What has Bayh-Dole changed?

There’s a persistent claim made that Bayh-Dole somehow changed university technology transfer–started it, revolutionized it, and/or made it successful where it wasn’t before. Something pretty darned big, anyway.

But nowhere in Bayh-Dole is there any hint that nonprofit technology transfer is non-existent, sub-performing, in need of change, requires greater investment. No-one even argued that the law was needed to improve university invention management.

But university patent licensing has indeed changed significantly after Bayh-Dole. How? Here are six things that have changed since, roughly, Bayh-Dole came into effect:

In-house patenting and licensing has displaced Research Corporation
Universities have imposed compulsory invention assignment policies
There has been a great loss of selectivity in what to manage or patent
Universities default to exclusive licenses or no license at all
Inventors are excluded from invention management negotiations
Universities are now conflicted with regard to the public interest

None of these things are mandated, required, encouraged, or privileged by Bayh-Dole. Bayh-Dole was predicated on universities having access to a robust technology transfer system–led by Research Corporation, Battelle, and such agents. The idea was that federal inventions made at universities could then follow the same pathway as other, non-federal inventions that inventors submitted for management. There was no need to start a technology transfer system or to revolutionize it. Just the opposite.

Let’s work through these six areas.

  1. Before Bayh-Dole, most universities did not operate their own in-house licensing offices. They referred inventors and inventions to external patent management agents. Most often, that agent was Research Corporation, and otherwise a university-affiliated “research foundation,” and often that research foundation also sent inventions to Research Corporation for possible management.When people talk about the growth of university licensing offices, they are talking about a transition from using specialized external agents to manage inventions to bringing those functions, and costs, and liability, politics, and conflicts of interest into the university.Nothing in Bayh-Dole requires or benefits or privileges or encourages universities to move their invention management in-house.
  2. Universities have changed their patent policies from voluntary participation to comprehensive demands for institutional ownership–not just for patentable inventions but for most anything that might be owned or controlled by the institution.When people talk about the growth of university patenting, they are talking about taking invention work away from their external agents and doing the patent work themselves. They are also talking about universities claiming ownership of many more inventions than would be offered to them in a voluntary program of disclosure and management.There’s nothing in Bayh-Dole that requires universities to take ownership of inventions or even to have a patent policy or a licensing operation. The NIH IPA program did require such things, but not Bayh-Dole. Under the standard patent rights clause specified by Bayh-Dole, contractors don’t have to take ownership of inventions. If they do, and the invention is within Bayh-Dole’s scope, then they must do certain things. But if they don’t take ownership, there’s very little they must do–provide instruction to potential inventors on the importance of timely disclosure of inventions that the contractor already owns. Yes, you read that right. Even NIST’s pathetic attempt to insert an assignment provision into the standard patent rights clause (itself a violation of Bayh-Dole) fails–it requires contractors to require certain of their inventors to assign subject inventions; again, subject inventions are inventions contractors already own, inventions “of the contractor.” The Supreme Court in Stanford v Roche made that all clear, not that NIST folks care to respect the Supreme Court in any of this.

    There’s nothing, even, in Bayh-Dole that requires universities to take ownership of inventions for the law to “work” or gives universities any special privilege to take ownership, or encouragement, or mandate. The NIH IPA master agreement did require nonprofits to take ownership of every invention made in NIH-funded work for which the nonprofit decided to seek a patent, but Bayh-Dole does not do so.

    Norman Latker, patent counsel at the NIH, drafted both the IPA master and Bayh-Dole. You’d think that he would retain the IPA protocols if he thought they were the best thing. But he didn’t. He dropped the assignment requirement. He even dropped the contractor-required agreement with potential inventors, only to re-introduce such an agreement in the standard patent rights clause, which he also drafted, without any authority in Bayh-Dole to do so. And even then, he did not include an assignment requirement–even though he had drafted just such an assignment requirement for the IPA master and said later that Bayh-Dole was based on the IPA program. Latker had two chances and punted both times. One would think that Latker thought Bayh-Dole could work just fine without universities having a patent policy, a licensing office, or a requirement that inventors have to assign all their inventions to the university.

  3.  Universities are way less selective in what they take in for management and what they choose to patent than they were (mostly, than their external agents were) before Bayh-Dole. Research Corporation accepted for management 10% to 15% of the inventions submitted to it by inventors and research foundations. Now, universities take most anything–some states even have laws that insist that public universities own most everything.The secret to Research Corporation’s 25% to 33% licensing rate (not commercialization rate, but the percentage of the portfolio moved to at least one licensee) was that selectivity. If you take in only inventions well suited to the patent system, and in areas that you have expertise and good connections, then you have a good chance of placing each invention with one or more companies.The foundations also had another source for selectivity. University inventors often self-selected which inventions rose to a level that made sense to consider patenting. Many inventions made at universities are not well suited to a patenting campaign, and while researchers might not know the ins and outs of patenting, they have a pretty good sense for when an invention is really big but needs patenting and when it’s not big or doesn’t need patenting or would be harmed by patenting. Now university administrators can’t help themselves. They cannot conceive of a patent position harming the uptake of any invention. But if you think only a bit about it, you can see that a patent position may cause many academic researchers and many companies to avoid using it, exclude it from standards, and design around it. And isn’t that the point of threatening to exclude everyone else? or at best, if you are lucky, exclude everyone else but for one company?

    The foundations and university licensing offices had yet one other element of selectivity. A standard practice, when considering whether to take an invention under institutional management, was to ask companies whether they were interested in the invention. The ask was done by means of a “non-confidential summary” sent to multiple companies. If any company was interested, then the university (or more often, agent) would file the patent application. Otherwise, if there was no interest, the agent (or university) would decline to manage the invention.

    That’s three levels of selectivity–inventor self-selection, evaluation for patent suitability and area of expertise, and evaluation based on industry expression of interest. All of that is now largely gone from university licensing practice. Nothing in Bayh-Dole requires universities to abandon selectivity. But they have.

  4. Prior to Bayh-Dole, non-exclusive licensing was the broad default practice for university-affiliated licensing agents and the handful of university-based licensing offices (UC, MIT, and Stanford,  most visibly). Now, attempted exclusive licensing is the default. No one offers non-exclusive licenses, and certainly not at a price so low that it is cheaper to pay than to ask your legal counsel to review. The Cohen-Boyer gene splicing patents were licensed non-exclusively by Stanford at the start of the biotech industry. So were the first of the Axel co-transformation patents at Columbia. So were the Hall patents by the Washington Research Foundation. All citing work prior to Bayh-Dole.The NIH IPA program, too, went out of its way to make non-exclusive licensing the default and presented various procedural barriers, at least on paper, to exclusive licensing.Nothing in Bayh-Dole requires exclusive licensing or gives privilege to exclusive licensing. Nothing in Bayh-Dole even requires licensing. Bayh-Dole’s primary requirement is that inventions arising in federally supported research or development are utilized. Licensing isn’t necessary unless inventions are not being used–and even, federal agencies don’t have to require licensing, and none ever has.

    Indeed, Bayh-Dole’s federally owned patents licensing provisions go out of their way (35 USC 209(a)) to place procedural requirements on exclusive licenses offered by federal agencies. The overwhelming impression is that federal agencies will offer non-exclusive licenses. In practice, it appears, however, just the opposite–federal agencies, like universities, hold out for exclusive licenses and otherwise don’t offer non-exclusive licenses, and certainly not first, upfront.

    Tack on that Bayh-Dole’s statement of policy expects to promote “free competition and enterprise” and the “maximum participation” of small businesses in federally supported research or development–and it’s clear to all but the most muddle-headed folks that Bayh-Dole can only operate if non-exclusive licensing is the norm. Yet exclusive licensing is now the norm for universities, running against Bayh-Dole’s policy and requirements.

  5. Prior to Bayh-Dole, when universities pushed inventions out to external agents, those agents were accountable to inventors or to the universities involved, and sometimes both. If an agent did not perform up to the agreed-upon standards, the university or inventor could pull (request the re-assignment of) their invention and move on. After Bayh-Dole, universities, taking patent work in-house, have changed their policies to preclude most accountability to inventors. They don’t have to license, they don’t have to make money, they don’t have to release inventions (or if they do–in theory–they also get to add all sorts of red tape and conditions). Some public universities go so far as to forbid inventors from attempting to influence licensing decisions–that would be interfering in actions of the state, so the argument goes, and a personal conflict of interest.Even Senator Bayh, writing an amicus brief in the Stanford v Roche case, was clueless about what had happened after Bayh-Dole. Bayh insisted that inventors could negotiate a share of royalties with their universities–but that was nonsense. University policies set the royalty sharing schedule and many such policies insisted that the royalties were not consideration for assignment but were rather a perk offered by a kindly administration. Consideration for invention assignment became continued employment, despite tenure and the remarkable facts that most everyone in a university is not hired to invent and the university disavows any right to direct research or determine when to publish, who to collaborate with, and the like–in short, for research and other inventive work, a university does not act as employer.

    Nothing in Bayh-Dole forbids inventors from having the right to negotiate a share of royalties. Bayh-Dole requires nonprofits to share royalties with inventors (but distinguishes between royalties and other income earned with respect to a subject invention), but to do so necessarily means that Bayh-Dole was concerned that nonprofits might hire people to invent (and make salary or continued employment was the consideration for assignment), and so protects against such a thing by requiring a sharing of royalties but without specifying how that share is to come about. Is $1 enough? What happens if a university licenses royalty-free? Inventors have the right under Bayh-Dole to negotiate royalties, but they don’t have that right under university patent policies. It’s not Bayh-Dole that’s done it to those inventors.

  6. Universities prior to Bayh-Dole could look out after the public interest because they stayed out of the patenting and licensing business. Inventors could trot their inventions to an external agent for management, and the university could review that agent’s licensing practices (when it took an invention for management). As universities took ownership and licensing in-house, they lost that independence by which to look out for the public interest. Yes, yes, they still say they do, but they are conflicted when it comes to their own patenting and licensing programs–they have a financial interest in the patenting and in the licensing, and there’s no getting around that, even by claiming (implicitly) that the public interest is always best served when the university attempts to make money from its patents.Nothing in Bayh-Dole authorizes universities to create such institutional conflicts of interest, or absolves them of such conflicts, or requires such conflicts to arise. Yet universities now embrace such institutional conflicts of interest and keep the key elements of their patenting and licensing programs secret. While Bayh-Dole aims to prevent federal agencies from disclosing information on invention use or development provided to them by contractors, nothing in Bayh-Dole requires contractors to keep such information secret. Universities have done that on their own as well.

But here’s the subtle change. Bayh-Dole authorizes federal agencies to grant exclusive licenses and even to assign inventions owned by the federal government. Despite the apparatus that makes it appear that exclusive licensing will be difficult to justify and therefore rare, Bayh-Dole by permitting exclusive licensing means that a faculty inventor who determines that a given invention would do best if published and made openly available without conditions or demand for payment cannot just publish. If the university gets wind of the invention, and invokes their policy claim of ownership, and then does not want to keep that ownership or pay for patenting, then the invention may go to the federal agency, and that federal agency could license exclusively and thus prevent the inventors (or anyone else) from working with whatever companies they chose to adopt or develop the invention. Do you see their dilemma? They have to somehow get the university to do the patenting *and* release non-exclusively to avoid the federal government doing the patenting and *potentially* attempting to license exclusively, denying everyone (or, everyone else, if an agency ever does get a licensee) open access. That part of Bayh-Dole ought to have changed university invention management practice, but it hasn’t.

David Mowery and his co-authors make clear (in ) that university technology transfer was growing in the years leading up to Bayh-Dole. The growth rates did not change suddenly with Bayh-Dole. Things continued to grow as they did before Bayh-Dole. For instance, the University of Nebraska in the decade following Bayh-Dole received 23 patents, but none of them cite federal funding under Bayh-Dole. It’s difficult to see how Bayh-Dole revolutionized patent practice at the University of Nebraska. At the University of Washington, the passage of Bayh-Dole came at the same time UW abandoned its use of other external agents and cooperated in establishing the Washington Research Foundation–based on Research Corporation right down to the Act of Congress that established it. That is, UW dove right into the conventional approach, mixing Research Corporation with WARF. Nothing revolutionary. A decade later finds UW abandoning its WRF over issues of selectivity and competence, but not going back to Research Corporation or Battelle as agents. Nothing to do with Bayh-Dole.

Universities have used misrepresentations of Bayh-Dole to rationalize the changes they have made on their ownsome. They claimed Bayh-Dole vested invention ownership with the universities that hosted federally supported research. Bayh-Dole does not do so, as the Supreme Court ruled in Stanford v Roche. They claimed that Bayh-Dole requires commercialization. It does not. It’s standard is use, not commercial products. Commercialization is one way–not the only way–to get to use. They claimed that Bayh-Dole expects exclusive patent licensing. It does not–and just the opposite, expects universities to break up their patent monopoly rights and license an invention in fragments, or non-exclusively.

Nothing about Bayh-Dole conforms to the open claims to the public made by universities and their front groups, that Bayh-Dole somehow started tech transfer or revolutionized it or has been vital to the existence if not success (what? what success?) of their licensing offices. None of this holds up. There’s nothing there. It’s institutional narcissistic clueless fantasy, or, more bluntly, sincere bullshit, or, for what it is, willful deception of policy-makers, faculty, and the public.

Bayh-Dole has not been the driver of these changes. University administrators have made the changes without Bayh-Dole or even in defiance of Bayh-Dole. Federal agencies have played along, refusing to comply with Bayh-Dole (especially in determining exceptional circumstances), refusing to enforce the standard patent rights clause (or ignoring it, or waiving it), and refusing to act on the rights in patents on subject inventions Bayh-Dole reserves for the federal government for its own use and to protect the public from nonuse and unreasonable use (including benefits of the use of inventions made available to the public on unreasonable terms, such as an unreasonable price). Nothing about any of these things points to Bayh-Dole as the driver, or even an iron or sand wedge or a putter.

What’s important, then, is to recognize there have been changes in university licensing practice–it’s more grasping, compulsory, non-selective, patenting, by default licensing exclusive or not at all, underperforming, conflicted, and non-accountable than before Bayh-Dole. The question is–what then has been the driver? Or, less metaphysically, how might we unwind this horrible mess that universities and federal agencies have made of the great federal experiment to support the advancement of science in the national interest? A good start would be to reject the unsupported premise that Bayh-Dole is responsible. It hasn’t been, and isn’t.

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