Making Bayh-Dole March-in and Government License Work

There’s a lot of stirrings about using Bayh-Dole’s march-in procedure to address the high price of drugs in the United States. Under march-in, a federal agency has the right to require a federal contractor (or anyone who is an assignee or exclusive licensee–which also become contractors under the obtuse definitions of the law) to grant licenses under their patents on subject inventions–inventions the contractor has acquired, and which were made in work receiving federal funding–if the contractor has not achieved timely “practical application” of a subject invention. Bayh-Dole defines practical application as use of the invention such that the “benefits are available to the public on reasonable terms.”

The terror among the folks that exploit Bayh-Dole to speculate on the value of patents obtained on public interest inventions–patent folks at universities, especially–is that the courts, if not federal agencies all on their ownsome, might agree that “reasonable terms” does include “reasonable price.” Surely it does. Thus, pure terror. For a group that has been lying about Bayh-Dole for forty years, there’s really no where else to go–they can’t turn their lying up to 11 and make any difference. March-in can also be used if health needs are not satisfactorily met. More terror for the patent speculation crowd. This is all set out in 35 USC 203.

There are problems with march-in, however. First, march-in was designed to look good but not to operate. Howard Bremer bragged later that he had stepped in to help with the regulatory implementation of the law so that march-in would not operate. And look at it. There’s no right of public appeal. And everything is kept a federal secret. It’s up to the federal agency that provided the funding whether to march-in. And once a march-in procedure has started, Bayh-Dolke allows the federal agency to walk away at any time, even if the agency has determined that the public is being harmed by unreasonable terms or lack of availability. There’s no uniformity among federal agencies–one could walk away and another pursue march-in. Well, there is the uniformity that no agency has used march-in.

The procedures for march-in are a convoluted mess of processes–determinations, notices, responses, transcripts, reviews, and the like. All of which go for naught if a contractor doesn’t like the outcome of the march-in procedures–the contractor can appeal to the Court of Federal Claims, of all places. All the while, no march-in. Thus, for anything where there’s a critical need, such as production of a needed vaccine, a contractor can delay march-in for years. Sucks.

Even if a federal agency does determine there’s a basis for march-in, and the Court of Federal Claims agrees, there’s still no guarantee that any other company will show up and take whatever license is on offer to the subject invention, or that in taking a license, any company will then produce product that meets the unmet need or addresses the unreasonable terms, or will do so in time to matter. And–ironies–a federal agency could set the terms of any march-in license so the offending/failing contractor makes a ton of money from all the others gaining access to the invention but having to pay for that access. It’s just that the federal government has to go out and do the “marketing” of the patent for the lazy-hazy price-gouging-happy contractor. Still sucks.

March-in, then, is a mess of crappy regulatory mud for anyone trying to gain access to federally supported inventions, especially in public health.

But there are other things in Bayh-Dole that are much more direct. For any subject invention that a contractor chooses to keep, the government gets a royalty-free non-exclusive license to practice and have practiced the invention for any governmental purpose. “Practice” is a broad term meaning “to make, use, and sell” product that uses or is based on the use of an invention. The government license involves no determinations, procedures, notices, or appeals. It just happens. 35 USC 202(c)(4).

For public health matters–clearly within the scope of governmental purposes–the government license is the much better tool for addressing pressing needs. The government does not need to march-in at all, where its actions are already authorized by the Constitution. It has got the license it needs outright. There’s no trigger–not nonuse, not unreasonable terms, not lack of availability. The only condition is that the purpose of the practice is governmental. Public health. Governmental. That works.

Executive branch patent policies from 1963 on divided invention use into two “markets”–a governmental market and a non-governmental market. The government license to practice and have practiced is directed at the governmental market–any governmental purpose. March-in is directed at problems in the non-governmental market–nonuse, unreasonable terms, lack of availability, failure to require U.S. manufacture in some circumstances. Thus, if sonar to detect submarines (a governmental market) is not being used to detect schools of fish (a non-governmental market; a “dual use” or “transfer of the technology” from a governmental purpose to other purposes, as it were), then a federal agency might march-in (ha! ha!) and try to line up companies that will build fish finders.

The lesson here is that the federal government should use its license to practice and have practiced to address any issues in the governmental market for health care. Wherever the federal government has the Constitutional basis to act, it has a license to inventions made in work it has supported, to the extent a contractor has taken out an exclusionary position on those inventions.

We ought to mention that States don’t need this license. They cannot be sued in federal court without their permission, and so patents cannot be enforced against them. Thus, States can practice any patented invention–not just subject inventions–without a license, though there may be some bother with regard to “have practiced.” A license to an invention also may be broader than the stuff claimed in a patent. An invention includes stuff that’s not patented, and stuff that demonstrates that an invention is patentable, such as data that confirms the invention works as conceived. So then States might also benefit from the federal government’s license to practice and have practiced.

There’s a second important lesson here, for other countries. While Bayh-Dole makes a gesture to allowing the federal government authorize rights for other governments to practice any subject invention, and to shape the patent rights requirements in federal funding agreements to comply with terms of treaties and the like, there appears to be no activity by the federal government to do anything with these rights either. The result is that federal contractors can take out patents in foreign countries and then fail to use subject inventions, can price-gouge or discriminate, and can fail to meet needs in those countries. The US government does nothing about such activities. More sucks for Bayh-Dole.

But there’s a clear, clean, even beautiful way for foreign governments to deal with this problem. Here it is. A foreign government needs to enact a “Bayh-Dole” extension for its country. We are not talking about copying (badly) the U.S. law for the research the foreign government sponsors. Sure, fine, make your own crappy mud mess, if you think copying the U.S. is the way to go. Rather, we are talking about attaching a country’s own conditions on patents granted by that country’s government based on a U.S. subject invention. If the invention is a subject invention, then when the patent holder shows up to obtain a patent in the next country, that country’s Bayh-Dole extension kicks in. What happens?

First, the country’s government asserts a non-exclusive, royalty-free license to practice and have practiced the invention for any governmental purpose in that country. The government may then authorize any production of a new medicine that it needs, owing nothing. The government can require full disclosure of the invention–including the “best mode” of practicing the invention known at the time the patent application is filed in the foreign country. And the government has a license to all this data and practice information as well.

Second, the country’s government can assert the right to march-in, for any non-governmental purpose uses of the invention. And the government can draft the procedures for such march-in so that march-in does operate. Make the proceedings public, not secret. Provide a right of public appeal. Make the due process happen in two weeks rather than two years. Make the march-in licensing non-exclusive and royalty-free. If a company shows up with a patent on a U.S. government financed invention, it had better play ball–work the invention, make it available to the public on reasonable terms–price, availability–or open the invention up to competition and collaboration alike.

And while the country is at it, include the Bayh-Dole preference for the country’s industry provision–35 USC 204. But now make that provision work for the country: any exclusive position in the country must require domestic manufacturing. Not just for exclusive licensing to use or to sell, but any assertion of patent rights in a U.S. subject invention. If a company, or worse a U.S. university, is going to show up with an invention made in a public interest project in the U.S., with U.S. government funding no less, then that patent holder sure as heck ought to require domestic manufacturing along with any exclusive position.

Rather than rely on the sleepy, reticent, bungling U.S. federal agencies to do anything for any other country–heck, they won’t even act to protect the U.S. public from exploitation–countries should enact their own Bayh-Dole extensions to provide them with the domestic rights they deserve to have in these U.S. originated subject inventions. Other countries don’t have to wait around for the U.S. government to step in and deal with their crappy mud mess of a law. These countries can attach Bayh-Dole extensions to their own patent laws–providing themselves with the same rights that the U.S. government reserves for itself but then doesn’t use. The difference, then, in practice is that the governments of these other countries may build the procedures so that the license and the march-in and the preference for domestic industry really do get used.

This entry was posted in Bayh-Dole and tagged , , . Bookmark the permalink.