A century of reaping enormous profits at the expense of sickness and misfortune, 3

The Mayo doctors, having made their specific arguments with regard to salvarsan in their 1917 letter to Congress, end with a full scale plea, not only to cancel the patent for salvarsan but also for other German drugs, and for patents on drugs in general:

We beg to urge upon you that you use every influence which you can bring to bear in favor of an immediate abrogation by Congress of the patent rights on this drug and incidentally on other drugs necessary to the public health whose usefulness is curtailed by German patents.

Then their expanded plea, for a “radical revision of our patent law”:

We urge that such an abrogation shall not be merely for the duration of the war but shall be permanent, and that furthermore, there shall ultimately be a radical revision of our patent law, looking to the prevention of private monopoly of remedial agents indispensible to the public health.

The letter is signed (by my count) 86 members of Mayo Clinic including both Mayos.

What follows, then were two bills introduced into the Senate, one that canceled the salvarsan patents (S. 2178) and the other authorized the United States to make and distribute for use any drug “that cannot be procured at a reasonable price” (S. 2363). Not quite what the Mayo doctors wanted, but something.

In this day and age, when the NIH and NIST officials claim to be confused by what “reasonable terms” might mean in 35 USC 203 of the Bayh-Dole Act, we might start with usage a century ago. Eighty plus Mayo doctors were clear on the idea–the terms that mattered for public health were quantity, quality, and price. Those are the terms that must be reasonable, or the United States should take action to make and permit the use of the “drug, medicine, or other remedy or device” and any patent or trademark owner can recover “reasonable compensation” through a court of claims.

But Bayh-Dole offers to go further. The federal government reserve the right to “march-in” under 35 USC 203 if the owner of a subject invention fails to create the expectation that it will take effective steps to achieve use of the subject invention so there are benefits available to the public on reasonable terms. March-in would take the form of a compulsory license–allowing others to practice the invention, on reasonable terms–i.e., the march-in compels the owner of the subject invention to accept consideration for the right.

This sort of march-in addresses problems in the private market for products based on the invention. Bayh-Dole also addresses the governmental market, as it were, for products based on subject inventions. This is the market that was identified in S. 2363 back in 1917–use by the federal government for its purposes, including its actions for public welfare. Bayh-Dole requires, as a condition of a contractor choosing to retain ownership of a subject invention, that the federal government receive a license “to practice and have practiced” the invention “by or on behalf of the United States.” Here, “practice” means “to make, use, and sell”–the substantive rights in an invention. These are the rights that were sought with S. 2363–that the federal government could make, and authorize others to make on its behalf, any drug, medicine, remedy, or device not otherwise available in sufficient quantity and at a reasonable price.

In the S.2363 debate, “reasonable” means “not a surplus profit,” not “an enormous profit at the expense of sickness and misfortune.” Reward the inventor generously. Recover sunk costs of development. Secure a reasonable profit. But no more than that. The profit interest must be tempered by the nature of the purpose–and if the purpose is to alleviate public suffering, then the profit must be reasonable.

Let’s hammer it home, then. In Bayh-Dole, if the benefits of using a subject invention have not been made available to the public on reasonable terms, or the needs are not reasonably satisfied (quantity or quality, for instance) in any private market, then the government may march-in to remedy a failure to meet Bayh-Dole’s statement of policy. However, if the subject invention has application in a government market–such as to serve the public welfare as a matter of public health–then the federal government has a royalty-free license to make, use, and sell, and authorize others to do so on its behalf.

If the private market supplies a medicine in satisfactory quantity and quality at a reasonable price, then the federal government has no particular mandate to act on its license. But if the private market fails to provide the benefits of a subject invention to the public on reasonable terms, then it is not merely that the federal government could act. Rather, the argument is that the federal government must act. Not to act is to be complicit with those reaping enormous profits at the expense of the public welfare. There is no other point to Bayh-Dole compelling the grant of a license to the United States but for the United States to act on that license when conditions require action. The United States holds that license as an asset. To fail to use that asset wastes billions of dollars–or rather, ensures that those billions of dollars are diverted to private companies and their owners.

We might therefore insist that when there is a failing in the government market for a medicine or other remedy based on a subject invention, the federal government has an obligation to act on its license to practice and have practiced. Congress does not have to abrogate any patent, nor does the federal government have to compensate patent owners for the practice of any subject invention. No formalities are needed, no impediments based on patents are presented. The federal government justs takes action to have the medicine made available in reasonable quantity, at an acceptable quality, at a reasonable price–on reasonable terms. If a patent owner wishes the federal government to defer such action, then the patent owner can change production, distribution, and pricing to that same standard, and the federal government’s mandate to act dissipates.

Under S.2363, the owners of patents and trademarks do not receive a restoration of the “surplus” profits “according to their conception of commercial expediency” as if the federal government and its contractors were producing product on their behalf, but rather they may claim a “reasonable” compensation, a share of the $1 price for salvarsan, a share of a reasonable price, or a cumulative total that reflects a “reasonable” compensation for the exploitation of an invention directed at public health. That’s the idea, anyway–the public policy before interested parties get ahold of it to apply their pressure.

One might say the public policy reflected in S. 2363, which eventually ends up in 28 USC 1498, is that the patent system must not be used to allow patent owners to enrich private fortunes well out of proportion to any reward for inventors in matters of public health. All the more so when the federal government has funded the inventive work in the first place.

The Mayo doctors, however, would have gone further–eliminate drug patents altogether. There is a weak gesture in patent law toward limiting enforcement of patents on medical procedures (35 USC 287(c)), but nothing like the total ban that Mayo’s doctors called for.

It would be interesting to see how nonprofit organizations, including universities, would respond to a proposal to amend Bayh-Dole to eliminate patent monopolies on inventions made in federally supported projects at nonprofit organizations. Actually, it does not even take an act of Congress to do so–universities could enter into an agreement not to patent, or permit the patenting, of medical remedies. They could enforce the pact by refusing to subcontract with any organization that fails to agree.

Bayh-Dole offers only tepid resistance, as its drafters could not imagine any nonprofit contractor not trying to claim all the inventions it could. Since Bayh-Dole applies only when a contractor acquires ownership of an invention arising under a federal contract, if a contractor does not own, there is no mechanism by which a federal agency can require assignment of the invention and deal in patent monopolies anyway.

No, even if the federal government got around to enforcing the (f)(2) written agreement in the standard patent rights clause, it wouldn’t matter because NIST’s new assignment clause is specific to subject inventions–ones a contractor already owns. So that addresses only inventions a contractor is stupid enough to have claimed but doesn’t want.

Or, perhaps the NISTwits decide to agree with the argument that I have made for some years, that the (f)(2) written agreement is not merely a complicated and overdrafted way of requiring each contractor to have a patent agreement with each employee that requires the employee to assign any inventions made under contract to the contractor so that the contractor can, if requested, assign to the federal government. Rather, the (f)(2) agreement has the form of a compulsory subcontract with respect to matters of invention. Each inventor then under the definition of funding agreement becomes a party to the funding agreement, a contractor, and therefore any invention made under contract becomes a subject invention, but one owned by the inventor, as provided by federal law.

But then the basic grant of Bayh-Dole at 35 USC 202(a) applies equally to inventors, who now are to be treated as small business contractors: each inventor is assured of the right to retain title, subject to the conditions of the patent rights clause. That means that the organizational contractor has no right to interfere in that retention of title. The inventors patent rights clause is set forth at 37 CFR 401.9, and there we find that inventors have no obligation to file patent applications.

There it is. Bayh-Dole does not compel inventors to use the patent system unless they give up ownership of their invention. As the Supreme Court ruled in Stanford v Roche, Bayh-Dole also does not compel inventors to give up ownership of their inventions. Since only a university is in a position to require its inventors to give up ownership, there it is–if a university does not make such a requirement, there is nothing that a federal agency can do to force it.

Well, there is the Nixon patent policy, which still apparently applies whenever Bayh-Dole does not preempt it–that is, when an invention is not a subject invention–that is, when an invention made in the performance of a federal contract has not been acquired by a party to the funding agreement. But if universities comply with the (f)(2) provision, then Bayh-Dole does apply because all inventions made under contract are subject inventions, and 37 CFR 401.9 provides that the inventors do not have to file patent applications and therefore there’s nothing that a federal agency can do about. Only if universities don’t comply with (f)(2) does the Nixon patent policy come into play. Even then, there’s a problem because the codification of the Nixon patent policy was thrown out when the Federal Procurement Regulations were replaced with the Federal Acquisition Regulations. Apparently, someone did not have a strong grasp of Bayh-Dole and thought it always applied, when obviously it does not always apply.

And there’s no point in grasping at the standard patent rights clause paragraph (g)(1), which forbids a contractor from having an interest in the subject inventions of any subcontractor as a condition of the subcontract. That provision would be moot if the subcontractor has already agreed not take an ownership position.

Doesn’t it just suck that Bayh-Dole is set up as such a complicated, confused mass of text all seemingly dedicated to undermining any activity in the public interest? All that machinery purporting to be in the public interest, and not a lick of it is open-hearted. Oh well.

Bayh-Dole is part of federal patent law. It is the perfect place to add an amendment that prohibits the enforcement of any patent on a medical remedy–drug, medicine, device, or method–when the patent is based on a subject invention. Let the howling of the patent megamonopolists begin. Let’s see how many university administrators are in that pack.

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