Here’s the point at which federal patent policy broke from the public interest. In 1971, President Nixon revised the Kennedy patent policy. One of the revisions was to the federal disposition of inventions. Here’s Kennedy:
Government-owned patents shall be made available and the technological advances covered thereby brought into being in the shortest time possible through dedication or licensing and shall be listed in official government publications or otherwise.
If the government obtains a patent, then it must see that the claimed inventions are “brought into being”–achieve practical application–in the shortest time possible. How? By dedication (i.e., disclaiming enforcement) or licensing (i.e., asserting the right to enforce in order to obtain agreement on licensing terms and conditions).
The Kennedy policy required as one of its defaults that when an invention was made in research directed at public health, the government should obtain ownership. When the government obtained ownership, it would make the invention available to all–including the contractor, the inventors, the research team, and anyone else. A federal contractor could make a case for its ownership of the invention when that ownership would better serve the public interest. But the contractor had to make a persuasive case, and a federal agency then had to act to release the federal claim.
Under the Attorney General’s Report (1947), which the Kennedy policy reflects, the government should never license exclusively:
As a basic policy all Government-owned inventions should be made fully, freely and unconditionally available to the public without charge, by public dedication or by royalty-free, nonexclusive licensing.
Clearly, the Kennedy policy picks up the Attorney General Report’s language while eliminating the “public” from “public dedication” and the “royalty-free, nonexclusive” from “royalty-free, nonexclusive licensing.” A subtle chipping away at the clarity of the Attorney General’s recommendation. Per the Attorney General’s Report, there was to be no enforcement of patents by the federal government–and there never had been.
Here’s Nixon:
Under regulations prescribed by the Administrator of General Services, Government-owned patents shall be made available and the technological advances covered thereby brought into being in the shortest time possible through dedication or licensing, either exclusive or non-exclusive, and shall be listed in official Government publications or otherwise.
What goes on here? First, that the disposition of federally owned patents is to be regulated–Nixon policy also requires codification–by the General Services Administration. That’s one problem. Second, licensing is expanded to expressly authorize exclusive licensing. An exclusive license involves an entirely different sort of enforcement. Where enforcement under a non-exclusive licensing regime has to do with compliance with terms and conditions in the public interest, exclusive licensing enforcement expands to include a promise (implicit in the exclusive license) to exclude all others from the practice of the invention. If the exclusive license conveys all substantial rights in a claimed invention, then the license acts as an assignment of the invention. In effect, the Nixon revision enables federal agencies to re-issue patents to favorite companies so that those companies may enforce patent rights by suppressing all use of the assigned invention–even uses that the assignee is not practicing or developing–and suppressing competing uses–and demanding damages as compensation for any such use, even if the assignee itself has not used, is not using, or shows no signs of working in the shortest possible time to achieve practical application.
These are huge developments. They change everything. This is the sea change in federal patent policy. Oh wow, oh wow.
It is no wonder that Norman Latker, patent counsel for the NIH, served on the Nixon policy revision panel. Latker revived the NIH IPA program in 1968 to end-run Public Health Service requirements and the Kennedy patent policy. Latker then worked to expand the IPA program to other federal agencies, including the NSF and the Department of Commerce. Under the IPA program federal agencies could farm out research to nonprofit contractors who then were required to take ownership of any invention made under contract that they chose to patent. The nonprofit contractors then could license those inventions exclusively. End run on the federal policy not to deal in exclusive licenses and that expanded form of patent enforcement. The Nixon policy revisions provided the cover for Latker’s efforts to have the NIH provide patent monopolies to the pharmaceutical industry and pushed review for the regulations from the Department of Justice to the General Services Administration.
Latker served, too, on the panel that oversaw the codification of the Nixon patent policy in the form of the Federal Procurement Regulation, finalized in 1975. The FPR then created space in which the IPA programs could operate without the appearance that they lacked regulatory approval. Latker no doubt had enablers and patrons. But for now we tag him with the primary work, because he clearly was at the center of the action at key points.
When Latker tried to get the GSA to issue government-wide regulations authorizing all agencies to use the IPA program, the program was reviewed and shut down in 1978 as contrary to public policy and–more importantly–ineffective. If a program were effective, one might change public policy. But there is no reason to change public policy to preserve an ineffective program. But that is exactly what Latker set out to do in drafting Bayh-Dole, which inexplicably passed in 1980. Latker then moved from the NIH to work on drafting the implementing regulations for Bayh-Dole.
We end up with a Congressional endorsement of an ineffective practice, and the failure has been proven out over the past forty years, with over 50,000 university patents on inventions made in federally supported work, most unlicensed, most of those that are licensed undeveloped, and the very few that have been developed not made available to the public on reasonable terms.
The pivot point is the Nixon policy change that authorizes federal exclusive licensing. Exclusive licensing practice changes everything. Now federal agencies can sit on inventions waiting to see if an exclusive licensee comes along. Now federal agencies can pass the threat to enforce a patent to that exclusive licensee–if there ever is one. Now the federal government holds patents on behalf of those exclusive licensees, if any, and therefore must also present a standing threat to enforce its patents on behalf of that hoped-for future exclusive licensee. Such practice creates such uncertainty that merely the opportunity by federal agencies to deal in patent monopolies drives public practice away from federally patented inventions. All that’s left are patent speculators and companies that tacitly have divided up an area of practice into patent-controlled domains, such as has the pharmaceutical industry.
To be clear. The federal government has no need to enforce a patent placed in a licensing program that makes inventions available “fully, freely, and unconditionally.” And the federal government has no need to enforce a patent that has been licensed exclusively–because such a license if it grants all substantial rights in an invention, conveys ownership of the invention and with that conveyance grants to the exclusive licensee (cum assignee) the right to enforce the patent. The government, in such exclusive licenses, gives up the right of enforcement. In either case, the government does not enforce patent rights.
We are left with the monstrous hybrids of federal agency (i) nonexclusive conditional or discriminatory licensing and (ii) exclusive licensing of some but not all substantial rights.
In the case of discriminatory or conditional nonexclusive licensing, the government must justify licensing to some companies while threatening to sue others. While it might be argued that setting conditions on the practice of a licensed invention might serve the public, as the Attorney General’s Report put it, “Control may be imposed more effectively by other means.” As for exclusive licensing in which federal agencies retain the right to enforce a patent, the exclusive license serves as a federal promise to protect the commercial interests of the exclusive licensee. That in turn compromises the federal agency’s own public policy standing, for now it has promised to serve the competitive interests of its chosen licensee. Neither of these monstrous hybrid cases makes for desirable public policy–each compromises federal agency standing, involves playing favorites, and tangles federal agencies in matters of patent enforcement that cannot serve the public interest. And that’s under the assumption that federal agencies have standing under federal patent law to enforce their patents.
Bayh-Dole did away with that standing. Federal agencies may enforce patent rights in federally owned inventions only by dealing the enforcement rights away in exclusive licenses, and those exclusive licenses may be granted on only the narrowest of conditions, and those conditions, it turns out, are in practice non-existent.
Of course, if all federal deal terms are kept secret (Bayh-Dole aims to do this) and Bayh-Dole’s requirements on federal agency exclusive licensing are not enforced (like most everything else in Bayh-Dole’s package of public protections that never operate), then federal agencies may trade on the appearance of the threat of patent enforcement to ensure that favored companies (whether big or small) have first if not the only pick of patents on federally owned inventions.
This is a most ineffective practice. To bring it down, a first hammer strike is at the authority of federal agencies to enforce their patents.
Here’s the core of it, from the Attorney General’s Report:
It has long been recognized that the United States may own and exercise patent rights, and that the incidents of a patent are not destroyed or “merged” by virtue of such ownership.; However, as with all Government property, authority must be found, in an act of Congress or elsewhere, for any disposition of the invention.
There is no such authority for the federal government to enforce patents on federally owned inventions. The Attorney General’s Report works around this deficiency by recommending that all federal patents be openly licensed, making the question of enforcement moot.
Bayh-Dole comes along and establishes statutory control over government disposition of federally owned inventions. Bayh-Dole replaces the Attorney General Report practices as tumbled down through the Kennedy and then Nixon patent policies with a new authorization. Federal agencies are required to make all licenses–even non-exclusive licenses–subject to terms and conditions of all sorts. Nothing may be fully, freely, and unconditionally licensed. See 35 USC 209. Talk about leashing federal innovation. Every candidate licensee must submit plans for marketing or development. Bayh-Dole rejects the idea that a licensee may wish to make and use an invention (e.g., as a method, as a research tool, in professional practice, for internal operations) without also seeking to mass produce or develop commercial product. Bayh-Dole goes out of its way to make federal agency licensing of inventions more difficult under the guise of making such licensing subject to a single set of requirements–an ineffective, nonsensical set of requirements.
But consider. If non-exclusive licensing was made simple and direct, at the Attorney General’s Report recommended–fully, freely, and unconditionally–then federal agencies would have a difficult time holding on to patented inventions to serve up to the pharmaceutical industry and whatever other companies that prefer to deal in speculative patent monopolies. If all federal inventions were as a default made available nonexclusive and royalty free, then what inventions could be withheld for exclusive licensing? Only those inventions, presumably, that no one had, after some period of years, never taken that free license, and for which there was a public need, and the invention could not be used in its patented state, and for which that public need did not rise to sufficient significance that any federal agency would devote funds to develop the invention for public use, and no non-federal entity or entities would undertake that development, and the only organizations left that would consider doing so were wealthy speculators in patents or companies that refused to participate unless they held a patent monopoly regardless of their eventual outputs.
You see where this ends up. In order for federal agencies to get to this last group of patent speculators they have to prevent anyone from taking a non-exclusive license or working together or even working competitively to make, use, study, develop, adapt, or apply any federally owned invention. The value of a federal patent to a patent speculator is precisely in the value of preventing all others from practicing the claimed invention. That is the value that induces the deal with the federal government. But that value is not public value. That value arises against the interest of the public. Bayh-Dole makes it appear that federal agencies have the right to withhold inventions from the public in order to feed them–even ineffectively and rarely–to patent speculators. This is cast as a great public good. The inspired bit of Bayh-Dole. Bayh-Dole reduces to a competition as to whether federal contractors or federal agencies can better feed patent speculators while holding off all other public access to inventions arising in federally supported research or development. This is what NIST–a clown show on this point–positions for “unleashing” innovation. How can federal agencies and contractors do better in feeding patent speculators? It is just this nonsensical.
Bayh-Dole authorizes federal agencies to deal in exclusive licenses that pass the right of enforcement to the chosen licensee-assignee. Bayh-Dole does not require federal agencies to license anything. There is no march-in on federal agencies failing to achieve practical application and failing to license. There is no public appeal. That makes Bayh-Dole unconstitutional. The Supreme Court found a similar provision of Bayh-Dole “deeply troubling” for lack of public rights of appeal and found a way to save the law by narrowing the scope of the provision. Here, the path to save Bayh-Dole is to recognize that the law eliminates the federal right of enforcement of patents. But even then, Bayh-Dole permits federal agencies, even after use of a federal invention is well established, to exclusively license (meaning assign) the invention to a favorite company, which then may sue all users for damages if not to shut down their practice of the invention. That’s not an acceptable outcome under Bayh-Dole and fails the requirements of Bayh-Dole’s statement of policy at 35 USC 200. The only way to save Bayh-Dole, then, is to hold that there are no conditions under which a federal agency could grant an exclusive license in the presence of any infringing use–or foreseeable infringing use–of a federally owned invention. Even if the candidate exclusive licensee was already using or prepared to use a given invention, it is clear that exclusivity is not necessary to such use. Any “development” activity to create a product version or mass produced version comes after the fact of a non-exclusive, non-enforceable license.
Bayh-Dole omits authorization for federal agencies to enforce federally held patents. In doing so–Congress choosing not to authorize enforcement by federal agencies while expressly authorizing federal agencies to grant under highly regulated conditions exclusive licenses that convey the right of enforcement to assignees of federally owned inventions, Bayh-Dole effectively forbids federal enforcement of government patents and federally dealing away that right of enforcement.
That’s a good thing, even if done by an otherwise very bad law.