A patent policy’s stated objectives mean something

University patent administrators don’t see that the patents they own and manage are any different from any other patents–exclusion of use, licensing (especially exclusively, for the duration of the patent), litigation, and indifference (failing to license, but no matter) are all available as possible strategies of exploitation. Administrators do, however, routinely cover whatever they do with the general claim that their actions are “in the public interest.” For this claim, apparently, it is expected there will be no challenge. Yet a statement made on behalf of a corporate entity is about as sketchy as one can get. The university might be said to act “in the public interest” as if by definition. But administrators can wordsmith all the pleasant-sounding statements they want to for the fictional person of the university and never reveal their own, personal intentions, which may have nothing more to them than a wish that others will believe their actions are intended to be “in the public interest”–that is, never examined.

As a result, university administrators work to pre-empt any responsibility (or liability) to the public for their actions. They adjust policy statements to exempt themselves from responsibility. They maintain special access to university counsel to make sure their actions are defended, not investigated. They write marketing text to present to the faculty and public that spins their work as ever positive and never with adverse consequences. They control what information is released, and never release information regarding inventions they have claimed but have not licensed or even if licensed have never been used or resulted in a meaningful commercial product.

Administrators assert that their actions support the public interest, but they are unwilling to allow the public–or industry, or government officials–to inspect their work or ask whether their assertions match the outcomes. That is, for university administrators, it appears sufficient to have in patent policy a university statement about the intention of doing good, without any consequences for failing to achieve such good. Such do-gooding statements aren’t fluff, then–they have a purpose. It’s just not what you might think. The administrative purpose of do-gooding statements in patent policy preambles is not to set a standard of reasoning by which actions in the management of inventions may be judged; rather, the purpose of these statements is to assert that all actions in the management of inventions must be judged to be do-gooding. That is, these statements form a policy mandate regarding what people (at least in the university) must say about patent management activity: by policy, they must say it is do-gooding, in the public interest.

One might think that these policy statements rather establish objectives of patent management, and thus displace any other objectives that one might think of. Unless a patent policy goes out of its way to make clear that its statement of objectives is strictly illustrative, not prescriptive, a policy’s objectives are what they stated to be, and not anything else. Of course, to make a policy’s objectives illustrative makes the policy a bit of nonsense: “The objectives of this policy include but are not limited to public benefit, encouragement of invention, and the commercialization of technology. Depending on the administrator, the time of day, and the number of chickens in Farmer Oldfield’s yard, this policy also may have as its objective making as much money as possible for the university.” You see the difference. When a university policy states an objective, the range of actions available is restricted to meeting that objective. It is that objective that authorizes whatever else the policy does. A stated policy objective is not merely illustrative of possible objectives. A stated policy objective is not wordsmithed fluff intended to make readers feel good about what follows. A stated policy objective is not a non-operative part of policy that provides a rationale for the policy but isn’t technically part of the policy.

Here’s a preambling bit from Brown University:

Brown University’s Patent and Invention Policy and Copyright Policy are intended to further the University’s central missions of education and the production, preservation and dissemination of knowledge. These Policies are designed to maintain the University’s general philosophy regarding the open dissemination of research results and the encouragement of research and scholarship without regard to potential financial gain, while recognizing that commercialization of intellectual property is the means to achieve the maximal benefit to society of certain research.

One would think patent management activities should, by policy, have to be referred to the university’s “central missions” to determine what is appropriate. The second sentence argues that licensing should generally be royalty-free–that “commercialization” does not require “royalties.” And even then, only “certain research” might achieve “maximal benefit” to society by means of “commercialization.” We might expect, then, to find somewhere at Brown a determination of what research this might be, and how a maximal benefit to society (not to the university) comes from “commercialization” of “intellectual property” acquired from the results of such research. Well, there might be such determinations, but they sure aren’t in the Brown patent and invention policy.

Brown’s patent policy defines broadly the scope of a “Covered Person,” claims “worldwide” ownership of “all rights” (not just “intellectual property rights”), and asserts that the Office of Brown Technology Partnerships will decide what it wants to patent and license, and that’s that. There’s no guidance regarding what sorts of research might produce intellectual property that will maximally benefit society by being “commercialized.” Brown takes everything and passes it by policy to an Office, covered by an assertion of good intentions. In this case, the good intentions are to manage patents consistent with the central missions of the university and to “maintain” (that is, not detract from) a “philosophy” of publication without regard to “financial gain.” Except that the rest of the policy promptly ignores all this and takes everything and asserts that an Office operating on whimsy can decide what to patent and what to license. Even where the policy addresses exclusive licensing, it starts well enough and ends by saying, exclusive licensing, too is a matter of administrative whimsy:

Exclusive licenses will be granted if it appears to the Office of Brown Technology Partnerships that this is the most effective way of ensuring development of the invention so that the public will benefit. Any exclusive license agreement will be drafted so as to protect against failure of the licensee to carry out effective development and marketing within a specified time frame.

How could an Office know what will “ensure” development of an invention “so that the public will benefit”? The general argument for exclusive licenses is that they are necessary to encourage or induce investment in development that otherwise would not be made, or would be delayed in being made. One might expect, then, a budget for development in each exclusive license, with reporting of expenditures and progress. But such exclusive licenses, also, are much less desirable for the licensee.

What is fascinating here is that Brown’s policy asserts that there must be wording to “protect against failure” to develop. Given that a United States patent is a right granted to an inventor without any such express requirement that the patent is subject to use, the development requirement is added by university policy. Yet the policy does not as well require the university to carry the same responsibility for effective “development and marketing of inventions.” You see the irony. Once the university acquires an invention–and it claims outright everything it can–the same requirements policy places on exclusive licenses also must apply to the university itself. It’s not just that the university decides not to license something and so may “release” the invention to the inventors; it has a positive obligation under its own policy “to carry out effective development and marketing within a specified time frame.”

Of course, even these words are slippery, as the policy never gets around to the idea that an exclusive license must result in something with “maximal benefit” to society by means of “commercialization.” There should be a product on the market, available to the public on reasonable terms, not simply “effective development and marketing” for some given time. The protection one would expect in an exclusive license is that if there’s no product on the market on reasonable terms within, say, three years, then the license goes non-exclusive, and if there’s been no development of a product to the point of public announcement of development (such as in SEC filing documents or public marketing), then the license terminates. And given that in some ways the university’s claim to own inventions amounts to a special sort of exclusive license from the inventors to the university (documents labeled exclusive license may be, in fact, instruments of assignment; and federal copyright law defines an exclusive license as a form of transferring ownership), then the university’s own policy should place a greater burden on administrators to be effective, just as the policy mandates that administrators should put such a burden on any exclusive licensee.

But no, the policy does no such thing. The university takes all inventions and is silent on the responsibility of administrators to report the reasons for their determinations to commercialize or to patent or license or license exclusively or what protections in exclusive licenses are adequate or whether to require a royalty.

There are two superficial ways to account for university administrators failing to limit by policy their exploitation of patents. Let’s get these out of the way. First, perhaps administrators reason that whatever way a university makes money from its patents necessarily must promote the “progress of the useful arts” because, why, that’s the stated Constitutional purpose of patents. Thus, any exploitation of a patent allows as it were an invisible hand to create the best of all possible economies. Second, perhaps they reason that making money from patents for the university must be a public good, because if the university has more money, then it can do more public good, since doing public good is the purpose of universities. In this scenario, any way of making money is justified, because the money will “go to a good cause.”

Neither of these two lines of reasoning is all that satisfying, and neither would be supported by Brown’s patent and invention policy, at any rate. Perhaps there are other arguments that administrators make. It would be interesting to have a roundtable discussion with them and hear what they have to say.

The stated objectives of a patent policy lay out not only the intent of the fictional person called the “university” but also restrict administrators in their actions taken in the name of the university. Thus, when the ownership of an invention passes from an inventor to the university, the nature of the invention necessarily must change from the intentions of the inventor to the stated policy intentions of the university. It’s not that just the invention management changes–from anything else to the university’s own administrators–but that the invention itself becomes an asset restricted to the objectives established for it in policy.

If administrators are not at liberty to do anything they want to with inventions they claim for the university (because patents are unqualified public goods no matter how used or because anything a university is made to do is an unqualified public good because universities can only do public goods or because “public benefit” is so nebulous it can mean whatever anyone wants it to mean), then any action university administrators take must conform to a disciplined, stable, reasonable reading of the stated objectives of the patent policy.

In the case of Brown’s patent and invention policy, one would expect then that Brown’s patent administrators would take ownership of inventions rarely, only when “commercialization” is indicated; would as a default license non-exclusively, often royalty-free; and in those rare cases in which an exclusive license is contemplated, there would be a record showing how such an approach will result in “maximal benefit to society.” It’s a serious question: why should society benefit most when any single company has an exclusive license to control the use of university research results? Should that exclusive license also exclude any other university or foundation or company research lab from making and using the invention? Should the exclusive license run for the life of the patent or for, say, three years from the date of first commercial sale, or eight years from the date of the license, whichever comes first? Answers to these questions are material to compliance with the policy’s objectives.

If there are no answers possible, or if this part of the policy is simply ignored, then to what extent is the policy at all enforceable? That is, how can it form a contract with employees (and others)? If it is not even enforced against administrators, how can it be anything more than a serving suggestion, a sketch of possibility? More like guidelines than rules. If the reply is that a policy may be selectively enforced–some parts operate and others do not–then what becomes of a statement of purpose that does not operate? Doesn’t that destroy the foundation of the policy? A statement of purpose is not merely a feel-good moment in what often is a rather sour, inept policy document. Certainly a policy document can operate without a statement of purpose. Stanford’s patent policy, for instance, just launches into things. But if a policy does state a purpose, then that statement of purpose has an effect on the operation of policy, or the policy lacks the authority to constrain actions of administrators or any others that may be affected by the policy. Administrators subject to a policy do not have the authority to exempt themselves from that policy. Or, if they do, then the policy is merely a statement of whims and the rest of it breaks as well.

This, then, is a problem with the idea that good intentions are all that is needed. First, for people, who do have intentions as real thoughts that can be self-monitored, an intention is not whatever one chooses to state that sounds good: “I beat people up and steal their goods in the public interest”; “I deceive people and promote my own career to maximize the benefit to society.” That doesn’t work. All the worse for a corporation’s intentions–a golem thing that has no inner life of mind, no intentions at all, but for statements made about intentions on its behalf. Anyone can write a statement of intentions for a thing–a rock, an ocean, a corporation. “The university intends to maximize the benefit to society.” Sounds nice, of course. Except the university has no inner life, does not think, has no urges. Such a statement is not descriptive of the state of the university’s mind. Any company can carry around a do-gooding statement of intent. Heck, Enron had a 64-page ethics statement. Such a policy statement must, rather, act as a direction to administrators, not telling them what to think, but restricting what they may do.

Is it impossible to know how to “maximize the benefit to society” by managing patents at a university? If so, does this mean that university administrators, by being put up to the impossible, are free to do anything they please with patents? Or does impossibility of knowing mean that administrators are authorized to do next to nothing? Or, better, if we really can know how to “maximize the benefit to society” in some disciplined, stable, and reasonable way, then administrators would do well (i) to explain for each invention they take under management their thinking on the matter and (ii) to make public the status and outcome of each invention. At least then we could see what has been attempted and what accomplished.

What I find odd is the implication floating around in these recent university patent policies that achieving the maximal benefit to society is roughly equivalent to making as much money from licensing as possible, and that to make as much money as possible, one chooses exclusive licensing, and those exclusive licenses grant the exclusive right to make and use along with the exclusive right to sell. One would think that societal benefit and making money would be in conflict much of the time, and that a university patent policy’s statement in favor of public benefit would necessarily mean that the university gave up seeking for itself a monetary interest in the patents it claims. Of course, some university patent policies (such as Yale’s) abandon the idea of public benefit and others assert both public benefit and making money (such as Stanford’s–but as a statement of objective for the licensing office, not for the policy).

It appears on the whole that university patent administrators assume that making money is an index of the benefit to society–they demand ownership of inventions, default to exclusive licenses, and insist on the payment of upfront fees, milestone fees, patenting cost reimbursements, running royalties on sales, a share of sublicensing consideration, maybe equity in the company, a share of litigation awards or settlement proceeds. I haven’t heard of a payment-free exclusive license being offered by an American university. It would appear that university administrators choose to license exclusively because the exclusive license gives them the greatest leverage to demand payment, not because an exclusive license will to their minds result in maximal societal benefit.

Here is a simple question for you:

What sort of license offered by a university will achieve the maximal benefit to society for a given area of research?

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