Bayh-Dole Basics, 8: Reasonable Terms Comments-7

Now let’s look at Bayh-Dole’s treatment of march-in (35 USC 203(a)) and “reasonable terms”:

. . . the Federal agency . . . shall have the right . . . to require the contractor . . . to grant a . . . license . . . upon terms that are reasonable under the circumstances . . . if the Federal agency determines that such —

(1) action is necessary because the contractor or assignee has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention in such field of use;

This is the failure to achieve practical application prong one of Kennedy–the paragraph (f) of the Nixon patent policy–and the only reliance on the definition of practical application in Bayh-Dole. Bayh-Dole march-in adds that the march-in must be “necessary”–as if other march-in might be simply governmental whim. The point of Kennedy march-in was that if an invention was not promptly brought to the point of practical application–with benefits reasonably accessible to the public–then the government should march-in. The failure to work an invention or to make the benefits of working the invention reasonably accessible to the public was sufficient. There was no need to add a further determination of necessity to the action. Bayh-Dole also adds the “is not expected to take” language, which further distances the march-in determination from actual practical application–no expectation that a contractor (et al.) will soon start to take effective steps. At some point, adding qualifications ends up turning a requirement into vapor.

(2) action is necessary to alleviate health or safety needs which are not reasonably satisfied by the contractor, assignee, or their licensees;

Now Bayh-Dole moves to Nixon paragraph (g) concerns and separates these. Bayh-Dole returns to the Nixon conditions–health or safety needs–and eliminates the FPR addition of “welfare.” But that’s just silly cakes compared to the additions: first, the repeated “action is necessary”; second, a “not reasonably satisfied” condition; third, an “alleviation” requirement; fourth, omits “public” from the needs.

To understand what is going on, return to the Kennedy patent policy. Kennedy opens with four conditions under which, by default, the government should normally acquire ownership of inventions which it will then dedicate to the public, using the patent system to publish them or not:

(i) when the government intends to produce a product for commercial use,

(ii) the research is for public health or welfare,

(iii) where the government is the dominant user or principal developer and contractor ownership of inventions would create a “preferred or dominant position” and

(iv) where the contractor operates a federal lab or coordinates the work of others.

Bayh-Dole eliminates these default conditions in addition to preempting the default government ownership requirement Congress had included in statutes that allocate funding to particular projects. To recover any of these default conditions, a federal agency must make a determination under Bayh-Dole that “exceptional circumstances” exist–that is, there is some circumstance beyond what Bayh-Dole requires for which a different treatment (such as any of the Kennedy policy requirements) is necessary. Stink about it. Bayh-Dole preempts those statutes providing the government with default ownership for open access. The “exceptional circumstances” have to be, then, something *other* than that Congress once required federal ownership–since that circumstance has already been anticipated and expressly dealt with. And even then the federal agency is constrained by Bayh-Dole to ownership positions that better accomplish Bayh-Dole’s (not the federal agency’s) policy and objectives.

It’s bizarre, really. What are the non-exceptional circumstances on which Bayh-Dole’s requirement is based? There are none. What makes any other circumstance “exceptional”? Could an exceptional circumstance be then, simply, the public mission of a federal agency? That is, does Bayh-Dole really purport to preempt the public missions of federal agencies whenever a federal contractor acquires an invention made in work funded to advance a federal agency’s public mission? It would seem so. “Exceptional circumstances” would appear to include the circumstances of federal agency public missions. A federal agency would have to follow Bayh-Dole to restore its own public mission, and to do so, it would have to show that its own public mission then advanced the purposes of Bayh-Dole, which clearly has already established that it runs counter to such a public mission.

If anyone thought for a moment about what was happening–only the DOE apparently was prepared to do this–then Bayh-Dole’s standard patent rights clause would have come with multiple default variations, not just with the DOE’s stipulation for nuclear propulsion and weapons systems. There would be an exceptional circumstances clause as well for development for commercial or regulatory use, one for health and welfare directed research, one for where the federal government was the primary user or dominant user (i.e., no established non-governmental market), and one where the contractor operated a federal lab (Stevenson-Wydler, anyway) or coordinated the work of others (for instance, as a general contractor on a grant). These patent rights clauses would be baked into the structure of the standard patent rights clause regulations. Instead, federal agencies, by not taking such action, would have to justify their public missions research contract by research contract–which for the most part they don’t do.

Once Bayh-Dole has displaced Kennedy’s first conditions of government ownership and made it difficult to recover those through statutory procedures, it can then transform march-in based on the second prong in Kennedy. In particular, Bayh-Dole’s default ignores whether federally supported research concerns public health or welfare. In Kennedy, that mattered. In Bayh-Dole, it doesn’t. Further, Bayh-Dole does not care whether a contractor has technological capabilities and an established non-governmental market for its products. In Kennedy, these were the fundamental rationale for allowing contractor ownership–and only then if the research was outside the four areas for which the government should take ownership and make inventions generally available through dedication or licensing. Thus, in Bayh-Dole, there is no march in based solely on government regulation or public health. To address those matters, a federal agency would have to determine exceptional circumstances and change the ownership default in Bayh-Dole. March in comes too late in the process to matter.

Now look at how Bayh-Dole treats march in for stuff that used to be part of Nixon’s paragraph (g)–the stuff that has to do with regulation and public health. To march in, the federal government has to show that an action is necessary, not merely determine that there’s a regulatory requirement or public health need. What can “action is necessary” possibly mean when combined with the “alleviation” and “reasonably satisfied” conditions?

Compare (Bayh-Dole like):

(A) to require the contractor to grant a license

if the Federal agency determines that such action is necessary to alleviate needs that are not reasonably satisfied

with (Kennedy/Nixon like):

(B) to require the contractor to grant a license

as may be necessary to fulfill public health or safety needs

with (unlike any):

(C) to require the contractor to grant a license

to alleviate what isn’t reasonably satisfied

with (strengthens Kennedy/Nixon march in, but without the Kennedy/Nixon initial claim to government ownership for inventions directed at regulations or public health):

(D) to require the contractor to grant licenses

whenever a regulation requires public use or the invention

involves a matter of public health or welfare

regardless of the contractor’s activity

In (A)–Bayh-Dole–we get a huge intervention of federal agency cogitation with regard to making a determination. In (B)–Kennedy/Nixon–agencies must make the case that the march-in is “necessary” but only to “fulfill public health or safety needs”–nothing here about what the contractor (et al.) may have done to achieve practical application, nothing here about whether the benefits of working an invention are reasonably accessible to the public (Kennedy/Nixon) or available to the public on reasonable terms (Bayh-Dole). It doesn’t matter in Kennedy/Nixon–the government determines what needs should be met, and determines that compulsory licensing will meet those needs. The contractor’s benefit is that compulsory licensing might involve payment to the contractor of a reasonable royalty, and so the contractor may expect compensation for the curtailment of its exclusive rights. In (C)–a variant of Bayh-Dole that doesn’t exist–the provision changes the determination step (and therefore reduces the opportunity for bureaucratic procedures to delay march in) and cuts to the right itself. If there are health or safety needs not reasonably satisfied (i.e., unreasonably satisfied or not satisfied at all), then the government can require licensing. In (D)–the determination is only that a regulation requires public use or the invention is directed at a matter of public health. If so, then a contractor is required to grant licenses on terms that are reasonable. This (D) of course doesn’t exist–but it is the provision that Bayh-Dole ought to have used, given the removal of the four conditions for government ownership stated upfront in Kennedy/Nixon.

A public health need is not merely a health need that is generally known, as if a public health need is a publicized or notorious health need. A public health need is a need of a community–not just, say, of patients. The CDC offers this quote from 1920 as the definition of “public health”:

“The science and art of preventing disease, prolonging life, and promoting health through the organized efforts and informed choices of society, organizations, public and private
communities, and individuals.”

In its educational materials on public health, the CDC simplifies the definition with a “knowledge check”:

Thus, a public health need is one that involves a community–a group of people–and involves a right to be healthy. By contrast, a “health need” without the “public” is merely a problem someone has with their health, for which they seek an “alleviation.” The difference is profound. Bayh-Dole, by dropping “public” from the Nixon patent policy march-in, reduces a march-in based on the needs of a community–the American public–and based on organized policy decisions–such as open access, multiple suppliers, collaboration, and community rights–to the isolated needs of individuals looking to purchase potentially helpful products.

A federal agency determination of a public health need is a policy determination–it arises from reasoning about organized efforts to meet a community need; a federal agency determination about a health need is an empirical inquiry into what people having that need have access to. Determination that such a private need has not been “reasonably satisfied” is yet a further step away from public health.

In the case of public health needs, that a company sells a product based on a patent monopoly has little bearing on the determination, which is about policy, and the policy could easily and reasonably determine that a patent monopoly denies the community a right to manage its health. Bayh-Dole works to prevent such a public policy health decision to be made as a form of march-in. Under Bayh-Dole, if a federal agency wants to address public health, it must do so by making a determination of exceptional circumstances upfront, before any research contract is awarded. Bayh-Dole march-in is designed to fail public health unless an agency declares public health expressly as part of not only the rationale for offering research funding but also as a modification of the patent rights clause Bayh-Dole attaches to the funding agreement and which becomes effective whenever a contractor acquires ownership of a patentable invention made under contract.

Think of the delightful irony the clever attorney at the NIH doing the drafting must have felt–federal research funding publicly justified as serving public health turns out, by operation of Bayh-Dole, not to serve public health unless the federal agency providing the funding has bothered to make a finding of exceptional circumstances to do so. And even there, the requirements under the exceptional circumstance (that is, one not anticipated by Bayh-Dole’s arbitrary policies) must still be crafted to better meet Bayh-Dole‘s policies than do Bayh-Dole’s defaults. Talk about adding bureaucracy to a bureaucracy. And folks claim Bayh-Dole somehow reduced administrative overhead.

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