Exceptional Circumstances in Bayh-Dole, 3

“Exceptional” circumstances are not stated by Bayh-Dole to be rare or unusual ones–they could be common. Exceptional circumstances are those circumstances in which Bayh-Dole’s arbitrary default at 35 USC 202(a) is not the best thing for promoting the policy and objectives of the law. As such, an exceptional circumstance is a policy and objective not a condition existing out in the world some place, like a storm or really loud band. And it is a federal agency policy and objective that does a better job of promoting Bayh-Dole’s policy and objective than does Bayh-Dole’s default–arbitrary–disposition of rights, which is not based on any circumstances–Bayh-Dole’s default applies arbitrarily–without regard to circumstances–whatever is within scope of the law. Any exceptional circumstance then will necessarily take the form of a federal agency policy and objective directed at modifying or preempting Bayh-Dole’s default disposition of rights with the claim that this new disposition of rights better promotes Bayh-Dole’s policy and objective at 35 USC 200.

Think of it this way. Bayh-Dole states a disposition of rights–if an organization acquires a publicly supported invention, then it may keep that invention and exploit it privately without supervision and without public reporting. There’s nothing that connects this default with anything in Bayh-Dole’s statement of policy and objective. Nothing that provides any clue how it is that private acquisition of inventions made in work dedicated to public interest leads to utilization, small business involvement, collaboration, free competition and enterprise, or the use of American manufacturing and labor. It’s a big arbitrary non-connection. Talk about a gap in Bayh-Dole. An exceptional circumstance, then, is any federal agency policy and objective for any allocation of federal funds for research or development. If a federal agency acquiesces in Bayh-Dole’s arbitrary default, as the NIH has largely done, then the agency is stating the position that whatever it says is its objective is really nothing, because that objective is nothing if a private party takes ownership of any invention made in a agency-funded project. The private party’s objectives–whatever administrative whims it may have–preempt the federal agency’s rhetoric about why it funds the research in the first place.

Let’s restate the basic structure of the law, focusing on disposition of rights:

[any invention arising in federally supported research or development for which title is not acquired by a nonprofit organization or small business firm (i) is not a subject invention, (ii) Bayh-Dole does not preempt other federal statutes, and (iii) those statutes control the disposition of rights]

[if a nonprofit organization or small business firm obtains title to any invention arising in federally supported research or development]

Each nonprofit organization or small business firm may, within a reasonable time after disclosure as required by paragraph (c)(1) of this section, elect to retain title to any subject invention

[exceptions to the above, among them “exceptional circumstances”]

The rights of the nonprofit organization or small business firm shall be subject to the provisions of paragraph (c) of this section and the other provisions of this chapter

Notice that here Bayh-Dole does not use “contractor” or “party to a funding agreement” in its statement of scope of rights. Any nonprofit or small business, if it obtains title to an invention arising in federally supported research or development, may choose to keep that title–but to do so it must disclose the invention to the federal government in sufficient detail to permit a patent application to be filed and it must accept the provisions of 35 USC 202(c)–regardless of whether the nonprofit or small business is a “contractor” or has become a party to a “funding agreement.” The “rights” of the nonprofit or small business are “subject to paragraph (c)”–the default provisions and to the rest of Bayh-Dole (including, necessarily, 35 USC 200, the statement of policy and objective).

Bayh-Dole is set up, then, so that the arbitrary default might never be used for whole classes of federal contracting. In fact, the arbitrary default runs pretty close to the Kennedy patent policy provisions for contractors in government procurement with established commercial positions in non-governmental markets. For these, the arbitrary default provisions work just fine.

For subvention research, however, such as federal grants-in-aid to support faculty-proposed projects “outside the walls” of their normal university duties, the arbitrary default provisions are, in general, poorly conceived, leaving federal agencies, faculty investigators, and the broader community of science vulnerable to predatory behaviors by university administrators with a fixation for dealing in patent monopolies instead of assisting in providing broad access to new research results and tools and working on “commercialization” as a later development that comes about after practical application.

We can see here the connection between Dr. Thomas’s fake account of Bayh-Dole’s objectives–economic growth and commercialization–and the threat of exceptional circumstances that might interfere with dealings in patent monopolies. If the policy and objectives of Bayh-Dole were really some alt-expert thing, such as to stimulate economic growth and commercialization, then any different disposition of invention ownership would have to do better at these objectives than private patent monopoly exploitation. And if, for commercialization, say, non-exclusive access for all was better than a private patent monopoly, then the premise that Bayh-Dole was necessary or inspired would fall apart.

NIH–the agency in which Bayh-Dole was drafted as a way to preempt even the stated mission of the Public Health Service whenever a federal contractor gained ownership of a federally supported invention–is not about to then admit that Bayh-Dole doesn’t get things right even some of the time. Maybe some other federal agency at times disagrees–DOE comes to mind–but not the NIH, even when it’s obvious (such as for research tools or open source software) that a non-exclusive approach is necessary and even when it is obvious (to the public at least) that it is unethical (and unnecessary) for inventions directed at public health to be placed with favored pharmaceutical companies for unconstrained private exploitation of patent monopolies.

The government (or a university) making money by being complicit in such deals has no moral high ground to stand on. It just sucks. It would suck even if it were the *only* way for a given drug to be developed. Just as it would suck if the *only* way to develop a drug would be to conduct clinical trials on, say, unsuspecting prisoners. We would say no rather than permitting an abuse of power so that a company could profit. It would not matter whether abuse of power was the only way that power abusers could participate in drug development. It would not matter, even, if the claim that this was the only way was indeed true, and that the way was indeed effective.

“We can do this, and if we do this, people suffering will have to pay 10x what it actually costs us to do this, so we can prevent anyone else from doing this any other way.”

“Oh, and as an afterthought, for our way to work, everything we don’t want has to sit behind a bureaucratic patent paywall for twenty years.”

It doesn’t matter what such a company claims about what it intends to do with some of its profits:

“If we don’t extract a lot of money from those who are suffering by being the only company allowed to sell something to help the suffering, then how will we ever make enough money to find new ways to extract a lot of money from the suffering?”

That, in a nutshell, is Bayh-Dole as practiced by the NIH. Otherwise, they would be the federal agency that always invoked exceptional circumstances for matters of public health.

If, however, a federal agency is concerned with any of the expressly stated policy and objectives of the Act, then things might be understood rather differently. Here are some of those policy and objective, again, from 35 USC 200:

  • utilization of inventions arising in federally supported research or development
  • maximum participation of small businesses in research and development
  • collaboration between nonprofits and industry
  • free competition and enterprise
  • use of United States industry and labor
  • protect the public from nonuse and unreasonable use

To get at all of this, lets see how Bayh-Dole operates, rather than repeat some widely circulated fantasy rationalization about it based on fake history and faux law.

First, Bayh-Dole does not repeal the statutory regime that was in place before Bayh-Dole. Rather, Bayh-Dole asserts precedence (35 USC 210) of that regime, but for Stevenson-Wydler, which concerns federal laboratory technology transfer. That prior regime operates whenever not preempted by Bayh-Dole.

Second, Bayh-Dole applies, for contracting, only to subject inventions–patentable inventions (and plant varieties) owned by a contractor, a party to a federal funding agreement. If something is not patentable, is not within scope of a funding agreement, or is not owned by a contractor, it is not a matter for Bayh-Dole.

Third, then. When inventors invent, they own their inventions. If inventors are not contractors, then their inventions cannot be subject inventions, even if patentable. If those inventions have been made within the scope of a funding agreement, Bayh-Dole does not apply–those inventions are not subject inventions. The statutes that apply are the ones that Bayh-Dole does not preempt.

Fourth. Bayh-Dole requires federal agencies to adopt a “uniform” treatment of inventions only after those inventions have been acquired by a contractor. Nothing in Bayh-Dole forces contractors to acquire inventions or gives contractors any special privilege or mandate to acquire inventions.

Fifth. Bayh-Dole permits federal agencies to vary from the “uniform” treatment of inventions even when a contractor has acquired ownership in “exceptional circumstances” when doing so better promotes the purposes of the Act than does allowing a contractor to choose to retain ownership on the condition that the contractor file a patent application and timely achieve practical application.

Nothing in Bayh-Dole stipulates that exceptional circumstances are rare or unusual circumstances–they are simply those circumstances that require a different treatment of contractor invention ownership than the arbitrary default specified by Bayh-Dole. Indeed, Bayh-Dole builds in a statutory exemption from Bayh-Dole’s policy and objectives for DOE nuclear propulsion and weapons research. In the original patent rights clauses, this exemption was formalized with its own standard patent rights clause (previously 37 CFR 401.14(b)). The DOE, for nuclear propulsion and weapons, does not have to consider Bayh-Dole’s policy and objectives–does not have to justify its ownership requirements.

Thus, there are three ways that Bayh-Dole’s preemption of the prior statutory framework can be itself modified. First, by building an exemption from Bayh-Dole’s default into the law itself. Amend the law. Second, by a determination of exceptional circumstances prior to an award being made. Third, by march-in when an agency determines that a contractor has not met the policy and objectives of Bayh-Dole using the default provisions of the Act. One can see that in its architecture, Bayh-Dole sets an arbitrary default that applies only when a contractor acquires ownership of a patentable invention otherwise made within scope of a funding agreement. If the contractor does not acquire, then Bayh-Dole doesn’t apply. If a contractor acquires such an invention but an exceptional circumstance prevails, then Bayh-Dole’s default provisions don’t operate. If a contractor acquires such an invention, but fails Bayh-Dole’s default provisions, then a federal agency may intervene.

Nothing about any of this is “uniform” in the sense of a single policy that must apply to all contractor ownership for use by all federal agencies across all federal funding objectives with regard to all classes of inventions that might be made. Contractors are not even required to have a uniform policy with regard to ownership of inventions made by their employees. Contractors don’t have to have any policy. They don’t even have to have patent agreements with employees. They don’t have to take ownership of any inventions and so turn those inventions into subject inventions. There’s no uniformity at all with regard to contractor practice in acquiring inventions. And for nonprofits, one would not expect such uniformity. Indeed, if universities–and faculty–and the public–had been told that Bayh-Dole would order universities to repudiate academic freedom in favor of seeking to share in profits made through the exploitation of patent monopolies in the treatment of disease and injury, Bayh-Dole would never have passed into law.

Put this way, in plain language, it’s crappy public policy. And it hasn’t even “worked.” Most inventions that get sucked into Bayh-Dole never achieve practical application, are withheld for years from research use, are excluded from commons, standards, and cumulative technology. Bayh-Dole has been a dismal failure. Universities would rather make up fake data and bogus economic models and handwave about the broader unmeasurable social benefits of “research” than in reporting accurately and fully what they have done–and mostly not done–with inventions brought under Bayh-Dole’s control. University deception here is not “in the public interest”–it betrays the public trust. In turn, the public has good reason to distrust not only the university claims regarding “technology transfer” but also the research itself, funded with public money, with its high salaries, gross inefficiencies, and no accountability.

Take a deep breath. It is not an unreasonable proposition that the public would be way better off with much less federal money allocated to university-hosted research. Much of that research is unproductive, much of that research costs universities more to administrate than they receive for that administration. Universities subsidize federal research from other funding sources even when much of that research is unproductive and especially when the vast majority of the inventions made in that research, when acquired by a university, never achieves Bayh-Dole’s standard of practical application. One might not like the proposition–and it may be there are good reasons to argue against it–but that does not make the proposition itself unreasonable.

Consider: when the “stimulus” package for research was administrated by the NIH, did the NIH fund new and innovative work that would stimulate the economy more rapidly than conventionally funded work? No–they merely lowered their standards for proposal review and used the extra money to fund poorer proposals that they otherwise wouldn’t have funded. Federal money chasing increasingly crappy research proposals is in the public interest because “research” is a public good? Again, it is not an unreasonable proposal that too much federal money allocated to university-hosted research degrades the quality of the work undertaken. And within that, the failure of Bayh-Dole to improve the outcomes of inventions made in that research adds to the reasonableness of the proposal to limit the flow of federal dollars into faculty-led university research. University administrations willing to deceive the public with regard to those outcomes create a yet more general public motivation to take down the entire scheme as corrupt as well as being ineffective. Seeing university administrations aligned with pharmaceutical companies involved with what sure looks like price gouging and anticompetitive practices adds a further reason to reduce funding if one can’t get changes in university and federal patent practices.

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