The use of the patent system for federal research results, 8: Exploiting the use of the patent system

FSA policy 110, the first agency attempt at making a policy to deal with inventions made in federally supported public health research, tries to establish a middle ground for the use of patents. While clearly endorsing open access, including royalty-free licensing, as one possibility, 110-1 does not end there and goes on to open up the prospect for the disposition of inventions that does not involve open access, such as assignment of the invention or exclusive licensing which may also make an assignment). And 110-1 does not contemplate what might happen if an assigned invention then fails to be used or benefits made available to the public, or if made available, not on reasonable terms.

To enable this middle ground beyond open access, 110-1 requires FSA officials to “find” something out–make a determination (based on evidence and reasoning, say)–that some non-open approach will be “better” than an open approach. How does such “finding” come about? How does one look into the future and determine, “whoa, in this case, open won’t work as well as allowing an inventor or contractor to hold exclusive rights via the patent system.” On the face of it, such a determination is difficult, and for federal agency officials, we might say nigh unto impossible. But the words of the policy make it sound straightforward, official, a matter of procedure. That’s typical of bureaucratic policy drafting style.

Sure–one could release open access, on the condition that if no one is making an effort to scale up for adequate commercial development for widespread distribution (slowly: there’s an unmet public demand, that demand is widespread, and it is not the government’s responsibility to meet that public demand, even though it is in an area of public health), then the FSA might allow a contractor, even though the contractor also (necessarily, given the premise) has not made an effort, to use the patent system to exclude others that would then scale up commercial development to copy what the contractor aims to do. Even this is a mess. If the contractor has not scaled up under open access, then why should the contractor be the one getting the benefit of patent exclusion? Why not make it a matter of public bids to do the work? If the contractor is deliberately holding out for the right to excludes others by patent before scaling up, then perhaps the contractor is souring everyone else’s interest in working under open access–not publishing data and know how, not responding to inquiries, not allowing others to inspect lab set ups and materials. In such a case, a contractor would appear to have an organizational conflict of interest in supporting open access work, in the hope of getting authorized to use the patent system to exclude all those others.

In any event, even if there’s been no adequate commercial development to meet a widespread public need, that does not mean that there’s not use or development of a given invention, and no public benefit from use. All we have is that whatever use and benefit there is, it is not adequate to meet demand, the government has no responsibility to meet that demand (with its government license, though the invention is apparently a matter of public health–explain that one), and possibly companies ramping up for mass production might meet that demand. Even then, how does anyone jump to the conclusion that patent exclusion of others is “necessary”? The government could fund the development, as has been the case with agriculture. The government could request companies consider scaling up production, showing the figures on widespread, unmet demand. And if more inventive work is needed–the invention is, as it were, half-baked–then the government could fund more research to resolve the outstanding problems.

Look at how the FSA treats this middle ground:

If he finds that the invention will thereby be more adequately and quickly developed for widest use and [safeguards], the invention may be assigned to a competent organization for development and administration . . .

Now instead of “to foster an adequate commercial development to make a new invention widely available” we have a very different criterion–“more adequately and quickly developed for widest use.” More adequately and quickly developed than what? Open access? How and when would such a determination be made? In the first construction, an FSA official would look at how open access has been doing for a given invention, examine the state of unmet public need, determine that that public need was widespread and was not the agency’s responsibility to address with its license, and then permit the use of the patent system to “foster” the needed “adequate commercial development”–preparing a product for mass production, say, or modified to meet the needs of a target set of customers (like, say, patients, now turned into customers). That use of the patent system might allow a contractor (or whomever the contractor assigns to) to exclude others from making the mass production product for the period of time needed to meet that need and to enable the “fostering.” One would think that in a public process, the company that offered to do the work for the least cost, fastest time frame, and with the shortest term of exclusivity to justify whatever stated expense they would incur ought to get the benefit of an exclusive patent position. At least, that sure appears to be the intent of the FSA policy.

It would be difficult–I know, there are people who do this all the time–to claim that the FSA intended a policy in which they would permit the use of the patent system to put the invention in the hands of a company that would take its own sweet time, charge the maximum the market would tolerate (and made yet higher by the absence of competition), and keep the unmet need strung along for years by lagging on making responsive modifications in parallel for all those having a need. Yes, we can imagine a devious FSA drafting policy to lean one way but really meant to authorize something very different, but that’s generally not how regulatory text is to be interpreted. The proper reading is not what a clever bureaucrat intends to exploit later, but what the authority issuing the regulation expresses in the words it chooses. So we have that.

But the FSA restatement of the threshold for use of the patent system for anything other than open access goes a different way. Here, the evaluation is abstract–can a single contractor or invention management firm develop an invention “more adequately” and “more quickly” for “widest use” than that organization working with others (collaboratively or competitively)? Put into the abstract, one might ask, is it more plausible that a company allocating its own significant resources with a profit motive enhanced by lack of competition will develop a given health invention better and faster than would multiple research organizations, nonprofit health care providers, and companies having open access to the invention?

Put into politics, the question can be reduced to “Will a motivated, capable company develop a given invention faster than a bunch of organizations not interested in or have the capability to undertake development for mass production and the widest distribution?” Here the obvious political answer is “yes, of course.” In actual practice, of course, both the question is wrong and the answer is wrong. It’s called baking conclusions into the premise (begging the question) and offering a misleading set of alternatives (false dichotomy). “If one company is better than all the others and the others aren’t doing the work and wouldn’t if offered, but then once they saw how that one great company has done the development work, they would quickly make copy-cat products to meet the unmet need but in doing so ruin the expectation of super-great profits that are necessary for that one capable company to do the development work in the first place, don’t you think that the federal government should see to it that that one company got to use the patent system?”

Put this way, if that one great company does not get maximum profits based on a patent position, it will never do the development work, and no other companies will do that development work either (it’s in the premise, so it’s not arguable based on, say, practice experience), and so the invention will never be developed, the public need will go unmet, people will suffer and die, and the federal research money will be wasted.

This is all just what is packed into the premise. I am sorry to keep pounding this point, but without it, it is difficult to see what is going on in the FSA 110-1 policy and how this position has been exploited by federal agency officials and university patent administrators for seventy years, so much so that it’s almost that they have made their fallacies a matter of federal regulation. That’s just what NIST has been doing, trying to rewrite Bayh-Dole via regulatory changes outside its authority to force people to accept the fallacies as true as a matter of compliance. It’s an old practice, in its way. For public health, it’s not effective. For diverting to patent speculators public-interest inventions and the opportunity to make money by using the patent system to suppress access and use by everyone else, very effective.

The FSA policy, then, switches from

“if open access doesn’t work, then where necessary use the patent system to restrict rights to products developed for mass production and widespread distribution, but don’t otherwise restrict open access and whatever manufacture, use, and sale is going on that doesn’t involve the specific mass production product that might get developed”


“if it is plausible that authorizing one company to develop a product for mass production and widespread distribution would be better than allowing everyone to have access and use the invention, then (1) use the patent system to give that one company an exclusive position for what it does develop, (2) with safeguards so that it is not unreasonable about things.”

We will deal first with the use of the patent system, and then with the safeguards. Both end up as exploits.

The first instance depends on finding that those having access to an open access invention are not acting to meet a widespread, unmet, non-governmental public health need, and that a patent right floating on top of whatever activity there is would be necessary (no other options) to scaling up a version of the product to meet that public health need. The first instance is based on actual evidence: the invention is not being scaled up in a form to meet a widespread public health need. The only thing that stands in the way is the lack of an exclusive position to block everyone else once the development work for mass production has been done, or even from doing the same development work, or even doing any development work even if that development work follows a different path for operation of the invention, configuration of the product, production methods, applications, delivery formats, and the like. In this first instance, there’s no need to block open access activity except for the scale up specific to a given product specification to meet an unmet public need that no one with open access has addressed.

The second instance depends on doing a mental examination of whether allowing one company to use patents to exclude all others will in theory motivate that company to develop product for mass production and distribution to meet that need, where it would not be motivated if it had to compete and other companies would have the advantage of having only to copy what the first company had to develop at its own, entire, substantial, at some great risk expense.

Reduced to simple, the first instance is: “if open access doesn’t work to meet widespread demand that would be addressed by mass production, then try the patent system, but only to the extent it is necessary.” The second instance is “if using the patent system would seem in theory to develop product better and faster than open access, then skip open access and use the patent system to exclude all others, and see if that works. If it doesn’t, then whatever, apply safeguards but only if they don’t ruin future opportunities to use the patent system because it sure seems in theory like the best way.”

And that’s where we are, now. Federal agencies and university patent administrators are committed to making this second instance “work” or appear to work. Otherwise, they could not keep deciding that exclusive patent rights are in theory the better way to “more adequately and quickly developed” and so authorize the use of exclusion (suppression) before any open access has been tried. In so doing, they cut off inventions from other related work in a given area of public health–fragmenting what ought to be bits of a larger body of work such as a library of tools or a platform on which to build or a cumulative technology, a pre-competitive exchange, an emerging standard. This second instance premise looks somewhere between silly and stupid if it is expanded to “a single company motivated by the prospect of monopoly profits will do a more adequate and quicker development with its tiny bit of a broader invention, with each other bit owned by some other company or nonprofit aiming to do the same thing, than would open access where all interested companies and nonprofits contributed their work and competed, if they chose to compete, based on the speed and resources and talent that they brought to the work.

If only one company works a problem, then patent rights aren’t needed because no one else wants to work that problem and so there’s no one to exclude. If multiple companies are working the problem, then patent rights aren’t needed to foster anyone to work the problem and just get in the way. One would have to argue that multiple companies working a public health problem is somehow bad, and that government should choose one company (or cede the choice of just one to a nonprofit contractor or its patent management firm) and block the rest for the term of the patent, unless that one company gets all unreasonable (safeguards, again). That would be a strange argument.

And if no one will work the public health problem–no one at all–because it’s not significant for the federal government or not within the government’s responsibility, and there’s only enough market (but a market for a widespread unmet public health need) for one company based on development and distribution costs, and once there’s development, others will jump in and undercut the price and steal customers so that any company fool enough to do the development in the first place without patent exclusion would never recover its expenditures through sales compared to those free-riding companies, then without exclusive patent rights to exclude those free-riders, nothing will ever happen and the invention is effectively wasted by open access. Convoluted. May not even depict a situation that ever exists. May be pure bureaucratic, political fantasy. But it sure has been used to foist an unhealthy patent monopoly practice onto public health research.

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