We have been considering an article reviewing the Bayh-Dole Act published in Nature Biotechnology ten years ago. The purpose in working through the article is to show just how deeply the rhetoric of university “technology transfer” has gained a life of its own, detached both from Bayh-Dole itself (and its standard patent rights clause) and from discussion of what leads to public benefits from projects funded to advance science or public welfare–or what leads to the use of inventions made in such projects–or even, somewhat aloof from pesky purposes of funding projects to help the public, of what leads to a lot of money from the exploitation of patents on these inventions. Strangely, these things aren’t up for discussion among university patent managers. Other than a few enlightened folks, the discussion is about how to defend current practice from any outside changes–that is, how to preclude accountability, enforcement of the law or patent rights clause, or changes in the law that might improve outcomes, starting with the public purpose of the projects, and moving to the use of inventions made in such projects.
What’s fascinating about the article by Boettiger and Bennett is that it proposes changes to Bayh-Dole from within the university technology transfer community. This is, in its way, a breaking of ranks, a violation of the code of silence. For that, there’s some respect due the authors for their efforts, despite their inability to characterize Bayh-Dole accurately.
We now take up a statement regarding the experience of university patent administrators. It’s a few sentences long. We will take it a clause or two at a time:
Over time, universities have come to a more subtle understanding of the benefits and the limitations of technology transfer.
That is, their approach doesn’t work. They have overclaimed what they can and have accomplished, but are unwilling to walk back on their policy changes, nor to open up a discussion about new directions or values or practices.
Collectively, university technology transfer offices (TTOs) have learned that patent portfolios are difficult and expensive to manage,
The key word here is “portfolios”–universities suppressed an approach that involved agents and replaced it with one that involved portfolios. An agent that takes on work manages that work until there’s too much work, and then does not take on any more until some has been cleared. That’s the carrying capacity of an agent. Taking on more work than one can manage is an agent’s route to liability and failure.
TTOs, in adopting the dual-monopoly approach–claim to own everything, license what one can exclusively, sue everyone later–surely have adopted a difficult and expensive practice. It’s a practice that creates its own complexities and liabilities. But our authors depict this approach as the only one possible, that any ownership position with regard to patents necessarily involves portfolios. Bayh-Dole does not require portfolios. It does not require university ownership for that matter (a university can assign ownership, direct that ownership be assigned, or refuse to accept ownership). A university could take a financial position with every patent and not own or manage any patent portfolio. It would have an upside for successes, and virtually no difficulty or expense in the process. When university administrators realize this–the ones that are not patent licensing officers–there will be a stampede for the door.
they take a long time to mature to the point where they will deliver revenue,
“They” refers to “portfolios” of patents not to inventions or patents. The “long time to mature” wording is really quite astounding. Bayh-Dole requires contractors to use the patent system to promote use of subject inventions. But in a portfolio model, one accumulates patents, waiting until industry falls across your properties, creating opportunities to “monetize” one’s patent positions. To take a “long time to mature” a patent portfolio is akin to saying “we have to hold patents for a long time before we can monetize them.” That’s hardly using the patent system to promote use–it is using the patent system to extract rents from use.
For all that, a portfolio approach needs only one deal every decade to be wildly successful, one deal every two decades to be successful, and one deal every three decades to be arguably successful. That is, maybe one invention making millions out of 10,000 inventions is all a patent portfolio approach requires. Spend for years, until one hits it big, and then all that spending “will be worth it.” Sounds like buying lottery tickets. It’s just that with a lottery, one actually knows the odds. The critical thing is that Bayh-Dole does not endorse a portfolio model. Bayh-Dole is based on an agency model. For each subject invention claimed, there should be practical application. There is no idea that many inventions will be held on the prospect that eventually one of them will result in lots of money to pay for the costs of holding all the rest. The portfolio model is nuts as a matter of public policy or Bayh-Dole. The law would never have been passed with such an overt endorsement of the virtue of a portfolio model. The fact is that universities have overclaimed inventions, been indiscriminate in what they claim, have exceeded their carrying capacity as agents, and as a defense claimed they are developing “portfolios” of patents and that this is difficult and expensive and revenue will take ten or twenty or thirty years. True, but an abrogation of Bayh-Dole and not the only approach possible.
results are widely variable and the investment required represents a long-term commitment.
That is, university administrators don’t know what they are doing but expect to get paid for years to keep trying. An invention that’s not used or licensed in its first three years of existence is not likely to get licensed productively later exclusively. The “investment required” of universities is the result of not having a clue about how to manage patents as an agent. It appears that nearly all “successful” licensing operations involving university-hosted inventions start off with a “successful” invention–Research Corporation, WARF, MIT, UW among them. The fun starts with other universities imitate these programs, thinking that if they build their own versions, then inventions will show up with profits to follow, ignoring that the programs they imitate started with those inventions. It’s a tough lesson for the bozonet, but our authors are at least accurate here with regard to what TTOs have learned. Not that they have learned anything about how to do things well or quickly or inexpensively or profitably.
As a result, expectations have changed with the primary focus of technology transfer shifting from one that is narrowly based on institutional revenue to one encompassing impacts on the broader local economy, industry-university relations, the formation of new companies and the development of industry clusters.
This is all puffy-speak. Whose expectations have changed? The expectations in Bayh-Dole haven’t changed–and our authors are writing an article about Bayh-Dole. Have the public’s expectations changed? How so? Universities report their technology licensing programs as successes. They never report–“We did crap last year and will do more crap this year but we stubbornly refuse change, crappitall.” What our authors here report is accurate–university TTOs have stopped trying to claim they’ll make money (or rather, have successfully beaten back the expectation by others in the university that they will at least pay their own way). Instead, the claim for patent licensing has switched to “social benefits”–economic impact and building collaborations and the like. But there’s a huge disconnect here, since economic impact can have little to do with the actual use of inventions (investors can invest millions in failed companies promoted by universities–I guess that’s an economic impact), and collaborations with companies tend not to be characterized by exclusive patent licenses. In fact, exclusive patent licenses are a great way to preclude industry collaborations. If one company has an exclusive license, why should any other company in the same field sponsor research, or donate to support research, or hire from the inventive lab (except to disrupt it or design around its patented work)?
So, yes, universities having failed at even money-making on the dual-monopoly model try to justify it based on non-financial terms–the portfolio model is not intended to produce revenue, so the argument goes–we claim to own so much and insist on monopoly licenses to produce regional economic results. And even that is subject to a lot of doubt. The University of Washington, late to all of this, went in 2009 from a TLO operation based on aiming to provide a range of helpful IP services to one committed to make a lot of money. They even put the plan in writing. After inducing UW and the Washington State legislature to spend over $100m chasing their plan–license patents to startups for equity and sell the companies to investors for huge profits–the program collapsed at the height of its claimed success and was replaced with a program with changed expectations, talking up innovation and collaboration. Nice, even typical, but a decade late and apparently still operating a portfolio model.
There are plenty of signs that the dominant university approach to patents on research findings needs to change–or rather, needs to be changed. Inventions are kept from research and public use, pending a mostly useless effort to find monopolists willing to share proceeds or, better, willing to pay something up front. Most inventions therefore go unlicensed and unused. Most of the inventions that are licensed exclusively fail to become products, and worse, then are caught up in zombie contracts that often won’t die. Of the few inventions that do become commercial products, we are faced with monopoly pricing. The high cost of prescription drugs is not merely the result of the government not negotiating prices–it’s the product of university licensing practices that create monopolies where none need exist, and prolong those monopolies when (other than money) there is not reason to do so, and support the highest price possible (under the argument that maximizing royalties is a public good, and “gives taxpayers a return on their ‘investment’ in university research.”