We are working through the problems with federal laws permitting federal agencies and nonprofit contractors, in particular to deal in patent monopolies. Although there’s plenty of rhetoric about how patent monopolies are in the public interest, behind it all is an interest in money. When one talks with university administrators about their technology transfer operations, they don’t talk about getting new findings into everyone’s hands, or about helping other organizations develop things. No, they want to know about licensing money. They are not generally interested in making enough money to make licensing a self-supporting service–they want big money, way more than it costs to run a technology transfer office. And they want whatever practices in place that will get them that big money. When a big university donor shows up all critical of technology licensing practices that don’t make big money, they are all ears. And usually those donors’ schemes involve monetizing patent portfolios by more effective exclusive licensing practices. Put another way, practices that move even more toward trying to create a few lucrative deals at the expense of everything else.
If money is the incentive that as a matter of policy should drive such licensing, then one might expect both the licensor institution and its inventors to rally toward the money. And that runs against the idea of public service, does it not? Do nonprofits and federal agencies really need a patent money incentive to fulfill their missions? Do the inventors who choose to work for them need patent money on top of their salaries to try to cure disease? Does that money need to come from patent choke points to engage in monopoly pricing and suppression of anything that might compete or otherwise use any bit of what’s claimed by a patent, even the stuff not used for some commercial venture?
There’s another oddity in all this. If licensing money is the institutional driver, the mindset easily may become that of managing a risky investment portfolio. If it costs relatively little to acquire inventions (just demand them from employees with a threat of firing them or suing them or defaming them–or all three), relatively little to patent them (and using public money at that, no personal money involved), one needs only one patent every twenty years to “hit it big” and the whole operation will look successful for another twenty years, even if nothing else is licensed in that time.
If the exclusive licensing approach doesn’t work, managers of patent portfolios can also turn to “monetizing” their patents through patent trolling–surveying industry for infringing uses and then threatening to sue (or suing) for a royalty. Such a thing flies against the use of patents to encourage public use, especially for medical treatments. And such a thing undermines the argument that patent monopolies are necessary or inventions won’t be used and the public won’t benefit. Clearly, if there are companies practicing inventions without a license, and without any exclusive licensee trying to develop what they have already done, then no patent monopoly was needed. Furthermore, the practicing companies develop anyway, even in the face of blocking patents held by nonprofits or federal agencies. So much for the general claim that nonprofits and federal agencies simply must deal in patent monopolies.
Put another way, exclusive licensing does not work as an institutional system. There is no way to manufacture patents and force them into service following an administrative procedure based on a portfolio defaulted to exclusive licensing. All those graphs of the “technology transfer process” at university web sites are pure wish-fantasy. The reality is, that system does not work. Most inventors, they don’t get a dime. They don’t get a dime because their own inventions are part of the 999 that don’t get licensed or if–not that often–licensed, never become product. They don’t get a dime, either, when some lucky one’s invention hits it big every decade or so. Only the inventors of that invention go large. So for most inventors, royalty sharing stinks if based on a portfolio approach to holding patents so once every decade or so some one patent in the portfolio makes a pile. If we were thoughtful members of the public, we might do better to advocate that all inventors–all researchers, for that matter–ought to get a dime or much more! But not based on an exclusive patent portfolio held by an institution that lives for patent monopoly speculation and pricing.
It would be far different if a university or federal agency had to put every invention it took ownership of into use. Nothing in Bayh-Dole endorses a patent portfolio/exclusive licensing/great if only one hits it big approach to money-making, either for contractors or for federal agencies. One might even argue Bayh-Dole has provisions that aim to prevent such a thing, but then again, those provisions are routinely ignored by everyone involved.
If a university or federal agency had to put every invention that it took into play, every inventor might expect royalty checks–or at least to have personal access to the invention along with everyone else. But to get to that outcome, we would have to adopt practices other than patent portfolio speculation. We would have to do something other than exclusive licensing as the primary method of making inventions available. And we might even have to do something different than policies under which inventors only get paid if there is a money-making license. Inventors might get paid for consulting services, or workshops focused on the use of their inventions, even if the inventions are made available royalty-free.
The problem is not that government inventors or university inventors might get paid a share of royalties for valuable inventions. The problem is that federal agencies and federal nonprofit contractors adopting a patent portfolio approach defaulting to exclusive licensing could use their exclusive licensing powers to exploit public health policy, play favorites with companies, and threaten to sue all others (or let their favorites sue). And hold back everything else behind patent paywalls. The federal agencies and universities depict the situation of one in which, without exclusive patent licensing, no health invention will ever get used and so public research funding would be wasted. That’s might be worrisome if it were true. But there are folks who believe it and think we should be grateful that we have implemented just about the least productive approach to health care innovation that we could have chosen, and on top of that, it is ripe for corruption.
Despite all the public spirited rhetoric about innovation using private investment, the basic design of the offer is this:
“Give the govt a financial stake in your product sales and you get an exclusive license for monopoly pricing OR we will block you from this invention and sue you when we find our favorite company if you use it anyway.”
Such an offer invites corruption. It is especially the case when one realizes there is no mechanism for public oversight, no right of public appeal, and the terms of exclusive licenses are kept secret.
There’s a similar work up for nonprofit organizations under Bayh-Dole, especially for state-affiliated organizations such as universities and hospitals. Money is part of it. But policy power appears to be even more attractive.
If you don’t mind government organizations and nonprofits offering to play favorites while being on the take about it and being fine with monopoly pricing, maybe it would still bother you that the approach is so unproductive. It’s not even a the argument that government and nonprofit favoritism is somehow necessary for productive use of inventions or even to make money for the federal agencies and nonprofits involved. Nonprofit exclusive licensing of federal inventions didn’t work in the IPA program. It hasn’t worked for forty years under Bayh-Dole. A few organizations and inventors get rich. Good for the inventors, I say. But most inventions get suppressed–and those inventors–the vast majority of inventors–do not show up all agush about Bayh-Dole, do they? But nonprofit and federal administrators get to play patent favorites with companies, policy, and research.
We can come around to the last bit in that tweet we started with. At the end, it tags inventions as ones the taxpayer paid for. Were it that way. Things look more like this. The federal government identifies a public health need and asks for volunteers to work to meet that need. University faculty and federal agencies show up proposing research and testing that might help. The federal government awards grants, contracts (external) and allocates budget (internal) to do the work. The contractors involved become parties to the effort. They are welcome to add their own funding and resources to assist with the work. This might be expected, even, for nonprofits that have made a commitment to public health. But the deal is–if you bring your own resources to the work, whatever you do with those resources also comes within the scope of the work. You can’t bring your own resources and get out ahead of the work you volunteered for and then drop a patent bomb that cuts out everyone else involved so you can hog rights for your organization.
Thus, it is not at all that taxpayers pay for the inventions involved. Taxpayers, if we want to put it that way, pay for at least some of the work involved in a project to address public health. It’s a matter that taxpayers pay to support some of the work in that project. It does not matter whether the taxpayer money is directly used to invent–the inventions could be with a contractor that has brought in its own resources, as one participant among others. Again, this is a form of “contamination”–though that’s a loaded word for it. The contractor volunteers to assist, and receives some federal money for getting involved. But by being a volunteer and now a contractor, whatever the nonprofit does directed toward the project everyone is working on becomes part of the project. That’s not the case, necessarily, with patents that pre-date volunteering, but for everything else, it is.
The problem–the place were it does not feel right–is that folks volunteering to address a matter of public health then want to defect on that commitment the moment they come up with an invention that would funnel expenditures to meet that public health need through that one nonprofit volunteer, to be split with a favorite company of its choosing. It just does not matter that the nonprofit or even the federal agency insist that this defection is essential to the use of whatever was invented or discovered. It still feels wrong–and other than that folks get away with it so often they have normalized it, it is wrong. Not only is this defection not necessary, it also is not effective. There are a few lucrative deals, of course–one every thousand inventions, maybe one big deal every decade or two, if a nonprofit is lucky. But even in those big deals, they get big as a result of the suppression of competition, monopoly pricing, and speculation on the future value of extracting as much payment as possible out of the suffering.
And that’s the thing that mystifies me. The exclusive licensing regime created under Bayh-Dole doesn’t work. It’s metrics are horrible. It doesn’t feel right. Everything secret. No public oversight. No public right of appeal. Public protections ignored, not enforced, routinely waived. Rights reserved for the public not acted upon. None of this feels right. Why should the only way a law works is that no one follows it? More so, exclusive licensing doesn’t align with nonprofit or university or federal agency values. Maybe companies should sue other companies for infringement, fight about who gets to make money from suffering in public health. I’m okay with that. Cats will fight. But it’s not what we should see in nonprofits. Harvard trying to legally wrangle the University of California out of CRISPR invention rights, for instance, where it would not matter if the tools, even if patented, were open. Or Caltech suing Apple and Broadband for using an invention Caltech hadn’t bothered to develop for use. When Cornell sued HP for infringement, HP not only pulled out of Cornell, it cratered its university research programs throughout the country.
I don’t have a problem with nonprofit inventors receiving a share of royalties from inventions they make. Talented, creative inventor folk don’t have to drop their financial interest in their work at the door just because they are recruited to a project in public health identified by federal agencies and nonprofits. If there’s going to be money made from their work, they don’t have to be patsies about it. But also there is no reason for them–or us–to demand or even expect that federal agencies and nonprofits should work it to maximize the money that comes through a patent choke point–exploiting the public for profit rather than building an infrastructure that includes companies to deliver a new medical treatment. Is this so difficult? the difference between a speculative, defecting patent monopoly and a reasonable profit from providing a competitive or cooperative product or service?
And yet here are the nonprofits, universities, and federal agencies all arrayed to defend this ineffective regime of exclusive licenses, patent litigation, and suppression of most of the inventive assets made in federally supported work over the past forty years. That regime does one thing–it makes money for pharma and for those to whom pharma gives a tiny share of that money under an exclusive license. It seems like sport gambling, not public service. Somehow, I don’t feel gratitude.