The Purpose of the Patent System for University Research

There is a general argument that the patent is a pretty useful cultural tool to stimulate and reward technological innovation. The owner of a patent has the right to exclude others from practicing (making, having made, using, selling, offering for sale, importing) the invention claimed in the patent. The idea is that an inventor ought to have some control over his or her invention, and by anticipating having that control, people will put in the effort to invent. The patent in its present form also has a further purpose–to make public how the invention works, so that others can practice the invention (under license, or after the patent lapses or expires), improve on the invention (one can do that without practicing it), and design around it (find another way to do the same thing). In this way, a patent is a publication, a specialized writing that describes something useful that’s new in the world, teaches how to use it, and sets out one or more claims that define the boundaries of the invention–what one cannot do without the permission of the owner of the patent.

In the United States, the patent has had an uneasy ride. Thomas Jefferson didn’t particularly like the idea of the patent:

Society may give an exclusive right to the profits arising from them, as an encouragement to men to pursue ideas which may produce utility, but this may or may not be done, according to the will and convenience of the society, without claim or complaint from anybody. Accordingly, it is a fact, as far as I am informed, that England was, until we copied her, the only country on earth which ever, by a general law, gave a legal right to the exclusive use of an idea. In some other countries it is sometimes done, in a great case, and by a special and personal act, but, generally speaking, other nations have thought that these monopolies produce more embarrassment than advantage to society; and it may be observed that the nations which refuse monopolies of invention, are as fruitful as England in new and useful devices.

This, from a letter dated 1813, a decade and a half after the first US patent law.

Ben Franklin, the big-name inventor among the “founding fathers,” didn’t seek any patents. Here is Franklin, describing how he published the design of a stove in a pamphlet:

This pamphlet had a good effect. Gov’r. Thomas was so pleas’d with the construction of this stove, as described in it, that he offered to give me a patent for the sole vending of them for a term of years; but I declin’d it from a principle which has ever weighed with me on such occasions, viz., That, as we enjoy great advantages from the inventions of others, we should be glad of an opportunity to serve others by any invention of ours; and this we should do freely and generously.

I’m working through A History of Technology, a five-volume set published between 1954 and 1958 (there should be a sixth volume and updates!). It’s amazing how much of what has been developed by way of technology hasn’t been a matter of patenting. Clearly, we clever humans can figure things out without state-provided powers of exclusion.

But it is also clear that in some societies, with certain economies, and certain competitive behaviors, with certain kinds of inventions that take a lot of effort to figure out and not much effort at all to copy, people might be less interested in making the effort (and incurring the costs) only to have other people “ride their coattails” and put their effort into making copies, having saved the cost of development simply by waiting for the clever–but economically stupid folks–to work out the design for free. If you have got that kind of economic environment, where an invention, once it is publicly used, can be disassembled or “reverse engineered” or otherwise figured out and copied–and there’s good enough money in doing so, and the folks with the money can quickly dominate a market, then inventors either work for such dominant companies for pay, or not for pay.

Yes, there may be some mental gratification in seeing one’s idea show up in commercial settings, but there’s surely also some gratification in seeing a check each quarter come along with the commercial use, recognizing the insight and effort (or even luck) that went into making the invention in the first place. We might, then, agree with Jefferson that the patent might have a place in a society, if a society so chooses, but that over the history of things, it’s an open question whether the patent has been more embarrassment or advantage.

In the five-volume A History of Technology, we see 200,000 years of technological innovation (the history ends around 1900). Sure, the first 190,000 years appear to be taken up with new techniques for making stone tools, but the last 10,000 years or so have made up for the lost time. And of those 10,000 years of technological change, we’ve had patents for only about 600 years. The industrial revolution either spurred the economic need for patents (say, among investors in public stock companies, themselves sometimes the beneficiaries of monopoly grants in trade) or was spurred on by patents, which created incentives for investment to make continued improvements and work-arounds to improve technology while disrupting the investors in last year’s clevernesses. Steven Johnson, surveying the history of “good ideas,” makes a case that many developed as a result of “non-market, networked” interactions, not through the monopoly-controlled unilateral development suggested by a patent system.

As with any system clever humans create, other clever humans figure out their best ways of exploiting the system. If a law makes theft a crime, then it also (to the exploiter) defines all the actions that aren’t technically defined as theft and suggests these aren’t crimes–until there’s a law about those, too. Thus, a Seattle bus can carry a warning sign that it’s a violation of Washington state law to either “spit or expectorate” on the bus, because somewhere, lawyers worried about the difference between “spit” and “expectorate”–the former, apparently the ejection through the mouth of stuff produced by the body, and the latter the ejection through the mouth of stuff previously put into the mouth (as gum).

Michael L. Michael argued in a discussion of the ethical problems of rules and responsive behaviors that a rule is likely to be either “over-determined” and therefore totalitarian and repressive, claiming to control more than it should, or “under-determined” and easy to work around for those who want to avoid the rule. Thus, if a rule (or law) bans smoking on the job, then folks will smoke on their breaks and see the rule as a nothing more than a bother. If the rule bans smoking altogether, then folks will smoke in secret and consider the society to be repressive. We might expect patent law to have similar attributes. Will patent law be generally over-determined, giving substantial monopolies to inventors (and whoever can take ownership from inventors)? or under-determined, making patents a nice piece of paper acknowledging priority, but making it difficult for the inventor to do much more with the patent than have sweet feelings about owning some special paper?

We might then propose that a rule may serve its intended purpose, but also will create conditions for new behaviors that may not have anything to do with the stated purpose, but exploit advantages created by the existence of the rule. Patents, too, we may then expect, might have these properties. And indeed, in the debates over the value of a patent system, we find arguments in favor of the social purpose of patents as well as arguments that lay out the other effects that patents appear to have. If we accept that the patent is a social tool that is neither entirely good nor entirely evil–but rather has its place, at some appropriate times in some appropriate settings (and even here, not perfect)–then the question really is how and when we should use this patenting tool.

The US Constitution grants the federal government the power to issue patents “to promote the progress of the useful arts.” Thus, if we look at the stated statutory purpose, it is progress, not economic return, not governmental favoritism, not to make something match people’s ideas of fairness. Progress is not merely human progress, or social enlightenment (a progressive), but the progress of the “useful arts.” Malla Pollack argues in a 2002 [I link to a draft] article focused on copyright legislation that “progress” as used here means “to spread” or “diffuse” not “a continuous qualitative improvement of knowledge inevitably leading to happiness.” Pollack argues that “promoting the progress of science and the useful arts” is different from “promoting science and the useful arts.” The Constitutional grant of authority to the Congress is not to “talk up” the useful arts or to “improve their quality” or to “give benefits to companies dealing in useful arts” but rather to increase the spread of new and useful ideas; that is, to stimulate the diffusion of such ideas, not the creation of these ideas. Had the drafters of the clause wanted to focus on encouragement of science and the useful arts, rather than making broadly available the benefits of science and the useful arts, Pollack observes that they had other words ready and suited to the task–improvement, perfection, or advancement.

And actually, the clause is focused not on progress itself, but on the “promotion” of progress–that is, to encourage the spread of the useful arts. The term “promote” shows up also in the Preamble to the Constitution, after the bit about forming a “more perfect union”: “to promote the general welfare and secure the blessings of liberty to ourselves and our posterity.” Here, promote must mean “to further”–not to start, not to be the sole source, but to add to the general welfare, to improve on it. Similarly, to promote the progress of the useful arts meant, and means, to further the diffusion of new and useful ideas. This spread of the useful arts is the Constitutional role of the patent system. We might add that the “Progress” clause already deals with the “science” of knowledge in parallel with the useful arts. The spread that is to be promoted with regard to the useful arts is not “knowing about” or “knowing that something exists” but rather teaching that leads to practice. Without practice–actual use–it’s not a useful art. We can then understand that the patent system’s purpose is to further the spread of useful practices. Without that spread, the Constitutional purpose is frustrated.

How to use patenting is the question at the heart of Frederick Cottrell’s creation of the Research Corporation, near to the heart of Archie Palmer’s efforts to encourage universities to adopt patent policies, central to the Institutional Patent Agreements used by the Public Health Service for a time, and if not at the heart then at least near the knobby kneecaps of the ill-begotten Bayh-Dole Act.

The Research Corporation

In a 1912 article, Cottrell describes his “experiment in economics” as an effort to create a new form of cooperation between academics and industry. Having described private consulting with industry and “Industrial Fellowships” (now treated as industry-sponsored research), Cottrell proposes a new approach:

While these and similar methods now in use bring about the desired cooperation [between universities and industry], it has been felt by some that they are open to the objection of introducing too direct business relations between the academic institutions or the members of their faculties and individual financial interests. As still another alternative, intended particularly to meet to some degree at least this last objection, the Research Corporation has been organized.

Cottrell describes the Research Corporation as a “board of administration” to manage patents entrusted to it, with proceeds of licensing going to the Smithsonian Institution and other societies for the support of scientific research. The Research Corporation was created, according to Cottrell, to serve a second purpose, that of providing “the necessary commercial guidance and supervision” by which the output of research might become useful without “unnecessary delays” and before the “original discoverers are quite forgotten.” He considers three cases–that of academic researchers, companies inventing stuff they can’t use themselves, and inventions published (and even patented) to be given freely to all. Academics, Cottrell notes, may be “disinclined either to undertake such developments themselves or to place the control in the hands of any private interest.” Companies may invent things that “overrun their own field of activities” and such patents are “apt to get pigeon-holed and come to actually stand in the way of true industrial progress, even though their owners may realize that the development and use by others would indirectly benefit themselves.” Finally, some patent inventions given freely to the public do not get used. First adopters might want some “protection” for their application of an invention. A board of administration such as Research Corporation might provide assistance in each of these three situations.

By way of interest, Research Corporation was itself a stock-issuing corporation, and its officers and shareholders included senior officials of corporations, of banks, of universities, and professional societies. It was truly a board of administration–not a company aiming to get the most money from patents, not an extension of university administration at a loss for how to knock up industry for money, not a feel-good society for openness. If there were to be patents, then a board of administration composed of members from various key groups might be just the thing for managing these patents. Clearly, the purpose was to use the patent system to do something other than exclude others for one’s own competitive advantage. Clearly, what was needed was a way to include others, but not all others, all at once, but only some others, at least at first. Clearly, this was an experiment to try a new way of using patent law in the context of university work that often had no business purpose, but also in the context of industry work that exceeded present business purposes, and to work as an alternative for folks who thought that publishing would be enough to induce commercial adoption of anything new.

Archie Palmer’s 1948 Survey

The debate over how to use the patent system was still hot and heavy when Archie Palmer published his survey of university patent policies in 1948. Palmer spends a section of his report detailing the arguments in favor of patents and those against. He argues that although inventions made at universities may have not been developed for commercial purposes, “the protection and control provided under the patent laws may have to be invoked to obtain the greatest public benefit and usefulness from these products of scientific research.” “Attitudes” in favor of patenting include MIT’s Karl T. Compton, who argues that responsibility for public benefit of inventions does not end with publication. Patenting is in the Constitution for a social purpose, and ought to get used for social purposes; Elihu Thomson (inventor and co-founder of one of the companies that eventually became General Electric), who argues that patents preserve inventions from disuse; William J. Hale (who at the University of Michigan with Professor Herbert Dow formed Dow Chemical Corporation), who argues for the prestige carried by patents and the basic right of a “true scientist” to patent “his own inventions” despite the “university drones” who might complain about it; Elmer L. Sevringhaus (a professor at University of Wisconsin who left to become an executive at Hoffman LaRoche, where he helped to manage the first drugs against tuberculosis), who worries that without a patent, a new medicine might be damaged by “pseudo-scientific exploitation” that might “discredit the science by exaggeration”; and Yandell Henderson (a physiologist, director of Yale’s “Laboratory of Applied Physiology,” and opponent of the commercialization of lead as a gasoline additive), who makes an argument similar to Compton’s, that the academic has a responsibility to “see to it that his idea or invention is not misused. He should control it.”

Henderson argues that inventions “have generally to be forced on conservative mankind.” The patent, apparently, is a tool for doing this–for making us change our habits through the concentration of financial interest in the getting people to adopt something new, often against their initial preferences. “Without commercialization,” Henderson argues, “a large part of all the scientific ideas that are now in constant and active use in our daily lives would be locked in books on the dusty shelves of university libraries.” It’s not clear if Henderson’s claim is all that true, given that it appears that many advances in science have come about as a result of prior advances in the useful arts. That is, folks often figure out how to do something before other folks figure out why it is that something works as it does. But one still may feel the force of Henderson’s apology for academic patenting: “It is properly the business of the creative scholar to see to it that, if possible, his ideas serve mankind in his own generation.” That, indeed, is the window of opportunity of the patent. If something will take more than 20 years to bring to market (that ol’ sell right) from the date of filing a patent application, then what’s the point of a patent (other than to prevent anyone else from working on the same thing, and perhaps doing it faster and better).

Palmer notes that an AAAS committee formed to look at the issue of patenting in science looked at nine specific objections to patenting and found that, well, pfft on that, and argued that patenting scientific work is “perfectly warranted” and that seeking “financial returns” is as good as “the good of the public.” The committee observed that “we are living in an economic structure in which the making of legitimate profit is a fundamental assumption.” Certainly from that assumption, anything that might advance one’s access to profits would be a good thing above all possible defects. But the committee adds a further reason, one that has stuck–“Scientists are therefore warranted in legitimately obtaining funds from the result of their own work whenever they can do so by patents.” A good use of the patent system is to generate money for more research. What’s interesting, then, is the debate among who gets to generate this money, and who gets it once it is generated–the arguments at the time were based on the interests (and responsibilities) of inventor-scientists, not their universities, or research foundations, or companies or governments.

For Palmer, however, “financial rewards are not the essential or necessary objectives in obtaining patents.” He lists purposes “of even greater importance” (formatting added):

  • “the protection of the public against exploitation by irresponsible or selfish persons
  • the regulation and control of the purity or reliability of the manufactured product (particularly in the case of a medical discovery)
  • facility in licensing responsible concerns which can
    • effectively commercialize the invention and
    • invest sufficient capital to manufacture a product of appropriate quality without fear of unfair competition and piracy
  • the introduction of the invention to the public through proper channels and under proper controls
  • and the provision through patent protection for unhampered further development

–all in the public interest.”

The argument Palmer lays out, then, for academic involvement in patenting focuses on these “greater importance” purposes–quality control, suppression of irresponsibility, choice of initial producers, and protection of further research. One would think we should find a university policy infrastructure built to support patenting based on these concerns–and yet we don’t have it. Although there are preambular gestures toward public benefit, there’s next to nothing in present university patent policies that directs university officials to pay attention to any of the elements in Palmer’s list as a matter of official practice.

Palmer makes clear that not all inventions made at a university are appropriate for exclusive licensing or even demanding royalty payments:

 

palmer-1948-some-inventions-dont-need-patents

Here, a patent is used to prevent monopolization of a variation on the invention–that is, to create a public commons of access by being able to use a patent right to preclude potential monopolizers. (It’s odd that Palmer imagines universities as granting patent licenses–at the time, virtually no university managed its own patent licensing operation. The patenting and licensing was done almost always by external invention management agents. Palmer here is imagining a future hypothetical.) One would then expect a metric reported each year by universities on how many monopolizers have been precluded by assertion of patent rights. But alas, no.

Palmer also considers inventions that might require more substantive management:

Palmer 1948-others do

Here Palmer works up to the idea that for some inventions–not all, not even of the ones that require capital or prior IP positions–might also require an exclusive license, and even then, an exclusive license involving a royalty. The suggestion of this paragraph is a move from available-to-all but suppressing monopoly exploitation to available-to-some because only some have the resources to develop the invention for public benefit. At the end, positioned as a rare case, is the exclusive license, and even rarer, an exclusive license that requires a royalty. I challenge anyone to find a university that’s granted a royalty-free exclusive license to a patented invention in the last thirty-five years, outside of some sponsored research agreements. As a matter of general practice, such a thing doesn’t happen. Even royalty-free non-exclusive licenses are fought by university patent administrators, though some federal grant programs (such as the NSF ERC program) all but require them.

What’s interesting is that universities do not, in their invention disclosure forms, make any effort to distinguish inventions that may be readily practiced by most anyone with moderate skill (such as a disease assay or a programming method) and an invention that requires substantial capital to develop or is bound up with existing IP positions. As a matter of practice, again, it’s not a distinction that people make or report–there’s no metric for how many inventions reported each year are ones that most anyone could practice, and how many are ones that ought to go to a few companies with the requisite major resources. Further, there’s no reporting of which inventions have been licensed royalty free, and which for a royalty, and of those royalty free, how many are solely or exclusively licensed.

Institutional Patent Agreements

The Institutional Patent Agreements used primarily by the Public Health Service also provide some insight into the use of the patent system. An IPA was a master agreement between a federal agency and a university and covered patent rights in any research funded by that agency at the university. The university was required to require assignment of patent rights in agency-supported inventions to the university, and then notify the agency whether the university will file a patent application. If so, then a set of requirements kick on regarding licensing:IPA-nonex-aIPA-nonex-b

Here again we see the expectation that licensing may be royalty-free or for a “reasonable royalty.” The idea embedded in the language, too, is that companies will “apply” for a license and a university will review the application for proper “qualifications.” Not just any company should be considered “qualified.” Further, we see the play between licenses requiring payment and those that don’t. What’s absolutely clear, however, is that the default license under an IPA is non-exclusive. That makes good sense, and follows Palmer’s typology: make stuff available, but only to the qualified and not to the dishonest, the selfish, and the monopolizers.

The next paragraph, (d), lays out the conditions for exceptions to the default of non-exclusive licensing. Here’s the first part of (d):

IPA-licensing review

Paragraph (d) stipulates that the university (“the Grantee”) must either (i) attempt to license non-exclusively (and apparently fail to obtain licensees) or (ii) “determine” that non-exclusive licensing “will not be effective” and that an exclusive license (ii-a) “is necessary as an incentive for development” or (ii-b) “the market” requires exclusive licenses. Whatever a “determination” is, it is not a simple assertion. That is, a determination would appear to involve a review of circumstances, and some reasoning put into words. That is, there should be something to document the move away from a non-exclusive license approach–either that didn’t work, or there are reasons why it wouldn’t work. The default, clearly, cannot be the reverse of the default. That is, one can’t just claim that nonexclusive licensing doesn’t work, ever, and thus exclusive licensing is “necessary” or “required.”

The IPA then moves to place restrictions on exclusive licenses:

IPA-exclusive

An exclusive license must be for a limited time and require diligence.  Under an IPA, the maximum term of an exclusive license is 8 years or 3 years from date of first commercial sale, whichever comes first. An exclusive license must also require diligence (“all reasonable effort to effect introduction into the commercial market”). So an exclusive licensee under an IPA was on a short fuse to get something done, and once the period of exclusivity was over, to deal with competition through other methods than a monopoly position on the government-supported invention–stuff like price, quality, features, availability, after-sale services, related products, brand, warranty, likability, advertising.

Once the exclusive term is up, the university must offer non-exclusive licenses to “all qualified applicants.” It is not clear whether the university has a positive obligation to notify companies of the availability of non-exclusive licenses, but that would appear to an expectation consistent with the rest of the clause. Both failure or refusal to offer additional licenses and asking more for non-exclusive licenses than for the original exclusive license could be used by a malicious or colluding university to extend an exclusive license beyond the term allowed by the IPA. Thus, the first rule of non-exclusive licensing: after you grant the first non-exclusive license, do it again, as soon as possible. Otherwise, that first non-exclusive license is really a sole license–a non-exclusive license done once.

Bayh-Dole

If we turn to the Bayh-Dole Act, our crotchety old friend, we find another statement of objectives (formatting added):

It is the policy and objective of the Congress

–to use the patent system–

to promote the utilization of inventions arising from federally supported research or development;

to encourage maximum participation of small business firms in federally supported research and development efforts;

to promote collaboration between commercial concerns and nonprofit organizations, including universities;

to ensure that inventions made by nonprofit organizations and small business firms are used in a manner to promote free competition and enterprise without unduly encumbering future research and discovery;

to promote the commercialization and public availability of inventions made in the United States by United States industry and labor;

to ensure that the Government obtains sufficient rights in federally supported inventions to meet the needs of the Government and protect the public against nonuse or unreasonable use of inventions; and

to minimize the costs of administering policies in this area.

Seven objectives are put forward for the use of the patent system. We already know that the Constitutionally provided purpose is to further the spread of the useful arts–“to promote the progress of the useful arts.” But in keeping with Senator Long’s “worst bill” ever judgment, the Act begins with a fundamental ambiguity of drafting. Does Congress intend to “use the patent system” to serve all these seven objectives, or is the patent system just intended to be part of the first objective. That is, do we read things as:

It is the policy and objective of the Congress to use the patent system:

to promote the utilization of inventions arising from federally supported research or development;

or

It is the policy and objective of the Congress:

to use the patent system to promote the utilization of inventions arising from federally supported research or development;

In the first reading, the patent system is to be used for all the stated objectives. In the second reading, the patent system figures in only the promotion of the use of subject inventions. It makes sense, given that Bayh-Dole is placed in patent law that patent law would figure in each of the objectives, but then again, making sense is not one of Bayh-Dole’s strong suits. It actually makes a world of difference: in the former case, we ought to consider how the patent laws are used to meet each objective; in the latter case, the patent system is restricted to promoting subject invention use, and the other objectives come about by placing restrictions on how a university or other patent owner can deploy patents on subject inventions. That is, in the latter reading, the first objective pertains to the patent system and the other six objectives have to do with the requirements of the standard patent rights clauses to be developed under the authority of the law.

We have seen the various arguments reported by Archie Palmer for why and how academic scientists might use the patent system to encourage use of their inventions. The general expectation is that for some inventions, a university would license everyone except monopolists and dishonest folk, and so preserve a practice commons. For other inventions, a university would license to the proper companies, the ones with sufficient resources or IP positions. And only in rare cases might a license be exclusive, and for some of those exclusive licenses, even might involve cash or royalties. This typology of patent use is of course still available under Bayh-Dole. Bayh-Dole just requires federal agencies to adopt a default standard patent rights clause in funding agreements with nonprofits and small businesses and dictates some (but not all) of the requirements for those patent rights clauses.

However we construe the statement of objectives, the emphasis in Bayh-Dole is on “practical application.” Practical application receives a definition, for instance, while commercialization does not. And in each place where we find a reference to commercial sale, we also find a parallel reference to public use. The definition of practical application is useful in understanding what might be expected of a university managing patents on subject inventions:

The term ‘‘practical application’’ means to manufacture in the case of a composition or product, to practice in the case of a process or method, or to operate in the case of a machine or system; and, in each case, under such conditions as to establish that the invention is being utilized and that its benefits are to the extent permitted by law or Government regulations available to the public on reasonable terms.

Basically, practical application takes place when (i) the invention is used and (ii) its benefits are available to the public (iii) on reasonable terms. Notice that it is the invention that is used–no mention is made of the patent that is to be used to “promote” the practical application. The implied idea is that practical application might happen anyway, but the patent ought to somehow speed up the use or broaden the use.

There’s nothing in Bayh-Dole that suggests the law exists to give universities a way to take invention rights from their faculty, to try to make money from patent positions, or to cater primarily to speculators in technology rather than to those who present the best opportunity to put an invention to use for public benefit on reasonable terms. Of course, given how poorly Bayh-Dole was put together (or how cleverly, depending on your point of view), there’s nothing in Bayh-Dole that repeats the restrictions on exclusive licenses in the IPA. There’s nothing that considers the various benefits of patent use by academics and scientists and their universities that is present in Palmer’s discussion of those things that are more important to patenting in science than money-making. There’s nothing, even, that connects the stated objectives of Bayh-Dole to expectations of licensing practice: no default to non-exclusive (so the default everywhere is exclusive), no expectation of royalty-free licensing (so the default everywhere is there must be payment), no expectation of collaboration (so the default is adversarial licensing), no expectation of limited term exclusivity (so the default is the life of the patent–20 years).

Bayh-Dole was a clever scheme packed into the hollow interior of a large wooden horse named Public Benefit. The horse purported to make federally funded inventions uniformly available to nonprofit research foundations for licensing to industry (and it did). This was called “title certainty” by Bayh-Dole’s advocates. Once they got title to an invention, the research foundations didn’t want to have to give federal agencies any reasons to keep that title. So the clever scheme was to announce grand objectives but suppress as many controls as possible–so the march-in requirements are so convoluted that they have never been successfully used; there is no limitation on exclusive licensing or expectation that patents must be used to promote use rather than simply themselves used as speculative assets; there is no public reporting of the use of inventions (all reporting is blocked by FOIA) and agencies are not required even to require reporting–requiring universities to report on the status of subject inventions they have claimed is optional.

It is not that Bayh-Dole does not have some protections against the misuse of patent rights by the nonprofit research foundations (Bayh-Dole’s primary beneficiaries, abstracted to “nonprofits including universities”): the universities get the most restrictive standard patent rights clause; small businesses get a more liberal clause; and individual inventors at universities get the most favorable clause at all.

It’s just that if one wanted to expose federally supported inventions to predatory university practices, Bayh-Dole is just the thing. Leave inventors exposed to university demands for ownership of inventions. Turn accounting off, so neither inventors nor the government nor the general public has a say in what universities do with inventions. Let inventions be licensed exclusively without oversight, as if patent rights in subject inventions was just another thing on which to try to make money, all the better if licensed exclusive to whomever is ready to pay, and otherwise, better not to be licensed at all, since non-exclusive licensing would (so the argument goes) undermine efforts to grant exclusive licenses. And why get a patent only to license it non-exclusively or royalty-free? Yet it was just those forms of licensing that (so the argument once went) would be the very things to “promote the progress of the useful arts”–that would hasten and/or broaden the spread of new practices.

For a hundred years, universities have considered how they should respond to the idea of faculty patenting inventive portions of their research. At the outset, Cottrell aimed to move patent management to a “board of administration” composed of all the major players, to move patent rights into industry with backing from the banks, freeing university faculty and administrators from dealing with patents. Palmer argued that patenting made sense, but not just for the money–even though the AAAS liked Cottrell’s idea of royalties for research–but for the other effects a patent could have on protecting the public and university research, such as broad access, quality control, choice of working relationships, and defense against the dark arts of monopoly. The IPA framework similarly expected non-exclusive licensing and anticipated some of that licensing would be royalty-free, in keeping with the emphasis on public access (and with Palmer’s account of why a patent might be helpful to encourage public access). Even Bayh-Dole, in its way, pays lips service to the importance of use, but unlike the previous approaches, guts key elements of oversight that would limit university exploitation of patents.

University As Trustee

There is one further regulation that does come into play, all but ignored by university patent administrators. That’s the requirement under the standard funding agreement for grants (2 CFR 215, previously Circular A-110) that pertains to university management of intangible property:

Real property, equipment, intangible property and debt instruments that are acquired or improved with Federal funds shall be held in trust by the recipient as trustee for the beneficiaries of the project or program under which the property was acquired or improved.

“Intangible property” is defined to include patents and patent applications:

Intangible property and debt instruments means, but is not limited to, trademarks, copyrights, patents and patent applications and such property as loans, notes and other debt instruments, lease agreements, stock and other instruments of property ownership, whether considered tangible or intangible.

Now when a university requires the assignment of inventions made with federal support as a condition of employment, and the funds for that employment are provided by the federal government, the intangible property is acquired with the federal money provided by the grant. There are other ways to acquire patent rights–mutual agreement, say. But if a university chooses to make assignment a condition of federal funding, then the university chooses to come within the requirement of 2 CFR 215.37, and the university must act as a “trustee” for the intangible property, for the “beneficiaries of the project.”

This regulation, embedded in each federal funding agreement with universities, places an additional requirement on how universities license patent rights in subject inventions when the patent rights are acquired with federal funds. Only one university I know of–UC Berkeley–has a program that addresses this requirement, and even that program, though it has been nationally recognized for its efforts, is disparaged by the nothing-but-big-money-from-patents crowd.

A Matter of Social Choice

Patents, a hundred years on in university practice, still represent a challenge to American universities and inventors–and companies. How a patent gets used is a matter of social choice. Individuals appear to make choices that differ from those of corporations and institutions. And academics appear to have–at least for a long time–made choices about patenting that differed from inventors in private practice. The university inventor may choose not to seek a patent and thus enlarge the public domain–which despite assertions otherwise, appears to have a nice track record of development without patents–or may choose to patent and offer licenses via an agent broadly to all “qualified applicants.” For a long time, this too was the default practice of the research foundations and universities, right up until Bayh-Dole. Then, oddly, non-exclusive licensing was tossed (even though the Cohen-Boyer, Axel, and Hall patents–all just pre-Bayh-Dole–were licensed a non-exclusive basis that turned out to also be most lucrative).

Something happened with Bayh-Dole that snapped the practice built by which agents administered university-originated patents for broad use in industry. Perhaps it is something in the move from external agents to university-run licensing offices, or perhaps it is Bayh-Dole’s tacit endorsement of non-accountability, or perhaps it is a mindset that university administrators apparently prefer to hire for–people who boast about making money from licensing or whatever the going trendy thing is to do–making money from startups, say. Or, perhaps it is what Sen. Ben Sasse says of “big government“: “Monopolistic, insular, unaccountable bureaucracies will do really stupid things.”

And here’s the rub–if universities put accountability into their patent policies, so they were responsible to inventors as agents (their policies renounce such a thing), so they reported to the public even the few things Bayh-Dole asks for but keeps secret (they never make such reports public), so they gave up patent rights they had not licensed in, say, eight years from disclosure (they almost never give up patent rights)–if they did these things, they would in all likelihood argue that they would expose themselves to liability and could not operate their programs as they have been doing. They would have to negotiate with their inventors; they would have to explain why so few of their patents were licensed at all and why still fewer had inventions that met the definition of “practical application” or showed that the university had acted as a trustee for the beneficiaries of an award rather than in its own self-interest; they would have to provide a justification for exclusive licenses, especially those for the life of the patent and those in all fields of use; they would have to provide justification for dealing with shell startup companies and insider dealings with university “boosters.”

They might then find reasons to adopt non-exclusive licensing as a default, to let inventors follow alternative routes to deploy inventions, to allow and even encourage royalty-free licensing, and to use external invention management organizations in order to stay clear of institutional conflicts of interest inherent in a self-interested patent licensing business. They might even find, if they aim for widespread “progress” in the useful arts based on university research, that their greatest financial return comes first from goodwill not the threat of litigation to “defend” patent rights obtained with billions of dollars of public money in the form of research grants.

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