Inventors would own more, were it not for noncompliant Bayh-Dole practice

Posted on March 10, 2023 by Gerald Barnett

I saw this tweet this morning:

I agree Inventors should own more, but institutions were/are the heart of Bayh-Dole that (arguably) enables IP-driven startups… this is bc many/most PI inventions would go into a black hole without tech transfer officer asking them for invention disclosures…

It was a reply to someone suggesting inventors ought to own their inventions at universities. The idea behind this response is that if it were not for university ownership and tech transfer services, these inventions would all go to waste in a “black hole.” Inventors at universities are unworthy to own the inventions they make. University administrators are so much more worthy. Certainly the black hole imagery is richer than merely gathering dust on a shelf. But there’s somewhat more to it, so I thought I would discuss.

In my over 20 years in tech transfer, inventions of any use don’t go “into a black hole” if a university fails to demand ownership. Sure, they may not get used–but 95% of patented inventions don’t get used anyway. One should not have a shocked face. But even in this context, the university demand to own everything is an even bigger, blacker black hole.

Continue reading →

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Why not let’s try, Frank?

Posted on March 9, 2023 by Gerald Barnett

Frank Cullen, writing at the “Council for Innovation Promotion” has posted a hand-wringing response to a letter from members of Congress to the Secretary of Health and Human Services requesting that the government use Bayh-Dole’s march-in provisions to address price gouging of the prostate cancer drug Xtandi. Cullen writes that march-in “would chill innovation and disincentivize the launch of new startups and inventions.” That’s nonsense–er, an unsupported claim–but if it were true, then it would be a chilling indictment of Bayh-Dole, since Bayh-Dole has march-in baked into its public bargain on retention by contractors of inventions they acquire made in federally funded work.

Cullen goes on to recite a fictitious account of Bayh-Dole and its effects, using this account as evidence for the chilling he predicts from march in. Let’s walk through this mess.

To understand why, just consider the status quo before Congress passed the Bayh-Dole Act in 1980.

Let’s do that. Before Bayh-Dole, the NIH, NSF, and Department of Commerce all operated Institutional Patent Agreement programs. Under an IPA, a nonprofit was required to take ownership of any invention made in agency-funded work that the nonprofit decided to patent. For other nonprofits not in an IPA program and for-profits without product-making capacity, such as contract research organizations, executive branch patent policy (Kennedy 1963, modified by Nixon 1971) allowed contractors to retain invention rights when they could show that their private exploitation of patent exclusivity would more likely serve the public interest than would open access to the invention by way of federal ownership. If they couldn’t show the public would be better off, then, well, what would be the point of letting them mess around with patents? The IPA programs were built by federal attorneys whose aim was to circumvent executive branch patent policy, making an exception (private exploitation of patents on inventions made in public-directed work) into their general rule. Continue reading →

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March-in rights, Xtandi, and Bayh-Dole’s patent rights clause

Posted on March 3, 2023 by Gerald Barnett

Senator Bernie Sanders just tweeted about Xtandi, asking patients taking Xtandi to share their stories.

The prostate cancer drug Xtandi was invented by taxpayer-funded scientists at UCLA, but now costs Americans nearly $190,000 — or up to six times the price in other wealthy countries. If you are taking Xtandi and would like to share your story, click below.

Yes, federal agencies should march in on Xtandi, among other actions they have a duty to take to enforce Bayh-Dole’s patent rights clause, under which a contractor retaining title to a subject invention grants the government rights sufficient to protect the public from nonuse and unreasonable use, including unreasonable, non-competitive pricing.

Senator Sanders is right to call out Pfizer for unreasonable pricing. But his standard is not the standard set forth in Bayh-Dole. Bayh-Dole is not concerned with either affordability or the patent monopoly prices charged in other countries–Bayh-Dole rather is concerned with free competition and enterprise and requires either a competitive price or licensing that creates competition. I’ll show you how it works. Bayh-Dole is a messy, dismal law, and as a consequence, the pain you feel is having to read 4,000 words for what ought to be straightforward. I’m sorry. Not my fault. I feel the hurt, too.

Bayh-Dole expects federal agencies to review utilization reports (35 USC 202(c)(5)) and determine if the benefits of a subject invention are available to the public on reasonable terms (35 USC 203(a)(1) and 201(f)). If the terms are not reasonable, then, as already agreed to by the contractor, a federal agency is to require licensing to introduce competition. But NIH won’t even conduct a review! NIH refuses to do its duty under Bayh-Dole. Continue reading →

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NIAID Breezily Repudiates Supreme Court Ruling

Posted on February 22, 2023 by Gerald Barnett

Perhaps you wanted a short version.

NIAID puts this in guidance to inventors regarding inventions made in NIH-funded work:

Under the Bayh-Dole Act, your institution as the grant recipient owns rights to the NIH-funded invention and has the right and obligation to pursue patent protection.

The Supreme Court in Stanford v Roche ruled directly on this matter in 2011. The Court held that Bayh-Dole does not vest title to inventions made in federal work with the grant recipient. Rights are with the inventor. Bayh-Dole applies only after a grant recipient has acquired title to an otherwise conforming invention in some conventional, non-Bayh-Dole related way.

The NIAID here pointedly refuses to comply with the decision of the Supreme Court. Smells like contempt.

The botch job on Bayh-Dole continues:

As we mentioned above, the Bayh-Dole Act requires that all government-funded inventions be reported to the awarding federal agency; in your case, NIH.

First, they don’t mention this above. Careless. The Supreme Court made very clear that inventions that otherwise conform to Bayh-Dole’s definition of scope do not become subject inventions unless they are owned by a party to the federal funding agreement–a contractor.

Bayh-Dole’s requirement to disclose is expressly limited to subject inventions, not all inventions made in federally funded work. See 35 USC 202(c)(1). NIAID is just wrong. Further, Bayh-Dole’s scope is inventions made in the performance of work under a funding agreement. The definition of funding agreement at 35 USC 201(b) provides that funding may be “in part”; that is, the proper scope of interest is any invention (when acquired by a contractor) arising within the scope of work for which the federal government provides funding for any part of that work.

Regulatory guidance at 37 CFR 401.1 stipulates that merely “funding” an invention is not determinative. Federal funding may be used outside the scope of the funded project to make an invention, and if that use of funds does not “diminish or distract” from the project, it’s not within Bayh-Dole’s scope. So “government-funded invention” is doubly wrong. Not just imprecise. Wrong.

There should be a rule that no law governing a federal agency can be made more complicated than federal agency administrators can comprehend. On that basis, Bayh-Dole should be repealed. It has attracted a whole cadre, a bozonet as it were, of people incapable of reading the law and providing guidance. They just make stuff up that sounds good to them, and ignore even the US Supreme Court ruling on exactly the issues that they are responsible for.

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NIAID botches Bayh-Dole

Posted on February 22, 2023 by Gerald Barnett

This will be a bit of a long ride. Buckle up.

In 2011, the US Supreme Court ruled in Stanford v Roche that the Bayh-Dole Act does not vest title to inventions made in federally supported work with the nonprofit organization that receives the money.

Nowhere in the Act is title expressly vested in contractors or anyone else; nowhere in the Act are inventors expressly deprived of their interest in federally funded inventions.

An “invention of the contractor” is one that the contractor has acquired:

And “invention owned by the contractor” or “invention belonging to the contractor” are natural readings of the phrase “invention of the contractor.” As we have explained, “[t]he use of the word ‘of’ denotes ownership.”

Bayh-Dole is limited to inventions contractors acquire:

The Bayh-Dole Act does not confer title to federally funded inventions on contractors or authorize contractors to unilaterally take title to those inventions; it simply assures contractors that they may keep title to whatever it is they already have. Such a provision makes sense in a statute specifying the respective rights and responsibilities of federal contractors and the Government.

Congress signals its intent to make major changes by addressing those changes expressly:

We are confident that if Congress had intended such a sea change in intellectual property rights it would have said so clearly—not obliquely through an ambiguous definition of “subject invention” and an idiosyncratic use of the word “retain.”

In 2021, the NIH’s National Institute of Allergy and Infectious Diseases published an article in its Funding News newsletter, “Insights Into Inventions–Reporting, Bayh-Dole, and More.” In a breezy style, the article encourages inventors working with NIH funding to disclose their inventions to their institution’s technology transfer office. Inventors are encouraged to “familiarize” themselves with Bayh-Dole. Fine, so far–but here’s what they write:

In a nutshell, it [Bayh-Dole] states that federal funding recipients (i.e., those receiving grants, cooperative agreements, or contracts) have the right to retain title to inventions made under federally funded research but must comply with regulations (37 CFR 401 et seq.) to ensure the timely transfer of the technology to the public sector.

This nutshell is broken. Continue reading →

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A university technology transfer annotated reading list

Posted on February 20, 2023 by Gerald Barnett

So you want to tell heaven from hell, blue skies from pain. Got it! Here is a basic reading list of documents that frame the history of university technology transfer. I’ve put it in chronological order and provide links to documents wherever I have found them. There’s much more on the theory and practice of university IP management and strategies of technology transfer. This list covers the broader regulatory context, and as such, it reflects muchly a sort of administrative mindset, where playing with policy is thought to result in actual outcomes in practice. Whulp, perhaps but not necessarily in the expected, claimed ways.

1789 U.S. Constitution Article 1, Section 8, Clause 8. 

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries

The copyright and patent clause. I’ve linked to a helpful site with commentary. This clause provides Congress with authority to create patent and copyright statutes. Notably, the clause is specific to authors and inventors–it’s almost as if it is the zeroth article of the Bill of Rights. If one wants Bayh-Dole to secure exclusive rights to inventions to organizations that contract with the government to conduct research or development, then there’s this problem of whether Congress has that authority, or at least with whether Congress can be clever enough to figure out how to make that happen anyway. The Supreme Court in Stanford v Roche chose instead to limit its interpretation of the scope of Bayh-Dole so that they would not not worry the constitutionality of the law.

1912. F. G. Cottrell, The Research Corporation, An Experiment in Public Administration of Patent Rights 

Cottrell was a professor at the University of California who developed the electrostatic precipatator, a device for removing soot from industrial exhaust. The University did not have a means to support patenting, so Cottrell started his own company, and as well started Research Corporation to manage a set of patent rights, with an industry board of directors, and with royalties going to the Smithsonian Institution to support research nationwide. Continue reading →

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The Bayh-Dole Public Bargain, 2

Posted on January 20, 2023 by Gerald Barnett

Baked into Bayh-Dole is the policy expectation that a holder of a patent on a subject invention will offer products based on that invention as if there were competition, even if a patent is used to suppress that competition. In the case of medicines, this policy reduces to: offer products as if they were generics.

The logic becomes evident: if one doesn’t offer products as if they were generics, then the terms are “unreasonable” and the federal government is authorized–expected–to protect the public by requiring licensing to introduce “free competition.” It actually works. You just have to get over all the nonsense you hear from people who have a vested interest in making sure Bayh-Dole’s public bargain never operates. To timely achieve practical application then means to provide patented product, or benefit from using a patented process, to the public on terms, including price, as if what’s offered has competition from others also practicing the invention. It’s not just that there’s competition from other companies that hold their own patents and charge what amounts to a patent monopoly price–their pain killer, say, uses a different compound, but you both have patents to stifle competition for each of our compounds (and any analogues), so you both can charge monopoly prices. Bayh-Dole’s licensing remedy only indirectly addresses such competition. No, the remedy of licensing works only if the patent holder (or ilk) or the federal government breaks up the patent monopoly and, in the case of the patent holder, at least, receives compensation for use by others, who then are in competition with the patent holder and with each other (and potentially in competition with the federal government). Continue reading →

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The Bayh-Dole Public Bargain, 1

Posted on January 19, 2023 by Gerald Barnett

Bayh-Dole is directed at federal agencies contracting for research or development with small businesses and nonprofits. The law requires agencies to use a default patent rights clause in every funding agreement unless an agency can justify a different clause. The heart of the public bargain is 35 USC 202(a):

Each nonprofit organization or small business firm may, within a reasonable time after disclosure as required by paragraph (c)(1) of this section, elect to retain title to any subject invention . . .

The rights of the nonprofit organization or small business firm shall be subject to the provisions of paragraph (c) of this section and the other provisions of this chapter.

There are two parts to this bargain. Continue reading →

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An Open Letter to Senator Warren Regarding Xtandi

Posted on January 16, 2023 by Gerald Barnett

Dear Senator Warren:

You have called repeatedly for the federal government to use regulatory tools available to it to address the high prices charged for drugs. Your attention to this matter is much appreciated!

I write with specific reference to the present situation involving the prostate cancer drug enzalutamide, which is sold under the brand name Xtandi. Xtandi’s price in the United States is more than ten times the price for which a generic drug manufacturer has offered to produce enzalutamide. The University of California first identified enzalutamide under federal grants from the NIH and the Department of Defense, which are cited in three patents (7,709,517, 8,183,724, and 9,126,941). UCLA exclusively licensed rights in these subject inventions to Medivation, which having developed the compound as a prescription medicine with its business partners, then merged with a subsidiary of Pfizer. At about the same time, UCLA sold its rights to future royalties to Royalty Pharma.

The Bayh-Dole Act sets out its policy and objectives at 35 USC 200. Among these are the use of the patent system “to promote free competition and enterprise.” Attention to free competition lies at the heart of Bayh-Dole’s requirements pertaining to exploitation of patent property rights in inventions within the scope of Bayh-Dole’s patent rights clauses. I will explain, and show you how there is a third regulatory tool in Bayh-Dole by which to achieve reasonable prices for medicines developed from inventions made in work receiving federal support. Continue reading →

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Smells Like Bayh-Dole Spirit

Posted on January 9, 2023 by Gerald Barnett

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. Continue reading →

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