The use of the patent system for federal research results, 9: Exploiting the FSA policy safeguards

The earliest major federal patent policy, FSA policy 110-1–for public health research, no less–sets up a process by which the head of each “constituent unit” of the FSA is to make a determination in each case whether the use of the patent system is necessary to achieve “adequate commercial development” to make an invention in public health research widely available. The policy then elaborates that this determination is to decide if use of the patent system is necessary so that a single company may “more adequately and quickly” develop an invention for “widest use.” There’s a huge difference between the initial statement and the elaboration. The first standard depends on evidence–consider the invention, its status, its possible uses and by whom, what needs to be done to enable those possible uses (if anything), which for some reason the government chooses not to support, and why if multiple companies have an interest in doing some aspect of that development work (or might use the invention without the need for any development work), it still is *necessary* to use the patent system to exclude them in favor of–this is the theory part–a single company, not yet identified.

In this first standard, it is almost impossible to find that it is necessary to use the patent system–the government cannot support needed development, no companies are willing to do the development, but there’s still an unmet public health need that someone ought to address, using exactly this invention (and not some other thing), and once someone does start work, it would be unfair to that company for anyone else to also start work, or to benefit from that work once it has been done–and worse, that even that one company won’t ever start work unless it is assured that no other company will be permitted to work on any aspect of the claimed invention, even aspects that the first company in is not working on–a different health condition, a different formulation, a different means of delivery, and the like.

And that it is difficult makes a degree of sense–if there’s an unmet public need (a potential “market” if you will), and doctors, public health organizations, and your basic bustle of companies are not able to meet that need, and yet the need is not so compelling that government feels the need to step up and fund whatever development is needed, then perhaps, having exhausted all other approaches to recruit foundations, institutes, and companies to do the development, the FSA might then set about recruiting a single company to do the work, not with federal funding, but with a patent and the prospect of recovering the company’s expenditures from a monopoly position in that “market” for seventeen (now twenty) years. The issue would be, only, how the company behaves in that market as the sole player–can it exploit that public need to charge higher prices or to slow walk additional improvements or to limit availability to reduce its marginal costs to reach outliers and remote patients?

That’s where the “safeguards” come in–no excessive royalties, no unreasonable conditions. But lost in all of this is any “safeguard” that this one company, on which all depends, actually does develop the invention, actually does make product available so that attention might turn to those other safeguards on price and conditions. What if use of the patent system does not work out? Then, obviously, use of the patent system was not *necessary* because that use failed to achieve the purpose. It’s just that in an administrative (or bureaucratic or policy wonkish) sense, the use of the patent system appeared as a preferable alternative to any form of open access. Not necessary but rather just preferred by those in charge of preferring.

Now look at the FSA 110-1 elaboration of this standard. Might one company, motivated by the prospect of an exclusive market of unmet health needs, produce for “widest use” a new product “more adequately and quickly” than might doctors or hospitals or universities or nonprofits or the government or a number of companies working together? In theory–at least theory as a federal official might grasp it–the answer to this latter question might well be “yes” without considering any specifics of any given invention. In theory, a motivated company might get things done faster and more efficiently than a number of organizations that do not have the same degree of motivation and might even–this is counterintuitive to the argument–be motivated by something other than money. (Consider Merck, say, in developing ivermectin for African river blindness and making it available essentially for free–in the theoretical world of this second FSA elaboration, that just cannot happen).

In this second formulation in policy 110-1, the question is whether one company, properly motivated, might outperform others that necessarily lack that same motivation. Follow? It sure seems the answer is going to be almost always, of necessity, yes. If one company might be motivated by the opportunity to exclude all others, then those others, were they to share access to the invention, would simply, logically (in a weird sense of logically), not be motivated by the opportunity to exclude others (even if, as a cartel or consortium or patent pool they might–it still would not be the same degree of motivation as one company would have excluding everyone else). To make it clear that this motivation to exclude really was substantial, then, there would be pressure on the safeguards so that they were not so rigorously applied and thereby diminish the value of the opportunity to exclude, to diminish, as it were, the value of the patent.

To justify giving a single company the sole right to develop a given health invention arising in publicly funded work, the FSA policy then asks its officials to determine whether one company with lots of motivation might (in the general case, even) “more adequately and quickly” develop a given invention into product than anyone lacking this “lots of motivation.” The answer tends to yes without the need to look at any specifics.  And if an answer is yes in general, then (and this is a fallacy but ignore) it holds for each instance within the scope of the general case. Even here, in an early major instance of federal invention policy for matters of public health, the use of the patent system is framed as something that in general will be better than open access, even as open access is declared to be the preferred method of making the results of public health research available to the public. This idea, that the patent system holds a general key to the promise of federal commitment of money for research, has captivated federal officials over the years, even with stout opposition from the likes of Admiral Rickover and Senator Long. It makes one pause to wonder why it is that patentable inventions have come to be depicted as the driver for the use of the results of federal research, especially given all the indications to the contrary over the past seventy years.

Look at policy 110-1’s restatement of the required determination with the qualifications removed: take out “widest use” and the imperative slips. Remove “more” from “adequately and quickly” and one company begins to look like any other company. Could one company use and develop the invention? Could others, too? Sure. It is the addition of the qualifiers then that presume the answer is yes–could one company with more motivation than any others do a better job (in theory) than those others? Could one company then with more motivation–even motivation that the others cannot legally have–do a better job (in theory) than open access, where that motivation (patent-based exclusive enjoyment of a market in unmet public health needs) simply cannot exist. Under open access, no-one has a motivation to develop any given invention based on the opportunity to exclude others by means of a patent right. Thus, the administrative calculus of 110-1’s restatement is that whenever the patent system is used, it will create a highly motivated company that plausibly will outperform open access, so much so that there should be safeguards to protect the public from exploitation of the market monopoly.

The driver, then, in 110-1’s formulation is the patent monopoly. That monopoly then selects among companies that otherwise might use the invention and assist in its development into product forms capable of mass production, storage, distribution, and effective use. How to choose among these companies just one, given that those not chosen then not only have no role (they are necessarily excluded by the premise) but they also have a new motivation to act against the invention–to avoid it, design around it, exclude it, undermine it, block it, and invalidate any patents on it. Exclusive interest in a patent may indeed motivate one company to undertake development with the promise of a monopoly and the financial and competitive benefits that come with such a monopoly, but that same exclusive interest may in turn motivate many companies, nonprofits, doctors, and researchers to avoid–not use, because they legally are denied the right to use–that same invention.

The concern of the policy then turns to “safeguards” on the use of the patent system. The middle ground of the policy then turns out to be the key area for FSA interest, and everything in this middle ground that requires decisions by the FSA, gathering of evidence, public comment, preliminary determinations, reviews, appeals, policies, regulations, oversight committees, and reports balloon into delays, inconsistencies, mistakes, false starts, more delays, oh, and bitterness, mystification, and betrayal. Funny how bitterness, mystification, and betrayal never figure in federal invention policy though they are so often the primary product of such policy.

The decision in the FSA policy then is either open access or a patent monopoly but with safeguards. The policy is drafted so that in general, while open access “is believed” to be best, really it is up to the head of each unit to decide, and based on how that decision is to be made, according to 110-1, really the default is the middle ground–a company agent acting with motivation in theory will do a better, faster job than some probably wavering unseen hand wandering among open access participants making unexpected magic happen. The issue, then, is what “safeguards” should be in place to protect the public from the full extent of this expected patent monopoly. 110-1 identifies four kinds of safeguard:

a government license with the right to sublicense
claims on foreign patent rights
assurance of no unreasonable restrictions
assurance of no excessive royalties


Surely commercial development might in theory produce product more quickly for widest use than would bumbling nonprofits and physicians. And even if nonprofits might do some development, for “widest use” nothing other than mass production and distribution will address such unmet public need, and so it’s obvious, in theory, that everything ought to go through the patent system and not rely on open access or Possibilities 1 (open access) and 2 (curatorial control). Things have to go through Possibilities 3 (flip with public protections) and 4 (flip without public protections). The question for policy then would become whether there should be public protections at all. Are such public health inventions made in federally supported public health research just ordinary inventions? Should patent rights to these inventions also be ordinary, as if the federal government had not provided any funding? As if public health inventions, especially those addressing significant public health needs, are not distinct from any other invention?

The FSA policy then requires the agency head to make a finding with regard to whether a given research contract or a given invention arising in federally contracted work ought to be open access or use the patent system, and if using the patent system, with what safeguards. But once the problem is set up in policy language, it ends up being not about what to do when open access is inadequate but rather about whether in theory it sounds better to have one company loaded up with the hope of monopoly profits using the patent system to exclude all others. How is such a “finding” distinct from pre-disposition or whimsy or corruption or ineptitude that justifies whatever it is an official wants without evidence? It just happens to sound good that a patent-monopoly-motivated company would do a better, faster, more adequate job than companies not motivated by a patent monopoly or worse nonprofits not motivated by profits at all.

Federal open access might use the patent system to document an invention, but refrain from enforcing a patent’s right to exclude–meaning, a right to demand payment and to place conditions on the practice of an invention. This version of the use of the patent system involves the “promotion of the useful arts” by means of publication of the invention. The federal government has no need for any “incentive” to receive payment or to limit the public’s use of an invention made in work presented to the government as in the public interest (public interest has got to mean something, no?) and therefore worthy of being supported by the government.

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