A clever misrepresentation at the origin of Bayh-Dole

Let’s see if we can isolate the origin of the Bayh-Dole Act. In about four minutes, you will read the following again:

The roots, then, of Bayh-Dole are to be found in a mischaracterization of the Harbridge House report of 1968, translated into a revision of the Nixon version of the Kennedy patent policy and from there into the federal procurement regulations, which formed the basis for Bayh-Dole, which was stitched together from those regulations and the dead IPA program.

Skip all the political spin about concerns over American technology competitiveness as measured by the number of US patents being filed by US companies. That’s just crass silliness. We are talking here about how it comes to be that the federal government gives itself the mandate to grant exclusive licenses to inventions owned by the federal government without proper supervision or accountability and to then delegate this right to nonprofit contractors, also without proper supervision or accountability. The Bayh-Dole cleverness was to make the delegation arbitrary and to preempt all other legislation that provided supervision or accountability in specific areas of research and development.

Various elements come together to permit the Latkerstein monster of Bayh-Dole to come to life. First, we have Vannevar Bush’s report to the president, Science the Endless Frontier, making the case that the federal government has a legitimate interest in opening up new frontiers, including those of science, and that a new organization, a national research foundation, should fund university-based research, with a particular emphasis on providing new science to be used to advance the practice of medicine. Bush’s report resulted in something other than what he advocated for, the National Science Foundation, and opened up all federal agencies (at the behest, too, of university administrators) to sponsor “basic” research.

Second, we have the monopoly meme, which holds that what is available to all will be used by none, or will be developed by none, or will not become a commercial product, and if not a commercial product, will not be available to the public, thus wasting federal research dollars. The monopoly meme is a rhetorical device to get the federal government to use the patent system to create private monopolies and to preclude the federal government from using its contracting power and financial resources to create a robust public domain for new technology. The monopoly meme runs against Vannevar Bush’s vision that federally supported research conducted by the “free play of free intellects”–faculty at universities–should open up new scientific frontiers for use by the public. The monopoly meme co-opts this vision with the claim that no scientific frontier will be used unless at the same time the frontier is opened it is closed to all except a single private owner. Perhaps you see then the deep irony that Bayh-Dole asserts as statutory policy that, with regard to federally supported inventions, the patent system is to be used to promote free competition and enterprise.

Third, running parallel with the use of federal funds to open new areas of science and the desire for monopolies to be the primary vehicle of private economic power, we have a gold rush forming in the area of chemical compounds to support health–patent medicines meet industrial chemistry. The gold rush started before 1900 and has been on-going. The range of potential compounds of interest was–and still is–huge. Huger than it is easy to imagine, 10 to the holycow huge. Academics working in this area have had a century-long history of coming up with interesting things, including insulin, vitamins, vaccines, and anti-cancer drugs. Thus, medicinal chemistry, as it was called, was a hot field for research funding–a potential gold field of chemical compounds greater than that of the Klondike.

The first order of business was screening compounds for biological activity. Screening was not particularly expensive, but it was more expensive than most academics could afford and so far “out there” that university administrations and donors were not easily persuaded to provide funds for screening. Pharmaceutical companies offered to do the screening of compounds at no charge in exchange for the right to patent (or license exclusively) anything interesting that they found in their screening work. These companies refused to work with compounds identified in federally supported research after the Department of Health, Education, and Welfare formalized a policy that claimed a broad federal interest in inventions made with federal funding, including an expectation that such inventions would be made available to all. For the pharmaceutical industry that was intolerable.

The HEW’s policy was based on a long-standing expectation–made express in the Kennedy patent policy of 1963–that with regard to public health, when the government funds the research leading to an invention, the government should take ownership of the invention and make it available via the public domain (“by dedication”) or through non-exclusive licensing. In our terms, we might say that publicly funded medical research should be open access or “open innovation” or that the objective of such research should be shared knowledge or standards, not private monopolies that exclude all others, including researchers, medical professionals, and industry. Thus, the federal government’s funding, with a default policy of open access, directly competed with the pharmaceutical industry’s desire for monopoly positions, early and often, as a precondition for any use of company money.

One workaround was the general policy of permitting any federal contractor to request the federal agency funding the work to allow the contractor to hold patent rights in a federally funded invention. A second workaround was the Institutional Patent Agreement program, revived by Norman Latker at the NIH in 1968, which required universities and other nonprofits to take ownership of each invention made under a federal contract on which they decided to file a patent application. But both of these workaround had their failings. The IPA program was shut down in 1978 as ineffective and contrary to public policy. The request for a determination that a contractor could hold patent rights was often slow and the decision in doubt–“title uncertainty” as the monopoly advocates branded it.

That’s the context. In the midst of the pharmaceutical industry boycott of the HEW requirements for federally sponsored inventions in medicinal chemistry, the Kennedy administration issued a new executive branch patent policy. The Kennedy administration sought to create a coherent patent policy that brought some order to the practices in play in various federal agencies. R. Tenny Johnson, a long-time attorney for NASA and DOE, has described the Kennedy patent policy as rationalizing and formalizing the different positions taken by various federal agencies.

For federal research grants provided by the NIH or NSF to university faculty via their institutions, the general expectation was that (i) the federal agency would require assignment of each invention to the federal government and (ii) the federal government would make the invention available to the public (and therefore also to the inventor) via the public domain or via a royalty-free non-exclusive license. Here’s Section 2 of the Kennedy patent policy:

Government-owned patents shall be made available and the technological advances covered thereby brought into being in the shortest possible time through dedication or licensing and shall be listed in official government publications or otherwise.

The Kennedy patent policy uses “dedication” of patents to mean “dedication to the public domain” or “use of the patent system to publish inventions but not to exclude anyone from using inventions” and  “licensing” to indicate non-exclusive licensing–at least that’s the theme running throughout the Kennedy policy document. The policy debate among government attorneys was whether “licensing” included exclusive licensing or assignment of inventions to private parties. That is, could the federal government preserve the monopoly part of a patent along with the publication part, and deal this monopoly to a private concern to be exploited as if none of the work had been publicly funded and the patent had never passed through the government’s hands to be managed in the public interest. If so, then the public interest ends up being nothing other than whatever private interest gains ownership of the patent.

This expectation gets changed in 1971, with the Nixon administration’s revisions to the Kennedy patent policy (my bold):

Under regulations prescribed by the Administrator of General Services, Government-owned patents shall be made available and the technological advances covered thereby brought into being in the shortest possible time through dedication or licensing, either exclusive or nonexclusive, and shall be listed in official Government publications or otherwise.

The Nixon changes require the codification of the policy as regulations (these will end up in 41 CFR 1-9 as part of the standard patent rights clause) and the express provision that the government may grant either exclusive or nonexclusive licenses.

Here’s the comment provided that justifies the express addition of exclusive licensing:

Section 2 has been amended to insure that the licensing recommended in this section is interpreted as being broad enough to include some form of exclusive as well as nonexclusive rights. The Harbridge House Study clearly showed that there are circumstances under which some degree of exclusivity will be necessary in order to achieve commercial utilization of some inventions.

In a comment on changes to “exceptional circumstances,” we get more detail:

The Federal Council [for Science and Technology] believed that the results of the Harbridge House Study demonstrate that, under certain circumstances, this type of invention [one that is the object of the funded research] will not be used commercially, and will, therefore, be unavailable to the public, unless some form of exclusivity can be granted. For this reason, the Council has recommended amendments to this portion of Section 1(a) which would permit the granting of greater rights to inventions that are the primary object of a contract where the head of the agency determines such action would be consistent with the intent of this section, and is a necessary incentive to call forth private risk capital to commercialize the invention.

The Harbridge House study (1968) did not “clearly show” that patent exclusivity is necessary to achieve “commercial utilization.” Harbridge House showed that the pharmaceutical industry refused to work with compounds that might compromise their patent positions. The issue taken up by Harbridge House was the effect of federal patent policies on the participation of companies in federally directed research. The study did not have anything to say about whether exclusivity was necessary for utilization or for commercial utilization–just that the pharmaceutical industry objected to federal policy for inventions in medicinal chemistry and therefore refused to participate.

Here’s Harbridge House’s finding:

The two key factors shaping industry reaction to the medicinal chemistry program are heavy private investment in civilian-oriented research which parallels government work, and application of that research to commercial products in which patents are important in establishing and maintaining a market position. When both of these factors are present, patent policy may have a significant effect on participation in government programs and utilization of their patentable research results.

Harbridge House then cites a third factor–the extent to which the federal government supports development of an invention to the point of commercial utility. In the situation Harbridge House describes, because of HEW requirements formalized in 1962, pharmaceutical companies refused to screen federally discovered compounds for activity and thus refused to participate in drug development efforts, even if the government offered to pay them to do so.

The problem for pharmaceutical companies was not the need for exclusive rights but rather the scope of the government’s claim to ownership of inventions; as they called it, a “contamination of ideas”:

Drug firms are negative about government patent policy not so much because they may lose rights to the outside compounds that they test, but because the outside compounds, any related in-house items that they may already have, and any and all ideas submitted to them by academic investigators may become the subject of a claim of rights by the Surgeon General.

The problem identified by Harbridge House, then, was that HEW’s claim to rights in inventions interfered with communications between government-supported academics and pharmaceutical companies, and interfered with pharmaceutical companies’ control over their own research efforts. The issue wasn’t the need for exclusive licensing of broad rights in government-supported inventions but rather the need to limit the scope of government claims in inventions if the government wanted the participation of an industry that was patent sensitive.

It is notable that Norman Latker was one of the members of the executive subcommittee of the Federal Council for Science and Technology concerned with federal patent policy. Latker revived the IPA program at the NIH in 1968, reciting this same claim about the Harbridge House report. The federal procurement regulations were finalized in 1975.

In 1978, Latker tried to get the IPA program adopted by the General Services Administration as a government-wide program. That would have been a wholesale end run around the regulations by taking the form as another regulation–instead of there being only some circumstances that required exclusive licensing, a government-wide IPA program would reverse the regulation and leave government contractors free to decide how to license–and under the NIH IPA program, universities and their patent foundations licensed exclusively.

Rather than extend the IPA program, the government shut it down in 1978 as ineffective and contrary to public policy. When the IPA program was shut down, Latker went on to draft Bayh-Dole, which was at least the fourth attempt at legislation to create a “uniform” patent policy. Doing so was dodgey, so Latker asked a colleague to type up the draft bill so the work could not be traced to his NIH typewriter. As far as I can ascertain, Latker was eventually fired from the NIH, and then reinstated, and then he left the NIH to work for the Office for Federal Procurement to write the implementing regulations for Bayh-Dole. There’s a whole backstory here with the basic theme that Latker’s fingerprints are everywhere.

The roots, then, of Bayh-Dole are to be found in a mischaracterization of the Harbridge House report of 1968, translated into a revision of the Nixon version of the Kennedy patent policy and from there into the federal procurement regulations, which formed the basis for Bayh-Dole, which was stitched together from those regulations and the dead IPA program. What ought to have been a limitation on the scope of federal government claims on inventions made in contracted research became instead an authorization for the government to deal in patent monopolies. It was only a small step, then, to authorize nonprofit and small business companies to also deal in patent monopolies based on inventions made with federal support.

In 1983, President Regan by memorandum extended the Bayh-Dole requirements to large companies as well. It was not a bigger step to allow large companies to deal in patent monopolies because, outside of matters of public health, atomic and nuclear weapons and propulsion, and space technologies, they already had that right under the Kennedy and Nixon patent policies. Patent brokers working for nonprofits were the ones that claimed they were throttled by executive branch public policy. There, apparently, the mistaken policy idea was that nonprofits would share the federal government’s preference for licensing non-exclusively if any licensing were necessary, and deal in exclusive patent monopolies only when absolutely necessary. The practice intent–and reality, as demonstrated by the IPA program–was just the opposite, however. The patent brokers wanted exclusive rights precisely so that they could deal in patent monopolies. Anything less meant that Bayh-Dole simply wasn’t necessary and that the monopoly meme was just hot, smelly gas escaping the nether regions of political pundits.

In a sad, silly way, the entire university apparatus of patent licensing offices has been dismantled and reconstructed in an effort to make it appear that the political pundits were not just bullshitting Congress and the American public about Bayh-Dole. Many university technology transfer people work with dedication to try to prove people like Howard Forman, J. Tenny Johnston, and Norman Latker right–and they then also work with dedication to impose their strange ideology of Bayh-Dole on academic research, professionals, industry, and the public. As senior university administrators align themselves publicly with the claims made for Bayh-Dole, they then must work to preserve their own credibility. As things don’t work out with technology transfer, they conceal the data, raise the bluster, add more funding, reorganize, rename. Bayh-Dole is behaves as a failed prophecy about technological innovation from research using patent monopolies, so they double down, having nothing left to but worry about appearances.

The patent brokers affiliated with universities wanted expanded access to university-hosted inventions, wanted expanded access to federally supported inventions, and in particular wanted that access in areas of biomedicine. And they wanted to deal, for the most part, in exclusive patent licensing. That is, they wanted to take ownership of a faculty invention and convey that ownership to a company of their choosing, taking a share of the company’s payment to cover costs and build a fund for financing more patenting. Rather than waiting for university-hosted inventors to arrive voluntarily, the patent brokers aimed to turn universities into corporate-style patent aggregators. For this, their best entry point turned out to be the appearance of a federal requirement that a university must own inventions made with federal support. Then expand that requirement to all inventions hosted by the university. Then the brokers would have the expanded access they sought–access to all inventions, made with federal funds or not, patentable or not.

Once the claims were generalized, no one had to look squarely at whether nonprofits were going to be complicit in exploiting human suffering for maximal profit. The idea of patent licensing was normalized by being generalized to abstract inventions served by the abstract monopoly meme. The nonprofit interest in dealing in patent monopolies in biomedicine was and is an anomaly.

The patent brokers insisted that patent monopolies were essential for the public to benefit from university research–and therefore from federally supported research as well, and therefore for biomedical research, too. The patent brokers found their willing industry poster children in the pharmaceutical industry, and they made the pharma companies appear to represent all industries and all inventions, when that simply has not been not the case–as the Harbridge House report made so very clear.

The comment on the codification of the Nixon patent policy concludes:

A provision has been added for the Administrator of General Services to issue Government-wide comprehensive patent licensing regulations for essential uniformity of policies, procedures, and practices by Federal agencies.

The Nixon patent policy then delegates the responsibility for “essential uniformity” of policies to the Administrator of General Services–and it is to the Administrator of General Services that Latker then addresses the expansion of the IPA program. Latker’s proposal gets blocked, leading to a succession of bills to move control of the policies to Congress rather than the executive branch, which resulted, eventually, in the passage of a Latker-drafted bill–Bayh-Dole.

We can see that before Bayh-Dole, federal policy claimed to have achieved “essential uniformity.” Further, we can see how advocates for the monopoly meme–that federally supported inventions should be licensed exclusively–abused the Harbridge House report to claim that it supported exclusive licensing when it did nothing of the sort. Thus, inserted into executive branch patent policy–effective around 1975–that the federal government ought to license inventions exclusively, and so should contractors retaining rights to federally supported inventions. Thus, it is also a fine abuse of statistics for Howard Forman in 1976 to raise the 28,000 (26,000) federal patents meme (all those patents, and so few formally licensed for commercial development)–when there was not in federal patent policy any clear mandate to license exclusively federally supported inventions.

It is difficult to find any other drivers for Bayh-Dole beyond university patent brokers fixated on getting in on the pharmaceutical gold rush. The policy pressure has been there for well over a century. It can be seen developing in Archie Palmer’s efforts to get universities to adopt research and patent policies; it is evident in the argument that patent licensing can be used to generate university research funding–especially the arguments at MIT and the University of California. But what seals things is the monopoly meme combined with the pharmaceutical industry demand to limit federal open access policy, to give the appearance (1) that federally supported research in general will not have public uses without patent monopolies; and (2) patent brokers and not inventors should control the results of federally supported research; and (3) that dealing in patent monopolies is suited to all industries, all inventions, and all public purposes–obscuring the patent brokers’ primary interest, that of the gold rush in biomedical research. And it is in the patenting of biomedical research that advocates for Bayh-Dole continue to emit their primary rhetoric.

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