Why do we have Norman Latker’s fantasy rather than Vannevar Bush’s fantasy?

There’s a number of people out blaming Bayh-Dole for high drug prices. There’s plenty to blame Bayh-Dole for–it’s an ugly law with a dismal track record. And there are ways that Bayh-Dole can be implicated in high drug prices, but not anything like what’s being written. In short, blaming Bayh-Dole for high drug prices isn’t all that close to the truth–and does a good job of hiding the truth.

Before Bayh-Dole, the NIH and NSF ran the Institutional Patent Agreement program, which required nonprofits to take ownership of inventions made under contract that the nonprofits chose to patent. The implementing regulations for Nixon’s executive branch patent policy–codified in the Federal Procurement Regulations–required all contractors to have patent agreements with employees to “effectuate” the requirements of the patent rights clauses–and since those clauses generally required contractors to assign inventions made under contract to the federal government unless there was an exception in place, those patent agreements necessarily had to require inventors to promise to assign their inventions to their contractor-employer or to the federal government as directed by their contractor-employer.

The decisions, then, not only about patenting but also about how any given patent might be deployed, were not in the regulations but rather were with the owners of the patents–with contractors and federal agencies.

Bayh-Dole does not change any of this, though Bayh-Dole did change things from the Federal Procurement Regulations and the IPA program. Bayh-Dole, for instance, does not require any contractor to take ownership of any invention. Bayh-Dole applies only after a contractor takes ownership. And because Bayh-Dole preempts any other law on the matter (but for Stevenson-Wydler and any later law that references Bayh-Dole and asserts precedence), Bayh-Dole effectively preempts *any* federal claim to ownership of any invention made under contract other than as Bayh-Dole provides. If the federal government wants ownership of inventions outright, outside of the conditions under which Bayh-Dole permits the federal government to request ownership, then a federal agency has to go through Bayh-Dole’s procedure for determining an “exceptional circumstance.” [Or avoid Bayh-Dole altogether by asserting that the funding is not for research or development and thus not within the definition of “funding agreement” in Bayh-Dole, in which case a federal agency can then contract for inventions as it wishes using “Other Transaction Authority.”]

Bayh-Dole, furthermore, does not require inventors to use the patent system. Unless they assign their inventions–even those made under contract–there’s no obligation that they or anyone else use the patent system. That obligation arises for any new owner of such an invention if that assignee is a federal contractor. And even then, the new owner has no obligation to grant exclusive licenses to the assigned invention–even exclusive licenses that end up being assignments.

If one believes that inventions made in federally supported biomedical research ought not to be assigned to companies to exploit as monopoly positions, then the problem is not the Bayh-Dole Act. The problem lies with the patent brokers working for universities, and lies with the federal agencies that allow universities to assign inventions under the guise of exclusive patent licenses, and with federal agencies holding out for doing the same sort of exclusive deals themselves. While Bayh-Dole enables federal agencies to do exclusive deals even in areas directly concerning the public health, Bayh-Dole does not require such deals. The federal agencies decide to deal in monopolies all on their ownsome. They have no Congressional mandate to do so. To put it coarsely, they suck because they choose to be sucky, not because they have been required to be sucky. Blaming Bayh-Dole for exclusive licensing is like someone blaming the state that issued a driver’s license because they are such a horrible of a driver. Yes, if it wasn’t for the state-issued license, they wouldn’t be a driver, and then they also wouldn’t be such a rotten driver.

At the root of it–if we want to blame–we have to look to Norman Latker. Norman Latker, former patent examiner turned government patent counsel for the NIH and later HEW. Latker drafts the NIH’s revived IPA program agreements in 1968. He serves on the committee that drafts Nixon’s revisions of the Kennedy patent policy in 1971. Notably, the Nixon patent policy calls for the policy to be codified in the Federal Procurement Regulations. Who chairs the committee to do that codification–why, Norman Latker. Those regulations get finalized in 1975. Latker then immediately sets about to have the NIH IPA program adopted government wide as permitted (so he argues) under the “exceptional circumstances” portion of the FPR that he just had drafted.

Latker’s effort failed–Congress blocked the General Services Administration from expanding the IPA program and in the ruckus, the IPA program was shut down in 1978. Latker set to work drafting legislation that would preempt executive branch patent policy and so permit the IPA program without having to even have the IPA program. So Latker drafts Bayh-Dole, feeds it to Congress through Senator Bayh and Senator Dole, and by a stroke of misfortune the law gets passed in a lame-duck session of Congress as a special parting gift to Senator Bayh. Latker then leads the drafting of the implementing regulations to Bayh-Dole. Latker even chaired a committee on university patent policy to make sure that everyone understood the agenda. From end to end, for a decade what becomes Bayh-Dole was the work of Norman Latker and whoever was helping him. I’m told there are boxes of Latker archives. It would be interesting to see Latker’s communications with the pharmaceutical industry.

Latker was invested in the monopoly meme. Inventions won’t get used unless there’s a patent monopoly. The federal government is crap at managing patent monopolies, so it should be taken out of the loop. Inventors are also crap at managing patent monopolies, so (logical fallacy alert) “middlemen” patent brokers should manage inventions made in federally supported research and convey these inventions as monopolies to industry. That’s the vision. Bayh-Dole makes it difficult for federal agencies to do anything other than acquiesce in that vision, but Bayh-Dole does not mandate that vision. The federal patent system does not require that vision. There’s nothing in patent law that requires an inventor to seek patents, nor to use or develop what has been invented, nor to license exclusively, nor to demand royalties. It is not even implicit that this is what must be done to use the patent system “as it was intended.” All that is nonsense fantasy cover for what people in the here and now are choosing to do.

People are also confused by Bayh-Dole’s public covenant apparatus. That apparatus was designed not to operate in practice. It was there to get the law passed, not to be used. Another federal patent attorney, R. Tenney Johnson, testified on a related bill (S. 1215) that the public interest apparatus in the Kennedy patent policy had never operated and wasn’t really necessary.

Bayh-Dole’s public interest apparatus establishes as federal policy that the patent system must be used to promote the use of inventions arising in federal supported research or development, among other things–the other things including promoting free competition and enterprise. Use–practical application–then is defined to mean use with benefits available to the public on reasonable terms. The apparatus makes a gesture toward expecting American manufacturing of patented products and giving the federal government the right to “march in” for nonuse or use that fails to adequately meet public or regulatory needs. But it’s all for show. The apparatus in general has never operated. Federal agencies don’t enforce any part of the public interest apparatus. They could, but they don’t and won’t. It’s not Bayh-Dole that prevents them from enforcing Bayh-Dole’s public interest apparatus.

Bayh-Dole enables federal agencies to ignore Bayh-Dole by requiring federal agencies to keep all contractor reports of invention use as government secrets. If any one bit of Bayh-Dole were to be changed it would be to determine that Bayh-Dole violates FOIA (which it does) and require all contractor reports of utilization of inventions, but for real confidential and privileged information, to be released under FOIA.

Imagining that Bayh-Dole is somehow to blame for high drug prices then requires one to entertain the fantasy that Bayh-Dole operates, that its public interest apparatus is enforced, and that somehow Bayh-Dole requires monopoly dealings in inventions, and that somehow the tiny bit of drug inventiveness coming from universities matters with regard to the overall pharmaceutical industry exploitation of patent rights.

Here’s another wild fantasy: the problem is that Bayh-Dole’s public interest apparatus does not operate. If it did (ha-ha-ho-ho), then for that bit of drug inventiveness coming from universities, things would (ha-ha-ho-ho) be very different indeed–universities would be forced to allow their faculty inventors to own inventions and decide whether to publish through the patent system. Universities would be required to impose the nonprofit requirements on any assignee (exclusive right to make, use, and sell) of any subject invention–the assignee would have to devote any income with respect to the subject invention to specified public purposes. Products would be made in the United States. Small companies would have first crack at licenses–and the licenses would be, then, generally non-exclusive. The federal government would march in on all instances of nonuse of inventions–and force nonexclusive licensing, including on royalty free terms. (Ha-ha-ho-ho). It won’t happen.

Federal agencies won’t enforce the standard patent rights clause, won’t use the exceptional circumstances provisions to preempt monopoly dealings when public interest is not advanced by such things (cumulative technology, commons, standards, share development, research tools, consortia). Federal agencies won’t even act on the rights reserved to the federal government–the outright license to practice (make, use, and sell) and have practiced any subject invention. It’s not Bayh-Dole that stands in their way. The federal agencies have just given up and handed everything over to patent brokers caught up with Latker’s vision of the monopoly meme.

Even repealing Bayh-Dole won’t help. Bayh-Dole doesn’t mandate monopoly control of public health inventions, so repealing Bayh-Dole won’t change monopoly practice. Bayh-Dole’s public interest apparatus doesn’t operate, so repealing Bayh-Dole removes that public interest apparatus altogether and there will be no chance of making federal agencies enforce that apparatus. And even if Bayh-Dole is gone, the universities will still operate with their new patent policies that they imposed by claiming that Bayh-Dole compliance required universities to “elect” ownership of faculty and student inventions. Bayh-Dole doesn’t require universities to have patent policies at all. Repealing Bayh-Dole won’t change the new regime of university patent policies or the established university fettish for holding out for monopoly licensing deals. And repealing Bayh-Dole won’t alter drug prices in the slightest.

If one wants to start thinking about how things could and should be different with regard to federal grant funding for research or development in matters of public health, start with the idea that federal funding in matters of public health research should create open standards. There are ways for open standards to also involve patent licensing into the standard–so long as that licensing is on FRAND terms–fair, reasonable, and non-discriminatory. If the pharma industry does not want to work with open standards, then it can go its own way and boycott the heck out of public research. If university researchers want to work with compounds they hope to present to a pharmaceutical company for monopoly-based development, they can forgo federal support. Go for it. If the NIH cannot bring itself to adopt open standards as the primary intangible asset created by its public health research grants, then the NIH should not get the money for such grants in the first place. The NIH can contract with pharmaceutical companies directly for products the NIH wishes to procure–just as the Department of Defense does–and leave the patent rights with the contractors. But for grants, the requirement should be open standards for biomedicine research–research tools, proto-products, inventions, whatever.

Any new biomedicine product produced through federal grants for research should expect to pass through an open standard. Commercial products would then be those that “crossed the commons”–the competitive positions would be in quality and availability and training and cost. Any proprietary IP would be in *non-essential* features, not in the core discoveries. Development to the point of practical application would be necessarily shared. Standards would be at the core of things. Look at computer and communications technology to see the approach in action. There is plenty of room for proprietary stuff, but at the heart of it, a robust commons comes first–and if it doesn’t, it soon takes over and lays the foundation for a competitive industry of suppliers and feature developers at the outer edge of the commons.

But law cannot do so well at forcing such things. Even in the info tech area, personal decisions drove the priority of commons and standards over monopoly patent positions. Forcing everything open is as bad as enticing everything behind patent paywalls. The bureaucratic brain cannot comprehend anything not at one pole or the other. That’s why bureaucratic brains, whether monopolist or communist, really ought not have anything to do with research or research innovation.

If we must have a federal law on the matter, it should be one to forbid organizational bureaucracies from having any claim on research results created in projects funded by federal *grants*. Combine that with a requirement that researchers requesting federal support should be accountable for what they have done with the results of any previously funded work. Ah–but even federal grants programs are run by bureaucratic brains. How can any bureaucratic brain decide who or what proposals should get federal grants? We would have to fall back to Vannevar Bush and read Science the Endless Frontier more carefully, and even then we would still have to think for ourselves–something that bureaucratic brains diligently avoid.

If research innovation depends on people thinking for themselves–“free play of free intellects” to use Bush’s phrase–then every bit of bureaucratic gesture works against the goal. Policy pundits who want to preserve federal bureaucracies or who propose altering those bureaucracies or who want to preserve university research bureaucracies and licensing bureaucracies all want to ensure there are bureaucratic brains supplied with budgets to hire pundits to flatter them in their bureaucracies and recommend more funding so they can reorganize and so “better integrate themselves into the innovation ecosystem.” That is, give ticks energy to dig deeper to find a host’s richer blood supply.

Repealing Bayh-Dole won’t change high drug prices. Enforcing Bayh-Dole might start a process–give it twenty to fifty years–to create a standards based biomedicine industry that does not have to involve the pharmaceutical companies that corporatized the patent medicine industry. Getting bureaucracies out of frontier science research–that would be the thing for innovation and the use of federally supported–publicly supported–grant-based research and development.

Vannevar Bush’s science innovation starts with free play supported by an independent organization headed by smart, aware people asked to make personal judgments about who to fund to go exploring. The NSF is not what Bush proposed–it’s what Truman required that was almost but not quite entirely not a national research foundation. We might return to the idea of a national biomedical research foundation–focused on expanding the frontiers of science of human physiology. Keep organizational claims out of it. Government gets a non-exclusive license. End of the regulations.

Then build targeted projects for with specific goals. These are Bush’s skunk works–draw people from academics, from industry, from prototyping and fabrication. Develop new things to the point of practical application. Supply those things to government agencies for public health deployment. Let companies build their own versions, too. Complete a project, wind it down and get the academics back to the university and the industry folks back to industry, and spin up new development projects. Outsource specialized processes to companies with those specialized processes–as contract research organizations. Like biotech companies do now.

This is Bush’s model of unexpected innovation–(1) open up new scientific frontiers that are not attached to any government or industry bureaucracy–(2) spin up skunk works that draw from the frontier explorers, industry folks, and gadgeteers to engage in a targeted development; (3) combine frontier science with conventional science and industry engineering to create prototype interventions that the biomedical establishment would not anticipate or fund; (4) adopt these interventions as they prove out for government public health programs; (5) use industry to supply commercial versions to lower costs and improve supply and add features.

That model was proven to work for the military. That model worked for information technology. The experiment Bush sought was whether that model would also work for biomedical interventions. That’s the experiment that the NIH and Norman Latker disabled in favor of the monopoly meme. That’s the experiment we have yet to try. That’s what federal policy ought to enable, at least for biomedical grant-based research at universities. Fantasy? Yes. But that’s the fantasy Vannevar Bush had. That’s the fantasy that was grounded in some crazy successes. That’s the fantasy that university and federal bureaucrats alike feared–it was innovative enough that it threatened their utility. Bayh-Dole promised a vision of federal support for bureaucracies, based on royalty-generating exclusive patent licensing. The bureaucrats have loved every minute of it. The rest of us, not so much.

Will federal grant-based health research directed at creating intangible assets of commons and standards result in drugs with lower prices? Perhaps. Could such programs create new categories of health innovations not based on patent medicines–drugs? Perhaps! After all, we have moved through prevention, and “vitamins,” and vaccines, and antibiotics to get to where we are. Why would we fixate on “drugs” when there appears to be a nearly endless frontier of other yet-to-be-imagined concepts by which to frame and develop health interventions? Loony? Yup. Loony as Vannevar Bush. So loony that it is beyond the ken of the bureaucratic brain.




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