The Legal Context of University IP, Part 1 Revisited

In 2010, the National Academies and the National Research Council published a commissioned a report–The Legal Context of University Intellectual Property and Technology Transfer by Sean O’Connor, Gregory D. Graff, and David E. Winickoff. The report lists 45 findings and expands on these with detailed discussion. In 2011, the U.S. Supreme Court decided Stanford v Roche and tossed some of these findings. But let’s have a look anyway. Since it doesn’t appear that any of the authors has much hands-on experience managing university IP, it should make for an interesting read.

The report has a useful, if partial, history of US patent law and federal research and invention policy. What’s notable about the history provided by the report, especially in the run-up to Bayh-Dole, is the absence of academic historians who have worked the issue–including David Mowery, Rebecca Eisenberg, and Sylvia Kraemer. For university patent policies, Archie Palmer’s work isn’t cited. It’s like whole blocks of the literature were not consulted, or if consulted have not been acknowledged. My own work involves two decades of practice in universities, dealing with Bayh-Dole, with policy requirements, with attorneys, with contracts, and all those layers of law, regulation, and policy that the authors of the report refer to. I have also spent the past seven years reading scores of university patent policies, chasing down the history of Bayh-Dole on my own, talking to people who were around when Bayh-Dole was being debated and the implementing regulations drafted. Research Enterprise–now with close to 700 articles–is one consequence of my work. 

The authors of the report have their path and spin; I have a different path and analysis. The benefit that you have, then, is the chance for a sense of perspective. The key thing is to look carefully at the text of Bayh-Dole, the implementing regulations, and the standard patent rights clauses and ask which account best conforms to what is there, in these texts and how they must operate. Decide for yourself by reading the texts. Follow the same procedure for university policies. Don’t just read a university patent policy–look, too, at its research policy, statement of academic freedom, and employment practices. The work does not stop there. We must also look at practice. Don’t assume anyone complies with Bayh-Dole–most don’t, especially where it counts–or even with their own policies–again, most don’t comply, and their policies are written to allow administrators not to comply while setting up sanctions on anyone else who doesn’t comply. And while we are at it, be skeptical of university reports and guidance materials. While these writings may be accurate on some points (the number of invention disclosures received in a given year, say), they are often not accurate or silent on many other points (such as how Bayh-Dole operates, what things were like before Bayh-Dole, and how successful their technology transfer program is).

This Legal Context report is wildly off. Though it’s prior to Stanford v. Roche–and Sean O’Connor wrote a valuable amicus brief in that case (and I contributed to other amicus briefs in that case)–the report still misses on a number of points, opting to recite conventional–and ubiquitous–“wisdom” with regard to Bayh-Dole. Post-Stanford v Roche, there’s even more that would have to be done to put the report in decent shape. It’s tough to get past what legal experts say is true, to get at the truth, to read carefully and fully rather than to assume and assert. For that, the report and my comments here might play a complementary role to illuminate the issues and point toward directions for productive action.

First, let’s just look at the report’s findings for patents. There is much more in the report’s supporting text, but there’s only so much time in the day. Open up a new window for the report and follow along as we look at the findings of Part 1, “Overarching issues.”

Finding 1. The legal environment of university IP and technology transfer should not be reduced only to patents and/or the Bayh-Dole Act as implemented. 

IP is indeed broader than patents, and university IP management has to do with way more than federal funding agreement requirements for subject inventions. And it’s true, many university IP officers do use “IP” as a sloppy shorthand when they mean patents, and it is true, too, that their Bayh-Dole practice (wrong and noncompliant as it is) does dominate all their “IP” work–often in odd, unexpected ways. For instance, because they read Bayh-Dole to mean that if “even one dollar” of federal money touches some research or enters a lab, everything in that research or lab must be owned by the university “just in case” Bayh-Dole applies. Nonsense–the Supreme Court even said it was nonsense–but there it is, going to its own 11.

The finding goes on to point out that IP includes copyrights, trademarks, and plant varieties, with the implication that these are all part of “university IP” as well. In this, the report makes a mostly empty distinction with regard to IP, and at the same time conflates the scope of the distinction. How to unravel all this for you?

There are various forms of “IP.” But for technology transfer, most of those forms don’t matter. Inventions and plant varieties are covered by Bayh-Dole. Copyrights are almost entirely a matter of scholarship and not technology transfer (but for some software and database elements), and trademarks while useful really don’t involve technology and have a separate life at universities, starting with university emblematics and the sports programs. Conflating all this as “IP” then goes the wrong way entirely, and makes things more abstract, more complicated, less tractable, and more given to legal dispute–just what attorneys thrive on. Perhaps the Legal Context report is attorney market development.  Instead, the primary thing that does matter are actual issued patents. Not inventions generally (patentable or not), and not even patent applications–but issued patents. And not any patents, but only patents that are suited to university management, patents that provide benefit for those inventions that are not practiced but for the patent. A university patent policy might identify these patents, or at least delegate authority to review inventions for such patents. A patent policy might also identify patents for which it is inappropriate for a university inventor to do other than make the invention available royalty free, non-exclusively (or, alternatively, not enforce the patent), unless the inventor leaves the university to pursue a broader exploitation of the patent.

It turns out that a patent policy based on these two concerns–what the university must manage and what’s inappropriate for anyone at the university to manage and remain at the university–is remarkably straightforward. A university might then determine that there are no patents that a university must manage, and direct all inventors to use agents external to the university for any patent work they feel they need to do. Or a university might determine that the only patents it will hold will be used to contribute to standards and be licensed on fair, reasonable, non-discriminatory terms, starting with royalty-free. There would be no need, then, for a university to claim everything, require disclosure of everything, paw through everything for anything that might make money through licensing, and patenting most of the stuff that can be patented, running up substantial legal bills, creating huge administrative difficulties, and then wringing hands over how to pay for it all.

The point is–a university patent policy that focuses on just those inventions that a university must control by means of patent will be more effective than a policy that starts with a broad definition of “IP” and then wallows in the complications that follow from that expansion of concern.

“University IP” conflates things in another way, making it appear that a university owns “IP” when that’s one of the issues to be addressed. The very usage “university IP” implies that universities own IP as a matter of course and the problem is sorting through all this IP for what ought to be transferred. In using “university IP” the Legal Context report assumes its own paper bag of complications and spends the rest of its time trying to battle its way out.

Consider the conflation of “IP that is properly and of a necessity the university’s to manage” with “IP that the university comes to own” with “IP created at the university” with “IP created by people who also work at the university.” “University IP” is an awful shorthand for a discussion of the legal environment for IP at a university, given that federal copyright and patent laws both start with the individual, not with an institution that happens to host what individuals do.

A better opening point of discussion is: What role should a university play if someone requests assistance in transferring technology? In the context of that discussion, we may then add, What should the university’s role be if some of that technology is patentable? Those are the two essential questions for university technology transfer policy–and within that policy, for patent policy.

“University IP,” furthermore, is especially inapt for institutions such as universities that make a big deal in formal policy about freedom of research and freedom of publication. These institutions expressly disclaim control over research and publication–how then can they also assert ownership of the right to publish (by suppressing publication prior to patenting, by forcing publication in the patent literature)? How can they assert ownership of inventions so that faculty cannot disseminate those inventions openly or teach others how to practice those inventions, except by the permission of university administrators. That doesn’t sound much like freedom of research or publication.

But federal funding now accounts for more than half of all research expenditures at most research universities, and administrators love having one policy to rule all things, so expanding federal-like procedures to all IP (and to NIPIA–non-IP intangible assets, and tangible research property) is bureaucratically natural. I have seen in the wild a university bureaucratic argument that runs along these lines: “Bayh-Dole requires us to take ownership of inventions made with federal funding, and it is therefore unfair to all other inventors that we don’t take ownership of their inventions, too, so our policy covers everyone, in the spirit of equality.” This, without regard to whether the university does a decent job with its Bayh-Dole inventions (which, generally, it doesn’t–and gets Bayh-Dole wrong in multiple ways, too). The argument reduces to “It is unfair to inventors that some of them are forced to give up control of their work to our cruddy licensing operation, so in the spirit of fairness we force all inventors to give up control of their work to our cruddy and now overworked licensing operation.” Rather than worry in some sophisticated way the legal context for such a cruddy policy decision, wouldn’t it be better to call out that cruddy policy decision, unwind it, and then do one’s sophisticated legal analysis of context?

Finding 2. Through changes in the economy and public policy, universities have come to operate both defensively and offensively within a highly complex IP environment. 

This is a deeply bizarre finding, though it recites a commonplace regarding “IP.” The finding amounts to “universities must minimize infringing IP” and “universities assert IP.” The “defensive” claim:

‘Universities must ensure that their research is at minimal risk of infringing IP, personal property, contractual, tort, regulatory, or other statutory rights of external individuals or institutions.

State universities, in particular, cannot be sued in federal court for infringement unless they agree to it–so for research purposes, what again is the policy reason for a state university to “minimize” infringement? No one is suing universities for patent infringement anyway. Why? Because there are no statutory damages for patent infringement. A patent holder has to show actual damages. The actual damages from university research are going to be minimal–less by far in most cases than the cost of the litigation. And there’s no reason to sue–merely sending a letter to a university administrator is often enough for them to demand that the research fold, even if there are good public reasons for continuing the research and doing what is necessary to work a deal or fight back (such as invalidating the patent, arguing antitrust/patent misuse, showing that the research is not infringing, and the like).

The problem of infringement of external party IP rights does not have to do with a university being “defensive.” The problem is that if one develops technology and that technology practices something controlled by another, then transferring that technology requires some dealing with that another. Simply, if one builds a house on someone else’s property, then renting it out can be complicated. It’s not the university that has a problem, and certainly not the university research–but rather, it’s the potential recipients of the new technology, who cannot practice the technology without some arrangement with the others that control elements of that technology. The university’s interest in such external controls has to do with care on behalf of public recipients of the results of research. It’s a sort of defensive-for-those-that-will need-defense.

Back it up a bit. Why is someone at the university doing “research” for public benefit using technology that the public won’t be able to use because there’s someone out there with exclusive rights that shows no inclination to grant non-exclusive, non-discriminatory licenses? That research would appear, then, necessarily to be for the benefit of the holder of those exclusive rights. Perhaps the public will eventually benefit after the exclusive holder of rights has made its profits, or the public will eventually benefit because someone else figures a way to design around the exclusive bit and cut it out of the technology, or when the exclusive bit rights expire. But that’s a long way around, isn’t it? One role for a university, then, might be to help to identify research technology that should not be used for research because the results cannot be transferred to the public. It’s like the whole fuss over confidentiality and “secret” research. Universities get all upset over research that cannot be published without the approval of some external party (trade secret or copyright), but don’t raise their eyebrows over research that results in things that cannot be used, but for the approval of some external party (patent). If universities focused on open platforms, and researchers had the opportunity to make their work open as well, then there would be, over time, a robust open environment in which both research and industry could operate, with fewer legal complexities, less potential for IP disputes, and less role for attorneys. Sad day, I suppose, for some.

Universities must ensure that their research is at minimal risk of infringing IP, personal property, contractual, tort, regulatory, or other statutory rights of external individuals or institutions.

Let’s unpack this bundle of dynamite. Note some usage:

“their research”–rather than “research conducted using their facilities” or “research conducted by individuals pursuing independently chosen lines of inquiry” or “research conducted under contract between the university and an external sponsor of research in support of a faculty investigator.” “Their” suggests that a university owns or commissions faculty research. It is rarely the case that the university owns the *research* as a matter of equitable title or commissions the research or directs and controls the research. No such control. No such intention. Not part of academic freedom. No trade secret.

“at minimal risk”–this is a bureaucratic dream and contrary to public mission. A couple of years ago, a big company threatened to sue a research university for infringement because some students in a design course using work taught entirely by expired US patents created a powder-based 3d printer in ten weeks. Rather than push back, the research university bureaucrats and lawyers caved in and shut the students down. Determining “minimal risk” is not the goal. Universities have to be willing to take risks–uncertainties in the behavior of patent holders–to support their public missions. That may include challenging repressive interpretations of, or uses of, IP law.

“research . . . at minimal risk”–this wording is fast and loose. The research is not the thing exposed, but rather the university’s administrative programs and finances. It sounds pious to protect “research” from nasty disputes, but the real issue implied in this construction is how to avoid spending money to defend against infringement, breach of contract, and regulatory violations. If one wants to simplify the *university’s* concerns, the best way to do that is to maintain distance between the university and the conduct of research. Faculty choose to do research, so let them. Don’t try to own their work. Don’t try to shadow it to control it. Some universities push their extramural research into quasi-independent research foundations. Before Bayh-Dole, nearly all universities pushed management of inventions and patents to an external invention management agent. Universities don’t need more legal guidance–they need to reverse their stumble into behaviors that create legal complications.

“risk”–this is typical lawyer marketing for “your situation is too complicated for non-lawyers to manage–keep the complications but hire lawyers to make the decisions.”

“defensive…offensive”–skew from reality. For IP “defensive” is establishing positions that permit freedom to operate–such as by-cross licensing or having IP ready to mount a counterclaim. Here, “defensive” apparently means having lots of administrators trying to prevent bad things (ones that are implied to happen but for the administrators–and because the situation is too complicated for mere administrators, those administrators have to be backed by good lawyers making the decisions). But there’s little evidence that bad things are happening as imagined by the report! But there is a huge body of evidence that administrators obeying crappy legal counsel (including a number of the findings in this report) are doing immense damage to faculty governance, faculty academic freedom, faculty collaboration with industry, faculty public service, faculty entrepreneurship, and the cost of higher education.

“Prudence” might be a better term, if one were looking to consider how faculty, students, and administrators work with others’ IP, contract for services, and comply with federal and state law.

For IP, “offensive” means disrupting competitor business opportunities by establishing IP positions that blocks development of their products, whether directly competing with one’s own or not. “Offensive” is a rotten term to describe publication, instruction, disclosure, or transfer of discoveries. To use “offensive” here suggests that university administrators must plan for litigation to enforce rights–but that’s *defensive* IP practice in the real world. A better term (and concept) might be “service.” How does a university facilitate the transfer of ideas that its faculty and students come upon, whether by discovery, invention, creativity, or training? Instead, the authors create the impression of an aggressive university bureaucracy ready to stick it to those external parties too thick to pay up. Hey–we get it, you wouldn’t adopt great ideas unless they come with a threatening bureaucrat and patent. Now that’s offensive!

The dichotomy of defensive and offensive appears to derive from corporate IP practice. The report does not consider whether corporate IP practice has much at all to do with university administration of faculty-led research–research that a university does not commission, direct, approve, review, control, disclose, publish, or teach. How unlike most corporations!

Finding 3. Like most individuals and institutions, universities operate in a mixed legal environment constituted of federal, state, and local laws and policies. 

Are there any individuals or institutions that do not operate in a “mixed legal environment” of federal, state, and local laws and policies? This is a finding? No, it cannot be. Perhaps the point is that a university must deal with multiple jurisdictions, just like other organizations.

If state universities have additional IP problems as a result of state oversight, then a de-complicating move is to limit what IP the university (and by proxy, the state) claims. If the purpose is service, then claiming IP is largely unnecessary. Even if the purpose is financial, using external agents greatly reduces problems (financial, ownership, disputes, compliance, training) while preserving financial interest. Universities used this external agent approach for decades, before bureaucrats used Bayh-Dole as a club to destroy the practice.

What might be a more useful finding is that when a university makes IP ownership claims and then grants exclusive licenses, over time it increases the likelihood it will end up in contractual disputes–over double licensing, over payment, over diligence. Contract disputes–employment and licensing–not infringement, not non-compliance with laws, is the likely source of legal troubles for a university. That would be a good finding. But no.

Finding 4. Few universities give a clear policy mandate to their technology licensing offices (TLOs)(, which complicates many legal decisions with regard to university IP and technology transfer. 

“Few” here is an overstatement. Anyone who has bothered to read university IP policies carefully will know how awful they all are–badly conceived, badly drafted, unconscionable in their demands, unenforceable but for administrative and legal bullying–but despite all that, most universities give their TLOs a clear policy mandate: make money licensing inventions for public benefit.

Prior to 1980 and Bayh-Dole, most universities did not have “technology licensing offices.” A few did–Stanford, MIT, UC. That’s about it. Most universities pushed all licensing to external agents–local research foundations and to Research Corporation. University patent policies reflected this. The mandate provided by policy involved dealing with patents: ownership, equity, and venue. Generally, universities did not own patents or copyrights unless the equity of the situation required otherwise, may have a financial interest in certain patents and copyrights, and sought to have commercial activity take place outside the university’s direct control.

Much of what has happened since Bayh-Dole has destroyed not only the external agent model but also the equity approach to the disposition of inventions has involved patchwork revisions of university patent policies. The general premise is kept, but ownership claims are swapped in and expanded, and external agents are removed in favor of an internal licensing program. The result is a “monstrous hybrid,” to use Jane Jacobs’s term.

The problem that the report finds is that there are competing goals once a *university* decides it must own and license patents and copyrights arising from the independent work of its faculty and students. The competing goals only arise because the university owns. The Red Cross Knight learns this when he defeats Error and becomes, then, the Lord of the whole domain of Error. But five hundred years of literary tradition is lost on lawyers.

But here’s the awe-inspiring issue in this finding. The problem of competing goals is not one of law, but of governance. That’s precisely what faculty governance is all about–that competing goals are allowed to co-exist, that debate may shift resources among these goals. But what does the report suggest–that laws could end the debate and displace governance. Holy cow! What are these folks smoking? Clearly not anything made from academic freedom. And the reason for using law to dictate the specific goals of university IP? To make legal planning “more effective”–that is, lawyers would not have to think about public mission or competing goals and would just comply with some statute.

It was bad enough that Bayh-Dole destroyed agency flexibility with regard to the management of inventions–most inventions held by federal agencies were to advance broad access to platform technology rather than fragmenting patent rights among speculative monopolists. There’s history here of self-interested gridlock that defies anyone quoting Adam Smith about unseen hands. The idea behind Bayh-Dole was to allow federally supported inventions to enjoy reliable access to the diverse, external, highly selective, and modestly successful invention management practice developed by universities. Faculty inventors could decide what they wanted to do, and what goals would take priority. Many–the great majority–chose to publish. A few chose to seek patents. How the patent might be used was a personal decision, not an institutional one. That decouples the goals of one inventor group with those of another. An attorney dealing with an inventor group that wants to start a company is not in any way confused because another inventor group wants to use public licenses. The confusion identified in Finding 4 has entirely to do with the problem that academic attorneys don’t know who the client is–is it the university administrator? the faculty inventor? the dean? the Board of Regents? the public? The appropriate response is: there can be no such single goal legal planning in a university that supports diversity and governance. If you want a police state, sure, aim for a law that displaces all this. That way lawyers can know just what they have to do, even if there is no client. Legal planning for a university, apparently, is about compliance not support for personal choices.

 

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