The AUTM CEO’s Speech, Fitt 4

We are about done with the AUTM CEO’s speech at the NIST symposium on “unleasing American innovation.” Yes, it is trash, so we are trashing it. But there’s a purpose here. It’s not just that there is a difference of opinion–CEO says “$67 billion” in research, context-free, and he is entitled to his opinion, but who should give a rip about his opinion if it is uncoupled from reality? It may be his opinion, but it is not a professional opinion. It is an eyes rolled back in the head bozonet opinion, a hope, a dream, an administrative habit of self-glory, or in this case AUTM-glory.

Reminder: for NIH and NSF university research funding, Bayh-Dole changed nothing. Oh, the paperwork. Nothing. The NIH and NSF used the IPA program restarted in 1968 to end-run the Kennedy/Nixon executive branch patent policies. The NIH had over 70 universities and nonprofits signed up to its IPA program when the IPA program was shut down in 1978 for being ineffective and against public policy expectations. Bayh-Dole–introduced 1979, failed initially, passed with scheming late 1980, effective mid-1981–merely replaced the IPA program with new bureaucratic paperwork, similar gesturing toward public interest, and the same implied fundamental premise to take inventions from inventors and slide them over as patent monopolies to a university’s favorite companies. We will meet this implied fundamental premise stated expressly by the AUTM CEO in a few minutes.

If one wants to look for a Bayh-Dole effect at universities, one has to look at something other than NIH and NSF projects producing inventions. The effect will have to be in DOE funding or NASA funding or Department of Interior funding, where Bayh-Dole made a substantive change in invention management regulations. But of course, those agencies provide only a tiny portion of most universities’ federal research budget. 

So, how effective was Bayh-Dole? Simply put, it unleashed American at a level never before seen, and was laser focused on increasing the ROI of US taxpayers of the investment in federally funded research and development.

The past tense here is rich. “A level never before seen”–so true, university-hosted inventions were being made available, used, and licensed at–this is approximate–80x the present rate before Bayh-Dole. “Unleashed” only begins to capture the metaphor: one must unleash dead dogs, too.

And “laser focused” is dramatic, but has nothing to do with Bayh-Dole. Nothing in Bayh-Dole mentions ROI to taxpayers. Nothing in Bayh-Dole, for that matter, is laser focused on anything. Bayh-Dole presents a random sample of objectives–involving small companies in research, or US manufacturing, or reducing administrative overhead, promoting free competition. And then offers all sorts of qualifications and waivers for each of these objectives, so meh. Anything but a laser focus. At best we get “promote the utilization of inventions” as a general policy requirement (in section 200) with a definition of “practical application” (in section 201) that stipulates that inventions should be used with benefits available to the public on reasonable terms. Not really a laser focus, but rather a general desire. Then, instead of making such a thing mandatory, Bayh-Dole places the enforcement of utilization in a “march-in” provision (in section 203) that a primary participant in the drafting of the clause bragged was designed not to operate–especially because march-in could be initiated only at a federal agency’s determination.

To cap it off, Bayh-Dole makes contractor reporting on invention utilization entirely at a federal agency’s discretion (in section 202). Federal agencies can simply not ask about utilization. Oh, the laser focus. And if a federal agency does request a utilization report, Bayh-Dole purports to exclude that report from FOIA disclosure (in section 202, again)–even if information in the report is not confidential or privileged as defined by FOIA. Bayh-Dole, with such a laser focus on utilization fails to connect its general policy requirement with its primary definition of utilization and then creates an enforcement mechanism that is designed to fail and entirely at the discretion of the federal agency, which is required to keep secret any reports of utilization (or non-utilization) that it might receive. Oh, the laser focus. What crap!

Sadly, our AUTM CEO doesn’t provide us with any evidence that we taxpayers have got any ROI–we get excluded from practicing inventions we have helped to support, we get high prices on the few products that do make it through the thumbs of university bureaucrats and emerge to be sold under a patent monopoly, and we watch industry drift away from collaborating with university faculty. The reality is that we don’t get any ROI, our public funding is not an investment, and we ought to be aghast at the idea that federal grant funding has been turned into a subsidy for big pharma and venture capitalists, and that somehow we are to derive great satisfaction if a few universities make big bucks (which they never share with us) from dealing in patent monopolies.

For example, before Bayh-Dole not a single new drug or vaccine was commercialized when the government took patent rights away from the inventing organizations.

This is nonsense truth. Before Bayh-Dole, the IPA program. The NIH permitted the “inventing organization” to deal in patents. How many instances, then, could there be after 1968, at least, of the government “taking” patent rights “away from” those organizations? Not many. If we are talking about big pharma’s boycott of federally supported inventions in medicinal chemistry in the early 1960s because the HEW insisted on non-exclusive licensing, then we are talking not about the commercialization of drugs or vaccines but whether drugs and vaccines were developed without commercialization. And there the answer is absolutely yes. Mass-produced penicillin, polio vaccine, flu vaccines, leukemia drugs–all sorts of stuff has been developed and placed into use without monopoly patent rights, by government or with the support of government. But the AUTM CEO makes a claim about something that couldn’t possibly much happen and expects us to make that stand for what was actually happening.

As it was, under the NIH IPA program that ran from 1968 to 1978, only 4 of 96 inventions were “commercialized.” That’s about 1/10th the rate claimed for university inventions without federal funding. The IPA program was shut down as ineffective. Bayh-Dole is based on the IPA program, but without public safeguards (no review of patent licensing capabilities, for instance, and march-in procedures designed not to be usable). Developing a drug might be a low probability event anyway–but university practices under Bayh-Dole appear to have made the probability of success even lower. It takes balls to turn that into a virtue.

There simply was no incentive for the company to take that risk, and federally funded university inventions sat on the figurative shelf.

Laughable. Digital computer. Internet. Gene-splicing. HIV treatment effectiveness assay based on PCR. “Figurative shelf.” Delusion. Simply untrue. Inventions held by the federal government, even if patented, were generally made available to all. There was no incentive for a monopoly-fixated company to get involved, but any company that simply wanted to practice inventions made with federal support could do so. Those companies were not bothered by the “risk” of not having a patent monopoly to hide behind, and were also not bothered by the embittering pain and delays of having to deal with university lawyers over gawdawfully drafted patent licenses.

Since Bayh-Dole was enacted in 1980, public-private partnerships have resulted in about 200 drugs and vaccines that are fighting disease both here and abroad because of the law. If you’ve used Allegra for allergies or Lyrica for fibromyalgia or synthetic Taxol as a chemotherapeutic agent or some hepatitis B vaccines, you are benefiting from public sector research inventions from universities and hospitals. And those are just four of the tens of thousands of inventions that have arisen from public sector research.

We never see the list of these 200 drugs. The number is thrown around as a fact. May as well assume it is a bluff. Whenever AUTM has provided a list of examples, most of those turn out not to be ones involving federal funding or Bayh-Dole. For instance, pregabalin (the compound active in Lyrica), was synthesized by a foreign visiting scientist at Northwestern University and co-assigned to the drug company Warner Lambert. The multiple patents obtained by Northwestern do not cite federal funding. While there was a “public-private partnership” apparently, it had nothing to do with Bayh-Dole or any laser focus on taxpayer ROI.

Of course, AUTM’s CEO doesn’t say that the 200 drugs have come about within the scope of Bayh-Dole. He says “public-private partnerships” have produced these drugs. Thus, the AUTM CEO doesn’t even claim that the “200 drugs” have been based on discoveries made at universities–a “public-private partnership” could be most anything: a clinical trial, a consultation, a workshop, a training program for young scientists. In other words, the AUTM CEO is simply bluffing for effect. He expects his listeners will make an unjustified connection between drug development and Bayh-Dole.

Post hoc, ergo propter hoc. Just because something happens after something else does not mean the later thing was caused by the former thing. Our AUTM CEO does a switcheroo. He talks about things happening after Bayh-Dole and wants us to attribute them to Bayh-Dole. So he never indicates how many of these “public-private partnerships” involve government funding under Bayh-Dole’s standard patent rights clause or an exclusive patent license. He won’t say–and he probably doesn’t know–and he appears not to care whether he knows. He wants his listeners to make the fallacious connection. AUTM’s licensing survey doesn’t even track which inventions were made with government support–that’s how scary Bayh-Dole is to AUTM. AUTM won’t even collect the data that would support its brave assertions about Bayh-Dole’s unleashed power.

Reality: Since 1981, universities and their allied foundations have obtained around 124,000 US utility patents, of which about 51,000 recite federal funding, or about 41%. Isn’t that interesting–if universities receive 60% (on, ahem, average) of their research funding from the federal government, why do only 40% of their patents recite federal support? Or, think of the sheer scale of the patenting and the paltry claimed result–from 124,000 patents, 200 drugs–and even that count is sketchy. Is this crazy? These same folks (or their policy parents) complained that the federal government owned 28,000 patents on inventions that were mostly available to everyone and thus weren’t being properly commercialized. Now universities hold nearly 100,000 more patents than the federal government did, and have “commercialized” on the order of 0.5% of them. Does this look like an approach that is “unleashing” anything? Think of it: universities have spent at least a billion dollars just on patent work, not counting all the salaries for licensing officers and millions in infringement lawsuits and suing their own inventors. That billion comes out of the public “return on investment.” Someone has been living large, but it sure as heck doesn’t appear to be the “public.”

We never see a list of the 200 drugs or any evidence of the government role in supporting the research behind those drugs. We never see that these drugs have come about as a “result” of the law. And if 200 monopoly-priced drugs in 35 years for somewhere around a trillion dollars of federal research is all we have got for our “investment,” we have been royally screwed. And for all that, the Hepatitis B vaccine was invented prior to Bayh-Dole, so that list should be 199. Allegra (fexofenadine) appears to have been developed by companies. 28 US patents have “fexofenadine” in their abstract; one of these patents is assigned to WARF, a university-affiliated licensing agent, for a method that involves the use of fexofenadine–not its invention. Perhaps there’s an angle for government funding and university patenting–there are 2,975 US patents with “fexofenadine” somewhere, and 113 have a government funding statement, and 83 of these appear to involve a university, foundation, or institute. That’s 83 of 2975, the earliest of which issues four years after fexofenadine was approved as a drug. I’m just not seeing that university patenting played any significant role in the development of fexofenadine. The list is 198. We could go on this way a long time.

In fact, two new products are created every day based on those inventions from a wide range of disciplines. Google to laser cataract surgery to even the Honeycrisp apple you might have eaten for lunch yesterday.

Honeycrisp, from the 1988 patent application (issued 1990):

This invention is a new and distinct variety of apple tree. It was discovered by Applicant in September 1974 as part of the University of Minnesota apple breeding program to develop winter hardy varieties with high fruit quality.

This new cultivar is a seedling of known parentage planted in 1962 in block 53 of the University of Minnesota Horticultural Research Center, located in Carver County near Excelsior, Minn.

The Honeycrisp apple is not a Bayh-Dole invention. No government funding notice in the patent. Just another university invention that has nothing to do with Bayh-Dole, made to appear that it does. The AUTM CEO’s discussion was to be about the importance of Bayh-Dole–and that means government funding–but he cites an instance that does not have to do with Bayh-Dole, as if it does.

So, not only that but public sector research institutions are responsible for hundreds of new startup companies year. Over one thousand in 2016 alone, up almost 100% percent in the past ten years.

The startup total includes shell companies created by universities to take licenses to their inventions, with no operations, and includes companies counted as startups by multiple universities. Heck, the University of Washington reported as a startup a company so new that it had no name. Right, sure. Beyond that, put all these “startups” in a bowl and they don’t form even a blip on the national statistics for new company formation–now about 600,000 new companies each year in the United States. Economically speaking, they are nothing. In terms of innovation, these “startup” companies hold exclusive licenses that ensure that university-hosted inventions will remain excluded from all practice but for the startup company, which may be nothing more than paper or a university ruse to obtain SBIR or STTR funding that otherwise would go to real for-profit small companies.

But products and startup companies aren’t the only benefit of the Bayh-Dole Act and academic technology transfer. In a recent report by AUTM and BIO, it was shown that public sector research institute technology transfer resulted in up to $1.3 trillion economic impact between 1996 and 2015, and supported up to 4.3 million jobs.

Sorry, but take a look at the machinations underlying the claim that something was “shown.” At best, what was presented was a crazy estimate based on a sketchy economic model with unfounded assumptions, no testing for accuracy, just multiplying numbers to get bigger numbers. Notice the use of “up to.” It’s all bluster. You can say it’s technically not untrue. But it is designed to both impress and deceive. Even if one accepted the goofball figure of “up to $1.3 trillion” of “economic impact” over 20 years, one still has a rounding error of impact in the national economy. Over the same 20 year period, the US GDP is 1,116,778.8 billion dollars. We are talking rounding error quality impact, even with a most outrageously hyped “estimate” of impact taken as fact.

And if you look closely, you can see that the AUTM CEO doesn’t even recite Bayh-Dole–it’s Bayh-Dole “. . . and academic technology transfer.” Our CEO replaces the activity arising from the 41% of university patents reciting government funding with 100% of university patents. Worm-tongue.

So, as we identify ways to further unleash American innovation, I urge great caution with any modifications to the instrumental Bayh-Dole Act. It is the backbone of the innovation ecosystem responsible for the many thousands products and services that help and protect our society.

This is the standard AUTM line after fake history, misrepresentation of Bayh-Dole, and delusional thinking about patents and university ownership of inventions–don’t change anything. Heck, just start enforcing Bayh-Dole’s patent rights! I bet AUTM would oppose that too! I’m trying to think–what but criminal enterprises don’t want the laws enforced?

Bayh-Dole is hardly a backbone for any “innovation ecosystem.” It is, to be sure, the backbone for a clever scheme by which patent bureaucrats, patent attorneys, speculative investors, and university administrators live large on the premise that they can take with impunity and without accountability inventions from university inventors. That’s hardly an innovation ecosystem.

A great way to move forward in any unleashing is to exclude anyone from AUTM from further discussions. At least then we might get non-fake history and metrics that are directed to Bayh-Dole and not proxies designed to conflate, miscount, and generally misguide.

We live in a country of innovators. Thomas Jefferson was responsible for issuing patents and Abraham Lincoln himself held a patent. I have no doubt that the next generation of drugs and devices will originate from universities, hospitals, and other public sector research institutions.

Too funny. Jefferson and Lincoln are hardly relevant at this point. The policy debate is not whether there’s a role for a patent system. The debate is, rather, whether the patent system should be used as-is for inventions made in projects undertaken in the public interest and so deserving of public funding. The Kennedy patent policy, the IPA program, and then Bayh-Dole have insisted that publicly funded inventions carry with them a public covenant, that patents are to be used in non-ordinary ways, to promote practical application and competition rather than to suppress inventions or to exclude competitors. But AUTM appears to believe that federally supported inventions are ordinary inventions with the special twist that inventors should have no rights in them in favor of university bureaucrats trying to get as much money (or as many exclusive licenses) as possible from them. Otherwise, we would see metrics such as the average number (ahem) of licensees per patent family; the size of university patent pools available for royalty-free, non-exclusive licensing; the number of companies using university-hosted inventions. But we have none of this.

We cannot contest the AUTM CEO’s belief about the next generation of “drugs and devices.”  It’s just that he cannot show that the last generation of “drugs and devices” has originated from universities, et al. So it is, truly, just a belief. Without a grounding in fact, even sincerely held beliefs are just another form of bullshit. We might pause to consider to what extent we want our research policies–at least with regard to inventions–to be shaped primarily by bullshit.

As such, we need to support strong research funding and a robust patent system not just to benefit innovators and entrepreneurs but to benefit everyone with groundbreaking medicines and next-generation smart technologies and innovations we are yet to dream of so we will make this world a better place for humankind.

Having provided fake history, misrepresentation of Bayh-Dole, a series of goofball proxy metrics that ignore Bayh-Dole while attributing big numbers that really are rounding errors to Bayh-Dole, our AUTM CEO ends with a string of non sequiturs regarding the safety of intellectual property, strong patent laws, strong research funding, and now a “robust” patent system–none of it having much of anything to do with “innovation ecosystems” other than as universities aim to disrupt those ecosystems.

The AUTM CEO closes with fluff about making the world a better place for humankind. Nothing like bureaucratic platitudes to inspire federal representatives not to do anything at all with Bayh-Dole, let universities patent wildly and speculatively without accountability, let universities misrepresent Bayh-Dole and at the same time ignore Bayh-Dole’s standard patent rights clause other than for the paperwork part, and keep the federal dollars rolling through this cleverly crafted scheme.


De nada. Truly.

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