Bayh-Dole Basics, 8: Reasonable Terms Comments-8

In Bayh-Dole the march-in for health or safety needs is drafted to prevent the government from breaking up private patent monopolies on supported inventions merely because there are health or safety needs. The default public policy in Bayh-Dole is that the patent holder should be allowed to keep the exclusive right to “alleviate” those health or safety needs so long as those needs are “reasonably satisfied.”

What might it mean to “reasonably satisfy” a “health need”? On what basis might the government determine that an individual’s need has been “reasonably satisfied”? Does the individual get any say about it? Would it be that a medicine doesn’t work very well or has unwanted side effects or costs so much that the individual must be bankrupt before it can be supplied? Or are all these things just reasonable adjuncts to alleviating that health need?

Now consider a bunch of people who all have roughly the same health need–they have a cancer, say. If a medicine out there sort of helps some of them and doesn’t help others, with the usual mix of potentially awful side effects, is that a “reasonable satisfaction” of the health need? Some folks sort of benefit and others don’t. Too bad, that’s reasonable? Or are we only talking about scarcity? That if there’s plenty of product for sale relative to the “demand,” then has the need been “reasonably satisfied” regardless of the price of the product, say, or the method of delivery, or the particular formulation?

We might frame these questions another way. In the case of an individual with a health need, should the government march-in to provide that individual with an alternative supplier of medicine if the contractor (et al.) cannot provide that individual with “reasonable satisfaction” of need? One would think so, though the government no doubt might not care to be bothered. But the compassionate use/expanded access policies are just this sort of thing, where patients assert “the right to try” given they don’t have alternatives–i.e., their health needs are not reasonably satisfied. One might think that Bayh-Dole’s march-in provision includes just such a “right to try” policy as well, cast as march-in on behalf of every individual whose needs are not met by the product on offer (if there even is one) from the holder of a patent (et al.) on a subject invention.

Bayh-Dole treats regulatory requirement march-in under the old paragraph (g) in the same fashion:

(3) action is necessary to meet requirements for public use specified by Federal regulations and such requirements are not reasonably satisfied by the contractor, assignee, or licensees; or

Here, Bayh-Dole asserts that the federal government may create a regulation that the public has to comply with, which serves the patent monopoly of an organization that made the invention with federal support. In Kennedy/Nixon, if the government anticipates such a regulation, then any inventions are to be owned by the government and made available, and if the government does not anticipate that the research will result in an invention that otherwise affects such a regulation, then the contractor agrees to grant licenses with respect to public use as required by that regulation. Again, under Kennedy/Nixon, it does not matter whether the contractor has met the threshold of “practical application” or has satisfied any needs, reasonably or otherwise. What matters is that a regulation requires public use; therefore, the government can require licensing of the invention for that public use. Bayh-Dole changes this condition–the government must determine that the contractor (et al.) has not “reasonably satisfied” the regulatory requirement.

Under Kennedy/Nixon, the moment a patent on a federally supported invention impinges on a regulation requiring public use, the government may compel licensing. In Bayh-Dole, if a patent made with federal support and owned by a contractor impinges on a regulation, march-in is restricted to only instances in which the exploitation of the patent monopoly fails to “reasonably satisfy” the requirement. Think about “reasonably satisfy” in the context of legal compliance. How does “reasonably” have anything to do with it? What is added to “comply” with “reasonably satisfy compliance”? Perhaps you see the problem. The drafting of Bayh-Dole merely imports a construction from the previous provision dealing with health needs, where at least “reasonably satisfy” has some meaning, even if that meaning is utterly ambiguous. Here, with respect to regulatory compliance, “reasonably satisfy” makes no sense whatsoever. Either folks comply or they don’t. They don’t “reasonably satisfy compliance.” Under Bayh-Dole, if by law the public must use an invention or some product produced by the invention–and if the patent holder “reasonably satisfies” the requirement for public use, that’s good enough. One would think that the standard would be much higher than “reasonably satisfy”–more like “absolutely and fully satisfies in such a way that any member of the public can comply without significant cost or inconvenience or risk of noncompliance.” But no. Just “reasonably satisfied.” Starts to seem creepy strange, no?

Bayh-Dole sets up the federal government to fund research, allow private patent monopolies, and then create regulations that require the public to use the invention under whatever terms the private patent holders dictate, so long as they “reasonably satisfy” the legal, public requirement. That’s quite the public-private “partnership”–with the government by default now able to create regulations that favor private patent monopolies without any responsibility on the part of the government to require public access when a regulation requires public compliance. A contractor may then sell under a patent monopoly into a market created by a legal requirement.

Compare with this bit of paragraph (g) in the Nixon patent policy:

to the extent that the invention is required for public use by governmental regulations

In Nixon, march-in may take place whenever a government regulation requires the use of the public use of an invention made with federal support. There’s no need to determine that march-in is necessary based on whether a contractor with a patent monopoly position might reasonably satisfy the requirement or whether any action must be directed only at the bit of requirement meed that has not been satisfied (“the government can make me license only to someone who will sell only to those people who cannot otherwise be my customers because they cannot afford my product or refuse to buy it”–right–and what company is that which will take a license to the part of the regulatory market that isn’t apparently a viable market? No, in such a case, the government would not use its march-in right but rather its government license to practice and have practiced–make, use, and sell–and contract with companies to provide the invention for public use, quite apart from any product that the patent holder has on offer. Given how Bayh-Dole drafts the march-in for government regulation, there is pretty much no situation in which the march-in would be useful. If there’s no practical application, then (1) applies, not (3). If there’s practical application, then the benefits of the invention are available to the public on reasonable terms, and that’s pretty much “reasonably satisfying” the “requirement” for public use under (3), so (3) would hardly operate. We might then think (3) is designed for the empty set but retained to make it appear that Bayh-Dole implements the Nixon patent policy and the FPR treatment. But it doesn’t of course. And you have to read things slowly to catch the attorneys’ slight of hand.

Finally, Bayh-Dole adds a fourth condition for march-in, just as weak as the others:

(4) action is necessary because the agreement required by section 204 has not been obtained or waived or because a licensee of the exclusive right to use or sell any subject invention in the United States is in breach of its agreement obtained pursuant to section 204.

The section 204 requirement involves a gesture at requirement US manufacture in the case of an exclusive license to use or sell in the US. The requirement does not apply to the owner of an invention and does not apply to non-exclusive licenses or to any licenses outside the US. The requirement is not that product must be manufactured in the US but rather that the exclusive licensee to use or to sell in the US must agree that any product they use or sell will be manufactured substantially in the US. Some parts may be manufactured elsewhere, or some product manufactured elsewhere–figure out what that means with regard to manufacturing an invention or using an invention. How does one break up an invention like that so a substantial portion of the claimed invention is made one place and the rest of the claimed invention can be made elsewhere? In some magical universe perhaps. No matter, of course, because section 204 also allows federal agencies to grant waivers to the 204 requirement based on a patent holder either trying and failing to get US manufacture or not bothering to try at all. Thus, a federal agency would have to have a pile of bees up its britches to march in based on this 35 USC 203(a)(4) condition.

Section 204 sets itself up as the most important section of Bayh-Dole and claims to supersede all other sections of the law. This 203(a)(4) condition appears to provide an enforcement mechanism in the event of non-compliance with section 204. But even that makes no sense–if a patent monopoly is (it is argued) necessary to justify the manufacture of product based on a given invention, then forcing licensing to additional companies because an exclusive licensee in the US has failed to source product manufactured substantially in the US goes after the wrong target. The exclusive licensee to use or sell in the US does not have an exclusive right to make. The patent owner controls that right. If the patent owner does not make product in the US and does not grant others in the US the right to make product, then the poor exclusive licensee to use or to sell has no way to comply. Obtaining the agreement to source US product is trivial. But it is the patent holder, not the exclusive licensee that controls whether US product will in fact be available. Section 204, by targeting the exclusive licensee with the right to use or sell, goes after the wrong side of the breach of the obligation to source US product–section 204 should expressly target the patent holder’s breach of the section 204 agreement, not the exclusive licensee to use or to sell, which does not (necessarily) have any right to manufacture.

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