Bayh-Dole was the banana that finally stuck on wall, but Norman Latker had tried any number of schemes to circumvent federal policy requiring default open access to the inventions arising in work for which the federal government provided funding.
People sometimes think that pharmaceutical companies corrupted federally supported science. Not so. The explanation is more banal–and in its way, horrifying. Latker, patent counsel for the NIH, believed that patent exclusivity was the only way (or primary way, or in any event a necessary way) by which the public might benefit from NIH research. Without that public benefit, perhaps NIH funding would be reduced, or redirected from nonprofits to company contracts. There’s something odd to the argument–won’t go into it here and instead dangle it for you–but it appears that the effort to undermine, and then change, executive branch patent policy came from government attorneys and research officials. All pharma had to do was sit on its hands and accept what was on offer.
It’s difficult to fault pharma for doing so, or for the efforts by PhRMA and BIO to keep the woefully defective Bayh-Dole Act in place, with its non-operational march-in procedures and other failed, waived, ignored, and unenforced public protections. Fault PhRMA and. BIO for repeating the fake history, fake law, and fake metrics attributed to the law, but not for the offer that Latker and others made to pharma in the hopes that doing so would motivate Congress to allocate more research funding to the NIH.
Among Latker’s papers is a draft of march-in provisions dated 9/24/76–four years before Bayh-Dole. Latker’s draft is word for word what ends up in 35 USC 203, with some notable exceptions.
(1) Right of public appeal. Here’s part of Latker’s draft (D), corresponding to 35 USC 203(a):
The right of the Federal agency to require the contractor to grant a nonexclusive, partially exclusive, or exclusive license to a responsible applicant or applicants, upon terms reasonable under the circumstances, or to determine that the agency itself should grant such a license, following a hearing upon notice thereof to the public, upon a petition by an interested person justifying such hearing, if the Federal agency determines, upon review of such material as the Federal agency deems relevant, and, after the contractor or any other interested person or Federal agency has had the opportunity to provide such relevant and material information as the Federal agency may require or allow, that such action is necessary:
The boldfaced part–the right of any interested person to petition for federal action–has been removed in Bayh-Dole:
the Federal agency under whose funding agreement the subject invention was made shall have the right, in accordance with such procedures as are provided in regulations promulgated hereunder to require the contractor, an assignee or exclusive licensee of a subject invention to grant a nonexclusive, partially exclusive, or exclusive license in any field of use to a responsible applicant or applicants, upon terms that are reasonable under the circumstances, and if the contractor, assignee, or exclusive licensee refuses such request, to grant such a license itself, if the Federal agency determines that such—
No petition expressly allowed. It’s funny how the “public protections” that somehow managed to make it through into Bayh-Dole are so unacceptable to those who claim Bayh-Dole is wonderful–but those public protections aren’t even the start of how the law could have operated, had anyone really wanted those public protections for a reason other than as “protection porn” to get the bill passed into law and then ignored.
(2) 30 days to show reason why a federal agency shouldn’t march-in.
Upon receipt of such notice the contractor has 30 days or such additional time as may be authorized by the agency to provide relevant and material information as to why, the proposed determination should not be made.
In Bayh-Dole, there’s no 30-day period–see the bit above. Instead, Latker builds out the time periods in the implementing regulations, at 37 CFR 401.6. The contractor has 30 days to respond to an agency notice of its intent to march-in. If it doesn’t, then the march-in is on. But if the contractor does respond, things get dragged out. There’s a 60-day period in which the federal agency can pull out of the march-in, or proceed to the next stage, which involves a written notice to the contractor announcing that the agency is “considering” march-in. Now another 30 days for the contractor to respond. If there’s a “genuine dispute over the material facts,” then the agency head has to initiate “fact-finding.” The fact-finding follows its own procedures, outside the scope of Bayh-Dole, but must include the opportunity for the contractor to “appear with counsel” and there must be a “transcribed record” of the hearing. But the hearing itself is “closed to the public” and everything in the whole march-in debacle is to be kept secret (i.e., exempt from FOIA). All this results in a recommendation to the head of the agency, with conditions on what the head can do with the facts. The head has 90 days to provide written notice to the contractor of the agency’s determination with regard to march-in. So far, if things are strung out, we have 210 days of considering and recommending before there’s even a determination. We are not done. If the contractor doesn’t like the outcome, then 37 CFR 401.6 points the contractor off to a non-existent part of Bayh-Dole, 35 USC 203(2). Perhaps they meant 35 USC 203(b). The contractor, within another 60 days, may appeal to the Court of Federal Claims, and during that appeal, no march-in may happen. So we are maybe 270 days from the first stirrings of a need for march-in, plus however long it takes for the Court of Federal Claims to get to a ruling.
And we haven’t even got to the easy gaming of the system by a contractor–the moment there’s a consideration to march-in, then show that there’s active work to “develop” the invention. That drops the march-in. Then stop developing until there’s another consideration to march-in.
Under the Kennedy patent policy, march-in was easy. A contractor receiving greater rights in an invention made under contract had three years from patent issue to show practical application or open access. If the contractor cannot make a case, then the government has the right to require royalty-free non-exclusive licensing. Done. No stringing things out. No uncertainty with regard to what agencies will get all hot to march-in and what agencies won’t. Certainly Bayh-Dole here has no uniformity whatsoever with regard to how agencies approach march-in. So much for a “uniform” law.
NIST has the shamelessness to propose that the regulations be modified so that march-in may be used only for national emergencies! Perhaps slow moving, five-year-long national emergencies.
(3) Antitrust appeal. Under section (D) of the draft, with a petition from an “interested person,” a federal agency may (after due process) require a contractor to grant licenses “upon terms reasonable under the circumstances” or grant the licenses itself if:
the exclusive rights to such Subject Invention in the contractor has tended substantially to lessen competition or to result in undue market concentration in any section of the United States in any line of commerce to which the technology relates, or to create or maintain other situations inconsistent with the antitrust laws.
All Bayh-Dole has is a disclaimer on antitrust (35 USC 211):
Nothing in this chapter shall be deemed to convey to any person immunity from civil or criminal liability, or to create any defenses to actions, under any antitrust law.
Which is a strange way of putting it–Congress does not intend to use Bayh-Dole to amend antitrust law. That’s some distance from establishing a right of petition for a federal agency action to address antitrust situations, rather than a Department of Justice action to enforce antitrust laws.
(4) March-in for too much time. Under (F) in the draft–(and in the Thornton bill, this section is (E), but without a provision for public petition)–there’s a basis for march-in based on the duration of patent exclusivity, again triggered by a petition from a “prospective licensee” who has attempted unsuccessfully to obtain a license on “terms reasonable under the circumstances” from the contractor. Under this march-in condition, a federal agency may, after the sooner of ten years from the date a subject in invention was “made” or five years from its first public use or sale in the U.S., determine that “such licensing would best support the overall purposes of this Act” and require the contractor to grant a license or the federal agency may grant the license itself.
This march-in condition echoes the Kennedy patent policy, but with longer terms. Under Kennedy, a contractor had three years from the date of patent issue to achieve practical application or provide open access on reasonable terms, or the federal agency could require royalty-free non-exclusive licensing. The Nixon patent policy altered this to just licensing on reasonable terms (thus, allowing for exclusive licensing and royalty-bearing licensing–in other words, march-in became something more like “if you don’t develop product or find a licensee, then the federal government can find a paying licensee for you.” Strange, no? Three years from patent issue–or about six or seven years from when an invention has been made–becomes ten years from when an invention has been made, or five years after first commercial sale. The original form of the Bayh-Dole retained a vestige of this march-in in the form of a restriction on nonprofit exclusive licensing to large companies–five years after first commercial sale or eight years from the date of any exclusive license (but extended to account for any regulatory delays–and the only significant area for such delays was in health-directed inventions, such as those that might be of interest to the pharmaceutical industry). Gone from Bayh-Dole is any anchor based on when an invention was made or when a patent issues. And no anchors at all if the nonprofit licenses exclusively to a small company or a small company acquires an invention made in federally supported work in the first place. And there’s no guidance whatsoever for when that small company grows big or gets acquired by someone big or sublicenses exclusively to someone big–it would appear to be an easy situation for a nonprofit to bypass. Perhaps that’s why the provision (originally at 35 USC 202(c)(7)(B)) see 94 Stat 3021) was amended away in 1984.
In the Thornton bill, the right to petition for duration of exclusivity is removed–the agency makes the determinations at its apparent whim, if ever–and the time to do so is extended from five years from public use or sale to seven years. Thornton also permits federal agencies to extend a contractor’s term of exclusive patent rights (section 315) if doing so would “best support the overall purposes of this Act.”
Bayh-Dole removes march-in for duration altogether, ending the consideration of what amounted to a shorter patent monopoly term for inventions made with public funds. With Bayh-Dole, march-in becomes something of a federal restriction of monopoly patent rights. A patent may be enforced, post march-in, to require payment of reasonable compensation, but not to suppress practice. There’s an argument that 35 USC 200’s statement of policy limits enforcement of patent rights to those situations that promote the utilization of inventions arising from federally supported research or development–but then no one reads section 200 as policy, so it’s rather an empty argument, however entertaining it might be. Following the lines of this entertainment, however, one can see that march-in is a specific instance of just such a limitation on suppression of use.