Repeal or reform Bayh-Dole?

It seems repealing is the activity of the moment when it comes to health care insurance, but it’s not at all clear that the replacement law will do much for the price of prescription drugs. And the problem is not simply that of patents, since some generic drug prices also remain high in the U.S. We might throw in other factors to consider, such as the cost of regulatory approval, the management of research and development, the choice of targets for research and product development, and advertising in all its varied forms from the use of media to indirect efforts to sway physicians. In short, repeal of a law doesn’t mean everything becomes peaches and cream.

Consider, then, the repeal of Bayh-Dole. Some folks think that would be a good thing. I’m inclined to go along with them, but repeal doesn’t begin to get at the problem that Bayh-Dole has created, and repeal doesn’t even land us back where we were under the Kennedy/Nixon executive branch patent policy, and repeal doesn’t address the problems we had back then nor the problems we have got now. [With repeal, we do indeed end up back under the Nixon patent policy, such as by operation of 15 USC 2216(d). But we do so without the codification of that policy which was in the Federal Procurement Regulations–that codification was abandoned when the FPR was replaced by the Federal Acquisition Regulations in 1987, and the FAR codified only Bayh-Dole and forgot entirely that Bayh-Dole did not repeal but only preempted other statutes, and that preemption only took place for inventions made under federal contract when a contractor acquired title to those inventions. Thus, repeal ends back with Nixon policy (because Reagan’s executive order to require Bayh-Dole practices for all contractors becomes moot if there’s no Bayh-Dole) and the conditionally preempted statutes, but without codification and without the administrative apparatus that knew how those statutes operated. Of course, NIST, which had been delegated to administrate Bayh-Dole’s regulations for the Secretary of Commerce, shows little indication that it knows how anything pertaining to Bayh-Dole operates, or why, so we may lose not so much by repeal anyway.]

There will have to be some insightful thinking on the matter–and insightful thinking has not been a major element of public policy on government funded inventions since, say, after the Kennedy patent policy in 1963.

Here are five issues involved in the repeal of Bayh-Dole, along with some possible directions for people to consider.

1. Repeal of Bayh-Dole won’t change university practices. Bayh-Dole did not cause university practices to change–university administrators made the changes on their own. Of course, they often cited Bayh-Dole, but their citations to Bayh-Dole are largely misrepresentations of the law, as they found out in the Stanford v Roche case. Not that a Supreme Court decision could stop them from digging in even deeper.

Just to set the record straight:

Bayh-Dole does not apply to universities. It applies to federal agencies and how they construct contracts to fund research. Bayh-Dole requires the creation of standard patent rights clauses. It is these clauses that universities agree to, funding agreement by funding agreement.

Bayh-Dole does not vest ownership of inventions made with federal support with the universities that host such research. Universities do not have any special right to take title, nor do inventors have any obligation under the standard patent rights clause to assign title to them.

Bayh-Dole does not require commercialization. The law’s focus is on practical application–use the patent system to promote the utilization of inventions made with federal support. Commercialization is but one way to achieve practical application. The law does not give commercialization any privilege in the manage of inventions.

Bayh-Dole does not require or even encourage exclusive licensing. The original Bayh-Dole placed restrictions on exclusive licensing. Those restrictions were largely removed four years later. Bayh-Dole still restricts assignment of inventions–and exclusivity can be granted either by license or assignment.

Bayh-Dole does not endorse a portfolio approach in which a handful of lucrative patents justify the nonuse of thousands of inventions. Bayh-Dole requires the prospect of accountability for each federally supported invention acquired by a university. (But Bayh-Dole does not require federal agencies to enforce that accountability).

The number of inventions reported, patent applications filed, patents issued, licenses granted, startups created, and amount of money made are largely irrelevant to Bayh-Dole (except money made by non-profits, which may be reported and the expenditure of which is subject to restrictions). The things that do matter–practical application, collaboration, free competition, protection against nonuse–are largely ignored. Universities routinely refuse to comply with the standard patent rights clause, and federal agencies routinely permit universities to do so. And here is the thing:

Bayh-Dole is a law that stipulates what federal agencies must include in a patent rights clause in a funding agreement. Those clauses establish the conditions upon which an owner of a subject invention is permitted to retain ownership. But Bayh-Dole does not require that any federal agency actually enforce any of those clauses. Thus, Bayh-Dole looks good (sorta) but ends up in practice being a do WTF you want law, but with useless administrative overhead (such as duplicating the reporting inventions and the like).

What does it mean to repeal a do WTF you want law? It means that university administrations will continue to do WTF they want. And what they have wanted, overwhelmingly, is to try to make money from licensing patents. And for that, they have decided that the best way to get patents is to demand that inventors assign all inventions to them. And to make that happen, administrators have changed university policies, tried to turn policies into employment contracts, and made it appear that it is unethical for an inventor not to accept whatever it is that the university administration asserts. Once they have patents, university administrators (many of them) assert that exclusive licensing is the best way to make money. And in that, they assert that making an assignment under the guise of an exclusive license is an even better way to make money, since then the licensee (now assignee) has the first right to sue for infringement (only a patent owner can sue for infringement) and the exclusive right to sublicense (which otherwise the university would do via a non-exclusive licensing program).

These practices are not part of Bayh-Dole. They came about because Bayh-Dole relaxed oversight–especially after the 1984 amendments–and university patent brokers and administrators went hog wild creating a fantasy version of Bayh-Dole and used this fantasy version to insist that university policies must be changed to “comply” with federal law. It was entirely bogus, but well done, even clever. The upshot is that regardless of Bayh-Dole, universities have changed their policies wholesale to

  • require institutional ownership of inventions;
  • create university-run licensing shops that are deemed to be successful with one lucrative patent transaction per decade or two;
  • endorse the default use of exclusive licenses (that are actually assignments with conditions);
  • fixate on commercialization of inventions to the exclusion of making inventions broadly available for use
  • refuse to disclose the actual data pertaining to practical application. No university reports what percentage of the patents it holds have led to commercial products that are broadly available on reasonable terms.

Repealing Bayh-Dole will change none of this. All a repeal might do is pull some federally supported inventions from the near-certain suffocation within this new university “system” of patent exploitation back into federal government non-exclusive licensing programs. Repeal of Bayh-Dole is like releasing an astronaut from toxic fumes aboard a space craft by dumping them into the cold vacuum of space. Nice form of salvation, that. We ought to do better.

At best, a repeal of Bayh-Dole would return us to some version of the Kennedy/Nixon executive branch patent policy established by executive order, along with the specialized invention clauses required by various statutes for specific purposes. In that repeal, nothing much would change for companies contracting with the DoD–they would have the right to retain ownership of inventions that they had before Bayh-Dole. For non-profits, they would be back to requesting to retain ownership on a case-by-case basis. That might be a useful thing–they would have to make a positive case for why they should own, and at least show that their ownership will result in broader, faster use through non-exclusive licensing, participation in a standard, or how a limited exclusive license (limited in scope, in duration) would result in broader, faster use than would non-exclusive licensing or the public domain. Make a case. Act on the claims. Use the results of that effort in making any future case for such ownership.

2. Repeal of Bayh-Dole doesn’t deal with executive branch patent policy. Here, there’s a need for thinking from experience, not so much thinking by drawing academic models based on abstractions that don’t necessarily exist other than in the pantheon of academic and political discourse. Here are some basics:

Will Nixon-era executive branch policy again control federal agency contracting for research? For that matter, should executive branch policy control inventions made in extramural research, or should Congress dictate that policy? Or should the funding of university research (as distinct from the procurement of research services) be entirely outside the reach of either the executive branch or Congress? Or should the executive branch be forbidden to include the delivery of invention ownership as a condition of federal research support, leaving patent law to do its thing, for better or worse? Yes, a bunch of questions–and that’s enough for most people to choose to keep doing the crappy thing that’s in place until “something better is proven”–which will be never because the crappy thing that’s in place won’t permit any testing of anything else.

Bayh-Dole conflates subvention and procurement–gift and purchase. It’s clear how a commissioning party, intending to procure something for its use, might insist on owning any inventions made in developing that something, or at least insisting on a royalty-free license to do whatever it wanted–“practice and have practiced” (to use the wording of Bayh-Dole’s required license). But it’s not clear at all what ought to happen when a party provides what amounts to a donation, a “subvention” to assist people in doing what they have proposed to do, especially when they propose to do it in the public interest, for public welfare. Or, perhaps another way, it’s clear that when work is done for the public interest, normal patent practices have already been displaced. The question then is what the abynormal patent practices ought to be, if any. Under the Kennedy patent policy, the default was government “dedication” of inventions to the public. This, it was argued, was all wrong. But was it? Is expanding the public domain through subvention funding of privately proposed research really that bad?

It’s not even clear that the federal government should, in providing subvention funds, be funding “projects”–yes, that’s where the “sponsored project” in sponsored project office names comes from. Why fund a project rather than a person? Charles Kidd argued in the 1950s that the government moved to projects to avoid having to appear to evaluate funding based on a the merits of the individual doing the research. But we might ask why subvention research should be a matter of competitive petitioning, King Lear style, and not a matter of going out and seeking people doing interesting things, and providing additional support to allow them to keep doing those things. If we ask such questions, it becomes clear that Bayh-Dole shows up as political exploit made attractive by problems created by other political choices regarding university research.

Even if we accept research projects and the conflation of subvention and procurement, we still have the issue of government rights. Vannevar Bush argued (in Science the Endless Frontier) that the government needed no more than a non-exclusive license to practice any invention made with his proposed National Research Foundation funding. Of course, the NRF was proposed to expand the “frontiers” of science and in so doing create the conditions under which new industries and new products might be produced by people working outside established orders. In World War 2, Bush had led just such efforts, working outside the military establishment to produce things that the military establishment could not specify for itself, could not think of, could not bring itself to give priority to, would not know how to use. The effort in Bush’s push for federal funding of civilian research was to do something similar for other established orders, starting with medicine and communications. For communications, Bush’s ideas were spot on, and we have the digital computer, the internet, the web, and WordPress as a result. For medicine, however, things failed and pharma broke the government’s policy interest in creating commons around newly discovered compounds with therapeutic potential. Bayh-Dole was to be the final nail in the debate over whether there should be any public effort to discover such compounds that did not result, eventually, in a private monopoly for a pharma company. Repealing Bayh-Dole necessarily re-opens this debate, one that big pharma in particular, continues to be prepared to destroy.

Even if we focus on inventions that are made in federally funded research that are directly in line with a proposed activity (“the planned and committed activities of a government-funded project”), what ought to be done with other inventions that also may arise–research tools, unexpected discoveries, applications, and stuff entirely skew from the research but based on the methods or reagents or designs or even the accidents arising in that research? If the matter is subvention rather than procurement, then the scope of work isn’t really the issue–it is what to do with anything that comes from the work that has been funded. Imagine funding an artist. If it’s a procurement, we tell the artist, “Propose something and if we like it we will give you the money” (this is straight King Lear–tell me how much you love me and I’ll give you a share of my kingdom). Attention then turns to how to handle what gets created from what was proposed. But if we are into a subvention, then we tell the artist, “We like what you have been doing, here’s some funding to do more. Surprise and delight and challenge us.” Such a thing is horrifying to “prudent” account managers. An artist–gawd, an artist–could do most anything. In the project-formulated version, we might assert that public support means that the public should have the primary benefit, not the artist, and not whatever organization the artist might happen to work at. After all, the artist petitions for funding knowing that the funding is for the public to benefit. But if we fund the artist outright, based on a sense of the artist’s present potential to surprise, delight, challenge (a sense typically not available to prudent account managers), then why should our provision of public money alter in the slightest the artist’s interest in his or her own work. (Imagine the government trying to fund, say, a Picasso, listening in on the government’s side of the conversation: “yes, yes, it will all go into the public domain; no, no you won’t get a thing for your efforts except our funding? what? what do you mean by that? well, go $#@! yourself, too.”)

3. If the patent system is to be used, that use starts with principal investigators and inventors, not governments and university bureaucracies speculating on the value of monetizing patent rights. This distinction is fundamental to whatever follows. If one believes that bureaucracies should control whatever is new, then Bayh-Dole seems reasonable, even if one might imagine something better. If one thinks that bureaucracies don’t have so good a track record, whether capitalist or socialist, when it comes to discoveries that might challenge an established order, then Bayh-Dole is worse than stupid–it is damaging.

But getting rid of Bayh-Dole doesn’t begin to address the mindset that prevailed to create Bayh-Dole. The principal investigator is one who proposes a given activity, a research “project.” An inventor is one who makes a discovery while involved in that activity. The relationship between investigator and inventor is the primary one. Bayh-Dole destroys it, refuses to recognize it at all. Institutions control inventions, and inventors get the crumbs if institutions decide something is truly worthless or harmless or stupid. (Of course, if an inventor wants something, then that something must not be worthless or harmless, and therefore should not be allowed into the hands of the inventor; and if the invention is truly worthless, then it’s not worth the effort to let the inventor have it–beyond Catch-22).

Recognizing the relationship between investigator and inventor lies at the heart of any new government policy with regard to inventions made at universities with federal subvention funding. That relationship created the environments in which things like warfarin were discovered. That was the hey-day of university research at the forefront of new discoveries in the public interest–research typically outside the reach of established orders, but starting with an engagement with people who had needs and interests not addressed by those established orders. Not ivory tower, but not also in the service of the status quo. A third option. Engaged. Policy has a tough time with people who are engaged with their communities.

4. Whatever new regime happens when Bayh-Dole is repealed, we need to have reliable reporting. At least then we can see what we are doing, unlike now, where all use reports pertaining to inventions made with federal funding are exempted from FOIA and therefore government secrets. It may be that the federal government should not reach through and demand reports (which patent brokers have made to smack of a requirement to self-incriminate), but certainly federal agencies might be required to ask for reports and make those reports public for inspection.

[We might argue, then, that if an action taken with regard to an invention made in research for which a request was made for support in the public interest–no one is forced to take federal money–then necessarily such action should be made public. While there is an argument in politics that many things done in the name of public interest ought to be kept from the public, that argument, if it applies to the disposition of research findings, overreaches. Research inventions ought not to be politics–just as science ought not be politics, just as the frontiers of science ought not be politics, what with the bluffing, the favoritism, the power of government deployed to command both consent and technology. If American innovation is to be “unleashed” by regulatory practice, the unleashing must be in the form of removing politics from regulation–regulation, as it were, must take the form of a bill of rights. The thing regulated is not the public, not inventors, not their inventions, but the government, the institutions involved, the political bureaucracy only too happy to take possession of any new thing to serve the status quo of sustaining bureaucracy.]

5. With repeal of Bayh-Dole, we are also back to the problems that arise under the Kennedy/Nixon executive branch patent policies. [The Kennedy patent policy was something of a restatement of the various federal agency approaches to inventions made with their funding. It was more a tessellation of multiple policies than a uniform policy–but then Bayh-Dole is hardly uniform either. Bayh-Dole is arbitrary rather than uniform, inflexible in text but utterly capricious and wavering in the various ways that the inflexible text can be ignored, waived, unenforced, and not acted upon by the various federal agencies. In a way, Bayh-Dole is the Nixon patent policy worn inside-out–stupid, embarrassing, and generally unavailing for the purpose. But apparently attractive to people who think public purposes are idealist flooffery and the only good purpose is one of hearty bureaucratic self-interest.

With the Kennedy/Nixon patent policies, we found that some companies in some industries declined to participate in federally supported research. They feared “contamination” of their own research and development with federally supported work that carried requirements of open access. Open innovation methods may, indeed, compete with proprietary methods, and proprietary methods have their place–the policy question is whether the public should care that corporations and speculative investors should make it a business matter to exploit treatments for disease and misfortune as one of seeking maximum profit. For instance, the public could care–and amend its patent system so that there are no remedies available for infringement of a patent with regard to practice of medicine–beyond 35 USC 287(c), which limits medical procedures (think, surgery) to undo the carve outs obtained by the biotech/pharma lobby for devices, methods, and compositions. Maybe the public should care. Maybe with repeal of Bayh-Dole, there would be an opportunity to care. Maybe Bayh-Dole forestalls public care for the inventions and discoveries that might bring it, for lack of a better word, delight–delight in medical treatments developed as treatments, not as first and only (if ever) as commercial products.]

Federal agencies also weren’t prompt or consistent in deciding whether a non-profit could hold patent rights. Government rights in inventions–license, march-in–created disincentives to patent. Dedication of inventions in itself is not sufficient to spark uptake–sometimes there needs to be active efforts to support an invention (even if those efforts involve teaching or provision of tools or answering critics with vested interest in preventing anything new from gaining a foothold). Bayh-Dole took a response to these problems in the direction of making patents on subvention research a glorified public good. Patents will create products. Patenting without accounting to the government will be even better. Patenting without restrictions by the government will be even better. Patenting that allows universities to assign inventions or litigate for infringement will be best of all. These arguments haven’t worked out. There’s no data. Nothing to show that patenting has been the wild success claimed for it, and that unrestricted patenting has been any better than government-limited patenting.

If we repeal Bayh-Dole, we will have to have other things in place to address the issues. Not merely dealing with the consequences of multiple agencies all providing subvention research funding (another thing university administrators demanded), but with rethinking whether subvention for innovation really benefits most from King Lear-style research project proposals (with all the waste that goes into creating, reviewing, awarding, reporting, and auditing those proposals and the work done). All the overhead of procurement–but without anything particular to procure. We ought to rethink the practice, and to do that, we ought to at least create something that competes with that practice. Maybe something like the National Research Foundation that Vannevar Bush proposed and didn’t get. Maybe something that does not use “research project” and doesn’t involve competitive proposals. Sounds imprudent. But perhaps there’s a way. Perhaps sparking discovery and innovation is inherently imprudent, especially to established orders, to bureaucracies, to administrators committed to serving their institutions (and their status in those institutions) above all else.

We don’t have enough in place to repeal Bayh-Dole. But we can do things to reduce Bayh-Dole’s toxicity and push university administrators to undo some of their most egregious policies and practices.

  • Require Bayh-Dole to be enforced on its terms, starting with the statement of policy in 35 USC 200. Bayh-Dole’s statement of policy is not merely one of “purposes”–it replaces executive branch policy and sets the framework in which all patents on inventions made with federal support must be handled. The Bayh-Dole Congressional policy does not permit litigation to prevent the use of subject inventions and does not permit patent practices that suppress competition. Those would be good provisions to enforce.
  • Roll back Bayh-Dole to its 1980 format, without the amendments of 1984 that released the university administrative krakken and promoted exclusive licensing. At least then exclusive licenses would be for limited terms and reports of use would be publicly available except for sensitive information that FOIA allows to be excluded.
  • Require federal agencies to enforce the government’s side of the standard patent rights clause. Any invention claimed and not achieving practical application within three years of patent issue should be marched-in. There would be hundreds of march-in proceedings each year. Universities would give up making all the appeals to delay their sitting on inventions in the hope of making a pile from “monetization” in some distant future. Universities have no business overclaiming inventions and stockpiling patents. Make universities get selective and make them act on what they select, and make that action timely. Force the marched-in inventions to non-exclusive licenses, and if there are no paying licensees, then make the non-exclusive licenses royalty-free. Be done with it.
  • Protect investigators and inventors in the standard patent rights clause by enforcing the (f)(2) requirement under which investigators and potential inventors make a commitment to protect the government’s interest. (NIST wants to turn this into a requirement that inventors must assign to the institution that hosts their research, making Bayh-Dole back into a vesting statute even though there’s no authority in Bayh-Dole for doing so–such is the power of the mindset that insists that bureaucracies should control and profit from inventions made in subvention research). The (f)(2) requirement flows down the critical part of Bayh-Dole and properly interpreted displaces any university policy or contract that is in conflict regarding the same subject matter–inventions made with federal support. Clarify the impact of (f)(2) by including with (f)(2) expressly the same restriction on institutional claims to inventions that governs subcontracting at (g)(1): the institution gains no rights in inventions made by inventors as a condition of their use of federal funds. Universities have in general absolutely no equitable interest in any invention made with federal subvention funding–the university is compensated for its direct and indirect costs. It has not commissioned the work, has no business interest in the work, has no right to control or approve the work. It meddles, unless it has been asked to assist.
  • Separate procurement and subvention funding. Leave Bayh-Dole alone for procurement work–so, for large companies, for small businesses, Bayh-Dole may be adequate. Go after subvention funding, however. Amend and strip out most of Bayh-Dole for universities and other non-profits, where the (f)(2) agreement with protections for inventors matters the most. There, we might be left with the standard patent rights clause at 37 CFR 401.9 that implements 35 USC 202(d)–which makes clear that inventors, when they hold their rights to inventions, are equivalent to small business contractors, but with the fewest restrictions of anyone. Start there. Inventors own their inventions under federal common law, and they should also retain the right to patent those inventions, subject to any agreements that they make with their colleagues in a given project (such as the principal investigators).
  • Protect subvention investigators’ freedom to publish, but insist on publication. A patent is a form of publication, and university policies on academic freedom uniformly assure faculty of their freedom to publish–and that should mean their freedom to decide whether to publish by means of a patent application. And the patent system is set up with the premise that there should be an exchange of exclusive rights for limited times in exchange for publication. If there is a fundamental obligation that inventors of subvention funding should accept, it is that they publish what they discover, invent, develop. How they publish is their choice. That they publish should be the primary means of meeting the expectations of federal subvention funding. How they publish in the context of a patent should also be considered for any subsequent subvention funding they may seek.

Will such changes in Bayh-Dole get at the high price set for prescription drugs in the U.S.? Likely, no. More has to be done to make finding and developing compounds as therapeutics less expensive and less given to monopoly exploitation. We gave over an entire infrastructure of exploration, compounding, and reporting when government policy was bent to the purposes of the pharmaceutical industry. Government regulation then wiped out much of that infrastructure–it lives on, covertly and on the periphery, in natural products and dietary supplements and off-patent drugs. We would have to re-cultivate development activity around medical therapeutics, and it may be that the federal government could support that cultivation rather than encouraging monopoly control that favors those aiming to grow fat on human misery. That restored activity may arise from the present “supplement” market, or from the “generic” drug manufacturing market, or from something entirely new, such as an “open compound” initiative comparable to the open standards/open hardware/open source approach that has been at the center of the digital computer and internet. Beginning the process by which university administrations are again separated from the predatory practice of claiming faculty inventions made with federal support would be a good start.

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