In February 1974, Norman J. Latker, patent counsel for the NIH, gave a talk in Chicago with the title “Progress Towards a Uniform U.S. Government Patent Policy for Universities and Non-Profit Organizations.” You can find most of it at IP Mall. The talk is illuminating with regard to the motivations that led Latker to work tirelessly to create the thing we call Bayh-Dole but really is the “Latker Act.”
Latker prefaces his remarks with a disclaimer:
Today I wish to note that I am speaking for myself–on my own time, at my own expense.
That is because, apparently, Latker was speaking against the prevailing policy of the Department of Health, Education, and Welfare. That sets the tone for what follows.
Latker describes himself as an “advocate for creators,” and claims affinity with the university administrators in his audience. Latker quotes a passage from Ayn Rand’s The Foundationhead giving a fanciful account of the discover of fire, held to be a demon for his gift. Latker says, that’s were we are today. An open implication is that he feels a sympathy for the demon fire maker.
Latker cites the U.S. Constitution’s patent and copyright clause. Creators should be treated specially, but “highly sophisticated industrial research organizations” have taken resources away from individual creators, and creators have had to assign away their invention rights without compensation. Perhaps such a thing is defensible, Latker speculates, since inventors freely agree to such a deal, and industrial research organizations have a good chance to develop for use what does get invented, and there’s a big bother in dealing with inventors owning their own inventions in such circumstances.
But that’s not the big problem. The big problem is the “massive infusions of Federal funds” for research, beginning around 1950 (with the formation of the National Science Foundation, among other things). With this funding
the simplistic thesis that “What a Government (or public) pays for (or even partially pays for), it owns” entered into the picture.
Latker associates this thesis with the practice of employers requiring assignments from their employees and contractors. But now it is the federal government making the claims. Here’s the problem:
The problem with applying this ownership rule to Government-financed research is the fact that the Government has no profit motivation to deliver creative results it owns to the public, nor to provide the creator with the special treatment needed to maintain his motivation.
Lack of a profit motivation. Failure to give inventors a share of patent royalties. We should pause here. Why would we want the government to have a profit motive? And why would we think that government, lacking a profit motive, would not have any other motive to serve the public interest with regard to research results, especially in areas such as public health, or space exploration, or the development of military weapons, or water desalination or any of the other projects undertaken by the federal government to advance the general welfare?
Similarly, under the government’s claim of ownership, government inventors lose the prospect that they might make money from the licensing of patents on their inventions, in contrast to university-based inventors, who do expect to receive a share of licensing income, if there ever is any, from their patents, whether they manage those patents themselves or use a patent management agent. In 1974, most universities did not have an internal patent licensing office (University of California, Stanford, MIT did).
But the point of emphasis in Latker’s comment is “deliver creative results it owns to the public.” This is the rub. There were serious hearings and reports in the mid-1960s on the problems of federal technology transfer. Back then, the issue was transfer of information and practice so that companies that ought to be adopting new things had a better chance of recognizing those new things, learning how to use them, and then going off and spending the time and money to put what they had learned to use. All that federal research flying about, and so little of it getting used. And this was with the federal government not asserting patent rights–no conditions, no payments, not even, usually a formal license required. Federal officials had tried technology clearinghouses, regional technology centers, publications–and companies still were not jumping to the opportunities on offer. Technologies–in the abstract–were “sitting on the shelf.” It wasn’t any assertion of patent rights by the government. It must be something else.
One possibility to consider is that much of the research wasn’t relevant to what companies were doing. That means, companies would have to figure out something else to do with the federal results that was more worth doing than what they were doing. That wasn’t happening.
Another possibility was that research taking place aloof from the folks who are doing things doesn’t develop in directions and using methodologies that make it easy to adopt for use. It’s designed from the start as incompatible and distant from practice, even if in theory it ought to be relevant. Parking scientists in government facilities and then trying to get their results out without letting them out too might be a problem.
Yet another possibility is that the results were being used. Many of the federally owned patents claimed inventions made in defense contracting where the companies involved had declined to take out patents–and defense contracting policy allowed them to if they wanted. The results were available to all, then, and might be used or not, but the companies involved didn’t see the point of using the patent system. The results weren’t suited to patent exclusivity. The primary market was the government, and starting a patent war with other contractors destroyed not only competitive bidding for government work but disabled the ability for contractors to work with results from other contractors ahead of possible development contracts.
But what the federal officials wanted in such situations was “dual use.” They wanted companies to find uses for military technology outside the military. Vannevar Bush had called for just this thing in Science the Endless Frontier. Open up military research for public uses. Well, patenting was a good way to make public a lot of military research, but folks just weren’t turning every submarine detection sonar into a fish finder for commercial fisherman.
Thus we get the idea that what was missing in all of this was the incentives of the patent system to exclude others and thus attract private investment for dual use, for the use of otherwise irrelevant results or results so aloof from company activity that company folks didn’t see the point in a timely manner. Stuff was sitting the shelf, then, because it hadn’t been properly kept from the public.
If results could be kept from the public and made available exclusively, then companies would be motivated to invest, royalties paid, and federal inventors treated specially to additional cash and therefore staying motivated to assist in the transfer and development of products beneficial to the public.
Of course, a critic of this point of view will correctly note numerous examples of products covered by Government-owned patents that were delivered to the public by industry with no exclusive position.
He concedes that exclusive patent positions are not necessary in the general case. But–
That is not the point — the point is failure to adhere to the system that will logically maximize delivery of the largest number of products to the public while still maintaining the creator’s motivation.
Here we get a whiff of Bayh-Dole’s insistence on a “uniform” policy. Bayh-Dole isn’t uniform at all, but Latker’s argument is based on the idea that it ought to be. There’s a pragmatic argument at work–maximize delivery of the largest number of products–and a requirement–keeping inventors interested with the prospect of a share of licensing income. Latker then aims to create a system, and this system, he argues, will out-perform present practices. But it’s not that. Latker argues that his uniform system is the one that will do the best while “maintaining the creator’s motivation.” Subtle? Work it again. Non-exclusive access results in the public getting new products, and doesn’t require the government to charge for patent licenses, and apparently doesn’t require inventors to receive money from patent licenses to provide the requisite assistance. But logically, if one motivated inventors by offering them special treatment–additional money–then stuff that presently isn’t getting used would get used, and there would be logically more of that unused stuff to use than there is stuff that is getting used now without needing a governmental or inventor profit motivation. Got that? This is at the heart of Bayh-Dole.
Any lesser delivery system will naturally deliver some end products, if enough money is shoveled into it.
The idea is that providing the government and its inventors with a profit motivation by using the exclusionary power of patents would reduce the amount of money that the federal government would have to expend to develop inventions to the point of practical application in some field of use, where companies and the public might see what has been made obvious and adopt it. Latker argues for what he puts forward is a logical, pragmatic engine that will produce the largest number of products at the least expense to the government. If there’s profit motivation, and federal inventors get a share of that profit, then the government can spend more on research and less on development. That’s the idea.
Government ownership without a delivery system and special reward nullifies the passage in the Constitution suggesting the guarantee to the creator of the exclusive right to his creation.
Odd, it would appear the concentration of research expertise in those industrial research centers also would deny the inventor his exclusive right–but the inventor agrees to give up that right in the interest of working at the center, knowing that others have given up their rights, too, so that the company can bundle those rights together and use them, and trade them for access to rights at other companies who are doing the same thing. In a big project, if each inventor asserts personal rights, the company is left with a shop right to practice but not to license others or cross license to create standards or patent pools, and each inventor then may hold out on all the others. Sounds ghastly, once you look at the scale of researchers and the number of companies that might be involved in working on any given area of technology. Sounds mighty fine if you consider only one inventor isolated from all the rest inventing something that his employer doesn’t need and doesn’t care to try to find a use for.
Latker says other sorts of reward systems and non-exclusive licensing doesn’t work. Then he mentions his own IPA program:
In fact, one court has declared the GSA licensing regulations to be unconstitutional, thus casting a cloud over the Government’s effort to return to’ the patent system
Latker returns to The Fountainhead:
Creation comes before distribution–or there will be nothing to distribute. The need of the creator comes before the need of any possible beneficiary.
In his typescript, Latker underlines this passage. Then restates it. Then restates it again:
Creator first; organization, second!
This is perfectly consistent with what I discussed with you last year–the Institutional Patent Agreement. That policy in its simplest form called for a “management capability” able to take care of its creators before the Government would release patent rights to the Institution.
And on one view of it, that’s what the IPA program did. Nonprofits had to demonstrate they had an acceptable patent policy and licensing capability–generally through an arrangement with Research Corporation or a university affiliated research foundation such as WARF or the Purdue Research Foundation. The IPA agreement required the nonprofit to take ownership of any invention made in NIH funded work that the nonprofit chose to patent.
There’s another way to view this requirement, however. The nonprofit’s patent people could then use the authority of the federal contract to force inventors to give up their inventions, file patents, and then exclude the inventors from access (outside the university) to their own inventions and, by extension, exclude the inventors from working with any company or investor of their choice to exploit their work. The nonprofit patent folks took over control by means of their deal with the NIH and their control of the patent.
In this arrangement, the inventor not only loses his (or her) Constitutional exclusive right but also loses the simple right to practice what he (or she) has invented or to teach the invention to others (merely an invitation to infringement). Thus, the profit motivation supplied by the idea of patent licensing (non-exclusive licensing also may make money–c.f. Cohen-Boyer gene splicing patents–but that’s still in the future for Latker’s talk) is focused down on a reliance on a share of royalties from licensing rights. Gone is the prospect, say, of earning money by consulting or offering services–design, prototype, testing, and the like. All the revenue must come through the license to be that special something to motivate inventors. The motivation then shifts from developing an invention that otherwise sits to participating in a delivery system represented as the most logical to move the greatest number of inventions while motivating inventors with a share of the profits from licensing.
Again, it’s not that other forms of deliver don’t work. It’s that those forms are not a single system and don’t reward inventors with patent licensing royalties. If you want a system, and have that system motivate inventors with a profit motive, then something like the IPA program spread across government is that system, is what will become Bayh-Dole.
Latker associates the idea that the government ought to own what it pays for to Soviet thinking. Just like communists is the implication. And yet, in its way, what Latker proposes is very much a variation–a state-wide system, built for volume not opportunism, aiming to be pragmatist so that all inventors stand to be rewarded as the state might provide, but rather than through a prize or honor or better work status, through a share of a state-sanctioned charge levied against companies that adopt, a tax if you will.
Latker then turns to a Department of Energy initiative to deal with invention rights in their funded research. This, Latker argues, will be “piecemeal legislation.” So much for one grand logical system. At the DOE hearings, three speakers: from Department of Commerce, Anti-Trust Division of the Department of Justice, and Irene Till from Public Citizen.
Here’s what Latker has to say about Till:
Mrs. Till’s comments I will dispose of by merely indicating that they consisted of the same anti-patent, anti-creator, save-the-public-from-the-high-price-of-monopoly material she has peddled for fifteen years to and through various mentors. I remain baffled as to how anyone over a period of fifteen years can fail to recognize that invention ownership must track delivery to the public in many instances.
I begin to like Dr. Irene Till, a long-time government economist, anti-trust specialist, wife of Walton Hamilton, a Yale professor and author of one of the major books pointing out what is wrong with the practice of patents. Take a look at “What Is a Patent” as a warm up to Patents and Free Enterprise. Patent-loving reviewers really hated the monograph. One might see where Latker, patent counsel, would align.
In one contested hearing, in a proposed patent policy for the Energy Research and Development Administration, involving limitations on patent enforcement and implication of background rights, Dr. Till argued on behalf of Corporate Accountability Research Group for
a uniform patent policy applicable to all agencies of government in which title to inventions from federally funded research resides in the government, and the technology is made available to all qualified applicants on a nonexclusive and non-discriminatory basis.
This is essentially the same recommendation made by David Lloyd Kreeger, the principal author of the 1947 Attorney General’s report on government patent policy.
Neither Justice nor Commerce spoke up regarding “how the needs of the creator would be best served.” That would be a good thing, no doubt, to consider. Latker expresses the hope that the Department of Energy will “utilize the flexibility of the exceptions” in executive branch patent policy to “release invention rights, both at the time of contract or grant or after identification, in appropriate situations.”
The public should not be placed at the disadvantage of having a federal agency’s patent policy determined by the people who occupy the invention area at a specific time . . . .
Here’s a second core feature of Bayh-Dole–an attempt to displace the judgment of federal officials in various agencies at any point in time who might implement patent policies that run against the grand system that Latker imagines will be an engine of the most productive results possible with inventors getting extra money for using the patent system rather than otherwise.
Latker then comes to his great worry of 1974: a memorandum drafted by the Attorney General that argues that (this is Latker’s precise) “future invention rights are property rights, just as are contingent rights in real estate, and, similarly, cannot be disposed of under Article IV, Section 3, Clause 2, of the Constitution without legislative authority.” Latker continues:
In essence, this suggests that DHEW’s Institutional Patent Agreement policy and the Department of Defense license policy are unconstitutional. . . . Let me assure you–every operating patent counsel in the Executive Branch believes this memo to be legally inaccurate. It is viewed as an Anti-Trust policy position supported by the most tenuous of analogies.
It gets worse:
My own personal belief is that Justice will not respond to our position in clear, concise terms, but will leave the situation clouded. Even on.the remote possibility that Justice . should publiclY withdraw the proposition, there is nothing to stop parties attempting to avoid the enforcement of rights obtained from the Government from arguing the proposition as originally espoused by Justice, no matter how irrational. Add this negative factor to the attitude of courts on patent validity, and what happens to technology transfer of Government-sponsored research?
It now appears that legislation to clarify the area is imperative.
There you have what I take to be the fundamental motivation behind Bayh-Dole–to create a law that prevents any federal agency–even Latker’s own–from opting out of his grand scheme to use patent rights to create a most logical system to deliver technology to the public while rewarding inventors with a profit motivation, and to make moot the Department of Justice concern for legislative authorization for any disposition of invention ownership by getting blanket authorization. That you’ll find in the ownership provision for contractors at 35 USC 202(a) and in the right of federal agencies to assign inventions in the form of exclusive licenses under 35 USC 207(a)(2).
And just to make clear who he took to be his enemy:
Well, the the final question is–who should speak for the creator when his results are disposed of under Federally sponsored research, and what type of legislation should be proposed?
Irene Till? —
It’s not really this personal, is it? Yes, but it is also a fight between the Department of Commerce and the Department of Justice over the patent system.
The Justice Department, or any one else’s horror stories, should not be permitted to erode the patent system any further. This might be accomplished by requiring Commerce review for impact on the patent system before the Anti-Trust Division is permitted to raise patent issues in court.
Latker calls for universities to be “advocates for the creative” and help the Department of Commerce defend the patent system.
And that’s where the available text of Latker’s remarks ends, just as he turns to an FDA approval of a new drug, apparently derived from an IPA-based invention.
The origin of Bayh-Dole appears to be Latker’s vision of a system to deliver research to the public using the patent system, preventing federal agencies from adopting policies contrary to such a system, and beating back the Department of Justice proposing that the federal government ceding patent property rights (or assigning them) runs against the Constitution without legislative authorization. It’s personal with the antitrust folks like Dr. Till, who Latker mocks. And its internal politics with the Department of Energy and Department of Justice–as it also internal politics between Latker and the leadership of the Department of Health, Education, and Welfare.