9 things Bayh-Dole does not require universities to do, part 2

We are working through a list of nine things Bayh-Dole does not require universities to do. It’s worth the review because there are all sorts of claims out there–almost never contested–about what Bayh-Dole requires. Most of it is nonsense. And that nonsense means that the university invention management community is mostly incapable of dealing responsibly with Bayh-Dole. But we should not be too hard on the university administrators–federal agency officials are no better at dealing with Bayh-Dole. Not only do they misrepresent the law–even NIST’s chief counsel gets the law screwed up–but also agencies ignore the law in their contracting and decline to enforce the patent rights clause. That’s enough to question why Bayh-Dole should continue to exist.

7. Bayh-Dole does not require a university to have a patent policy.

The NIH’s IPA program required universities to have patent policies. A review of the patent policy was one of the preconditions for approval to participate in the IPA program. Bayh-Dole, however, does not require a university have any patent policy. Instead, Bayh-Dole simply states that if a university acquires ownership of an invention made under federal contract, it can choose to keep that invention. No policy needed. The rest of the conditions placed on the patent property rights in that invention are a matter of the standard patent rights clause–a matter of federal contract. The university agrees to those conditions. Again, there’s no need for the university to have a policy that it will agree to those conditions. The university agrees when it accepts the federal funding.

But what about inventors? Nothing in Bayh-Dole reaches to inventors as inventors. That’s the fundamental point of the Supreme Court’s decision in Stanford v Roche:

The Act’s disposition of rights—like much of the rest of the Bayh-Dole Act—serves to clarify the order of priority of rights between the Federal Government and a federal contractor in a federally funded invention that already belongs to the contractor. Nothing more.

Bayh-Dole is about priority of rights between contractors and federal agencies–not about priority of rights between contractors and inventors. That’s a huge difference–one usually lost on university administrators and even on federal agency officials, such as the ones at NIST. The Supreme Court, con’t:

But the lack of procedures protecting inventor and third-party rights makes perfect sense if the Act applies only when a federal contractor has already acquired title to an inventor’s interest. In that case, there is no need to protect inventor or third-party rights, because the only rights at issue are those of the contractor and the Government.

Thus, there is no requirement under Bayh-Dole that a university have a patent policy or that if it has such a policy it change that policy to somehow “comply” with Bayh-Dole or to make inventors comply with Bayh-Dole. The entirety of an inventor’s obligation under “Bayh-Dole” arises in the standard patent rights clause, in a section that has no authority in Bayh-Dole (it is derived from the Federal Procurement Regulation patent rights clause–1-9.107-5(e)(3), which never made it into Bayh-Dole). There, for each funding agreement they enter into, universities are required to require certain employees to make a written agreement to protect the federal government’s interest in subject inventions. A university might change its patent policy to require itself to require its employees to make this written agreement, but such a policy is not required and does not actually do anything–it does not force employees to make the written agreement and it does not stand in place of any such written agreement. It is more like a reminder of what compliance with a federal funding agreement entails.

Thus, when university administrators state that they must change patent policy in order to comply with Bayh-Dole, they are wrong–more likely, they don’t know what they are talking about, and some cases they know just what they are doing and intend to deceive those that don’t know anything about Bayh-Dole. A fraud, a conversion of personal rights into bureaucratic rights, an abuse of position, an affront to faculty freedom of research and publication, incompetent, immoral, corrupt. Call it what you will. Still, no requirement in Bayh-Dole that a university have a patent policy.

8. Bayh-Dole does not require a university to have a technology transfer office.

Bayh-Dole makes no reference to technology transfer offices. Again, the NIH IPA program required universities to have a technology transfer program. If they didn’t, then they were not eligible to participate in the IPA program. Bayh-Dole is not based on whether a contractor has a technology transfer program. All that matters is that a contractor acquire ownership of an invention made under a federal funding agreement. If the contractor discloses that invention, then the contractor has the right to choose to keep title to that invention, subject to the conditions placed on that ownership by Bayh-Dole. Bayh-Dole, as it were, preempts any other conditions that might be placed by statute on the invention. We might say that by obtaining an invention, disclosing it, and choosing to keep it, a contractor preempts other public purposes and swaps in the public purposes announced by Bayh-Dole–which amount to using the patent system to promote the utilization of the invention.

Nothing in Bayh-Dole, however, requires a university to have a technology transfer office, a licensing function, or a commercialization center. Again, it’s just not there. A university does not even have to designate personnel responsible for patent matters. Yes, Bayh-Dole refers to such personnel–but Bayh-Dole does not require there to be such personnel, and if so, they do not have to be at the university. The designated patent personnel could be at invention management companies, or law firms, or even at another university. A university, owning a subject invention, may use that invention and make benefits available to the public on reasonable terms–no “transfer” of the “technology” is necessary, no licensing is necessary. For instance, the university could use a subject invention to create a research tool that it then makes broadly available–a reference material, or a cell line, or a device. No “commercialization” is required. No commercial selling is required. No patent licensing is required.

Folks claiming that Bayh-Dole sparked university technology transfer offices typically want us to believe that somehow Bayh-Dole requires patent licensing or enabled patent licensing where before there was none or gave university administrators an incentive to benefit the public through licensing where before they lacked that incentive. It’s all nonsense. Nonprofits participated in the NIH and NSF IPA programs before Bayh-Dole. They had pretty much open access to inventions made with federal support. For other agencies, they could petition to retain ownership if an agency was required to make an initial claim to that ownership. Almost nothing changed in practice with Bayh-Dole.

What changed was the administrative rhetoric. The change was in a misrepresentation of Bayh-Dole that somehow federal law required university ownership of inventions, required inventors to disclose all inventions, required patenting, required commercialization, required changes in patent policy, required big, fat technology licensing offices (or risk non-compliance!). It’s nonsense farted out by bureaucrats–but it was effective farting, as it stole tens of thousands of inventions and built a multi-million dollar “industry” to bureaucratize inventions made in university research. The success of this effort has been a patent monopoly pipeline from federal funding to the pharmaceutical and health-related industries, enabled by university administrators. Bayh-Dole does not require such a pipeline, and in fact many of its provisions point away from such a pipeline, but in its misrepresented form, Bayh-Dole has been held out to mandate just such dealing by university “technology transfer” offices.

Whatever has come about, has come about because university administrators chose this path–not because Bayh-Dole requires it.

9. Bayh-Dole does not require a university to license subject inventions for money.

Nothing in Bayh-Dole stipulates that universities must try to make money from the exploitation of patents on subject inventions. It’s rather strange. One might think that universities would be the ones to adopt royalty-free licensing of subject inventions, treating the patenting costs as a contribution to the public good, along with the research effort itself. Royalty-free licensing is not the same as the public domain. Royalty-free licensing can require licensees to comply with quality assurance requirements; or to share alike any improvements or applications (or at least not prevent others from making similar improvements or applications); or to not make sketchy claims with regard to the invention that might mislead the public. But a university does not have to try to make money from licensing.

It’s strange then for there to be the suggestion that university administrators needed the “incentive” of making money from licensing as the basis to care about inventions made in research. It is as if the university’s public mission was not enough, or that making money from other things–instruction, say, or research contracts, or donations, or public subsidies–weren’t good enough. In a sense, university patent administrators have made the implicit case–borne out in practice–that they want money to come to the university as a patent royalty rather than through any of these other pathways. Thus, a collaborative relationship under which expertise, information, materials, and the like might be exchanged gets transformed into one in which the university demands payment for patent positions–even ones that sponsors have worked to create.

Even if a university patent on a subject invention does result in licensing income, a university has no obligation to keep that money under Bayh-Dole. A university can deduct its patenting costs and can allocate the remainder to the inventors, or if not that, allocate the remainder to “scientific research or education.” That activity does not have to be at the university–the university could designate an organization to manage funds, such as Research Corporation did with the Smithsonian Institution. While it is possible to treat Bayh-Dole’s invention priority between contractor and federal agency as an “incentive” for university administrators to make money, that very “incentive” is, much more immediately creates an institutional conflict of interest between looking out after public interest and looking out for the university’s own financial interest and especially the financial interest of the university’s technology transfer program. Bayh-Dole provides no mandate for universities to make money from patent positions. Bayh-Dole does not grant a waiver to universities from institutional conflicts of interest that necessarily arise when a university chooses to exploit patent positions for money, or to make business contracts with companies that have been selected because they intend to exploit those patent positions for money (and share some tiny percentage of that money, if there is any, back with the university).

Nothing in Bayh-Dole endorses university exploitation of patents for profit. There’s nothing, really, in a consideration of public welfare that argues for universities to exploit patents for institutional profit. Nor does it make any sense that a university should have an interest in preserving a patent monopoly so that a business favorite could make a better profit by exploiting a monopoly position–preventing others from using the invention, preventing others from developing products based on the invention (even products that don’t directly imitate what the favorite has chosen to do), preventing others from offering competing product at a reasonable price (even after then favorite has more than amply recovered its cost of development and a fine profit).

Bayh-Dole actually argues against universities exploiting patent-based monopolies on subject inventions for profit. The patent system is to be used to promote use, not to exploit the exclusion of use. The patent system is to be used to promote free competition, not to suppress competition. The patent system is to be used to encourage maximum participation of small businesses in research and development, not merely pick a university-created startup that is hoped will sell out to a big company and suppress access to an invention for all other small businesses. Yet we find the widespread mantra that Bayh-Dole, like some plutocratic deity, commissions universities to subordinate their public missions to the effort to make money from patent positions, as if their public mission was merely an excuse to speculate on patent positions.

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