WARF, Vitamin D, and the Public Interest, 2

Posted on October 4, 2018 by Gerald Barnett

We have worked through a 1945 appeals court reasoning about the University of Wisconsin’s president’s refusal to allow the licensing of an invention beneficial to public health for use in food products that might compete with State of Wisconsin dairy products. The court found that the opportunity to bolster the state’s dairy industry and make money for the university is outweighed by the public interest in having broad access to the invention.

The court finds the patents are invalid–and these are the anchor patents with which WARF was started–but along the way constructs an argument that the University of Wisconsin’s president has acted against the public interest by refusing to direct WARF to license the inventions for use in all food. Dairy industry profits–even to the extent that these profits provide a benefit to dairy owners and dairy workers–don’t outweigh the public interest in having access to inventions that treat or prevent disease. That is, the benefit of the invention takes precedence over a benefit of exploiting a monopoly on the invention that excludes public access.

Now consider the situation we have with Bayh-Dole. Public university administrators insist that they must own inventions made by personnel at their institutions. When a university takes ownership of an invention made in a project receiving federal support, the invention becomes a “subject” invention and Bayh-Dole preempts any requirements of ownership that may otherwise be made by any other law (but for Stevenson-Wydler and any later law that recites Bayh-Dole). Bayh-Dole substitutes instead its own public covenant that constrains the patent property rights for owners of subject inventions. It’s just that nearly all of this public covenant is wrapped up in a standard patent rights clause–a part of a federal contract–and delegated to the federal agency that provided the research funding to waive, enforce, ignore, or otherwise not act upon.

But the federal enforcement of the standard patent rights clause is not the only basis for enforcing Bayh-Dole–there’s also Bayh-Dole’s statement of policy at 35 USC 200, and that statement does more than just recite the Congressional intent for Bayh-Dole–it also provides the statutory policy that constrains patent property rights. Bayh-Dole is after all part of federal patent law, and 35 USC 200 states the scope of patent property rights for inventions made in projects receiving federal support, regardless of who might own the patent rights, regardless of whether an invention becomes a subject invention or is owned by the federal government. That portion of the law is not delegated to federal agencies for enforcement, or even to the Department of Commerce–that’s for the Attorney General.

There’s more. Federal patent law is not the only law applicable to the actions of university presidents in the deployment of inventions. Universities are also subject to their charters, the declarations by which they obtain non-profit standing, and in the case of public universities, laws pertaining to the proper conduct of instruments of state government. There’s no law that provides that when a university president has control of a patent, the university may do anything it wants, just as any private owner of a patent might do. The outer constraint is not antitrust law. The outer constraint is the law of public interest.

In this, the monopoly meme has no life. Continue reading →

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WARF, Vitamin D, and the Public Interest, 1

Posted on October 3, 2018 by Gerald Barnett

In the 1940s, WARF was basking in the income from licensing its flagship patents–on a way to irradiate food products to produce in them vitamin D. (For an interesting account with lots of details, see Rima D. Apple (a University of Wisconsin historian who mostly ignores the lawsuit discussed  here and provides a soothing alternative explanation that Steenbock had decided on his ownsome to grant licenses for margarine) “Patenting University Research: Harry Steenbock and the Wisconsin Alumni Research Foundation.”  The University of Wisconsin had introduced the concept of “vitamins” into the popular imagination, and vitamin D was one of the elixir compounds that prevented a “vitamin deficiency disease”–rickets. But things weren’t quite right. WARF refused to license its patents for introducing vitamin D into margarine. A company, Vitamin Technologists, sued, and the case ended up as a matter of antitrust, with WARF losing on appeal in 1945.

In essence, Vitamin Technologists used a form of “march-in” to break the monopoly of a patent that was not being licensed in the public interest. The court decision is worth the read. The decision gets even more interesting if we consider what Bayh-Dole is up to with its version of “march-in” (35 USC 203), preemption of all other federal statutes but for Stevenson-Wydler (35 USC 210), and disclaimer with regard to antitrust (35 USC 211). Keep firmly in mind that Howard Bremer from WARF worked closely with Norman Latker at the NIH first on the IPA program–the University of Wisconsin got the first revived IPA deal in 1968–and then to draft Bayh-Dole and its implementing regulations. Bremer more than anything would be mindful of what happened to WARF in 1945 (and again in 1965, with 5-FU). This is not some random bounce through a law case. We are at ground zero for the revenge of WARF via Bayh-Dole on federal agency action to promote the public interest with regard to inventions made in federally funded research. Continue reading →

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Shaping Science

Posted on September 28, 2018 by Gerald Barnett

A short version of a Research Enterprise article on Daniel Sarewitz’s “Saving Science” is posted as correspondence at The New Atlantis, where Sarewitz also responds to various comments on his paper. In part, Sarewitz gathers some of those comments into a quote attributed to scientist Michael Polanyi to the effect that science cannot be shaped. Sarewitz disagrees:

Yet the recent history of the complex U.S. science enterprise, which I sought in part to portray in my article, is a flat-out contradiction of Polanyi’s position: We consciously shaped science with the intent and result of capturing practical benefits.

It’s in this claim that I differ from Sarewitz. Where does Sarewitz get his “we”–how is it possible that he can make a general claim that we have “consciously shaped science” with any intent at all? What is this thing science, that can be shaped? Sarewitz asserts as a fact the thing we are debating. It’s not that science cannot be shaped–the question is whether dong science on the frontier operates so well if it is shaped by anyone other than those at the frontier. At the frontiers, I suggest, we don’t know the shape of science until people recognize what they are doing is science.

Sarewitz asserts that we shape science consciously to “capture practical benefits” and that if we substituted elite opinions about that shaping we would do a better conscious job not only of shaping science but also capturing practical benefits from science so shaped. For that, Sarewitz argues, scientists have to “get out of the lab” and “into the real world.” The real world, then, like the we, is a technical term that means roughly, “obeying someone else, an elite.”

By contrast, Vannevar Bush argues that at the frontiers of science, we need the free play of free intellects–not obeying anyone, but accountable for what they find and bring back for the rest of us. Bush’s argument is that John von Neumann or Richard Feynman does not do better science because he is made to obey an ex-general or a celebrity advocate or a tech billionaire or a government official. That’s Bush’s argument from experience. Sarewitz simply contradicts Bush. As Monty Python has it, contradiction is not a good argument. Bush argues that to expand the frontiers of science–that is, to learn to see new observables and provide for those observables new explanations for underlying physical principles, we cannot rely on managers to dictate the problems, the projects, the observations, the analysis, or the publication. Free play of free intellects is a decidedly anti-management argument about how we discover. It has nothing to do with we consciously shaping science to capture practical benefits. At the frontier, at the unknown, scientists must shape their science. We must not–cannot–do it for them.  Continue reading →

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The monopoly meme, 5

Posted on September 26, 2018 by Gerald Barnett

Now let’s turn to the Bayh-Dole Act and see how it works with the monopoly meme. Short form, if you don’t want to bother, is that Bayh-Dole doesn’t follow the monopoly meme in its gestures, but because these gestures never get used, in effect Bayh-Dole enables the monopoly meme. Here’s how.

The monopoly meme argues that the true purpose of the patent system is to enable the exploitation of patent monopolies–the right, for limited times, to exclude others from practicing an invention. Crucially, the monopoly meme argues that without such exclusion, new inventions will not be used, will not be developed, and the public will not benefit from them. If the public has to pay high prices for inventions for a period of time as a result, that is the price that must be paid. The alternative, according to the monopoly meme, is not to have any new products at all. This, then, is what university administrators mean by “commercialization.” If each invention made in university-hosted research and is not patented for the purpose of excluding all others in favor of a company willing to develop the invention into a commercial product–but only on the condition of exclusivity–then the public will not benefit from federally supported research. In this way, the monopoly meme insists that federal support of faculty research must necessarily be to create patent monopolies for companies. There’s no other point, then, to Bayh-Dole but to enable such monopolies, with their pricing and suppression of competition and suppression of research and professional use.

On the face of it, however, excluding others from practicing a university research-based invention runs counter to the public purpose of supporting research in which such inventions may be made. What’s the point, even, of publishing that research in the academic literature if the use of the results depends on the freedom to practice inventions, but that practice is nearly always excluded by a patent held by administrators looking for a single “commercialization” partner? An academic publication becomes a kind of propaganda, a nah-nah-nah about something new that’s been done that no one else can use. Perhaps the point of publishing research results that no one else can practice is so that others can quickly find ways to design around, obsolesce, undermine, block, fragment, and avoid using those research results. Otherwise, whatever the advocates assert is the “true” purpose of the patent system, in the area of research publication, the use of the patent system to exclude others from the immediate use of published research runs against pretty much everything we expect from university scholarship and the public role of the university.

All that aside, we might counter the “true purpose” of the patent system argument by pointing out that the express purpose of the patent system is to promote the progress of the useful arts–and “progress” here means “dissemination.” The grant of exclusive rights for limited times is the consideration for publishing what otherwise might remain unknown or held as a trade secret. Given that universities don’t generally hold trade secrets and university faculty gain much of their standing by publishing new results with priority, the right to exclude all others is a rather awkward right for university faculty and administrators to seek out or to be stimulated by.

The monopoly meme, however, argues that whatever the mores of the university might be, the creation of patent monopolies to stimulate profit-seeking is the primary public purpose that should displace all others–whenever an invention is owned by a federal contractor. Universities, the meme argues implicitly and many technology licensing officials argue openly, must change its mores. Porsches in the faculty parking lots should inspire other faculty to pursue inventions, desire the money that comes from patent licensing, and especially to temper these inspirations and desires to accept what a university’s technology licensing program might be able to deliver.  Continue reading →

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The monopoly meme, 4

Posted on September 25, 2018 by Gerald Barnett

We are nearing the end of examining Howard Bremer’s Senate subcommittee testimony from 1979 on a bill that was remarkably like Bayh-Dole. Bremer’s testimony is useful in helping us get at the rhetorical effect of the monopoly meme–that without a patent monopoly, no research-originated invention would ever be used or developed or benefit the public or something or anything like that.

Eight, that the less restrictive a Government patent policy is, the
greater is the transfer of technology under the policy;

Here Bremer gets interesting. What makes a patent policy “restrictive”? Is it that the government insists on owning inventions made with public funding? If so, then how is it possible that a university patent policy that demands ownership of inventions even when not made with *university* funding is less “restrictive”? No, that would be a *more* “restrictive” policy.

If Bremer were arguing that inventors should be free of all restrictions on their inventions made with federal support, that would be something. Then, at least on the terms he premises here, technology transfer would be the most engreatened, as it were. But Bremer argues for trading government “restriction” for university “restriction”–using the power of the government to enable it! The government “restriction” on ownership is “everyone has access, including the investigators, the inventors, collaborators, and others competing to get federal grants or industry funding.” The university “restriction” that Bremer argues for and casts as “free enterprise environment” is “the university owns and only one company may get access, otherwise the invention will not be developed and the public won’t benefit, and the only acceptable alternative, short of government march-in, is that no one gets access.” Continue reading →

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The monopoly meme, 3

Posted on September 24, 2018 by Gerald Barnett

We are working through Howard Bremer’s testimony before a Senate subcommittee with regard to a bill remarkably like what would become Bayh-Dole. The point is to explore how the monopoly meme works in practice. Bremer gives nine principles that ought to govern federal regulation of inventions made in federally supported research.

Bremer:

Four, that the absence of a uniform Government patent policy
has been a serious disincentive to successful technology transfer
from the university to the public and has, in fact, often deprived
the public of the fruits of basic research;

Bremer here insists that a “uniform” policy is lacking and that this lack has “often” deprived the public of the “fruits” of “basic research.” It’s a bizarre claim. First, as Bremer keenly knew, the NIH and NSF had operated the Institutional Patent Agreement program for a decade–the NIH revived the IPA program in 1968, the NSF joined later, and the program was shut down in 1978 as ineffective when Latker attempted to get the program endorsed government wide and was blocked by Congress asking telling questions. The IPA program, in turn, operated under the Kennedy (with later Nixon re-editing) executive branch patent policy. Just about any university or nonprofit that mattered was in the IPA program.

The Department of Defense allowed contractor ownership, following the Kennedy policy. Other agencies–the Department of the Interior, Department of Agriculture–showed substantial public benefits by taking ownership of inventions and developing them to the point that they could be released for commercial production–think new fertilizers and the like. For NASA and DOE, there were statutes that required the federal government to own inventions–the premise was that there was no commercial market for nuclear weapons and space ships, so leaving patent ownership with contractors just meant they could mess with each other in bidding on government contracts. And NASA and DOE had programs to review inventions and allow contractors to own, on a case-by-case basis–again, following the Kennedy patent policy. We could go on. Continue reading →

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The monopoly meme, 2

Posted on September 21, 2018 by Gerald Barnett

To get at the rhetorical workings of the monopoly meme, we are working our way through Howard Bremer’s testimony before a Senate subcommittee discussing S. 1215, an alternative bill to Bayh-Dole that was being considered after S. 414 had failed to pass.

To summarize: Bayh-Dole does not allocate or vest ownership of inventions–the Supreme Court was clear on that–but rather Bayh-Dole stipulates that obtaining ownership of such an invention is sufficient to render moot all other public purposes. The owner of a subject invention has the freedom to decide what to do, how to use the patent system–federal agencies, inventors, and the general public have no say in the matter. The monopoly meme does not show up in Bayh-Dole. Rather, the monopoly meme co-opts Bayh-Dole as a means to enable monopoly meme practices.

Even the public interest apparatus in Bayh-Dole appears to require practices that run against the monopoly meme. Sure, it’s clear that the patent system (patent monopoly) might be used to promote “utilization”–that’s just what the monopoly meme argues. According to the monopoly meme, there won’t be any use of an invention without first obtaining a patent monopoly to “protect” the invention–that is, to “protect” in the future a company’s investment in developing the invention for commercial use or as a commercial product. Without a substantial post-invention development cost, the monopoly meme falls apart. It’s in the interest of the monopoly meme, then, to find situations in which development costs are great compared to research costs or invention-making costs and then make these situations stand for the general case. It does not much matter whether development (to the extent that’s even needed) might take place for very little expense, or very little expense if done some other way–what matters is that those selected to consider development swear to the gods that development is, in general, really expensive. These are the folks the monopoly meme trots out to the public.

But what then do you make of Bayh-Dole’s policy requirements concerning using the patent system to promote free competition and enterprise? Or to maximize the participation of small businesses in federally supported development? Or how about that if a company hasn’t taken effective steps to achieve utilization of a given invention, the federal government could march-in and require the patent owner to grant non-exclusive licenses–wouldn’t those licenses absolutely destroy any chance that the invention would ever be used or developed? Wouldn’t the mere fact that one other company still had the right to use and develop the invention destroy the interest of any other company to take a non-exclusive license? Oh, wait, maybe a foreign company that has already developed the invention for use outside the United States might be willing to take a non-exclusive license to sell in the U.S. But then Bayh-Dole’s policy claim to bolster American global technology leadership has failed.  Continue reading →

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The monopoly meme, 1

Posted on September 20, 2018 by Gerald Barnett

There’s a meme that has floated around patent management discussions for decades. It goes something like this:

“What is available to all will be used by none.”

Here’s an instance from the National Patent Planning Commission report (c. 1945):

It often happens, however, particularly in new fields, that what is available for exploitation by everyone is undertaken by no one.

Variations include “What is available to all will be developed by none” and “Non-exclusive licensing is just a tax.” There’s never actual data to back up the claim–just the bare assertion, followed by other assertions that doesn’t hold up to any sort of scrutiny, such as it costs way more to “develop” an invention than it costs to pay for research in which inventions are made.

The meme insists that patent monopolies are a necessary pathway to all things good, especially things arising from scientific research. In a way, it is baffling. “That which is new, useful, and non-obvious won’t be used by anyone because others can also use it.” Huh? “A cure for cancer won’t be used unless only one company controls the rights to cure cancer.” Huh? “If there is free competition and enterprise with regard to something new and useful, then no one will develop it.” Huh?

Think about that last one. If no one would develop something available to all, then there wouldn’t be any competition once any one company began development. All the rest would slump their fictitious shoulders and slink away. One wouldn’t even need a patent monopoly at that point. If no one would develop something because someone else was already developing it, then all an inventor would need to do is be the first to develop. For that, trade secret would work as well as anything. Why publish an invention through the patent system for all to inspect when one could keep the invention secret and start development–since, according to the monopoly meme, no one else would ever develop something that was available to all (and thus, available to even one other company, such as the one the inventor creates or chooses). If the monopoly meme were generally true, all one would need would be trade secret and “first mover” status. No one would dare try to imitate. Doesn’t hold up to the laugh test.  Continue reading →

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Federally supported inventions and public trusts

Posted on September 19, 2018 by Gerald Barnett

In 1933, the Supreme Court considered a claim by the United States that two employees of the National Bureau of Standards must give up a patent they had obtained on improvements to radio technology (United States v Dubilier Condenser Corp). The United States claimed, among other things, that the invention should be held in trust on behalf of the public. The Court disagreed:

 It is claimed that, as the work of the Bureau, including all that Dunmore and Lowell did, was in the public interest, these public servants had dedicated the offspring of their brains to the public, and so held their patents in trust for the common weal, represented here in a corporate capacity by the United States. The patentees, we are told, should surrender the patents for cancellation, and the respondent must also give up its rights under the patents.

The trust cannot be express. Every fact in the case negatives the existence of one. Nor can it arise ex maleficio.

That was 1933. Now consider the present situation for federal grants. Here’s the first sentence of 2 CFR 200.316:

Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved.

“Intangible property” in turn is defined at 2 CFR 200.59 as

property having no physical existence, such as trademarks, copyrights, patents and patent applications and property, such as loans, notes and other debt instruments, lease agreements, stock and other instruments of property ownership (whether the property is tangible or intangible).

It would appear that the federal government has addressed the shortfall in its argument in Dubilier. There is, expressly, the expectation of a trust whenever a “non-federal entity” that has received a grant acquires or improves an invention “with a Federal award.” If a university then asserts ownership of an invention as a condition of a federal grant, or the use of resources made available for use in the performance of work supported by a federal grant, then the university acquires or improves the intangible property with the federal award. A property trust relationship is established.

Now, the question is whether Bayh-Dole preempts 2 CFR 200.316. Here’s Bayh-Dole, 35 USC 210:

This chapter shall take precedence over any other Act which would require a disposition of rights in subject inventions of small business firms or nonprofit organizations contractors in a manner that is inconsistent with this chapter . . .

And then a list of statutes, and then some walkback–the precedence applies only to contracts with nonprofits and small businesses, and does not apply to Stevenson-Wydler, among other things.

So, is a property trust relationship a “disposition of rights” “inconsistent with this chapter”–i.e., Chapter 18 of 35 USC–“Bayh-Dole”? Who can say?

One might argue that university appropriation of inventions made in work receiving federal support for the purpose of commercialization complies with the property trust requirement, and therefore the issue is moot for most everything. One might also argue that holding an invention in trust is entirely consistent with promoting free competition and enterprise. It would appear that there’s actually nothing in 2 CFR 200.316 that ends up altering what a university might do with a subject invention as a “trustee.” There’s an odd argument that it is in the interest of the beneficiaries of a project receiving federal funds that they pay a premium to obtain a commercial version of what was discovered or invented with federal funds–and that no other access to the discovery or invention is allowed. Such an outcome must be enforced on the public, so this argument goes, or there will not be money to repeat the process of making beneficiaries pay a premium for other discoveries or inventions.

According to this reasoning, university fulfills its role as trustee for beneficiaries of a project by working to ensure that beneficiaries must pay as much as they can bear to obtain the benefit of discoveries and inventions made in projects receiving federal support, and to that end, no one may have access for any other purpose to those discoveries and inventions: “Patients must pay as much as they can for new medicines because otherwise there won’t be the money available to universities as an incentive to repeat the process for other new medicines.”

Thus, even after the federal government addresses the “trust” problem, Bayh-Dole ends up preempting the trust requirement. And even if Bayh-Dole doesn’t preempt the trust requirement, it appears that the “trust” required by 2 CFR 200.316 applies only after a university has “acquired or improved” an invention, and then can be interpreted pretty much any way university administrators want to, so long as they cast their interpretation in terms of benefits for beneficiaries. It just happens that the greatest benefit for beneficiaries, in the university administrator’s mind’s eye, also happens to be one that offers the greatest financial return to the university.

 

 

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Undisclosed subject inventions made in development and commercialization contracts

Posted on September 18, 2018 by Gerald Barnett

A note on subject inventions not disclosed under Bayh-Dole–and a place for auditors to romp and play as auditors are wont to do, if auditors were ever to romp and play with regard to anything consequential in Bayh-Dole. What follows then is a sort of fantasy because no one ever audits Bayh-Dole for anything consequential!

Under Bayh-Dole, any party to a federal “funding agreement” (a “contractor”) may extend at will the funding agreement to add additional parties to the funding agreement. See the definition of funding agreement at 35 USC 201(b).

New parties to a funding agreement may be added by “any assignment, substitution of parties, or subcontract of any type.” For instance, the (f)(2) agreement requirement in the standard patent rights clause in effect requires institutional contractors to make specified potential inventor employees parties to the funding agreement via the patent rights clause. More so, and expressly, Bayh-Dole requires assignees of nonprofit-owned subject inventions to accept the nonprofit patent rights clause–and therefore those assignees become parties to the funding agreement, and therefore contractors. See 35 USC 202(c)(7)(A).

An exclusive license to all substantial rights in an invention conveys ownership of the invention–is an assignment. There are a number of court decisions, some looking directly at university licensing practices. Most–almost all–university-granted exclusive licenses to inventions are assignments. That means that inventions made in development work by a company that has accepted assignment of a subject invention from a nonprofit, when those inventions are acquired by the company, are also subject inventions. Those inventions are just as “made under contract” or “made in performance of . . . work funded in whole or in part by the Federal government.”

How a contractor manages the scope of any federally supported project therefore has significant consequences for a determination of what work is “under contract.” A university contractor does not have to assign any subject invention to a company as part of “commercialization” efforts. That’s a university’s choice. And when it does assign, the company becomes another party to the funding agreement and any inventions made in the development work, when acquired by the company, have the same requirements as if they were made by the university itself. They are nonprofit subject inventions.  Continue reading →

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