Let’s put some context around the idea of “free agency.” AUTM clearly hates it, and so do Scott Shane and Joe Allan. But what is it, exactly, that they hate? I cannot get into their minds–and of course, it’s clear that AUTM doesn’t have one–but perhaps by outlining a variety of approaches to freedom to innovate, folks can get a better idea. My hypothesis is that AUTM and co hate a worst case scenario of their own practice, which they then attribute to others and use that as a basis for disparaging those others with the aim of suppressing the discussion about innovation in innovation management. In short, they hate a bugaboo. That’s natural. Bugaboos are the kind of thing one would expect to get hate attention. It’s just a question whether faculty choice of invention management agents is also a bugaboo of this sort, or perhaps it is a nice bugaboo that ought to be embraced as part of the distinctive innovation environment that university faculty bring to national research and discovery.
Consider a baseline unperturbed by university claims. Faculty (and students, and staff) are provided with resources with which to do their work. The faculty work, when it comes to personal development, scholarship, research, and thinking about things, is not assigned by the university. The university may be an employer, technically, but these activities are not part of the employment relationship. They are not done to benefit the employer, as duties owed to the employer, or subject to the control of the employer. An employment relationship among the other elements of a faculty appointment does not provide for the assignment of intellectual property from faculty to the university.
In this baseline environment, when a member of the faculty invents, the ownership of the invention is with the inventor. This is a result of US patent law, and that in turn follows the US Constitution, which makes inventions and discoveries the personal property, for limited times, of their inventors and discoverers. Invention rights vest with the inventors, subject to the inventors’ decisions regarding applying for a patent, and if a patent issues, it is in the name of the inventor. Employment does not disturb this ownership. Use of resources does not disturb this ownership. In the case of university research, federal funding does not disturb this ownership. An inventor, or an inventor-to-be, can contract to change these defaults, and can make assignments with or without a contractual obligation, but from the start, an invention is owned by its inventors. Are you with me so far?
The question then becomes, under what circumstances should university inventors be forced to give up ownership of an invention that they have made? And when should that ownership be assigned to the university at which they worked when the invention was made? Before we go rushing to answers to these questions, we should introduce the other elements of the Big Five: control, money, attribution, and risk.
We may separate ownership and control. An invention may be owned by its inventor, but in employment relationships, at least, if the invention pertains to the business of the employer or was developed using the employer’s facilities, then the employer may be entitled to a “shop right”–that is a constructed permission to use the invention. Some control passes to the employer, without the employer needing to own. Generally, licensing is a way for a patent owner to distribute control. Those that receive a license, the patent owner promises not to assert infringement of the patent. Those that don’t have to deal with it. It is important to see the difference between ownership and control to have any chance to discuss free agency, since agency does not require ownership, but rather relies on control. A university may own an invention but delegate control of it to a principal investigator or to the inventor. An inventor retain ownership but give up a great deal of control in a licensing arrangement or a patent management deal. Ownership does not mean absolute control, and absolute control is not a precondition for all sorts of innovative (and profitable) activities.
Money is pretty obvious. We mean by money both expenses and income. Who pays for obtaining a patent is one of the early questions an inventor might ask. Here, an inventor might be happy to think of someone else paying. As a full utility patent application may run $10K to $20K, depending on its complexity and how diligent the inventor and management agent are, the cost is non-trivial. Foreign filings past the PCT stage are much more expensive–one can pay $10K or more just for translation costs, let alone foreign associate fees and national patent office filing fees. Easy six figures. There goes the Tesla Roadster acquisition.
Patenting is not the only cost out there. Typically there are costs associated with getting an invention in well documented form–a working prototype, demonstration materials, papers to write, data to collect and assemble in a form that’s usable. These are application and/or transfer costs to have the invention in working order, or at least a clear description of it. Sure the patent application has to teach the invention at a certain level, but the working documentation involves the technology–not just the invention–and that can mean assembling parts lists, and developing a platform or context in which to demonstrate the invention. Beyond these costs there are costs associated with development of the invention and development of new users–early adopters, who may not care about product development or speculative investment. Just other folks who see the worth of the invention and want to work with it. So there are time costs and out of pocket costs. Finally, there are management and marketing costs. If one is using an invention management agent, then quite apart from the attorney and patent office fees, there’s the invention management agent to feed and clothe and outfit with a Tesla Model S. So those expenses have to be covered, too, if one is going to use them.
We’ll pause here and note that if a royalty of inventors (i.e., a group) can manage their patent affairs directly, then they do not have a whole lot of out-of-pocket expenses to cover. However, if a university steps in and requires the use of its licensing office, then it will expect to recover its costs from some future revenue stream, and may give up work if it loses confidence that it will be able to create that revenue stream. Then it will want to recover its costs from something else–infringement litigation if it gets the chance, or from the inventors if they want the rights back. The point is, involving a management agent can increase the money needed to “recover” from the management activity, and that in turn can change the choice of strategy for the agent and the inventors alike.
Attribution also involves a number of things. When one buys a book, it’s a little creepy if there is no author listed. Just what is going on? Even a cookbook made by committee gets “Betty Crocker” as an attribution. But when one buys a car, with its 300 or so patents, no one sees any inventors listed at all. Copyright = fame and Patent = oblivion, at least when it comes to product attribution. Well, that doesn’t work for a lot of things in academia, which involve reputation building, priority for discovery, opportunity to compete for grant funding, and advancement. So personal attribution in matters of scholarship matters, and an invention is often another expression of scholarship. Rather than get buried in a corporate invention inventory control system, a university inventor often wants to use an invention as part of developing reputation, laboratory, collaborations, research opportunities, conference papers, consulting, and company applications. For a university royalty of inventors, company use may be more valuable than trying to get companies to pay, or to get just one to invest to make product to sell to the rest. Widespread use with priority attribution is a pretty darned good outcome in a number of academic settings.
If a university removes an invention from a lab and dedicates it to an effort to charge companies to practice, and that in turn chases companies off to other technologies, then the whole widespread use with attribution is down the tubes. Worse, if companies use covertly (or even stumble on the same stuff somewhat independently) and then cannot afford to give attribution as that would open them up to willful infringement if they know about the university patent. So there’s a lot at stake in terms of what an academic inventor might value, and what changes when a university agent dedicated to “commercialization” by “exclusive licensing” takes over, especially if there’s a mandate to “recover administrative costs”.
There are other sorts of attribution at work, too. The laboratory might develop a reputation, or a web site. Take, for instance, Open 3d Printing. Here we developed a web-based outlet for an instruction-based research laboratory developing open hardware and materials systems for 3d printing. The web site reports its progress and ideas with a number of correspondents, and gets somewhere between 300 and 500 visits a day, with many more for a big announcement–pretty good for a mechanical engineering lab. But that’s attribution, too, providing a visible source of information to support a community’s interest in open 3d systems. (It is, by the way, also a nice form of NIPIA–a non-IP intangible asset that may be “worth” more than any particular thing that was published that helped to create it–certainly it is worth more to the Solheim Rapid Prototyping / Rapid Manufacturing Lab. Choice of agent can change the choice of venue for the reporting and distribution of inventive stuff. That in turn can influence attribution.
The core IP right involved in attribution is trademark, often cited as the most valuable form of intellectual property, and for good reason, because a trademark connects a proprietor of a good or service in the marketplace with the goodwill of a community audience. Goodwill is often a major contributor to a company’s intangible assets, in the form of brand and brand loyalty. An invention with a distinctive name, made available through a distinctive channel can develop a host of valuable IP and NIPIA without the patent itself making a dime in licensing fees. This idea is alien to a patent licensing house devoted to moving patent rights for royalty-bearing licenses, but not at all for anyone dealing in standards, consulting, research services, and interoperability. In some early markets, competition in the form of others adopting and selling the same thing is actually a positive influence on the adoption decisions of major players. A trademark can distinguish the competing goods, associate the acquisition transaction with quality research and consulting services, and realize significant value growth.
One faculty developer pointed out that whenever she needed extra money, she could hold a summer workshop, and she knew she would get 50 attendees willing to pay $2K each for a state of the art briefing in her area of specialty, and she’d clear nearly $100K. Now, she astutely asked, how much work and how long would it take for her to get $100k as her share in royalties from a patent license? Well, that would be five years or so from license to product sales, and then the product sales would have to be, um, on a 2% royalty after 20% admin fee and a 1/3 split to the inventor, assuming she’s the only one, the invention forms the primary IP in the product so there’s no stacking, that would be like $20m in sales, a modest success, for sometime well down the road, perhaps. Meanwhile, she can do $100K every year with a week long summer workshop, and pay for patenting to her heart’s content, and give away the patent rights along with other stuff as perks to her workshop attendees. $2K for a workshop with a leading light, and free patent swag in the bag as well. It just doesn’t get any better. Compare to the lugubrious come-on from the patent licensing office–if you were in industry, which would you think is the better working relationship? Which do you think you could get through your legal counsel?
Attribution also works at the institutional level. The university wants to be known as a hot house of innovation, and patents add to the lustre, or so I’m told. Thus, there is an attribution interest at the university level as well, but here it is more of a reputational thing, like bragging rights, more than it is something that develops the reputation of the inventors, or NIPIA that marks areas for non-licensing value creation. At times, attribution may be more important that ownership or control, but money seems always to give attribution a run when it comes to what really motivates administrators. It’s nice to be acknowledged, but even nicer to get paid. As for attribution for the technology transfer workers who process paperwork, cover the attorneys, handle upfront expenses, and help make connections, they rarely get any attribution, though it is nice when it happens. Usually they are stage managers that don’t show up at the final curtain and maybe if they are lucky get in a long list in 7 point type somewhere on a program to fill out extra white space. But like Mikey in Monsters, Inc., it’s still something.
Finally, there’s risk. Risk is the dark thing in the closet that doesn’t get discussed as much as it should. There are a number of species of risk, some obvious and some not so obvious. There’s legal liability kinds of risk–risk of breach of contract, of product liability (not so much for a pure patent license, but it comes up), or regulatory violation; there are business and financial risks–that a patent doesn’t issue, that investors pull out or a license gets cancelled or a licensee doesn’t pay; and there are personal risks–of wasted effort, of opportunity costs, that people one has to work with aren’t competent or pleasant or focused; and there is always the threat of accusations of conflict of interest by the institution or misuse of resources by disgruntled associates. The biggest risk of all is that good stuff does not get used, for whatever reason, and for that it is often an open question whether obtaining a patent increases the risk of non-use, or lowers that risk. In my experience, I’d say that it is typical for a patent to raise the risk of non-use, especially where there is not immediate application and the development costs are moderate.
Risk starts with ownership–if you own, it’s all your problem, until you distribute control and bring in others. That’s where agent thinking gets interesting. An agent may be in the position to absorb a lot of risk and mitigate other risks by using sound management practices, working with capable and experienced legal counsel, and knowing who to talk to in industry and investment markets, and who to avoid. It’s like having a real estate agent who carries insurance, has been through a number of deals, and knows a lot more what to expect. For university inventors, use of an agent has been a good idea–going on a century now since Research Corporation was formed by Frederick Cottrell to act as an agent for a portion of his patent rights.
The challenge is–what agents are available? Who should a faculty inventor choose to work with? And what might come of differing pathways? Now we are ready to discuss forms of agency. Then we can discuss the rationale for collapsing the diversity of agent options into an institutional monopoly focused on putting patents behind a paywall. From that we can ask if coercing faculty to assign inventions to their universities is all that good a thing, even if some folks have made money by doing so. Then we will be in a position to discuss whether it might a good thing to free the bugaboos that AUTM apparently fears, and perhaps, in an unexpected resolution it turns out that AUTM really doesn’t hate bugaboos like faculty choice and diversity of invention management agents, and that it would be really good for AUTM members, and for growing AUTM membership. Then we could all be happy again, after a fashion.