Bayh-Dole Secrecy, Part 10

The 1984 change to Bayh-Dole conflates information that must be disclosed by federal agencies under FOIA with information that federal agencies must exclude from FOIA disclosure. This conflation itself violates FOIA. Bayh-Dole does not declare as a matter of law that invention use reports must be kept confidential by the federal government. Bayh-Dole, however, does restrict federal disclosure of contractor invention reports and patent applications–for limited times, so Bayh-Dole (taken as a golem-like thing that can act on its own without humans acting for it) does know how to restrict information if it wants to. But for invention utilization reports and information surrounding questions of practical application, Bayh-Dole requires federal agencies to contract to treat all information received in invention use reports as “privileged and confidential”–bungling the wording of FOIA’s (b)(4) exemption in the process. But worse than bungling, Bayh-Dole requires federal agencies to treat non-privileged, non-confidential information as if it were both “privileged and confidential.” Bayh-Dole requires federal agencies to contract to violate FOIA rather than to act within FOIA.

The implementing regulations to Bayh-Dole hop along with this project by adding the requirement that federal agencies agree not to disclose invention use reports–again bungling this requirement with inconsistencies about whether an agency can disclose within the federal government or is limited to disclosure within the federal agency itself.

The standard patent rights clause then gets packed with a federal agency promise not to disclose anything in invention use reports, even if the information is otherwise made public, even if the information is essential to the assessment of Bayh-Dole’s fundamental premise, even if the information would serve to hold universities accountable for their licensing practices in the public interest–if not to the standard set by Bayh-Dole (such as it is, after being twisted by university administrators and patent brokers hoping for work from university administrators)–then at least to the standard set in university’s own formal charters and policy documents–all those puffy preambles to university patent policies might come to mean something rather than be read as red-faced fictions to quell a presumed to be easily placated public (or humanities faculty) before getting on to the business of plundering patent rights for monopoly speculation–all characterized as an expensive, complicated, risk-filled enterprise that has to be done or the progress of the world will creak to a halt. This effort has to be staffed by well paid specialists and operated without public accountability or public accounting, to ensure, ahem, maximum flexibility in meeting the grand challenge placed before universities–to serve the faculty by engaging private capital to build the new products and new companies of our glorious economic future on the strength of patent monopolies diligently rescued from faculty publication, greed, foolishness, and dithering and licensed to worthy, wealthy partners willing to pay the university its proper share of that glorious future.

Think about it. Is Bayh-Dole set up to be a public enterprise or a scam? Whatever claims may be made for Bayh-Dole’s purposes and reasons for existence, the law has the architecture of a scam. This is especially true after the 1984 amendments made federal accounting for contractor practices under the standard patent rights clause a government secret.

Bayh-Dole in its present form prevents us from knowing. We can guess and estimate using indirect measures. We can observe rather than count and make a pretty safe bet that Bayh-Dole patent practice results in massive invention nonuse, creates FOIL gridlock, and imposes harsh terms on licensees rather than FRAND–fair, reasonable, and non-discriminatory–terms. But we don’t have access to the invention use reports that Bayh-Dole makes a requirement of the standard patent rights clause but then doesn’t require the federal agencies to enforce.

Even if we changed Bayh-Dole to require federal agencies to require invention use reports, the reports would still be a state secret. We would have to change Bayh-Dole’s “shall” regime back to a “may” regime, so federal agencies separated the information the public was entitled to know from the information that was legitimately privileged or confidential, as FOIA’s (b)(4) exemption provides. But even that would not be enough–federal agencies could drag their feet on what information to ask for from owners of subject inventions, and if the agencies can waive the receipt of any of that information, then the information is not required and it’s even more the case that the information will fall under (b)(4)’s exemption just when we need it the most.

Instead, there must be a positive statement in Bayh-Dole that carries through the public covenant on subject inventions to invention use reports, especially for reports from organizations who broker inventions rather than use them–universities, research foundations, and assignees (especially those assignees who gain their position by means of an exclusive license from a non-profit). That is, Bayh-Dole must authorize federal agencies to collect and report certain information, even as those agencies segregate and withhold information that legitimately meets the conditions of FOIA’s (b)(4) exemption. The information from the patent brokers may be sensitive to the brokers’ business interests, may be embarrassing, may undermine their claims of being successful, or expert, or diligent–but that information is essential to the operation of the law, essential to the oversight of practices under the law, and essential to the evaluation of the effect of the law.

Bayh-Dole has to authorize the release of that information: for each subject invention, its status–patent or no patent? assigned or not assigned? licensed or not licensed? if licensed, non-exclusively? if non-exclusively licensed, on FRAND terms? and above all, the date on which practical application has been achieved–(i) established use with (ii) benefits available (iii) to the public (iv) on reasonable terms. And for each broker: subject inventions under management; the number of inventions achieving practical application; the number achieving practical application on FRAND terms and what those FRAND terms are; the number of subject inventions assigned (including by exclusive licensing of substantial rights); the gross royalties received on subject inventions under management; and the disposition of those gross royalties–amount to inventors, amount to other incidental costs of managing subject inventions (and not any other inventions), and the use of remaining balances for scientific research or education.

There, those are the parameters that frame Bayh-Dole, its operation, its outcomes, its broker behaviors. None of this information is readily available. The mechanism by which federal agencies might receive, review, and report this information has been entirely stoppered up–not just blocked up, but made non-required, and made to distract attention from brokers to the actions of federal agencies, so that even the reports they receive are for all practical purposes non-actionable. No public reporting, no march-in, no accounting, no penalties.

Bayh-Dole may as well be made simple. Skip all the silly administrative paperwork–the reporting of inventions, the election of title, a paper copy of a government license the government will never use. Just state that

Patent brokers–regardless of their qualifications or practices–as a matter of law have a right to take from inventors any inventions made with federal support and do whatever they want with them bounded only by antitrust law, so long as they share any royalties with inventors, such royalties to be whatever they decide, all without public reporting or accounting, other than that a statement of government funding will be put in any patent application.

Yes, skip even the government license, since the government never practices its rights, even if in doing so it would save the billions of dollars and make federal research relevant once again. There’s the law in its willful, impulsive form, there in the minds of university administrators and patent brokers. That’s essentially the version of the law as dreamed up by Norman Latker and Howard Bremer and the form of the law defended by Senator Bayh in his senescence, or at least defended in his name by others, as before the Supreme Court in Stanford v Roche.

It’s one thing to argue that US patent law for all its foibles is a decent thing, and we ought to let it play out however it will, with inventors free to do whatever for limited times a federal monopoly permits them under the law, including not seeking patents, or gaining patents and sitting on them, or licensing patents to others for speculative profit, or licensing patents to others to create or contribute to a commons, or making new stuff and making that stuff available, all the while teaching everyone else how to practice the invention. That’s a worthy argument to have, whatever one’s position in it.

But that’s not the argument that Bayh-Dole makes. It is crossed up. Bayh-Dole makes the argument that the US patent system isn’t quite right. There must be a public covenant that runs with every subject invention. That public covenant makes the property right in POSIs different from the patent property right in ordinary inventions, running under ordinary federal patent law. That public covenant sounds good in its way–promote use (rather than nonuse), make things available on reasonable terms (not monopoly terms), prohibit speculation in assignment of inventions (so assignments must carry the public covenant), and report on the status of each subject invention, the outcomes, and associated broker behaviors.

Except that Bayh-Dole doesn’t then follow through on the public covenant–even though the covenant is clearly there in the law, and the law follows a line of public policy back to at least 1947, if not earlier, that asserts just such a public covenant. That’s the public covenant given clear expression in the uniform executive branch patent policy under Kennedy and Nixon, and even given lip service in the Institutional Patent Agreement program directed at nonprofits from 1968-1978, under Nixon and Carter. Instead, Bayh-Dole expresses the public covenant as a spectacle of political expediency to get the bill passed into law, as the surprise parting “gift” to Senator Bayh in a lame duck Congress. Bayh-Dole, however, in its technical apparatus and implementing regulations and standard patent rights clause–these latter well outside direct Congressional review–(er, the people who aim to control access to Bayh-Dole, taken as a collective noun)–obscures, obfuscates, ambiguates, and undermines the public covenant.

Bayh-Dole then makes another strange departure from ordinary federal patent law. In ordinary federal patent law, inventors own their inventions. The Constitution grants the federal government the right to allow inventors to enjoy exclusive rights in their inventions for limited times in exchange for publishing their inventions in the patent literature. But Bayh-Dole doesn’t think this is good enough, when inventors happen to be funded by the federal government, even when the funding is in the form of a subvention, a grant-in-aid, made because the government has decided it is in the public effort to help.

If the government were simply procuring research for its own use, then like any commissioning party, the government could require delivery of patent rights as another deliverable. That’s how contract research organizations work in the design and development world. I worked with a CRO that had many patents on the walls and the CEO was proud to acknowledge that every one of those patents was assigned without a second thought to the organizations that funded the research–it was more than pride, it was integrity–that something so valuable, coming into their hands, could be placed where it was contracted to be, with the party bringing the project, so full of unknowns and in need of expert assistance, to the table.

But Bayh-Dole doesn’t adopt CRO contracting practices, because universities weren’t thought of as CROs (though they did set up independent organizations to be exactly that). Instead, universities were thought to be organizations set up with a public mission, to provide public benefits through teaching, research, and service. The federal government did not procure research from those hosted by universities; instead, they provided subvention funding to assist. This is what Vannevar Bush was trying to formalize within government–the grant in aid for a purpose, the expansion of the frontiers of science, not to procure anything for any established order. Not procurement for the federal government, not for industry, not for the military, not for professional medicine. And not for “science for its own sake” or “research as an industry” either. Instead, to push the envelope of how we observe and affect and perhaps manipulate phenomena in the natural world. For this funding such work, Bush proposed that all the government needed was a non-exclusive license to use inventions made with this support. Inventors could have at the patent system any way they wished. The only public covenant was not to sue the government that helped them in their work for infringement if they took out patents.

Bayh-Dole exploits the idea that universities aren’t ordinary federal contractors. It turns federal grants–based on subvention–back into procurement contracts (“funding agreements” is the euphemistic abstraction), then asserts the government’s right to acquire patents as deliverables, then argues that the government does a crappy job with patents as deliverables (an argument that was false at the time, but falseness was a political expedient, as it were–don’t look so shocked), and then argues that universities should own the inventors’ inventions outright (or through some bothersome administrative mechanism, if necessary) in order for the patent system to be used to its proper potential. That is, Bayh-Dole pretends to transfer the right of the federal government to receive a research deliverable to the universities that host the research, as if they have a procurement contract with their own inventors and that virtual, implied contract stands in for the federal government’s subvention agreement (i.e., a grant) with the university, made on behalf of the principal investigator and to serve the public interest.

Bayh-Dole makes it appear that ownership of patents should vest with not even the employer of the inventor, but with the university that receives the government’s money intended to support whatever it is that a university investigator has proposed doing, because that work is judged to be of value to the public. The host gets the inventions, dispensing money that’s not its own, and even paid the full cost to host the research, to permit employees to work on the research rather than on their regular work (“extramural”–outside the walls), to manage the money, purchases, and financial reporting for the research projects. This is a strange adaptation of federal patent law.

Arguably, it is outside Congress’s Constitutional authority to vest ownership of inventions with organizations that host research paid for by the federal government. The Constitution reserves rights to inventors, not to employers, and certainly not to hosts. It takes a specially clever, tangled mind to try to twist a clear Constitutional authority to become a vesting statute for research hosts. Government subvention has to be made to appear to be another form of procurement (hence, add small businesses), and procurement in turn has to involve patent rights (hence, government prerogative), and then those government rights have to be conveyed to the host of the research (by “election to retain title”) so that the host can be thought to have the government’s procurement right directly, and exercise that right in the place of the government, and doing so will be in the public interest because the government does a crappy job with patent rights–just gave them away without a profit motive, never enforced them, and so did a lousy job of creating monopolies that produced real value for investors in that sort of thing.

Actually, it’s not “arguably” outside the limits of federal patent law. The Supreme Court in Stanford v Roche made it clear that Congress could not have intended to create a host-vesting statue out of Bayh-Dole. Not directly, not through some twisted mental apparatus. If universities wanted patent rights, they needed to negotiate for those rights upfront, in the normal way, and get assignments. That rather ended the argument, but not the effort by patent brokers to get patent rights to the university hosts and from there into the hands of the patent brokers. Instead of the standard patent rights clause’s (f)(2) agreement being a protection for inventors against university predatory practices, the effort now is to turn this agreement into a requirement to assign inventions to the research host. And that amounts to vesting. There’s nothing in Bayh-Dole that authorizes such a thing. And the Constitution doesn’t grant Congress the right. But NIST proposes to pull vesting “out of its butt” (to use the technical term for it) and turn (f)(2) into a vesting requirement. The hope is, apparently, that no one has another few million dollars to push another case to the Supreme Court and the patent brokers will get away with their scam for good.

Yes, it’s complicated. Yes, your brain rebels. It’s like looking at 10,000 lines of someone else’s buggy spaghetti code knowing you will have to work through it step by step, not just skim it for a conclusion, to understand where it goes wrong.

But it is just in this way that Bayh-Dole makes exploits the argument that federally supported inventions should be treated differently than ordinary inventions, that there should be a public covenant, but really that public covenant shouldn’t be in how patent rights and income are used but in who should get to profit from these special patents, these POSIs. POSIs (so the implied argument goes) are so important to the public that university research hosts should own them, so that monopolists can acquire them for whatever they will, and this is what is put forward to be in the public interest, to be the inspired use of the patent system, so wildly successful–and to that end must be kept entirely from public scrutiny. And this is what Bayh-Dole’s secrecy provisions protect from public review and accountability.

Bayh-Dole is a scam through and through, executed by people with enough technical knowledge to make it appear legitimate when it is not. As Dante argued, the one thing a community cannot defend itself from is the intelligent fraud. At some point, we rely on the experts to have integrity, to do and see for us what we are not able to do for ourselves. It’s a credence activity. We place our interests with those who appear capable. But if they turn, then the community itself is destroyed from within.

That is what is happening to university research enterprise. While Clark Kerr may be right that university change comes from the outside, it also appears to be true that change caused by decay comes from within. A recent article about a whistleblower case (now a lawsuit) involving Arizona State University reports the following:

During a 2010 meeting with Crow and other administrators, Meldrum alleges in the whistleblower letter, the ASU president rebuked her for complaining that the biosignatures venture was not getting promised support, then explained that “a good part of everything being done at ASU is puffery and papier mache, and that it was their job to support the illusion before it all collapsed on itself.”

Perhaps Crow’s quip is true even if the story is distorted by memory, interests, and the press. Maybe Bayh-Dole is just part of the apparatus of puffery and papier mache, designed to give the public a spectacle that there’s an invention factory built alongside federal research to produce new products, new companies, new industries, economic growth, and cures for diseases–if only there’s more research funding, more money for patents and licensing, and more money to buy products at monopoly prices. Then the apparatus will work–and in the meantime, there is a really, really good living for patent brokers and licensing executives at universities, in law firms, and in companies.

The university brokers weren’t doing better than the federal government in invention licensing when Bayh-Dole was being debated. They were doing about the same, except where it came to federally funded inventions they obtained under the IPA program (which required them to have an assignment clause, as a matter of contracting, not a matter of federal patent law)–for those federally funded inventions, the university brokers were doing 10x worse than the federal government. Instead of licensing non-exclusively, to create competition and to provide wide public access, the university brokers licensed exclusively instead. Their goal was to subvert public policy by using the appearances of public policy.

We can go around about how the federal government should acquire patent rights that it otherwise issues to inventors for itself. That’s strange, too. But at least it is legal. We can fuss about what it means to use a patent without a profit motive. But that’s entirely permissible within federal patent law. We can even wonder if every patentable invention should be patented rather than published for general use without an ownership claim. Such dedication to the public isn’t forbidden by patent law, and there’s nothing that says that dedication is any less effective at promoting the progress of the useful arts than is patenting for monopoly control. But this Bayh-Dole scheme–there’s not much merit in it, once one recognizes how dysfunctional it is. But we won’t know just how that dysfunction affects behaviors and outcomes because Bayh-Dole makes those behaviors and outcomes federal government secrets.

There are helpful, even important or critical roles for invention managers. I have no doubt about it. Beating up on Bayh-Dole does not mean that inventors must somehow work without assistance. Quite the opposite. Bayh-Dole, at least in its faux, non-compliant implementation, forces inventors to use the patent system whether they want to or not and to accept the intervention of people who are often not qualified to help them, may not have their interests at heart, and who have effectively no accountability to the inventors, to the federal government, or to the public. Bayh-Dole assures everyone that private interests will outweigh public interests, with the implication that this is a public virtue.

One reason, I suggest, that the IPA program had such dismal outcomes was that it required nonprofits to require inventors to assign inventions to the nonprofits. When inventors assigned voluntarily, outside the IPA program, licensing rates were 10x better. Bayh-Dole, making compulsory institutional ownership appear to be a mandate of law and riding a wave of government funding for research that long ago swamped out all other sources of research funding at most American universities–and swamped out many industrial sources of research funding as well–has taken university licensing outcomes to a new low, running apparently at 1/10th the unexceptional rate of the IPA program, and 1/80th or so the rate of voluntary university-mediated patent licensing programs. It is no wonder that patent brokers don’t want this information to come out. Thanks to Bayh-Dole’s secrecy provisions, it won’t.

I’ve argued previously that “of” is the most important word in Bayh-Dole–“of the contractor” is the condition that turns a patentable invention into a subject invention and triggers the bulk of Bayh-Dole’s lumbering, leaky, and survival-clever apparatus. But “shall” is right up there. With “may” instead of “shall” we would have a wealth of information about Bayh-Dole practice, submitted under the pain of fraud by university contractors. That information could then be audited for accuracy and evaluated for what it indicates about invention management practice, and especially about that practice as reflecting contractor flexibility in meeting the expectations (if not legal requirements) of the public covenant that runs with subject inventions.

This is a study in ten parts. Here are the links.

1 1984 amendment from “may” to “shall”; roots of reporting in IPA

2 Bayh-Dole’s focus on use; regulations on reporting

3 1984 amendment in detail; connection between reporting and march-in

4 FOIA 552(b) and Bayh-Dole 202(c)(5)

5 37 CFR 401.8; Bayh-Dole circumvents FOIA

6 FOIA 552(b)(4); Public Citizen v NIH

7 18 USC 1905; Kennedy patent policy march-in; Bayh-Dole march-in

8 Comptroller General reporting; federal agency licensing 209(d) and secrecy 

9 Open access records case; distinguishing sensitive info; royalty reporting

10 Public enterprise or scam? public reporting essential; puffery

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