Re-reading an article today that argues for an “implied duty to commercialize” under Bayh-Dole. This all gets me grumpy because it reinforces a simplistic equivalence in understanding the law: that “commercialization” is the primary goal. And by “commercialization” is meant, essentially, making products and selling them, based on patent rights. It’s the classic thing, using patent rights to hold off eager, opportunistic competitors to thereby recover one’s substantial investment in making product. The bigger point, often not discussed, is the effect of making “product” out of a substrate of technology that otherwise might form “platform” or “standard” or “local practice.”
Bayh-Dole has no implied duty to commercialize. Bayh-Dole has an express duty to promote use of inventions, if one claims title to them. There’s no nudge-nudge that this has to mean “commercialize”. Commercialization, however, is one way to meet the objectives of the law. We can hit on the definition of “practical application” in the law in a minute. But first, here is a cascade of use that might be of some help.
This diagram maps out the geography of various ways of using inventions and patent rights. Obviously, if one holds a patent right, one can exclude use of all sorts, for whatever reason one wishes. But a patent right under Bayh-Dole is something else, since it carries with it obligations imposed by the law, and not just the general premise that patents are a means to promote the progress of the useful arts. In particular, note that research and internal uses of various sorts do not depend on the existence of patent rights. If something is useful, and folks have the capability to implement that use, or study it, they will. The patent right adds nothing to the motivation. Of course, economic concerns–money and risk–still play a role, and a patent might add something to that discussion, for good or ill.
As we move down the cascade, however, we see a shift from use of the invention to use of the patent right, until, at the bottom, in the deepest pit of patenting, we see the use of the patent right without reference to one’s own use, and opposed to the use by others, but for, perhaps, payment. This is perfectly well formed business of capturing value from a legally entitled position, but how far afield is it from the public objective of Bayh-Dole?
We can summarize the objectives of Bayh-Dole from 35 USC 200: “use the patent system to promote the utilization of inventions arising from federally supported research.” That’s the major bit of it. A number of additional things come along for the ride, but they all depend on this piece of action involving patents. As we can see, patents are to be used to promote the use of inventions. That’s the connection between the intellectual property right–a legal position, if you will–and the invention–a technology position. Among the various objectives, we find this: “to promote the commercialization and public availability of inventions made in the United States by United States industry and labor”. That’s one thing among ten or so objectives, along with promoting collaboration and promoting free competition and avoiding badness to research and development. How then does commercialization come to dominate nearly all university practice under Bayh-Dole?
Let’s look at some features of Bayh-Dole for the use of inventions. For this, we move over to 35 USC 201(f) for the definition of “practical application” (also at 37 CFR 401.2(e), with a typo of “of” for “or”, and in the standard patent rights clause at 37 CFR 401.14(a)(a)(3)):
(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.
We might note that the definition is directed at the invention, not the patent. It is the invention that is practically applied. We might note also that commercial sale of product does not come up, nor the generation of licensing revenue. That is, we use the patent system to promote the stuff listed in “practical application”. That’s the objective. What we get out of the deal by way of income arises as a consequence of this promotion of invention to practical application.
If we work through the standard patent clause at 37 CFR 401.14(a), we find at (h) that a contractor electing title is to report on “utilization” of inventions, providing status of development, date of first commercial sale or use, and royalties received. In the march-in rights at (j) we find a host of things an agency may require a contractor to do by way of licensing if the contractor hasn’t done enough to achieve “practical application” of the subject invention. At (k)(4) we find the requirement that the contractor will “make efforts that are reasonable under the circumstances to attract licensees of subject invention that are small business firms….” These passages indicate some of the ways in which a contractor might use the patent system to promote the use of federally supported inventions. We don’t find, however, a requirement for commercialization, but instead a focus on utilization or practical application, so that the benefits (not products, necessarily) of this use are available to the public.
The emphasis on commercialization may reflect a deep desire by folks who like to see money squeezed from juicy patents, but it’s not the primary objective of the Act. It’s clear from the history of things that the law was intended to hand universities (and other non-profit government contractors) an ownership position in patents, and licensing is the way one deploys patents if practical application is going extend beyond one’s own organization.
Thus, we are back to the cascade of use. Commercialization shows up as one effort among others. Building university collaborations with industry, though, might show up as research or internal uses, creating standards or testbeds and the like, without any commercial product necessary to achieve practical application. Licensing in such settings might not involve royalties but rather other forms of consideration, such as access to facilities, exchange of tacit knowledge, partnering on new research proposals. Those would appear to be good things, too. But universities don’t report on that kind of stuff, at least not in the systematic way they report on patents and licensing income. One might observe, the aim of reporting is to track utilization of inventions, but the universities end up reporting metrics that track exploitation of patents. This is perhaps a convenient conflation. A patent and an invention–same thing.
The law, however, asks universities to use the one to promote the other. It’s too easy to skip over that and go for the money, which moves one way down the cascade of use. Once a program is optimized to work deep in the patent exploitation world, it is darned hard to get back to anything else. That’s where the US university technology transfer has been built out, however. That’s what the IP policy statements assume: that it’s about patents and making money, with the big interest how to divide the spoils prospectively between inventors and administrators. Left out of the mix are the investigators, other research organizations, and the public.
But more so, what’s left out is a focus on the use of inventions in research, for internal purposes, to build common technology infrastructure. Those parts don’t need commercialization, and aren’t advanced by starting venture backed companies that may not develop the inventions covered by the patents they license in. And certainly, by the time a university finds companies off using inventions without holding a patent license, there’s a bit of a moral dilemma as to whether to declare success in meeting the objectives of Bayh-Dole (there’s the practical application), or show up as a threat to shut the use down unless payment is made (there’s the patent coming into the deal late, not to promote use, but to ride it for payment). It may be, that’s what folks do when they have patents. But it’s not the purpose of the law. For that, perhaps, the bit in Circular A-110 __.37 about acting as a trustee with regard to intangible assets (including patents) acquired by the university in the course of conducting research ought to have more impact in discussions of how university licensing of patents should be conducted.