NIST, Bayh-Dole Policy, and Disincentives

I spent the past two weeks working on comments in response to NIST’s proposed new regulations for Bayh-Dole. I ended up with 73 pages of answers to questions and section-by-section comments, and about 60 pages of outtakes. NIST didn’t make it easy.

NIST’s restatement of Bayh-Dole’s “framework” makes material omissions that tacitly endorse a reading of Bayh-Dole that the Supreme Court rejected. NIST didn’t show markup of deletions and additions, its summary of changes omitted a number of significant changes, it used “clarify” when it meant “change entirely from the clear meaning of the law,” and it didn’t consistently mark relocated text at both the point of deletion and the point of addition.

Then there was the inattention to detail–change a definition at 37 CFR 401.14(a) but forget to change it at 401.2, too, and drop a whole section that still has pointers to it. And finally there were the big hits to public interest–a clueless effort to exclude price from the meaning of “reasonable terms,” a rewrite of the inventor patent rights clause to make it into more of an inventor submit to your employer clause because we say so provision, and an open request for someone, anyone, to tell them that the government license is a “use” license not a “practice and have practiced for any government purpose” license.

Even if folks really believe, sincerely believe, that the only, best, first way by which the public will ever benefit from federally supported research is if the results of that work are bundled off to institutions and federal agencies to be assigned to companies given free rein to price gouge, hold back, and suppress, and that letting them do whatever they want is a necessary element in getting anyone to do anything at all with those research results–even if all this were true and not just some happy fantasy–Bayh-Dole does not endorse it, does not mandate it, does not give it any special privilege.

NIST folks, apparently, in the thrall of this sort of thing, appear intent on creating regulations that enable the happy fantasy as a matter of compliance while foreclosing other pathways by which research results become available, get tested, stuff builds on them, and things get done. Instead, in NIST’s happy fantasy, a bunch of institutions forestall the market for university research, take out patents and hold them hoping for an exclusive license. The upshot: companies avoid university research, design around, block, undermine, exclude from standards. The university patent fetish makes university research irrelevant, even where it ought to be relevant. Their compulsory assignment exclusive license default practice means that what does get licensed does so despite their presence.

And look at the behavior in aggregate. Federal agencies spread research work in a given area around. This is one way Kilgore beat Bush. If there’s any area of research that gets hot, federal agencies scramble to open funding programs in that area, give out hundreds of grants to institutions spread everywhere, and each organization involved grabs any inventions, files patent applications on their little bits, and waits like a poisonous spider for some company to cross its web of claims.

Multiply by scores of other institutions and there’s no way that any single company can get freedom to practice. The licensing is slow, there’s some university lawyer behind it all who doesn’t know much about IP and is usually risk averse and determined to make the next deal look like the last deal to avoid appearing unfair or inconsistent, universities won’t pool or build standards, they all want a royalty stack, they don’t permit cross-licensing (you have to pay the cash value of the cross license!). Getting one license is bad enough. Try having to get 20–and universities holding out for an exclusive license are not about to ruin their chances by giving your little squat bug company a royalty-free non-exclusive license just because you are silly enough to ask.

This is the behavior NIST aims to make more of, make easier, to unleash. How can we recruit entrepreneurs to participate in this happy fantasy? How do we find people who are motivated by getting very wealthy by exploiting the greatest public needs with exclusive patent positions prepared especially for them by nonprofits and federal agencies and all they ask in return is please, please share some tiny bit of your upside with us so we have enough money to do even more of this. Luckily for them Bayh-Dole keeps licensing terms secret along with reports of invention usage, if federal agencies ever bother to ask for such reports.

Bayh-Dole doesn’t require these practices, and no one cares to seek out the effects. We get bogus metrics framed by a fake version of the law placed in a context of a fantasy history created especially to make the happy fantasy look like a brilliant solution for the public good.

There’s no good reason, but for politics, ego, and hanging out with the wrong people, why NIST should rewrite Bayh-Dole to appear to endorse the happy fantasy of the monopoly meme. There’s no good reason, either, why universities should tolerate its dominance in their licensing offices or in their IP or research policies. The monopoly meme betrays their public mission. The monopoly meme violates the public trust. The monopoly meme invites truly ineffective transfer practice. The monopoly meme renders university research more irrelevant than it ought to be. The monopoly meme thwarts relationships, cancels opportunities, and burns up goodwill. And yet, it is a happy fantasy that folks continue to repeat and expect to be believed.

Rather than enabling the monopoly meme, as if Bayh-Dole requires it to function “as intended,” NIST ought to be fantasy-neutral. Read the law as it is written, in the context of multiple possible ways in which research results might diffuse into use–from no ownership at all, to individual control, to consulting and publication, to commons and cumulative tech, to pre-competitive consortia, to standards, to startups, to venture-backed startups, to big time exclusive licenses that feed goliaths. Even to indifference and neglect, to playing the loon, to celebrity champions, to crowd-funded initiatives. And there’s more, even, than that, some stuff illegal or almost illegal or unethical, immoral even and so we will pretend it doesn’t happen and when it does it never involves innovation or anything.

Bayh-Dole does not endorse the monopoly meme. Bayh-Dole does not endorse institutional controls. Bayh-Dole does not endorse exclusive licensing. Bayh-Dole does not even endorse patenting. I can show all this in the law, or in the absence of these things from the law. And yet NIST would have you think that Bayh-Dole does require all these things, but gosh, they are implicit and have to be got to by squeezing words until their meanings change and they squeak out “we meant to say do whatever it takes to make the monopoly meme really produce the kind of public benefit you sincerely believe it can produce even though it hasn’t done much to speak of in the past half-century. You can say we command you to do so!”

What I have come to realize–and I am bitter that it has taken so long–is that Bayh-Dole does not create incentives for institutional ownership of inventions, patenting, and exclusive licensing. Instead, it creates disincentives. All those administrative requirements, government rights, restrictions on nonprofit assignment, march-in for nonuse or unreasonable use or failure to satisfy health needs or regulatory needs, US manufacturing–all those are disincentives. If a contractor doesn’t take ownership of an invention made in federally supported work, it cannot be a subject invention. Bayh-Dole’s contracting provisions simply don’t apply. If inventors want to use the patent system, then, they can, and they get ordinary patents unburdened with requirements to disclose, or elect title, or file patent applications in a rush job, making sure to have the sacred wording about government rights, or make reports that no one reads or worry that someday a federal agency will wake up from its coma and march-in or audit for improper use of income or noncompliant assignments.

Bayh-Dole imposes disincentives in the following order, from least to greatest:


inventors made parties to a funding agreement

small businesses


Yes, nonprofits have the most disincentives, which pass to any company fool enough to take assignment from a nonprofit of a subject invention–and that includes exclusive licenses conveying all substantial rights in an invention. The overt public policy in Bayh-Dole is that inventors ought to own, and if not that, then they ought to control their inventions as contractors participating in a public interest project. If not that, then small companies ought to own and do their own thing, like inventors ought to do but with a few more controls. And then there are the nonprofits, who have the greatest disincentives–must use any income for scientific research or education. Not for the endowment, not to invest in stocks, not to ramp up the non-federal side of the licensing program.

If you follow the policy as laid out, university inventors ought to assign *to companies* not to universities! The companies have a better deal under Bayh-Dole’s disincentives than the nonprofits do. That’s the guidance given by Bayh-Dole policy. Prefer to assign to companies, university inventors, if you want to see anything get done. It’s just universities being pigs about it and trying to thwart Bayh-Dole that gets them to demand assignment to them rather than to companies.

The same goes for exclusive licensing. Disincentives abound. Look at 35 USC 209(a) on what a federal agency has to go through (in theory anyway) to grant an exclusive license. Ask how a default preference for exclusive licensing meets the objective of maximum participation of small companies? or free competition and enterprise? Even march-in is based on the premise of “we will make you do what you obviously should have been doing all along–granting non-exclusive licenses on reasonable terms.”

Even the basic “use the patent system to promote the utilization of inventions arising in federally supported research or development” at 35 USC 200 acts as a restriction on the enforcement of patents, and by extension, on the enforcement of exclusive licenses. Not that anyone thinks to rely on that restriction in real life because federal agencies refuse to point it out and confirm that it’s there. But to state “use the patent system–for a particular purpose” is a restriction on the use of the patent system, and enforcing patent rights is every bit as much a use of the patent system as is filing patent applications.

Not only that, but Bayh-Dole is part of federal patent law. This restriction on use of the patent system is not merely fluff talk by silly senators–it’s integral to the patent property rights that attend patents on any invention arising from federally supported research or development, subject invention or federal invention or an inventor’s invention. There’s your 35 USC 262 to 35 USC 200 connection, for those of you following along at home–“Subject to the provisions of this title, patents shall have the attributes of personal property.” 35 USC 200 sets out the provisions of the title with respect to inventions within the scope of Bayh-Dole. It’s not just that Bayh-Dole patents have a problem with enforcement, but that that limitation is inherent in the patent property right. The patent property right, with respect to enforcement, is simply not what it is for ordinary patents for which this disincentive does not exist.

35 USC 200 then establishes the theme for Bayh-Dole–you can use the patent system to encourage others to work an invention, but you cannot use the patent system to suppress people from working the invention. Oh, that’s huge right there. That’s not just “you cannot suppress competitors getting to practical application ahead of you” but also “you cannot prevent people from using the invention in ways you haven’t bothered with or don’t want.” Enforce because a use harms the public–an unreasonable use, a use that violates a standard but doesn’t admit it, a use that results in defective products. Sure, enforce then, on behalf of the public good, using that patent right because it’s the tool you’ve been granted. But none of this shallow threatening to sue for infringement because someone is using the invention. Bayh-Dole says that use is the objective. So the patent system cannot be used to thwart it.

Okay, that’s the new fissure that’s opened up, and I’ve vented. More later.

/the reference above to pigs was not meant to denigrate pigs in any way. I had to pick something that the university folks demanding ownership would gristle over. Next time, priests of Baal, okay?/

/the above disclaimer was in no way meant to equate pigs with priests of Baal. Both have their legitimate roles to play. It’s a Moloch state. Oh, wait. Who? The Big M? Oh, hey, hiya, M. Yes. Yes. I see. Yes. Okay. Very well. Of course. Immediately. Yes. And you too./

/in the above disclaimer, Moloch objects to the use of the word “state.” Moloch requests I make this disclaimer and promise that any future references be to “Moloch’s Universe of Fun” and not have any possible association with university administrators. Pigs and Baal priests, however, are good fun and always welcomed./

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