WARF, Vitamin D, and the Public Interest, 2

We have worked through a 1945 appeals court reasoning about the University of Wisconsin’s president’s refusal to allow the licensing of an invention beneficial to public health for use in food products that might compete with State of Wisconsin dairy products. The court found that the opportunity to bolster the state’s dairy industry and make money for the university is outweighed by the public interest in having broad access to the invention.

The court finds the patents are invalid–and these are the anchor patents with which WARF was started–but along the way constructs an argument that the University of Wisconsin’s president has acted against the public interest by refusing to direct WARF to license the inventions for use in all food. Dairy industry profits–even to the extent that these profits provide a benefit to dairy owners and dairy workers–don’t outweigh the public interest in having access to inventions that treat or prevent disease. That is, the benefit of the invention takes precedence over a benefit of exploiting a monopoly on the invention that excludes public access.

Now consider the situation we have with Bayh-Dole. Public university administrators insist that they must own inventions made by personnel at their institutions. When a university takes ownership of an invention made in a project receiving federal support, the invention becomes a “subject” invention and Bayh-Dole preempts any requirements of ownership that may otherwise be made by any other law (but for Stevenson-Wydler and any later law that recites Bayh-Dole). Bayh-Dole substitutes instead its own public covenant that constrains the patent property rights for owners of subject inventions. It’s just that nearly all of this public covenant is wrapped up in a standard patent rights clause–a part of a federal contract–and delegated to the federal agency that provided the research funding to waive, enforce, ignore, or otherwise not act upon.

But the federal enforcement of the standard patent rights clause is not the only basis for enforcing Bayh-Dole–there’s also Bayh-Dole’s statement of policy at 35 USC 200, and that statement does more than just recite the Congressional intent for Bayh-Dole–it also provides the statutory policy that constrains patent property rights. Bayh-Dole is after all part of federal patent law, and 35 USC 200 states the scope of patent property rights for inventions made in projects receiving federal support, regardless of who might own the patent rights, regardless of whether an invention becomes a subject invention or is owned by the federal government. That portion of the law is not delegated to federal agencies for enforcement, or even to the Department of Commerce–that’s for the Attorney General.

There’s more. Federal patent law is not the only law applicable to the actions of university presidents in the deployment of inventions. Universities are also subject to their charters, the declarations by which they obtain non-profit standing, and in the case of public universities, laws pertaining to the proper conduct of instruments of state government. There’s no law that provides that when a university president has control of a patent, the university may do anything it wants, just as any private owner of a patent might do. The outer constraint is not antitrust law. The outer constraint is the law of public interest.

In this, the monopoly meme has no life. “The state must deny something inventive to the public generally so that the state may have the incentive to profit from it as a commercial product.” Fails. “The state must deny something inventive to those ready to use it because otherwise that use would compete with our profit incentive.” Fails. “The state must deny something inventive on general principles because the cost to develop a commercial product is always much greater than the cost of the research in which any invention is made.” Fails. Not true. But also a fallacy regardless of how it is smithed–replace “always” with “often” or “sometimes” and it’s still a fallacy. There’s no necessity of monopoly created by comparing the relative costs of inventing and those of commercial product development. That’s simply not relevant. Compare: “We will deny you access to a life-saving treatment because it is colder in winter than in summer.”

I’ve used an example that ought to raise your interest. Ah! The monopoly meme responds: but if you release that invention to all, then no one will use it or develop it and you will have in effect denied access to that life-saving treatment. That’s the monopoly meme’s basic claim–the only way that the public will have any benefit from a life-saving treatment is that there’s a full-blown monopoly on the practice of that treatment and all activity toward using the treatment is excluded in favor of a single effort to create a commercial product version of the treatment. Fails. Fails historical evidence. Fails logic. Fails what we know about how medical treatments may be used, disseminated, and developed. The only thing we might accept is that some medical treatments, when made the subject of monopoly patent claims, still do become, in some limited version, widely available medical treatments. But for each patent claiming a few hundred to thousands of variants, only a tiny fraction of the claimed “technology” is ever developed or used. The patent monopoly forbids such development or use for two decades, and by then the patent owner has added more patents, extending the monopoly franchise.

There are other factors at play, as well, to preserve a monopoly. Federal regulation. Competitive practices. Trade secrets. The monopoly meme is useful in justifying the creation of monopoly franchises, but has nothing to say about all the other ways that the public might benefit from access to a full account of and freedom to use any given invention. Thus, the claim that only by a patent monopoly that prevents public access will the public ever benefit is simply wrong. It’s wrong in the general case, and its wrong in the case of medicinal chemistry. It’s a clever cognitive illusion: because sometimes a product does come from a patent monopoly does not mean that the patent monopoly is the only, the best, the first way in which any other invention may come to be useful. And that’s all the more the case when a university has insisted that it is the proper owner of an invention. All the more so when the invention has been made in a project receiving federal support or university support.

A university does not get to shed its public mission merely because it comes to own an invention. “We would never shoot anyone–that’s our formal policy–unless, of course, we obtain a loaded gun, and then we can and will shoot everyone we can, our formal policy be damned!” “The true purpose of a loaded gun is to shoot, and any limitation on our shooting will chill our incentive to use the loaded gun as it was originally intended to be used!” That sort of claptrap. In practice, university administrators are more subtle–but just because they bury the claim that patent policy preempts copyright policy, preempts policy on academic freedom, preempts policies on not competing with the private sector, preempts policies on institutional conflict of interest (such as having an ownership interest in a company receiving an exclusive license).

It’s just that a university’s patent policy cannot preempt the university’s charter or laws attending on the public purpose of the university, especially of a public university operating as an instrument of the state. That’s what the Vitamin Technologists case comes down to.

The presidents of the University of Wisconsin over the course of two decades refused to permit the use radiation to produce vitamin D in margarine, and thus denied access to the benefits of the invention to a broad segment of the public–especially egregious in a time of war rationing. That refusal may be entirely within the rights of a patent owner in the abstract, shorn of any other obligations. But the presidents of public universities are not such abstract owners of patents:

all three judges now conclude the refusal unwarranted and against the public interest

Whatever an abstract patent owner might do has nothing to do with it. We do not reason from the genus to the individual but must consider the obligations incumbent upon the individual. Even if the monopoly meme were true for the individual inventor or the corporate owner of a patent, it is not true when a public university becomes the owner of a patent. Claims about the patent system’s “original intent” simply don’t matter. The issue is the obligation of a public official now in control of the right to exclude the public from practicing a claimed invention–practicing any part of what might be hundreds or thousands of variations and functional equivalents. In Vitamin Technologists, WARF’s refusal to license–the president of the University of Wisconsin’s refusal to license–so that an invention could be used broadly by the public runs “against the public interest.” Perhaps if there were a personal liability for such practices, university presidents would take their responsibilities seriously and not just repeat the monopoly meme as if it were the only bead on their intangible asset rosary.

A few universities have made substantial money by exclusively licensing patents to the pharmaceutical industry. In those transactions, university administrators–and by extension, university presidents–have attempted to circumvent Bayh-Dole by refusing to comply with its requirements–especially they have not made clear to their exclusive licensees that an exclusive license to make, use, and sell in fact conveys ownership of the subject invention and that the exclusive licensee must now comply with the nonprofit patent rights clause, including dedicating all income earned with respect to the subject invention to the specified public purposes. See 35 USC 202(c)(7)(A) and (C). University administrators also ignore Bayh-Dole’s policy, which requires the patent system to be used to promote utilization of inventions arising in federally supported research or development–not commercial development, but utilization; and which also requires the patent system be used to promote free competition and enterprise. This policy cannot be complied with by assigning inventions as if patents on them may, in the abstract, be used to suppress all use or to suppress free competition.

Under Bayh-Dole, nonprofits must dedicate all income with respect to any subject invention, less certain limited expenses, to public purposes–and so must anyone to which a nonprofit assigns ownership of any subject invention. The only way a licensee escapes this public use of income is not to hold exclusive rights. Thus, while Bayh-Dole does not require nonprofit non-exclusive licensing it does require any company taking an exclusive license that conveys ownership to use any income for the specified public purposes. For commercial development, Bayh-Dole then all but requires presidents of universities to license non-exclusively, refusing no one.

The lesson of Vitamin Technologists, however, drives further into heart of the monopoly meme. Quite apart from all the fussiness of Bayh-Dole and the rest of federal patent law, university presidents have obligations to the public for whatever assets their universities control. Nothing in federal patent law, Bayh-Dole included, releases university presidents to play the patent troll or to refuse to license inventions to the public–not even because they recite some bugaboo thing they have heard that someone insists is true in the abstract case. University presidents still have an obligation to the public–even more so in the case of presidents of public universities.

If we follow the historical logic, it runs like this.

The federal government has a legitimate interest in opening new frontiers, including those of science. This research is distinct from research that is purpose-driven, even if that research also may discover frontier scientific knowledge.

Universities provide a venue for faculty to pursue their scientific interests without the constraints of corporate or government requirements, and therefore are a proper venue for federal support by means of grants.

Universities do not constrain the ownership of inventions made by faculty generally, and when the full cost of the research is provided by the federal government, will have no claim on inventions made with federal grant support.

Because faculty publish and generally do not claim patents (and some leading universities ban patents in the area of medicine), and when they claim patents they have historically licensed those patents to all for their beneficial use, there’s no real difference between faculty-owned inventions and government-owned inventions, so long as the federal government gets a royalty-free license, along with most everyone else.

If a university believes that it could provide non-exclusive licenses to promote public use of any given invention better than might the federal government, it can make a case for doing so, and if that case is a persuasive one, there’s nothing to prevent the federal government to allow the university to step in and serve the public as would the government, but with more dedicated efforts and greater efficiency.

That’s the logic that got things started. But the pharmaceutical industry, beginning in the 1950s, insisted on patent monopolies. That led to the Harbridge House report, which supported the Kennedy patent policy but pointed out the conflict between the Public Health Service insisting on non-exclusive public access and the pharmaceutical industry boycotting PHS supported inventions. That is, the pharmaceutical industry refused to develop even life-saving inventions for which there was no monopoly to exploit to extract maximum profits.

Rather than telling the pharmaceutical industry to piss off, the NIH and university patent brokers took a different approach–appeasement–and created the revived Institutional Patent Agreement program. The IPA program gave the appearance of providing for universities to get involved when they could be certified to do as good or better job at non-exclusive licensing than the NIH, but in reality authorized the universities to grant exclusive licenses, and without saying so expressly, these licenses were intended for pharma. The historical evidence from practice backs this intention up–almost all the licenses done by universities under the IPA program were biomedical, and almost all of those were exclusive.

The IPA program did not require universities to take ownership of any invention made in an NIH contract unless the university (i.e., the president of the university) decided to apply for a patent. Even then, the IPA program did not require exclusive licensing. Indeed, the IPA makes a big show of expecting non-exclusive licensing, and permitting exclusive licensing only when non-exclusive licensing efforts have been exhausted. In practice, however, no one bothered with non-exclusive licensing efforts. You know, the monopoly meme and the pharma boycott and all. And even then, the IPA not withstanding, nothing stripped university presidents from their public obligations. It simply does not matter that companies may make money from excluding all others. It simply does not matter that patent brokers cannot license to pharma unless the license conveys all substantial rights in a given invention, as if the invention had been made by the pharma company, but for a tiny royalty to be shared by the inventors, the university, and the brokers. Given that the brokers and the universities worked it out to keep most of this tiny royalty for themselves and pass on only a tiny bit of a tiny bit to the inventors, it’s easy to see how the scheme was attractive to brokers and administrators alike.

There’s a nonprofit out there, Canned Water 4 Kids. It sells canned water. “Drinking Water–with a purpose.” On the can we read “95% of all money collected from the sale of this water helps fund & deliver clean drinking water programs to those in need worldwide.” Sounds wonderful. It’s just that the published statements of account for the nonprofit show that while the nonprofit took in about $480,000 in 2017, only about $35,000 has gone to two charities (preventing AIDS, supporting international adoptions)–neither, on the face of it, having to do with “clean drinking water programs.” As a nonprofit, the enterprise labels cans of water and companies make money, the nonprofit (sometimes, apparently) makes money, and even a couple of charities get tiny grants. But the published premise of the nonprofit–whatever were the intentions at some point–simply doesn’t operate, other than as a sales pitch.

This is, in effect, the method of university control of patents on inventions made in publicly-directed research. There’s a wonderful-sounding premise. In practice, everyone makes money–patent attorneys, especially, university technology transfer officers, university administrators, inventors (rarely, because they only get paid when their inventions are profitable, while attorneys get paid regardless and administrators get paid whenever any one invention is profitable). It’s just the public that gets screwed over in all the bustle. “For us to make this money, really any money at all, we have to deny the public access to all these inventions while we wait for a company to come forward which will only take a license.” That’s what the monopoly meme covers for.

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