There are, then, three entry points for the IPA approach re-established by Norm Latker at HEW in 1968. First, an agency may allow a university to acquire rights at the time of contracting at the agency director’s discretion–if doing so is in the public interest. Second, an agency may allow a contractor to acquire rights after an invention has been made, if the invention is not a primary objective of the funding (and, clearly, the agency director has not determined up front that it’s in the public interest for a university to acquire greater rights). Third, given that universities lack both the capability and commercial position to justify holding any patent rights in federal inventions–there is no equity of the contractor–the university must show that it intends to bring an invention to the point of commercial application, or at least practical application–expeditiously and as a result of private initiative that requires “risk capital” and “private initiative.”
The problems for the IPA are two-fold. First, there’s nothing in the Kennedy patent policy that permits a federal agency to make a decision upfront, before any contracting, that all contracts with a university (or other contractor) will permit the university to acquire greater rights. The Kennedy patent policy stipulates either at the time of contracting, or after an invention has been made. The HEW version of the IPA pushes the timing ahead even of any actual contracting. That’s not sanctioned by the Kennedy patent policy.
Second, the agency head must certify that it is in the public interest, for any given contract, that the contractor acquire greater rights. How such a determination is made is one of the critical factors in play under the Kennedy patent policy. It is easy enough to assert that it is in the public interest that the government acquire patent rights and release the invention for everyone to use, given that’s the default government position. The assertion may not be true, but it is easy enough to presume. It is up to the university contractor to persuade the federal agency that despite having no capability or commercial position, its administration of a patent monopoly on an invention made with federal support is in the public interest.
Since the federal government has no need to manage a patent monopoly to make money–and therefore the public interest cannot be governmental financial self-interest–a university, to administrate a subject invention in place of the federal government, has to come up with something, too, that does not involve making money from exploiting a monopoly position. Something as the primary purpose, not a side-effect. Thus, it cannot be that making money from a patent position is a university’s primary purpose in administrating a federally funded invention, even if for other inventions money-making might be a university’s purpose (as it was, apparently, for MIT and UC).
Here, then, is one of the critical obfuscations of university patent policies. Many state a two-fold purpose: to benefit the public and to generate revenue. The benefits to the public arise generally from the development and use of an invention. Policies often ignore this general case and assert that “commercialization” is the benefit–the effort to develop an invention into product form and sell it. That effort is the benefit. As for revenue, that’s an assertion of the primacy of licensing practice, not general benefits to the university. A patent policy that asserts revenue generation also asserts (even if not express) that revenues that might otherwise come to a university by other means–donation, sponsored research, sale of services, tuition, state subsidy–are subordinate to revenues that come by way of licensing. In this formulation, a university patent policy stipulates that patents can dominate other relationships. If a university can earn enough from its patent program (as the University of Washington asserted in a five-year plan–which spent $100m in the effort and failed), then the state legislature can see good reasons to shift state funding to other areas of social need. “Even more excellence” is not a compelling competition with social need.
What these university patent policies fail to do is distinguish precedence between serving the public by promoting use and making money from patent positions. An implication of this failure is that the purposes are somehow equal or interchangeable or compatible. Thus, the “invisible hand” argument–by seeking financial returns, we must also serve the public interest. Or, by creating private monopolies that exclude all research and internal uses in the hopes of creating profitable products, we must also serve the public interest. Anything we do serves the public interest, therefore we can exploit patent rights any way we wish, from nonuse through indifference or greed to monopoly pricing to participation in speculation to suppression of all other approaches. When a university patent policy does not expressly forbid certain licensing behaviors, it endorses them. When a university patent policy does not require public service to take precedence over profit motives, then it endorses profit motives. If a university patent policy does not proscribe nonuse or abuse or anti-competitive practices, then such practices are permitted.
To exploit a monopoly to make money can easily mean withholding use of an invention (so someone could profit, for instance, by selling a different product) or could mean charging higher prices (because of the monopoly), or making the public (or companies) pay more, based on need (because for, say, health, people have to pay whatever someone has the right to charge).
If a university and its patent brokers are up for any form of patent exploitation by which they might make money, and use public service merely as a cover for their practices, then the federal government must dictate the behaviors that are acceptable. This is the general case for dealings with any government contractor. For universities, the case has to be made all that more expressly when university by policy does not establish with confidence that its practices must differ from those of just any corporate patent owner out to maximize profits. Thus, the federal patent policy must flow down to any university that desires to step in and administrate patent rights in the stead of the federal government. That’s the purpose of the Kennedy patent policy statement. The purpose of the HEW IPA program restarted in 1968 was to circumvent the Kennedy patent policy while appearing to comply with it.
Since under the Kennedy patent policy an agency director must certify that any given arrangement is in the public interest, the IPA program itself is subject to the determination of the agency director. When new HEW director Joseph Califano determined that the IPA program did not meet the public interest (despite all the gestures toward non-exclusive licensing, nearly all inventions managed under the IPA program ended up as exclusive licenses, and not with much in the way of “commercialization”), the IPA program was shut down. And that was just as the IPA program had been proposed as a template for other agencies to adopt.
The Kennedy patent policy statement of basic circumstances articulates a government-wide policy “reflecting common principles and objectives.” The policy asserts a uniform position, re-stated broadly:
The government in contracting for research should acquire ownership of inventions unless the equities of the contractor or other public interest indicates otherwise. The government should manage the patents it acquires in the public interest, through (non-exclusive) licensing or dedication to the public. Contractors acquiring greater rights may expect exclusivity for three years from the date the patent issues. Agencies varying from the default expectations should do so only in exceptional circumstances and to address special situations.
That’s pretty clear, consistent, and, well, equitable. The government’s use of the patent system under the Kennedy patent policy was to secure a clear publication of each invention and allow domestic access and use of such inventions while having the right to regulate importation of products practicing the invention. “Dedication or licensing”–with the licensing being non-exclusive and generally royalty free. The federal government’s use of the patent system was not guided by what money the government might make. There was then no government interest in a bargain under which it would split the proceeds from a patent monopoly with a commercial partner.
If a university (or a patent broker working with a university) wanted to acquire greater rights in an invention made with federal support, then there were two ways to do it. The first way is the simple way–it just acquires rights and the government does not contest those rights. The rights that get acquired are ordinary patent rights, and the university is free, short of anti-trust law, to do whatever it wants. The other way is more complicated–the university acquires the government’s interest in acquiring the patent rights. That is, an option to the government’s interest. It is as if the government sells off its right to acquire an invention to a contractor which otherwise would have no equitable interest in the invention–the government pays the contractor’s costs plus overhead to release its personnel to work on the federal project. The project serves a government purpose, a public interest purpose. It does not serve a company purpose. As a project concerning the public welfare–and particularly public health, since most of the funding for these projects came to universities from HEW–there was little room to consider how such project might be converted into profit-producing monopolies as a pre-condition to public benefit. If a university was going to acquire greater rights under a government option, then it would administer those rights in the place of the government–that is, without a profit motive. The arguments for a university acquiring greater rights under an option included:
(i) moving the administration of inventions closer to the inventors
(ii) providing greater energy and focus in identifying potential developers
(iii) calling forth risk capital when necessary to develop an invention.
If universities wanted to acquire a subject invention under the IPA option to the government’s interest, then they would “administer” the patent rights (that’s the IPA’s terminology) in the public interest. That is, they would engage inventors, find users, and only if necessary grant limited exclusive licenses to attract private investment. That is, they would, like the government, administer the patent rights to achieve a purpose–practical application–and not primarily to produce institutional profit. Other than recovering the costs of providing the service, there was no public interest reason to make companies pay for access to subject inventions administered by universities.
In effect, the argument made by universities to administer subject inventions on behalf of the government that was their advantages–proximity, energy, and investment awareness–less the costs to run the program outperformed the government’s own programs to do much the same thing. University administrators, so the argument went, would be better able than their federal government counterparts to separate the inventions worth patenting from those that should be dedicated to the public, and could separate those inventions that would benefit from non-exclusive licensing from those that required exclusive licensing to call forth risk capital, and for those that did require exclusive licensing, university administrators would be better able to negotiate the terms and be diligent in enforcing the license to achieve timely practical application. The impression left is that many inventions would be dedicated, most of those for which patents were to be sought would be licensed non-exclusively (if not royalty-free) for all to use on an equal, competitive basis, and a very few inventions would be identified for exclusive licensing, and only then when substantial private capital was required for development.
In practice, however, none of this happened. It appears that university patent brokers filed aggressively rather than selectively, licensed exclusively most of the time (when they licensed at all), did not diligently enforce the terms of their deals, and did not release the remaining rights for research and general public (and company) use. The argument for university control (as made by Latker and Bremer, for instance) rested on the assumption that universities would be better invention administrators than the government for social reasons, but it turns out that the insider argument was that the universities would be better invention administrators because they had a profit motive, and that profit motive would be transferred to the invention brokers who in turn then could expand the number of inventions for which they sought payment. Again, if the invention broker works on the terms set out by the university administrators–acquire patent rights, license most inventions royalty-free and non-exclusively to create working relationships with university faculty, inventors, and their research–then the broker, as an agent, has no right to seek greater profit than the university requires. If the benefit is in collaborative relationships, in the strength of weak ties, in recognition as a leader, in recognition as an advantage to the development of new technology, then those are the agent’s metrics of success.
But if a university has a profit motive. If the purpose of patenting is not to sift through many inventions for a few that would benefit from a non-exclusive licensing program rather than dedication through publishing and teaching, and from the few to find a finger hold of inventions that require private financing available only from single sources of funding and thus exclusive licenses (and even then, time and subject matter and scope of rights limited to balance recovery of the investment with future competition to manage pricing and rapid improvement and application)–if not all this (sorry, but you really do need to hold it all in your head before hitting the implication), but rather to make as much money as possible from taking patent positions against industry and investors alike, then the patent broker has the job of maximizing income–not just from one invention to the next, case by case (as would be the case if the broker represented independent inventors) but on a portfolio basis. Speculate on patents, do a big deal once a decade, and the financial part is covered, and that is success.