From provider to predator: University of Texas patent policy, Part 3

In Part 2 of this series I compared the preambles of the 1977 and 1988 versions of the University of Texas System patent-cum-intellectual property policies. The 1946 policy was so straightforward that it did not need a preamble. It was clear what the policy did–it limited claims that administrators could make in the name of the university for the inventive work of anyone at the university. The university could make a financial claim–up to 20% of income–and the university could encourage non-exclusive licensing of patents for sponsors of research. Done. Makes sense. Smart.

But there always seems to be someone who wants a preamble, just like there’s always someone who wants a mission statement–wasting hours and hours to produce something ghastly. So the preamble in 1977 was:

While the discovery of patentable processes or inventions is not the primary objective of the System, for any such discoveries made, it is the objective of the Board to provide a patent policy which will encourage the development of such inventions for the best interest of the public, the inventor, and the sponsor whenever an invention occurs, and will permit the timely disclosure of any patentable discoveries, whether by patent, publication or both.

The thrust of the 1977 preamble is (a) to encourage development of patentable inventions while (b) addressing the interests of the public, inventors, and research sponsors, and (c) ensuring timely disclosure of patentable inventions to the public.

Implicit in these points are administrative worries. For the first, the worry is that inventions might not be things that universities are any good at “developing”–to adapt an invention to a practical use might involve work that’s not basic or applied research. It might involve what’s called “development.” In biotech, development often includes a series of clinical trials to test for safety, effectiveness, and risk-benefit economics, plus formulation of a delivery means and all the formalities of registering with FDA. In engineering, development might mean advancing an idea through Technology Readiness Levels, where a university might have a central role up through TRL 3, Proof of Concept, but for later levels, people are designing an actual product, at first laid out “breadboard” style and later buttoned up as a prototype product. In software, development might mean getting contributions from many sources to develop a standard or platform with broad acceptance and use. In 1977, software was still unprotected by copyright and there were no open source licenses (because source, when available, was free anyway), so development meant getting things to work the way you wanted them to work.

In all of this, the worry is that things started at the university were unlikely to get finished at the university and might not get taken up and finished by others either. That’s a reasonable worry, though the world is stock full of such unfinished stuff and folks might settle down a bit about it. The university, the thinking goes, was set up to do research, not to build products, not to customize stuff for specific private uses. Maybe a university research program would look a lot different if it were tied directly to a product-making operation. Maybe that would be, in some circumstances, a really, really good thing. But even in industry, the big research labs have a terrible time pushing anything they do into their own companies’ products.

This is a problem of “linear model” thinking–that somehow someone starts with a scientific discovery and through a series of steps that can be articulated as an administratively managed process ends up making a beneficial if not lucrative commercial product. Success stories in this area almost always have to include the lucre part or they aren’t properly successful. Benefits, while they could be as modest as someone earned a livelihood for a few years selling some new widget, aren’t so dramatic that an exemplary story gets told. There has to be hundreds of thousands of something or other for the benefits to justify the investment of millions of dollars in research. All those millions so Dave and Sandy could sell 800 widgets in two years ain’t much of a success, despite what Dave and Sandy might think.

This worry about the linear model is one caught up in trying to construct a story about the purpose of a policy. Here is a version of the thinking as best I can map it out:

Why do all this research? Because other people will use it. How will they use it? To make beneficial products. How are beneficial products made? By industry, backed by investment. But it appears this doesn’t mostly happen. Industry folks mostly ignore university research, think it is irrelevant. Thus, to make this development happen reliably, or more quickly, or optimally, or even at all, there must be something additional beyond doing the first part of the research–discovery, invention–that instigates, encourages, catalyzes the rest. This is the place of “technology transfer”–to offer results to industry, and if that doesn’t work, to step up the leverage and offer patents on results to investors who profit from the “creative destruction” of capitalism by creating disruptive startups (and selling them to the status quo or sometimes selling them to the public via an IPO).

The possible modes in the thinking are these:

• free to all
• non-exclusively licensed to capable companies
• exclusively licensed to one company (preferably an industry leader)
• exclusively licensed to a startup (preferably venture-backed)
• exclusively licensed to a startup (for future investment, such as state seed funds)
• licensed to a patent management organization (to speculate with, to troll).

In practice, university administrators skip the first two. Free means (to the administrators) no income on top of patenting costs, so that sounds foolish. Yet free can build tremendous goodwill and stimulate ready adoption. Just ask the folks at Berkeley behind SPICE, or at MIT behind X-Windows. Goodwill and broad adoption means one is central to a technology ecosystem, and in the flow of many, many opportunities to do more work–research, consulting, organizing, managing, customizing, planning. So administrators often are clueless about where their money comes from and want money stripped of the context in which it often comes, and supply the context of patent rights (“protection,” like prudent high school jocks) instead.

When it comes to non-exclusive licensing, administrators think it is more work that it is worth, and make a virtue of exclusive licensing. This is one of the fool-pitches in the Bayh-Dole rhetoric, that the law gives universities the ability to license federally supported inventions exclusively, where the federal agencies, tied in knots by ideological red tape, could only make things available to everyone on common terms. Of course, the law doesn’t give anyone the ability to do exclusive licenses. What it does is prevent federal agencies from requiring non-exclusive licenses and makes it next to impossible for federal agencies to represent public interests when university administrators abuse the system (or simply don’t know how to work it). Bayh-Dole does this by placing few restrictions on exclusive licenses (substantially manufactured in the US, preference for small companies, all things being equal), making reports on utilization exempt from public disclosure law, and making march-in procedures so difficult to use no-one has successfully used march-in in the 35 years of Bayh-Dole. Clever, if one aims to be a patent troll with federally supported inventions. Nasty, if one thinks that federally supported research should float the boats for everyone, not just for university patent administrators out to make a buck.

The upshot is, most university patent administrators refuse to default to nonexclusive licensing, fight tooth and claw against sharing expectations in NSF cooperative research center awards, aim to narrow the effect of NIH tools dissemination guidelines, try to get around the standard patent rights clauses that forbid a university prime contractor from gaining an interest in the inventions made by subcontractors, and insinuate that folks releasing software open source are breaking policy and gaming the system to set up private consulting practices. Exclusive licensing is the default effort in most university licensing operations, and any non-exclusive license, even to a research sponsor, undermines the prospect of finding an exclusive licensee to develop a given patented invention.

Of course, such prospecting for exclusive licensees is itself fraught with problems, especially outside the world of solitary hamster-like pharma companies each looking for a big upside on a compound they have to develop on their own, at huge expense, which they can’t much share with others. In recent years, pharmas have used biotech startups as the front-end for prototyping risk, but even here they prefer to have exclusive strategic partnerships. To have patent pools on compounds, apparently, is unthinkable. This is the lot of the monopolist product designer. A new product is going to be expensive to develop, and there just aren’t that many companies at any given time interested in bidding for an exclusive license. In fact, bidding almost never takes place. Mostly, it’s begging–by the patent administrators–or blind luck, or a speculator ready to offer the moon (and later renegotiate or reneg or breach or terminate if they can’t resell the right for more than they paid).

The hunt for exclusive licensees–in search of administrative convenience and prospects for bigger payouts–greatly reduces the audience of possible business partners, drives up the costs and risks of a deal for these partners, and makes it utterly unlikely that anyone will ever license the offered patent, no matter how sweetly the non-confidential summary is designed in the technologies available for licensing database. It’s a dead-before-arrival approach to technology transfer that meme-driven, fully boxed administrators, willing to say anything to advance their careers, could find attractive. Instead of changing their approach, university administrators have instead expanded their budgets for licensing, expanded the scope of what they claim, and have changed their policies to claim as much as they can upfront, automagically, with impunity and with only the most distant accountability in terms of effort and income–all so they can focus on making this amazing model of exclusive licensing “work.” It never will. Every so often, there is a big hit license. Once every ten or fifteen years. The success is ascribed to the model. In reality, the default exclusive license as the key link in the linear model transition from research to development is the single greatest suppressor of technology dissemination from universities. Really good stuff doesn’t become successful as a result of this model, but rather in spite of it. That administrators don’t know the difference means they are truly clueless. The administrators who do know the difference but choose to talk up the model anyway are hacks.

Since exclusive licensees are next to impossible to find among industry leaders, university administrators have opted for startups. With a startup, the university can demand an equity position in addition to royalties. The expectation is that the company is more likely to be acquired than that the licensed invention will ever become a commercial product. That means that there is no linear model at work. The link is not between research and development, but rather as a link to making a show of development to attract investors that will buy the company and then do what they want–often, raid it for its engineering talent, change its product direction, or try to sell it off to yet other investors, having replaced its management, changed its name, and rewritten its mission statement. When these companies fail, the patent rights may get sold off in bankruptcy–to patent management organizations, the trolls.

Even though university administrators put clauses in exclusive licenses demanding reversion of rights in the event the license terminates or is materially breached, rights rarely come back and when they do, they are almost never relicensed. Why? Well, for one, the licensed rights may come back, but not any of the improvement patents, none of the “developed” technology, and thus anyone else trying to work the same area is going to run into patents and be working an area of already failed technology–but now years behind. Who but the desperate, the foolish, or the crazily lucky would dig into returned patents? Ah, yes, the trolls. Just exploit the patent position and forget trying to do the development. Wait for it, and then demand a share. In such cases–and universities do play the patent troll themselves (talking ’bout you, Caltech)–the patent has nothing to do with development. The patent is a time-bomb that ready to explode to the advantage of the patent owner if there ever is development. This is not the linear model. This is playing at the impossible linear model to set up a leverage point for money when development does happen–but through some other line than one in which a university patent licensing office connects research and development.

This, then, is the welter behind administrative worries about whether university research amounts to something. The administrators dearly want a story that justifies the research, so there will be more funding, especially from the federal government. Government funding is like manna from heaven. Every morning there’s more. Success stories ensure that the manna continues, and that there is more, so there’s enough to survive and then enough to grow fatter.

There are other stories about how research matters, but administrators don’t know these stories and when they do often cannot tell them and even when they do want to tell them, they are laughed at and suppressed by the folks who are deeply invested in the linear model, exclusive licensing, and the prospect of having preferred access to university inventions for their speculative money-making fun. Thus, we get patent policy preambles concerned about “development” of inventions. Administrators want a model that proves a social benefit to research, and the linear model sounds wonderful, is simple to learn and repeat, and does the job, rhetorically. It’s just bullshit, having no regard for the truth. But bozonets thrive on bullshit–it’s their daily intake and output. Yeah, I’m being rough on ’em. But look what they have done for three decades. When is enough enough?

In 1988, someone thought it would be a really good idea to simply replace invention with intellectual property (later given an implicit definition to mean most anything but especially “intellectual creations,” if you understand what that means):

While the discovery of patentable processes or inventions and the creation of other intellectual property is not the primary objective of the System, for any such discoveries or creations, it is the objective of the Board to provide an intellectual property policy which will encourage the development of inventions and other intellectual creations for the best interest of the public, the creator, and the research sponsor, if any, and that will permit the timely protection and disclosure of such intellectual property whether by development and commercialization after securing available protection for the creation, by publication or both.

This made nonsense of the objectives of the System, because to operate a university has got to mean to create a place for the production of “intellectual creations”–that’s what happens with scholarship and research. To just have “teaching” what is already known–that’s school. No need for a university and its apparatus for that.

Now here’s what is fascinating about the 1977 Texas patent policy. It addresses the problem of “development” of inventions by insisting that inventors should retain the right to decide whether to take an ownership position in the invention (patent it) or simply publish the invention. The policy forbids university administrators from compelling any inventor to patent or publish. Instead, it authorizes administrators to provide resources if inventors want to work with the university instead of working on their own or trying to interest an invention management organization. The 1977 policy is not concerned with “commercialization” but rather with “development” and its point is that inventors in general know better than administrators whether something they have made will benefit from an ownership position or not. That’s the insight of the 1977 policy, and it is a good insight. The 1946 policy simply stated that inventors own their patents (meaning: we forbid university administrators or attorneys or humanities faculty from making a claim that just because university facilities were used, university administrators should control all the juicy results–or worse, as at present, any and all the results, juicy or not).

The 1977 policy ensures timely disclosure to the public by leaving the decision regarding publication or patenting (or both) with the inventors. No university committees have to review things before they are published, if that’s the direction an inventor wants to go. And if something is patented, the policy puts time limits on the review for institutional interest and allows administrators to waive committee review to facilitate patenting decisions.

What the 1977 policy does not handle particularly well is the matter of dealing with interests of the public, inventors, and sponsors. The administrative worry is that these interests differ–but it’s difficult to break down how without falling into easy but mostly untrue caricatures: the public wants open access, inventors are selfish egotists, and sponsors want everything for themselves. The public is an abstraction. It’s hard to say what the public wants–the public rarely agrees and when it agrees, we often regret it. Inventors, especially university inventors, are in my experience anything but selfish or egotists. There are selfish people at universities, and egotists as well, but inventing does not make them this way–and managing one’s own inventions may even turn a selfish inventor to recognize the importance of help from others. The prospect of ready money–especially money endorsed by a university licensing office–may do more to turn university inventors paranoid or grasping than anything else. The mere existence of a university program with a mission (stated or implied) to make lots of money from licensing is enough to deform the characters of folks unused to the idea, having chosen an academic career rather than a sales job. But if the university says going for the money is righteous, well then….

Sponsors, too, often argue for things the caricature doesn’t account for. Sponsors often don’t want an exclusive right–especially industry leaders. They don’t want to be saddled by exclusive license with a monopoly interest and then accused of using their market power to prevent or delay the development of whatever they took in, and they surely don’t want the poison apparatus that university licensing offices rig up to go along with an exclusive license–demands for best efforts to develop a product, milestones, right to cancel the license if milestones aren’t met, right to audit, penalties for under payment or late payment, limitations on sublicensing and right to review sublicensing, demands for venue and governing law… on and on, poison upon poison.

Some sponsors even encourage inventors to patent, even when the sponsor doesn’t want a license at all. Other sponsors just want to be left alone. They would be happy if the university said “we will never sue you for infringement of stuff we have patented, because if you are using our stuff, our work is successful–what we want in exchange is acknowledgement, that’s all.” But no university to my knowledge has done this, thus keeping alive the bitter exchanges. Other sponsors would dearly love it if the university and its inventors wouldn’t file at all. Of course, some want all the rights, often when they have proposed the research and supply the problem or technology to work on. Other sponsors don’t want anything ever published unless they approve, fearing unfavorable outcomes. Some nonprofit sponsors–such as private foundations trying to find a cure for a disease–want all the rights so they can combine those rights with work at other institutions and make a platform of rights available to anyone willing to work on the problem with them.

The point is: there is no one monolithic sponsor view on patenting. There is no way to represent “sponsor” interests in a simple document. There is no way that a university administrator, having obtained ownership of patent rights, will be any better at making a decision than might an inventor, a principal investigator (who may not be an inventor), an independent arbitration panel, an industry professional association or standards organization, or a judge.

The 1946 Texas patent policy simply stated the guideline that sponsors ought to expect a non-exclusive license, regardless of whether the university had an interest in an invention made by university personnel. Perhaps that is the best anyone can do. The public is no monolith, nor are inventors, nor are sponsors. Furthermore, there are more players. The government–federal, state, and even city. Industry, but not the part doing the sponsoring. The other folks working in a lab, and researchers at other institutions, and those institutions, trying to support their own regional economies, and the people who are supposed to be benefiting from all that research. And, of course, the elephant–the administrators who think about the System and align their own interests with those of the System.

Dealing with this range of possible competing interests is no more the domain of university patent administrators as is commercial product development. Certainly, adding more categories of what might be owned by the university doesn’t do much to address the general case of dealing with these interests. One might better reduce the concerns any of these groups might have by choosing research sponsors thoughtfully and by clearly stating goals for various research projects and sticking to those goals. One might also follow the 1946 policy and get the university mostly out of the patenting business, just as it largely stays out of day-trading, lotto-ticket buying, and selling automobiles. A university provides the logistics and governance so a bunch of people can teach, develop professionally, do research, and consult–mostly as it strikes them. This is the crazy–good–contribution of a university. Tame it, domesticate it, turn it into a manager’s paradise, and it’s sterile.

At least Texas managed to remove from its policies the requirement that the staff owes the administration “cheerful acquiescence” in obeying policies:

It may be that tolerating renegade willfulness, with all the risks to administrators and their delicately worded rules, is the one thing that most advances the prospects of innovation arising from university work. Better to have hundreds of self-directed talented folks than a herd of fearful sheep. But to deal in renegade wilfulness requires administrators with a desire for extra work and the use of real-time, not policy-prescribed, innovation-tuned judgment.

I’ve discussed already how the 1988 policy makes a total mess of the preamble, substitutes a goofy definition of intellectual property for invention, and makes it appear that the university doesn’t aspire to produce “intellectual creations” but still desires that each and every one of these creations will be “developed” in the public interest. The 1988 preamble is worried about protection of these intellectual creations, and its solution is to have them all reviewed by administrators before disclosure or publication, with administrators having a general claim to own most all of them, but getting to pick and choose which ones for which they will actually assert that ownership. I can’t imagine a situation much worse for the development of a creative spirit and personal initiative. This is a happily fascist approach–fascist in its pleasant form of “holistic”–“let appointed professionals take care of you.” The state, the public, and administrators are one, and administrators best know the needs of the state and the public.

To enable the 1988 policy objectives, the policy eliminates inventor choice whether to patent. That choice shifts to administrators. This move suggests that administrators were bothered that some inventors were merely publishing and not feeding technology for ownership, licensing, and university money-making to the System Patent Office. So, don’t let them decide any more. Expanding the scope of what’s to be reported and what is owned by the university operate as expansions of administrative power–but without comparable changes in administrator status. That’s a recipe for a fight.

By making the internal reporting come ahead of any publication or disclosure, the administrators created a huge, time-pressured bottleneck in deciding what the System should claim to own. By expanding the scope of what to report, the administrators created a huge logistics problem–but no doubt there was a big bump in the number of “intellectual property disclosures” which also no doubt was spun as a sign that there was greater participation in the university’s technology transfer programs, reflecting a desired cultural shift in the university from backward, stuffy ivory tower professors to smart, clued-in entrepreneurial faculty and especially their overly gifted graduate students, all of whom cheerfully acquiesce in the requirements of policy. Any bump in disclosures, so the impression goes, could not possibly have been due to an expansion of the definition of what must be disclosed. I have never seen a university technology transfer report that attributed changes in disclosure rates to changes in policy. Never happens.

Now look at the 2007 policy preamble:

Purpose. To balance the interests of the many contributors to the substantial creation of intellectual property at and by U. T. System, the Board of Regents promulgates these rules on intellectual property with the purpose to (a) provide certainty in research pursuits and technology-based relationships with third parties; (b) create an optimal environment for research, development, and commercialization opportunities with private industry; and (c) encourage the timely and efficient protection and management of intellectual property.

In the earlier versions, development of inventions (or intellectual creations) was the first objective. At least development has some public spiritedness about it, even if the linear model that underlies the desire is itself largely bogus. Administrators aren’t expected to have depth–even when they do!

But now, in 2007, the first objective is purely administrative–to “balance” the interests of “the many contributors”–so instead of three that matter (the public, inventors, and sponsors), we have only the indication that there are many. The idea is not so much that these will be named later and dealt with, but that there are so many that no one could possibly sort them out, and so administrators will have to “balance” their interests–which is shorthand for “disregard” or “play favorites” or “focus at least on what administrators need to survive the wonky approach to licensing that they have publicly committed to.”

We get three objectives, then:

(a) certainty in pursuits and relationships
(b) optimal environment for opportunities
(c) protection of intellectual property (still defined expansively and folksy)

The policy apparently addresses these three objectives by demanding institutional ownership over a broad expanse of creative work involving a broad expanse of employees and non-employees over a broad expanse of their activities, all but eliminating the role of inventors to decide on matters of ownership, development, or licensing, and to focus efforts at each point on “commercialization” rather than, say, diffusion or broad access.

The 2007 policy treats as an administrative virtue what the 1946 and 1977 policies forbade. Personnel are furthermore forbidden to use any System facilities and the like for any development or commercialization “outside the course and scope of employment.” That is, folks cannot use university stuff except for what they are directed to use it for. To save their jobs, reputations, and careers, they must accept that if they do use any facilities in their work, they have agreed to alter their scope and course of employment to encompass whatever it is that they have done.

The clever administrative idea is to define the course and scope of employment as anything that someone does with facilities and the like. Instead of accepting that the university directs very little of what faculty and students do–that whatever money they receive, most of it is not for employment but for appointment or support of scholarship–the policy trick is to make it appear that whatever people do has been assigned to them by the university in the abstract, on threat of sanctions for unethical use of public resources otherwise. This is predation in its finest, unapologetic administrative form. Instead of supplying a teaching and research environment suited to a wide range of possible uses, exploited by personal initiative, for which the university properly claims no right to ownership and properly forbids administrators from seeking such ownership, the 2007 policy here aims to capture all such activity as if it arose in employment, and that the only justifiable use of university facilities is for employment. All your intellectual creations are belong to us. Why not make that the policy statement? There’s no point in elaborating, because the rest of the policy hinges on administrators making up whatever the policy is supposed to mean, since it is so poorly written no one else has the time to figure out its true intent. It’s left to a few of us just to document the incompetence and ask why the Regents and faculty tolerate it.

The first sub-objective in the 2007 policy, “certainty,” might seem strange, and in a normal world, it would be. But we are talking about the post-bayhdolapolitic world, and at the center of that post-rational rhetoric is a meme about “title certainty.”

Here is some history, from the Purdue Research Foundation:

On a nation-wide basis, the results support the conclusion that the Bayh-Dole Act has promoted a substantial increase in technology transfer from universities to industry, and ultimately to the public. Certainty of title to inventions made under federal funding is perhaps the most important incentive for commercialization.

See for instance this bit from “Bayh-Dole: Undeniably Effective” (2005)

The provisions of Bayh-Dole enable small businesses, universities and not-for-profit organizations to take title to inventions developed with federal funds. Certainty of title to inventions made under federal funding is a critical incentive that enables laboratories to partner with industry to transform government-derived technologies into products for commercial use.

Here is Arundeep Pradhan, an AUTM officer, repeating the standard script in testimony in 2007 before a House subcommittee on “technology and innovation”:

The passage of the Bayh-Dole Act established certainty of title in and to inventions conveyed to the universities under the Act and alleviated the industry-sponsor’s fears, thereby encouraging additional sponsorship, collaborative efforts, and expanded licensing opportunities.

This argument comes from Sen. Bayh himself, along with two of the “Three Amigos” that take credit for drafting and working the Bayh-Dole Act through Congress. In 2009 Sen. Bayh, along with his former staffer Joseph Allen and long-time WARF patent counsel Howard Bremer published a piece in which they stated:

Furthermore, one of the most important contributions of the Bayh-Dole Act was providing assurance to industry developers that there was certainty of title to inventions, which were candidates for development, and that there would be uniform, predictable systems in place to justify their high risk investments. This is a highly significant factor in commercializing universitybased inventions.

They were fighting against a federal circuit decision in the Stanford v Roche case that to their minds hinged on “title certainty”–by which they meant that universities should have certainty with regard to ownership of inventions made with federal support. The federal circuit court had tossed this idea, and they were aghast. But strangely, university administrators are attracted to the idea that the Bayh-Dole Act gave them absolute control–through vesting, or a first right of refusal, or a restriction on inventors assigning to anyone but the university (all rationalizing fantasies)–and this “title certainty” was key to establishing a commercializing link between the lab and companies producing products that incorporated the universities inventions.

And here is BethLynn Maxwell, an attorney for the University of Texas, in a news brief titled “Twenty-Five Years After the Bayh-Dole Act” (2005):

On a nation-wide basis, the Bayh-Dole Act has promoted a substantial increase in technology transfer – moving technology from the laboratory to the market place – from universities to industry, and ultimately to the public. Certainty of title to inventions made under federal funding is perhaps the most important incentive for commercialization.

We will come back to Maxwell’s arguments, because they provide some insight into the changes Texas made in its 2007 policy. But first it is worth observing that the claimed history around title certainty and Bayh-Dole mostly repeats political rhetoric. The uncertainty in patent title, if there ever was any, before Bayh-Dole lay in university-affiliated research foundations (notably, Purdue Research Foundation) gaining assignment of patent rights to federally supported inventions, and then trying to get the federal agencies involved to release their presumptive claim of a right to require assignment of inventions to the federal government. There would be no title uncertainty but for the aggressive approach of the research foundations to attempt to own what federal agencies in their funding agreements with universities claimed to control. The Supreme Court looked at the claims for “title certainty” and tossed them. Universities can get title to inventions the way anyone does, but putting in place the appropriate patent agreements. Bayh-Dole does not do anything other than limit what federal agencies can require by way of government interest when an invention with federal support is made at a university (or other nonprofit, or a small business).

So when the 2007 policy puts title certainty as a primary objective, it appears to be participating in an effort to make sure that the university owns all inventions made with federal support–except, of course, that the policy expands its claims to title way beyond that of patentable inventions, and by disclaiming laws as the basis for ownership introduces an even greater title uncertainty–what is the certainty in title to forms of intellectual property that cannot be considered property under any statute? Are these new forms of property created by common law? Who could know until a judge decides? Ah, the $200,000 question.

Maxwell, having reaffirmed that the Bayh-Dole Act was a marvelous success, makes the case for university ownership of inventions:

A university owning the inventions it creates with Federal funding has another significant benefit — it protects the right of scientists to continue to use and to build on a specific line of inquiry.  This is very important to research-focused institutions because of the way research is typically funded — with multiple funding sources. Title to inventions to the university/institution is the only way to ensure that the institution will be able to accept funding from interested research partners in the future.

We need to work through this argument sentence by sentence. Maxwell asserts that university ownership of inventions “protects the right of scientists to continue to use and to build on a specific line of inquiry.” This makes no sense. Ownership of an invention provides no rights to use. Laws and regulations as well as rights held by others may affect a person’s right to use an invention. Furthermore, owning an invention is not the same as owning a patent covering the invention. If Maxwell means “patent” when she writes “invention” it still doesn’t work. A patent does not grant any right to use the invention–it grants a right to exclude others from using the invention. Scientists with a university owning patent rights in their work are not at all “protected” and their continued “use” of a “specific line of inquiry” (to the extent that makes any sense) has next to nothing to do with what patent rights the university owns in their work and everything to do with the patent rights others hold in anything needed by the scientists to do their research.

At public universities, such as the University of Texas, what protects scientists is sovereign immunity: a state cannot be sued in federal court unless it agrees to be sued, and patent and copyright infringement both are federal subject matter. If that weren’t enough, when one sues for patent infringement, one gets actual damages if one wins. Given the cost of patent infringement litigation often exceeds a million dollars per side, one had better have the prospect of lots of actual damages before bringing suit. It happens, but usually from patent trolls, not established companies. The trolls figure they can settle for less than the apparent cost to defend their lawsuit and still be way ahead financially. Texas owning a patent won’t protect anyone from such a troll shakedown, because there’s nothing even to countersue about.

So it just doesn’t work. University ownership of inventions has nothing to do with protecting scientists. It’s just wishful thinking. It’s made up. It’s repeating what everyone says. But it does not evidence any insight into the conditions on the ground. But it does appear to be a motivation to change the Texas patent policy–if people believe this stuff and don’t have any way to examine it.

Continuing, Maxwell argues that “this”–meaning, apparently, protecting scientists by taking ownership of their work–“is very important to research-focused institutions because of the way research is typically funded — with multiple funding sources.” The “title certainty” argument at the base of Bayh-Dole had to do, in part, with problems that arose if two federal contracts supported the same invention, and one federal agency allowed the contractor to retain title and the other didn’t. How would such a thing resolve? No one talks about making sure that scopes of work don’t overlap–so that two agencies aren’t induced into funding the same work, twice. Nor do folks talk about being diligent about ascertaining which statement of work actually sets out the “planned and committed” activities in the project that anticipated the invention. No, it’s about the problems that competing sponsors might have in inventions.

But here’s the thing. A university taking ownership of everything makes the sponsor problem all the worse. First, there’s the problem that more stuff is being owned. Without an ownership claim, there’s nothing for a sponsor to expect by way of license, because the sponsor has unconstrained access without the need and bother and delay and expense of a license. Stuff being freely available–what a concept! Freely available runs to a strength of a university, its distinctive role in a research infrastructure in which industry research often comes with strings or is not published at all but rather held as trade secrets. Second, there’s the problem of background rights. As a university gathers more and more stuff that it owns, any license with any one company easily may implicate all sorts of other property the university has.

Even the common drafting mistake of licensing a “technology” or “invention” rather than a specific patent right (easy to do upfront in a research agreement, too) may implicate any number of rights that pertain to the practice of that technology or invention. If university patent administrators prudently disclaim all background rights, then any licensee smells a snake because it leaves them exposed to repeated demands for licenses from the same university as they realize they need additional permissions to practice whatever it is they want to do or build, but haven’t discovered all the property that the university is sitting on. “Just tell us all the things you own, and license them all at once,” they beg. But it doesn’t happen–it can’t happen. A university that claims to own most everything also doesn’t have a clue what it owns. It only knows–because it has made the assertion in policy–that it really does own most everything.

So now the sponsor or licensee is on guard, has to try to figure out what the university might own and how to secure it all. For its part, university administrators are unacquainted with the problem of royalty stacking, and many of those that do understand the concept tend to like it. A royalty stack happens when multiple demands for a royalty are placed on the same product. Patent owner A demands a 3% royalty on sales. Patent owner B demands a 4% royalty. Total royalties now are stacked–7% of sales. In technology environments, a product can have multiple patents involved, sometimes from participation in a standard, sometimes from cross-licensing, sometimes because one has acquired technology under license, sometimes because one has to pay a troll. An ink-jet printer can have 50 patents. An automobile 300 or more. One nanotech company we worked with spent two years trying to obtain licenses to 20 patents from various universities just to build one product. Each university wanted its royalty, and once the stacking problem became evident, each university wanted its patents to rate better or at least no worse than anyone else’s, so they would fuss with each other about revising their royalty demands.

Now consider when Patent owner A and Patent owner B are the same university. And that university claims to share royalties with the inventors of A and B, and those are different people. This means that the university has to figure out what royalty payments go to what inventors. How much for A and how much for B? So the university wants to stack the royalties to solve an accounting problem created by a patent policy’s royalty-sharing schedule that has imagined that there will always be one invention per license and one invention per product. Nuttiness, but it is much easier to be dumb than to figure out how to get something right. Thus, especially in work funded by multiple sponsors, university ownership of everything is a much higher barrier than the university ownership of very little. Furthermore, if a university offers all sponsors a FRAND license–fair, reasonable, and non-discriminatory–then it doesn’t matter whether the university owns or not. What matters is whether whoever does own, if anyone–inventor, university, sponsor–offers everyone else involved in the research the same FRAND deal. We worked this out and called it a make-use commons. Companies saw what we were proposing and had no problems with it. The simplest make-use commons doesn’t require the university to own anything–just that those folks working with the university agree not to sue the university or anyone else that is supporting the work for any making and using of what’s developed. Selling–beat each other up.

And now the capper from Maxwell: “Title to inventions to the university/institution is the only way to ensure that the institution will be able to accept funding from interested research partners in the future.” This does not follow from anything Maxwell has written and doesn’t square with reality. For federal funding, Bayh-Dole makes it clear that “title to the university” has nothing to do with federal funding. The government will fund based on the standard patent rights clause, and that clause does not care whether a university obtains title. In fact, if a university or other approved agent does not obtain title, a separate patent rights clause–37 CFR 401.9–kicks in to govern what a federal agency can work out directly with the inventors, treating them as if there were a small business, but with fewer restrictions than even a small business–and many fewer restrictions than nonprofits and universities have under their standard patent rights clause. From a federal innovation perspective, the most liberal rights are offered to inventors who do not assign their inventions. A federal agency can request assignment to the government, but if it doesn’t, the inventors are in the best possible position. A university wanting to promote invention development then would do well to implement a program of only requesting title when a federal agency indicates that if it doesn’t, then the government will request title. Otherwise, leave it to the inventors. That covers federal funding–and that was 57% of UT Austin research expenditures in 2014. Only 12% of UT Austin’s research expenditures came from industry.

So there are plenty of options. Texas for decades accepted research funding on a policy that provided that inventors owned their inventions unless contractual terms provided otherwise. Sponsors negotiated what they needed. Bayh-Dole took care of federal agencies. Nonprofits typically are not commercialization partners, though they may want to see commercialization happen, too. If specific terms of research agreements, as a matter of policy, trump policy, then there’s no need in policy to state a default that the university owns everything, nor to claim that such ownership is the only way the university could possibly receive grant money for projects involving multiple sponsors. What Texas policy expected in 1946 does just fine: sponsors should expect a non-exclusive license, regardless of whether an invention is owned by the inventors, assigned to the university, or assigned to any patent management organization.

But perhaps Maxwell’s 2005 arguments reflect the thinking behind the change in Texas policy in 2007 to change the preamble to worry over title certainty rather than development of patentable inventions. It’s a policy written by administrators–and their legal advisors–trapped in a mystery box of political rhetoric and lack of practice experience, and commitment to a mythic, difficult linear model of innovation that just doesn’t happen all that often.

The 2007 preamble’s other two sub-objectives–an optimal environment for dealing with “private industry” and “encouraging” stuff to be “protected” and “managed” in a “timely and efficient” manner–also aren’t well reflected in the policy’s practices. The main objective–to balance the interests of all contributors, including one would think “private industry”–competes with creating an “optimal” environment for dealing with private industry. No indication is given about what an optimal environment might be in such a predicament. One might think the optimal thing is to negotiate agreements between sponsors and the university with the lead participation by the investigators involved. That’s how Wisconsin did it for decades and it seemed to work. If all sponsors want is access or a non-exclusive right–freedom from hassles–it doesn’t matter who assures them of this freedom. If a sponsor wants assignment or exclusive license to some specific invention, then it’s better to have the inventors do the deal directly with the sponsor–that’s title certainty in all caps, and the transaction undoubtedly will be fast, efficient, and mutually acceptable. The only problem is that it may well cut out the university from its thumb in any licensing income. But then the policy does not say that its primary objective, or any objective, is to make money for the university–just to balance the interests.

When the 2007 policy gets around to the role inventors play, it further reduces it. In 1946, inventors owned outright, owed the university a share of any income, and owed sponsors a non-exclusive license. In 1977, inventors retained the “ultimate right” in deciding whether to patent or publish their work. In 1988, inventors were reduced to having “a major role” in the determination of how something is made public. By 2007, however, inventors have the opportunity “to give reasonable input on commercialization of inventions.” That is, the management of inventors’ work has become the work of administrators seeking to find companies to make products. Management of inventions is not the inventors’ own right and responsibility as scholars to decide when and how to publish their work, to whom and in what forums to teach what they have discovered or made or whatever.

The history of the Texas policy is one of successive predation on scholarship, without much more than superficial handwaving rationales. Taken another way, however, it is the result of administrators failing to grasp the fundamental defects of the myth of a linear sequence of research to development to products to benefits. Adopting the linear model as a convenient way to explain the value of research to the general public and to legislators leads to a make-believe program of patent management, filled with metrics that gauge effort and success stories that aim to confirm the rightness of administrative judgment, but lacking in the data and accounts that would show what was possible if only such a bizarre, anti-academic, inventor-loathing policy was not there at all. Perhaps, then, one role for history is to see what is still possible but since suppressed or forgotten. Maybe Texas will rediscover its 1946 policy, and throw off the repressive, expensive, unworkable, tangled mess that it presently maintains as policy guidance on intellectual property.

In Part 4 of the series, we will look at a University of Texas Office of General Counsel newsletter article from 2005, which provides some insight into why the System reversed a policy of freedom to one of institutional control, expanded its scope and claims, and thought this change must be a very good thing.