The VPR Letters, No. 4

Dear Vice Provost for Research,

It’s been a while, and I thought I would drop you another note to help you with your management of university-hosted intellectual property. I once was contacted by a vice provost of research at a major research university. The gist of the conversation was that the VPR confessed that their current approach to IP, licensing, and commercialization wasn’t working. The VPR wanted to know if I had written a white paper outlining a better approach. I suggested that no formal approach would be a better approach, but that said the VPR wouldn’t do–what was needed was a better approach that looked like (I paraphrase) an administrative process. When I had that, I was to let the VPR know. I put the white paper on my list of things to do, where it has sat for a few years, while I wondered over it.

This won’t be that white paper, either. But it may help you see how difficult the administrative problem is. From the administrative perspective there are a limited number of ways to change the policy path one is on.

One way is to identify changed circumstances. If the circumstances assumed by a policy no longer pertain, then the policy and practice should be changed to address the new circumstances. But if policy is written to be “flexible,” then there’s a great temptation to attempt to deal with the new circumstances within the framework of the existing policy and using the usual practices. If there’s state investment funding available, rather than making inventions available at no charge to anyone based in the state (a sea change in practice), the administrative objective will be to start new university companies to compete for those funds, giving each new company the usual exclusive license that’s really an assignment of the invention. The administrative problem then becomes how to start so many companies–answer, make them shell companies that exist only to mop up money that otherwise would go to support existing private business and to run up one’s licensing bean count (look at all our startups!). Administrators typically see changed circumstances as a challenge to expand the use of current practices rather than drop them.

Another way is to restructure–change the name of the organization, give it a zippy marketing theme or wordsmith a new mission statement. Perhaps fire a director but rally everyone else around the new zippiness, impressing on them the importance of signing on and avoiding the fate of the poor director. Say hello to the new boss, same as the old boss. But this way is well trod.

A third way is to change policy and practices for efficiency or streamlining and the like–to improve on or build on the way that is not working in the hope that it will magically open out and work, spurred by better policy and thoughts from a review committee listening to complaints. This way runs along the lines of what Stuart Kauffman calls the “adjacent possibles” that attempt to move up a particular solution to a practice problem. The administrative direction is taken to mark progress over the past (so, no going back), and the job is to improve, to push up toward peak efficiency. As Kauffman points out, however, there’s often nothing to indicate that the present chosen path is on the best peak in the solution space. There could be other optima, but on entirely different peaks, so that one cannot reach them with another clutch of adjacent possibles. No amount of little administrative tweaks will get you there. But as long as the administrative starting point is that everything is being done well, with grand success, then there’s no room for leaving the effort. Anything that represents stopping the “development” of a bad direction is called counter-productive, blocking, wasted effort. If water is rushing into the ship, the argument goes, all hands should work to plug the hole and return to normalcy. It’s unacceptable to suggest abandoning the old scow in favor of the luxury yacht that is cruising nearby, or to get off ships altogether and walk along the shore instead.

But when administrators leave their cave and accept that their present practice is a fail, then improvement feels like trying to make a sucky practice less sucky. There’s only so much one can do. That’s how the loser IT project manager deals with a fundamentally bad system architecture. Add more patches and leave before the whole thing blows up. It’s much the same thing with university IP policy and practice. Ya got a rotten practice, and arm-chair improvements aren’t going to save it.

The limitation in all these ways is that administrators set the boundary conditions for what for them appears to be acceptable change: (1) the new way must retain administrative control; (2) it must involve administrative procedures; (3) it must be established as a better way–much better to justify dropping the current way altogether; and (4) it must not imply that the current way was wrong from the get-go.

Yet another way to change is to admit that the institution is on the wrong path and revert to a prior path or launch out on a new one. Administrators are loath to admit they are on the wrong path, however, and the only good way to change paths is to clean house, as one does with a coaching staff, leaving no one to offer resistance to the new direction. For any number of reasons, administrators don’t like to do that to other administrators even if they are fine (with appropriate expression of regret) with closing down an academic unit and laying off its faculty and staff. But launching a new path (or even delaunching back to an old one) means that existing IP staff may not have a clue how to operate in the new way. One has to start over, with people who know the new path well and don’t fall back into the current failed way. How does one find those new people? How does one supervise to stay on course?

For any significant break with current practice, there’s also the worry of administrative responsibility. Administrators seek safety, and one place of refuge is “best practices.” If everyone is doing it, then it must have some merit. If things go wrong, then it’s not the administrators’ fault–they were following best practices. It must be bad luck, or a rotten bunch of licensing officers, or the lack of a zippy branding program. Administrators also tend to duck personal responsibility for change. As one director of a university licensing office admitted (more paraphrasing), “Your approach may indeed be better, but there’s no way I am going to try it. If things don’t work out, it will be on my head for not following established practice. And even if things are even more likely not to work out my way, I won’t be blamed because everyone will accept that this is “risky” and not every deal works out and I followed best practices.” Except that best practice is actually ubiquitous IP fail practice, and the director willingly chose the sucky path because it kept him from carrying any responsibility for his IP management decisions.

In current university IP practices, the successes happen largely despite the presence of “licensing professionals” and formal university policies that demand ownership of IP and foreground exclusive licenses, payment, and “commercialization.” That is, the current IP paradigm is parasitic on opportunity, not catalytic. It’s just that your administrators, VPR, can’t or refuse to see the difference. Post hoc fallacy run amok.

There’s a deeper, more significant fallacy operating below all of the effort to institutionalize “technology transfer.” The desire to institutionalize practice goes back at least to Herbert Hoover’s efforts (as secretary of commerce) to set up the idea that business, not government should regulate businesses. (For which, see Gabriel Abend’s The Moral Background). For university patent policy, the Johnny Appleseed of institutionalization was Archie Palmer, who from the 1930s to the 1960s was an advocate for universities creating formal patent policies and working out how to deal with inventions. By the 1960s, federal working groups were insisting that whatever ways “technology” developed both in federal labs and in federally funded research was getting used, those ways would be enhanced by institutional control over the activity. Things would get more resources, would get a focus, and more technology could therefore be transferred more quickly to more people for greater public benefit.

The idea of institutionalization of invention management then becomes a major theme within federal agencies. Institutional control lies at the heart of both federal policy to claim ownership of inventions made in federally supported research and in the IPA programs run by the NIH and NSF to require contractors–nonprofit institutions–to take ownership of inventions “for the public benefit.” Bayh-Dole extends this idea of institutional control of inventions (though, actually, it doesn’t). It is made to appear that institutional IP practice is necessary for any public benefit from research-based invention (or any invention anywhere near a university). It’s not just that institutional IP management will be more powerful, faster, and broader, but that it’s the only way, the best way, the standard way. Anything else is rogue, counter-productive, a waste of time, giving false hope.

One might be able to see, then, how university administrators might see in institutional control a bright idea, one on which their jobs are based (so they think), and one that they are not about to question, let alone challenge, let alone abandon.

Thus, when that VCR asked for a white paper, the implied request was to provide a different approach to institutional control. Letting go is not an option. Holding fast is everything–just help us change our grip.

In the movie Strictly Ballroom, the organizers of ballroom dance competitions disqualify anyone who uses unapproved dance steps, no matter how imaginative, effective, and crowd pleasing they may be. Why? Oh, watch the movie. Hayek makes the case that no central system can adequately anticipate the needs and capabilities of any particular individual operating within that system. The individual, to make the system work, must be made to comply, to conform to the decisions of the system. In its way, such central systems, based on dictat, become totalitarian. For manufacturing a specified item, perhaps that is the necessary approach. For discovery seeking opportunity, however, central thinking almost never has a clue about what’s possible for the individual. It may be that some individuals also have no clue, but that doesn’t mean that an institution is routinely better–having less of no clue than individuals. The institution, after all, is nothing, a golem, and whatever clue it has is the result of administrative individuals trying to outthink the discovering and inventing and gathering and authoring and composing individuals.

Having no university policy on invention ownership or disposition means that federal patent law controls–inventors own their inventions, and are free to use the patent system or not. As for university costs, no policy at all is simple and inexpensive. No ownership, no attempted and mostly failed licensing, no contract disputes, no risk management, no compliance bother, no worries about unrelated business income, no bullying faculty and students (at least for their IP). But then inventors–here’s the crux argument–could just go off and sell their patent rights to some company or speculator or entrepreneur, and benefit personally from the use of public property. And–according to this argument–that cannot be allowed.

But it’s a muddle-headed worry. We see why in the current debate over Bayh-Dole’s stipulation that the benefits of using a subject invention should be available to the public on “reasonable terms.” The advocates of a fake version of Bayh-Dole argue that “reasonable terms” cannot include “price” and NIST, among the leaders of this clown show argument, has proposed a new regulation for Bayh-Dole that expressly forbids federal agencies from using price as the exclusive “reasonable term” to review. In many public situations, price is the only term on offer, and the NIST proposal would in effect preclude a federal agency from stepping in when there’s, say, price gouging. The upshot of this argument is that companies and investors must be free to charge any price they wish for new drugs that patients need, perhaps desperately. This, the argument goes, is capitalism at work the way it best works, and that the public benefits from this personal (and organizational) exploitation of publicly supported assets for maximum private benefit. The public benefits best when “reasonable terms” means “anything the market will bear.”

Now consider: university administrators and federal officials alike argue that for the Bayh-Dole era practices to succeed, universities have to hand over inventions made in publicly supported research to companies and investors who seek to make as much money as they can. In effect, the argument is that such companies and investors–those that are determined to make as much money as they can or they won’t get involved at all–are the very ones essential to making the Bayh-Dole system work. Anyone who would give licensed rights away at no charge (as for a standard or to engage the broader community in following a given line of development) is not wanted. It’s not merely an argument to prevent government “price controls”–it is also an argument to exclude anyone who might develop new medicines without having a full-on profit motive and therefore might under sell the companies and investors who are willing to exploit the public (and government, and medical insurance companies and physicians and hospitals) to the maximum they will tolerate. If anyone develops medicines at much less cost and makes those medicines available at 1/100th the cost, that will drive the profit-seekers out of the activity, causing Bayh-Dole practice to collapse and (non-sequitur) the public will never benefit from federally supported medical research).

Here’s the blunt realization. If the advocates of this faux Bayh-Dole vision of the need for maximum exploitation of patent rights for the public to benefit are right, then they are arguing for the necessity of converting inventions made in publicly funded work to maximum private exploitation, as if those inventions had been made directly by the private exploiters. The claim is direct, but for the interposing of an institution to take control (a university, a federal agency) who then chooses an appropriate maximal exploiter of the patent right. Think about it. The faux Bayh-Dole argument is merely that universities and federal agencies as institutions can do a better job picking out the maximally self-interested organizations to exploit the public in matters of health than can individual researchers, who might mess up more often and not seek out such exploiters and do things like release their inventions open access or license to a company that self-limits its own returns on a given patent by contributing to a standard or cross-licensing to develop a common platform and the like.

If it’s fine–even necessary–for institutions to favor maximal exploiters of inventions made in publicly supported work–then the baseline argument is that the public benefits best (or even at all) only when public assets are exploited for maximal personal gain. There’s goes the personal conflict of interest arguments that somehow institutions must guard against inventors benefiting personally from their use of publicly provided resources. If the faux Bayh-Dole argument is accepted (it isn’t true, so don’t go there), then what purpose is served by institutions intervening to prevent researcher exploitation of public resources? There’s nothing gained by having institutions step in on the premise that they can consistently outperform individual researchers in finding the maximal exploiters. You see the shape of the argument? If a university adopts compulsory invention ownership *and* royalty-bearing exclusive licensing without price controls, then the university formally, actively aims to find the maximal private exploitation of public resources and benefit from doing so. The university’s intervention does separate any given inventor from any direct benefit from inventing–status from open innovation say, or getting more shares in a startup by bringing in an invention directly–but that intervention does nothing for the fundamentals, that the university actively aims to do better than the researcher in finding a maximal exploiter. There is, then, in the faux Bayh-Dole practice argument, any space for the idea of some special importance attached to public resources. In the faux argument, public resources are to be pro-actively offered out for maximal personal returns–but only through institutional involvement so that the institution gets a piece of this “capitalistic” action.

If the faux Bayh-Dole argument prevails, then there is nothing about institutional involvement in matters of invention or IP that manages any conflict of interest. The master conflict of interest is then the institution’s, for which there is no possible management within the institution. And this conflict of interest is in its way fatal–that somehow the university’s public mission is nothing other than finding the maximal exploiters of the public for all the essential discoveries made by anyone associated with the university. The public mission is turned on its head by the argument that the public is best served by being maximally exploited. And it’s only that in theory. In practice, the argument is that the public is best served by university administrators merely attempting to find maximal exploiters and failing to do so 80% or more of the time, holding back everything else in an effort to preserve the system to engage future, hoped-for, dreamed-of, taken to be “necessary” maximal exploiters. This isn’t even Ayn Rand style selfishness–this is a turn-on-integrity desperation. The only way to make the “system” work is to defect on the public–but prevent faculty and student inventors from doing just that on their own. It’s really nothing more than a Moloch state argument to enfranchise a self-preserving priesthood ready to feed on each opportunity for technology change, and share that feast with maximal exploiters.

If there’s a basis, however, for price control in Bayh-Dole (there is, and plenty of it), and if the public should reasonably expect much lower prices for medicines made in publicly supported work (even if not federally supported), then universities have to include price controls in exclusive licenses or license non-exclusively or get out of the business of owning and licensing altogether and keep others out of it as well.

So, my VPR colleague, you have read this far. I appreciate your interest. What can you do with your present failed IP practice? Without changing policy you can implement changed default practices. You can waive an interest in any invention that the inventors do not want to have licensed non-exclusively, royalty-free. You can insist that any invention owned by the university be licensed non-exclusively, royalty-free as the default. Nothing in your policy requires the university to do more than claim ownership of inventions. Your university does not have to take ownership. Nothing in Bayh-Dole requires your university to take ownership either. There is no compliance problem in declining to take ownership. In fact, compliance under Bayh-Dole gets remarkably simple if you don’t take ownership–nothing needs to be disclosed, there’s no bother electing to retain title or filing patent applications. All those requirements pertain only to subject inventions–inventions the university has gone out of its way to acquire. If the university does not own an invention, then it cannot be a subject invention for the university, Bayh-Dole and its patent rights clause do not apply, and federal agencies have no way to request title to those inventions–they have rights only to subject inventions that a university declines to retain or fails to seek a patent for.

If you move this way, then you get the university out of the assumption that institutional control is uniformly better for research enterprise or innovation or economic development or public benefit or even university income. Instead of attempting to isolate each invention with a maximal exploiter and failing that to prevent open access to the inventions, you make the university a source for everyone, including all the non-maximal exploiters and including the research team that made the inventions and anyone else who might have a reason to use the invention (in research, in professional practice, for internal testing, for products). You drop potentially millions of dollars a year in extracting assignments from inventors, paying for patent work that goes mostly nowhere, and dealing with licensing complications. You give up the hope of one lucrative patent deal a decade to make your failed program look at least financially successful. That, perhaps, is your big downside. But Cohen-Boyer patents were licensed non-exclusively for roughly less than it cost a company to involve its legal counsel in negotiating the license–and those patents were in their way very “lucrative.” While you might give up the opportunity to deal with maximal exploiters of biomedical inventions, you open up the possibilities for dealing with non-maximal exploiters of those same inventions, and for the broad, popular, perhaps just as lucrative (if money is your secret primary desire) dealings with companies in industries that are not so addicted to monopoly patent rights as are (apparently) pharmaceutical companies. More so, you open up your university for much broader involvement with industry on a non-exclusionary basis–more companies, with more services to them on offer, with greater opportunities for transfer and way fewer patent barriers that motivate design around and avoidance of publicly supported research–and that’s what patents do when held by the university for exclusive, maximally exploitative licensing. The university’s IP fail practice chases most everyone away. It is no wonder that “marketing” such inventions is so difficult–it’s tough to come up with companies that will only take a license if they can maximally exploit the public on price.

A better approach than the current failed practice, then, does not involve any policy change. It involves changing practices within current policy. And to be clear, the new approach does not mean every invention must be shorn of its patent rights or patented by the university and offered non-exclusively. Instead, it means that the university should get involved only (i) when requested by the inventors and (ii) only when the university can make the invention available non-exclusively better than can the inventors–and they know it. Everything else falls where it may. Recommend inventors take those inventions to an invention management organization such as Research Corporation or a university-affiliated foundation. Skip the conflict of interest demands for personal ownership–universities have already demonstrated that those demands are a dodge to gather up IP that they then fail at managing, attempting all the while to outdo individual inventors in finding (for a tiny piece of the action) maximal exploiters of the public and public resources for private gain.

This approach is not an attack on private gain–just the opposite. But it is an attack on the use of the university to be a parasite on discovery opportunities. Or, perhaps rather the university implements a necessary self-limitation on what discovery opportunities it will become involved with–those opportunities that involve non-exclusive access with special additional institutional support to reach companies and investors that don’t need to exploit these university inventions as monopoly assets. Those companies and investors who are fine with non-exclusive access do exist, and in far greater numbers than the maximally exploitative folks.

This approach is not even an attack on those maximally exploitative folks. Bless their hearts, they have a place in the world, too. It’s just that universities have no particular, pressing need to offer them public subventions to turn their attention to the work done at universities. The maximal exploiters may play an important role in the economy and even in the development of new technology, but it is not the university’s place to given those folks the place of privilege in the institution’s research enterprise.

If you follow this approach–waiver of compulsory invention assignment and accept only those inventions suited to default non-exclusive low-overhead if not royalty-free licensing (if licensed at all–no patent, no license–think research and supportive services instead)–you build a much more versatile, self-sustaining IP program with a high capacity for working relationships and moving technology both out of and into the university.

With hope for the future,


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