Sometimes I feel like my job is to come along after the parade and sweep up all the horse-manure left by AUTM folks. Crowds are gone, balloons all popped, marching bands safe back in their hotel rooms. University inventions locked up for more years behind patent broker paywalls, in, uh, “portfolios.” You know, like stock portfolios, except where 90% of the “portfolio” loses money but the broker makes money on the size of the portfolio not on its overall performance, so doesn’t tell you about all the losses.
Anway, I just came across a brief objection by Ashley Stevens from 2011, upbraiding Bhaven Sampat over Bayh-Dole and arguing that UK’s approach to university patenting follows a similar course of success. Stevens creates a happy history that never was for Bayh-Dole, and uses that history then to disagree publicly with Sampat. Let’s see if Stevens’s arguments hold up. I know, we are talking about stuff from six years ago–working through the horseshit after the parade. But sometimes doing so is, let’s say, fertile ground for learning something new.
Here’s Stevens on Bayh-Dole:
The act was passed as an agent of economic policy, not of social policy.
Do you comprehend the distinction?There’s nothing in Bayh-Dole that makes this distinction. The policy and objectives of Bayh-Dole (35 USC 200) look every bit like they involve social policy, not economic policy. The primary objective is to use the patent system (a social thing) to promote the use of inventions (without singling out commercial use for profit, certainly not the profit of the patent owner). Other objectives involve use of American labor (a social thing), preference for small businesses (a social thing), collaboration (very social), lowering administrative costs (economic), protecting the public (social). Stevens makes an empty distinction. The history of American federal patent policy–and university patent policy–has been that the patent system on its own is ill suited to the social aims of university research. That’s why we had research foundations, why there were faculty prohibitions on patenting, why patents were held for defensive purposes, and why the government aimed to limit the use of the patent system to those activities that promoted innovation without giving patents entirely over to whatever money-grubbing or indifferent position a patent owner might (legally) take.
The problem we have now is that university patent administrators for the most part (there are exceptions) are given over to money-grubbing and indifference, not to social purpose. And what’s the outcome of the money-grubbing and indifference (the meaning of “portfolio” in technology transfer terms)? About a 0.5% commercialization rate. It’s ugly in there folks, but no one wants to talk about it.
More from Stevens about Bayh-Dole:
It aimed to reconnect academic research to the national economic infrastructure by allowing universities to obtain patents on their research and then commercialize it. It bypassed ‘top-down’ rules established by the government.
This is pure nuts. “Reconnect” is an odd verb, suggesting something was connected and then disconnected, for which Bayh-Dole “reconnected.” Perhaps Stevens refers to the cancellation of the IPA program in 1978 because it failed to live up to claims for public benefit. Perhaps Stevens just picked a random verb. Dunno.
At any rate, American universities had active programs in technology transfer–mostly pushing things to research foundations and especially Research Corporation but also Battelle and other national agents. Universities were at least modestly connected to the “national economic infrastructure.” The patent brokers at universities, however, wanted more inventions to work with. They had that from some federal agencies–DOD, NSF, and others. And even from HEW–through the IPA program. The IPA program allowed universities to claim ownership of “subject inventions” (a different definition from Bayh-Dole’s), and license those inventions. A Congressional examination of what happened was that the universities licensed almost always exclusively and didn’t do any better than the federal government–under 5% of inventions resulted in commercial products–4 of 96 inventions. Meantime, the other 92 inventions were not nearly so available, subject to institutional ownership claims. So HEW canceled the IPA program. Bayh-Dole aimed to resurrect the IPA program. Perhaps that’s what “reconnect” means. It’s just that the “reconnect” applies only to HEW and the other federal agencies that did argued for a different means by which universities should “connect” with “economic infrastructure”–not through monopoly patent ownership.
What “top-down” rules? That federal agencies should let companies own who had commercial positions and capabilities, and any others should have to make a case based on what they intended to do with privately held patents? Is that so bad? Or that any contractors holding federally supported patents should get the inventions into practical application as quickly as possible or give up a monopoly position? Is that a rule that should be “bypassed”? Or that agencies should have flexibility to do what is in the public’s best interest? Oh, yes, let’s bypass that one for sure.
When Harbridge House looked at contractor commercialization in 1968, it was clear that organizations without experience did much worse than those with experience. University ownership of inventions, on the evidence, was much worse than most any other way of placing federally supported inventions. One would think that the only way Bayh-Dole passed, other than as a parting gift to Sen. Bayh from Congress, was to make up stories about how bad the government’s management was (there were instances of bad management, but they weren’t ubiquitous) and how important bureaucratic middlemen were to innovation (and there was no evidence for that, either–it was an argument formed from the fabric of “sounds good.” But in testimony before Congress, university folks admitted their licensing programs were crap–but with “incentives” might get better. So now we have glossy crap licensing programs. Nice.
More Stevens:
Sampat implies that universities grant only exclusive licences.
How straw man can we be? Stevens claims an implication with *only* and then beats his inference down. No one could possibly claim that universities grant *only* exclusive licenses. Anyone who works in the business knows that universities routinely grant non-exclusive licenses to research sponsors, often up front before any invention is made. Furthermore, when universities go out trolling for infringement, their settlements often include non-exclusive licenses. That’s all beside the point. Here’s what needs to be clear:
Most university licensing offices are predicated on the exclusive patent license. I’ve worked in those offices, and with many of those offices. That’s the fact. The operating model is *almost never* to start with an offer of a non-exclusive license, unless required by a sponsored research agreement or an industry consortium agreement. *Virtually* no-one goes for “open hardware” or “open research tool” if there’s a patent involved. Stuff gets held for exclusive license until the patents expire, are worthless, or someone is infringing. I’ve heard directors of licensing offices say outright that they would refuse to handle an invention if they were told it had to be licensed non-exclusively.
The reality is that exclusive license thinking dominates university licensing operations. Leading technology transfer directors claim that Bayh-Dole gave them incentives to use exclusive licenses, and that “non-exclusive licenses are just a tax.” That is, only exclusive licenses somehow produce innovation. Non-exclusive licenses just take money out of innovation. And all this doesn’t hold up to examination either. It’s just more bullshit from university patent brokers to keep people from realizing how awful their practices actually are.
The Bayh–Dole Act aimed to liberate universities from the rigid government prescription that permitted only non-exclusive licensing of federally funded inventions (most start-up companies require an exclusive licence, for example).
This, too, is nuts. Under the IPA program, universities could grant exclusive licenses after determining that non-exclusive licenses would not achieve practical application. There was no “rigid government prescription” under the Kennedy-Nixon patent policies. Even the original Bayh-Dole Act contained an IPA-like restriction on exclusive licenses–no longer than five years from first commercial sale or eight years overall, unless the exclusively licensee was a small business. University patent brokers rushed to get this limitation removed in an amendment four years later. So much for preferences for small businesses.
There’s more to Stevens’s made-up history. The research foundation licensing programs were often non-exclusive, from the electrostatic precipitator and using radiation to create vitamin D to end-run federal regulations regarding adding things to milk to warfarin to the Cohen-Boyer and Axel patents. Many of the great patent licenses in university programs were non-exclusively licensed to industry. Where does Stevens get his history?
As for startups, they start all the time pulling things from the public domain. Their commercial position and their investment position does not depend on everything being a monopoly. Stevens imagines a situation in which startup companies have to choose for paying for an exclusive license and paying almost as much for a non-exclusive license. There, the choice is clear. But what about paying for an exclusive license with a bunch of invasive demands for royalties, insurance, audit, and termination and a royalty-free, irrevocable, non-exclusive license? There, it’s not so clear. I’ve had a number of startups much more interested in a non-exclusive license, especially in non-exclusive licensing programs tuned to small company needs. It may be that venture capitalists like to see exclusive licenses–but then when was it that Bayh-Dole became a welfare program to subsidize the interests of venture capitalists?
Finally, if startup companies don’t generally “require” an exclusive license. This, too, is pure nuts. Startup companies want ownership. They want assignment. They don’t want a university bureaucrat riding in the trunk on every date. They don’t “require” exclusive licenses. They are beaten into accepting exclusive licenses–those that have to do business with universities in the first place and can’t design around. Stevens makes it sound like startups just trot up to universities with their list of demands and universities patent bureaucrats are helpless in the face of it all.
Here’s the irony. Most universities that grant “exclusive licenses” actually make assignments relabeled as “exclusive license.” They grant exclusively the rights to make, use, and sell, the right to sublicense, and the right to enforce the patent–a right only a patent owner can have. And those assignments violate the standard patent rights clause under Bayh-Dole. But what do the patent bureaucrats care?
In practice, the licensing mix of academic institutions is much more nuanced — 61% of US licences in fiscal year 2009 were non-exclusive (Association of University Technology Managers survey).
Here we have a case of deceiving with statistics. Think just a tiny little bit. AUTM’s licensing survey reports absolute counts of the number of licenses, not whether, for each reported invention, it was licensed exclusively or non-exclusively. Furthermore, AUTM’s licensing survey conflates patentable inventions with everything else–software, biomaterials, board games, whatever–so long as the license brings in $1,000, it’s a “commercialization” license. And yet furthermore, AUTM’s figures conflate subject inventions with everything else–with things not federally funded. Thus, for instance, we had a software project at UW licensed to 200 industry sites. UW could then do 120 exclusive patent licenses and, nuanced, UW grants 60% non-exclusive licenses in 121 “technologies.” Take your pick: Stevens is deliberately deceiving his readers, Stevens is incompetent with statistics, and/or Stevens is bullshitting to make Sampat look bad. Oh, these aren’t mutually exclusive options. Perhaps you can think of something more charitable.
What Stevens won’t point out, however, is that universities license only about 20% of what they claim and only 0.5% of it ever becomes commercial product. Licensing is not the measure of Bayh-Dole. Practical application is.
Thus far, Stevens has argued without evidence that universities don’t just license exclusively (they do license non-exclusively, but not for patents unless forced to do so, except at a very few universities). Stevens then turns to UK university practice. Here, he makes a point about U.K. research patent policy–that in 1988 UK moved from placing all research inventions with a state corporation (similar to Research Corporation) and allowing universities to own. That’s a useful point. It’s just that UK patent law permits employers to own inventions, so as long as university faculty are considered to be employees (that’s an iffy proposition, but not beyond university administrators to push), then the UK change released a Crown claim and replaced it with university employment claims. There is a parallel here to Bayh-Dole. It’s just that, apparently, nothing came of it until the UK government provided additional funding for knowledge transfer and community service (“Third Stream is about the interactions between universities and the rest of society.“)–this funding was then co-opted by university patent brokers to fund patenting and licensing activities.
Stevens then asserts the purpose of third stream funding:
This essentially gave universities an economic development mandate and paid them to fulfil it.
But if you look at the documentation on third stream funding, it is overwhelmingly social in its purpose. To equate “economic development” with “economic policy” (not “social policy”) as for Bayh-Dole would create a whole lot of cognitive dissonance. I don’t know quite how to take all this. Perhaps Stevens uses “economic” where he means “financial.” That really Bayh-Dole gave university administrators a money reason to get involved in patents, that having a social reason was not good enough. That is, universities could not support discovery and innovation using things like academic freedom (that is, personal choice in the context of personal public commitments) but instead had to have a money interest. But even this doesn’t work, since universities routinely claimed a financial interest in successful inventions commercialized by their faculty. They did not need Bayh-Dole for such a claim. What they wanted out of Bayh-Dole (and misrepresented the law for 30 years when they didn’t get it) was ownership of inventions. This is strange. Why own and pay for what you could simply wait and gain a financial share of later?
It wasn’t the university faculty or administrators that rushed for Bayh-Dole. It was the patent brokers, who wanted more inventions to work with, who wanted to expand their sphere of influence, who wanted to take a share of university income rather than live on a share of what they successfully licensed. Most university licensing programs that appeared successful started with a big-hit licensing program. Then they had the money to expand, forget their roots, make it appear that they were based on a system rather than a distinctive opportunity, and hunt for more deals to do, this time from a position of authority and strength rather than as an agent recruited to assist.
An “economic development mandate” is hardly a demand that universities own patents and license them, whether exclusively or otherwise. And certainly licensing is not the measure of economic development. Cost savings from use, or benefits from use, or new industries arising from access, or commercial sales at profit, or new jobs (and not net job loss)–these might be measures of economic development. Tracing such things back to a patent license–that takes some doing. To argue that these things happen only, or best, or primarily because of patent licenses to inventions arising in university research–that would take some evidence to believe. You know, not just confirmation bias arguments and hand-waving, but actual evidence.
Steven buries the idea of financial incentives in the construction “universities”–as if universities can respond to financial incentives. But a university is a social structure and a legal fiction. What people in a university needed financial incentives to contribute to the economic development of the country? Faculty? Students? The implication seems to be that faculty and students weren’t paid to contribute to economic development–discovery and teaching and publishing and going out and using what one had learned and producing things and assisting others aren’t apparently “economic development.” But licensing patents to speculators–that is. Even though licensing itself means nothing, other than as an “economic” measure of the pull of patent licensing. Use matters. Sale matters. Benefit matters. Institutional patent ownership means nothing. Licensing means nothing. Or, whenever institutional patent ownership and licensing (or not) does not lead to use, sales, and benefits, then the institutional involvement has been a net drag on science, scholarship, and public access.
Put it this way: if university patent brokers did not have outright access to inventions made in at a given university, then patenting decisions would be much more selective and patents would issue not to the university but to inventors, to patent agents, and to companies rather than to universities. The growth of university patenting after Bayh-Dole reflects bureacratic processes, a failure to be selective, and outright engrossing and forestalling a broad market for innovation–one that does not depend on patent rights or exclusive licenses. University patenting goes up not because research discovery goes up or because faculty have a financial incentive to be more productive, but rather because university patent brokers persuade university officials to force all inventions to a claim of institutional ownership. Sure, faculty report more “inventions”–because they will be disciplined if they do not, and sure, some faculty report “inventions” because they think the licensing office will make them rich–why not? But giving an institution ownership of patentable inventions–and thus, patent monopolies–without any clear purpose in licensing means that research personal become indifferent to the impact of their work while relying on the institution to somehow justify the patenting activity.
One might argue that Bayh-Dole increases the indifference of research personal to the public outcomes of their inventive discoveries. If use can only come about by means of an exclusive license, then everything else depends on the university taking action–not just to license, but to license so that public use results. This happens for 1 in 200 inventions, apparently, on average. For the other 199, the patenting withholds a discovery from use. Reporting inventions is sending them off to die.
No wonder faculty take an interest in starting companies–it’s the only way to get access back to the inventions they have had to give up. Essentially, university startups are a form of bailing inventions out of jail. If university administrators had an ounce of sense, they would not take ownership of inventions that faculty aimed to start companies around–allow the inventors to assign their inventions to the company directly and stay out of it. At best, they might obtain a financial interest in the success of the company or the invention or both, based on the circumstances. The idea that a university has to acquire a patent, and then with all its institutional overhead behind it, license that patent exclusively to a startup company formed by the inventors, simply to regain access to what they invented–that’s not only bureaucratic overhead; it is also a dead weight on innovation activities.
Stevens makes a case for not thinking clearly about university patent ownership. The effect, to the extent anyone believes Stevens, is to preserve university claims to own research inventions, and to keep alive a failed social experiment in institutional patent licensing. Universities were doing an iffy job with federally supported inventions in 1978, and in 35 years under Bayh-Dole appear to have managed to reduce their effectiveness by an order of magnitude.
The dual monopoly model of innovation is a disaster for public research and public welfare. Strip faculty of their rights and responsibilities. Withhold inventions from any but speculative monopolists willing to “share” their upside. Report on how much money speculative monopolists spend to gain access to what ought to be broadly available. Never report on how many inventions are withheld and never become available. When is enough enough?