The Atlantic has published yet another retrenchment piece by Allen and Bayh. At least there is no question where they stand on the matter: comprehensive, compulsory stripping of faculty rights to inventions is the way to prosperity and should be adopted by any self-respecting administrator, not because it will make the institution a lot of money, but because, well, it’s just the right thing to do for America. Some university administrators are passing around these articles by Allen and Bayh, going, see–if Allen and Bayh make an argument lacking substance and ignoring Stanford v Roche, then they must be right about present assignments, too. How very reassuring.
There will be time to discuss issues in concisely in other forums. Here I work through their Atlantic piece paragraph by paragraph. Take this as a map of possible responses. I expect to update this piece from time to time, and add more links to document my points.
Summary: A&B’s arguments repeatedly don’t hold up. They mischaracterize Bayh-Dole in defiance of the Stanford v Roche decision, they get the technical details of Bayh-Dole wrong, they show a decided lack of knowledge of IP practice, and they appeal to a bent for administrative order over personal initiative. They appear to be advocating for Stanford, MIT, and WARF to continue to dominate public discussion of ways to innovate, when it is these very institutions that raised these same A&B arguments in Stanford v Roche and lost at both the CAFC and the Supreme Court.
This is a long post. It provides a map to the argument made by A&B. It provides context and explanations. It shows how limited the A&B argument actually is, how little it has to stand on. The real work starts later, to restore Bayh-Dole, to build out a diversity of flexible practices, and get back to the effort to develop the agent model that worked so well for decades for university inventors and sponsors of research alike.
1. There’s no shortage. A&B characterize Bayh-Dole as the “foundation for our university/industry R&D partnerships.” Nothing of the sort. In fact, the way Bayh-Dole has been implemented by universities, it represents the single greatest regulatory barrier to those partnerships. Not only has it created institutional claims to ownership where there should have been none, but it also has served as a platform for the expansion of ownership claims to data and software, preventing the broad circulation of these tools of research. This is not a problem inherent in Bayh-Dole, but in the university administrative exploitation of the freedoms in Bayh-Dole to curtail inventor choice.
2. The reason for our success. A&B argue that Bayh-Dole “created no new bureaucracy”. Yet it did. That bureaucracy is called the university technology licensing office. Bayh-Dole may have decentralized inventions with regard to federal agency management, but the university implementation has converged on doing just the same thing as the federal agencies had done–making comprehensive, compulsory claims to place inventions in the hands of administrators, not innovators. If anything, there is now more invention bureaucracy, more IP policies–many of them ghastly–than ever before. A&B’s argument reduces Bayh-Dole to substituting university administrators for federal agency administrators. Somehow, that didn’t make it into the statement of objectives in 35 USC 200.
3. Like the little engine. A&B show no evidence for Bayh-Dole’s actual effect on our economy. Confirmation-biased statistics about the growth of university patenting and licensing do not show that these activities are net contributions to the economy, and show nothing of the adverse effects on the economy by the unlicensed portfolio of inventions American universities have amassed, nor on the debilitating effect of exclusive licenses, such as the ones MIT granted for 3d printing, which have held up innovation in the field for a decade.
A&B argue that the goal of the freedom to innovate movement is to “remove technology management from the universities and place it in the hands of academic inventors.” Not true. First Bayh-Dole does not place “technology management” in the hands of “universities.” The Supreme Court was clear on that point, repeatedly. Second, Bayh-Dole applies only to inventions, not to all “technology”. It serves no purpose in this discussion to conflate invention with technology. Third, Bayh-Dole places “management” in the hands of the inventors, because it does nothing to disrupt this outcome of federal patent law. What Bayh-Dole does do, through its standard patent rights clause, is establish an agent model that starts with a choice by inventors–they may choose an agent to manage their invention. This is the genius of Bayh-Dole. Bayh-Dole does not use of federal power to strip inventors of their rights and hand those rights on a platter to university administrators.
Bayh-Dole provides inventors with the choice of agent. If they do not make a choice, then the funding agency gets to choose. The agency can choose itself or it can choose the inventors. If the agency chooses the inventors, then it treats them as if they were a small business contractor. If the inventors choose an agent, then if that agent is a university that hosted their research, then the agency is expected to allow the university to “retain title” that the inventors have assigned to it. If the inventors choose any other agent, then Bayh-Dole’s standard patent rights clause gets assigned as well. If the other agent does not have as a primary function the management of inventions, then the agency must approve the assignment.
What A&B are arguing is that this pattern of choices–the heart and soul of Bayh-Dole–the way in which it makes uniform agency protocols while preserving the diversity of inventor and invention management agent relationships and practices–that this pattern can and should be collapsed into a simple bureaukleptic taking of invention rights, for the good of the country. It is not good for the country, or for scholarship, or for university-faculty relationships, or for research collaboration, or for innovation. It is not good for the country. Why all that nuance in Bayh-Dole, if the only proper use of it is to re-implement the same monopoly administrative approach to innovation that was failing the federal agencies?
A&B note that “some in Washington seem to be buying” the message that universities are on the wrong track. Hooray! It is not “tragic” at all! What is tragic is that A&B, apparently to rescue their legacy, have ended up on the wrong side of history, arguing against the very best parts of the legislation they helped to create, advocating for the very worst possible response by university administrators, appealing for them to assert the dictatorial side of their natures. It is just this dictatorial bent that eliminates the idea that university administrators are acting as “stewards” for federally supported inventions. They are acting in self-interest and by compulsion.
4. Passed during a contentious election. Bayh-Dole does not insure that “taxpayers receive the full benefits from billions of dollars invested in public R&D.” That is not a stated objective of the law. There is no insurance package in Bayh-Dole. Its genius is that it asks inventors to get involved in seeing their work move into practical application.
How odd, that A&B argue that it was terrible under the prior system, where agencies “took inventions away from university and small company contractors making them readily available to all.” This statement is wrong in many ways. In the prior system, universities did not, generally, make any claims to federally supported inventions. Inventors assigned to the government directly. If the inventors wanted to hold rights, a good way to do it was to approach a research foundation or other agent and have them work a deal with the funding agency. It was this administrative overhead for the agency and the inventors that Bayh-Dole effectively addressed. There was no take-away from universities, but for a few, such as MIT, which has been obsessed with administrative invention ownership for the purpose of making money since the 1940s.
It will take some doing for A&B to explain how making federally supported inventions available to everyone denies the public of the “full benefits” of federal R&D. It would appear A&B’s argument is that by denying access to many inventions, the public gets the “full benefits”. This may be the case with some few inventions that require monopoly-style investments, but by denying access to tens of thousands of inventions to support only a handful does not make for a ringing argument for monopolies in research practice.
David Mowrey points out that WARF in its 80 year history has 4 “big hits”. Stanford in 30 has 3. There is a substantial literature developing regarding “stagnation” in innovation in America over the last 30 years. There is a literature documenting the lack of new drugs in the research pipeline. There is a literature documenting how badly university research is reporting its results, so that biotech companies are unable to replicate most university reports of “breakthroughs”, no doubt many of which are the subject of patent applications that justify withholding data and tools. Something is seriously wrong. It is not Bayh-Dole. It does appear that implementation of ownership demands at universities, at the prompting of folks like A&B, and now in defiance of the Supreme Court guidance in Stanford v Roche, does have something to do with it.
A&B appear focused on the idea that the purpose of Bayh-Dole is to develop “new drugs”. If that’s true, it’s nowhere in the law. There are many industries that might benefit from fundamental research, and even within health care, there is much to be done that does not involve taking more drugs. Drugs have a role to play, to be sure, but they are not the core objective of fundamental research. In many ways, this fixation on drugs has been used to create an approach to patenting discoveries that has destroyed whole fields of innovation before they can even start–nanotechnology, for instance–and has been adverse to other areas, such as software and social media innovation. In this, universities following the A&B approach have rigged institutional IP policies and practices to reflect going after “big hit” biotech patent licenses, to the detriment of nearly every other industry or way of managing patent rights. There is virtually no participation in standards, cross licensing, or open innovation coming from university technology transfer offices operating on the A&B model. The effects are devastating, but you have to be on the ground in the research labs to see it, because you won’t find AUTM carefully documenting them.
A&B are correct on one point–the federal practice at the time of Bayh-Dole did “destroy the incentives of the patent system”. But so does the A&B version of Bayh-Dole. The incentives of the patent system start with the inventors. Any approach that takes the inventors rights by compulsion destroys those fundamental incentives. The argument presented by A&B is that the purpose of Bayh-Dole was to give university administrators “incentives”. What incentives would these be? Do university administrators desire new drugs more than federal administrators? More than inventors of compounds that might result in new drugs?
I have no idea how many of the 28,000 patents held by the federal government involve compounds that had a prospect for becoming a “new drug”. I also don’t know where A&B get their information that no new drugs were developed from federally held inventions arising in university research, especially given that the government was willing to allow contractors to retain title to inventions when the contractors made a good case. Perhaps A&B could provide documentation for the claims here.
5. Bayh-Dole reversed this wasteful practice. A&B persist in their refusal to accept Stanford v Roche. They state that “Bayh-Dole reversed this wasteful practice allowing universities and small companies to own and manage their discoveries.” They want this “allowing…to own” to mean “allowing…to take”. This is the crux of the debate between freedom to innovate and retrenchment, between Bayh-Dole as a Bill of Innovation Rights and Bayh-Dole as a restatement of the Geneva Conventions for captive inventions. A&B are squarely on the side of better treatment for captives. How nice, except they are also the ones arguing for taking those captives in the first place.
The “wasteful practice” if there was one was the administrative overhead for inventors, agencies, and invention management agents in working out arrangements when inventors felt there was an opportunity to act privately to develop an invention.
A&B provide no citations for their figures on how university patent licensing contributes financially to “US gross industry output”. Perhaps this is based on AUTM’s approach of multiplying royalty income reported by 50 (reflecting a 2% royalty on sales) to get an estimated total sales, and then dividing by an average worker salary to get an estimated number of jobs. It’s not a meaningful estimate. Much income is not in the form of royalties on sales, and many of the sales that dominate the AUTM figures are from companies with global operations, so the jobs–if there are any–are not necessarily in the US. It’s just a shabby form of quantitative spin. Even if one accepts the figure, A&B are claiming all this compulsory approach to innovation gets the country is $38b a year in outputs. And that’s not even considering what the outputs would be under the approach Bayh-Dole anticipated, or under the pre-Bayh-Dole approach. Certainly the number in either of these other approaches would not be $0. For what it’s worth, the US gross domestic product in 2010 was $14.6 trillion, so we are talking here about 0.2% of the economy, at the most. And for that, the aim is to strip inventors of their rights, suppress the choices they would have under federal law, all to give university administrators the chance to make money licensing patent rights.
There is nothing in A&B’s arguments that would show that university inventors could not, with any agent of their choice, obtain the same patents and same–or better–licensing deals with biotech firms. There is nothing in A&B’s figures regarding the effects of administrative controls that show that this is the optimal approach to innovation. Clearly, there is quite a literature that argues against this approach. Clearly, a part of that literature is the arguments that were made in favor of Bayh-Dole when it was passed. Clearly, there’s the language of the Bayh-Dole Act itself. And we have the Supreme Court to underscore the point. As Taleb argues in The Black Swan, you don’t have to have empirical evidence for every argument. Some arguments are made based on the use of reason. It will be difficult to find evidence for the performance of alternatives if folks like A&B are determined to suppress all such activity!
6. Nowhere are university-industry partnerships. Industry-university partnerships are important everywhere. But A&B are not arguing for these partnerships generally. They are arguing that these partnerships must be shaped by university administrators making all the deals. Think of the overhead–the institutional policies to be followed, the legal reviews of contracts, often by university lawyers with little or no experience with IP or strategic research partnering. Think of the alternatives–imagine if the government, say, were making inventions available to all. Would that really raise the costs of drug development? Would that really prevent drug companies from pursuing new compounds?
Look under the hood just once. If a university makes a discovery of a new compound that might have a therapeutic effect, it files a patent application with claims as broad as it can make them. To get that compound, or any of the class of compounds that get claimed, into a useful form, quite apart from the clinical trials, companies will have to do any number of things to develop an economically viable way of formulating the drug, developing a delivery system, and implementing a manufacturing system. Any of these aspects can also involve inventive steps. Any one of these can result in patents that serve the purpose of preventing “free riders” from following in the same pathway, with the same compound, with the same formulation, with the same delivery system, using the same manufacturing techniques. A company seeking to imitate will have to innvate as well, and will therefore have to go through their own FDA reviews, with their own data.
Worse, a class of compounds or techniques can be claimed, but a company obtaining an exclusive license to a patent covering all of them may select to develop only one. The others “sit on the shelf”. A&B are advocating for this outcome, in championing the argument for university exclusive licensing. Yet it is this very outcome that has been so devastating to disease assays. Universities have patented assays, licensed them exclusively to companies, which have developed assay kits that implement tests one way, but not necessarily the best ways, and then force laboratory medicine departments to buy (at a premium) and use (at a risk to patient diagnosis) the commercial test, not the test in the forms that otherwise could be used directly from reading the scholarly literature. Universities such as Cornell are behind this shameful exclusive licensing, and ought to be called out for it.
7. Companies are now hollowing out. There is a shocking fact for A&B. Even if US companies did their research here in the US, the manufacturing is being done offshore. This has nothing to do with ownership of inventions. It has to do with manufacturing, labor, and immigration policy. Many foreign researchers left as export control laws were expanded to force a two-tiered system that treated foreign talent as second-class. There has been a great, silent migration of foreign talent out of the United States.
It makes sense to park one’s research operations where there are fewer regulations and costs, and near one’s manufacturing operations. Companies can still “tap into” US research, and even pay for patent rights, but they are going to do their clinical trials and manufacturing offshore until the US creates a policy environment that favors a return of these activities to the US.
A&B provide information on at least 153 “new drugs, vaccines or medical devices.” To be useful in making their case, this list should not introduce medical devices into the list. The discussion in the preceding paragraphs was focused on new drugs. Medical devices are a different area of patent practice, and do not have the same overhead for development, and have a much greater need for interoperability–crying out for standards not more proprietary, fragmented, practice-suppressed university patent claims all in the name of monopoly licensing for the money. A&B should provide the figure for the number of new drugs, and how many of those new drugs date from an invention made after 1995.
8. This is hardly the time. The “monkey wrench” thrown into the “university technology management system” is A&B’s interpretation of Bayh-Dole, which ignores the language of the law and its implementing regulations, ignores the history of university faculty involvement with patenting, and ignores the Supreme Court ruling in Stanford v Roche, a ruling that should have silenced these arguments and instead they persist.
The very term “university technology management system” belies the idea in A&B that university administrators operate a system, and that this system is both the goal of federal policy and necessary for Americans to enjoy the benefits of research. It appears to be the case that university administrators have indeed built such a “system”. But it is built on a fraud, and that is the claim that Bayh-Dole strips inventors of their personal invention rights, and the further claim that this is a good thing. Further, this “system” appears badly implemented (if the state of university IP policies are any indication), has caused tremendous problems in research practice (if the UIDP debates are any indication), and has been utterly unresponsive to different industry needs, and even the needs of industries such as biotech in different stages of their development.
It’s a disingenuous “system” if the reporting (or lack of reporting) by universities of their actual invention management is any indication. Universities report only in aggregate, hiding the massive lack of licensing in their portfolios. Hiding the costs of their activities. Hiding the licenses that have failed to produce product or practical application. It’s a massive case of deliberate confirmation bias, collusion among state governments (in the form of their public universities), to snooker the public and legislators. At some point it passes beyond the pale and is simply corruption–taking of personal property without compensation or due process, misrepresentation to governing officials, misrepresentations to the public, suppression of adverse outcomes.
As for the Kauffman Foundation, here is my situation. I was advocating for an broadened agent approach to research inventions years before the Kauffman Foundation found me at the University of California. I participated in a book project that was co-funded by Kauffman and HP. I then wrote a proposal for a 3 year grant co-funded by Kauffman and the University of Washington to explore these issues, and demonstrate alternative approaches to innovation, which I did, much of which is chronicled by this blog. Kauffman provided no editorial direction, no guidance, no praise or blame for any of the material I produced. I have been funded since ($5K) for assisting in the development of IP Advocate’s efforts to make visible the Stanford v Roche decision, from September to December 2011. IP Advocate, in turn has received modest funding from the Kauffman Foundation for their efforts. At no time has my work been shaped by anyone at these organizations, and certainly not to argue a line that represents their positions. If anything, these organizations have provided support to my work because they recognize in it an independent, experienced voice, making a case for improving the university approach to innovation. There is plenty to discuss; there is room for disagreement. A&B don’t want to have the discussion. AUTM does not want to have the discussion. Is it paranoia? Do they know their public statements and figures won’t hold up under scrutiny? Are they trying to hold in place their money interests in licensing by holding hostage as much of the university research output as they can? Seems so.
My work continues to be my own, grounded in 20 years of practice. I challenge A&B to reveal the sources of their connections with AUTM, university administrations, and other organizations.
9. Under their plan. This paragraph is deeply messed up. It misrepresents the Kauffman idea about agency, repeats the arguments that the Supreme Court rejected, perpetuates the idea that faculty assign inventions as a condition of employment, and ignores the requirements of the Bayh-Dole authorized standard patent rights clause.
I have dealt with the condition of employment issue elsewhere. The core of it is that the (f)(2) agreement supersedes any such obligation to assign. The condition to assign, under a federal funding agreement’s standard patent rights clause, is controlled by the standard patent rights clause, not any employment agreement. It is another great beauty of the Bayh-Dole implementation. Universities are not required to have employment agreements covering patent rights with their faculty, are not required to obtain assignment of inventions from research collaborators, are not required to have an IP policy, for that matter. They are not required to own anything. Everything gets handled via the funding agreement.
It is Bayh-Dole that gives researchers the opportunity to choose an invention agent. There are such agents now that are reputable, capable, and ready to assist. A university could assist in qualifying such agents, and could have agreements with such agents involving standards of work, protection of inventor rights, and even a financial interest for the institution.
The Freedom to Innovate proposal is based in the idea that investigators and inventors should have a primary voice in who they will work with to develop an invention, if it should be developed with patent rights at all. If investigators do not want to do have this voice, it is easy for them to default to government rights (agencies now have robust tech transfer operations, unlike 30 years ago–they have developed their expertise as well, something else not considered by A&B), or to offer the rights to their host university’s preferred agent, which could be its own technology transfer office, or an affiliated foundation, or a preferred invention management agent.
The Freedom to Innovate proposal is to implement Bayh-Dole the way Bayh-Dole was written to permit. Universities should give investigators and inventors the same range of choice that federal policy provides. Doing so complies with Bayh-Dole, and reflects as well the spirit of Bayh-Dole. Bayh-Dole says, if you don’t choose an agent, then the government gets to decide between you and its own invention management. Freedom to Innovate says, if you don’t choose an agent that the funding agency approves, then choose our default agent, otherwise, it’s between you and the government. It could be as simple as a checkbox on any government grant that’s awarded:
/ / Default
/ / Other agent: __________________
/ / Government choice
/ / Inventors’ choice
/ / Choose later
This would be the choice of the principal investigator. The investigator could use “choose later” to delegate this choice to inventors participating in the grant. Everyone would know up front the deal before joining the federally funded project. It is very doable.
A&B think such a “system” is “chaotic”. Far from it. It is straightforward. And it could very well involve a licensing agent at another school, for instance, when there is a consortium of schools sharing federal funding. It may well be that one school has an office much better situated to handling consortium outputs than the school at which a particular research team does its research. Why wouldn’t another school handle consortium inventions? It would make it much easier for industry partners, it would take advantage of the expertise and relationships of the school that’s preferred, and it would limit fragmentation of rights within the consortium. That’s just one example. Same for foundations such as Myelin Repair Foundation, trying to coordinate multiple research teams at different universities. It could serve as the agent, partner with a commercial concern to do the actual licensing of inventions, and establish the protocols for ensuring that the research teams with complementary parts of the overall project stay in synch on IP and data as well as research focus.
Whether or not this approach speeds up “commercialization” is beside the point. Bayh-Dole is not merely about “commercialization”. It is also about collaboration, and lower administrative costs, and ensuring that universities do not with their patenting unduly interfere with research or abuse their patent positions. A compulsory ownership position combined with a refusal to disclose the management of inventions so claimed sets up the real prospect for abuse of patent positions by university administrators. Enough is enough. Make the choice of agent voluntary within the menu established by Bayh-Dole, and let’s see what happens.
Rather than sneering at such ideas, A&B ought to be exploring them.
10. Our current system. The “current system allowing universities to manage their technologies” was thrown out by the Supreme Court. The weasel words are “allowing” and “their”. Federally funded inventions are not the universities’ inventions. A&B cannot give up the arguments have been repeated for years, and which are incorrect and unsound. A&B’s ideas are not federal policy, nor should they become federal policy. No vesting. No bureaucratic system trumping investigator choices. No institutional self-interest ahead of scholarship and collaboration. We can do better than A&B’s compulsory, inflexible, bottlenecked “system.”
If America is effective at taking up its research findings, it’s no thanks to the A&B system that has been created to intrude patent ownership claims between faculty and industry. There may well need to be buffers between faculty and industry–that’s what invention management agents can do. But there’s nothing to indicate that American creativity depends on an administrative regime bringing institutional self-interest to all inventive research outputs.
Not all countries are taken with Bayh-Dole. Further, the form of Bayh-Dole that is being evangelized in many countries is just this A&B formulation, which is not Bayh-Dole, but certainly might be expected to appeal to autocratic, order-loving, top-down regimes. The biggest problem of all, however, is that the claims made for university “success” are just the same confirmation-biased, unsubstantiated claims that have snookered legislative officials and the public in America. It’s bad enough that Americans have misled themselves on freedom and innovation. Worse and worse that they have evangelized autocracy to foreign governments and universities.
A&B argue that Bayh-Dole allows universities to hire “experts” to manage inventions. Of course, it doesn’t. Universities can hire such experts because faculty want such expertise, but there is no reason in an agent model why a university has to hire anyone. The experts can be hired by invention management firms, or can be in the companies that have an interest in the inventions in the first place. Certainly there is no reason why a university’s hiring of experts has to be linked to a compulsory system of ownership. Even two or three successful licensing arrangements will generate enough money to hire experts for a decade. It’s not a matter of Bayh-Dole.
As for the University of Utah situation, show me that this is not another scam. According to the information I have, most of the “companies” started by Utah have no operations, no funding, no real employees, and don’t even have a business address other than the technology licensing office. As a strategy to change finding licensees into finding investors, it has its place. It’s just administrative bean counting to make a splash to call these “startup companies” because one has filed paperwork. To the extent that doing so persuades legislators to put more money into universities for technology transfer, it’s at best “capture” and at worst, it’s deception by public officials.
11. Bayh-Dole makes the university a steward. Bayh-Dole does not make a university “steward of the public interest.” Again, see Stanford v Roche. Universities may be stewards of the public interest, but that standing does not come from Bayh-Dole, and it is not furthered by universities taking ownership of research outputs with an eye for self-interest such as making money or playing up a facade of productivity to get more research money or more state subsidy.
If anything Bayh-Dole places additional constraints on university invention management. Bayh-Dole places the greatest obligations on university administrations, as if they are the least acceptable of the possible agents to handle faculty inventions! More constraints than small businesses. More constraints than faculty inventors acting on their own. A university becomes a steward of public interest under federal research policy by 2 CFR 215.37, which requires it to act as a trustee when it acquires intellectual property under a federal grant. That’s not Bayh-Dole. A steward of the public interest has a tough time of it when its primary goal in practice (regardless of the rhetoric) is to make money for itself and cannot release most inventions that it claims until it is satisfied they are worthless to everyone.
A&B refuse to accept that university technology transfer offices are in it for the money, not for publicly spirited “transfer.” If it were merely transfer, offices would need not charge anything. They might even subsidize industry adoption. Many universities are overt in making a claim for profits. Stanford’s OTL lists “generating unrestricted income” as an anchor of its mission statement. The University of Washington’s technology transfer office has in its latest strategic plan generating sufficient profits to change the university’s “financial operating model”. It proposes to do this, by the way, by flipping startup companies to investors, arguing this is a faster way to profits than licensing inventions to existing companies. Even where a tech transfer office is thoughtful about things, as at UC Berkeley, with its socially responsible licensing program, they have to argue it as an exception to the profit motive, not as a default.
While universities do have to share royalties with inventors under the Bayh-Dole authorized standard patent rights clause, A&B fail to mention that universities do not have to take title to inventions, and inventors could do even better with their royalty sharing with other agents. A typical university share these days is 67% plus expenses. An invention management agent such as Research Corporation might take 40% plus costs. If an inventor assigns directly to a startup company, the share can be even better–the inventor can have 100%. In a number of Canadian universities, if the inventors manage the invention, they get 67%, but only 33% if the university manages.. For all of this, however, the problem is not the willingness of a university (or inventor) to share a portion of royalties but the overall lack of arrangements that produce royalties beyond expenses. Of the thousands of inventions claimed each year by American universities, only hundreds will produce enough to cover their own expenses. Thousands of inventors get nothing, and have no standing to give it a go themselves, or to find an agent willing to work on their invention, on terms that work for both inventor and agent.
Bayh-Dole construes university sharing of royalties with inventors as an expense. It is quite clear on this point (see 37 CFR 401.14(a)(k)(3)). Bayh-Dole does not rely on university generosity to share with inventors. If so, that share would not be an expense. What makes the inventor share an expense, and only for nonprofits? It is because Bayh-Dole anticipates that universities do not hire faculty to invent, and therefore any patent agreement must show bona fide compensation for an assignment of invention rights? I think so. A&B appear to overlook this “pesky detail”.
The idea that assignment is a condition of employment, or of Bayh-Dole, and that the university is being “generous” in sharing royalties is specious. Bayh-Dole anticipates inventors making workable deals with their invention management agent of choice, and that agent will pay out to the inventors a negotiated share. That share, if negotiated, is real consideration for assignment. No eminent domain, no federal vesting, no lack of due process. But if that share is decreed by the university after a taking of rights, then there’s no negotiated deal, and it is entirely open whether the consideration is adequate for the assignment. Clearly, if there is never any royalties to share, it cannot possibly be just compensation unless the deal was negotiated on a voluntary basis.
12. Bayh-Dole requires universities. Bayh-Dole requires preferences for manufacturing in the US only for exclusive licenses. As for the reported counts having to do with licenses to small companies, A&B are again hiding behind statistics. The statistic that matters is how many exclusive licenses to federally funded inventions go to small companies that are not startups of the university. How many exclusive licenses to federally supported inventions did the University of Utah grant to small companies other than those in its company puppy mill? We will never know. The universities do not report such figures, and AUTM does not track them, but we are asked to believe unsubstantiated ones from A&B.
The reality is that apart from perfunctory licenses embedded in STTR IP agreements, licenses to university startups, and non-exclusive licenses of the form that A&B rail about as a terrible abuse by providing everyone access, small companies don’t generally figure as university exclusive licensing partners for federally funded inventions. It is all too easy to count 200 small companies downloading a piece of software for $1,000 as a “non-exclusive” license to pump up one’s overall figures. If that’s the case, one can have 85 monopoly licenses with big companies, and one invention licensed to everyone, and still smell like 70% roses–but that one non-exclusively licensed invention is not the model that A&B are arguing for.
13. If only the inventor. This is a most scurrilous argument. A&B are arguing that faculty inventors, on their own, would go for “immediate profits” over a “broader community of interests.” There is nothing to back this argument up. It is just disparagement of faculty. In other settings I have called this “inventor-loathing”. In my experience, many faculty argued just the opposite, that they don’t royalties, they don’t want patents, they don’t want companies or research colleagues to be charged a fee to use, and they don’t want the overhead of dealing with lugubrious university licensing requirements and delays. Sure, some faculty do want money, and lots of it. But in my experience, they are in the vast minority. If so, this is not a flaw in faculty culture–it is precisely what we might expect. Many faculty are ready to play for the long term, for benefits across a range of relationships–broad access, research opportunities, attracting talent, jobs for students, donations to the university by companies well served. Most are decidedly not in it to “maximize immediate profits”.
The odd thing is, that many university technology transfer offices also are not in it to “maximize immediate profits”–but do expect to license for profit, and are generally not willing to grant licenses to federally supported inventions that are not going to be profitable. Some universities will not even re-assign inventions to the inventors when they have been unable to license, without demanding the inventors pay! It is as if they cannot help themselves, even when they have driven something into the ground to the point of being worthless.
14. The Kauffman concept. It is not at all clear that A&B understand the Kauffman concept, let alone have insight into the beliefs on which it is based. Let me help here. First, universities do take on inventions from “inventors outside their own institutions.” They do this when they handle joint inventions where one or more inventors are at other institutions. They do this when they handle inventions made by others in a service area. For instance, for a time WARF was handling inventions for UW campuses other than Madison. Various universities have announced, as well, co-marketing agreements, so they are working together to place shared portfolio. Such a co-marketing effort was the focus of a Larta effort a few years ago, for instance. Finally, universities from time to time accept donated patents from industry and others and add these to their portfolio of inventions available for licensing.
As I’ve pointed out previously, it makes sense to bundle inventions together when there’s a consortium or commons, rather than follow the conventional, fragmented, institutionally self-interested approach advocated by A&B. Here’s an international example. It may well be that Stanford, MIT, and WARF–three private organizations–will not take on any responsibility for the movement of federally supported inventions made elsewhere. That is their choice.
Why, however, must the entire panoply of universities and investigators be burdened with the thinking of Stanford, MIT, and WARF? Indeed, this is one of the unstated problems with the current situation. Apparently what works for MIT is good for everyone. It is just such thinking, however, that suppresses local action to build on strengths and approaches that will never be those of Stanford or MIT or WARF, and it attempts to persuade legislators that the way Stanford, MIT, and WARF are doing things is the way everyone should do things, and should do things this way as a condition of federal law. Or, perhaps it’s “best practices”. It may well be that it is this claim that Stanford, MIT, and WARF represent “best practices” is under fire, and should be. After all, it was Stanford, MIT, and WARF that were the principals behind the Stanford v Roche case. They argued for federal vesting, for claiming ownership of everything, for Bayh-Dole being about them, not collaboration. It was a losing argument, and it lost. It was an argument against freedom, against collaboration, against faculty insight into processes that faculty over the past century have created.
Maybe A&B are now fighting for the reputations of Stanford, MIT, and WARF. These universities have lost their standing to be policy leaders as their roles in Stanford v Roche have become clear. Their attorneys do not know Bayh-Dole, or do know it and choose to misrepresent it for the sake of argument. Stanford sued Roche over the money. Nothing about technology transfer, broader interests of community. Nope. The HIV kits were a roaring success without a license from Stanford. Now Stanford is out millions in litigation fees, have lost the Roche Palo Alto research facility and its 600 jobs, and are left with A&B out still repeating an argument they lost nine months ago and still cannot accept.
In any case, it’s time to have a national discussion on diversity in university innovation practice that does not, for once, involve Stanford, MIT, and WARF. They have a fine model if you want it, but it’s also not the model that a lot of universities should be using, and it’s clearly not built on the arguments that it has claimed support it. Certainly, it is built on a misrepresentation of Bayh-Dole, and now everyone knows that.
15. And for good reason. What to say?
16. Technology transfer is a service. As construed by A&B, technology transfer is a “service” imposed on faculty. One does not impose services. Services are offered, services are requested, services are contracted for. It is certainly true that a university technology transfer office is not a profit center for most inventions. It is also certainly true that universities imposing their management “services” on faculty tend to run up big bills. They have to, to deal with everything they have claimed, and to live up to the arguments they have made for claiming everything. But federally funded research invention management need not be expensive at all for a university. An inventor may simply offer rights to the government. If the government sees an opportunity, it can pay for the patent work, use its experts to identify companies, and work out arrangements. Many federal agencies run operations every bit as sophisticated as university licensing offices, and often with a broader national reach, and often with more capacity to handle inventions they choose to manage.
It is also true that some university managed inventions do take years to reach the market. Many, however, never reach the market, never get used by anyone, or reach markets outside the reach of US patent rights, creating at once a barrier to innovation at home, and providing a happy gift to companies in Japan, or Brazil, or France, or Kenya, where there aren’t patent rights. A&B argue “even successful discoveries are unlikely to make significant money in the short run.” A few sentences ago, we were informed that university technology transfer wasn’t a profit center. Now we are dealing with the problem of the cost of university administration. A&B here conflate the cost to manage a particular invention with the cost to manage a comprehensive, compulsory technology licensing office.
For a particular invention, the cost to file a provisional patent application is nil and within the reach of most any faculty member inventor. That buys a year. Early adopting companies can easily pay the costs to convert a patent application to a full utility filing. So can startups, out of investment funds. In university licensing offices, the big hits pay for everything else. Universities certainly could pay for inventions made elsewhere if a) they thought by doing so it would advance innovation in “broader communities” or b) they thought they could make money doing so. What is not so obvious is why university administrators do not apply the same selectivity to inventions made by inventors at their own institutions.
The point is, academic inventors are likely to “foot the bill” for their own inventions, or find someone who will, or not use the patent system at all, in preference to other approaches, such as open hardware, or a patent exchange. But it is true, academic inventors do not show much willingness at all to “foot the bill”–a much bigger bill–for a compulsory system that takes in everything, is unresponsive to their needs, runs up huge costs by hiring “experts” for subject areas that do not concern them, and offer little likelihood of ever closing a deal.
17. If inventors turn. This argument has no support, if it makes any sense at all. What are the “lowest hanging fruit”? Inventions easily licensed? Inventions that are easily licensed by “outside firms”? If so, then it would appear that faculty inventors could make good choices, find firms that will rapidly close deals, and the system A&B rail against could actually work. It appears that A&B are really arguing that if faculty inventors use other firms, then the technology transfer offices and their extraordinary expenses and licensing overhead and compulsory policies would not be needed for a lot of “low hanging fruit”. A&B are left to argue, then, that the purpose of Bayh-Dole was to shut down such efficient practices so that university administrators, not faculty inventors or outside firms, could harvest the financial benefit of patenting and licensing “the low hanging fruit”. No, that isn’t in the law.
Oddly, in biotech where faculty inventors did go to “outside firms” such as Genentech, they found investors and management more than willing to invest in patents for the long-term development is required. Throughout industry after industry, long-term perspectives are taken, and investments made in inventions. Also oddly, industries with very short term windows of opportunity–in software and electronics–are some of the most prolific at patenting. If the long-term interest runs past 20 years, a patent means nothing, as it will expire before the opportunity to benefit from it presents. The role a patent has in such situations is to disrupt the research of others. And that is precisely how university technology transfer offices handle many of their “long term” inventions–by refusing to grant licenses for research use upfront, as a condition of taking ownership. I have had university technology transfer offices unwilling to state that they would not sue for infringement if my institution practiced their invention for research purposes. This disruption of research is endemic–while not overt, it shapes industry collaboration, choice of research (why work on an area claimed by MIT, unless it is to frustrate their effort to corner the market and disrupt research and technology exchange everywhere?), and willingness to publish.
It is true many academic inventions have multiple inventors. A&B asks who decides how the patent is managed? A&B seem to think that a compulsory approach solves the problem–why, none of the inventors should decide! In practice, however, inventors are able to make consensus decisions. The beauty of invention ownership is that each inventor has an undivided interest in the entire invention, with no obligation to account to the others. Thus, it is up to co-inventors to work things out that work for everyone. Bayh-Dole handles this situation remarkably well. If the inventors cannot agree on an agent, then it is the government that gets to decide. If the inventors also cannot agree on a private disposition of the invention amongst themselves, then it’s an easy decision for the government. Since the inventors know this, if not getting along is more important than the patent right, it goes to the government. Otherwise, they work things out. This happens all the time.
Taking away choice does not resolve differences–and in fact it can deepen them and also embitter relationships between inventors and others on their team, and between the inventors and administrators. After all, if the inventors disagree on a course of action, and the university compels assignment, who do the administrators listen to? If one inventor wants a startup, another wants the invention broadly available to all, and a third wants it to go to a well established company, university ownership does not resolve these differences. Indeed, taking ownership pretty much rules out making the invention broadly available to all–after all, by A&B’s argument, doing so would be a disaster for the economy. If a university has fallen for the Utah model and thinks flipping puppy mill companies to gullible investors is the secret to success, then even folks wanting to license to established companies are out of luck.
The alternative for disenfranchised inventors is not to participate in the program at all. Don’t recognize inventions as inventive, don’t report them if you don’t have to, don’t report them until they are fully realized as inventions–every component conceived–and publish like heck while working on it so that by the time it’s fully conceived, it’s also assuredly not patentable. A compulsory program of invention ownership creates its own opposition.
18. Pesky practical details. A&B claim that folks like me ignore “pesky practical details”. Yet I am the one with two decades of on-the-ground practice experience, and A&B, regrettably, haven’t done deals. If anyone has read the work on this blog, they will see a lot of attention to practical details–how to fix the atrocious drafting of university IP “experts”, how to shape policy for flexible and collaborative relationships with companies, how Bayh-Dole actually operates and how to implement practice to be in compliance with its standard patent rights clause. No, advocates of the Freedom to Innovate model are working every day in the pesky practical details. It is folks who don’t want to change, and especially do not want to admit that their claims to ownership of others’ personal property is the result of Bayh-Dole, who are ignorant of the details.
No one has argued that technology commercialization is a simple task. That is not the issue, nor the point of the debate. The issue is whether universities should have compulsory ownership policies for inventions, given that federal policy clearly does not require them to have such policies, given that prior to Bayh-Dole they did not generally have such policies, and it was this activity prior to Bayh-Dole that formed a major portion of the argument in favor of Bayh-Dole. The point is that institutionalization of innovation relationships has a lousy track record. Institutionalization of innovation does happen, but it is often late in the process, as an innovation becomes standardized. To institutionalize an invention, especially with a non-operating administrative bureaucracy a early as possible is generally earlier than meaningful.
Furthermore, neither Bayh-Dole nor university missions mandate “commercialization”. Selling product is the not the be-all and end-all of university research and university invention. In Bayh-Dole, the emphasis throughout is on practical application. That takes in much more than commercialization. Practical application can include use, platform and standards creation–all without making and selling products. The fixation of the retrenchment movement, led by A&B and apparently Stanford, MIT, and WARF, on “commercialization” mischaracterizes Bayh-Dole, federal innovation policy, and the mission of university research. Much of this debate is whether we practice what we say, or we put a false facade up, badly reasoned, to support an administrative bureaucracy that has decided it knows more about innovation than the innovators.
It would appear to be the case that the only way companies could find the “next big thing” would be to “beat down the doors”–because the present approach to university-hosted innovation is to start by making sure the doors are all closed, using federal law (which has failed) and now present assignments (also a failing, inept nightmare). However, no one I know believes that companies are seeking the “next big thing” at universities. And that’s a subject of profound concern, given the $60b+ each year that the federal government is investing in university research. Why is it that companies are not looking to this investment? Could it be, in part, that the A&B implementation of Bayh-Dole has had a stifling, stagnating effect on university research outputs? That the research itself is not as well informed as it could be by research and practice at companies? Could it be that the thought of having to deal with a university technology transfer office set up to “commercialize” patent rights sends a hopeless chill down a company scientist’s spine? Could it be that it is better to design around, avoid, ignore university “research”, wait 20 years, or just use it in some other country, where the university hasn’t thought to file patent applications?
It may be that for all its reported “successes”, the A&B model is creating them at the expense of the broader community, personal initiative, contributions by specialists, and collaboration with industry. It may be that the A&B model encourages over-patenting, focuses too much on commercialization, is inflexible in changing circumstances, and ignores or suppresses a diversity of innovation models and uses for patents beyond making money with monopolizing speculators. Surely A&B model is no place for the faint of heart, and all the more so, not for anyone with a bit of reason and respect for the role and capabilities of faculty and those they work with.
19. The federal government funds. Actually, the federal government funds fundamental research at university–basic and applied research. A&B miss the point, or they use terms loosely. There is nothing to indicate that “breakthrough technologies” are more likely to occur in fundamental research than elsewhere. I for one would not expect it. “Technology” doesn’t “occur” –it is developed and proven out in practice. That’s what makes it a “technology” rather than just a “claim with potential if a lot of other things get done over a long period of time at great expense and that’s why it is so darned hard to find the right speculative monopolist with enough money to do it.” It is an important, and necessary, discussion we should have, out in public, about the role of federally supported research at universities. It is time that this discussion is not shouted down by retrenchment folks, as if the future of American technology depends on it not happening. For my part, I don’t have any sense that university inventions are uniformly “far removed from being commercial products”. Some are–and will never be–and others aren’t, and could be used almost immediately, whether in “commercial products” or simply practiced by the broader community.
I do believe, however, that a compulsory ownership scheme that places control of university-hosted inventions with administrators, not by the choice of investigators and inventors, and not without any commitments to them, does make it more difficult and longer to get new technology into use. The A&B approach may indeed have its successes, but they appear to take longer, with more expense, than otherwise.
In our open 3d printing project, we went from lab discovery to first commercial sale (by a small company, no less) in a week. It surely would not have happened had the university’s technology transfer office been involved, with its commercialization of patents by startups to be flipped for big money emphasis. The small company would have had to negotiate a many-page license agreement, agree to pay patenting costs, and perhaps even submit a business plan before any such arrangement could take place. And for all that, the office would have had to think twice about licensing non-exclusively when it could start a company or find a monopoly interest willing to pay more–perhaps if only to keep it out of the hands of the small company.
Bayh-Dole’s standard patent rights clause does indeed provide something of a “bridge” in the management of federally supported inventions. That bridge is a preference for the use of an invention management agent before deciding between the inventors and the government. But this is hardly the same thing as the relationship of basic research to technological breakthroughs. Basic research may trail technological breakthroughs (as in the case of warfarin) by decades. One does not look to basic research for technology, but for understanding and disconfirmation of theory. Anything that industry chooses to develop, it goes without saying that it will pay the costs and assume the risks. It does this whether university administrators hold patent rights or not. The only difference is that if university administrators demand payments as well, and impose obligations that protect their interest in payments, then all the A&B model is doing is driving up the costs and risks for industry. There is nothing in the model that makes using federally supported inventions any more attractive, cheaper, less risky, or easier to use or adopt. For all its claims, the A&B model is like an arsonist in the fire department, setting more fires than it can put out, but claiming credit for each one that it does put out.
20. China just announced. No one is advocating abandoning the Bayh-Dole model. We are advocating abandoning the Bayh-Allen model. That model was dismissed by the Supreme Court, despite arguments from Stanford, MIT, and WARF and scores of university administrators that chimed in. The Bayh-Allen model is kaput, dead, gone to meet its maker, pushing up the daisies. It lives on, of course, as a kind of zombie without brains, living on the claim that such a build out of administration surely must be the best thing possible. No, Bayh-Dole is a smart law. Sen Bayh and Sen Dole should be rightly proud of it. But Sen Bayh, in particular, would do well to acquaint himself with how the law has been implemented, in its pesky practical detail, and why that implementation encourages inventor freedom to innovate, not institutional autocratic control of inventions made in federally supported research.
By the way, China’s increase in basic research funding is welcome. It brings its funding of basic research to about $2.4b in 2012. US federal investment in R&D funding was $104b in 2008. The race to understand nature, I would think, is not a matter for nationalism, and certainly no excuse for socializing innovation in the hands of university bureaucrats. As China and other economies develop their own innovation and technology, we might expect greater opportunities to trade and partner, as equals rather than with some odd vision on future hegemony if only we can control patent rights at universities.
21. Some things are just hard. Hitting a fastball is hard. But it’s a lot harder if you have a fly on your forehead. That’s the A&B model of innovation. A fly on every inventor’s forehead, in the form of a university administrative demand for ownership, an inflexible innovation model, a fixation on commercialization to the exclusion of practice, a demand for money, and a continuing propensity to deceive the public and policy makers on the fundamentals of Bayh-Dole, the fundamentals of university IP practice, and what can and should be done following Stanford v Roche.
A&B characterize proposals for change as “yelling from the sidelines”. As far as I can see, it is A&B who are doing the “yelling” if that is what is meant by repeating arguments that were reviewed by the highest court in the land and dismissed. It is also certainly true that A&B are on “the sidelines” in this discussion. Put it this way: I have been working in university intellectual property since 1990. I have led IP management teams, I have directed campus technology transfer offices, I have worked with Bayh-Dole subject inventions, and I have worked with assets that don’t have anything to do with Bayh-Dole. I have worked on multi-million dollar federal contracts and on the simplest of informal agreements. I have been major public research universities and I have worked with schools that have only a handful of grants. I have been point for industry sponsored research agreements and have been point for copyright policy matters. I and the people I have worked with have developed some of the most innovative programs in university IP management to address the limitations of the A&B model and to show what is possible. There is plenty to debate, and there are people in IP practice who don’t share my point of view–and who I deeply respect. But there is no way that I am “yelling from the sidelines” about these matters.
I am in the thick of it, I have a wealth of practice experience, I am confident that the Bayh-Dole agent model is worth a try after 30 years of increasing suppression, and after Stanford v Roche all the more so. Certainly freedom to innovate is better than compulsory bureaucracy. Certainly we should provide faculty investigators with leadership positions to continue to develop an infrastructure that addresses the requirements and insights of scholarship and collaboration and opportunity as it exists today, not what it was in 1980 or 1950. That leadership comes about because we adopt Bayh-Dole as it was written, and implemented, not the Bayh-Allen rewriting of the Act to favor institutional controls that favor monopolizing speculation that makes money for the institution–or worse, doesn’t.
No, whatever B&A want to say, the debate they have with me is with a seasoned practitioner who has made a study of innovation practice, university policies, the Bayh-Dole Act, the defects in the AUTM metrics, the backstories of licensing, and the wide range of expectations and insights reflected by those involved in university research and instruction. The B&A model of innovation has its place–short of the compulsory framework and the insistence that the federal government has somehow willed this little bit of socialism for the benefit of university administrators on behalf of the public. Sometimes things really do need a university administrator’s firm hand. But not often, and not to save America, and not because of Bayh-Dole.
It’s time to wrap up this part of the public debate. A&B’s arguments don’t hold up. They do not reflect federal law, they do not reflect practice, they do not reflect what is possible, and they tumble on their own poor logic and statistics. It’s time for universities to revise their IP policies, open their federal research to multiple agents, and consider working together to provide industry with packages of inventions and related assets that don’t involve huge overhead to gain access, that keep the university in the position of mediator and steward, not self-interested pugilist. There is much to plan and do in the new, refreshing, open, personally motivated research world to come–let’s move on from the rehashed arguments of the retrenchment movement and work out how things will work under Bayh-Dole, restored to its pristine brilliance, which it should have had all along.