The IPA and Bayh-Dole on nonprofit assignment of subject inventions, 2

We have looked at the IPA assignment clause. Since the IPA is specific to nonprofits, there’s no reason to call out nonprofitedness. But there is a reason then to restrict any later invention assignment to nonprofit assignees. Why? The point of the implicit IPA policy is that a nonprofit–set up as it is already to serve public interests–may serve as an appropriate alternative to a federal agency in the management of a “public” asset such as an invention made in work supported by the federal government. The policy then is that when nonprofits are engaged to do work in the public interest, the patentable results of that work should go to for-profits by means of a license. If one nonprofit can do the job of managing patents for another, fine. But things stay within the nonprofit circle. Clearly, for-profit operators, even if they might be more capable or more effective or more cost effective (there’s a long discussion there about how even in seeking to tack on a profit margin a for-profit magically finds ways to cost less overall than anyone else happy to do things at cost, or for reasonable hire), are as a matter of policy, excluded from taking assignment of an IPA invention from a nonprofit, just as they would be prior to Bayh-Dole if the federal agency owned the invention.

This nonprofit stickiness of the IPA is itself rather strange. The federal policy insists that whenever there’s an exclusive license to an invention made with NIH support, a nonprofit has to be on one side of that license, that the nonprofit has a role, then, in policing that exclusive license agreement, and the NIH has a role in policing the nonprofit. All this policing, so the idea goes, will protect the public from abuses of the patenting system such as blocking other research or concentrating economic power or withholding inventions from public access or charging exorbitant prices or failing to meet public needs. That’s a lot of stuff to ask of any federal agency or nonprofit licensor. But conjectures about how innovation surely works better with bureaucrats armed with aspirational mission statements and patent attorneys tend to ignore such details.

The whole point of the IPA was to allow NIH nonprofit contractors to take patent positions on NIH research inventions and pass these patent positions (in theory) to pharmaceutical companies for “development” into public-benefiting commercial products, avoiding executive branch patent policies that made a claim for government rights in inventions made in working with inventions made under NIH research awards.

Everything about the IPA is predicated on the need for patents, and for exclusivity in managing those patents. The NIH lacked the power to unilaterally grant patent exclusivity under HEW patent policy, following the advice by the Attorney General made twenty years earlier. But as the Comptroller General’s report of 1968 argued, the Kennedy patent policy did provide for federal contractors could be “accorded exclusive commercial rights” if a contractor

has an established nongovernmental commercial position and where there is greater likelihood that the invention would be worked and put into civilian use than would be the case if the invention were made more freely available.

This report then goes on to identify the NIH IPA master agreement as the solution–while failing to note that nonprofits generally do not have established nongovernmental commercial positions. But what’s clear is that the IPA argument was not that nonprofits could better manage open innovation than could federal agencies (though that may indeed be true). Rather, the argument for the IPA was that private exclusive control (less “freely available” necessarily means “not freely available” here) was necessary based on a determination of “greater likelihood” of civilian use. The argument makes sense only if you don’t bother to try to follow its logic.

As far as Latker could see, the alternative to getting a law passed that overturned the AG’s recommendations was to revive the IPA program, give it the trappings of non-exclusive licensing as a default but leave open a clear path to passing NIH patent rights from universities to their patent management organizations to pharmaceutical companies. The driver for the IPA and eventually Bayh-Dole is not the pharmaceutical companies, but a patent attorney in the NIH worried that if pharmaceutical companies don’t get exclusive patent positions, then NIH’s research inventions will not be used pharmaceutical companies. It would seem to be an absurd worry, except if, perhaps, you thought that your government patent job was at risk of being irrelevant.

The Harbridge House report (1968), which Latker cites in rationalizing the need for the IPA program, looked squarely at the pharmaceutical industry boycott of PHS inventions. The federal concern was “participation” in federal research. If pharma companies refused to participate, because they objected to the terms required by the government, then the government (and the public) lost access to the capabilities that these companies had. Call it an early version of “inclusiveness.” The primary problem had to do with the screening of candidate compounds–classes of compounds, really–for potential therapeutic effects. Pharma companies had worked out deals with university faculty doing research in medicinal chemistry to screen compounds in exchange for an option to license the patent rights (from a patent management organization, generally). When the research was PHS-funded, however, the PHS required the pharma companies involved to sign a patent agreement under which anything the pharma company developed based on that screening activity carried with it a government license for all government purposes.

The issue for pharma, according to Harbridge House, was. not that pharma companies demanded exclusive patent rights to all the compounds that they screened for faculty, but that they feared “contamination” of their privately developed technology with PHS-supported compounds that carried with them a requirement for a government license in any “new use” patent. Any private technology, if it were directed to the same “intended use” of the compounds to be screened could appear to be within the scope of the government license. And here, “intended use” could be as broad as “used to treat medically diseases in humans.”

Exclusive patent rights was not the issue–though it was presented as the issue, as in the Comptroller General’s report of 1968–nor was the “uncertainty” with regard to whether the Surgeon General would decide to allow a contractor to hold exclusive rights to an invention made in PHS work. Open was acceptable with regard to the federally supported work. The problem was whether that “open” extended to everything that a company did with a compound coming from PHS-supported research, and to everything that a company may have or do separately addressing the same uses that the compound may have. Read the decision in Mine Safety Appliances (1966) to see how the scope of a federal contract might well be sufficiently broad to include inventions made “off the books” by a contractor receiving federal funding.

In a sense, Latker made exclusive patent rights in inventions made with NIH support the issue, when the issue was the scope of claim by the government to inventions made by non-contractors working with those NIH-related inventions. Did NIH “support” extend to providing compounds for private “development” and more inventing? If so, there’s what pharma called “contamination.” Latker’s solution–since he was not in a position to dictate NIH policy on scope of interest in inventions made by others, was to set it up for nonprofits to play the middleman in moving NIH inventions to pharma. If pharma companies licensed these inventions exclusively from nonprofits that handled the NIH funding, so the thinking went, then anything additional a company licensee happened to develop or invent would lie outside the scope of the government’s claim.

And now we come to the second condition in the IPA on assignment:

and an assignment to such an organization shall be subject to all the terms and conditions of this Agreement.

The IPA requirements must be flowed down to the patent management organization. This requirement would have to be in the patent administration agreement. Since the IPA was not federal regulation, the only way for its requirements to have effect on a new entity–a patent management organization–was for the NIH to require the nonprofit Grantee to require the patent management organization to accept the IPA requirements as a condition of the assignment of a subject invention.

We might ask, then, why the “nonprofit” limitation on patent management organizations? An obvious reason is that a nonprofit is set up to serve public–charitable–purposes, and thus any licensing income realized by the patent management organization necessarily will be spent in line with the organization’s nonprofit charter. There would be a balancing, then, between the patent management organization’s interest in making money from licensing (for public purposes) and encouraging an exclusive licensee to develop medicines to be made available at lower price than otherwise (for public purposes). It’s a balancing of one form of public interest (getting as much money as possible, to run it back into research at universities–as non-federal funding) against another (lowering the price of new medicines that have received federal research funding that has supported discoveries and inventions). Organizational conflicts of interest abound, even if the conflicts have to do, in the abstract, with different ways to benefit the public.

The amazing thing about the IPA is that Latker took a single situation–PHS policy directed at pharma companies providing “free” screening services for university faculty involved in a gold rush to identify compounds that might serve as the basis for new drugs in exchange for the patent rights to what they found–and abstracted the situation into one in which no company would ever develop any new commercial product unless it held a patent monopoly on that product based on an in-licensed invention. The screening services “problem” was created by the NIH in the first place, by funding “research” but declining to fund broad scale screening services to evaluate the results of that “research”
for therapeutic effect. Rather than build up the non-corporate “drug discovery” infrastructure, the NIH chose to overwhelm that infrastructure and make a case for subsidizing corporate drug discovery.

We see how the claims that Bayh-Dole built the pharma industry in the US might come about. The NIH helped pharma get rich while neglecting public infrastructure. Bayh-Dole, like the IPA program it is modeled on, was one of the NIH’s tools. Another was refusing to support public screening services as part of research in medicinal chemistry. When it came time to face down the pharma industry for boycotting compounds made in PHS supported research, the government blinked rather than creating opportunities for contract labs to build up their expertise in compound screening for open medical science. Thus, we end up with a wealthy, patent-mad pharma industry intent on making price-gouging appear to be not only normal but somehow necessary instead of an open, standards-based, well supported public infrastructure for drug discovery–research, screening, formulation, clinical testing. All that could be done–and better, and more directed at cures and prevention–without patent monopolies isolating the work to the whims of single corporate  and investment entities making unilateral decisions on where they can most profit while suppressing all other uses and development.


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