Nixon’s Need and Encouragement

In a series of articles we have dealt with the monopoly meme. The monopoly meme argues that the true purpose of patents is the corporate right to exclude all others from practicing an invention. Without this right of exclusion, so the meme goes, no one will use any invention and no one will develop the invention and therefore the public will not benefit from the invention. “What is available to all will be developed by none.”

The monopoly meme generally dismisses the role and rights of inventors in the use of the patent system. What matters is that a single company–one that’s wealthy or that can attract investors–gains exclusive control over an invention and “develops” it for commercial advantage. Without the “incentive” of exclusive control, neither companies nor investors will be motivated to “take the risk” to develop any invention, and without companies and investors, the public then will not have the benefit of any invention, let alone inventions made with federal funding, and that federal funding then will be wasted.

Here’s President Nixon’s version of the monopoly meme, from a March 16, 1972 explanation for changes in the Kennedy patent policy:

One important barrier to the private development and commercial application of Government-sponsored technologies is the lack of incentive which results from the fact that such technologies are generally available to all competitors. To help remedy this situation, I approved last August a change in the Government patent policy which liberalized the private use of Government-owned patents. I directed that such patents may be made available to private firms through exclusive licenses where needed to encourage commercial application.

If everyone has access to a government patent, then that access is a “barrier” to “private development” and “commercial application”–at least in the United States. Bayh-Dole advocates use the reverse of this argument to claim that without patents on federally supported inventions, foreign companies gain the benefit of United States research, all for free. Nixon characterizes the introduction of exclusive licenses as “liberalizing” private use, as if open access indeed is a “barrier” and excluding all others constitutes a lowering of this barrier. Down can be up in political rhetoric, to be sure. Thus, exclusive licenses “encourage commercial application” where common access or standards apparently won’t, except perhaps in foreign countries.

The monopoly meme is nonsense, but it has been effective nonsense in getting universities to bureaucratize research discoveries and inventions, as well as software, research materials, and data. University administrations are tasked by the monopoly meme to take inventions from faculty, students, and staff and deliver these inventions to corporations willing to operate under the monopoly meme–established companies and startups seeking venture capital. If you are worried that the monopoly meme here is just a straw man that doesn’t exist in the literature, I encourage you to go read the literature. The problem is, the moment one backs off the monopoly meme, says that it is qualified or more nuanced than depicted here, one must abandon the meme itself and admit it is just bluster and deception, as far as public policy goes.

The monopoly meme is the rhetorical driver behind the effort–culminating with the Bayh-Dole Act–to make it federal law that federal agencies may grant exclusive licenses to inventions owned by the federal government, even to the point of assigning ownership of those inventions to companies. The monopoly meme is also behind Bayh-Dole’s preemption of the public purposes of federal research funding in favor of allowing federal contractors to own and exploit patent positions for their own contractorish purposes, whatever those purposes happen to be. Whatever the justification for providing public funding to a private research effort, Bayh-Dole stipulates that that justification should be preempted by whatever a contractor-owner of any invention desires to do–and in particular, how the contractor-owner desires to exploit a patent monopoly. If the contractor-owner were to have no interest in a patent monopoly, then we are in very different territory with regard to Bayh-Dole. In such a case, the contractor-owner would be aligned with the federal policy before or without Bayh-Dole–that only in really rare cases might a patent monopoly have a public purpose in the areas in which the federal government makes research grants–science, medicine, support for an industry.

Turning federal funding to the private objectives to exploit patent monopolies makes that federal funding not a public subvention (a grant-in-aid) but a subsidy (a public contribution to private profit-making). Those proposing a project worthy of subvention with the expectation that the results will be broadly available are therefore also worthy of receiving a subsidy and the freedom to prevent the results from becoming broadly available in favor of efforts to make money from patent monopoly positions.

This argument is not about the flaws of the patent system, nor that companies might exploit patent monopolies, or even that there might never be a time when a patent monopoly is really necessary to achieve practical application of any given invention. The problem with the monopoly meme is that it puts the federal government, and many instruments of state government in the form of public universities, in a position to play favorites with invention assets that were produced on a premise that there would be no favorites, that the benefits of the research would be public, would serve industry as a whole, would create a commons from which competitive use and development might arise.

Bayh-Dole says, essentially, “if you are worthy enough to propose a project in the public interest, then you are permitted to play favorites with industry, and so is the federal government.” That’s the gist of Nixon’s use of the monopoly meme. The point of putting a patent clause in the Constitution was to limit the federal government’s exploitation of exclusive franchises–not for government profit-seeking, not to play favorites, not to reward cronies, not to have a basis on which to attack one’s political opponents or the competitors of one’s friends. Bayh-Dole upends this thinking with the claim that federal funding does play favorites, and ought to allow those favorites to also play favorites, even when the rights are held by instruments of government, whether federal agencies or state instrumentalities.

When government plays favorites, we start to wonder about justice, about how public money is appropriated, about whether government has aligned itself with favorites rather than to serve as a neutral arbitrator of competing interests. Of course, a democracy can decide that governments playing favorites with industry makes for a better country. But then, why not just come out and announce that this is Bayh-Dole’s genius, its spark–that it permits governments to play favorites and share in the profits that derive from such favoritism, and to deny access to inventions made with federal support to anyone who does not accept that governments should play favorites, and to commission those favorites to bring infringement cases against anyone who stumbles across any patent right that has been exploited as a favorite.

Again, governments playing favorites is something a democracy might choose. One might even argue that Nixon announced as federal policy just such a choice–much depends on what meaning one gives to “where needed to encourage commercial application.” Is the emphasis on “needed”–when absolutely needed without which no benefit to the public will ever happen because such benefit is only available by means of commercial application and not any other form of application–not by nonprofits, not by governments, not by individuals DIYing their own implementations, as a matter of craft rather than commerce? Or is the emphasis on “encourage”–that the aim of federal policy is to remedy a lack of encouragement–that an invention might be used and developed for public benefit, and even through commercial application, but the thing that is lacking in federal policy is that there is not sufficient “encouragement” for the commercial application part, and thus federal policy must change.

In the “needed” environment, one would have to show that no use of the invention will be made without a monopoly position. What sort of invention might that be, where the utility is not so advantageous that companies would immediately work to develop the invention for that advantage, even in the presence of possible competition (as, say, those dreaded foreign companies would do, were it not for the federal agencies and their contractors staking out monopoly positions to prevent it)? That would apparently be the sort of invention that would stand in need of commercial “encouragement.” The middling invention, the not-so-tasty-danish, if the truth be told.

But if the problem is merely that there is a general “encouragement gap” and that somehow we will enjoy better benefits from federally supported research if there is more “encouragement” for commercial applications relative to any other sort of application, well, then you get Bayh-Dole as it presently operates.

It is worth pointing out, here, that if Bayh-Dole were enforced according to its written provisions, if federal agencies acted on the rights that Bayh-Dole sets out for them–non-exclusive license to practice and have practiced, regular, serious reporting of utilization efforts, march-in for a failure of these efforts–then it may well be that Bayh-Dole’s emphasis would fall on Nixon’s “need” and not on Nixon’s “encourage.” Inventors would own their inventions and be considered small business contractors; institutional contractors could acquire those inventions only outside the framework of Bayh-Dole; nonprofits could not assign such inventions without passing on Bayh-Dole’s nonprofit obligations–including using all income with respect to any subject invention for public purposes; organizational contractors could not bring infringement suits unless they could establish that such litigation promoted use, free competition, and the maximum participation of small businesses.

If the emphasis were on “need,” then Bayh-Dole’s public interest apparatus would operate–all the time, with consequences; not never, with other consequences.

Nixon’s policy change in 1971 appears to be the work of government attorney and former patent examiner Norman Latker. Latker was instrumental in the effort to end-run the Kennedy patent policy with the NIH’s revived Institutional Patent Agreement program. Latker then worked on the Nixon patent policy revision, and the Nixon revision called for the codification of the revised policy. Latker then worked on that codification, resulting in the 1975 Federal Procurement Regulations. Latker then attempted to get the GSA to implement a government-wide IPA program as an “exceptional circumstance” within the FPRs–and that attempt failed. In 1978, the HEW and NSF IPA programs were shut down as running against public policy and for being ineffective.

Also failed were Latker’s attempts in the late 1970s to introduce bills in Congress to supersede executive branch policy and existing federal statutes regarding the disposition of inventions made in specialized programs, such as atomic weapons and space technologies and water desalination. Then Latker got lucky with Bayh-Dole in 1979 and 1980. Latker went on to participate in the drafting of the implementing regulations for Bayh-Dole. We might call Latker the Bayh-Dole mole.

The turning point in federal policy may well be this statement by Nixon–and the ambiguity that has been exploited is to make the emphasis fall on “encourage” and not on “need.” That has been enough to disable Bayh-Dole’s public interest apparatus while leaving that apparatus in place to lead the public to believe that the emphasis remains on “need.”

As a result, we have federal law and policy that stipulates government favoritism in matters of patent monopolies built out as a sort of tunnel system within a Constitutional and statutory framework that allows such favoritism only when “needed.” People see the visible framework of public interest and necessity, but practice follows the Latker mole holes and implements government favoritism with regard to monopoly franchises in inventions made with federal subvention funding.

It is this illusion–of public interest through broad access as the superficial appearance while concealing widespread government favoritism in practice–that Bayh-Dole exploits. A democracy may also choose to create illusions of public interest all the better to deceive itself. Perhaps if this illusion approach actually operated as claimed, one might think it were a good thing to deceive ourselves on the matter of government favoritism.

No doubt the illusion approach does operate–university administrators and federal agency technology transfer officers have well paying jobs, patent attorneys have plenty of additional work, and there are more opportunities for second- and third-tier venture speculators to find value in holding things back from common access. Perhaps that’s enough. Perhaps that is the best result for federal research funding that we can expect. If such is the case, then spending even more money on new programs to add more administration and more patenting can only be seen as creating more success. In such a policy approach, the illusion of greater “potential” for public benefit is sufficient to be regarded as “success.” We are, after all, then talking only of a policy for the happy encouragement of private profit-seeking at the expense of the public rather than a need to recover one’s cost and risk before competing to provide a developed invention to the public.

The monopoly meme is harmless enough as a folk tale to be told to company executives and speculative investors to induce them to seek patents. When the monopoly meme becomes instantiated as federal law, however, it destroys the public commons that exploration research and public health research and communications research was to extend and develop.

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