Bayh-Dole was written for the research foundations. Pity for us all that it didn’t work out.

After I wrote the previous article, it struck me that the origins of Bayh-Dole really are with the affiliated research foundations trying to license patents to industry, not with the universities, and not even with Research Corporation (which remained neutral on the matter, according to a reliable source who was close to the action). Thus, the expansion of focus in Bayh-Dole should be thought of as moving from the affiliated research foundations, which wanted access to federally supported inventions without having to show a plan and without federal agency oversight, to nonprofits in general, and thus including universities (only a handful of which had their own licensing operations), and finally reaching to small businesses. It’s not clear that university officials or small business persons were advocates at all for the law. I see nothing to indicate that university faculty in general thought the Bayh-Dole Act was important to their work. No outpouring of public support. A dog of a bill, snuck through a lame-duck Congress. From what I have read (and heard), Bayh-Dole was a creature of Purdue Research Foundation, Wisconsin Alumni Research Foundation, and the “three amigos”–the patent counsel at the NIH, patent counsel at WARF, and a staffer for Senator Bayh.

In creating the law, they had to include the national invention management organizations, led by the Research Corporation. So there’s that “nonoprofits, including universities” construction, sounding so strange in Bayh-Dole. It really should be, “nonprofit invention management organizations,” but that would expose the movers to scrutiny. Adding universities and small businesses added political empathy.

One problem for the affiliated research foundations was that theinvention management firms with national scope, such as Battelle, University Patents, and Competitive Technologies, were the competition. Everywhere that faculty inventors had a choice of invention management agent, a local foundation was likely at a disadvantage relative to a regional or national invention management firm. The underlying theme was how to prevent inventors from choosing what invention management agent they would work with. That’s where the research foundations worked hardest–to change university policies so that just as the federal government could not take an invention, neither could faculty inventors withhold their inventions from the university, who would then pass the inventions to the local foundation for management.

This is what the affiliated research foundations mean by “title certainty.” This is their “clever scheme.” But why would big pharma want to work with the research foundations?From a big pharma perspective, the rapid expansion of federally supported university research meant that the government was turning “compound mineral rights” into public property. It was the equivalent of nationalizing all the gold ore in the ground, before anyone could mine it and own it privately. The workaround, apparently accepted by big pharma for a time, was to allow the research foundations to take monopoly ownership of government-supported inventions, and then license exclusively–but not assign–rights in those inventions to pharmaceutical. This was just word games. An exclusive license of substantially all patent rights is an assignments. It’s how the instrument functions, not what it calls itself.

So the deal was, “we, big pharma, will play along if you can get us the government’s inventions.” The quid pro quo is that for the stuff that was successful, the research foundations would get a share–on the order of 1%. Big pharma could swallow that. The government could accept it. Affiliated research foundations had found their parasitic niche in monopolistic biomedical licensing. All they had to do was pull back inventions that otherwise would go to the government, and take a brokerage fee for running cover for transferring tacit ownership to whatever big pharma company happened to be ready to play. What was good for the deal with big pharma would also be good enough for all other forms of invention, and all other industries–except no one bothered to check to see whether this was true (and it wasn’t, by far).

What big pharma didn’t anticipate was the rise of venture-backed biotech, which at first threatened to displace pharma, then learned to exploit pharma (selling up), and finally quieted down to be something of a minor league farm system for pharma, taking risk, and paying off the venture investors and entrepreneurial scientists when something needed to be got out of the way, or in those rare cases, when there was big money to be had. Big pharma also did not anticipate the tenacious, perhaps one might say grasping, and risk averse licensing terms, which looked more like a shakedown than a brokering.

What the affiliated research foundations didn’t anticipate was that big pharma was not about to hold to its tacit deal, and that university administrators, smelling lucre, would try to bring all the activity in-house–even taking the local business from all but the most well established of the affiliated research foundations. Big pharma licensed research foundation and university biotech patents for about a decade, and then grew tired of it.

As is typical in university settings, when things appear to be going well, a particular sort of university administrator aims to bring successful things in-house, where it gets dumbed down, processified, and ultimately stultified. That is, if Research Corporation was doing well with licensing, and was taking, say costs plus 40%, then a university administrator (again, of a particular mindset) would think that the university could do just as well, and pocket that 40%. Such thinking often leads to failure and waste, but those university administrators who do think in this manner have a habit of outrunning their mistakes, leaving before the waste is obvious, or blaming something else, like “the structure” or “uncooperative companies.” The administrators then re-organize, rename the program, and bring in another candidate based on swagger talk for another expensive honeymoon that does no better than the previous one. This is not a criticism of the folks trying their best to do the licensing. It is intended, though, as a criticism of the ones those who put them up to it under such awful conditions.

Bayh-Dole did not accomplish all the research foundations wanted. It did not force ownership of inventions from inventors to host universities. It did not require universities assign only to nonprofit invention management organizations. It did not prevent agency oversight. But it did allow foundations to keep inventions with impunity, grant exclusive licenses without agency approval, prevent public disclosure of results, and make march-in procedures so convoluted no one has successfully used them–so convoluted that the law was drafted with language to protect federal agencies that found a need to extract themselves from march-in proceedings. So the advocates lost on outright ownership and limitations on assignment but gained a great deal by gutting public accountability.

They then set out to get in the field what they did not get from Congress–and so they established the myth that Bayh-Dole vested ownership, created a licensing survey instrument that avoided the metrics requested by Bayh-Dole, and worked to get university patent policies changed “to conform with federal law” when in fact the policy changes had nothing to do with conforming to the law. But once those policy changes were in place, then the law did not much matter. It took twenty years to get policies changed. Then they were confident enough to go to the Supreme Court with a case, in the hope that the Court would agree with their story about what Bayh-Dole required–only to be tossed on their rear-ends by the Court’s decision.

Undeterred, not a single university (to my knowledge) has changed its policy statements or guidance to faculty inventors to conform with the Supreme Court’s decision. Instead, those that made changes further tightened their claims on faculty creative assets–not just inventions that are or may be patentable, but pretty much anything that might be packaged up and sold off under the rubric of “invention” or “intellectual property.” Thus, invention comes to mean both patentable and not patentable inventions. Intellectual property comes to mean intellectual property and non-intellectual property such as tangible property, data, information, and know-how. Publication comes to mean advertisement for a license in academic journals, rather than an open announcement of information free for public use. University administrators, using the same clever but wrong technique used originally with Bayh-Dole, then created the fiction that to comply with Bayh-Dole, universities had to implement present assignments–so the university could own all research assets upfront without prior review for circumstances all that a faculty member might “invent”–and I put “invent” in quotes to indicate that it encompasses a much wider range of assets that those involving patents.

In essence the administrators broadened the disclosure requirement–reporting what one is doing for purposes of institutional awareness, equitable management of circumstances, and the like–and combined it with the Bayh-Dole Act’s standard patent rights clause requirement that universities must require their research personnel to make a commitment *to the government* to disclose patentable inventions to the university host, and thus made a new requirement, that faculty had to agree to assign all inventions of any sort as defined in policy to the university–even those inventions for which there was no valid theory of ownership. There is no more need for present assignments under Bayh-Dole as there was to claim that Bayh-Dole vested ownership directly with universities. Total crap. But crap happens.

The standard patent rights clause authorized by Bayh-Dole works because the clause requires universities to delegate–in essence subcontract–certain functions under each funding agreement to their research personnel acting in their private, not employee, capacity. Thus, those personnel, if they invent, become “contractors” under the definitions given by the law, and their inventions are “subject” to the standard patent rights clause–as it applies to them, personally, and then also to their university, as they report their inventions as they have committed to do under their (f)(2) agreements with the government. It’s just that university administrators refuse to comply, and instead demand outright ownership and by this method can argue that they have made the (f)(2) requirement moot because they ensure that it will never be needed. But it is not at all clear that public universities, at least, have the legal authority to take private property for public purposes without due process and just compensation. They just bully their way to ownership, and most faculty don’t have the resources to fight them. It costs about $150K to prove them wrong, and even then it doesn’t stick. The University of California, as one example, merely goes back to its old habits again, figuring no court is going to come after them for contempt, and it will be years before another faculty member is willing to spend the small fortune to check them again.

Even calling it noble cause corruption misses the mark, because there’s really not much so noble about it–the encroachment on academic freedom, the conversion of discovery to capital, the placement of capital into the hands of administrators without public accountability or oversight, the commitment of that capital in primarily exclusive licenses, the dealings with speculative monopolists under the heading of entrepreneurship or economic development, the suffocation of thousands and thousands of ideas, discoveries, collaborations, and opportunities, and the nearly complete destruction of the national invention management agents, the fragmentation of related discoveries into provincial portfolios–and all to support the idea that if the university could just make a pile of money, even from one license a decade, all of this domination, bitterness, complexity, expense, liability, and institutional selfishness would somehow be worth it.

The conflation of nonprofit, university, small business, and later large corporations all under the heading of Bayh-Dole is cover for the effort by the affiliated research foundations to stockpile as much research capital as they could on behalf of investment capitalists. Oddly, instead, it turns out that the university administrators for the most part have tried to do the job themselves, and thus universities now claim to be the beneficiaries of Bayh-Dole, when the law itself treats universities (and their nonprofit affiliates) with the greatest level of distrust. The affiliated research foundations imagined the law to serve their needs, got enough of it to claim victory, and then presided over the destruction of the innovation ecosystem that they had fought so hard to get a bigger piece of. Sad the day. And it will continue in this byzantine, gridlocked, false-speaking, publicly deceptive, expensive, innovation-killing way until the university administrators let go of what they have taken, and never should have taken. How that happens, I don’t know. A bunch of $150K lawsuits, I guess.

Better, if someone in a position of responsibility would have the courage to do the right thing. Release faculty from the compulsory obligation to assign ownership of anything to the university as a condition of employment or use of university facilities or use of university-administered funds. That simple. This approach is time-tested. This approach was the basis for Bayh-Dole. This approach was then destroyed by greed and misrepresentation. It can be restored by integrity and the truth.

 

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