Smells Like Bayh-Dole Spirit

Bayh-Dole has two main concerns: contractor patent rights (35 USC 202-204) and federal agency disposition of patents (35 USC 207-209). These two sets of provisions work together in odd but let’s say intended ways. For instance, 35 USC 207(a)(2) authorizes federal agencies to deal in exclusive licenses, take a money interest in licenses, and sue for infringement or do so by a commercial proxy. These are huge changes, repudiating the 1947 AG’s recommendations that had long been the basis for executive branch patent policy. So if a contractor, having obtained ownership of an invention made in federal work, decides not to continue owning it, or decides not to file a patent application, or not to continue prosecution of a filed application, and the like, then the federal agency has the right to request assignment of the invention. Once the government owns the invention, 207(a)(2) applies, and the federal agency can license the invention exclusively to whomever.

The contractor and its inventors then face the possibility of losing the freedom to practice the invention, and other than what company the federal agency licenses to–if it licenses at all–the contractor and inventors also lose reason to work with any other company on developing or using the invention–all because of the federal control of any patents on the invention. Well there is still a reason to work with other companies–to design around the invention now held by the federal agency, to *avoid* using it, to make it *obsolete* or *irrelevant*.

To be bluntly about it, 207(a)(2) pressures contractors to file patent applications on subject inventions just to keep control of any patents out of the hands of federal agencies who might then block any further technology transfer or development by either the contractor or its inventors.

Without Bayh-Dole–and with the 1947 AG’s recommendations still in place–if a contractor chose not to seek patents, then the federal agency had the right to obtain ownership of each invention. But even if a federal agency obtained patents, it would not enforce those patent rights. Thus, contractors, inventors, and research teams knew that regardless of whether they were permitted to keep principal rights they would always have freedom with regard to their research work (with respect to patent rights in that work), and could provide it freely to others without the threat of a government-backed lawsuit even if the federal government came to hold patent rights in their inventions. That’s not the case under Bayh-Dole. That’s a big, nasty change. You can almost smell it!

Bayh-Dole’s implementing regulations aim to mitigate 207(a)(2)’s authorization for federal agencies to grant exclusive licenses. In something of walk-back, the regulations copy over from the now-defunct Federal Procurement Regulations from 1975 a provision that somewhat assures contractors of a royalty-free license to inventions acquired by the federal government, with a right to sublicense to anyone that the contractor was legally obligated to license to prior to the funding agreement under which the invention was made. See 37 CFR 401.14(e)(1). That’s a weak gesture, and mind-bending. A contractor would have to have prospective license deals with other companies for inventions to come out of a federal funding agreement before that funding agreement came into effect, and before any invention that might become a subject invention could be made. But it is worse. This license and right to sublicense is also revocable at federal agency discretion “to the extent necessary to achieve expeditious practical application of the subject invention” (37 CFR 401.14(e)(2).

All this is just screwy weird. First, the standard for march-in beyond practical applicaton is “action is necessary to to alleviate health or safety needs which are not reasonably satisfied by the contractor, assignee, or their licensees” (35 USC 203(a)(2)). Not “reasonably accessible to the public.” That language comes from the Kennedy patent policy of 1963, retained by Nixon in his 1971 revisions, and incorporated into the long form patent rights clauses for domestic contracts (1-9.107-5). But that’s not Bayh-Dole’s standard–that’s what Bayh-Dole is replacing for small businesses and nonprofits. Sloppy drafting? Sloppy thinking? Your choice.

Here we have the tangled logic of exclusive patent rights fighting with the public domain. Exclusive patent rights, we are told repeatedly, are necessary for any invention to attract the private investment necessary to be developed into anything beneficial to the public. If federal research inventions aren’t patented, and the patents exploited to suppress access but for a favored exclusive licensee, the inventions will just “sit on the shelf” and the federal research money is wasted (as if the only result of any federal research of any public value is patentable inventions–which is absurd, but there it is). Without this claim that patents must be used to exclude all competition or inventions won’t be used, there is no reason for Bayh-Dole. It just vaporizes. So Bayh-Dole, with all its qualifications and options, comes down to company contractors excluding all others (or risk being excluded by the federal agency), nonprofits licensing exclusively and excluding all others (or risk being excluded by the federal agency), and federal agencies licensing exclusively (with nothing happening if they don’t license at all).

Yes, it does get even worse. The federal agency licensing side of Bayh-Dole, having authorized federal agencies to deal in patent monopolies, to take a money interest in licenses (and so, having an interest in seeing each exclusive licensee profit as much as possible), and to sue for infringement (to protect exclusive licensees from competition so they can charge monopoly prices), goes about trying to limit when federal agencies can grant exclusive licenses. Here, look at 209(a):

A Federal agency may grant an exclusive or partially exclusive license on a federally owned invention under section 207(a)(2) only if—

(1) granting the license is a reasonable and necessary incentive to—

(A) call forth the investment capital and expenditures needed to bring the invention to practical application; or

(B) otherwise promote the invention’s utilization by the public;

I’ll wait while you go back and really read that! No, read it. That “only if” sounds pretty darn firm, but wait–if exclusive rights are assumed to be necessary for the use of any invention, then an exclusive license will always be “reasonable and necessary”–that’s the whole premise of Bayh-Dole, isn’t it? According to the monopoly meme’s twisted logic, inventions sat on the shelf because the government wouldn’t grant exclusive licenses or allow nonprofit contractors (really, their research foundations) to grant exclusive licenses. So here, we get drafting to make it look like there’s a big limitation when in practice obviously there’s not.

Just to make it clear that there’s no restriction at all, Latker has thrown in a (B) prong–even if the invention doesn’t require any investment capital in order to be used, or that exclusivity won’t “call forth” (oh, gawd the archaic diction here) that capital, a federal agency can still grant an exclusive license “otherwise”–it’s not even that the exclusive license will better promote utilization than would open access or non-exclusive licensing–it’s just “otherwise promote.” Do whatever you want, but it is made to look like a big hurking limitation to protect the public from patent abusers. Thus,

to the extent necessary to achieve expeditious practical application of the subject invention

is just a mockery of a limitation. The metaphysics of Bayh-Dole is that exclusivity is always necessary (no “reasonable” here–clearly no one drafting the standard patent rights clause thought it mattered, maybe because “necessary” was assumed or maybe because these folks were such sloppy drafts-people that they couldn’t write a direct sentence to save themselves, or maybe they chose not to write direct sentences because they were intent on hiding what they meant, snookering the Congress, and setting up shop to screw over the American public with bozo patent licenses for speculators, trolls, and monopolists and their owners and investors).

The “expeditious” is interesting because it is not in 209(a), and isn’t even in 203(a) for contractor march-in. In 209(a)(3)–and 209(d)(3)(A))–it is “a reasonable time” and in 203(a) it is “not expected to take within a reasonable time, effective steps.” That is, not just a reasonable time to get to practical application, but rather a reasonable time to start taking effective steps to maybe get to practical application. What horse droppings we have here–unless the aim all along has been to hide the exclusive licensing pathway under the merds of regulations that don’t ever regulate. Then this is a master work of drafting, worse at what it does best.

So federal agencies can grant exclusive licenses even if an invention does not require development to achieve practical application, even though the only meaningful reason for granting exclusive licenses is to call forth investment capital because the invention, if left available to all, has not been developed as needed. If one were thinking about this stuff even for a bit, one would see that the test of “necessary” is that an invention is first offered on a non-exclusive basis (maybe even royalty free) and after say three years if no one has licensed the invention and developed it as needed for public benefit, then, say, try an exclusive license to “call forth” that cowardly stupid money that will invest only if it gets exclusive rights via a patent license, for which it is willing to pay a share–nudge, nudge, wink, wink–of the patent-monopoly profits that must motivate the investment.

Now come back to the standard patent rights clause at 37 CFR 401.14(e). There’s one bit that was not copied from the Federal Procurement Regulations long form patent rights clause, but added as a new thought:

This license will not be revoked in that field of use or the geographical areas in which the contractor has achieved practical application and continues to make the benefits of the invention reasonably accessible to the public.

Woah. Reset: the contractor has not wanted patent rights, and so floats these off to the government. Under the FPR, everyone would then have access regardless of whether the federal agency used the patent system to mark how wonderful the federal funding had been in producing patentable inventions. The contractor, inventors, research teams, federal agencies, competitors, collaborators, entrepreneurs, DIY public–all would have access. But under Bayh-Dole’s standard patent rights clause, here, we have a big problem. In this conditional, the contractor has gone off and achieved practical application without needing a patent to exclude others or to call forth investment capital from people all hot for monopoly patent profits.

If that’s the case–this is the premise of this bit of the patent rights clause–then there’s no way that a federal agency could determine that an exclusive license was needed to call forth investment capital, but for which exclusive license and capital there could be no practical application. Because, clearly, the company has indeed gone and achieved practical application anyway. But, yes, there is that “otherwise” clause in 209(a)–so even though the invention does not require private investment capital to be called forth to save the public, a federal agency can still revoke the non-exclusive license everywhere that the poor contractor has not got to with its practical application. Of course, on the monopoly meme premise that what’s available to all will be used by none, there should be no-one showing up at the federal agency for an exclusive license because, well, there’s competition out there already and so why would anyone else invest? or pay the federal government for a license that has a competitor already baked in?

Take one more step back. If the monopoly meme premise is right, that patent exclusivity is necessary, then there will be no contractors who give up patent rights to the federal government and then go on to achieve practical application. They just won’t ever do it. They aren’t fools! That’s the necessary logic that Bayh-Dole is based on, such as it is. How can anything serious be this utterly confused? And if a contractor is fool enough to go on with practical application anyway, then a federal agency can starve the contractor out by revoking the non-exclusive license everywhere that the contractor has not got to or has limited supply–“you didn’t sell enough here, so revoked.” Eventually, the federal agency and its royalty-paying exclusive favorite speculator will corner the market. How’s that for effective conflict of interest?

Does it smell like Bayh-Dole spirit yet? Repeal the sucker and all its stupid, clumsy, disingenuous drafting. American research innovation deserves a whole lot better.

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