At IP Watchdog, Eric Guttag is out with a piece on the effect of patent reform legislation on Bayh-Dole compliance. It’s an important topic, and Guttag raises some valuable points. But at the root of it, he is working with some problematic ideas about Bayh-Dole and university management of research inventions.
Guttag argues that “When enacted in 1982 [sic], the primary purpose of the Bayh-Dole Act was to encourage federally funded individuals, small businesses and universities to commercialize technologies created from that federally funded research.” The objectives of Bayh-Dole are laid out at 35 USC 200. Guttag is referring to the secret, fingers crossed version of the law. The objectives as stated at 35 USC 200 (I know, these aren’t really the objectives) are arranged under the head of using the patent system to promote the utilization of federally supported inventions. These are objectives for the agencies in their procurement procedures for inventions. Utilization is not commercialization, though commercialization is one avenue by which use may be accomplished. Commercialization even gets a mention in a list of a number of such avenues, along with things like collaboration with industry, which university patent administrations like to think means “capitulation to the reasonable terms of university patent administrators.”
The Act and the standard patent rights clause (SPRC) that the Act authorizes define “practical application” to include “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.” My emphasis. The definition at the central purpose of Bayh-Dole focuses on the benefits of inventions being available to the public, not the invention itself necessarily, not only commercialized products, and certainly not only commercialized products controlled by monopolists held to this approach by university contract.
Promoting use is the mandate presented to federal agencies in their funding agreements with universities (and others). This is a key part of federal innovation policy going back to Science The Endless Frontier.
Commercialization is not required under Bayh-Dole, not mandated, not preferred, not emphasized, not assumed, not secretly desired. Efforts to make money are anticipated, and in particular university efforts, for which the public gets extra special protections under the Act (see SPRC (k)) in addition to the more general march-in rights.
The purpose of these restrictions is to defend, in the absence of case-by-case agency oversight, against indifference and especially against trying to make money at the expense of innovation and research. The law does not read, if you can’t encourage use, at least make money. The law also does not read, “threaten to withhold rights unless people pay.” The law furthermore does not read, “sit on a lot of unlicensed invention rights to support hope-for valuations for a few inventions–ones that may not have yet been made, but could be, or not.” Nor does the law read, “demand royalties for each and every invention claimed.”
This is all made up stuff by university administrators and their advisors. It is the world they want to live in. It is what they are adamant they want and have advocated publicly for, even all the way to the Supreme Court. They were not just joking with us, saying offhand things for a reaction, or speaking loosely. It is all very deliberate, consistent over time, reflected now across training documents, summaries of the law, university IP policies, with some of the best minds in the tech transfer business behind it. It is their secret fingers-crossed system that AUTM defends and shouts down anyone who would question it, prod it, or think that things could be done better.
Human beings are remarkably adaptable. Even in dictatorial regimes, people find ways to make lives for themselves. The dictatorial regime can point to these small gestures and say, “See, the system works.” Of course, it is not the system that is working, but the human spirit in all its self-interested, even sentimental, attachment to personal desires and decisions over those provided by a system carefully planned by administrators. The essence of liberty.
The road to serfdom for inventors and investigators is paved by the carefully pointed rhetoric of administrators.
The point is: if there is one word that matters in Bayh-Dole, it is for agencies to promote use of inventions. The objectives in 35 USC 200 are directed at the agencies, with universities, industry, and the public given the benefit of reading along over the shoulder to see what federal innovation policy might expect of them by way of behaviors, should they choose to cooperate. The key word is not title, not patent, not commercialize, not royalty. Promote.
These other words are, however, the key words in the secret, fingers-crossed reading of the law (for the agencies) and the SPRC (for the universities). The administrators want to agree to a funding clause that requires them to take ownership of inventions from inventors and seek to commercialize–er, make money. But they also want the law not to provide for any accountability for not commercializing. No march-in has every succeeded. No audits for spending royalty income. No challenges to the credibility of reports of progress. No questions about the lack of substance in such reports.
If the law cannot vest title outright, it should at least strip inventors of any hope of doing anything personally with title (even blowing title). If they cannot get that result from the law, then they will deploy university requirements to do that–research policy, conflict of interest policy, delegation of authority policy, employment policy, conflict of commitment policy (yes, administrators think this is different from conflict of interest). Imagine: “It is unethical to publish the results of your research without complying with invention disclosure requirements which if followed would provide the university with the opportunity to make money from patent licensing. Don’t you see that you are harming the university, denying the public a return on its investment in your work? Don’t you *want* to make money with us? Isn’t that the culture change we *really need* in universities? What is wrong with you university inventors?! You are not greedy enough, and yet when you are, you are not docile enough to allow us to *represent your greed properly and within bounds to the public*.”
That’s the secret, fingers-crossed version of the law. This rhetoric is happening *every day* across America, led by the best, er most vocal, thinkers in AUTM. There is no vocal public opposition in AUTM to this position. It is an undebatable, necessary good.
This assumption of commercialization then colors the remainder of Guttag’s observations. There are two key areas. First, that if the purpose of the Act is commercialization, then universities have to obtain monopoly patent rights, and they have to deploy these monopoly rights to preserve an exclusive position. Second, that somehow it is federal policy to require ownership of every invention that might possibly be made in a research setting with federal funds.
Let’s take these one at a time. Commercialization does not have to require monopoly positions. Investment does not require in all, or even many, cases that the research contribution is a monopoly position, or if it is a monopoly position it is preferentially held by institutional administrators. It is true, there are instances of investment preferring institutional monopoly positions, but they are rare and do not make for a general induction on how commercialization takes place. The internet and world wide web, for instance, did not require monopoly patent positions. And the inventions that founded these innovations were commercialized, if one can call it that, without becoming products sold to anyone. They became standards, platforms, on which huge economic activity has been built.
What patent reform is doing is changing the concept of invention from the absolute first to invent to that inventor who first makes application for an invention. There have been some good discussions about whether invention meant, at the time of the drafting of the Constitution, and later with the first patent law, absolute first to invent. Apparently not. That’s okay.
This change has profound effects for research. It means that if researcher A is working in an area and invents various tools and has various discoveries but is working to validate them before publishing, and researcher B at another institution invents some of the same stuff and races to the patent office with it, university B, if it obtains ownership of B’s invention, can block the further research of A, limit A’s interest to at best prior user standing, and go out and troll the rest of the research community under the guise of “commercialization” requiring monopoly rights and complaining that even the prior user rights held by A are a detriment to this effort, if not the *whole excuse* for not being able to *commercialize*–which reduces, clearly, to making money by selling rights to anyone willing to pay–speculators, trolls, gold diggers, hucksters. That’s a concern worth addressing–and there, the effect of withholding publication will be to expose a university (and all researchers) to any private claim made by a more aggressive patenting university, an MIT, say. To beat back this claim, once publication is suppressed, folks will have to file on everything, as quickly as possible. The result: universities will be competing with each other–even more overtly than now–to set up ways to prevent each other from practicing inventions made with federal funding.
The second thing to fall out of Guttag’s assumptions is that the government is bargaining in the SPRC for university administrators to get patent rights as often as they can. That somehow compliance with the SPRC means that university administrators have to obtain invention rights and deliver these to the government if they don’t elect to retain title themselves. But this also is not the case, except in the secret version of the law. In the actual version of the law, the government seeks an interest in those inventions “of the contractor”–that is, in inventions in which the contractor has a claim and the prospect of securing an ownership position. There is no penalty for inventions entering the public domain, in which case the government has what it wants–freedom to use–and the loss, if there is one, is only of a monopoly right, whether held privately or the by the government, to exclude others in order to promote practical application.
The real question is whether Bayh-Dole, as a law of federal procurement of inventions, requires agencies to demand the management of every invention, no matter how trivial or economically foolish or so difficult to develop that it will take longer than the twenty year term of a patent to do it, or so immediately attractive that people will invest and implement without the need for an incentive created by a monopoly position. The answer is no. There is no demand to manage every invention. The university may elect not to retain title. The federal agency may choose not to require title to be conveyed. Inventors may choose not to perfect the title they hold in inventions by seeking patents. Nothing in the law disturbs these choices. There is no mandate to anything other than the reporting of inventions. The Act could then be nothing more than making for uniform reporting requirements, if everyone were off the habit of patenting. Something other than the law motivates the urge to patent.
We can dispose of one more element of this, and that is that monopoly rights are necessary to the practical application of inventions. This also is not a mandate of Bayh-Dole. If there is a mandate, it is to use the patent system to promote use. Even though a patent bestows a monopoly interest, it does not mean that Bayh-Dole insists that this monopoly interest result in a monopoly. Yes, to make the benefits of an invention available to the public, one might seek to have the invention manufactured and included in products sold in the marketplace. But even this does not mean that the monopoly right has to result in a commercial monopoly. A right can be made available non-exclusively, can be made under a public license without the need for further contracting, and can be made at no charge, provided the licensee behaves in various ways (marking product with patent information, for instance).
In the secret, fingers-crossed version of Bayh-Dole, one asks, why would anyone do this? Meaning–we all know that public availability is not the real purpose of the Act; making money from investment in creating lucrative product is the real purpose–the purpose for which we intend to exploit the Act.
I don’t have problem with making money from inventions. Fine and dandy. But here’s the rub: when universities take ownership of inventions, and then cite Bayh-Dole to say they have a *mandate* to exclude others and through this recruit business partners to make money, then there’s a problem with promoting the use of the invention versus promoting the exploitation of the patent. The former is technology transfer–teaching others to their advantage. The latter is arbitrage–buying low and selling high, who cares what happens next.
I do not see how Bayh-Dole is a law that mandates university arbitrage of inventions. It is not even clear that arbitrage makes it through the entire list of objectives in 35 USC 200, nor that if reported it would be regarded as progress toward utilization. Shifting rights for revenue is not within the definition of practical application in the Act.
But commentaries like Guttag’s are premised on exactly this, a notion of innovation that starts with monopoly arbitrage and then looks to the law for support for university actions to be more zealous in claiming inventions, preventing work from entering the public domain (no penalty in Bayh-Dole), preventing work from being jointly developed (no penalty in Bayh-Dole), and somehow seeing prior user rights as bad (when it could be that they are the prior users, when it comes down to it, and they discover they have been beaten to the patent office–but more so, that if the prior users are industry, then a lot of Bayh-Dole’s objective is already accomplished–that American industry is using the invention).
Federal funding of university research is not for the purpose of creating institutionally held monopoly rights. There is no mandate to hold these rights for money even if many would invest or practice without the incentive of a monopoly position. There is no mandate to interfere with the research activities of others, whether at universities, other nonprofits, or industry. Yet, in the secret other Bayh-Dole, it would appear that doing just that is the kind of “hardball” that is construed.
I don’t see that patent reform distrubs Bayh-Dole compliance much. I don’t see that the time limitations on disclosure, election of title, and filing of patent applications have anything to do with statutory bars. They don’t. The two months before a statutory bar does, of course, as does reporting publications post disclosure. These time limitations have to do with reasonable periods in which actions must be taken. If there’s first to file, then what is in play is whether post-reporting publication means anything.
If early publication creates a bar to filing, and there is no penalty in Bayh-Dole for publishing, then we can ask whether federal innovation policy is moving to demanding that universities shut down collaboration, consulting, visitors–everything that makes university-hosted research attractive as an alternative to closed labs and trade secrets. I think not. Federal innovation policy has the means to choose contractors that run closed labs if that’s what agencies want. If they want free-ranging, networked, institutionally not-controlled research, then universities are just the thing.
And if it is not federal innovation policy that provides an impetus for closing university labs, then will it be administrators and their advisors, acting on the secret fingers-crossed version of Bayh-Dole, that the law is a mandate for them to close labs to preserve monopoly patent positions from which to make money? This is more likely, as it appears university patent administrator innovation policy, as well represented by AUTM, is to insist on monopoly rights first, accumulate a dragon’s pile of invention assets, and license for money rather than practical application. In this model, inventors are loathed because they might blow patent rights by publishing, collaborating, receiving visitors, or focusing on advancing science over advancing their own economic circumstances by means of a patent right.
Such values are not to be tolerated in the university patent administrator version of innovation policy. Thus, we can anticipate that under the (f)(2) education clause, university patent administrators will add the importance of not disclosing anything that could be inventive until a patent application has been filed. For the secret version of Bayh-Dole, this is necessary prudence to maximize the threat to industry presented by a patent position. For broader, publicly available federal innovation policy, this means degrading the mechanisms by which university science and inquiry has operated, and especially it means preventing investigators from making the personal choice when and how to collaborate, disclose, publish, and secure ownership positions in what they have done.
Bayh-Dole also does not disturb this choice of investigators. If patent reform would mean that federal innovation policy precludes open university research, then the US really has entered a bureaucratic dark age of innovation, where the only really effective investigators and inventors will be operating covertly, against the interests of bureaucrats, and the rest will respect the “rule of policy” and try to survive in their niche roles of eating grain, laying eggs, and avoiding the foxes guarding their house.