Reflections on Shill Reflections on Bayh-Dole, 4: Fake history, executive branch patent policy, and contamination

Back to reflecting on fake history, namely this:

prior to the Act, the government often funded research to spark innovation, but then put the research in the public domain for non-exclusive licensing,…

Executive branch patent policy from Kennedy on (until Reagan botched it all up) provided that company contractors with non-governmental markets should be allowed to own patentable inventions made by their employees, and nonprofits and contract research organizations, which did not have markets, should have to make a case for their ownership of patentable inventions–how would their exclusive control better serve the public than open access? Put another way, how would their legal right to exclude all others, or to discriminate among those having an interest, better serve the public? How would their opportunity–nonprofits, mind you–to align themselves with suppression of inventions (competition!) and with monopoly pricing (more money for research! and administration!) better serve the public? Nonprofits and contract research organizations could request exclusive rights, but they had to make a persuasive case for those rights.

Much of Bayh-Dole is about university patent administrators not wanting–or being able to–make a case for how the public benefits from their exclusive control of inventions made in work these same administrators petitioned the government to support as being in the public interest. So, make the case. The other bit of Bayh-Dole is about university patent administrators upset that some federal agencies–NIH, NSF–allowed (no, conditionally required) the universities to take ownership of inventions while other federal agencies did not and instead required the universities to make a case for that ownership. These conflicting requirements, claimed the university administrators, created huge uncertainty–one federal agency did not require the university to make a case that its ownership would be better for the public than open access would be, and another federal agency did. Oh, my!

The solution proposed by Bayh-Dole, which has never worked–no surprise, perhaps–is that no one would have to make a case for contractor ownership and the federal government would “march-in” and require licensing if a contractor messed up. Bayh-Dole, being the prick of a law it is, then was set up to make the government oversight as inoperable as possible. All reporting of use was to be a government secret. No public reporting. No public accountability. No public right of appeal. Not for inventors, for research teams, for companies affected by the suppression of open access. Ungainly procedures for march-in. Agency discretion whether to march-in at all. No mechanism to compel march-in. Awkward–secret–procedures to contest march-in. Appeals. No march-in until final appeals exhausted. Discretionary, secret, slow, moot. And people want the government to march-in on covid-19 treatments. If remdesivir for covid-19 is a subject invention, then Gilead has failed to timely disclose that invention, the government has a right to take title, and Gilead has the right to appeal that taking. So start up that process. Screw march-in. March-in is like “in case of fire eat this pickle.” Don’t go there, don’t do that.

Executive branch patent policy had four exceptions to the rule that company contractors could own the inventions their employees made in federally supported work: (i) agency intends to pay for development to the point of practical development; (ii) work directed to public health or safety; (iii) government is dominant user and private patenting would screw up open bidding for future work; (iv) the contractor supervises the work of other contractors. In any of these situations, companies with non-governmental markets had to show how their exclusive control better served the public interest than did open access.

For agencies paying for development and then releasing the resulting technology for all, there wasn’t a case to be made, really. The Harbridge House report (1968) showed that agencies that followed this route had a 100% success rate in introducing new technology into use. It’s worth pointing out that this approach is what the 1947 Attorney General’s report recommended that federal agencies do. Seems that David Lloyd Kreeger, the primary author of the final report, was on to something.

Where the government was the dominant user of the technology–nuclear weapons, space rocketry–there’s also sense in creating an open commons so that no one company can get a private monopoly on any portion of the technology platform and use their patents to interfere with other companies bidding for government contracts. Sure, there’s a weirdness about “dual use” technologies–but then companies can make the case that while sonar for submarines might be common, sonar for fish finders could be dual use and the company ought to have its patent rights.

Similarly, where a company is hired to supervise the work of other companies all working on a federal contract, it makes sense that the supervising company should not be allowed to get in a position of reviewing the other companies’ work, anticipating directions, and filing its own patents on those directions and applications and improvements out ahead of those supervised companies–and then holding those patents against those other companies, or playing favorites among them, or taxing them all to have access. Again, there’s a good reason for companies that agree to supervise don’t get to dip in and gain exclusive control over what they learn from supervising–by gaining access to the research and reporting of the companies they supervise.

So far, there’s nothing for university patent administrators to fuss about, other than to be fussy.

But the fourth exception–research in public health or safety–is the big problem. The patent administrators wanted to deal patent rights to pharma, and wanted exclusive rights. Now think about it. Under the Kennedy patent policy, every pharma company would have open access to every health invention made in work by any government contractor, whether company or university, unless that company or university could make a persuasive case that the public–including all those pharma companies, including their own researchers–would be better off if the federal government allowed that company or university to suppress access by everyone (except the government) to a given invention so that the invention (in all its variations and applications) could be conveyed to a single company to pick and choose from for development, testing, and product-making.

If you argue that the pharma industry wanted this outcome–that it wanted (that companies in the industry had agreed among themselves) university patent administrators to decide on single companies to gain monopoly patent positions on research findings from public public health research does not that sound like suppression of competition? It sounds like pharma decided it would be easier to buy out rights from university patent administrators, who set themselves up to be bought, than from federal agency administrators who, other than Latker at NIH, did not set themselves up to be bought out but did not have to because they made everything openly available, patented or not.

And if pharma did not want federally supported research to be isolated and run through university patent administrators for exclusive licensing, then who did (appears: federal agency lawyers, working with a few university-affiliated patent administrators, like Bremer), and why do we still have this policy situation foisted on pharma and the public? Harbridge House, which looked squarely at the pharma patents situation reported that the pharma concern was “contamination” not exclusivity. The pharma concern was that by taking in-house a federal-interest invention, the government would argue that all other work by the company that might be related to the invention also was dedicated to the public.

Was it that the government was corruptly paying out to subsidize profit-seeking activities, and providing patent monopolies to suppress use and competition while supporting monopoly (i.e., 10x or more over non-patent) prices? Or were companies big-heartedly dedicating all their relevant research and technology to a public project any time they worked on a public invention? There’s your nonsense dichotomy as imagined by bureaucrats. What pharma wanted, apparently, was an assurance that if a company worked on an invention made in federally supported work, all the other relevant company assets–existing or to be created–were not then also subject to the same federal open access. This problem has not been resolved. It still lurks in the heart of Bayh-Dole’s messed up definitions and requirements. But it cannot slouch toward Bethlehem to be discussed because federal agencies don’t care about it and the whole thing has been patched over with the idea that what pharma wants, and the public needs pharma to have, is exclusive positions on all health-related inventions made in work receiving federal support.

The moment you allow that even some public health inventions are not suited to exclusive controls (research tools, methods that do not require “development” to be practiced, anything that may be practiced without the need for a consumer or mass-produced version), then you do have to ask why federal contractors should arbitrarily get to decide which inventions those might be, given that a contractor is likely to profit the most from withholding by patent exactly those public health inventions not suited to exclusive controls. The exclusive control on those inventions is exactly what “captures value” where no patent is otherwise needed to “encourage” use. Where there is a present demand for access, that’s where a patent “creates value” by forcing that demand to a sole source rather than allowing people to do things for themselves or to contract with whomever is able to do it for them.

If one wanted to create layers of bureaucracy to try to address this problem, one would focus on contractor non-exclusive licensing and retention of title. Contractors would have a default right to retain title only if they could show that the public health invention in question was not suited to open access, or that it was suited to open access and the contractor would do a better job than the federal agency in releasing the invention open access. But that just gets us back to contractors petitioning for broader (i.e., exclusive patent rights to be used to suppress access by others) rights under the Kennedy public health policy default of government open access.

If you really wanted to push this situation, then the default in Bayh-Dole would be open access for any public health invention, regardless of who owns–inventor, contractor, or federal agency, or any assignee. Open access would run for five years from the date of patent issue. Industry boycott of that access would raise antitrust issues. Nonprofit refusal to assist in assessment of the invention by others would raise the issue of whether the nonprofit should continue to have the right to retain title to any such inventions. If after five years, no one is using the invention–that is, has not registered that it is making, or using, or selling the invention–then the contractor after providing public notice could offer an exclusive license or sole license or a limited number of non-exclusive licenses. Same on the federal side, for federally owned inventions. If open fails, then try exclusive. But an agency folks cannot mess up open because they want to do exclusive.

If you follow this line of reasoning, you see that the fundamental problem in all of this has to do with teaching an invention–or any research finding–to people who have a reason to use what they learn from that teaching. It has nothing at all to do with patents, really. Sure, patents exist, so like hungry bears stalking your forest trail, you have to take them into account. But the fundamental problem is one of technology diffusion. Why and when do people who are doing one thing decide to do another? And if they decline to change, how does shaking a patent at them alter the deal? Think about that the best you can. That’s where the real action is in all of this talk about technology transfer. Do you think bureaucrats are up to it, with the tools they have? If people won’t adopt immediately something claimed as new, would they do so if threatened with another layer of bureaucracy? Yes, NIST, this is how federal innovation policy discussions operate.

In matters of public health, for-profits, nonprofits and contract research organizations had to show that denying the public (and inventors, and researchers, and entrepreneurs, and the pharma industry) access in favor of an exclusive patent position (to give some one entity both access and control over the invention) better served the public. What was uncertain was that any of these contractors could show this for most inventions made in federally supported work.

To be bluntly practical about all this, it is a matter of “participation.” If a would-be federal contractor has got an idea or technology or both relating to public health, and wants to keep it proprietary, and insists on monopoly control–either its own or to be sold to some other–and needs money to make money on it, then don’t ask for federal money. If you ask for federal money, then you don’t get to keep the idea or technology proprietary.

Now you can look at the “participation” “contamination” issue for pharma. If public policy is that public health should not be a matter of creating or encouraging or giving competitive advantage to sole source monopolies that prevent doctors from treating patients or patients treating themselves but for paying patent monopoly prices to profit-seeking companies, then companies that are set up to profit in this way cannot participate in federal public health projects. It is not that these companies are competing with the federal government on public health work–sure, they are–but that they are setting up monopoly patent positions obtained from the federal government to extract more money from suffering patients (and from their care givers, and their insurers, and their families) than people think is appropriate–unreasonable terms, outrageous pricing, unethical business.

Even if you think patent monopolies in public health is good business, and monopoly high prices are the happy return on the “risk” of paying for formulation and testing without any competitive pressures–how do you reconcile that good business with federal subsidies for it? Perhaps it is as simple as “if the government chooses to allow patents in this area, then the government has already necessarily approved the practices that follow from such patents. Federal funding doesn’t change anything, and federal agencies should not put any conditions on the exploitation of patent rights.” If that’s the case, then there should be no conditions in Bayh-Dole on inventions. The law would read: “Federal agencies may place no conditions on inventions made in work with federal funding as a condition of that funding.” That would be it. Oh, then throw in the government license. And for that, you would need disclosure of inventions so that the government would know what it had licensed. And that might require a remedy if a contractor failed to disclose. And that remedy might include invalidating the patent–fraud on the patent office for failing to properly identify the invention. And so there’d have to be an adjudication procedure, and a right of appeal. And the layers of bureaucracy build up.

In the alternative, the government–we, the people, say–could amend federal patent law to remove the exceptions to the exceptions for the remedies for patent infringement by providers of medical treatment. That’s 35 USC 287(b) if you are following along at home. 35 USC 287(b) rules out infringement remedies for medical treatment. If you have a health-directed patent, you cannot sue doctors for infringement for treating their patients. But then a list of exceptions to the 287(b) exception on remedies puts all those remedies back into play. End that policy. Don’t expose medical treatment to patent infringement claims. Put another way, the federal government should not as a matter of public policy issue patents that allow people to sue for infringement doctors and other care providers providing medical treatments. Patent holders should have no right to suppress care or tax care or decide who gets to provide care and who does not. If you don’t like Bayh-Dole, start by changing 35 USC 287(b). Then Bayh-Dole patent monopolies don’t matter for medicines prescribed by doctors. Start there. Don’t waste energy on ridiculous, useless, designed not to work march-in.

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