Five Steps to Restoring an Effective University IP Practice, Step 5

We have been working through five steps to restore a university’s IP practice to something that. might be modestly effective. Abandon AUTM, which has worked for decades against effective IP policy and practices. Abandon compulsory university ownership claims. You may have no idea how damaging those claims are to university IP management, but you should. Let go. Things will be good. If you are afraid of not making money, don’t be. You probably aren’t making money now, if you take into account all the subsidies that you have propped up your licensing operation with.

And if you are worried that not taking ownership somehow violates Bayh-Dole, oh gawd I warned you about AUTM already so don’t go back there. Bayh-Dole does not require you to take ownership of anything. Once university IP management is voluntary, then it’s easy to make the university default non-exclusive access. If university inventors want to deal in exclusivity, let them. If you want to comply with Bayh-Dole’s authorized standard patent rights clause, make potential inventors party to the federal funding agreements that support their work. Then they–the inventors–become (per Bayh-Dole 35 USC 201(c)) contractors and it is up to them to report their inventions to the government, decide about keeping title, and whatnot. You don’t need to do that for them. With freedom comes responsibility. A good lesson.

Having got square with ignoring worm tongues, ending compulsory IP claims, and adopting default open access, you can turn your attention to research contracting. Stop offering exclusive licenses, right to negotiate for an exclusive license, or even a first right to negotiate an exclusive license. Sponsors that demand such a right are not the sponsors of research you are looking for. Most company sponsors don’t need exclusivity anyway. Faculty startup companies don’t need exclusivity from the university–because they can get that from faculty inventors directly, if that’s what they want. You are left with speculators, trolls, and companies with special needs poorly matched to university-based work. Say no to these folks. If there’s a public purpose in helping them, then set up a private company to do the work, and faculty can do the work as consultants to that company, off campus, well paid, and free of university administration–which is a great thing for university administration, too.

Now there’s one step left, also pertaining to sponsored research. If your IP policy does not require university inventors to assign ownership of their work to the university, then neither should your research agreements–unless the university personnel involved agree upfront that university ownership (and open access) is what they want. The sponsor will get that same open access, so the issue won’t be IP rights–it will be IP provenance: do any contract deliverables come with IP that is not controlled by either the university or the research personnel involved? Log stuff in, keep track of it, mark it going out. There’s a good practice for anyone working with companies to follow.

5. End the practice of demanding that the university own IP created by its personnel in sponsored research

This action runs with not offering an option to an exclusive license. The practice of demanding ownership in research agreements is an administrative dodge to get around university patent policies that for the most part well into the 1960s were mostly voluntary. If faculty inventors wanted to patent, they presented to a committee and might be referred to Research Corporation or to a university-affiliated research foundation that had a deal with Research Corporation. In 1968, Norman Latker, patent counsel at the NIH, revived the NIH’s Institutional Patent Agreement program, recasting it to circumvent the Kennedy patent policy while giving the policy lip service. Under the IPA master agreement, a participating nonprofit was required to take ownership of every invention made in NIH-funded work that the nonprofit chose to try to patent.

The first university to sign up was the University of Wisconsin, home to the Wisconsin Alumni Research Foundation, which had been set up to manage Steenbock’s vitamin D patents and use licensing income to make money in the stock market, from which funds WARF made an annual gift to the University of Wisconsin for use in scientific research and education (but not social sciences and humanities, though later some WARF funding was allowed)–same language you will find in Bayh-Dole, not at all oddly or by mere coincidence. Wisconsin at the time had no patent policy at all. Inventions were owned where federal law provided they were owned–by the inventors. Wisconsin made no claim on those inventions. This was the real thing, the good stuff. You should try it. Really. But WARF wanted control of inventions made at Wisconsin to feed their stock investment scheme, and the IPA–drafted by Latker with help from Howard Bremer of WARF–did the job. Wisconsin research policy required everyone to comply with the terms and conditions of sponsored research, and for NIH work, Wisconsin administrators agreed to join the IPA program and in doing so created a patent policy for NIH-funded work that university faculty had no access to because the policy was embedded in an NIH contract that applied its patent requirements to every other NIH research contract at Wisconsin. So WARF could pick out whatever inventions it wanted, Wisconsin would take ownership per the IPA and pass the invention over to WARF to manage.

That’s the dodge, then. If the university insists on its ownership in a sponsored research contract, and the university has a policy that the terms of research contracts take precedence over any other university policy, including a patent policy that is mostly voluntary with regard to university ownership, then the university can change policy on ownership by controlling the terms in sponsored research agreements, and not change the text of its policy at all. It’s clever, but there’s a good argument that such dodges violate the more general university rules on delegation of authority. One may as well have a patent policy that says that the university gets ownership of whatever university administrators decide they want. That may sound attractive, but it really is neither attractive nor effective as far as technology transfer goes. Go the other way, return to the point at which your institution got lost, and start out anew. It will be good.

Inventions and works of authorship made in university research vest with those who do the inventing and authoring. Sponsorship of that research does not change that. Nor does provision of university resources–which are compensated for by indirect cost charges in the funding arrangements. Leave it that way until those involved request otherwise. Likely they will, especially if they want the university to front the risks, help to manage deals, even pay for patenting work. But if they choose it, it is so much better than if you forced them to it before they made their choice. The foundation of effective technology transfer is exactly these voluntary choices. Policy that overrides such choice is doomed to pull in a whole lot of debris, turn faculty into covert operators suspected of all sorts of nefarious dealings, and turn the university into something of an IP police state. You can’t tighten the policy screws enough to make your licensing operation effective. You just make it more cruel, less responsive, and more desperate to fake its metrics to keep you thinking that the compulsory model will work, somehow, in just a few more weeks. But it won’t, and you know it.

The TLO may well put up a horrible stink. Hold your nose and deal with it.

First, they will argue that Bayh-Dole prohibits universities from waiving ownership of inventions made in federally funded work. That’s not true. If they have got this basic bit of regulation wrong, then question their competence. If they are members of AUTM, then question as well their judgment. As the Supreme Court in Stanford v Roche (2011) held, Bayh-Dole does not require universities to take ownership of inventions made in federally supported work. Bayh-Dole creates no mandate for a university to take ownership, no special privilege to get ownership. Bayh-Dole does not work only if a university always takes ownership. None of that. Bayh-Dole applies only after a university has acquired ownership. That’s when an invention becomes “of the contractor” and if the other conditions are met, becomes a subject invention. If the university does not take ownership, then the invention is owned by the inventors, and federal agencies have no regulatory means to demand ownership. Bayh-Dole in fact eliminated that regulatory means and replaced with federal claims to ownership only if a contractor, having acquired ownership and turned an invention into a subject invention, decides it doesn’t want that ownership or otherwise screws up its patenting. There’s nothing in Bayh-Dole that reaches to inventors. There it is. If your TLO crew cannot comprehend this point, there’s another good reason to have them move along and get some people in who show better comprehension skills.

Second, the TLO staff may worry how they deal with industry sponsors of research. With the changes outlined above, it won’t be their problem. Most big companies want only non-exclusive rights anyway–and non-exclusive can be super easy to manage, such as by one sentence in the sponsored research agreement. “Sponsor will receive, upon request, a non-exclusive license, from the university or from those involved in the sponsored research, or both, to any deliverables unless marked otherwise as not originally produced under this research agreement.” Or, as a non-assert rather than a license: “University and its researchers involved in this work will not assert any intellectual property position against the Sponsor for anything that they make, invent, author, or collect, and which is a deliverable under this research agreement.” It also won’t be a problem for faculty startups, as they deal directly with inventors directly and don’t have to go through the bottleneck of the TLO. They may be fine, as well, with providing non-exclusive access to their startups. And if the university has a policy that defaults to non-exclusive licensing, they may be fine pushing inventions to the TLO and letting the TLO make them available, where it is easy pickings for the startup to get its license and run, looking all official.

The TLO may have another worry, and may hesitate to bring it up, but you will find others–administrators and even some faculty–that will raise the point. If the TLO doesn’t get all inventions, then some “big hit” inventions may “go out the back door” and make millions for their inventors and leave the university in the lurch. This worry is wasted breath. Making millions from the transfer of technology suggests there has been great success and it did not require the TLO to spend a dime or worry a worry. That’s a plus one for efficiency. Second, in my experience, at least, faculty who make millions in royalties tend to be very generous to the universities that have been supportive. They give back, sometimes much of what they receive. You shouldn’t question their generosity because you can imagine some few who won’t give back. Even if they don’t give back to the university, they may use their millions in other ways that benefit the public. Don’t think for a minute that the university’s coffers are the most compelling place for an inventor to be generous, and don’t think that a policy enforcing that crooked thought somehow will straighten it.

Spend your effort instead in keeping personal IP business activity separate from academic activity. Limit people in power relationships (supervisor, lab director, department chair) in their control over subordinates with regard to what those subordinates make and do (for their education, for the university, not for the startup not for some company that will own everything). It may take some effort to restore personal responsibility for IP, but once it’s back in place, you will see a much higher standard of professional care. It’s worth any of the fusses by which your people relearn about self-interest, promises, and dodges in a university environment.

Much of university IP policy is shaped as administrative answers to perceived problems. Each new bit of policy offers a patch on previous policy. As a problem is resolved, administrators resolve to never let such a problem arise again, so they draft more policy. Once they have policy, administrators have a propensity to try to expand it, so that everything is “uniform” and personal judgment can be replaced by procedures, and procedures can be managed by administrators who don’t need to know much of anything. Throw in some disinformation regarding Bayh-Dole and some related useless worry about compliance, and you will end up with the cruddy, ineffective, opportunity-crushing IP policies that you have now.

If anything a university should be the home of inventors and authors in a wild array of often informal, illegible, unmanageable activities. That’s great. It is a “scene”–as in “what a scene, you should get over to the university!” You do nothing for vitality by imposing a corporate-style orderly shadow over everyone’s work, and leaving it then to a TLO staff–no matter how well intentioned–to try to do something for everyone. It is not possible.

If a TLO operating under a compulsory IP policy does one significant deal a year, you should be ecstatic. Even one big deal every five years, or ten. But those deals are exclusionary–they drive away everyone else in the industry because your TLO has denied access to everyone else by playing favorites. By contrast, if a faculty inventor does that big deal, then it’s only that person that has self-isolated. Everyone else is still open to make relationships, and the real action comes when fifty companies are all working with a lab that has made its work available non-exclusively. There can still be payments–it costs to maintain assets and those costs rarely get covered by grants or donations–but companies habitually expect to pay for services that they want. It is not some strange new thing for them. And if each of fifty companies paying $5K a year sees that they are receiving $250K in new work for their $5K contribution, then it starts to look like really good business to sign up. The self-isolated faculty member might make millions, but will also be understood to be in the pocket of one company. If anything, a university taking ownership of an invention to do an exclusive deal for that faculty inventor uses its position to cover up the relationship between the faculty inventor and the company. It’s more laundering than it is stepping in to do what someone could not do for themselves.

A TLO may also argue that faculty and students are incapable of dealing with all the complexities of patent law, licensing, and license enforcement. Sure, that may even be true, but it’s a non-issue. Faculty and students deal with all sorts of complexities in their lives and where they need help, they get experts involved. They don’t have to know all the complexities of patent law and the like. There are law firms that can handle both patents and contracts. There are firms, too, that specialize in marketing inventions into specific industries. Not the “patent light bulb” firms that sometimes advertise late at night on TV, but firms that know an industry and have a track record of placing inventions in industry. These specialist firms have an advantage over a university TLO office, which, however diligent and capable its staff, simply cannot be expert in all industries across all kinds of inventions.

You have to see that it is impossible for a generalist TLO to be able to stay current and connected with everyone in every industry. Even a TLO focused only on biomedical inventions is still too broad to be effective–and all the worse if the TLO fixates on exclusive licensing. Every exclusive license implicitly excludes all that licensee’s competitors from considering licenses with the TLO. There are consequences to playing favorites in an industry. It is only possible to imagine a TLO being capable, through proper naming of the unit and hiring of a director with a background in “industry” or with “startups,” of handling any invention that anyone at the university might conceive if one is utterly divorced from actual practice and operates instead on rosy simplifications. Why, all that’s needed is to post inventions available for licensing and there will be a “market” for licensees streaming in to bid on exclusive rights. It’s pure fantasy, but it has been a highly seductive fantasy for university administrators, who slurp up news stories of lucrative patent deals and want one of those deals for their own institutions, but have no idea how those deals have come about, and whether the IP policies and practices that have been imposed after those deals have anything to do with finding another such deal.

By releasing claims on inventions and moving to a non-exclusive default for management, a university sets up its TLO to manage assets that it has a chance to move. The point of industry access becomes the laboratory rather than the TLO; the insight into who might adopt first comes from the connections that the laboratory has with companies. The advantage for these companies is that they adopt first, and get a jump on those that follow. The benefit that comes later for these companies is that they can develop on a common platform, saving development and training costs, which become shared across the industry.

To return your TLO IP practices to an effective footing, you need to ban claiming IP in research agreements. If you don’t need to offer an exclusive license to the research sponsor, and you don’t, then you also don’t need to claim ownership of the IP to support a default offer of a right in an exclusive license (or to negotiate for an exclusive license, or a first right to negotiate.

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