Working through an old misrepresentation of Bayh-Dole, 3

I have previously pointed out the University of Rochester’s strange policy statement with regard to commercialization. This is part of Rochester’s new and stinky. A statement currently pops up on the Rochester site that it will be down for a policy update on February 27, so maybe things will change. In the meantime, let’s have a visit. Here’s Section 6.2 of Rochester’s IP Policy (my bold):

Whenever possible, the University endeavors to make its creative works and inventions available on a non-exclusive basis; however, in many cases an exclusive license may be necessary to make it economically feasible for an enterprise to undertake commercial development and production.

The highlighted phrases are incompatible. If it is possible to make stuff available non-exclusively, and the university then does so, then it cannot also be necessary to offer exclusive licenses. Or, if it is necessary to offer exclusive licenses for commercial development, then “whenever possible” means merely “whenever there are no takers for exclusive licenses.” But even that is a problem. How will anyone know there are no takers for an exclusive license? Yes, that’s right–when the patent expires and there’s no longer a patent monopoly available to offer.

The weasel words in this policy statement include “endeavors,” “in many cases,” and “economically feasible.” The university, so policy tells us, “endeavors” “whenever possible” to make “its creative works and inventions” available non-exclusively. That is, “tries” or “thinks about trying” or “offers a policy statement that sounds good.” Compare to a fictional alternative policy statement:

The University makes all its creative works and inventions available on a non-exclusive basis. If no one has accepted a non-exclusive license on fair, reasonable, non-discriminatory terms within six months of a broad announcement of such an offer, then the University may consider requests for an exclusive license to sell (but not to make or use) a creative work or invention, but only if significant expenditures are required to put the creative work or invention into a form in which it may be used by or benefit the public and no source for such funding has come forward on a non-exclusive basis.

Instead, Rochester endeavors to license non-exclusively but immediately withdraws that expectation by asserting that “in many cases” exclusive licensing “is necessary.” The implication is that non-exclusive licensing is unlikely, that the University won’t even offer a given invention non-exclusively. It’s not just this broad reversal, however, that is disconcerting. What makes an exclusive license “necessary” where otherwise everyone would have an expectation of access?

to make it economically feasible for an enterprise to undertake commercial development and production

What are we to make of “economically feasible”? Can that be any more euphemistic? Does it mean “profitable”? If so, is the idea that exclusivity is necessary because otherwise any one company would not be able to profit? But that doesn’t make much sense. Let’s say a company takes a non-exclusive license and works to develop a commercial product. Spends a bunch of money. Now a product launches and is successful. There are profits. But also that attracts competitors that build similar products, spending their own money to do it, but with the confidence that there is a good market waiting for them. Now what is the first company in thinking? That they will have to share the market with competitors? But it is a strange monopolistic market in which only one company can ever be profitable and the rest all fail. Thus, such a market, as implied by Rochester’s policy statement, is a fight to corporate product death. Only one company will prevail, and the rest will give up.

If so, what does it matter to Rochester? If it licenses ten companies and only one makes it, doesn’t that, too, result in a defacto exclusive commercial position? It’s just that it didn’t take an exclusive license for the company to establish that position. In fact, Rochester ought to be well ahead in the profit game, because in the end it has a business relationship with the strongest company, alpha chimp that was able to defeat all the others. If, by contrast, Rochester tries to pick the winner up front, there are many ways that it could fail. It could license to a company that moves too slow, or lacks resources, or is despised by other companies that then work to undermine it, or just wants to buy up positions in case, or wants to use the license to build a speculative company to be bought out by other investors or a big company for whatever reason and never bother to build the product that was the premise of the license. In some of these schemes, Rochester may end up making some money–but in most of them, the likelihood of an actual, successful commercial product based on licensed rights is practically nil.

The reading of the policy, however, allows another claim: that exclusive licensing is necessary because that is the only form of license acceptable to certain “enterprises” and the point of the policy is that university inventions should be directed preferentially to such enterprises and not to others or to the public generally. The sense in this reading is that Rochester reserves its creative works and inventions for those enterprises that demand an exclusive license in order to justify spending any money to produce commercial products–and these enterprises exist only to produce commercial products. Excluded are companies that would use inventions as tools, for research or for production, and have the capability to adapt the invention for their purposes. These companies have no need to attempt to commercialize for others what they can do for themselves. If anything, they might benefit most by making the tool a standard that everyone then uses in a canonical form. Such a thing might reduce training time, provide for interoperability, and coordinate resources and suppliers for both efficiency and desired redundancy (so if one supplier fails, there are others available).

If we back up a bit, we can see that Rochester’s entire IP policy is premised on commercialization. Here’s the opening sentence, in the first section “1.1 Objective”:

The University of Rochester strives to support its faculty and employees in securing commercial development of intellectual property resulting from their research so that society may benefit at the earliest opportunity.

There’s another “endeavor” word as the first verb–“strives.” The target is “securing commercial development” of IP. There it is. There’s no support for making inventions broadly available for general use or for collaborative development. No thought that maybe the best route to availability is by teaching an invention on-site to people who would have a reason to use it.


Faculty who make discoveries and inventions as part of their academic work are encouraged to develop their inventions consistent with the academic mission of the University.

The IP policy claims IP made by other than faculty–staff, “full-and part-time agents” [sic], students, interns, fellows–all regardless of whether they are paid by the university. (See Section 1.3). But only faculty are “encouraged” by the policy–there, another “endeavor” and “strive” class verb.

But what does it mean to “develop” an invention? One makes a potentially patentable invention by conceiving it–having the idea–and reducing it to practice–building it or using it to demonstrate that it works, or describing it in sufficient detail that one with ordinary skill can make it and filing that as a patent application. Where does “development” come into it?

Federal contracting distinguishes research and development. The definitions vary around primary themes. Here is a simple set of definitions from the FASAB Handbook for federal accounting (and see here for an extensive discussion compiled by the NSF):

• Basic research: systematic study to gain knowledge or understanding of the fundamental aspects of phenomena and of observable facts without specific applications toward processes or products in mind;

Gain knowledge without specific applications.

• Applied research: systematic study to gain knowledge or understanding necessary for  determining the means by which a recognized and specific need may be met; and

Working on a problem to identify means to solve it.

• Development: systematic use of the knowledge and understanding gained from research for the production of useful materials, devices, systems, or methods, including the design and development of prototypes and processes.

Produce useful stuff.

In this context, to develop an invention would mean to attempt to make the invention work for some particular purpose, such as in an industrial process or as a product. But development could also mean simply building an instance of the invention suitable for personal use, or professional use (imagine a physical therapist bringing in an instance of the invention to work with a child relearning to walk), or research use, or for a company’s internal use, without much need for expensive adaptation, improvement, scaling up for mass production, compromises for user training or abuse, and the like. So what does the Rochester IP policy mean by “development” of an invention, that faculty but not others are “encouraged” to do so?

Further, why would faculty by policy be encouraged to develop their inventions rather than, say, publish those inventions and be available to assist others who might want to develop them? It would appear that Rochester intends that faculty inventors should want to make product versions of their inventions–develop for “commercialization” or mass production in product form. For that, one might expect all sorts of things that might need to be done to any given invention–choosing the proper materials, redesigning for cheap or rapid or consistent quality mass production, adding or removing functions for ease of use or training or safety or reliability, dealing with regulatory compliance, with foreseeable hazards and other risks, for avoiding infringement of everyone else’s IP positions. That is a bunch of stuff–but it is not the burden of invention adoption, nor even of development outside of the idea that commercialization must mean mass production and sales for profit.

Why, too, does Rochester qualify its encouragement of faculty to develop their inventions with the qualification of “consistent with the academic mission of the University”? How does making product of any sort have much to do with the “academic” parts of the university’s mission? It would appear that what the IP policy means is that faculty are encouraged to think about their inventions and maybe adapt them for use them in their teaching and research, but that any other development would fall outside this academic mission and so faculty would not be so encouraged for this other development.

Now some bureaucratic garble nonsense:

The University has policies and guidelines that provide incentives for its researchers while protecting the integrity of research emanating from the institution.

“Emanating” is wonderful. Research emanates. It flows out, like sunshine, like smiles. Now we find policy talking about other policies, that researchers need “incentives” and that these incentives somehow place at risk the “integrity” of research–but no, not research but the “research that emanates.” One might think–publications and talks and disclosures and instruction. But no, it’s “research” and it “emanates.” Somehow, it would appear, that development of inventions works against the integrity of research but for policies that cleverly balance the one–incentives–with the other–integrity. The implication is that developing inventions is rather demonic but is necessary, within limits set by administrators using policy to control patents, copyrights, and the like. Or, maybe this is just throwaway garble that got caught up in some bored committee’s wordsmithing.

Oh, and what are the incentives? After the university has taken all your IP, has made you disclose everything before you can talk to anyone, and has committed everything to “commercialization” which in many cases necessitates exclusive licenses that then prevent the inventor from ever practicing the invention except as an academic exercise and only at the university, there’s–yes–royalty sharing. That’s the incentive. Inventors get half, after legal expenses, unless the invention is actually worth something, in which case they get 40% or 35%. Funny, one would think the incentive for coming up with really valuable stuff would be an increasing share of licensing income, and would be off the top so that it didn’t matter how inefficient or bungling the university might be in its legal affairs. So “incentives” here is a strange usage.

That’s not all:

Moreover, the University provides an array of services to its inventors to assist them in protecting rights to University Intellectual Property, in satisfying requirements imposed by sponsors of the research and in fostering commercial development.

More mealiness. The “array of services” to inventors are so the inventors may comply with university demands–“to assist them in protecting rights” to the IP the university claims as its own. The requirements “imposed” by sponsors are requirements that the university administration has chosen to accept. It is not like the university has no choice in the matter. As for federally funded research, even Bayh-Dole does not impose anything on inventors–they don’t have to disclose inventions, don’t have to file patent applications, don’t have to commercialize anything–any of these things depends on a university administrative action, such as to own, or decision to keep owning. These things are not imposed on the university–the university chooses them and then demands that inventors comply. So it goes.

Finally, this array of services assists inventors in “fostering commercial development.” What does it mean to “foster” commercial development? Feed it? Raise it as one’s own? Commercial development of inventions does not happen by “fostering” it. One provides something to people who control the activity. What would it be? Well, yes, it could be exclusive rights to a patent. But how does that “foster” development? It simply provides rights to the thing to be developed commercially in favor of any other use or development. Perhaps what is meant is the “Technology Development Fund,” through which Rochester makes money available to “our researchers” to “develop their innovations” via “prototyping, testing, and de-risking. None of these things would appear to be “academic” in nature, but rather are part of commercial activity. Of course, the TDF itself is based on fantasy bureaucratic concepts, such as “Oftentimes, our research efforts yield scientific breakthroughs that are not ready to be translated to real world situations.” Pick most any word in that sentence and it makes no sense, other than that together the words sound like something a bureaucrat would write. Notice how inventors disappear behind “research efforts” and inventions become “scientific breakthroughs” but somehow scientific breakthroughs are not ready for “real world situations.” It is mind-numbing is what it is.

A second fund targets drug development with $10,000 awards. A full institute also funds drug discovery, but with $100,000 to $7.5M awards. This is not “fostering” commercial development–it is undertaking commercial development under the guise of “preparing” inventions for “real world situations.” Really, “de-risking” amounts to doing development to make an invention (or “technology”–not even worrying patents) attractive to speculative investors who otherwise would not do that work–at the $10,000 or $100,000 or $7.5M level, where typical exits for biomedical technology in new ventures run at $100M or more of private equity investment.

We return to Section 6.0 Commercialization. Here’s 6.1:

The University encourages the commercial development of creative works and inventions for the public use and benefit. Typically this requires that the University grant one or more enterprises a license to further develop, use, or sell those works and inventions.

Again we find that commercial development is the goal. Not public availability, not open publication, not collaborative development. The stated objective is “public use and benefit” but the method then “requires that the University grant one or more enterprises a license to further develop, use, or sell those works and inventions.” Again, this does not make any sense. The university takes out ownership positions on IP in inventions. The university does not have to grant licenses–it can choose not to enforce its IP positions, or it could by default grant a public license in every invention that it claims. That would take care of any worries about use or selling works or inventions. Granting licenses is necessary in the event of IP positions because candidate licensees feel the threat that the IP holder might sue for infringement or misappropriation. The license functions as a promise not to sue, not to disrupt the development, use, or sale of a work or invention.

But this account of licensing is not what is going on here. Instead, the subtext, as made overt in Section 6.2, which we started with, is the chosen administrative necessity to grant exclusive licenses and to hold back on granting non-exclusive licenses unless to such licensing is “imposed” by grant requirements. Somehow, exclusive licenses are necessary for invention development. But the logic fails. If no other company would use or develop or sell a product based on invention if it discovered that another company was already using or developing or selling, then there would be no need for any exclusive license. The market would shake out based on the logic that there was room for only one developer or producer or user. No, the exclusive license exists to prevent other sales, use, development that is anticipated to happen regardless of whether a first company starts selling, using, developing. The exclusive license is not *necessary* to encourage an enterprise to sell, use, or develop–it is necessary to suppress anyone else from doing so.

It is here that we see the asymmetry in dealing with a claimed invention as a matter of patent and licensing and the development of an invention as a matter of commercial product creation. A claimed invention may involve thousands of variations, all of which are controlled by a patent. But development of that same claimed invention for commercial production typically involves only one or two of those thousands of variations. The rest are suppressed, rather than released for anyone to use. After all, if by being made available to others, no one else would possibly think to use, sell, or develop them, then there’s no reason not to release them, just to prove the point. But that’s not what happens, is it? No–things get licensed exclusively for the life of the patent–assigned, even–and all those variations never get developed or used or sold. And that’s the case for research, for direct practice, for standards formation, for cumulative technology, for applications far afield from the bit for which some commercial development is attempted. It is true, of course, if the university never licenses (and most university inventions are never licensed because no exclusive licensee shows up), and it is also true if an invention ever is licensed exclusively.

If, by contrast, an invention were made available royalty-free, without formalities, such as under a public license embedded in the issued patent, the invention would not be suppressed by any patent, even if no one chose to practice it (in any of its many variations). “Fostering commercial development” then means, in effect, suppressing many variations of any given invention, if not all variations, in the hope of securing an exclusive license to mass produce a commercial product. It is not the inventing that is difficult, or the use of the invention, but rather mass producing a profitable commercial product. That’s what Rochester’s IP policy dedicates all its ownable stuff to.

There’s an argument–it’s been made in the wild–that by making an invention freely available, it all but assures that the invention will never get used or developed. It’s a nonsense argument in the general case. What is available to all will be used by none. That argument is a driver of the Bayh-Dole Act, though you won’t find it anywhere in the law. Nothing in Bayh-Dole requires patenting or exclusive licensing. Indeed, Bayh-Dole restricts exclusive licensing. But the practice Bayh-Dole has enabled, has groomed university administrators to accept, is that exclusive licensing is “necessary.” It is almost never “possible” to grant non-exclusive licenses–it just isn’t done. Where is the university technology transfer office that publishes inventions available under non-exclusive license with the terms of such license also published–that is, so the license is clearly fair, reasonable, and non-discriminatory? It just doesn’t happen for patented inventions. Just for “end user licensed” sales or bailments of “tangible research property” or software and digital media.

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