The use of the patent system for federal research results, 6: The seeming middle ground

Posted on August 3, 2021 by Gerald Barnett

While the FSA policy makes what appears to be nice gestures–royalty-free licensing or at least licensing without unreasonable restrictions and without excessive royalties–there’s little here to provide guidance so far. The policy continues, looking at the prong in which the agency director makes a determination whether to allow the grantee to retain rights:

If he finds that there is adequate assurance that the invention will either be effectively dedicated to the public, or that any patent which may be obtained thereunder will be generally available for royalty-free and nonexclusive licensing, the effectuation of these results may be left to the grantee.

Here, Possibility 1 is first indicated–nonnprofit open access. We have it rather clearly that “royalty-free” is within the scope of not “excessive” royalty, and that “nonexclusive” meets the expectation for not “unreasonable” restrictions. That is, if the grantee hasn’t gotten the right to retain title to inventions upfront, then an agency head can allow the grantee to retain title anyway, provided the grantee intends to make the invention available nonexclusively, and royalty free. Either the government does this, or the grantee for some reason does this. Doesn’t much matter.

The compromise word in all of this is “generally”–“will be generally available for royalty-free and nonexclusive licensing.” That is, the default is royalty-free, nonexclusive, but “in some cases” patent exclusion practices may be “necessary” to “foster an adequate commercial development to make a new invention widely available.” This compromise opens up 110-1 to exclusive licensing, suppression of competition (and collaboration), and patent speculation. Of course, that’s not put forward expressly, but such things can be construed as within the scope of “generally.” Continue reading →

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The use of the patent system for federal research results, 5: Possibilities of patent use

Posted on August 2, 2021 by Gerald Barnett

We are working through and around FSA order 110-1, the first major federal executive branch policy regarding inventions made in federally funded work, issued in 1952. The Supreme Court in its 1933 decision in Dubilier said the it was up to Congress, not the executive branch, to decide on any special requirements on the ownership of inventions made by federal employees. One would think, then, that it would also be up to Congress, not the executive branch to stipulate ownership of inventions for inventors who work for federal contractors and may not be either federal employees or contractor employees. But one would then think wrong. In a sense, then, Bayh-Dole completes–planned and pushed through by executive branch officials and lawyers, however wretchedly–the task assigned to Congress by Dubilier.

It’s worth looking at this policy for how it reflects a prevailing thought that federally supported work in health ought to be made openly available and for that patents don’t have much of a role but to disrupt and delay and embitter and exclude. Even so, the FSA policy also leaves open a role for patents. And the opening sets the stage for executive branch patent lawyers to work to change the default, eventually, so that patenting becomes the norm and not patenting or declining to enforce a patent or otherwise exploit its exclusivity comes to be depicted as a waste, a suppression of use, and abuse of the public. In Bayh-Dole policy talk–though no one will come out and say it–the public desires itself to be abused with unreasonable conditions and unreasonable royalties and pricing because to have any medicines at all is so much more important than anything that a monopoly on those medicines might involve. “Abuse us with monopoly pricing and limitations on function rather than abuse us by giving us open access but refusing to make the medicine at all.”

It’s a tough dichotomy, if those are the only two options one is willing to consider. Continue reading →

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The use of the patent system for federal research results, 4: Forman

Posted on August 1, 2021 by Gerald Barnett

We are looking slowly at FSA order 110-1, the policy that starts the administrative battle over how federal funding ought to affect company opportunities to profit on matters of public health. The FSA, having insisted that research results should be used in the best way to serve the public interest, then moves to explain what that way is:

It is believed that the public interest will in general be best served if inventive advances resulting therefrom are made freely available to the Government, to science, to industry, and to the general public.

Key words here: believed, in general, best served, freely available.

Passive voice to start–we don’t know who is doing the believing. God, maybe. Or a “reasonable” citizen, properly informed. And we get a return to “public interest,” as if public interest is a necessary administrative touch point, and now we get a specific stipulation, based on public interest without ever getting into what public interest concerns are in play. Public interest may as well be “the will of Zeus” or “political expediency” or “anything else is bound to fail as an argument.” Continue reading →

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The use of the patent system for federal research results, 3: FSA 110-1 and public interest

Posted on July 31, 2021 by Gerald Barnett

Federal policy on inventions made in federally supported research starts in a big way with Federal Security Agency Order 110-1, dated December 30, 1952. Norman Latker, patent counsel for the NIH, in 1978 testimony before Senator Nelson’s subcommittee, identified Order 110-1 as the basis for the Institutional Patent Agreement program, which in turn Latker later identified as the basis for his drafting of Bayh-Dole. Not that Latker necessarily complied with FSA 110-1, but rather found in its language sufficient ambiguity to, with a bit of spin, get the IPA program back up and going.

The Federal Security Agency was created in 1939 to bring together various federal agency activities pertaining to social welfare and public health, including what are now the NIH and Department of Education. The FDA was added in 1940, various bits were tossed off in reorganizations, until in 1953, the FSA was re-organized away into the Department of Health, Education, and Welfare. So order 110-1 was a beginning of federal invention policy created by an agency about to end.

Let’s have a look. We will take it slowly, so we can see just what Latker might have seen.

The Agency, as a matter of policy, takes the position that the results of research supported by grants of public moneys should be utilized in the manner which would best serve the public interest.

We stop here to wonder at this simple sentence that isn’t simple at all. The “as a matter of policy” qualification to what follows is odd. What other matters might be in play besides policy? Same for “takes the position that.” More oddnesses!  The sense of these two constructions is that there are other matters and positions, but that the FSA has for whatever reason adopted just this one policy position on the matter of research results. Rather than stating what might be taken as obvious, the FSA here makes a restriction–that results of publicly funded health research should be used to best serve the public interest, even though other uses might also be possible. Continue reading →

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The use of the patent system for federal research results, 2: Why universities patent

Posted on July 30, 2021 by Gerald Barnett

For an account that covers reasonably well the context for universities getting involved in patenting, see Elizabeth Popp Berman’s 2006 paper “Why Do Universities Patent? The Role of the Federal Government in Creating Modern Technology Transfer Practice” (draft here). What Popp Berman doesn’t notice also matters–the NIH IPA program was not “successful” despite Latker’s claim that it was, and the defense departments and the DOE did not adopt the IPA because they did not need it–they already had in the Kennedy patent policy authorization to allow contractors to retain rights to inventions, and most of the federally owned patents were on inventions made in DoD or DOE work where the contractors had declined to own, and the agencies used the patent system to document and publicize inventions, not to attempt to “commercialize” them by means of patent monopoly inducements. The industry that created these inventions chose not to fragment their cumulative technology by company ownership setting up to sue all others, and there was no purpose served in a federal agency withholding access to inventions in that industry by shopping patent rights exclusively to what amounts to predatory speculators on that industry, happy to deal in exclusive control of fragmented big Invention rights.

As for the Department of Agriculture and Department of the Interior, they had programs under which they undertook the development–new fertilizers, tomato picking machines, water desalination–and then released the developed products for commercial production. Harbridge House found nearly 100% placement rate when these agencies funded the development to the point of practical application. There would be no good reason for the Department of Agriculture to contract with five universities to help develop some new thing and then leave it to each to patent their little bits of the whole–blocking the other universities and handing over their invention interests to speculators. Even if each of the five universities were successful in their effort to license exclusively their bit of the whole to a company, the companies then would have to work things out–cross-license, say–before anyone could use or sell the completed tomato picker or whatever. And of course if the universities moved to non-exclusive licensing, how would that be any better than federal open access? And even if the universities all licensed exclusively to a single company, they would still have work out the patent stack–they can’t all have their 5% royalty, so such deals will, to each of them, look deeply unattractive–only 20% of the potential “return” of a deal done with a company that doesn’t have to acquire four other patents before it can make and sell product.

Past the university administrative verbal flapping about exclusive licensing, there’s simply no substance to their claims that they can transfer technology better with exclusive licensing than can federal agencies with open access. Their claims may sound good, but only if you have no experience in technology transfer or don’t bother to work through how things happen in the real world rather than the fantasy world that university administrations feel the need to present to the public and to policy makers.

Most federal agencies had no need for the IPA program developed by Latker at the NIH. The IPA program was, in its fundamental design, a horrible thing for any agency spreading work around in a given area, where multiple nonprofits might then invent as part of what ought to be collaborative work to contribute to a cumulative technology base, or platform, or library of methods and materials, or ad hoc standard. It’s nothing that Latker’s IPA program was blocked as the default. It should have been blocked. It was stupid, just as Bayh-Dole is stupid. It’s just that no one can out and say this in the university community. Instead, they put on airs, and make their aspirations (that something stupid will work given enough time and money) appear to be facts. If anyone wants to know why there’s so little “innovation” from the billions of dollars spent on university each year, one reason is that key outcomes–inventions–are controlled by sincere, diligent but often dishonest (oh, it’s just politics for them) and badly informed university administrators.

Continue reading →

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The use of the patent system for federal research results, 1: Dubilier

Posted on July 29, 2021 by Gerald Barnett

It starts with Dubilier. In 1933, the Supreme Court decided in Dubilier that federal employees, just because they were employed, did not give up their personal–Constitutional–rights in inventions that they made. Considering the possible differences between private employment and federal employment, the Court placed the responsibility for claims on federal employment inventions with the Congress:

To the laws passed by the Congress, and to them alone, may we look for guidance as to the extent and the limitations of the respective rights of the inventor and the public.

Furthermore:

And this court has held that the Constitution evinces no public policy which requires the holder of a patent to cede the use or benefit of the invention to the United States, even though the discovery concerns matters which can properly be used only by the government; as, for example, munitions of war.

Oddly, then, the Court creates the situation in which the Congress does not have a Constitutional mandate (or power delegated by the States) to create a claim on inventions made by federal employees or contractors, other than when, as with private employment, an inventor is hired expressly to invent, and does so. Thus, this outcome (quoting the opinion in Solomons v United States):

An employee, performing all the duties assigned to him in his department of service, may exercise his inventive faculties in any direction he chooses, with the assurance that whatever invention he may thus conceive, and perfect is his individual property.

Continue reading →

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Goodyear and use of a gateway patent to control a big Invention

Posted on July 28, 2021 by Gerald Barnett

In Medical Monopoly Joseph Gabriel describes how Charles Goodyear used patents to lock out competitors from using his process for “vulcanizing” rubber without a license. We will use Gabriel’s account to consider alternatives to the prevailing university narrative about how the use of patents is supposed to work in university research.

In 1844 Charles Goodyear obtained his first patent on the process of vulcanization, and Goodyear then licensed the rights to make specific products using his method to individual manufacturers.

So far so good. This is the general idea behind a “good” use of patents, allowing inventors to control the market for the use of their inventions for a limited period time, obtaining a financial benefit as a share of the financial benefit gained by others in a stream of commerce.

Goodyear’s process had significant drawbacks–he had rushed to secure the patent for commercial reasons–and it took another four years of work by Goodyear and a number of other inventors in the field before high-quality vulcanized rubber could be reliably produced.

Here we see an implicit distinction between the inventing that “reduces an invention to practice” to demonstrate that what’s claimed really does work and the inventing, retooling, testing, and training that may subsequently be needed to make from some initial invention a new, broader, invention work in a manufacturing and mass production environment. In a sense, then, there may be an initial or gateway invention, and from that invention might spring a number of other inventions and non-inventions (NIPIA!–non-IP intangible assets) that, taken together, form this broader invention, something that is reliably produceable and useful. We can call this collection of assets the Invention, with a capital I. Continue reading →

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Status Update

Posted on July 8, 2021 by Gerald Barnett

If you are looking for new posts, you have just a bit longer to wait. Life pulls many ways! But I’ve got a number of articles drafted and more planned. When things settle down, I’ll have more time. Then things should be back to regular postings.

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Funnel vision and university default exclusive licensing

Posted on June 3, 2021 by Gerald Barnett

Much of the current, dominant narrative about patents at universities depends on looking isolating single inventions at a single institution with a single profile for use. “Inventions,” so this narrative go, will not be used or developed unless for each a patent position is established so the university grant an exclusive license to a company attracted to the incentive of that exclusionary position.” Without such an “incentive,” no company will spend the tens of millions of dollars necessary (it is claimed) to make the invention benefit the public.

Perhaps that sounds right to you, sounds normal, like there’s something to this narrative about patents. If so, but why? Is it just that’s all you’ve heard about patents at universities?

Let’s add in necessary qualifications to this narrative of the single patentable invention that should be “protected” so an exclusive licensee has an incentive that it otherwise would not have to spend money to develop the invention for public benefit. Continue reading →

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Learning from Latker’s 1984 “Federal Initiatives for Innovation” Talk, 3

Posted on June 2, 2021 by Gerald Barnett

Norman Latker, formerly patent counsel at the NIH and chief architect of Bayh-Dole and its extension by Presidential memorandum to all federal contracting, argues that if federal inventions are not privately owned and exploited for their exclusionary and financial value, then the results of federally supported research are wasted, and the public will not benefit from federal research because companies will not adopt or invest in anything that they cannot own exclusively–or, more particularly, given that American companies at least won’t adopt much of anything made in federally supported work, that patent speculators ought to be given “incentives” of patent exclusion to put up the money to make commercial products that, when sold at whatever price the market will bear and in whatever form might be most profitable, will then serve the public interest.

Latker proposes a plausible fantasy. Fom a practice point of view, it’s nonsense. Companies adopt new technology all the time that does not come with a gift of exclusionary rights. There’s no additional uncertainty if the federal government takes ownership of inventions made in its operations and releases those inventions, uniformly, without conditions or payment requirements. Such open access amounts to a more robust public commons–a sort of federal open innovation. If the federal government had the right to deal exclusive rights in any such invention, then a company might hesitate–why should it contribute to research that could, when any invention arises, be diverted to a federal agency that could play favorites in the market, cutting out everyone else with an interest.

And that’s just what Bayh-Dole has done–by act of Congress authorized federal agencies to deal in exclusive patent rights. 35 USC 207(a)(2): Continue reading →

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