AUTM arguments for not complying with Bayh-Dole

Just a quick note here on AUTM arguments are for not complying with Bayh-Dole. Just off a meeting that paid attention to AUTM’s position. I’ll summarize the main arguments here.

  1. Access in the form of commercial products is more important than compliance.
  2. Exclusive licenses are more difficult to close without the incentive of monopoly pricing.
  3. Without exclusive licensing, commercial products won’t be made.
  4. Bayh-Dole’s “reasonable terms” requirement would mean fewer exclusive licenses.
  5. “Reasonable terms” don’t include reasonable price because price isn’t mentioned.
  6. Senators Bayh and Dole claimed they never intended Bayh-Dole to be used for price controls (which they did).

In short, the argument goes–if we were to comply with Bayh-Dole, then we could not grant as many exclusive licenses–but rather than own up to our noncompliance, we claim that we are complying with Bayh-Dole and ignore the parts that we aren’t complying with. They don’t bother pointing out how few exclusive licenses they actually grant compared to the size of their patent holdings, or how few of those exclusive licenses that they do grant result in actual commercial products. It’s really hard, the way they do it, obviously.

Put another way, Bayh-Dole must be ignored to the extent that it expects reasonable pricing or the promotion of competitive use of subject inventions–even though these are express objectives of the law. Another way, AUTM argues that Congress intended patent monopoly pricing and suppression of competitive use of inventions made in federal work as necessary incentives for the commercial development of those inventions. Or, bluntly, the only way that new medicines get developed is if pharma companies have the freedom to screw the US public on pricing, and since that is just how it is, it makes sense for universities to get a share–however miniscule–of this price gouging of the sick and the federal government. The royalty paid to the university in a small way lightens the pain of the price gouging by giving the public a “return” on the federal payment of research funding. There is no point in finding other ways to develop new medicines–all other ways will fail.

Underneath this argument is an assertion (if not actual belief) that exclusive licenses are the only (or primary or best or default) way that inventions made in federally funded work will ever be used or made into products. That assertion is backed by the (undocumented, wrong, misleading) claim that when the federal government held patents–26,000 or 28,000 or 30,000–most were not used and few were licensed, and the parallel claim that in university licensing office hands, many more such inventions are used and made into commercial products. This position was baked into AUTM back when it formed as SUPA in 1975  under the influence of Norman Latker of the NIH, to provide a lobbying function to support his effort to turn the NIH IPA program into government-wide federal law.

All this is so much B.S. That is, it has no regard for the truth of things. Or, rather, the truth it has a regard for is a belief system that lacks anchors in law, history, and practice outcomes. In a way, it is a cult that cannot give up its cult positions. In its way, AUTM’s position is a persistent statement of self-interest. On the surface, that self-interest is about public benefit. But that’s just a premise. Anyone can claim a good intention as a cover.

(Aside. I once worked on project aiming to find a cure for glioblastoma, an almost always fatal and nearly untreatable form of brain cancer. From diagnosis to death average is 14 months, and that’s with a surgery that might double life expectancy from 7 months or so. After months of work, the project was blocked by the technology transfer unit of a major medical operation, who refused to allow surgeons at his institution to exchange diagnostic information and treatment ideas with other surgeons at other hospitals–there might be something patentable! he insisted. No sharing allowed, everything had to be “commercialized” or otherwise withheld.

That delay has gone on now over three years and the project is pretty much dead. Of course, his medical institution is doing a brisk business on the surgeries. When I objected that people were still dying while he dithered, he interrupted on his moral high horse and asserted that he cared more about these dying patients than anyone in the room. His licensing operation paid the surgeon’s salaries, he’d have us know. So much for claims of good intentions without the deeds to back them. The “good intention” of trying to find a treatment for glioblastoma by suppressing collaboration so that patentable things might be pushed toward speculative investors and to companies that have failed for decades to produce an effective treatment just shows how a seductive but ineffectual idea can, if draped in public benefit, blind IP folks to what is otherwise possible. Not only that, but it repudiated the AMA statement on medical ethics. What the hell.)

Just under the surface, the AUTM position is about making the most money possible, in the most worldly and practicable manner, and that means taking a share of the biggest possible revenue, and the biggest revenue, in this conception of financial return, means supporting patent monopoly pricing and suppression of alternative (“infringing”) practice.

(I’ve heard only one vice chancellor for research concerned with anything other than licensing money, and especially net licensing money. Certainly not public benefit–mere idealist fluff. Early in my work in university licensing, I was asked to work with faculty from the School of Nursing who had developed a care booklet for family providers working with AIDS patients. I called up the university’s press and found a responsive editor–you have to publish this booklet, and let’s do it royalty-free, at cost. Nursing faculty were all for that. So the press published the booklet, at a very low price. No one made money, or even tried to. After the deal was done, my boss called me into his office and drubbed me down for not getting a royalty. Okay–that’s where these folks are at.)

Deeper, that self-interest is about refusing to accept that their assertions about Bayh-Dole, government open access to inventions, and their fixation on ownership of inventions and the role of exclusive licensing are wrong–or let’s say lack the support of evidence or reasoning–or even that Bayh-Dole might work better if they complied with the law, and that there may be better ways of assisting others in the use and reliance on inventions and other stuff made in federally funded work. In other words, once an institution has taken a public position, it generally will refuse to change that position, no matter what. You think Lance Armstrong was stubborn? You haven’t seen AUTM yet. Nothing will back them down. There is no conversion experience possible. No shining light. No vision. No change.

Perhaps I have lost hope. What could possibly cause AUTM to renounce its present position and arguments, own up to its own problems with outcomes, and adopt a position that had support in the law and respected university public missions? Nah. Can’t happen.

In rebuttal to the AUTM position, here are some arguments, again in outline:

  1. Compliance with Bayh-Dole is essential to its Congressionally intended effects.
  2. Bayh-Dole gives “utilization” of inventions as its first objective, not “access.”
  3. “Practical application” is “utilization” that provides public benefit.
  4. Practical application includes “available to the public on reasonable terms.”
  5. “Reasonable terms” in Bayh-Dole necessarily includes reasonable pricing.
  6. Reasonable pricing in Bayh-Dole means competitive pricing–pricing one would reasonable expect if there were competitive use of a subject invention, even if a patent is used to suppress competitive use. It is how Bayh-Dole march-in works.
  7. There is no incentive to monopoly pricing in Bayh-Dole.
  8. What Bayh and Dole claimed as their personal intent has nothing to do with statutory interpretation. When Bayh tried this on the Supreme Court in Stanford v Roche, the court ignored his amicus brief, read the law for its plain language, asked what Congress intended, and ruled against what Bayh swore was his intent.
  9. Bayh-Dole states as another objective to “promote free competition and enterprise.”
  10. Exclusive licensing is to be used only where necessary (compare 35 USC 209).
  11. Many inventions will be used and developed because they are part of platforms or standards, with common access rather than isolated by an exclusive license that poisons royalty-free sublicensing or dedication to a platform or standard.
  12. Exclusive licensing with a reasonable pricing requirement may be more difficult–and that is a policy decision made by Congress–mere difficulty is not a reason not to comply. The difficulty might help to find participating companies that have a better commitment to public benefit, accept the value of competitive use (which also may be collaborative use that distributes development costs rather than duplicates them), and not so much solely to maximizing profits.
  13. It is unlikely that a commercial product will be made from most inventions, including ones made in federally funded work, but restricting access to exclusive licensees only makes it even more unlikely that commercial product will be made, since an exclusive license isolates an invention and forces the rest of an industry to design around that invention and avoid working with the university that granted the exclusive license–if any exclusive license is ever granted, which is rare anyway.
  14. In the Bayh-Dole era, universities have acquired more than 50,000 patents citing federal funding, most unlicensed. Stanford reported it licensed only 20% of the inventions it claimed, and only a very few–under 5%–resulted in commercial products of any significance. Even fewer, if one considers exclusive licenses only.
  15. Most of the federally held patents prior to Bayh-Dole arose in defense contracting where contractors could hold patents but chose not to. The federal government made these inventions available royalty-free, non-exclusively and in many cases did not police use, track use, or require licensing. Where the government did track licenses (to address public interest matters, not money or exclusivity), in biomedical the government licensing rate was comparable to the best university agent licensing rates at organizations such as Research Corporation.
  16. Prior to Bayh-Dole, the NIH ran an IPA program under which nonprofits could hold patents in inventions made in NIH-funded work. That program had 4 commercial products from 96 inventions. Worse by far than the university agent licensing rate. The IPA programs were shut down in 1978 as ineffective and contrary to the public interest. Latker, NIH patent counsel who drafted Bayh-Dole, said he based it on his IPA program.
  17. Bayh-Dole’s “reasonable terms” requires competitive pricing; contractors are required to grant the government (1) a government-purpose license to practice and have practiced worldwide each subject invention (where practice means “make, use, and sell”–language adopted from the Kennedy patent policy via the NIH IPA master agreement; (2) a government right in each subject invention to request licensing if an invention is not available to the public on reasonable terms (the licensee does not have to change its pricing, but it has agreed to allow competitive practice of the invention if its pricing is not competitive); and (3) for nonprofits and any company accepting assignment of a subject invention from a nonprofit (including assignment by an exclusive license of all substantial rights in a subject invention–make, use, and sell, for the term of the patent, with right to enforce), the nonprofit patent rights clause will control and requires all income earned, less the cost to administrate subject inventions, to be used to support scientific research or education. Windfall profits go to charity or price competitively or don’t take an exclusive license that’s also an assignment from a nonprofit.
  18. Even a non-compliant reading of Bayh-Dole does not give universities a free pass to violate their own policies and written commitments to public interest in the management of inventions. Nothing in Bayh-Dole requires a university to allow monopoly pricing or to suppress competitive practice of a subject invention.
  19. That Senators Bayh and Dole claimed that “reasonable terms” did not include price controls is misdirection and doesn’t matter. What matters is what the Congress intended, and Bayh-Dole does not impose price controls. Bayh-Dole imposes a duty to price competitively or be exposed to competitive use of a subject invention. That’s not a price control. Competition addresses price, else antitrust. Bayh-Dole uses non-competitive price (an “unreasonable” term) as a standard under which the government has the right to act on the conditional permission already granted by the contractor to request licensing or do the licensing itself if the contractor refuses.
  20. AUTM is plainly wrong about the law, the law’s history, and university licensing outcomes. AUTM is also wrong on moral grounds and takes positions opposed to the public and the public missions of universities.
  21. Even if AUTM were right about Bayh-Dole and exclusive licensing, the IP practices of universities work against public and commercial uptake of inventive work done with federal funding, even as it is documented that there is great uptake of unpatented work done with federal funding.

Dunno. I see nothing here that will change AUTM’s position. The best we might expect is for universities to disavow AUTM as representing their positions–since AUTM does not appear to represent any university’s position–and to refuse to fund their licensing officers’ memberships in AUTM. If university licensing officers left AUTM as a career or moral or financial hazard there might be an opportunity to form professional organizations that did not take a position on Bayh-Dole and did not lobby but rather focused on how university-based new technology might be made available for use and development–and made available to the public on competitive terms.

[okay, let’s make it even simpler:

1. Congress intended us to do what we are doing.
2. Federal agencies support what we are doing.
3. What we are doing is successful.
4. Whatever the law says, it authorizes what we are doing.
5. So proper reading of the law confirms what we are doing.
6. No readings that conflict with us are correct.

This line of argument failed utterly in Stanford v Roche, where AUTM and many university attorneys submitted amicus briefs to this effect. The Supreme Court found it “deeply troubling” if Bayh-Dole were read the way AUTM (and Bayh, and university attorneys) claimed–signaling it would seem, that there are ways of reading Bayh-Dole (as advocated by AUTM) that would render the law unconstitutional. This all beside the point that there’s nothing to show Congress intended what AUTM says universities are doing, or that what they are doing is successful against Bayh-Dole metrics, and it is a disaster to make the law’s wording be forced to say what the university licensing managers say it must mean (or they would be doing non-compliant, er, illegal things, eh?).]

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