How Bayh-Dole Is Intended to Work, circa 1992, Part 3

We are still working through a passage in a law article from 1992 that sets out how Bayh-Dole is intended to work and addresses questions of faculty ownership of inventions. The issue is not with the author of an article a couple of decades ago, but rather with the very current, continuing appeal that we must consider assertions of how Bayh-Dole was intended to operate rather than reading the law itself–even with all its strangenesses. It is this private control of what was “intended” that is the problem. It was a problem, as well, for Bayh-Dole in Stanford v Roche, where Stanford argued how the law as “intended” to work and the Supreme Court rejected Stanford’s arguments. Not only that, but the Supreme Court rejected Senator Bayh’s arguments, and rejected the arguments of scores of university attorneys who insisted that the world would fall apart if universities did not get outright ownership of whatever their personnel invented if in any way associated with federal funding.

Here’s a bit from the AUTM amicus brief:

Congress enacted Bayh-Dole with the specific purpose of providing universities and other nonprofits with certainty that they would own their federally funded inventions and could enter into collaborative licensing arrangements to commercialize them.

It’s just that nowhere in Bayh-Dole is this “specific purpose” expressed. Go look at Bayh-Dole’s statement of policy and objective at 35 USC 200. No “certainty of title” talk there. Certainty of title–or certainty that a university would own inventions made by people doing research supported by federal funds–simply is not in the law. It’s a fantasy put forward by patent licensing people and by the people who love them. The law, we are told, must be interpreted to enable this fantasy, cast as something that Congress had as a “specific purpose.” The Supreme Court scoffed at such a thing:

It would be noteworthy enough for Congress to supplant one of the fundamental precepts of patent law and deprive inventors of rights in their own inventions. To do so under such unusual terms would be truly surprising. We are confident that if Congress had intended such a sea change in intellectual property rights it would have said so clearly—not obliquely through an ambiguous definition of
“subject invention” and an idiosyncratic use of the word “retain.”

Bayh-Dole, as it is claimed to be intended to work, is an elaborate scam–a scam that has stripped inventors of their rights, has boarded up 50,000 federally supported inventions behind paywalls where they cannot be used even for research, and has cost the American public hundreds of billions in monopoly-priced medicines and hundreds of billions more in lost opportunities. Continue reading

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Is this what Congress intended when it passed Bayh-Dole?

Would Congress have passed Bayh-Dole if things had been stated clearly?

It is the policy and objective of Congress that nonprofit organizations should, for inventions arising in federally supported research or development:

  • strip inventors of their common law rights in inventions without the right of appeal;
  • ignore investigators and inventors with regard to how these inventions might be used to advance science and the public interest;
  • obtain patents to diminish the public domain, create patent gridlock, and stifle competition;
  • attempt to convey monopoly rights to favored companies, especially those involved in profiting from medicines;
  • share in the profits derived from monopoly pricing; and
  • use those profits without publicly accounting for that use.

with the provisio that it is acceptable if only 1 in 200 such inventions ever come into use through the efforts of the nonprofit patent holder as long as the rest are held for infringement litigation if industry, without the need for exclusive rights, were to use any such invention without without first paying for a license;

and all of this on the condition that

information obtained by the federal government pertaining to the use of such inventions by nonprofits and their monopoly partners must be a government secret.

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How Bayh-Dole Is Intended to Work, circa 1992, Part 2

We are working through a paragraph from a law review article from 1992, taken perhaps out of context, but setting out how Bayh-Dole was “intended” to work. Our problem is not so much with the law professor who wrote the article over 25 years ago as it is with the broader issue of accepting accounts of “intentions” for Bayh-Dole to substitute for the law itself.

Intention–abstracted from actual human beings–is fiction, fantasy, bluff, distraction, misdirection. Instead, we assert how Bayh-Dole operates, document the basis in the law for our assertion, show that our account addresses each element of the law, and then we can consider whether this operation is in fact desirable as policy. If it is not desirable, then we–humans–can intend to change the law to a more desirable operation. But we have no business claiming that our proposed change was the original intent–abstracted–of the law, or that we don’t have to bother changing the law since we can just assert that no matter the words, our private interpretation of the words is what counts and should apply to everyone, as if we get to make up the law as we want it to be and require everyone to agree that we are right. No, that would be–and is–a crock up.

But Bayh-Dole is a policy crock up. It fails to implement the patent rights clause of the Federal Procurement Regulations put in place just four years before, and folks added in elements of those regulations after the fact as part of the patent rights clause, and the amendments to the law in 1984–just three years after the law came into effect–mess up the law still more, as do NIST’s 2018 changes in the patent rights clause.

Here’s one example. The original Bayh-Dole required contractors to disclose subject inventions within a reasonable time after the inventions were made. That meant that contractors had a standing obligation to identify and disclose subject inventions. In that context, an inventor was to be required to undertake an obligation to disclose all subject inventions to the contractor so the contractor could comply with its disclosure obligation. But in 1984, Congress amended Bayh-Dole so that the contractor’s obligation to disclose to the federal government is entirely conditional on when the contractor’s patent personnel become aware of a subject invention. Congress we must think intended this change. Thus, Congress also intended that inventors should have no obligation to disclose inventions unless someone designated for patent matters becomes aware of the invention. Continue reading

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How Bayh-Dole Is Intended to Work, circa 1992, Part 1

I found a passage quoted from an article from 1992 in Wisconsin Law Review–“Faculty Generated Inventions: Who Owns the Golden Egg?” by Pat K. Chew, a distinguished law professor now at the University of Pittsburgh. Chew describes how Bayh-Dole is “intended” to operate:

Bayh-Dole is intended to work in the following way: the government agency sponsors research conducted by the faculty with the university acting as the contractor. If faculty develop an invention arising from the research, they follow the disclosure provisions outlined under the law. The university can then elect title to the invention and work with the faculty members to apply for a patent and to market the invention. The government receives a nonexclusive, nontransferable, irrevocable, paid-up license (shop-right) to the invention.

Just about everything here is twistedly wrong, but overall, the passage does track what university officials–and even Senator Bayh, in his amicus brief in Stanford v Roche–have claimed for the law. In that sense, the passage is accurate. Even though Stanford v Roche shows that this view of the law is not correct, it persists. Worse, people still openly use the tactic of claiming special knowledge of the intention for the law. Let’s work through this passage, as it gives us an opportunity to understand the law as it is, without any claims of special knowledge with regard to intentions.

Bayh-Dole is intended to work

The opening premise is strange. Who is it who intends Bayh-Dole to work in some way? Why the passive voice to hide the responsible agent? Consider an alternative opening: “Here is how Bayh-Dole works.” That would be direct. That’s apparently what the article is to get at (and as it turns out, gets wrong). But here we start with an unattached intention about the law as the guiding force for interpretation. We might posit that university administrators and law professors think this is how Bayh-Dole operates, and we might be led to believe that the law should be what they think, regardless of how the law reads.

What is the burden of “intended”? It would appear to mean, “Bayh-Dole is intended to work this way, but in practice it may work some other way.” That would make sense as a gambit in an article discussing the legal issues around the ownership of “faculty generated” inventions–even the title implies that faculty merely “generate” inventions but don’t necessarily own those inventions. Of course, if one opened with “Here is how Bayh-Dole works” and it turns out that no one works Bayh-Dole that way, then we are left with either a silly commentator or the allegation that there is rampant disregard for the law–or perhaps both.

Consider, by contrast, if we started with a title of “Faculty-owned inventions: Do universities misrepresent federal law to take ownership of the golden eggs?” We would now ask whether it was “intended” that university officials could use federal law to take inventions from inventors. We could then write, “university officials insist Bayh-Dole works this way” or “university officials insist Bayh-Dole is intended to work this way and so they argue that all interpretations of Bayh-Dole must support their claim for intention.” But why are we even talking about unattached intention with regard to how Bayh-Dole works?

Even discussing the intention of Congress leads us into a strange fiction in which assemblies can have intentions though they do not have hearts or minds. We should go there only if the law is provides multiple possible interpretations and the proper interpretation can be conclusively resolved by reference to legislative history. So why not establish first what the law says, and appeal to intention only where the law is uncertain? But even this only gets us to what we are constrained by disciplined interpretation to say that the law requires. We haven’t even got to what the law ought to require–that is, what would be best for the disposition of inventions arising in research or development projects receiving at least some support from the federal government.

We need not fault our author here, but claims of “intention” continue to plague discussion of Bayh-Dole. Presently we are faced with articles claiming that it was never intended for Bayh-Dole (or its march-in provisions to be used) to preclude outrageous monopoly-supported pricing for medicines discovered and developed in projects receiving federal support. We never find out who this “it” is who has done the intending. Perhaps “it” really is a horror-inducing clown. By calling forth intentions, commentators on the law asks us to ignore the law and instead start with an assertion about the intention of the law. Apparently once we accept this extra-legal intention, then we can pick and choose what we want from the law and ignore the rest, filling in any ambiguities, contradictions, and gaps with whatever sounds good in light of the “intentions.”

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Invention Option Theory and Bayh-Dole Crock Work

At one point, many years ago, I thought Bayh-Dole was totally clever. I was very wrong, but here’s how I thought Bayh-Dole worked.

The federal government had a general claim under federal law to own any invention made under federal contract. It did not matter who otherwise owned the invention–inventor, contractor, or any other assignee–if the invention was made under federal contract, it was a contract deliverable due the federal government.

Deep breath. Go on. Bayh-Dole then required the federal government to shift this obligation to deliver inventions to pass by the contractor. The contractor could choose to became a conditional substituted party–the contractor could intercept any invention due the government, and claim ownership of it in the name of the government, subject to various conditions under which the government would not interfere in the contractor’s ownership. The contractor, if it intercepted such an invention, was in effect nominated by Bayh-Dole to act in the place of–on behalf of–with the authority of–the federal agency for the intercepted invention.

Another deep breath. Continue. Thus the odd use of “elect” in Bayh-Dole, as in “elect to retain title” and “elect rights”–the contractor elected to exercise an option to obtain and exploit the government’s deliverable, with all the rights that attended the government’s authority to demand assignment. Any inventor or any assignee of the inventor would then be required to assign to the contractor with the same force of law that the inventor or assignee would otherwise have been required to assign to the federal government. Thus, inventors had to assign to a contractor when the contractor “elected to retain title” as a matter of federal law because the contractor had invoked the federal right to the invention deliverable in place of the federal government. Continue reading

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Fantasy depictions of technology transfer, 3

Despite all this discussion of university fantasy depictions of a technology transfer process, their invocation of the Bayh-Dole Act as their justification, and the reality that actual practice is nowhere like their depictions of process, success, or history, there are a few sobering points yet to make:

1 The patents held by university bureaucrats don’t amount to much. Those patents are no more than a few percent of all the patents in any given area of technology, and patents often reflect only a small portion of the developing art in most any area of technology. We are talking a total of about 55,000 US utility patents owned by universities citing federal funding in the Bayh-Dole era, and about 125,000 university patents overall–out of over 5 million US patents issued during that same time. The “technology transfer process” is a bureaucratic side show, ants at the picnic–only a rea; bother if the food and company is no good. The ants, of course, will advocate then for their right to hang around.

2 Most really new things take a generation to become economically meaningful, much longer than the twenty-year term of a poorly administered university patent. And most university patents are poorly administrated. The patent comes and goes and no one is ready for the new thing that has been claimed. Sure, there are exceptions–and people not interested in business as usual can make a big effort because, say, people will die otherwise–but patenting does not appear to do anything, in general, to speed up adoption of something new, especially in matters of public health. If a big effort is needed–not business as usual–then waiting around to see if a patent will issue is simply not part of the effort. In business as usual–as part of a bureaucratic “process,” private risk capital does not come flooding in as blankets in the aftermath of a hurricane for the public good–rather it comes in seeking in patent monopolies a better upside to be found in people’s desperation to escape suffering than an investment might otherwise obtain in people’s desire for entertainment or improved productivity. Why try to make millions from some labor-saving appliance when one might make billions on a drug that keeps tens of thousands of people alive for ten or twenty years, at $100,000 a year? Heck, one can make millions just betting for or against someone else’s efforts to make billions on a drug. What’s a speculator not to like here?

3 Most stuff happens despite the university standard technology transfer process. The desperate, the ignorant, and the sincere might choose to participate in the process, but anyone with anything of immediate value has multiple ways to circumvent the “process”–publishing, withholding publication, leaving the university, passing the idea in consulting, passing the idea via graduation of students, co-developing with others outside the control of the university. Even stuff that undergoes the “process” might succeed only because it is strong enough or lucky enough to become important despite the process, not because of the process. Just because the process is there does not mean that much of anything good happens as a necessary result of the process. Mostly, the process is distraction. If the process was really so excellent, universities would not have had to create policies to force everyone to assign their work to the university. Stuff happens, and university administrators may even play a beneficent role, but the process of technology transfer largely does not figure. For that matter, bureaucratic processes largely do not figure. We do not get more innovation from research because people fill out forms or have their inventions categorized in databases or have non-confidential summaries of their work written or have federal agencies notified that inventions have taken place or patents filed. Just isn’t the case. (Don’t believe me? Go find the evidence for innovation based on faculty research depending on any of these elements of the standard technology transfer “process.” I worked within that environment for over 15 years. No evidence that the process is necessary or even advantageous for innovation. Other things, perhaps. The process, no.)

Many of the reasons for universities to be involved in patent licensing are gone. Early university patenting in biomedical areas was done to control quality and protect the public from false advertising. Those functions are now controlled by federal regulation. Patent licensing to raise money for research not tainted by federal politics–the big thing in the early 1960s–is now moot, as federal funding has swamped out all other forms of university research funding in most universities. There’s plenty of money for research, but for the huge number of people chasing it in preference to any other source of research support. And even patenting to publish new technology through the patent literature is largely useless–patent applications are constructed not to teach an invention but to claim it and are largely unreadable as instruction–they are decipherable by those that would already be in a position to know, and otherwise by attorneys arguing over scope and validity. We don’t much read patents to learn anything except whether we can patent or break a patent.

Even if at one time there was some reason for patenting to lead people to publish rather than hold as a trade secret or die indifferent to whether others learned something new, that’s never been much of a reason for university personnel. They publish and teach anyway–it is what they do. In a sense, the roles are reversed. The indifferent let the university take ownership of inventions and publish through the patent literature, and those that care refuse to participate, either because they wish to avoid the needlessness of the patent system and university administrator involvement or because they care more about their work than any university administrator ever could and they choose to control how their work is owned and deployed and property rights managed. The standard process of university technology transfer wishes us to infer the indifference and incapacity of university faculty and students. It is another political bluff, but one that also damages individuals and their opportunities, even if in petty ways.

For all the fuss, then, we might argue that life goes on, despite university officials and their fantasy bluster about the technology transfer process. If we were to get complacent at this level, we would also become something of the form of happy patsies–life goes on despite bureaucratic nonsense. But there’s something else, too, in which societies taken up by what Matt Ridley calls the Moloch state and Jane Jacobs calls monstrous hybrids and Friedrich Hayek calls the road to serfdom wind down into awfulness. If things do become what we make of our opportunities, then it is important that we unwind the university fantasy depictions of technology transfer. Bayh-Dole is not directly at fault for these fantasies–though it enables them when it shouldn’t were it enforced–no, these fantasies come from another source, a failure of character, a lack of confidence, an inability to deal with unique opportunities, a desire for control, simple happy greed, a naive belief that if an organization is a nonprofit then anything it does to advance its own interest must be in the public interest.

Repealing Bayh-Dole, however, would expose how university administrators and their technology transfer process have suppressed freedom of research and publication, have tied up research discoveries and inventions, and have aligned themselves with biomedical speculators rather than, say, people suffering from disease. People with diseases are just another abstract excuse to try to make money–and a darned good excuse at that, if money is what one wants most, and the way to get it is to sell others on the idea that a patented cure is just around the corner. There is no going back once people have had a taste of the gin. We would also have to repeal Reagan’s Executive Order 12591, which imposed Bayh-Dole practice as matter of executive authority on all federal agencies regardless of the contractor.

But repealing Bayh-Dole would not end the awfulness of university technology transfer policy and practice. We would have to force federally funded work outside such policy and practice. Traditionally, such things are done by a form of “bill of rights” or through protections on markets from such now obscure practices as regrating and forestalling and engrossing. And even that would not disrupt the patent pipeline from federal funding to pharmaceutical companies. For that, we would need to do something quite different, such as remove as patentable subject matter claims on compounds and devices and methods for use in human health, or to remove remedies for patent infringement for such things–the very things that 35 USC 287(c) carves out, presently, as exceptions, so that the “life sciences” industry can exploit patent monopolies on things that would alleviate suffering while working to prevent those things from being used or developed through any other means. Here’s 35 USC 287(c)’s basic statement:

With respect to a medical practitioner’s performance of a medical activity that constitutes an infringement under section 271(a)or (b), the provisions of sections 281 [civil action for infringement], 283 [right to obtain injunctions], 284 [right to damages], and 285 [right to attorney’s fees] shall not apply against the medical practitioner or against a related health care entity with respect to such medical activity.

This provision sounds good until one gets to the definitions and exclusions:

For the purposes of this subsection:

(A) the term “medical activity” means the performance of a medical or surgical procedure on a body, but shall not include (i) the use of a patented machine, manufacture, or composition of matter in violation of such patent, (ii) the practice of a patented use of a composition of matter in violation of such patent, or (iii) the practice of a process in violation of a biotechnology patent.

In other words, there aren’t any remedies for patent infringement for medical activities unless those medical activities infringe patents. Sigh. The devil is not only in the details.

More:

This subsection does not apply to the activities of any person, or employee or agent of such person (regardless of whether such person is a tax exempt organization under section 501(c) of the Internal Revenue Code), who is engaged in the commercial development, manufacture, sale, importation, or distribution of a machine, manufacture, or composition of matter or the provision of pharmacy or clinical laboratory services (other than clinical laboratory services provided in a physician’s office), where such activities are:

(A) directly related to the commercial development, manufacture, sale, importation, or distribution of a machine, manufacture, or composition of matter or the provision of pharmacy or clinical laboratory services (other than clinical laboratory services provided in a physician’s office), and

(B) regulated under the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act, or the Clinical Laboratories Improvement Act.

So if one works at a university and the university aims to “commercialize” medical inventions, then the university, by engaging in such “commercial development” (such as conducting clinical trials) brings itself and its medical practitioners within scope of the exclusion–and so exposes them and the university’s use–to a claim of patent infringement.

Bayh-Dole is a well defended fortress of political bluster. It is awful in its way–full of clever tricks to appear in the public interest and baked-in weaknesses to prevent anyone from ever enforcing its provisions in the public interest. But that awfulness is nothing compared to the awfulness of life forced to appear to imitate the art of university standard technology transfer process. Either we disable patent rights in biomedical inventions made with federal support–a return to the Public Health Service policy of the 1950s and 60s without the circumvention of NIH’s IPA program–or we disable the remedies for patent infringement in biomedical inventions generally. Whatever commercial exclusive position there might be would then arise from regulatory clearances rather than from patent exclusion.

Dean Baker, an economist, makes the observation that the federal government could in effect nationalize the development of medicines and as a society we would be hundreds of billions of dollars per year ahead. We could fully fund all the research and development now paid for by the biomedical industry, bring new medicines to the point of practical application, and then allow anyone who so chooses to make and sell those new medicines at whatever profit they might secure, and we would be ahead by hundreds of billions of dollars a year. Yes, speculators might leave biomedical inventions and university administrators would stop trying to do deals with them–but we wouldn’t care, would we?

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Fantasy depictions of technology transfer, 2

The standard accounts of the “technology transfer process” seem so clear and plausible that you may well believe they are generally accurate, even if there might be “technical details” that they gloss over. But these standard accounts are largely, almost entirely counterfactual. You might rationalize that they propose a golden world–how the policy ought to work, if everyone would just get on board and make the policy work. People should be forced if necessary to follow the process and then, surely, the process will work as claimed.

You might think perhaps that the standard accounts are more like aspirations, or prophecies–as some university officials testifying before Congressional committees in the 1970s implied–that while universities were not doing all that well with their patent licensing efforts, given time and money enough, they would improve and then the process would work as claimed. We are half a century into this time and money and things have gotten worse, not better. It’s just that to know things are worse, one has to work in the business because universities don’t publicly report the worse things and the federal government keeps the worse things secret.

But actually, the standard accounts of university technology transfer–the idea of using patent monopolies to attract speculative investment in the absence of any other investment and even when no investment whatsoever is required–is political bluffery, now placed in the hands of people full of sincerity. They don’t know anything else, cannot imagine anything else, or if they could imagine anything else they have no urge to try it. Continue reading

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Fantasy depictions of technology transfer

People play innovation policy with stick drawings. Inventions are depicted as proto-products rather than as broad swaths of potential. Patents “protect” inventions from competing use that would discourage private purchase and speculation. A patent is depicted as merely excluding competing “free-rider” products rather than as excluding hundreds to thousands of compounds or methods or functional equivalents. Patenting is thought of as a single event in time, not a series of filings and continuations and continuations in part and divisionals taking place over five, ten years, plus multiple additional patent applications on variations and applications. And the activity of patenting to protect inventions and discoveries is put forward as if only a single organization with a single discovery at the start of time is involved. Nothing has come before. Nothing is happening elsewhere in the present. Nothing but unfair competitors to be excluded in the future. It’s a fantasy world drawn for policy-makers who have no conception of practice or who are willing to have their thinking purchased by vested interests.

Look at the depictions of the “technology transfer process” at most any university licensing office web site. They show just this stick drawing fantasy. They imagine that by a uniform administrative process they can create an engine of innovation that through owning, patenting, and exclusive licensing will create beneficial new products that otherwise would never be developed.

Here. Look. Boise State:

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On reasonable terms

Here is the definition of  to the point of practical application in the Federal Procurement Regulations, finalized in 1975, just five years before Bayh-Dole (41 CFR 1-9.107-5(a)(5)):

“To the point of practical application” means to manufacture in the case of a composition or product, to practice in the case of a process, or to operate in the case of a machine and under such conditions as to establish that the invention is being worked and that its benefits are reasonably accessible to the public.

Here is Bayh-Dole, 1980 (35 USC 201(f)):

The term “practical application” means to manufacture in the case of a composition or product, to practice in the case of a process or method, or to operate in the case of a machine or system; and, in each case, under such conditions as to establish that the invention is being utilized and that its benefits are to the extent permitted by law or Government regulations available to the public on reasonable terms.

Norman Latker, patent counsel at the NIH, was involved in drafting both the FPR codification of the Nixon patent policy–quoted above–and Bayh-Dole. In the FPR, a case might be made that “reasonably accessible” does not include price–it might be considered a matter of availability in sufficient quantity, for instance. But “reasonable terms” is without doubt concerned with price. When one considers “terms” in any sales situation, price is almost always central.

Why did Latker change “reasonably accessible” to “reasonable terms”? Surely there was some intent there. But does it matter? No, not really. Other than perhaps Latker was too clever and screwed up here as he did elsewhere. Continue reading

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The FPR criteria for invention ownership–2

We are talking the proposed goals for federal policy on the disposition of inventions made in projects worthy of federal support, circa 1973, by way of a Department of Commerce committee report. The report recommended as goals for deciding ownership objective criteria, expeditious development of inventions made with federal support to the point of practical application, and maintaining the availability of such developed inventions for public use and benefit.

Let’s pause and build a concrete analogy to help our imagination of the role of any public interest apparatus–including march-in–attached to a policy regarding the non-federal ownership of inventions made with federal support.

In the simplistic terms of the monopoly meme, we might put things this way. Publicly funded research envisions a bridge across a river. If just anyone could build such a bridge, then we might get ten different groups building bridges in competition, but only one bridge is really needed. So there is a great deal of wasted effort. Furthermore, it may be that only one bridge can be properly maintained, and the other bridges even if completed will not be used, will fail. Now most bright people can see this, so no one will build any bridge at all with private money unless they are assured that there won’t be any other bridges built for twenty years.  That’s the shape of the argument, at least. Continue reading

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