Five Audit Issues for University Compliance with Bayh-Dole

Posted on October 10, 2016 by Gerald Barnett

While most discussions about Bayh-Dole compliance focus on the time periods for reporting inventions, filing patent applications, and giving notice of election to retain title, the compliance issues that matter are often overlooked. The top five involve ownership, money, and accurate representations of the law.

If you are going to audit a university patent practice, here are things to look for.

1  University representations of the Bayh-Dole Act, its implementation, and standard patent rights clauses. 35 USC 200-212; 37 CFR 401; 37 CFR 401.14, 37 CFR 401.9; and 2 CFR 200.315, 316.

From 1981 until 2011, many university patent policy statements, practice manuals, and guidance documents claimed that the Bayh-Dole Act vested ownership of inventions made with federal support in the university. These documents differ in their account of how the law operates, but agree that Bayh-Dole gives the university the right to take title from inventors. In 2011 the Supreme Court expressly rejected these claims.

Bayh-Dole does not apply to universities; it applies to federal agencies and to federal patent law.

Bayh-Dole does not vest title to inventions in university contractors, does not give contractors a right to take title, does not give contractors a right of first refusal, does not give contractors title upon notice to elect to retain title. Bayh-Dole establishes a contracting default that restricts a federal agency’s power to require assignment of title if a university has somehow acquired title.

Bayh-Dole does not require commercialization; it requires use of the patent system to promote practical application of inventions made with federal support. Practical application is defined as (i) invention use (ii) that can be established (i.e., not secret) with (iii) benefits (iv) available to the public (v) on reasonable terms. While commercialization may achieve this end, there is nothing in Bayh-Dole that requires commercialization to be used to do so. Continue reading →

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Imagine

Posted on October 8, 2016 by Gerald Barnett

Without patents, we would ask whether invention means all that much in the menagerie of university research insights.

What sort of epiphanies did you have today? Ah, I found an error in a published paper, had an inkling that there was a different cause at work than the one I had been assuming, thought of a new place to go to collect fossil pollen, and designed an interface between my microscope and my iPhone. Oh, nice!

What you do next is up to you. You could chase down any one of these, or you could have more epiphanies tomorrow that are even better. The basic expectation is that of what you do chase down, you will publish what is worth publishing and teach what is worth teaching and continue to epiff early and often.

If there were a business in collecting fossil pollen (there is, actually), you would have to decide whether it was worth it relative to doing your faculty thing, which you have spent a decade or so working toward, what with the doctoral studies and years as an assistant professor. Value would be relative. What of your work today has value, and who decides that value and what is that value is worth? Someone might appreciate that you found a flaw in a published paper. And someone might really want to see your new pollen samples, when you get them–and if they are there. Working on a new causative agent might open up a different pattern of attack to a long-standing problem. And that interface between the microscope and smartphone–well, now, that could mean a bunch of fun making plastic large-scale replicas of fossilized pollen grains. There could be good money in any of these things–but is pursuit of money the thing? And if someone else wanted to interface their microscope to smartphone, would you fuss about it and wish you could make them stop or pay you because you think you thought of it first? Or would you be glad of the company and compare notes on how to make things work?

And of the things you have done today–discovered an error, thought about a new angle, decided where to do some collecting, and glee that you can 3d print directly from your microscope–how do those rate with what you might find tomorrow or the next day? Continue reading →

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Things universities can do with patents

Posted on October 6, 2016 by Gerald Barnett

A patent has many uses.  A patent can be used to:

  • exclude others from using an invention the patent owner is using
  • prevent others from using an invention the patent owner is not using
  • extract payments from users or companies wanting to market products
  • leverage access to the technology of others
  • create a common platform or standard
  • create a patent pool
  • charge a higher price for a product than if there were competition
  • appear better to investors and customers
  • justify the development of a product that is expensive to create

Within these uses are all sorts of variations, too. Deter research uses of the invention that might lead to work-arounds or blocking improvements. Block access to improvements based on the invention desired by other companies for their products or operations. Cross-license to eliminate competition based on rights. Establish industry roadmaps that give advantages to the company’s investments and products. Limit other companies’ ability to compete for government contracts. Justify the development of a product that is expensive to create but easy to copy. Justify the development of a product that is easy to copy, regardless of the expense. You get the point–there are many ways in which a company can use patents.

Now consider a faculty investigator working at a university. He (or she) invents. It’s a patentable invention, at that. Of course, all those company practices are available to him (or her) as well. But what of those practices are appropriate for an inventor who is working at a university? Two stand out:

  • create a standard or standard platform
  • justify the development of a product that is easy to copy

Why just these two? Continue reading →

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Active Latency Innovation

Posted on October 4, 2016 by Gerald Barnett

In The Lever of Riches: Technological Creativity and Economic Progress, Joel Mokyr works through an economic history of technological change. He observes that sometimes changes happen incrementally, and sometimes with a sort of “macro” leap.

mokyr-lever-of-riches

It appears that in some cases, at least, there’s an invention–an insight–that goes straight into use, and at other times, the first insight awaits variations or improvements or change in context to become valuable for use. That is, there’s a potential latency around insight and we might even postulate that latencies are in general “longer than immediate.” That is, it is rare that an invention on its own is ready to be developed for use. More often–way more often–it will have a long latency. In neolithic times, those latencies could run 10,000 years, easy. Now we fuss if we can’t do something within the term of a patent–or within two or three years in the case of some areas of information technology.

There are then these two complementary activities–insights and the variations that make the insights compelling. As Mokyr puts it: “the person who came up with the improvement that clinched the case receives more credit than the inventor responsible for the original breakthrough.”

H.S. Harrison provides a similar account of technological “mutations” in an article he contributed to A History of Technology (in volume 1). Continue reading →

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Seven key documents frame university invention management

Posted on October 3, 2016 by Gerald Barnett

Seven documents frame university management of inventions:

There is much more to it, of course, but these are core.

Without being frivolous about it, arena rock also extensively discusses institutional patent policy:

I expect you can think of more.

 

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Does Bayh-Dole Require Reasonable Pricing?

Posted on October 2, 2016 by Gerald Barnett

[Revised and extended for clarity]

Short answer: no, but well, sort of, er, actually–yes! but not what you might expect.

In 2005, Norman J. Latker, the key draftsman of both the Institutional Patent Agreement and Bayh-Dole published a critique, along with co-author John H. Rabitschek, of efforts to use march-in provisions to address the pricing of drugs that had been developed from subject inventions. In “Reasonable Pricing–A New Twist for March-in Rights Under the Bayh-Dole Act,” after the usual unsubstantiated claims that the law has been wildly successful, Latker  and his co-author provide a brief history of march-in provisions, from various presidential executive orders to the Institutional Patent Agreements.

Turning to Bayh-Dole, Latker argues that Bayh-Dole “can be considered a codification of the IPA.” Odd as it is to contest the account of the man who wrote the bill, Bayh-Dole is hardly a codification of the IPA. Bayh-Dole might better be described as a distortion of the IPA mashed up with federal procurement regulations. While there is much in common in use of key terms–subject invention, practical application, reasonable, and the like–the regulatory context and definitions vary significantly between the IPA and Bayh-Dole, as do the mechanisms of operation and especially the public oversight.

Consider ownership. Here’s Rabitschek and Latker:

Under both the NIH and NSF IPAs, as in Bayh-Dole, the university had a contractual right to elect ownership to any invention, thereby eliminating the arduous task of justifying ownership after identification of an invention.

Continue reading →

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The Effect of Bayh-Dole on University Therapeutics

Posted on October 1, 2016 by Gerald Barnett

Yesterday Kelly Sexton tweeted out the following claim:

sexton300

It would be great to think that the Bayh-Dole Act has resulted in a bunch of new therapeutics reaching the public. And perhaps that’s the case. And it might even be simpler to celebrate 300 new therapeutics in 35 years–those might be really important therapeutics, regardless of whether Bayh-Dole had anything to do with their success. But Sexton couches her report of happy outcomes with some claims worth considering. She claims “no therapeutics to market from University research” before Bayh-Dole. She claims that after Bayh-Dole, there have been 300. And behind these two claims is the implication that Bayh-Dole is the reason for the difference. And behind that is the implication that Bayh-Dole has been hugely successful. Let’s look at these assertions and implications.

Let’s start with therapeutics before Bayh-Dole. This part is easy. There were of course therapeutics arising from university research getting “to market.” We can start with heparin (1916, Johns Hopkins, into clinical trials in the 1930s), insulin (1921-22, University of Toronto), and warfarin (1930s to 1950s, University of Wisconsin, into clinical trials in the 1950s). (Here’s a convenient article on both heparin and warfarin). There are plenty of other examples. Cisplatin (1960s to 1970s, Michigan State, clinical trials 1970s), for one. In England, we have penicillin (1920s to 1940s, St. Mary’s Hospital (and medical school) and Oxford, in widespread use 1940s). From Austria, sulfanilamide (1908, Technische Hochschule, in clinical use 1930s). Streptomycin (1943, Rutgers, 1940s–Robert Dole was the first patient treated to survive its use without awful side effects).

Examples here are enough to show Sexton’s assertion isn’t true. Continue reading →

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Attacking Bayh-Dole monopoly pricing

Posted on September 30, 2016 by Gerald Barnett

[Added a comment at the end.] PhRMA published recently a white paper arguing that Bayh-Dole’s march-in provisions should not be used to mitigate monopoly patent pricing. Here’s the basic argument from the executive summary. It’s a few sentences, but it is good to capture some context:

There have been several recent petitions to the National Institutes of Health (NIH) to use march-in rights in an effort to directly reduce the prices of innovative medicines.

So true.

These misguided efforts threaten to undermine the success achieved under Bayh-Dole over the past 36 years in both fostering early basic research and ensuring the use and translation of those early findings into new medical innovations.

Actually, no. Bayh-Dole doesn’t have anything whatsoever to do with “fostering early basic research.” And while it does have to do with patents on “early findings,” it does not do much at all to “ensure” use or translation of findings into “innovations.” Bayh-Dole prevents federal agencies from acquiring inventions made at universities with federal funding–if the inventors assign their rights to the university that hosted their inventions, an invention management organization, or other approved assignee. How patents on such inventions come into use is not Bayh-Dole’s concern. In fact, the march-in provisions were deliberately weakened to make it difficult for the federal government to have much to say how anyone used (or didn’t use) their patents on subject inventions.

The limited march-in right established by the authors of Bayh-Dole reflected an understanding of the inherently costly, risky, and uncertain nature of drug development and the need to provide clear, consistent, and predictable ground rules for government licensing to encourage public and private sector collaborations to harness promising scientific and technological research into advances for patients and consumers.

A mouthful of bureaucratese. Let me help. Continue reading →

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PhRMA loves Bayh-Dole but won’t out and say why

Posted on September 29, 2016 by Gerald Barnett

PhRMA, a pharmaceutical industry lobbying group, has published a white paper championing Bayh-Dole. What they are after is to prevent the Bayh-Dole march-in provisions from ever operating. To do this, they make a variety of assertions about Bayh-Dole that can’t be supported or which involve data that has nothing to do with Bayh-Dole. The broad issue is whether, without limitations on monopoly pricing and term, we pay way more than we ought to for prescription drugs created based on inventions made with public funding. If pharma companies get the benefit of federal research funding and can do pretty much as they please with the results, aren’t they enjoying a public subsidy that bolsters the income of shareholders? Doesn’t the argument then reduce to “public-subsidized private monopolies that exploit the public in matters of healthcare are in the public’s interest”? Perhaps it is no wonder that pharmaceutical companies like the idea of university bureaucrats handing patent rights to them.

Let’s take a look at their claims for the success of Bayh-Dole, and then decide what evidence there is for actual success–if that’s the right word. Sadly, almost every sentence in the PhRMA document is nonsense. Unsupported, misstated, distorted, suppressed. Deceive for the sake of the cause. If you like the idea of university bureaucrats in collusion with big company bureaucrats to make sure that the federal government does not have oversight over monopoly deals, where the big companies get 99% and the university bureaucrats get 1% and the government gets 0% and the public gets screwed with monopolies, nonuse, and price-gouging for 20 years, read no further.  Continue reading →

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Demonstrate that Bayh-Dole isn’t a disaster

Posted on September 28, 2016 by Gerald Barnett

Okay, folks. Here’s your challenge. Demonstrate that Bayh-Dole isn’t a disaster and university patent licensing practice isn’t also a disaster.

Here are some observations. Produce evidence to show they are wrong.

1. Commercialization under Bayh-Dole is 100x worse than under the private network of invention management agents it destroyed, and 10x worse than under the IPA system it replaced.

The commercialization rate under Bayh-Dole is below 0.5% at the top performing research universities, below 0.1% otherwise. Bayh-Dole has resulted in a university approach to invention management that is 100x less effective than the diverse, largely voluntary, selective agent-based approach in place prior to 1981. Or perhaps it is just 80x worse. Fuss over that, if you want. Universities claim the rate for the federal commercialization before Bayh-Dole was 4% to 5%. Universities trying to make money from monopoly positions are now doing 10x worse than the federal government was doing when the government was not trying to make money from monopoly positions. Prior to Bayh-Dole, most universities did not lose any money on patent administration because they used external agents that paid the costs. Now, most universities lose money–often public money. They are gamblers who can’t pull out, who figure the next lucrative license is only five, maybe ten years away–if they keep spending.

2. If universities had great commercialization rates, they would report them. But they don’t report them. The rates are awful.

Instead, they report metrics that show how much work they do, how much money they make, and how important they must be. This is PR. But it does not show that they are using the patent system to promote practical application. They use the patent system to promote their own activity, to exploit patent rights for money, to pad the resumes of faculty inventors, to compare themselves with others doing the same thing, hoping to show they are “excellent” and “leading” and “improving.” But none of this has anything to do with Bayh-Dole. Universities don’t report commercialization rates because they don’t care about them, and they don’t care about them because they are awful. Instead, universities have optimized to a portfolio model in which one lucrative deal a decade is all that’s needed to be successful.

Continue reading →

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