Political bluffing as Bayh-Dole policy advice, 1

In a once-notorious essay (“Is Business Bluffing Ethical“) Albert Carr, a former presidential advisor, argues that business “bluffing” is ethical because business is based on games, and in games bluffing is perfectly acceptable. Same for politics. If everyone expects everyone else to bluff (or lie, or deceive), then it cannot be unethical to do so, because no one involved could possibly rely on what people say in such circumstances. If everyone aims to deceive, then no one can possibly be deceived.

Here’s Joseph Allen, a former political aide to Senator Birch Bayh, giving advice to President-elect Trump in December 2016:

Because of Bayh-Dole policies, when Stanford and the University of California came up with the basic process for biotechnology they were able to own and manage it.

The reference, of course, is to the Cohen-Boyer “gene-splicing” patents. But Allen is bluffing. Here’s an account of Cohen-Boyer’s patents (my emphasis):

The patent application was filed on 4th November 1974, with Cohen and Boyer as inventors. If a patent was issued it was to be assigned to Stanford University. In 1976, Boyer co-founded Genentech with Robert Swanson, a venture capitalist.

Six years after the 1974 patent application was filed, the first patent titled “Process for producing biologically functional molecular chimeras” (US Patent No. 4,237,224) was granted on 2nd December 1980.

The second titled “Biologically functional molecular chimeras” was granted on 28 August 1984, and the third was granted on 26 April 1988, all three of which would expire in 1997 and assigned to Stanford University.

Bayh-Dole came into effect July 1, 1981. Cohen-Boyer was not invented under Bayh-Dole “policies.” The patents are not subject to Bayh-Dole. The Cohen-Boyer invention has nothing to do with Bayh-Dole. Furthermore, Stanford did not use the patent system to conduct a trade in monopoly rights, did not demand “commercialization” or “products.” Instead, Stanford:

  • Consulted with industry on a licensing strategy
  • Granted low-cost non-exclusive licenses
  • Chose not to try to extend the term of its patents

The authors of “Lessons from the Commercialization of the Cohen-Boyer Patents: The Stanford University Licensing Program” describe the licensing practices behind the patents. It’s an odd mix, but let’s deal with some of the oddness.

Had it not been for Stanford’s enlightened licensing practices, the Cohen-Boyer technology might have been placed in the public domain where the technology could have remained undeveloped or in the laboratories of large established pharmaceutical companies.

This bit is full of non-sequiturs. First, Stanford’s licensing practices had nothing whatsoever to do with the Cohen-Boyer work’s public domain status. Stanford’s patenting practices–and Cohen’s and Boyer’s willingness to cooperate with patenting–kept their work from the public domain. Licensing has to do with the distribution of permissions when something is not in the public domain.

As to whether Cohen-Boyer would have “remained undeveloped” if not patented, Neils Reimers at Stanford was clear that the patents were not necessary for use. Here’s an excerpt of an interview conducted by Sally Smith Hughes:

Hughes. You are saying that the growth of the biotech industry was not dependent upon this patent?

Reimers. That’s right. Well, you’ve got to turn that around; you mean the license.

Hughes. Yes.

Reimers. It was dependent on what was behind the patent, but it wasn’t dependent on the license.

Hughes. Because the technology would have happened regardless?

Reimers. Would have happened. We were just, in one sense, taxing them. But it’s always nice to say “technology transfer.” [laughter]

The patents did not stimulate the growth of the industry. They were not required for development of the technology. Reimers suggests that beyond using the patents to “tax” industry, the provided “some order” or established a “base line.” Sally Smith Hughes draws Reimers out on this point:

Hughes: And then the news release went on to quote Donald Kennedy: “[The licensing effort was designed to] assist the process of technology transfer by making sure lots of players get into the game. This increases the probability of valuable new applications for human science.”

Kennedy’s claim is, essentially, the same talking point that Joseph Allen uses–that patents are necessary to stimulate industry development. But here’s Reimers’s response:

Reimers: It’s fine that Don said that, but whether we licensed it or not, commercialization of recombinant DNA was going forward. As I mentioned, a nonexclusive licensing program, at its heart, is really a tax. He’s correct in that we were letting every player in on the game. But it’s not an action that made the industry grow. I guess you could say it provided some order. It sort of was a base line, and the industry proceeded from that point. But from a legal point of view, or from what a patent means, or what the license means, it didn’t make the industry grow. A lot of people don’t fully understand all facets of technology licensing, because it is, as I mentioned earlier, a complex mix of business, technology, and law.

Back to our authors drawing lessons from Cohen-Boyer. They have it wrong, apparently, about whether the “technology” would have failed to have been used if Stanford hadn’t patented it. There’s an argument for the genius of Stanford’s licensing program–that the “order” and “base line” may have limited other organization’s efforts to fragment the new technology and its applications into an unworkable mess of patent rights. But that’s not the argument that Reimers makes–and he designed the licensing program–nor what our authors trying to learn from Cohen-Boyer assert. More from our authors:

Or it might have been licensed exclusively and the rise of a
biotechnology industry might have been delayed for years or decades.

This, too, is unsupportable from the evidence of Cohen-Boyer. We could just as easily assert that had Stanford licensed exclusively, then it would have been tangled up in infringement litigation for a decade while the industry grew around its claims, working feverishly to find ways to design around Stanford’s patents, undermine them, invalidate them, and push Stanford work out of the way. You know–CRISPR. Or look at nanotechnology.

Here’s their summary of the effect of the ready availability of the Cohen-Boyer work:

In total, 2,442 known products were developed from the recombinant DNA technology, among them drugs to mitigate the effects of heart disease, lung disease, anemia, HIV-AIDS, cancer, diabetes, and numerous other diseases and disorders. Stanford and the University of California received a quarter of a billion dollars that was used to fund internal research and provide infrastructure.

I have no idea where they got their count of “known products.” But compare the 2,000 plus products developed with broad, non-exclusive, federal-like access to the Cohen-Boyer invention with the paltry 200 products that Allen recites from 35 years and tens of thousands of university biomedical patents. Reimers wanted the invention to be broadly available. To that end, he broke up the patent monopoly as non-exclusive licenses available at low cost. The result, if we may think of the Stanford licensing program as a cause (or at least as not a barrier), was that many companies got involved, and whatever exclusive positions these companies needed to develop their products did not depend on also having an exclusive position to use a basic method, even though that basic method was inventive, and even though Stanford obtained patents.

The Cohen-Boyer patents were handled by Stanford in a manner similar to the federal government’s own licensing practices–non-exclusive, at a very low cost, to provide everyone with access. The thrust of Allen’s argument however is that Bayh-Dole represented some different “policy” on the use of the patent system. He is wrong on that point, too. But if we were to allow him to be right about things, then he is right about a faux version of Bayh-Dole that does not exist in statute or regulation but does get recited as if it were Bayh-Dole or ought to be or is what Bayh-Dole was intended to be and with enough amendments and regulatory debasement may yet become.

Allen describes the federal patent policy before Bayh-Dole, that of making research inventions broadly available:

Then potentially important discoveries wasted away because the incentives of patent ownership necessary for their development had been destroyed.

Apparently Cohen-Boyer proves this point. The incentives of patent ownership must mean something like “the right to exclude all others.” In light of Cohen-Boyer, Allen’s claim must be a bluff. Important discoveries and inventions that are basic methods, classes of compounds, and strategies for tackling problems get used and developed all the time without patent ownership, without patent monopolies, without institutions having to make money. We might consider the digital computer and internet protocols among such inventions. As Neils Reimers put it:

Typically, we licensed exclusively, because most university technology is undeveloped. And to encourage investment to develop a product, you need to give an exclusive license. That’s very typical of university licensing. But when you’ve got a basic tool, such as this, you want it to get out broadly and nonexclusively. I did early on think that maybe we could give a field-of-use exclusive. But as I learned more about this recombinant DNA technology, I felt that this was something that we’d want to get out to everybody, as broadly as possible. I wanted to get it established early on as sort of the fundamental patent building block of the whole field.

Allen recites a typical patent practice for making products (especially biomedical drugs and vaccines), but then extends that practice to include basic research and development tools in all areas of practice. More bluffing. Only someone clueless would fall for it. If the federal government were in the business of subsidizing product development, then perhaps we could discuss how organizations attempting those products might exploit patent monopolies–so long as the government provided support to only one company in each area of product development. As soon as the government “spreads the work around,” then the rights in the combined product fragment and either the companies fight it out, cross license, or give up. Again, the argument doesn’t hold up. It’s a bluff.

But if the federal government is in the business of supporting the creation of basic tools, then patent monopolies are not necessary. They may have a role in standards development, in mitigating unreasonable use of other patents, and ensuring access for all–but only if the patent monopoly gets broken up by non-exclusive licensing. That is–exactly the federal patent policy that Allen disparages and makes to appear to be ineffectual.

The pharmaceutical industry boycotted federally supported classes of compounds in the early 1960s. They wouldn’t provide screening services unless they got a patent monopoly on anything they found. If they got a patent monopoly on whole classes of compounds merely for providing an inexpensive screening service, they could prevent access to the whole class while developing (if ever) any single compound.

The NIH used the pharmaceutical industry boycott to circumvent executive branch patent policy (and Public Health Service policy) to create the Institutional Patent Agreement program under which the NIH required nonprofits–if they decided to patent an invention made with NIH support–to take assignment of the invention and license the invention to industry. The IPA program made clear that such licenses could be exclusive–that is, the nonprofit could deal in a patent monopoly rather than break it up. The IPA program served as a pipeline of patent monopolies to chosen companies in the pharmaceutical industry. It was shut down a decade later because it was unproductive and because the licenses that it did foster were mostly exclusive and the deals were mostly sweetheart deals. In place of the IPA program, the NIH came up with Bayh-Dole.

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