In arguing in Public Citizen v NIH that secret exclusive deals were the only way the NIH could fulfill its public mission–or at least the mission of its patent licensing office–the NIH produced some interesting metrics. In 2000, the NIH negotiated on 43 inventions, and for only two of these inventions was there a second interested company. What do we make of that? Perhaps it is that the NIH fails to broadcast availability sufficiently broadly. Perhaps it is that because the NIH is open to secret exclusive deals, once a company shows up to request a license, the NIH shuts off announcing availability of the invention under negotiation. Perhaps more potential licensees would appear if an invention was made available non-exclusive, royalty-free. The Court has this to say:
Thus, forty-one of the applications had no competition.
Now, if one were to assess the NIH patent licensing program relative to the expectation on exclusive licenses set out in Bayh-Dole (35 USC 209(a)(4)), one would conclude that the NIH had failed to comply:
granting the [exclusive] license will not tend to substantially lessen competition
NIH, no doubt, would argue that if there was no competition for a license, then granting the license could not tend to lessen competition. Nothing from nothing leaves nothing, as the song goes. But such an argument, were it to be made, would be a creature of the bozonet. The NIH’s program of offering licenses itself necessarily lessens competition–not merely competition for exclusive licenses but for use and development of the invention covered by the patent.
It is worth pointing out that Congress’s stated intent is that the patent system be used, with regard to inventions arising from federally supported research or development (including inventions the government’s employees make), to promote free competition and enterprise. Under Congress’s mandate, the NIH invention licensing program failed to comply because–well–there was no competition where the NIH in its patent licensing program was to promote competition. However, in the drafting of Bayh-Dole, the promotion of free competition, for federal agencies, ends up to mean, for exclusive licensing by the government, simply not lessening–not *substantially* lessening–competition. Promoting free competition, then, in Bayh-Dole, for exclusive licenses, means lessening free competition, but not “substantially.” Bayh-Dole, the turd. Of course, given that Norman Latker at the NIH drafted Bayh-Dole, we might expect NIH to be more than happy to work with Bayh-Dole’s twisted language.
The Court goes on. The NIH had 2,000 “technologies” available to be licensed, 30% for more than five years:
Thus, it is beyond dispute, that, for the majority of NIH technologies there is only one (and sometimes zero) firms interested in obtaining a license.
Again, we would reasonably conclude that the NIH’s licensing program was a failure–its choice in what to patent, the manner in which it offers licenses to the “technologies” that it does patent, the price the NIH charges for its licenses, the time required to negotiate a license, the terms of the secret exclusive licenses that it negotiates. The NIH had 2,000 “technologies” available and had discussions with companies regarding 43 of these for exclusive licenses. We don’t see how many of these negotiations resulted in licenses–no doubt that must be kept secret, too. How could the NIH engage in negotiations if companies knew the odds of getting an actual license?
The Court, however, does not consider any such thoughts. If the NIH’s licensing program is the failure that the NIH’s own metrics make it out to be, then wouldn’t Public Citizen have a valid point–that public scrutiny of the NIH’s licensing practices is an important step toward reforming the NIH’s licensing program? Instead, the Court argues that the NIH’s failed licensing program must be protected from public scrutiny and that secrecy must be maintained–or the failed program might fail more. If the NIH is forced to reveal royalty rates and income, then
there will be a diminuation in the number of firms willing to engage in partnership with Defendant [NIH] to license new technologies.
That’s the Court’s conclusion. Because the NIH engages in secret exclusive licensing deals, if the secrecy were lifted, fewer companies would engage the NIH in secret exclusive licensing deals. Yes, that is true. It does not take any evidence to reach this conclusion because it is an artifact of the syllogism.
In any other formulation, we might consider that if the NIH’s exclusive licensing program were required to reveal royalty rates and income for each transaction, the NIH would be forced to alter its licensing program to standard terms or to eliminate exclusive licensing and focus on creating standard platforms from which beneficial products might be developed. Moves such as this may well increase the number of firms willing to “engage in partnership” and accept licenses. How would we know unless the NIH were forced to reveal the financial terms of its failed, secret exclusive licensing program–even if that meant that the NIH would then have to give up that failed practice and try something different, something responsive to Bayh-Dole’s stated policy and objective?
The Court reaches its happy conclusion:
The Court concludes that in balancing the public interest in disclosure against the private interest in withholding information, the private interest prevails.
The Court finds that the NIH has
substantially demonstrated that the effectiveness of the licensing program would be critically impaired if the royalty information was released.
That is, a failed effectiveness would fail more if there were public disclosure of how failed it already was. The Court grants the NIH’s motion for summary judgment–so there’s not even an opportunity for Public Citizen to make its case at trial and cross examine the NIH’s officials.
Having worked through the Court’s account of Bayh-Dole in Public Citizen, we can see the outlines of a failed law:
The NIH is to promote inventions, not the utilization of inventions
Thus, the NIH meets its statutory mandate by advertising its “technologies available for licensing.”
The NIH is to not substantially lessen competition rather than use the patent system to promote free competition
Thus, the NIH may license in secret and exclusively, even if doing so lessens competition, so long as the lessening is not “substantial.” A secret, exclusive licensing program that is so bad that it already has no competition, then, can never be one that could substantially lessen competition. Thus, crappy federal patent licensing programs may survive without public oversight, provided they are designed to function crappily from the outset.
The NIH’s program depends on secrecy and exclusivity not on public disclosure
If the NIH announced that it had a standard exclusive license royalty rate of 1%, no one in industry could derive the slightest idea about what value any company licensee placed on the invention licensed. The fact of the license would carry more information than a standard royalty rate. There would be no need for secrecy with regard to financial terms. The NIH, however, insists on playing a secret game of royalty setting. Does the NIH then play favorites with the companies it deals with, giving some better terms than others? That would be one of the things that the public would discover, if the NIH revealed its non-standard financial terms. The Court concludes that preserving whatever favoritism the NIH engages in is more important than public disclosure of that favoritism.
A failed program cannot be subject to public scrutiny or it will fail more
We reach the fundamental principle behind the survival of Bayh-Dole. The Harbridge House report–a thorough study of the use of government-supported inventions–found that licensing of inventions had significantly worse outcomes than ownership, and ownership by organizations that lacked experience in the market had significantly worse outcomes than ownership by organizations with that experience. Bayh-Dole implements the worst possible combination–with nonprofits and government agencies owning inventions and then attempting to deal in patent monopolies to companies and speculators. The only way such a horrid system can persist is that it never reports on its horridness.
AUTM avoids reporting on Bayh-Dole metrics such as the rate at which subject inventions attain practical application, how nonprofits demonstrate claimed practical application meets the “benefit available to the public” and “on reasonable terms” requirements, the time it takes for such practical application to be achieved, and what happens to the rest of any claimed invention that is licensed exclusively but which does not achieve practical application. Universities don’t report their subject invention activity. The biomedical industries apparently, also, do not want Bayh-Dole activity to be public.
Somehow, the worst possible approach to dealing with federally supported inventions is so successful that no one is willing to report the activity that would demonstrate that success. We might then posit that the success that those close to Bayh-Dole desire to preserve is not a success Congress intended, nor a success that benefits the public. It is a private success of some sort–payments that flow to patent attorneys, payments that flow to speculators dealing in patent rights, federal research dollars converted without notice to public subsidies for private gain. What is good for speculators is good for America. And if speculators “grow fat on human misery”–to quote an apt expression of the arrangements from a century ago–then that is the public policy that Bayh-Dole protects and provides cover for.
The implied logic is that if speculators do not grow fat on human misery, then there is no chance whatsoever that any form of federally supported research could ever alleviate human misery. The patent system, according to this version of Bayh-Dole, must be used to attract monopoly speculators, and such advertising would fail if the speculators’ financial terms were to be revealed. The speculators are to grow fat, but the public must never read the scales.
The gaping cyncism in this simple proposition of fat and misery is that speculation alone can advance human health. No other practice can do so. Only those motivated by the maximum financial return possible from patent-created monopolies have a role to play in alleviating human disease and injury. The moment the absolutes in the proposition are dropped–that monopolies are not necessary, that financial return is not the sole basis for action–the basis for the NIH’s exclusive patent licensing program falls apart.
The NIH–the colon in which both the IPA program and Bayh-Dole were produced–has made a commitment to this gaping cynicism, has normalized it, rationalized it, and institutionalized it in policies, in pleadings before courts, in guidance to all those that would do business with the NIH. Secrecy preserves the NIH’s cynical patent licensing program, suppresses practice changes that have a much better chance of success, and keeps in power a coterie of practitioners parasitic on private success by speculating on the value of patent rights, not on promoting use of inventions so that use provides benefits available to the public on reasonable terms.