensure that if a university declined to deal in patents, the federal government could acquire the invention and deal in patent monopolies itself. After Bay-Dole, there has been no uniform default that government owned inventions would be made generally available to the public. This change is way more huger than anything having to do with universities.

The Act was designed to stimulate economic growth and the commercialization of federally funded inventions.

The passive voice hides the agent. Who again designed the Act? Patent attorneys at the NIH and the Wisconsin Alumni Research Foundation. Let’s complete Dr. Thomas’s statement:

… to stimulate economic growth and the commercialization of federally funded inventions directly addressing the public health through the use of patent monopolies provided to the pharma industry via both nonprofit organizations and the federal government.

If we slow down our reading to half speed, we see how the illusion works. There’s no need for Bayh-Dole to target both “stimulate economic growth” and “commercialization of federally funded inventions” unless the two goals follow different pathways. Are these two goals distinct? That is, does Bayh-Dole have a stimulus for economic growth that has to do with something other than commercialization of inventions? How would one use the patent system to stimulate economic growth with research inventions without using the patent system? Oh, would that be through teaching, publishing, and dedication to the public domain?

No, the Bayh-Dole “stimulus” for growth is the private exploitation of patent monopolies to motivate the “commercialization” of inventions. According to the political rhetoric, commercialization will not take place without patent monopolies. Of course, if such a claim were true, then there would also be no instances of infringement prior to commercialization because, well, if no one would commercialize without a patent monopoly, then surely no one would commercialize when someone else held that patent monopoly. Yes? Counterexamples abound. Even Stanford v Roche–Roche developed a commercial product while Stanford sat on its hands–and then Stanford sued Roche for infringement, and then cited Bayh-Dole. Utter nonsense. The political rhetoric is at best a bluff, and more often bureaucratized bullshit.

Dr. Thomas perhaps intended us to understand his meaning as “commercialization of federally funded inventions to stimulate economic growth.” Even that hasn’t worked out.

As for the Bayh-Dole Act itself, Bayh-Dole does not state that its aim is to stimulate economic growth or to stimulate commercialization of federally funded inventions. Dr. Thomas is just making this part up. The express policy put forward by Bayh-Dole is to use the patent system to promote the utilization of inventions arising in federally supported research or development. Use is the goal, and a particular kind of use–use with benefits available to the public on reasonable terms. Whether use stimulates economic growth or results in commercial products is not a stated goal of Bayh-Dole.

It may be that NIH’s goal is to stimulate economic growth or to commercialize inventions–but then one has to wonder why the NIH has changed its charter so that private exploitation of patent monopolies for economic effects and bolstering of for-profit companies’ product lines should take precedence over something like “to seek fundamental knowledge about the nature and behavior of living systems and the application of that knowledge to enhance health, lengthen life, and reduce illness and disability.” It must be that by “application of that knowledge to enhance health” the NIH means “to deal in patent monopolies so that pharma companies and their investors can maximize their profits at the expense of the suffering and those attempting to help.” Who would have known?

Dr. Thomas, having set the stage with a misrepresentation of the law (though we can presume a representation that runs close to NIH’s official “interpretation” of the law), turns to Bayh-Dole’s “exceptions” to the default case in which a contractor may, simply by gaining ownership of an invention, preempt the public purposes for which research was proposed by faculty and funded by a federal agency. We will spend some time considering the nature of the exceptions, why the NIH declares that these are difficult to obtain, and what that means for the patent monopoly pipeline and public purposes of federally supported research and development.

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