Unenforced, Bayh-Dole enables a federal offer to look the other way on price-gouging

The government’s failure to use its government license to practice and have practiced (=make, use, and sell) puts undue pressure on march-in to address nonuse and unreasonable use of inventions arising in work receiving federal support. NIST wants to gut both march-in and the government license. The gutting is justified as a consequence pf the difference between expenditures on research and expenditures on “development” of inventions into commercial products. That distinction is delusional.

Under Bayh-Dole, medical research is key part of any project that intends to result in medical products. Universities taking federal money state as much in their formal policies on research and technology transfer–in some, it’s even in their mission statements under the heading “economic development.” That’s the difference between the “work” that federal money supports at least part of (35 USC 201(b)) and the “work” specified in any particular proposal for federal funds. Federal agencies and universities alike argue that they intend their participation to move from research to development to commercial product. The “project” spans the entire arc. Federal funding at any point in this arc creates a federal–public–interest in the results of anything done along that arc. The federally funded part of the arc supports the entire arc; the federal funds support the entire arc by supporting any part of the arc, such as, say, a research part of the arc.

“Performance of work” is the proposal work plus work that distracts or diminishes from that work; “under a funding agreement” is the “project” (37 CFR 401.1(a))–the greater work spanning research to development to use with benefits available to the public on reasonable terms. The spending on “invention” is absolutely meaningless in the arc of a funding agreement project. Inventing can be a flash of insight on which *nothing is spent*. It can be a slow hunch on which *nothing is spent*. Spending on invention is immaterial to the public claim.

In many ways, federal funding directed to university faculty tapped into independent thinking in science and engineering. Even small federal grants gave faculty time to explore outside established scientific conventions and institutional/company objectives. Even in such exploration, invention is *unanticipated*. There’s no budget for inventing. There’s not even any federal support for dealing with inventing, or pre-inventing, or immediate post-inventing. But inventing may be crucial–and off-topic from the specified research.

So it’s beyond nonsense to talk in the abstract that it costs more to develop a product than to do research that invents and therefore (so the argument goes) companies should get patent monopolies and charge price-gouging monopoly prices. And it’s beyond nonsense to break up the arc of a project into research and development and claim that since research spending is less than product testing, the public deserves to get price-gouged and have other useful versions of the invention suppressed. And even more nonsense to hump up reported development costs by billing a bunch of failed other efforts to an effort that has been supported by the public and succeeds. Call it parasitic bookkeeping.

For any new thing there is a cost of practice to understand and adapt and use some version of what’s been invented. That local cost of “development” is a part of the cost of new practice generally. Sum each adopter’s costs and there’s the cost of development. Use of something new is the single greatest contributor to understanding how something might be used, adapted, and versioned and used some more. Using a patent to suppress early use runs against adoption and adaption by others–and also suppresses local development. That early adopter use and adaptation in turn lowers the cost of local development for other adopters–the new thing gets integrated into existing technology and practice. Adopters assemble libraries and then build platforms and then make standards–making more adoption easier.

A commercial product ends up being an instance of a shared platform made to a standard and mass-produced. The product serves two “markets”–(1) the DIY market, if it is cheaper/better than DIY and (2) those that can’t or won’t adapt the new thing for their own use. The commercial product comes *after* shared access shakes out use and adaptations and where there’s opportunities for scale and uniform parts based on that use. The product version lowers the cost of adoption for those who otherwise won’t adopt, and the costs for DIYs.

Using a patent to suppress early adoption and adaptation raises the overall cost of development and adoption. Potential later adopters don’t have the benefit of early DIY adaptation–research uses, industry internal uses, professional uses, entrepreneurial uses. The patent monopoly folks fuss about the “free rider” problem. In public projects, “free rider” is the goal–that later adopters get it easier because earlier adopters have built the infrastructure to include them, too. Products can be important–but products come *later*.

Bureaucrats and speculators miss these points. They skip early adoption and adaptation of something new, hoping to dictate new practice by making a product while suppressing all other use of the invention. Development costs skyrocket. And everyone else must look for alternatives. It is only in rare to the point of pathological cases that a new thing cannot possibly be adopted or adapted by anyone else without becoming first a mass-produced commercial product. Not even medical products fit this case profile.

Yet we now have federal policy makers at NIST determined to make patent suppression of early adoption the law of the land for federally supported work. They do this while yapping about wanting to “unleash” innovation and reach out to “entrepreneurs.” Their careers and status are invested in patent suppression of early use of inventions to drive up the speculative value of patents and they draft regulations to force their fantasy on everyone else. They cannot allow competing practices to show they are wrong.

Bayh-Dole throughout lays a foundation for inventor control (especially at nonprofits) and open access, collaboration, and free competition. Federal exclusive licensing is limited–see 35 USC 209(a). Rights are divided between contractors (including inventors) and federal agencies–35 USC 202(c)(4) [govt license] and 203 [march-in for non-govt markets]. Contractor right of enforcement is this limited–35 USC 200. Nonprofit right to use exclusive licenses as a form of assignment is also greatly limited–35 USC 202(c)(7)(A). Any such “licensee” must comply with the nonprofit patent rights clause–and especially must dedicate income earned to scientific research or education.

Everything in Bayh-Dole points toward preserving open access except in the pathologically rare case in which no one, absolutely no one, would adopt a given invention unless it first becomes a mass-produced commercial product AND no one will make that product because it is too expensive to make, and not of sufficient value to the public that the government or a nonprofit refuses to make it, and once made, anyone else could see what to do and make it so much more cheaply that they could undersell the initial product.

And even then–whoa–apparently the product wasn’t so expensive to develop after all–it’s just that it was expensive for whoever happened to show up first and wanted to do the development in isolation. And why? Because there was no early adopter/adapter activity to show the way? Maybe. And why was that?

Yet now we have NIST determined to rewrite Bayh-Dole regulations to prevent the operation of Bayh-Dole the law and force everything into that pathological special case as if it were not only the general case, but the only way things can be allowed to happen.

This line of thought uncovers discussions in the mid 1960s among federal officials about “technology transfer,” before those discussion were beat down by demands for a “uniform” patent policy. When something is invented, how does that new thing reach the people who would benefit from knowing about that new thing and might adopt and adapt it?

Vannevar Bush in Science the Endless Frontier called for a broad dissemination of scientific information that had been withheld during WW2. Federal officials tried to set up programs of dissemination. Programs for federally supported inventors report their inventions and new technology. Central repositories, clearinghouses, regional technology support offices. These didn’t seem to work.

Just because something was identified as new or even inventive didn’t mean that something was relevant to what anyone else was doing or wanted to do. Or even if relevant, was a good way to do it, or better enough to bother with it. And even then–who would assist? The federal officials imagined that if an invention got documented, then technology transfer people could assist everyone else, keeping the inventor in its coop to do more inventing. It’s like having to deal with an insurance officer instead of a doctor to get medical help. So of course setting up process and paper systems didn’t work. But instead of figuring that out, the officials instead decided that the missing element was “incentives” to use that went beyond the “benefits” of use exceeding the costs of adoption and adaptation.

“We will give you the incentive of a patent monopoly to adopt.”

The federal offer then becomes: Don’t adopt because using the invention will benefit you–adopt because the exploitation of the patent monopoly will benefit you, even if you and no one else ever uses any version of the claimed invention.

Built into trying to make their earnest efforts to make federally supported research results relevant to the public is the offer that the feds will look the other way if there’s monopoly pricing. The monopoly pricing–price gouging on medicines, even–is for the federal officials a sign of success. That they have finally found an incentive that makes their process efforts to make federal research relevant to the public–at the cost of price-gouging for medicines. Price gouging suffering and dying patients then becomes an acceptable consequence of finding a “uniform” incentive that justifies agency efforts to make its research expenditures relevant to the public (and so continue to receive federal allocations for even more research). Universities, their front organizations such as AUTM and APLU, federal agencies, and biopharma lobbying organizations have spent the past forty years trying to persuade the public that we should embrace monopoly pricing and thank those involved in government and universities for creating so many more opportunities for monopoly pricing.

“We have now found an incentive to which we ascribe the existence of a few new drugs and now we will build that incentive into federal regulations as if it is the only incentive, the best practices incentive for everything.”

What’s been lost is a focus on how people stumbling into a problem that’s been solved in some way elsewhere realize that there is a solution–and that solution is better than what they have got, and they want that solution even before it is a commercial product. This is a problem of distributed technical intelligence and awareness. Spreading federal research around, so that many agencies and thousands of contractors spread out everywhere (Senator Kilgore’s vision!), distributes–and fragments–new technology ideas. People can work to put things back together again, but it is a struggle and it’s easy to be daunted by distance and unknowns and lack of reciprocity and bad faith.

You cannot salvage this approach with either federal open access (+ clearinghouses, etc) or with a uniform “incentive” of patent monopolies (with the prospect of price gouging with federal approval–short of antitrust violations).

The clearinghouse model requires turning inventive understanding into documents, gathering those documents from hither and yon, now separated from researchers and facilities and contexts, to be broadcast out to who knows who months and years later. Messages in bottles. Oh yeah. One can’t fix that by training people in how to take messages out of bottles and sprinkling them in cities around the country. Unlike scotch, new technology reports don’t get better with age.

The patent incentive model doesn’t work because once an area of research and development–a big picture project–has been fragmented to hundreds of “contractors” by many federal agencies, and each contractor takes that patent incentive repeatedly, the project itself fragments. No one can put together enough of the fragments of work–now all patented and held to realize future value from monopoly pricing–to do anything until the patents expire. So, there’s a delay of twenty years or more before anyone can piece together a platform and use anything. Example: nanotechnology. Look at all that federal carbon nanotube research no one has been able to use for two decades. Bayh-Dole effect.

And during that delay time, everyone has the incentive of necessity to avoid the whole fragmented mess–design around, exclude from emerging standards, undermine, challenge patents as invalid, take the work and any products off-shore to markets where there’s no enforcement. Unleashing innovation ho! Anything relevant to the public that makes it through Bayh-Dole as presently practiced is a testament to the determination of folks to do things even in the face of bureaucracies dedicated to building monuments to political fantasies concocted by federal officials.

March-in and the government license and restrictions on nonprofit exclusive licensing are all efforts to limit the adverse effects of the desperate federal offer to look the other way if there’s patent price gouging. Unenforced and not acted upon the “protections” of march-in, government license, and restrictions on nonprofit assignment of subject inventions are the looking the other way.

What’s worse is that the offer to look the other way on monopoly pricing, especially in matters of public health and safety, exists at all in federal invention policy.

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