Illusions of Bayh-Dole: “manufactured substantially” 5

Bayh-Dole’s statement of policy at 35 USC 200 includes a provision calling for the use of the patent system “to promote the commercialization and public availability of inventions made in the United States by United States industry and labor.” Folks often misread this requirement as if it states that Bayh-Dole mandates commercialization–it does not. Rather, this provision focuses on the making inventions in the United States by United States industry and labor, regardless of whether those inventions are commercialized or are made publicly available. Note–not making of inventions in the United States by foreign industry, or making of inventions in the United States with foreign labor.

Bayh-Dole’s statement of policy at 35 USC 200 stands on its own. The rest of the statute provides guidance for specific situations–when a contractor licenses exclusively in certain situations, when the federal government licenses, and when the federal government permits a federal employee to own an invention. We have worked through Section 204 in detail in previous installments. Now let’s consider the federal side of Bayh-Dole’s use of the patent system to promote United States industry and labor.

First, a refresh. Section 204 of the Bayh-Dole Act positions itself as the most important part of the law. Section 204 requires that owners of subject inventions must, in exclusive licenses to use or to sell, have licensees agree to source product based on the invention “manufactured substantially” in the United States. The requirement is a weak one–it applies only to exclusive licenses in the United States, not to a patent owner’s own exploitation of a subject invention. The requirement is further weakened because it authorizes federal agencies to grant waivers to the requirement. The requirement is weakened further still because the requirement is placed in the standard patent rights clause, federal agencies are given authority over the standard patent rights clause, and federal agencies have no obligation to enforce the standard patent rights clause. Thus, Section 204 is mostly administrative fluster. Continue reading

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Wipe Bayh-Dole off the books

When Congress passed Bayh-Dole, they made a giant turd. There is pretty much nothing that someone can say about Bayh-Dole that is positive, true, and substantiated. Bayh-Dole needs to be, ahem, wiped off the books. Between the IPA program and Bayh-Dole, we have had fifty years of failed federal patent policy. Can’t we have had enough already?

Bayh-Dole does not work.

The IPA approach it is based on didn’t work and was shut down as ineffective and contrary to public purposes. Universities, foundations, and institutes now hold over 120,000 US utility patents, 50,000 of which recite federal funding. Most of these inventions are unavailable behind patent paywalls, and of those inventions that have been licensed, most have not resulted in commercial products. Bayh-Dole simply does not do what has been claimed it will do. What little does become commercial product mostly does so despite Bayh-Dole.

No one complies with Bayh-Dole. 

Universities and federal agencies alike ignore Bayh-Dole’s substantive provisions and refuse to comply with the standard patent rights clause. Federal agencies refuse to enforce the standard patent rights clause and refuse to act on the federal government’s rights. Bayh-Dole’s public protections, such as march-in, are just for show. Bayh-Dole gets away with this because the law delegates to the federal agencies the enforcement of the patent rights clause but doesn’t require federal agencies to enforce anything. Bayh-Dole provides no enforcement for the law itself nor meaningful penalties for non-compliance. Advocates of Bayh-Dole call universities the “stewards” of the law. Foxes to guard the hens. Super crappy. Continue reading

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28,000 federal patents and the monopoly meme went into a bar, 3

Howard Forman, a long-time patent attorney in the chemical industry turned federal employee, introduced the 28,000 unused federal patents meme into Bayh-Dole rhetoric in his congressional testimony in 1976. Senator Bayh includes Forman’s meme in his introduction of S. 414, which eventually, ahem, is passed and becomes Bayh-Dole.

Bayh has argued that the monopoly meme controls the use of federally supported inventions. If a company has no patent monopoly, then it won’t invest to develop any invention, no matter how useful the invention might be. According to the monopoly meme, inventions available to all will be used by none. Bayh exploits the monopoly  meme to argue that, necessarily, if the federal government makes inventions available to all, they aren’t used and the public fails to see a “return” on the federal government’s research expenditures. History shows Bayh was wrong, but no matter. The essence of Bayh’s use of the monopoly meme is that any invention made with federal support must end up as a patent monopoly in the hands of a company.

But Bayh does not propose simply changing federal patent law to vest ownership of patentable inventions with companies. There’s problems with that. What happens when the federal government funds research at a university? Bayh wants faculty inventors stripped of their rights–he makes that clear in his amicus brief in Stanford v Roche many years later. But who should choose which company should receive the patent monopoly franchise? That’s the pivot point for Bayh-Dole–contractors, not the federal government–should have the first right to choose their favorite company.  Continue reading

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28,000 federal patents and the monopoly meme went into a bar, 2

Howard Forman’s 1976 testimony is where the 28,000 patents meme enters what will become the Bayh-Dole rhetoric. Senator Bayh uses Forman’s meme when he introduces S. 414 in 1979:

When the Government decides to retain patent rights on these inventions there is a very great chance that they will never be developed. Of the 30,000 patents that the Government presently holds, less than 4 percent are ever successfully licensed.

By 1979, Forman’s 26,000 patents that he recited as 28,000 patents has become 30,000 patents. (And, yes, the federal government did acquire about 4,500 new patents from 1976 through 1978–so apparently Bayh used Forman’s written statement figure of 26,000 patents. Anyone using the 28,000 patents figure is clearly being irresponsible with the facts). Bayh combines two elements that aren’t connected:

(1) There is a great chance that an invention will never get developed.

(2) The government acquires a patent right in any invention.

Element (1) is on average generally true. Estimates of patented invention use run about 5%. The question, then, becomes one of whether government ownership of an invention changes the likelihood of use. But even then, we are talking about averages–and averages throw out much of the structure of the data. We might find that government ownership is essential for the use of some inventions and adverse to the use of others. We might find, furthermore, that it is not ownership that matters, but what the owner does with the rights of ownership. We might find, then, that the government obtaining a patent works against use, or facilitates use. We might find that a mere patent right made available to all attracts use. And in other cases we might find that a patent right made available to all inhibits use. But in this last case, we might pause to wonder who it is that might be attracted, and who is inhibited. Continue reading

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28,000 federal patents and the monopoly meme went into a bar, 1

Here’s an important–perhaps the pivotal–instance of the monopoly meme in the history of what will become the Bayh-Dole Act. Synopsis. Howard Forman introduces the meme of 28,000 unused federal patents in his legislative testimony in 1976. Senator Bayh repeats the claim introducing Bayh-Dole in 1979. Admiral Rickover dismantles the logic of both, but somehow the patent lobby prevails and we get the turd called Bayh-Dole, created out of fake history, unsubstantiated assertions, and fallacious reasoning. Cross the 28,000 patent claim with the monopoly meme, and Bayh-Dole results.

The point of working through Forman, Bayh, and Rickover is not just to point out the flaws of their arguments but to establish a framework for considering how federal research invention policy might be constructed–and in particular that bit of research invention policy directed at research on scientific frontiers and research addressing public health. At least, here, we might begin to see stuff we can rule out.

In 1976 Howard Forman testified before a Senate subcommittee on the need for a “uniform” government patent policy. Forman was a long-time patent attorney who helped shape both the Kennedy and Nixon executive branch patent policies. Norman Latker, J. Tenny Johnson, and Forman appear to be the government attorneys who lay the policy groundwork for Bayh-Dole’s great misadventure.

In his testimony in 1976, Forman introduces the 28,000 government patents meme into the discussion of federal patent policy. The 28,000 figure is actually a misstatement in his oral presentation. His written statement gives the figure 26,000.

Continue reading

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Bayh-Dole the Giant Turd

Howard Forman, a patent attorney, introduced the claim that the federal government had 26,000 unused patents in his testimony before a House subcommittee in 1976, and that the reason for the nonuse was that the government made the inventions available to all and therefore suppressed the patents. (Forman misquoted his own written statement and inflated the number t0 28,000, which is the figure repeated by most anyone wishing to bluff about Bayh-Dole.)

The Senate Judiciary Committee report on S. 414 (which eventually became Bayh-Dole) cites the 28,000 patent claim as evidence that the federal government, by providing open access to research inventions made with federal support, has failed to manage these inventions for commercialization, and thus foreign competitors gained access to federally supported research for their own nefarious technology development.

Where are we now? US universities, institutes, and foundations hold over 120,000 US utility patents acquired in the Bayh-Dole era, over 50,000 of which are marked as having had federal funding. And universities’ claims to ownership of inventions must exceed 300,000. Most of those patents are unlicensed and the inventions are not legally available for use. Of those patents that are licensed, most are licensed exclusively (often in violation of Bayh-Dole), and most of those that are licensed exclusively have not resulted in commercial products based on the license.  Continue reading

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Five easy ways to circumvent Bayh-Dole’s “manufactured substantially” requirement

Bayh-Dole makes American manufacture of product based on subject inventions the centerpiece of the law. Bayh-Dole’s statement of policy and objective calls out promotion of inventions “made in the United States by United States industry and labor” (35 USC 200). The section that expressly concerns American manufacture expressly takes precedence over all other parts of Bayh-Dole: “Notwithstanding any other provision of this chapter . . . .” (35 USC 204). When Senator Bayh introduced S. 414, which would eventually become Bayh-Dole, he led with claims about the decline in American technology and innovation, with S. 414 as the remedy.

One would think, then, that above all else, the point of Bayh-Dole would be to create more American manufactured products–new products–and new American industries based on making those products, and new jobs for American workers. If one wanted to create any metrics whatsoever, one would look for measures of these three things–new product manufactured in America based on subject inventions, new industries created by such new products made in America, and new manufacturing jobs in America directly related to such manufacturing. But we have nothing of the sort.

Most university administrators I know would rather circumvent the “manufactured substantially” in the United States requirement, the centerpiece of the law they so publicly adore, than they would work hard to find ways to have product based on their subject inventions manufactured in the United States.  Continue reading

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NSF’s circumvention of Bayh-Dole in cooperative research centers

Bayh-Dole positions the “preference” for United States industry as the most important provision of the law, asserting precedence over any other part of Bayh-Dole (see 35 USC 203). Bayh-Dole requires owners of subject inventions to require certain exclusive licensees to use American-made product. But Bayh-Dole’s provision turns out to be almost useless in practice, since it is limited to an odd licensing scenario–an exclusive license in the United States to use or to sell–and the requirement then doesn’t apply to owners of subject inventions directly, nor to non-exclusive licensing, nor to exclusive licenses outside the United States (so, no requirement to prefer to export US-made products). Even so, Bayh-Dole’s preference for United States industry figures in Bayh-Dole’s statement of policy and objective (35 USC 200):

to promote the commercialization and public availability of inventions made in the United States by United States industry and labor

And Senator Bayh in introducing S. 414 in the Senate made American technology leadership the cornerstone of his reasoning for why Bayh-Dole was needed. What’s the point of sponsoring inventions if those inventions are all exclusively licensed to foreign companies who then import their licensed products into the United States? How the heck does doing that advance American industry or technology leadership?

We might note, then, that when the NSF all but forces the universities hosting cooperative research centers to grant each industry member a non-exclusive license to any inventions that get made by the center, the NSF is also requiring universities to avoid the “manufactured substantially” requirement. Continue reading

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What the NIH says about Bayh-Dole, 3

Now we arrive at the source of the NIH’s conflation in its most recent “background” misrepresentation of Bayh-Dole. We are deep into the federally owned invention side of Bayh-Dole, section 209(a), in a list of the requirements that must be met before a federal agency can grant an exclusive license. It’s here that we start to find requirements that an exclusive licensee must commit to “pursue” practical application:

(3) the applicant makes a commitment to achieve practical application of the invention within a reasonable time, which time may be extended by the agency upon the applicant’s request and the applicant’s demonstration that the refusal of such extension would be unreasonable;

This is the bit in which an exclusive licensee must agree to achieve practical application–and within a “reasonable” time, whatever that is. In the Kennedy patent policy, it was three years from the date of patent issue. In the Latker-drafted NIH IPA program, circumventing the Kennedy patent policy, it was the shorter of three years from the date of first commercial sale or eight years from the date of the exclusive license, with a limited right of appeal by the patent owner. In the original version of the Latker-drafted Bayh-Dole, it was a limit only for nonprofit exclusive licenses to large companies and then the sooner of five years from the date of first first commercial sale or eight years from the date of the exclusive license, with the opportunity to extend the time of exclusivity on appeal by the invention owner. That provision was amended away three years after Bayh-Dole passed–before it could ever come into operation. On the federal side, “reasonable” is left indeterminate–whatever someone at the NIH, say, thinks is reasonable. Continue reading

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What the NIH says about Bayh-Dole, 2

We are working through the NIH’s most recent misrepresentation of the Bayh-Dole Act. In the first part of this effort, we looked at the NIH’s bungling of the basic premise of Bayh-Dole and the concept of practical application. Bayh-Dole’s first stated policy objective is the use of inventions. When a funding recipient gains ownership of an invention made in work supported with federal funding, Bayh-Dole then applies. Failure to achieve practical application is the standard upon which a federal agency may, but never has to, compel the owner of a subject invention to grant licenses on reasonable terms.

Now to untangle. Bayh-Dole deals not only with contractor owned inventions–subject inventions–but also with federally owned inventions, including those that the federal government obtains through the operation of Bayh-Dole when a contractor fails to disclose, or does not elect to retain title that the contractor already has gone to the bother to obtain, and the like. For federally owned inventions, Bayh-Dole authorizes federal agencies to grant licenses, including exclusive licenses and exclusive licenses that are in fact assignments, 35 USC 207:

grant nonexclusive, exclusive, or partially exclusive licenses under federally owned inventions, royalty-free or for royalties or other consideration, and on such terms and conditions, including the grant to the licensee of the right of enforcement pursuant to the provisions of chapter 29 as determined appropriate in the public interest;

The implementing regulations for sections 207 and 209 make it clear that federal policy for federally owned inventions is utilization:

It is the policy and objective of this subpart to use the patent system to promote the utilization of inventions arising from federally supported research or development.

Skip all that stuff in Bayh-Dole 35 USC 200 about free competition and enterprise, for instance. Yes, Bayh-Dole still references that stuff (35 USC 209(a)(4), (b), and (c)), but the CFR treats these like an afterthought, not as the fulfillment of a broad statutory policy.

An exclusive license that conveys the right of enforcement means that the invention has been assigned–the owner of an invention has the right of enforcement. That’s pretty well established in the courts. Bayh-Dole then slips in that federal agencies have the right to assign inventions–but cannot actually use the term “assign” and so we get exclusive license with right to enforce–which amounts to the same thing. See–section 207 is directed to federally owned inventions–not to federally owned patents, and not to subject inventions. Continue reading

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