The Bayh-Dole desperation continues. Now Bio has released its very own fakographic, citing impressive-sounding numbers with no foundation in fact, a fake history that exists in the minds of a few pundits, and perpetuates a fraud on the public that is happily convenient for the drug industry. But what of facts?–who needs fact when one has a happy fantasy?
Let’s have a look at this new fakographic. This is getting to be a regular feature. Who next will put out the same stinking thing?
The “Law at a Glance”:
No, Bayh-Dole does not “empower” anyone to “take ownership.” The Supreme Court was crystal clear on this point, not that Bio or AUTM or any of their propagandists could possibly read:
The Bayh-Dole Act does not confer title to federally funded inventions on contractors or authorize contractors to unilaterally take title to those inventions; it simply assures contractors that they may keep title to whatever it is they already have.
The Act’s disposition of rights—like much of the rest of the Bayh-Dole Act—serves to clarify the order of priority of rights between the Federal Government and a federal contractor in a federally funded invention that already belongs to the contractor. Nothing more.
What’s left out of the “so they can license” is 1) that for the most part, they don’t license and 2) the licensing practice is almost entirely exclusive, meaning that everything is put behind a paywall. Almost nothing is “available for broader public use.” The basic idea here is that the public gets no access until speculative monopolists have had their shot at extracting a profit from a monopoly. And then–no one gets access if they aren’t a speculative monopolist! There’s no subsequent release of the patent rights royalty free if a university can’t find its special, sharing speculative monopolist. Nada.
Nothing in Bayh-Dole addresses private sector investment. The stated objective of the law is “utilization,” especially in the form of “practical application.” Nothing about “tested and approved products” in Bayh-Dole. This is all just writing pharmaceutical products into the law. There’s no doubt the law was created to provide pharmaceutical companies with a way to obtain monopoly control over discoveries made with public money. But this same monopoly strategy doesn’t generalize to all inventions and discoveries, even if one actually wants pharmaceutical companies to enjoy monopolies on publicly funded inventions.
Bayh-Dole does not require “products to be manufactured domestically.” The Act requires that exclusively licenses in the U.S. to use or to sell must require that product be “manufactured substantially” in the U.S. The provision applies *only* to U.S. exclusive licenses. All licensing for foreign use or sale does not require U.S. manufacturing, regardless of whether that licensing is exclusive. Furthermore, if the licensing in the U.S. is non-exclusive, product can be made anywhere, so it’s easy to circumvent. Oh, wait–even the “manufactured substantially ” requirement is walked back in Bayh-Dole. Federal agencies don’t have to enforce the requirement (35 USC 204):
However, in individual cases, the requirement for such an agreement may be waived by the Federal agency under whose funding agreement the invention was made upon a showing by the small business firm, nonprofit organization, or assignee that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible.
Furthermore, federal agencies can waive the requirement, pretty much at whim based on a university claiming either “we tried”or “we didn’t bother to try.” So the requirement is narrow, waivable, and easy to work around. Bio here is just waving its hands to make it sound good. Why cite the inoperative elements of a law to show how successful the law is? Desperate deception.
March-in procedures have never been used. Howard Bremer gloated after Bayh-Dole had been passed that he had to intervene to ensure that the implementing regulations for the march-in procedures would be so awful that they would never operate. He did a grand job. Again, why cite a portion of the law that has never operated? How could this part of the law ever have contributed to those wonderful (and bogus) statistics of success?
And notice the inaccurate recitation of the law. The requirement regarding practical application has nothing to do with what’s licensed. It has to do with any and every subject invention. The reality is that 99.5% of subject inventions do not achieve “practical application” and federal agencies should march in on all of those. Worse, each of those subject inventions, especially in pharmaceuticals, results in a patent that claims hundreds to thousands of compounds–and even if one of those compounds (rarely) becomes a commercial product, the other thousands sit behind a patent for two decades, can’t be used by anyone else. Rampant nonuse, but no matter, nothing in Bayh-Dole requires a federal agency to march-in. NIH has refused. The reality is that no federal agency has ever marched, doen’t care to march, and the march in procedures are designed to fail.
The line about “public health emergencies” is pure fantasy. Here’s the provision (35 USC 203(a)(2)):
action is necessary to alleviate health or safety needs which are not reasonably satisfied by the contractor, assignee, or their licensees;
There is no “emergency” standard. The fakographic here is pure fak-o bullshit. What’s amazing is that they can make this stuff up and expect there will be no ill consequences. They can write anything, so they do.
The “including” is telling. This is the “special special case.” First “special”–inventions that require substantial private investment before anyone can use the invention at all. Second “special”–where the invention involves public health. This is the private monopoly that Bio companies covet, and they have worked tirelessly since the late 1950s to find ways to co-opt federally supported research or at least keep that research from developing an approach to drug development that does not involve monopoly control of compounds. The present monopoly pricing for prescription drugs is in part a consequence of Bayh-Dole suppressing alternative forms of drug development, and suppressing the vast majority of compounds discovered in federally funded projects at universities.
Even if one wanted drug companies to hold monopolies on publicly funded inventions–even if one thought that this was God’s blessed way of providing the public with therapeutic compounds that never ever otherwise would be created–it is simply untrue and ludicrous to think that this special special case is in fact the general case and applies to all such university inventions.
The “ensure” is also telling. Whatever the intentions of Congress–the objectives and policy are set forth in the law itself–the outcome of Bayh-Dole has been woeful. Universities now hold some 30,000 still-in-effect patents on federally funded inventions. And have licensed virtually none of them so that they meet the standard of “real-life products.” The sad silliness is that inventions made in research must become speculative monopolies to be used, or even to become products. Most university inventions may be used immediately or with very little private investment. Many are research tools and are already in use by the labs that created them. Some of these tools may become hugely valuable, such as presently CRISPR gene editing technology is. It’s just that with such tools–CRISPR included–patents that create licensing monopolies serve no useful purpose in encouraging the use or development of the invention. There is absolutely no need for a monopolist to supply private investment. All the patents do is create paywalls and obstacles for the development of the technology. The same thing happened with carbon nanotubes and we are just now getting beyond the shadow of the patent death star that has blocked development for two decades.
Bio cites AUTM for its figures on jobs and economic development, but AUTM does not have any such figures. It has a big-number “economic model” that if you believe, I have many bridges to sell you. AUTM does not even track subject inventions. AUTM has no way to connect Bayh-Dole with the results of its licensing survey. In a commercial context, AUTM would be committing fraud. But here, of course, AUTM like Bio can write whatever fantasy it wants and get away with it, because no one cares.
Here’s one of the most egregiously fraudulent claims in the Bio fakographic:
Before Bayh-Dole, there was the IPA program. It’s just that university licensing rate under the IPA program was under 5% and the PHS’s rate was 23%. Here’s what Allen wrote:
Before Bayh-Dole not a single new drug was developed when the government took patents away from the inventing organizations, making them available through non exclusive licenses while destroying the intended incentives of patent ownership. Since Bayh-Dole ended this waste of taxpayer supported research, more than 200 new drugs and vaccines arising from academic inventions are combating the scourge of disease both here and around the world.
What Allen won’t reveal is that the revived IPA program was nothing more than a monopoly pipeline to drug companies that didn’t work very well. Bayh-Dole has “worked” even worse. Allen doesn’t connect subject inventions with those reported 200 “new drugs and vaccines.” He skips from Bayh-Dole to “arising from academic inventions”–without regard for whether those “academic” inventions were funded by the federal government. Given that universities and their related nonprofit foundations hold about 120,000 U.S. utility patents, and about 50,000 of these have a federal funding notice, fewer than half of those 200 drugs and vaccines arise within Bayh-Dole’s framework. Let’s say 100 drugs over 35 years from 50,000 patents. We might say that the effect of Bayh-Dole is to ensure that hundreds of thousands of promising therapeutic compounds have been kept from public access for two decades, all for 100 (or fewer) commercially available drugs and vaccines. Are we to be impressed? Three cheers for monopolies!
And the line “took patents away from the inventing organizations” is simply nonsense. Universities outside the IPA program routinely did not claim ownership of inventions made with federal support. The government did not take these inventions or patents on these inventions away from the “inventing organizations”–the vast majority of universities were not involved. There were no drugs developed when the government took the inventions away from the inventing organizations because there were no such inventions, at least not after 1968 with the restart of the IPA program. How much stupider do the arguments have to get? Oh, wait.
The “intended incentives” of the patent system are focused on inventors, not on their employers, and certainly not on university administrators who release faculty to work on federally supported projects. Bayh-Dole is built on a fraud that the Supreme Court in 2011 called out. It’s just that some folks like the fraud so much they just can’t let go.
Finally, consider Allen’s logic for its policy foolishness. Even if creating monopolies was the only way by which new drugs and vaccines might be developed into new products, the federal government could now “take” ownership of inventions that it sponsored and license these inventions exclusively to industry itself–with price controls, say, to deal with the rotten urge to exploit human suffering with monopoly pricing. There is no reason whatsoever for university bureaucrats to be involved, or universities to have a profit motive that aligns with monopoly pricing.
The second side of Bayh-Dole enfranchised exclusive licensing for federal agencies. Thus, any invention that did not end up owned by a university contractor might be routed to drug companies by the government itself. In Bayh-Dole thinking, this was the safety net by which drug companies could get monopolies even if universities declined to participate. But in a strange reversal, we can see that the federal government could “take” all subject inventions and license them directly to industry. The “success” of Bayh-Dole then is not that universities get to participate in monopoly pricing with drug companies, but that exclusive licenses were baked into federal patent law. It makes no sense at all to fragment ownership of inventions across hundreds of universities and nonprofits, and then fragment the licensing of inventions across these same organizations, with such a range of incompetencies, lack of resources, and licensing practices. Bayh-Dole is a monster.
Bio repeats an anonymous opinion from The Economist:
Of course, The Economist got the history totally wrong in an uncanny way, as if The Economist was channeling Joseph Allen:
Before Bayh-Dole, the fruits of research supported by government agencies had belonged strictly to the federal government.
Simply untrue. Before Bayh-Dole, there was the IPA program for the NIH and NSF, which allowed nonprofit contractors to acquire ownership. Before Bayh-Dole, the DoD allowed contractors to own inventions. Before Bayh-Dole, the Kennedy and Nixon patent policies allowed contractors with commercial positions to own inventions made with federal support. The “fruits” is nonsense. We are talking only about patentable inventions. Not data, not software, not anything else.
Nobody could exploit such research without tedious negotiations with the federal agency concerned.
Utterly untrue. Anyone could exploit the research–in most cases it was published and made available without patents or non-exclusively, royalty free. There were no negotiations needed. The Harbridge House report found that some federal service agencies had a 100% commercialization rate for inventions that they supported through development with contractors and then released for competitive manufacture and sale.
If someone wanted to obtain a private monopoly over an invention that was made with public support in an area such as public health or safety, then yes it makes perfect sense that there would be negotiations in which the federal government made sure that the private monopoly would not end up being predatory on the public good–exactly what the drug industry seeks.
The Bayh-Dole act did two big things at a stroke. It transferred ownership of an invention or discovery from the government agency that had helped to pay for it to the academic institution that had carried out the actual research.
The Supreme Court found the first “big thing” to be untrue. Bayh-Dole did not transfer ownership of an invention to the academic institution. The Economist had no clue what it was writing about. It merely repeated the fraud that the Supreme Court refused to endorse.
And it ensured that the researchers involved got a piece of the action.
And this is a sick point. Bayh-Dole requires contractors to share royalties on subject inventions with the inventors–not with the researchers generally. So it creates haves and have-nots, which is one of the most divisive things one can do to a research team. Further, all Bayh-Dole did was require a sharing–it did not specify what a “piece of the action” would be. It could be $1. Or it could be 50%. No matter. Most inventors see $0 and waste their time dealing with university patenting. Here’s the worst of it: Bayh-Dole aims to make inventors want monopoly licensing because they are to be led to believe that monopoly licensing will get them the best “piece of the action.” But the few figures we have about university licensing indicate that there is no meaningful action for 99.5% of inventions and only 1 in 1,000 or more inventions becomes “lucrative” as patents go. We are talking one invention every decade or two at most universities, maybe one invention for $5 billion in research per university. That means that nearly all researchers do not get a “piece of the action.” They get denied access to their own inventions, which they cannot practice privately or at any company without getting the permission from university bureaucrats. Talk about tedious negotiations.
The Economist started to figure out the Bayh-Dole fraud and walked back its assessment a few years later in a 2005 article titled “Bayhing for blood or Doling out cash?” But Bio wouldn’t quote from that article in an infographic–that would actually inform people rather than mislead them.
If we wanted to free up university research, we would repeal Bayh-Dole in an instant, re-instate the Kennedy-Nixon (bipartisan!) executive branch patent policy, undo the horror that university administrators and organizations like Bio have done to university patent policies, implement a new regulation that prevents any nonprofit contractor receiving federal grant funds for research to take any ownership or financial interest in any federally supported invention–ever–as a matter of institutional conflict of interest. Shut down the fraud. There will still be university technology transfer. There will still be public benefits from research. But we won’t have to endure this monstrous, ineffective, innovation-suppressing, monopoly-creating fraud any further.
Kill Bayh-Dole.
Destroy the secret pipeline of federally funded inventions to the drug industry.
End the stupid policy claim that all inventions must be commercialized via private monopolies because, well, because drug companies want to deal that way.
Deal directly with drug companies that want to exploit monopolies on federally supported inventions–make those transactions, their outcomes, and their financial dealings a matter of public record.
The sooner the better.