Nonsense about Bayh-Dole from Bio, 2018 edition–1

Let’s look at a new infographic from Bio about Bayh-Dole. It’s largely the same as the old infographics. The point of the infographic is to create the impression that the Bayh-Dole Act has been wildly successful and that any effort to use the law to reduce drug prices will destroy medical innovation and hurt our military. It’s nuts. Bayh-Dole could disappear tomorrow and nothing would change. Why? No one complies with Bayh-Dole. Bayh-Dole therefore cannot be at all responsible for high drug prices. But university administrators and federal grants officers and “technology transfer” officers can be responsible at least for some drug prices being higher than they ought–for failing to comply with Bayh-Dole or to enforce the standard patent rights clause and for putting the interests of big companies and wealthy investors ahead of other interests–ahem, public interests.

Meanwhile, we can work through yet again more Bio misinformation about Bayh-Dole. If you already know it’s nonsense, don’t bother reading on. If you feel some wonder, then here’s the commentary that calls out the misinformation.

Nope on “empowers.” Bayh-Dole requires contractors to disclose inventions that they acquire and allows contractors to keep those inventions that they disclose against any claim that might be made by a federal agency. See 35 USC 202(a). Bayh-Dole does no “empowering” of anyone to “take ownership.” See the Supreme Court decision in Stanford v Roche.

Bio makes it appear that universities are given ownership of inventions “so they can license these basic inventions.” It would be nice if universities and others would license anything. Mostly, they don’t licensing much at all. Notice–Bio doesn’t report that. Further, not all university-hosted inventions are “basic.” That’s just a clever transfer from the idea that university faculty conduct “basic” research. Yes, of course they do. But they also conduct “applied” research and they even “develop” stuff for their use–as research tools, in clinics, and to demonstrate functions. Even “basic” research can result in “well developed” inventions–for instance, the needs of observational astronomy (a “basic” science) have resulted in the development (by university faculty and technicians) of a fully operational adaptive optics system (“well developed” to the point of implementation. Bio must take folks for fools to make it appear that because universities host some research that’s “basic,” then all inventions at universities are also somehow “basic.” Or that Bayh-Dole applies only to those inventions that are “basic.” No, Bayh-Dole applies to any patentable invention that a university acquires and which was made in work supported by federal funds. 

Now for the licensing. If universities didn’t claim ownership, no “licensing” would be needed for public access. Universities would not be playing favorites and attempting to grant exclusive licenses. Research tools would have broad immediate access. Diagnostic tests could be implemented by others upon publication. Inventive methods in software could be used as needed–most of which do not require any “applied research” or “development.”

Universities claiming ownership of most everything that they can call an “invention” necessarily prevents most everything from being available for “broader public use.” If Bio wants to make a special case that the pharma industry requires a broad exclusion to practice for each patent in medicinal chemistry–not just to block others from “developing” the same compound, but to block others from using or developing any of hundreds or thousands of other compounds that the favored company is not using or developing.

Ah, our friend the monopoly meme. If university faculty found a cure for cancer, no one would use it or develop it if it were available to all. Right. Companies invest all the time knowing they face competition from others developing similar products. What’s with pharmaceutical industry executives that they can’t hold up to competition? No–it must be the “free rider” argument, that other companies could develop and manufacture a given medicine more quickly and cheaply than some big pharma company, and so must be stopped. Okay. We’ll come back to the monopoly meme in a few paragraphs, to watch it eat itself.

Bayh-Dole does not require any product to be “manufactured domestically.” Bio is bullshitting us. Go look at 35 USC 204–it’s a “preference” for United States industry. Bayh-Dole requires that exclusive licenses to use or sell in the US must require the licensee to use product manufactured substantially in the US. There’s no requirement for an *owner* of an invention to manufacture in the US. There’s no requirement if the license to use or sell is non-exclusive. So an owner of an invention can license a foreign manufacturer and sell the medicine in the US itself. All compliant with Bayh-Dole. For all that, Bayh-Dole allows federal agencies to grant waivers for even the exclusive license bit. The NIH does such a business in waivers that it has set up a web site to process all the requests.

Technically–and legally–most university exclusive licenses for biomedical inventions assign the invention rather than merely exclusively license it. The company ends up being the owner of the invention. Thus, unless that company grants an exclusive license to use or to sell to some other company, section 204 of Bayh-Dole doesn’t apply at all.

Bayh-Dole in no way “assures royalties for universities.” Nothing like that is in the law, the implementing regulations, or the standard patent rights clause. Again, Bio is just making things up to deceive folks. If Bayh-Dole were so wonderful, don’t you think that Bio wouldn’t have to make things up? Bayh-Dole has nothing to say about the consideration a university might receive for a patent license. A university could grant royalty-free licenses, for all that. Okay, stop laughing.

Bayh-Dole does require the nonprofit owner of a subject invention–and any subsequent owner of that nonprofit’s invention–to share royalties with inventors. Nothing about sharing royalties with universities. Bayh-Dole also stipulates that the owner of a nonprofit subject invention must use all income earned with respect to the subject invention for public purposes–support of scientific research or education–and allows deductions only for the expenses incidental to the administration of subject inventions. Those happy pharma companies backing Bio don’t bother to point out that they never comply with this part of the law. Kinda sucks that a law this successful relies on no one ever complying with it!

As is, for basic research, universities are floating in money. They have no idea how they could spend more money or spend it any better. When the huge bolus of economic stimulus money came to the NIH to augment research, they simply funded *less competitive proposals.* That’s right–they funded proposals they otherwise would have rejected. More money lowered the standards. Didn’t change course. Didn’t do anything wild and new. Just funded crappier proposals. The royalties that universities make are tiny. In about half the cases, the costs of running a patent licensing office are more than the income received. In almost all cases, the amount of licensing income is a tiny portion of the total university research budget–1% or so. Yet Bio would have us believe that this tiny amount makes all the difference in basic research. Do you want to be self-deluded? No, of course not. Bio bluffs, Bio lies.

By the way, I’ve never seen a university put patent royalty money into the instructional side of the budget. It all goes to administration and research. Imagine Bio bragging that tiny amounts of biomedical patent royalties are used by universities to make administration bigger. Well, yes!

More rot. First, march-in has nothing to do with whether an invention is licensed or not. The march-in provisions–see 35 USC 203–have to do with what an invention owner, or assignee, or exclusive licensee does. It is true that the march-in is “limited.” In fact, march-in is so limited that it is impossible to use. The standard is not “not being used” but rather that a federal agency does not “believe” or “expect” that the owner of a subject invention (or assignee or exclusive licensee) will “take effective steps” to achieve “practical application”–the use of the subject invention with benefits available to the public on reasonable terms. March-in doesn’t start if an invention is not made available for public use–march-in starts (if ever) only if a federal agency decides that an invention won’t be made available for public use at some point in the future.

There’s nothing in Bayh-Dole about “national emergencies.” That’s more Bio fantasy. The standard for march-in is that “action is needed” to “alleviate . . . needs not reasonably satisfied” by the invention owner and its ilk. Doesn’t have to be a national emergency. It can be, say, a regulatory requirement. Or just that an invention owner or ilk doesn’t manufacture enough, or screws up manufacturing and cannot make any product available.

But all this doesn’t matter. March-in has never been used. Bremer later crowed about how he had to step in and make sure that the implementing procedures for march-in could never operate. Even if there *were* a national emergency, the march-in procedures are so cumbersome and slow that a federal agency would never be able to compel an owner of a subject invention to grant additional licenses in time to meet the emergency. More so, no new manufacturer of a prescription drug could gear up and pass all the regulatory requirements to make a competing drug to address all but the most slooooow mooooving national emergencies. March-in is silliness.

Now for the monopoly meme. If patent monopolies are essential to “encouraging private-sector investment” in developing prescription drugs, then march-in all but destroys that encouragement. March-in would chill all future investment, so the monopoly meme argues. Thus, we can’t have both the monopoly meme and march-in. If there’s march-in, then we are back to non-exclusive access to the core technology, and we are back to the regulatory world outside Bayh-Dole, the world that Bayh-Dole preempts when a university gains ownership of an invention made in a federally funded project. It’s simple. If Bayh-Dole requires march-in, then we don’t need Bayh-Dole. Bayh-Dole exists, then, only if there’s never any march-in. Bayh-Dole exists to promote private patent monopolies that preempt all other public purposes. The private patent monopoly on federally supported health-related research inventions is the public purpose of federally supported health-related research.

Oh, another thing. The federal government does not need march-in. Bayh-Dole requires owners of subject inventions to grant to the government a royalty-free non-exclusive license to practice and have practiced the subject invention for or on behalf of the government. “Practice” means in executive branch patent policy that Bayh-Dole preempts “to make, use, and sell.” And “government” includes state and municipal governments. Any of these can practice a subject invention at any time, without any march-in necessary. The federal government can simply authorize manufacturers of prescription drugs based on subject inventions at any time for any reason, so long as the authorization falls within the powers of government–federal, state, or local. No cumbersome protocols. No delays. No compulsory licensing. March-in, you see, is silliness. Is too narrow to matter. Delegates enforcement of the standard patent rights clause to each federal agency rather than to, say, the Attorney General. Has never been used. Procedures were designed not to operate. Why would Bio emphasize march-in, other than so you could delude yourself that march-in mattered?

Bayh-Dole has nothing to say about “basic innovations.” Bayh-Dole is part of federal patent law. It does not deal in innovations and it has no standard of “basic” or otherwise. Bayh-Dole’s concern is to define a new category of patentable invention–one that’s owned by a contractor, a party to a federal funding agreement for research, and made in performance of that agreement. Bayh-Dole “ensures” nothing with regard to “development” of inventions. It “ensures” nothing about “real-life” products. And the rest of Bio’s pufferying–“approved therapies that reduce suffering, treat the sick and improve the lives of patients”–has nothing to do with Bayh-Dole. One may as well say that Congress enacted Bayh-Dole to make everyone wealthy or to house the homeless or to compliment you, dear reader, on your intelligence and good looks. There is nothing about improving anyone’s life in Bayh-Dole. There is nothing, even, that requires anyone to create “real-life” products. Bayh-Dole’s policy standard is (35 USC 200)


Or, if that’s not good enough

practical application

which Bayh-Dole defines (35 USC 201(f)) as use (utilization) with benefits available to the public on reasonable terms. It is nothing to Bayh-Dole if there are “real-life” products available on unreasonable terms. $100,000 a year for a drug that costs $3,000 a year to manufacture, including a reasonable profit? In whose usage is that “reasonable”? But Bio doesn’t want to talk about what Bayh-Dole actually requires. It wants to peddle fantasies about the law.

Here’s a little box that repeats a nonsense claim:

Let’s see. On the left side, it might be of some interest to know that I can find no instances in which the government “took patent rights away from inventing organizations” for drugs or vaccines. Further, if the government “took” patent rights away, then there’s no need for the invention to be “commercialized.” Consider the Salk vaccine for polio. It was made available without patents. You might say it wasn’t “commercialized,” even though companies manufactured the vaccine.

There’s more subtlety here. The claim is not that the federal government took patent rights from inventors, but from inventing organizations. The government would have to wait for inventors to assign their vaccine and drug inventions to “inventing organizations” and then take away those patent rights. It’s such a limited standard that it’s laughable. But look at the sources–Joseph Allen, a political operator, and IP Watchdog, where Joseph Allen often publishes his punditry. Joseph Allen can just make things up–he rarely gives data to back his claims–and Bio doesn’t bother to fact check anything. They just cite Joseph Allen. May as well cite God.

The left side, then, is pretty much the empty set going back to 1968, when the NIH revived the Institutional Patent Agreement program, which required participating universities to take assignment of each invention made with NIH funding when the university decided to seek a patent. We can go back before that to the early 1950s, when the NIH first introduced the IPA program for the universities that did the bulk of its extramural research. We can then consider that the pharmaceutical industry boycotted federally supported research inventions when the federal government received ownership of the inventions outside the IPA program because the federal government would not license exclusively.

In short, the federal government proposed that its research should result in technology platforms and standards for biomedical interventions, and the pharmaceutical industry insisted on patent monopolies for proprietary products. Things weren’t commercialized because pharma companies–the new patent medicine companies–refused to participate. It had nothing to do with the government “taking” patent rights from “inventing organizations.” If there wasn’t “commercialization,”it was that the pharma industry was willing to harm the public through inaction until it found a way to extract 10x to 100x the payments from the public over the government’s approach.

Now for the duplicity of the right-hand box. The claim is that “more than 200 drugs and vaccines developed through public-private partnerships.” But we are not talking, now, about federally supported inventions, but just any inventions made at universities and licensed (exclusively) to biomedical companies. There’s nothing to indicate that the drugs and vaccines would not have been developed anyway. There’s not even a backing list of the drugs and vaccines that Bio claims have been developed under license from a university or other invention owner. Presumably that’s what’s meant by the “public” part of “public-private”–even though a number of universities dealing in patents are themselves “private.” And for all that, we have no information on these 200 “drugs and vaccines” with regard to what they have done for the public, and “on reasonable terms.”

Whenever I have reviewed a list of Bayh-Dole supported inventions put out by a lobbying group, I’ve found that most of the claimed inventions weren’t Bayh-Dole. Lobbying groups count any invention made at a nonprofit. Any invention that a nonprofit assisted in–clinical trials or whatever. Or there’s an add-on invention that would have otherwise blocked a useful feature of an invention. Until Bio trots out an actual list of drugs and vaccines created through Bayh-Dole subject inventions licensed to companies for development, this claim is just more bluffing. Self-delude if you must. But you see the pattern of rhetoric deployed by Bio–bullshit about the law, cite as authorities political pundits, and replace good data with whatever pundits assert.

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