On July 18, 1978, Senator Gaylord Nelson of Wisconsin sent a letter to the director of the Office of Federal Procurement Policy recommending an indefinite stay in extending government-wide the Institutional Patent Agreement program. In the letter, Senator Nelson makes a number of points with regard to the IPA program, the mechanics of extending the program to all agencies, and the rationales for doing so.
Here, I highlight just a few of Sen. Nelson’s points.
And what is in the public interest when it comes to patents on inventions made in federally supported subvention research, grants-in-aid, assistance not procurement? We might start with the patent system. Is the use of the patent system uniformly in the “public interest” no matter how it is used, so long as the use is legal? Is the “public interest” merely the greatest good for patent owners, however they think of good? Or is the public interest best focused on the good of industry-leading companies, or companies that desire to lead an industry, if only they can gain a monopoly through patent rights? Or is maximum royalty returns to universities from patent licensing in the public interest?
Or, let’s say the public interest is served best by getting the results of subvention research into use more quickly and at less cost than might happen without a public policy intervention. You know, practical application–use with public benefits on reasonable terms, faster and more diligently than “normal.” If that’s the goal, then how do we shape federal policy interventions to get there? Do you think an arbitrary, across-the-board intervention for all research support, whether procurement or subvention (but not fellowships and scholarships–that is, direct support for people) is the best approach?
Do you think the administrative convenience of an arbitrary policy outweighs the use of judgment, if only to match a requirement to the form of research support to distinguish subvention from procurement? That is, is the public interest in the outcomes of research primarily in limiting the use of judgment by federal research administrators for the convenience of patent brokers representing universities?
The issue of how patents should be used in federally supported research is, fundamentally, a matter of “judgement for policymakers.” It is this judgment that is then in play in how executive patent policy is created. If we look at things this way, then what was transferred first by the IPA program and then by Bayh-Dole with increasing impunity was the right to exercise judgment with regard to national policy. Essentially, that policy control was privatized in the hands of patent brokers with access to inventions made in federally supported research hosted by universities.
Bayh-Dole transferred the locus of public judgment about the availability of federally supported research findings–discoveries and inventions, at least–to private hands–to dealers in monopolies. The government was saddled with an arbitrary policy (called “uniform”) while university patent brokers could do most anything they want (because Bayh-Dole has no enforcement mechanism, no protections for inventors, and no right of the public to appeal private practices–and Bayh-Dole keeps invention use reports secret anyway).
Despite the IPA having an apparatus that describes non-exclusive, royalty-free licensing, for a decade the university patent brokers obtaining title to subject inventions licensed exclusively. So much for the non-exclusive apparatus. Clearly, the IPA was an end-run around federal policies that argued that the public interest was served by making the results of federally supported subvention research available to all on comparable, reasonable terms. So we have a disagreement over what public policy should be.
The president, via executive order, sets out a policy that gives contractors with established commercial positions and capability to develop inventions the right to do so, and for everyone else federal agencies are to consider what’s in the public interest, with a default that if the federal government is funding something to become a product, or is the only user, or is leading the development and so does not want to give any single contractor a monopoly in bidding for further work, the government should hold title to inventions and make the inventions available to everyone for use and development.
Patent counsel for the NIH and university patent brokers disagree with this policy, say it is not “uniform,” declare that university patent brokers cannot know “with certainty” that when they obtain title outside of protocols established by the federal government they will be able to “retain” that title. Well, of course there would be uncertainty, since the brokers are operating outside of federal regulations.
Despite all the complexities, the public interest debate comes down to whether the patent system is well suited to subvention research, especially at scientific frontiers, especially hosted at nonprofit organizations, especially when the federal government is providing the majority of the funding. Should university patent brokers get to pick favorites? Get to maximize their income from licensing? Get to trade on speculating on the future value of patents? Or should our thinking be dominated by the idea that no research invention will be used unless it becomes a commercial product, and nothing becomes a commercial product without great expense, and the primary source for such great funding should be speculative investment? In this way of thinking, patents are the thing that “calls forth risk capital” and thus permits commercial products to be produced, which otherwise will never be.
On the face of it, it’s hard to believe the commercialization via risk capital argument in general, even if it is indeed true in some instances. Should we generalize from accounts in which a few inventions are shown to benefit from a patent position to gain investment support that otherwise they would not have had? If not, where’s the limit that prevents university patent brokers from attempting to force all inventions into this model, so that every invention must be patented, must be presented to risk capital, must be forced to a commercial product form?
This method of refusing to acknowledge university technology transfer performance has operated now for nearly forty years. The government was “bad” at technology transfer, so universities will be “better.” Bayh-Dole seals this argument by making Bayh-Dole invention use reporting a government secret, when that reporting is even required at all.
In fact, things were worse for the universities than Sen. Nelson observed. For biomedical inventions, the federal licensing rate was 23%–about what the universities claimed as the rate for their own non-federally supported inventions. But for federally supported inventions under the IPA program, the university licensing rate was under 5%. University brokering of subvention funded inventions was simply not even close to the federal licensing rate. Was ceding to university patent brokers a host of public policy decisions about how to exploit patent monopolies in the public interest?
Sen. Nelson gets at the fundamental fallacy of that 28,000 government patents figure that advocates of Bayh-Dole continue to use even now. “The condition of the Government’s patent portfolio is not of itself a reason to suppose that universities could do better.” Norman Latker and university patent brokers gave a variety of reasons why universities might do better: their personnel were “closer” to inventors and thus could work with them better than could government patent administrators; their personnel were more “motivated” to do licensing deals and so could do a better job obtaining investment to develop inventions; the patent brokers had a monetary incentive and could share that monetary incentive with industry, building a better licensing program from the proceeds.
These arguments sound good. It’s just that in practice they haven’t worked out. Familiarity may breed contempt. A local licensing official may lack the capability or specific expertise of a licensing official located far away. University licensing officials may be focused on the good of the university rather than the competitive shape of an industry or the effect of petty monopolies (that is, monopolies on bits of research invention) on the overall direction of research and development as well as on the cumulative platforms that might otherwise be created. And a money incentive might easily become corrupted into the primary goal, even while “public benefit” is still given as the public rationale for pursuing mega-deals involving exclusive licenses (which often end up to be assignments).
This was just as true of Bayh-Dole. The idea was that if universities could gain outright control of inventions made with federal support, then they would build licensing operations to exploit patent positions–and the calling forth risk capital argument would take over from there. Other than in the pharmaceutical industry, we see little in the way of support for Bayh-Dole. And of course the IPA program and then Bayh-Dole were created for the benefit of the pharmaceutical industry, to circumvent public policy that argued against unchecked patent monopolies in areas such as public health research.
There are any number of ways of drilling into the arguments in favor of unchecked patent monopolies to show that they don’t hold up–not on the numbers, not on the reasoning. But this is a political debate about money and power, and so is not about numbers or reasons. Once the debate has been decided by regulation, all that’s needed to keep the decision in place is to create doubt or uncertainty or the appearance of difficulty in acting to change things. One doesn’t have to reason, or even show numbers. All one has to do is make it difficult for anyone else. That’s where we are. Advocates for Bayh-Dole, by and large, don’t reason and don’t have to. They declare success and make people appear to argue against that success. In such a context, reasoning itself is mostly a losing proposition! Yes, I’m aware of my predicament.
Sen. Nelson concludes:
This was a serious public policy problem with the IPA program, and it was an even greater problem with Bayh-Dole, which was also drafted in secret, with text controlled by patent counsel and university administrators and patent brokers. Bayh-Dole then is something of an entitlement for the “middlemen” who aimed to exploit the future value of research patents for money, and justified doing so on the claim that this was the best, first, only way that federally supported inventions might come to have a public benefit.
In this argument, one might claim that Sen. Nelson is putting process over function, that his objection to private drafting by self-interested parties is merely a technical objection that stands in the way of real progress. But there’s another claim possible, too: that there’s a real question of how patentable inventions–things for which a government-issued monopoly is available–ought to be managed to advance research, the frontiers of science, and public access to the results. The patent brokers have had their say, and almost forty years and a trillion dollars in federal funding to make their case. It would seem they have been a dismal failure, but for the glossy technology transfer brochures, annual reports that suppress all the adverse metrics, and the propaganda at AUTM, COGR, and IP Watchdog.
Perhaps the question of what, in general, is in the “public interest” is not answerable. Maybe things come down to power and influence. If so, why should patent brokers call the public policy shots with regard to the use of the patent system? Why should we have a law that all but requires that they have this role? Apparently because the pharmaceutical industry has decided that patent brokers, rather than government officials or individual university-hosted investigators, should have this role.
A start at reforming or repealing Bayh-Dole is to make invention use reports public. For each subject invention, show its status–patented or not, licensed or not, if licensed exclusively (if so, how) or non-exclusively (if so, FRAND and in how many licenses), and for each whether there has been practical application that meets the standard of the law–established use with benefits available to the public on reasonable terms.
A second step, then, is to require federal agencies to enforce the federal side of every patent rights clause–no more waivers or indifference.
A third step is to require the development of alternative patent rights clauses for “exceptional circumstances” and require the use of these alternative clauses. For all that, university research investigators could stipulate the use of an alternative patent rights clause, such as for research they believe should be open and free of any university administrative claim to patent and monopolize, regardless of the reasons giving for the monopolizing.
And finally, just get rid of Bayh-Dole and return to the Kennedy/Nixon executive branch patent policy, and rebuild from there to address the defects in that approach. At least, then, public policy with regard to inventions made with federal support would not be outright with patent brokers, putting inventors last in the pecking order and disenfranchising federal officials from having any say in how the use of their federal funding affects the public generally.