Harbridge House on university exclusive licensing, 1

The Harbridge House report on government patent policy in 1968 laid the foundation for Bayh-Dole. Or, rather, federal officials selectively used portions of the report to change federal policy to conform to the wishes of patent development firms affiliated with universities.

Here’s Harbridge House on university inventions (vi):

Today, however, schools with large government research programs are taking greater interest in their patent portfolios and are seeking through a variety of means to promote them through licenses with industry. Nonprofit research firms also view their patents as a potentially useful source of income and actively seek to license others.

The driver appears to be the money.

In both cases, the inventions must frequently arise from basic research and require substantial private development before reaching the stage where they are commercially useful.

This is a report of survey responses. There is nothing to support the repeated claim that inventions arise from basic research, that these inventions require “substantial” development before use, that that funding must be “private,” or that there is some future stage at which the invention will become “commercially useful.” Certainly, it is reasonable to expect some inventions will meet all these conditions. But very rarely.

Basic research itself is a contested term. There was an argument that if research produced inventions, then it wasn’t basic. Furthermore, a great source of inventions in basic research is in the development of apparatus used to conduct inquiry–new sensors, new methods of analysis, new materials, new research animals. These research tools, once used, are ready for use by others with minimal “development.” Indeed, to replicate published studies, it is imperative that others have access to these new tools in just the form they have been used in the reported work, so they can be used with other data sets, can be studied for their operation (and to identify any defects in their operation that might affect reported results). These tools then may also be available to be adapted for other research uses, again with minimal additional development expenditure, and with no concern for commercial mass production. Similarly, such tools, if they prove robust, may be adopted by companies engaged in similar research. If sufficient users adopt these tools, and there is an opportunity to create a standard tool or produce a tool at less cost and with greater functionality and quality than a DIY version, then commercial producers will take an interest in development. The commercial interest arises organically, after a new tool has been validated by use and varied to achieve specific desired performance.

None of this requires a single private developer focused on a commercial product to hold exclusive rights in a claimed invention covering a tool arising in basic research. A patent owner, however, might see asserting control over the use of the tool in research as a means to increase the value of a patent license among those companies that would only take the opportunity on the condition of broad patent exclusivity. But these are separate issues that have been conflated.

Other forms of basic research invention include applications of discovered phenomena. Applications could be simple or complicated. Not everything is “high tech” involving expensive equipment and facilities along with highly skilled technicians. Some stuff is decidedly low tech. Some applications might be designed to work with existing production capabilities, while other applications might require the build out not only of new production facilities and methods but also entirely new resources for distribution and service. If the changes and needs are too great, then no patent monopoly can attract the funds from a single source to purchase the transformation from society. Change will happen too slowly to be monetized within the life of a patent–and may happen even more slowly if people bristle at the behavior of a patent monopolist. People have been known not to adopt new things just in spite.

The chain of conditions, then, simply does not hold up–that patent exclusivity is somehow necessary because inventions made in basic research are somehow of a kind, and that kind somehow requires solo private wealthy funders of development, that such funders are somehow of a kind that demands patent monopolies or will not fund, and that their development must be first and solely directed to creating commercial utility–meaning mass production and sales of a product.

There’s no doubt that mass production and sales of a product is an important outcome. The issue has to do with the means of getting there, and the effects that those means have on (i) non-commerce practice of the invention and (ii) the adoption of the invention, even if eventually developed and (iii) the conditions under which the product version of the developed invention are made available for sale. Folks fixated on buying a winning lottery ticket in the form of an exclusive deal that pays out via a royalty on mass market sales simply do not have the patience to consider these other issues–and, as forty years of Bayh-Dole nonsense have shown, are willing to work hard to suppress any discussion that questions their efforts or proposes alternative practices.

Harbridge House continues its report of survey responses:

Some measure of exclusive rights appears necessary to motivate licensees to invest in the work necessary to commercialize these inventions.

The only reason for universities to have “some measure of exclusivity” is so that they can attempt to pass that exclusivity on to some chosen company. If no exclusivity needed to be passed on, then federal open access is as good as any university open access.

This claim, that some measure of exclusivity is necessary is a claim made by the university patent development firms and repeated–no doubt accurately–by Harbridge House. There is nuance–“some measure” of exclusivity–not lots of exclusivity, but limited exclusivity. Perhaps limited to only some inventions, or for only a limited term, or to some part of an invention, for some purpose or market. Just enough exclusivity to motivate a private developer to make a commercial product. Because–why?–pursuing a profit in a competitive development environment  would not be interesting?

The apparent products that are the target of such exclusive licensing are mediocre ones–ones not sufficiently compelling in the public interest to attract government or nonprofit funding, not sufficiently compelling as to profit that companies would jump at the opportunity, even in the face of competition, even in the face of patent rights. So we are talking about stuff that’s in the middle. Bland stuff that is inventive but no one cares, but for people with money who refuse to act unless they get a monopoly on the product. People willing to try to make something out of bland stuff.

This way of thinking works if one is firm that things that are compelling in the public interest ought to be developed in the public interest first and not by speculating monopolists, and that things the companies are ready to use and develop with competition are not by default withheld in favor of speculative monopolists. Speculative monopolists, if they might invest in bland mediocre inventions if they gain a monopoly to cover their bet, surely would be happy also to take monopoly positions in, say, matters of public health or exciting industry developments.

The argument Harbridge House presents for exclusive licensing is generic and sounds sensible if one accepts a generic account of inventions made in something generic called basic research all requiring something generic called development which is always expensive. The moment that one applies specifics, however, the argument changes its character. For instance, if the invention involves breast cancer and could be implemented by any laboratory medicine operation from a published account, then there is no reason at all to prevent laboratory medicine practice in favor of a commercial product version. This is the case, for instance, with disease diagnostics, which has become a big patent business but does not require exclusive rights for making and using such tests.

The cost to develop a product is generally greater than the cost to implement a new diagnostic test in local practice. The exclusivity arises because a university patent development firm (now usually a technology licensing office) wants to extract a royalty, and there would be no public policy point in extracting a patent royalty directly from local use, though one could do it. There would be much bother, plenty of push back, if not open revolt. Instead, the licensing official uses a patent to suppress such local use in favor of selling the local user a product on which a royalty will be paid. Even better, the licensing official might front-load the royalty payment in advance of sales in the form of upfront licensing fees, or annual payments while a product is under development–things, again, that it would be more difficult to obtain if a license was non-exclusive.

The argument reported by Harbridge House is one for the administrative convenience of patent administrators working with university inventions seeking to make money on the least cost and without causing an outcry from the research community, industry, or the public. The way they do it is by burying practice in unjustified generalizations, reasoning from these, so that it appears that most inventions are “early-stage,” that they cannot be used at all without a product form, that this product form has so little value to the public that no foundation or state agency or federal agency is willing to fund its development, and that the development then must be done by companies with sufficient wealth, and only then those companies that demand a payout well above their expenditures, supported by patent exclusivity. This clearly has been a successful rhetorical strategy.

Harbridge House, from its 1968 report on government patent policies:

Where the institution has an active promotional program and the government has none, commercial utilization would appear to be promoted more effectively by permitting the institution to retain exclusive rights.

That is, institutional exclusive licensing programs will be more effective than federal agency exclusive licensing programs. This is just the 28,000 federal patents meme, stated as the results of assertions made by university-affiliated licensing officers responding the the Harbridge House survey. It was also Norman Latker’s argument at the NIH. The government need not have an “active promotional program” for exclusive licensing if the government sees no need to license exclusively to accomplish its purposes. No one bothers with the question of whether institutional exclusive licensing programs are better than almost anything else other than a non-existent, undesired federal exclusive licensing program–open innovation, inventor licensing programs, designating commercial partners up front as a condition of the research grant, moving the research to a company as soon as there is an invention, or basing the research at a company and subcontracting for university assistance, using standards organizations or industry organizations as licensing agents. Anything but institutional exclusive licensing.

Indeed, one argument for government ownership of inventions–made in the Attorney General’s Report of 1947–was that government ownership precluded inventors from selling their federally supported inventions to companies or whomever–no matter any argument that companies wanted patent exclusivity to get involved. The arguments were that such inventor sales would disrupt industry, make participation in federal work uncertain, deny the public access to these inventions, suppress competition, and result in the public paying monopoly prices for what they supported in the first place–all sorts of ills.

The government did not acquire inventions made with its support because it claimed to be better at exclusive licensing than were inventors, but to preclude just such activity. The comparison that gets suppressed is whether inventors make better decisions about who to have manage their inventions than do institutional patent administrators. This is not a comparison that has a generic resolution.

At the time, when according to Harbridge House, “The principal agent for the transfer of the patentable products of nonprofit research to industry is the patent development firm,” it would appear that inventors were every bit as capable to approach such firms as were university administrators. If we wanted to talk the expeditious movement of patent rights from inventors to industry, we would cut out the university administrators as the default. Inventors would choose them only when they appeared the best pathway. Inventors move with priority. Administrators have many inventions to worry over. Inventors work without precedents. Administrators have to do deals that do not undermine other deals or future deals. Inventors know their area of work. Administrators often have to come up to speed. Inventors can sell their inventions and move on. Administrators insist on licensing and hanging on. Inventors can develop a license that concerns only their own assets and liability. Administrators must impose terms that address all the assets of the institution that might be in play and the liability exposure of the institution.

If the goal is expeditious development of commercial product based on a patent monopoly, then inventors working with professionals–attorneys, venture capitalists, patent brokers–can be much more direct and efficient and motivated than institutional administrators sitting on binders of patents. And if inventors aren’t motivated to do so, then it’s rather a lost cause that administrators demand the patent rights anyway in order to try. Either the effort runs against the public interest–suppressing access in the hope of money–or without the inventor, development is unworkable at any level of investment. Consider: if an inventor refuses to cooperate with an institutional effort to deal in a patent monopoly, the inventor is often the best person to know how to design around the patent, to make the patented invention obsolete, or to block the implementation of the invention in a given direction of application with new inventive work done outside the claims of the institutional employer.

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