In a recent Twitter post, Prof. Richard R. John at Columbia University (@RrjohnR) asks for suggestions for a bibliography of “scholarship on the history of anti-monopoly since 1945.” One respondent cites Elizabeth Popp Berman “Why Universities Patent” (well, Prof. Berman cites her own work, which is fair) and another respondent cites David Mowery (et al.) Ivory Tower and Industrial Innovation, along with a mention of Bayh-Dole. Both are useful works in their way. Mowery, especially, makes the case that Bayh-Dole was not the watershed that has been claimed for it, that universities were patenting (via their foundations and Research Corporation) before Bayh-Dole, and the growth of patenting did not quicken with the passage of Bayh-Dole.
What we have now, however, is 120,000+ U.S. utility patents held by universities and their proxies, 50,000+ of which cite federal funding, mostly unlicensed and of the relatively few that have been licensed (<20%), most of these have not resulted in “practical application” or commercial use, and of those relatively few that have, a number involve products not reasonably priced or universities and their proxies acting as patent trolls aiming to apply a private patent tax to use of inventions that did not have any need of patent exclusion to justify development and even took place in the presence of such patents and the implied threats by universities that they would sue.
Compare this situation of massive withholding of inventions made at universities with Howard Forman’s undocumented claim that the federal government held 26,000 patents. But those patents were made available to all. Only a few hundred were “licensed”–in situations in which the government imposed conditions to protect the public, as in the case of possible medical uses. Agencies did not keep records with regard to “commercialization” based on patents because commercialization wasn’t the goal for any given invention, and licensing (especially exclusively, to a single private agent) was not considered viable. As Admiral Rickover made clear, most of those 26,000 patents were for inventions that defense contractors had passed over, and the patents played a “defensive” role, making public the subject matter of the inventions, raising the bar in the prior art for future patenting, and creating a broader commons from which defense contractors could draw in competing for federal work.
But there’s another angle on Bayh-Dole and monopoly, that gets closer to home and more personal. In 1941, Walton Hale Hamilton, a Yale professor and Special Assistant to the Attorney General, wrote a monograph for the federal government on problems with the patent system, “Patents and Free Enterprise.” The monograph was part of a Senate study on the “concentration of economic power.” The concern with “concentrated” economic power would figure in the struggle between Vannevar Bush and Senator Harley Kilgore over policy on the disbursement of federal subvention funding for science.
Bush represented the idea that in a war situation, find the best and most capable and get them to work problems and opportunities through to implementation as fast as possible, and to fail as fast as possible if something wasn’t going to work. That turned out to be a successful strategy during World War 2, with Bush’s federal agency, the Office of Scientific Research and Development, using only a few companies and a few universities to do all the work. Kilgore worried this “concentration of economic power” created by the choice of federal contractors and instead argued for spreading federal funding around–many companies and universities in many regions, not a few and not the necessarily the best, with the idea that funding for the less capable might in time make them more capable and thus build a more robust national science and technology base. Bush won on the idea of federal funding, and Kilgore won on spreading the work around so it went at the pace of the less capable and fragmented across contractors and geography. If folks are worrying the pace of innovation, at least from federal contracts, one might start by comparing the outputs from Bush’s approach with those of Kilgore’s. Of course, Bush’s approach doesn’t rely on treating research funding as a kind of Congressional pork to be sent home to one’s state or electoral district. And so, Bush’s approach appears to use federal funding to concentrate economic power.
A few years later, in 1948, Hamilton published “What is a Patent?” His co-author on this article was Dr. Irene Till, an economist who would have a long run serving in various federal agencies (and who also was married to Hamilton). In this article, Hamilton and Till argue that a patent starts “dangerous business”:
To use an exclusive right, however worthy the purpose, is dangerous business. The instrument is at odds with the economy within which it is set. A letter patent is, within its limits, a monopoly, and the common law-eventually caught up into the antitrust acts-has decreed that our industrial system shall operate as free enterprise. A monopoly removes from the domain of competition all that it encompasses. If the monopoly can be enlarged and perpetuated, it threatens to remove areas of industry from market control and to make of them closed corporate estates.
Hamilton and Till then go on to distinguish patents from inventions and consider the abstraction called an “inventor,” comparing inventor with other legal fictions such as the “reasonable man”:
A task of consequence is to disentangle the invention from the developing art in which it is set. The heart of the question is the novel-and workable-idea. Is “the inventor” responsible for the big idea? Or did he, following timidly where others had boldly blazed the way, merely take an all-but-obvious step or contrive a variation on a well-known device?
If the patent office does not separate “invention made from invention claimed,” then “the machinery of examination” in the Patent Office is “set for multiple grants” of patents, creating multiple claims on–and vetoes over the use of–“big” ideas that now no longer are available to everyone and instead are claimed and over-claimed by multiple patentees. Hamilton and Till continue:
It is the very purpose of the patent lawyer to flood the office with an endless stream of applications. In the field in which his client operates he wants to lay legal claim to all that is, or may become, a part of the technical process. The arsenal serves the double purpose of an armament to ward off competitors and an array of choice weapons with which to attack them.
Hamilton and Till point out that patents often have poorly defined boundaries–purposefully so, through the work of patent attorneys, and sloppily so, through the inattention or disinterest of patent examiners:
If it is desirable that the inventor secure an exclusive right in his invention, it is equally essential that his privilege shall not trespass upon what is not his. He has no claim to the prior art, to any antecedent scientific discovery, to any bit of technology which lies to right or left. That which is his contribution needs, as a condition of the grant, to be sharply separated from all to which it is related. Unless that is done, the patent owner may assert a private claim to some part of the fund o£ common knowledge; he may assert a monopoly over techniques which all members of the industry are legally free to use.
The inventor’s interest in a patent has largely been co-opted by corporate interests. Rather than having a national policy that encourages invention and supports inventors, Hamilton and Till argue we have nothing:
Instead we have allowed technology to become captive to the corporate estate, where its advance or stagnation has had to wait upon the irrelevant prompting of the profit motive.
In this view of things, we might sense that Bayh-Dole is a national policy to enlist universities in the effort to make sure that even the quasi-independent inventors among faculty and students are compelled to offer their inventions to the corporate world, depending on the “irrelevant prompting of the profit motive.” We might ask whether a corporate profit motive, even cast as an “incentive” to do what the corporation otherwise would not do otherwise, is a sound basis for making national policy regarding inventions in general, and inventions made in work identified as in the public interest in particular. Would we be better off if federally supported inventions were not so quickly removed from public access (by patenting and ineffective licensing practices) and not so readily offered to the corporate world as exclusive positions to be taken by some one company against the interests of the rest (and otherwise not offered at all)?
Hamilton and Till conclude with an appeal to restore the patent “to its constitutional office”:
The present patent system represents, not a conscious commitment of public policy, but the acts ·of persons who have attempted to turn the system to their own advantage. The lack of a policy in respect to technology is a great-perhaps the greatest-source of national weakness at the present time.
We might see in the Bayh-Dole Act an effort to enhance just use of the patent system–the patent system is wasted if it does not reward efforts to turn the patent system to personal (or corporate) advantage. Universities can do so more readily than federal agencies; therefore, federal policy should default to university ownership of inventions. Ignore in this dichotomy that common law that provides for inventor ownership, the Constitution provides for inventor exclusive rights for limited times, and that public funding for projects identified as in the public interest provides for an expectation of public access not merely a happiness to see patent holders seeking their own advantage. Hamilton and Till argue in effect that an effective invention policy should not support companies turning the patent system to their own advantage.
Irene Till later worked for Sen. Estes Kefauver (D-Tennesee), chair of the Senate Antitrust and Monopoly Subcommittee from 1957 to 1963. In 1965, three years after Sen. Kefauver’s death, Till worked to publish under his name In a Few Hands; Monopoly Power in America, a consideration of monopoly and especially patent monopoly based on Kefauver’s hearings on the subject. The first chapter is titled “Monopoly and Prices: The Case of Drugs.” Near the end of the work, Till points out how the U.S. patent system differs from that of Europe when it comes to medicines:
The European countries have generally taken the position that public health is of such paramount concern to the national welfare that patents in the pharmaceutical field fall in a special category and warrant exceptions from the usual treatment accorded to patent grants. To this end, patents in most European countries are permitted on processes of manufacture but not on drug products, and provision is made for compulsory licensing if the process is not “worked” or if such licensing would serve “the public interest” or enhance the “public health” (233).
The U.S., by contrast, allows patents on drug products, not just methods of manufacture, and has no working requirement. In 1963, President Kennedy issued a memorandum that established a federal patent policy for inventions made in federally supported work. This policy distinguished inventions made in projects with federal support directed to public health from other inventions and imposed a working requirement on all federally supported inventions–in effect doing for inventions made in federally contracted work what the patent system did not do on its own. The parallel with the European approach leaps out.
Executive branch patent attorneys opposed to this policy of singling out public health inventions for special treatment adopted the argument that federal patent policy should be “uniform.” Cast as correcting the uncertainties of different federal agencies making differing decisions with regard to private ownership of inventions made in federal work, compounded by a number of federal statutes that required federal ownership unless an agency decided otherwise, a “uniform” policy’s underlying purpose is to undo special treatment for public health inventions–namely open access, generally, and in special cases private ownership but for any government purpose, and only then with a working requirement, called “march-in.” “Uniform” means, in effect, patents on drugs should not be singled out for special public interest oversight–not when the result of federally supported work, not ever.
“Uniform” then is not merely an argument about regularizing federal agency practices in releasing federal claims on inventions as deliverables for open access; it is a cover for a broader defense of patents on drug products. Bayh-Dole accomplishes this re-conflation of public health patents with other patents, and at the same time makes the “march-in” procedures so unworkable that they have never been used–agencies are not required to march-in, the public has no right of appeal to initiate march-in, all invention status reports and licensing terms are made a government secret, and even if march-in were used, the process can be drawn out so long as to make any action to require licensing ineffective, ultimately landing in the Court of Federal Claims, where the process of discovery and argument starts anew.
In 1974, Norman Latker, the NIH patent counsel who restarted the Institutional Patent Agreement program for the NIH, and later drafted the Thornton bill in an effort to create a “uniform” federal patent policy, and still later drafted Bayh-Dole, and then led the drafting of Bayh-Dole’s agency regulations, and even later still drafted President Reagan’s 1983 memorandum overturning the Kennedy patent policy (as amended by Nixon) and expanding Bayh-Dole to all company contractors (as an end run around promises to limit Bayh-Dole to nonprofits and small companies) gave a talk in which he ridiculed Till and her arguments on patent monopolies:
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.
Dr. Till–Latker refuses to recognize her training–has positions on patents as the result of “various mentors.” Latker makes it appear that it is not worth taking up Till’s points (as we have done) and providing a counter argument that addresses her concerns. Latker makes his claims skew from other arguments current in the public policy debate. Till is, in Latker’s representation, “anti-patent, anti-creator, save-the-public-from-the-high-price-of-monopoly.” Given what we have seen in our brief overview of Till’s arguments, Till was not anti-patent; she was against misuse of the patent system. She was not anti-creator; she was against allowing patent holders to expand their assertion of rights beyond what was constitutionally permitted. She was indeed concerned with the high price of monopoly products, including, for our discussion, drugs. Here’s Kefauver (with Till) on pricing of drugs in a patent monopoly:
The justification of high price in terms of value of the service to the public is the ideology of monopoly. Implicit in this defense is the concept that costs and profits are irrelevant in the whole price question; that the ordinary standards used for the judgment of business enterprise cannot be applied. (40)
They observe that where there is competition, pricing is subject to market forces. But where there’s no competition, then “service to the public” becomes the standard for pricing, and what exactly is that? The authors conclude that “service to the public” means “what the traffic will bear.” Perhaps that’s fine, but Kefauver and Till paraphrase testimony by Michigan State professor Walter Adams, who argued that
Only a monopolistic firm . . . can force the consumer to subsidize its expansion; in a genuinely competitive market, the level of prices bars the practice. In a sense this is “taxation without representation,” for the public is defenseless against the power of the giant corporation to tax the for expansion of the private corporate enterprise.
There’s your connection between high price of patent monopoly drugs and the resulting effect of the profits gained to expand the power of the the corporation holding the patent monopoly.
But Norman Latker was having none of it. Arguments might be ignored because they are too silly to spend time with. But arguments might also be ignored, and made to sound silly, exactly because they are compelling and would get in the way of a political agenda. Why debate seriously something you might not win when you can laugh it away? Latker concludes:
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.
What is baffling, but for politics, is how Latker could ignore the evidence that (1) private ownership of inventions made in public projects did not track to “delivery to the public”–certainly not in “many” instances, and (2) the big problem wasn’t so much delivery (such an abstraction), but rather monopoly price in the absence of competition and the concentration of economic power in the big pharma companies.
Till argued that public health inventions were different, and that company activity ought to conform to public purposes, not run amok on its own self-interest:
In a field as important as the health of our citizens, there can be no compromise; here, if anywhere in our industrial system, the mores of business must be made to conform to the requirements of the public welfare. This can only be achieved, however, by eternal vigilance–not only by industry’s members and the regulatory agency but by the elected representatives of the people and the general public.
Latker drafted Bayh-Dole to keep all subject invention and contractor (and federal agency) licensing information a government secret, omitted any form of public oversight or right of appeal, allowed federal agencies not to ask for reports on the utilization of subject inventions, allowed federal agencies not to march-in, even if march-in was indicated, and in any case limiting march-in to unworkable procedures, so they would not be used. These are just the things that Kerfauver and Till had argued should not happen. “Delivery” of public health inventions, under Bayh-Dole, means “only those products for which a monopoly price may be charged,” with a university or other nonprofit licensor on the other side of the deal to insist that the monopoly price be charged so that the university licensor might gain a fair share of the upside of such pricing. The nonprofit license in a clever twist, serves to justify the monopoly pricing.
The Department of Justice was concerned with monopoly practices. The great fear among those advocating for Bayh-Dole’s “uniform” policy was that the Department of Justice would enforce Bayh-Dole’s public safeguards, which were there to get the law passed but. not be used. So Bayh-Dole ends up being “enforced” (meaning, not enforced) by the Department of Commerce, not the Department of Justice, which, as it happened, strangely declined to get involved in enforcement–and there must be somewhere a record of the political battle in the executive branch that got the Department of Justice and Dr. Till’s monopolist concerns out the way, and that too worked to shape the Bayh-Dole heist.