How Bayh-Dole dammed, and then damned, the commons

This is the third article in a series. The first is here. The second, here.

The motivating driver of the Bayh-Dole Act, if we can be blunt, was to put the affiliated research foundations in a position to keep with impunity any federally supported invention they could get assigned to them. This workaround was necessary because certain agencies–the Public Health Service and Department of Energy, in particular–had policies that expected public ownership (that is federal ownership) of inventions made with public support. For health care, this policy followed a long tradition, also at universities, of holding that it was unethical for medical interventions to be monopolized by anyone–and this position was argued especially for inventions made at organizations operating in the public interest, such as universities, state governments (in the case of public universities), and the federal government. About all that’s left now of this argument is the practice of refusing to permit the enforcement of patents on surgery techniques. But at one time the prohibition was much broader. Harvard’s patent policy went so far as to offer legal assistance to faculty seeking to overturn any medical patent. Loma Linda University’s policy declared such patenting unethical and prohibited it. How times change.

Similarly, the Department of Energy managed much of the nation’s nuclear energy research programs, and there were (and still are) some touchy things about uranium and plutonium that might not be entirely well off if a “free market” were to develop in these things. It is understandable that the DOE might want to limit universities from hauling off and creating monopolies around advances in nuclear energy (or weapons! or propulsion systems! or, or, oh gawd!) and then licensing these monopolies off to the highest bidder. Thus, the DOE policy was to look at each invention case-by-case. Makes some sense, doesn’t it? 

The effort behind Bayh-Dole was to get around these agency policies, and get the research foundations free access to the inventions being made by faculty at universities with federal funding, especially inventions involving the NIH. One problem was getting the federal agencies out of the way. The other problem was making the faculty cough up their inventions to the research foundations, not to Research Corporation and other national invention management agents. The first problem the foundations solved in Bayh-Dole. The second problem they lost on with Bayh-Dole, but created a cover story that snookered universities into changing their policies in the mistaken belief they had to do so to comply with federal law, but mostly also because they also believed that money would come pouring in if they did so. In solving these two problems, the research foundations and university administrators have managed to destroy a generation’s worth of research discovery, collaboration, and innovation. No, you won’t see AUTM reporting that any time soon. You don’t look in glossy institutional reports to see ghosts.

Hold in your mind’s eye the situation as it was around 1950: university faculty were publishing freely their biomedical research. Vannevar Bush had identified biomedical and information technology as two areas in which outsiders drawing on freely available resources and adding new discoveries could introduce huge changes into entrenched establishments. Bush had made such changes with the military during World War 2, creating targeted development centers that brought together talent drawn out from industry, from academics, and from the shop to build stuff that the military establishment could not even imagine. Think of Los Alamos, for instance. Bush proposed a National Research Foundation to manage civilian-version skunk works–to keep the funding decisions for such research and development outside of government, another entrenched establishment. The NRF became the National Science Foundation. The Bush scheme consisted of the following:

  • develop a robust commons of research findings
  • gain access to talent that could step away from entrenched bureaucracies
  • make skunk works populated by academics, industry folk, and gadgeteers
  • put inspired leaders in charge of the projects
  • have respected authorities present results to entrenched establishments

Put these five elements together, argued Bush, and you have a powerful engine for innovation. That worked for the all sorts of military applications. It worked again for the digital computer and the internet. And it worked in the medical field, with all sorts of discoveries–think, warfarin and expression of polypeptides in yeast.

When the federal government ramped up research funding after World War 2, it was following Bush’s vision. But not everyone saw the strategy as Bush did. The purpose of most government funding to universities was to feed the commons. Bush did not argue that people studying medicine would make advances in medicine. He expected that advances in medicine would come from chemistry, from physics, from information sciences–anything but directly from medicine. And Bush was right. But there was a competing simplistic version–that medical researchers should lead medical innovation, that chemistry researchers would lead chemical innovation, and electronics researchers would lead electronics innovation. And of course, this does happen–it’s just that it happens within entrenched establishments, and Bush’s vision for innovation had to do with how one challenges (or surprises, or obsolesces) an entrenched, established order, not how one subsidizes an entrenched, established order to do more of whatever it wants to. Instead, we got a simplistic linear model of innovation that broke research funding down into “basic,” “applied,” and “development” and relaxed in the idea that if one funded in each of these categories, the various segments of the worm would spontaneously join together to form a new worm, better than the sum of its parts. Even if academics and government funding officers thought otherwise, the linear model parked itself in university-affiliated patent licensing offices. It was a useful rhetoric, however flawed. The discoveries made at a university should first be somehow reserved for the benefit of that university. Nothing of value should “go out the back door.” Claiming patent rights was, in this view, simply prudence. The linear model still lives on in university patent policy and practice, with faculty creative life forced to imitate bad administrative art.

An established order generally aims to enhance the power of those in control of the order. A hospital does not willingly pursue innovation that would make the hospital obsolete. An electronics firm does not readily support research that undermines the firm’s investment in equipment or manufacturing facilities. University faculty, even, don’t tend to support research by what they consider to be quacks and fools who suggest that washing hands might prevent fever or that continents shift around on moving plates or that a bacteria might live in the stomach and cause ulcers.

Vannevar Bush wanted to pull talent out of the normal for a while, give it freedom, give it an independent focus, and have it build what it could imagine. And then present for adoption those prototypes–not shopped by garage inventors, not pitched by unfunded entrepreneurs, not held by wily patent brokers, but rather by senior leaders representing the effort–to the leaders of the established order. Adopt or obsolesce. That would be the option.

The idea of extramural research at universities follows as well from Bush’s requirements. Before the federal government got involved, most faculty research at universities was departmental research or personal collaboration with industry. Departmental research was professional development, often tied to instruction. A faculty member pursued his (or her) professional curiosity, often involving students, often as part of regular instruction. The discovery of warfarin is a good example from the past. Mark Ganter and Duane Storti’s work with open 3d printing at the University of Washington is a great example in the present.

For departmental research, there is generally no budget, no statement of work, no contracts, no required reports and other deliverables. By contrast, to conduct extramural research, a faculty member must request a *release* from official duties. The government (or another sponsor) then contracts with the university to fund not only the investigator’s salary but also the full cost of supplying the facilities, the budget management, and all the incidentals–power, equipment, janitors, purchasing agents. It’s as if the government has leased the talent and the talent’s lab to become a separate entity for the purpose of the research, pulled away from the established order of the university, away from whatever the university might think of as in its own self-interest. The result is a kind of short-term, leased skunk works working on a government-supported problem, to think about science, not about starting companies to promote the happiness of venture investors. There aren’t many skunk works now developed with federal funds, but extramural practices conserve the basic idea. That kind of innovation lay behind Bush’s arguments for federal funding of research. Bush was not interested in creating welfare for industry or a safety net for academic careers. But things don’t go the way even a person like Bush might envision.

Universities, prompted by folks like Archie Palmer, developed patent policies to address what happens as faculty became more involved in research supported by industry and private foundations. Mostly universities adopted polices that considered the circumstances  pertaining to each invention for which a patent was sought and decided what was fair, based on a recommendation from a faculty committee. Mostly they encouraged faculty inventors to work with external invention management agents, frequently Research Corporation–itself a creation of a university faculty member and industry leaders. Research Corporation had the standing–based on the industry credentials of its Board–to present developed research findings to industry and expect to be listened to. It was this approach that Bush both studied and built on, that proved to be successful. It was an approach that was diverse, used external agents for skunk work development, and freed innovation from institutional self-interest.

Government funding for university research, as it increased rapidly after World War 2, was not seen as an unqualified public good. President Eisenhower warned the public about the problems of government funding. The Chemistry Department at the University of Washington in the early 1960s voted not to take any government funding, as it might distort research directions. Now, of course, federal funding is seen as the best of all possible funding–but the concerns have not been addressed, just forgotten. The government’s move into biomedical funding, in particular, built on the research commons that was already in place and enforced by university faculty. The effect of government funding was to ramp up the movement of findings into the public domain, or, when the government acquired patents, to license those patents non-exclusively to support industry work. Government patents defined platforms and standards, not products and monopolies. Government patents fed the commons, prevented fragmentation of rights (as had happened in the early aerospace industry in America and which required government intervention).

But government intervention also meant that companies aiming to obtain monopolies on new biomedical products would have to compete for discoveries or they would have to share markets for discoveries with competitors. Imagine how costs would be reduced if all clinical testing data was shared immediately, if the fundamental compounds were available to most any company, that these would be “generic” from the outset and be differentiated based on formulation, quality, availability, and price. It might be that a billion dollars now claimed per successful monopoly drug might be only a few tens of millions for a drug built on a public standard compound. The early risks of compound discovery would be taken by the government, the prototyping costs and clinical testing would be shared across the industry by a “coalition of the willing” to borrow a phrase, and the profits would go to the competitors who produced the best final product. But this vision ran against that of the big pharma companies, and against the ideas of research foundation patent brokers, both of whom wanted patents on basic research to be used for monopoly control rather than for shared platform creation. That is, the patent managers were intent on exclusive licenses and monopoly control of markets. WARF had been dinged for anti-trust licensing practices already–twice.

The vision, then, of patent attorneys at both the leading research foundations was that basic research should not feed the commons. It should feed the established order, it should be for the benefit of wealthy companies and investors, and for this clever workaround to government policy, big pharma should be willing to pay a brokerage fee to the research foundations. Government would fund university research. Universities would require inventors to assign their inventions to the research foundations. The research foundations would hand the patents to their favored company or investment partners on an exclusive basis. The companies would make product and pay a tiny royalty and the research foundation would pay a share of this royalty to the inventors and a share to the university, and pocket the rest to support prototype development for the next generation of inventions–and the salaries of patent attorneys.

The problem in this arrangement was the uncertainty built by the Public Health Service into the institutional patent agreement approach. The PHS insisted on oversight of all exclusive licensing deals. If there was an exclusive deal, it had to produce product, and it could not be for longer than a few years. Then there had to be free competition. The PHS vision, consistent with Bush’s, was that basic research should feed the commons, and the commons should not be fragmented by institutional claims before prototypes were developed. Industry and innovators would draw from the commons–industry to advance its self-interests; innovators to present new things to an established order that changed what was worth being interested in.

Now perhaps you can see what Bayh-Dole was intended to do. Not what the law says it does, not what the advocates of the law say about uniform patent terms in research agreements. The purpose of Bayh-Dole was to allow private interests to convert federally funded basic research findings into capital and divert this capital from the commons. The purpose of Bayh-Dole–and its primary effect–was to dam the flow of research findings to the commons, to the public. You could say Bayh-Dole damned the commons. In its place, Bayh-Dole proposes the use of the patent system. There’s nothing in Bayh-Dole to indicate when the patent system should be used–just that it will be a private decision, not a public one–or at least not a federal one. The underlying idea is that market forces, led by the transformation of discoveries to capital, will create innovation; that offering findings in the form of capital for monopoly control will encourage development of new products. This view is so widespread now that patent policy experts can spout that without the ubiquitous conversion of basic research to capital in the form of patents for the benefit of monopoly speculation, there would be no innovation. Crazy! It’s like arguing we cannot laugh unless we are all dressed like clowns. The only way that works is if someone enforces the condition–that only those dressed like clowns are allowed to laugh.

And that’s what has happened with university research under the thumb of the Bayh-Dole workaround. It’s not that we cannot innovate without patents on basic research–clearly we can, and this computer that I’m working on has an architecture defined by the skunk works at Fine Hall that drew on basic research in the public domain–same for the internet protocols that delivers this document file to your computer to be assembled and displayed. No, what has happened now is that to prove that monopoly control of basic research can result in innovation, all other forms of innovating have been suppressed–open publication, dedication to the public domain, standards formation, open source software, consulting, agricultural extension, informal networking. When a university reports “innovation” now, it is reporting what has survived its repressive, self-serving processes.

Of course, no university comes out and puts it this way. Administrators talk about public interest, about innovation, about economic development, about changing lives. But these same people would call a stick of dynamite with a ribbon on it a pretty gift. When the intentions detach from the actions, then only a fool focuses on the intentions. When the intentions are merely pious incantations created by a committee on behalf of an institution or corporation, only an utter fool would expect more from the statement than from an examination of what is actually done. If it were otherwise, all thieves would walk free. All they would need is a nicely written statement of good intentions, and that’s all that a court would consider. It is a dream world for those who desire impunity, and that’s pretty much the dream behind Bayh-Dole–to give patent attorneys at research foundations and the monopolists who acquire patents from these foundations freedom from public accountability, and also freedom from accountability to faculty inventors.

Bayh-Dole was and still is an attack on Vannever Bush’s vision for how basic research supported by the government might create a robust commons from which groups with vision might build prototypes that demonstrated capabilities that the leaders of entrenched, established orders could not imagine, or would not approve, or would stamp out if given the opportunity. Bayh-Dole created a market incentive to monopolize the most important advances in basic research, diverted those advances from the public commons, gutted public accountability for that new market, and denied faculty inventors any say in how their research–often their life work–would be managed. Bayh-Dole allows the suppression of thousands of key research findings in the hope for monopoly licenses and encourages the fragmentation of basic research findings into institutional pools of self-interest (witness the disaster in nanotech university patenting–the number of patent owners is a measure of capital fragmentation, the antithesis innovation). Bayh-Dole has turned basic research publications disclosing inventive work into advertisements for monopoly licensing and prevents faculty investigators who happen to invent from practicing their own inventions outside the university that happened to host their work.

Bayh-Dole has been successful in creating a nation-wide bureaucracy dedicated to turning research into capital for the benefit of speculators. There is a big fight going in Congress right now over what to do about patent trolls. As with most politics, the remedies proposed carry with them some major problems. But Bayh-Dole permitted research foundations, and later universities as they abandoned the foundation front, to become the trolls of basic research, damming and thus damning the commons, disrupting the possibilities for “networked, non-market” innovation. Bayh-Dole prevents commons from forming, delays platform and standards creation, and obstructs the development of alternatives to entrenched, established orders. In all of these things, Bayh-Dole serves a narrow vision of innovation, in which the role of the broker is that of the factor, to get in between the established order and what it may desire. That is, to play the troll. In market terms, it is abbroachment–buying up the available goods to create a monopoly position to control the resale. And that’s what, collectively, the research foundations and universities have done. As they talk with one another at AUTM meetings, they participate in the ultimate nonprofit anti-competitive, anti-innovation activity.

There is a way to think of Bayh-Dole as relatively benign, a neat administrative correction to a confusion of federal agency approaches to university research. I used to think Bayh-Dole was okay, and the problem was with the folks who lied about it and the university administrators who believed the lies and–worse–took some delight in crushing academic freedom and the diversity of innovation pathways in their hunt for “new sources of revenue.” I still think the administrative response is negligent, even corrupt. But as I have studied Bayh-Dole and its history, and witnessed the effects as an insider, I realize that the Bayh-Dole mindset itself is antithetical to innovation and was intended to be so. The aim of Bayh-Dole was to destroy the research commons that federal research policy was creating. Bayh-Dole distorted university administrative priorities, fed a gold rush for patent royalties, and like most gold rushes, only a few miners have gotten rich, but all those supplying the wanna-be’s with resources have done very well indeed.

To get beyond Bayh-Dole, we have to do more than tweak some improvements. Bayh-Dole can stay, but universities have to change, and soon. Administrators are stubborn folk, not much given to reflection. I expect change will require a confession, a conversion, a rebellion, legislation, and/or a class action lawsuit.

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