Bayh-Dole the Giant Turd

Posted on October 30, 2018 by Gerald Barnett

Howard Forman, a patent attorney, introduced the claim that the federal government had 26,000 unused patents in his testimony before a House subcommittee in 1976, and that the reason for the nonuse was that the government made the inventions available to all and therefore suppressed the inventions and wasted the value of the patents. (Forman misquoted his own written statement and inflated the number t0 28,000, which is the figure repeated by most anyone wishing to bluff about Bayh-Dole.)

The Senate Judiciary Committee report on S. 414 (which eventually became Bayh-Dole) cites the 28,000 patent claim as evidence that the federal government, by providing open access to research inventions made with federal support, has failed to manage these inventions for commercialization, and thus foreign competitors gained access to federally supported research for their own nefarious technology development. [Funny peculiar that foreign companies can and do develop what is made available to all, but somehow American companies we are asked to believe can’t do that–except when they do with, say, the internet or software or electronics, or ah, pretty much anything except drugs.]

Where are we now? US universities, institutes, and foundations hold over 120,000 US utility patents acquired in the Bayh-Dole era, over 50,000 of which are marked as having had federal funding. And universities’ claims to ownership of inventions must exceed 300,000. Most of those patents are unlicensed and their claimed inventions (often much broader than what was done to signal an invention had been made) are not legally available for use. Of those patents that are licensed, most are licensed exclusively (often in violation of Bayh-Dole), and most of those that are licensed exclusively have not resulted in commercial products based on the license. Continue reading →

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Five easy ways to circumvent Bayh-Dole’s “manufactured substantially” requirement

Posted on October 26, 2018 by Gerald Barnett

Bayh-Dole makes American manufacture of product based on subject inventions the centerpiece of the law. Bayh-Dole’s statement of policy and objective calls out promotion of inventions “made in the United States by United States industry and labor” (35 USC 200). The section that expressly concerns American manufacture expressly takes precedence over all other parts of Bayh-Dole: “Notwithstanding any other provision of this chapter . . . .” (35 USC 204). When Senator Bayh introduced S. 414, which would eventually become Bayh-Dole, he led with claims about the decline in American technology and innovation, with S. 414 as the remedy.

One would think, then, that above all else, the point of Bayh-Dole would be to create more American manufactured products–new products–and new American industries based on making those products, and new jobs for American workers. If one wanted to create any metrics whatsoever, one would look for measures of these three things–new product manufactured in America based on subject inventions, new industries created by such new products made in America, and new manufacturing jobs in America directly related to such manufacturing. But we have nothing of the sort.

Most university administrators I know would rather circumvent the “manufactured substantially” in the United States requirement, the centerpiece of the law they so publicly adore, than they would work hard to find ways to have product based on their subject inventions manufactured in the United States.  Continue reading →

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NSF’s circumvention of Bayh-Dole in cooperative research centers

Posted on October 25, 2018 by Gerald Barnett

Bayh-Dole positions the “preference” for United States industry as the most important provision of the law, asserting precedence over any other part of Bayh-Dole (see 35 USC 203). Bayh-Dole requires owners of subject inventions to require certain exclusive licensees to use American-made product. But Bayh-Dole’s provision turns out to be almost useless in practice, since it is limited to an odd licensing scenario–an exclusive license in the United States to use or to sell–and the requirement then doesn’t apply to owners of subject inventions directly, nor to non-exclusive licensing, nor to exclusive licenses outside the United States (so, no requirement to prefer to export US-made products). Even so, Bayh-Dole’s preference for United States industry figures in Bayh-Dole’s statement of policy and objective (35 USC 200):

to promote the commercialization and public availability of inventions made in the United States by United States industry and labor

And Senator Bayh in introducing S. 414 in the Senate made American technology leadership the cornerstone of his reasoning for why Bayh-Dole was needed. What’s the point of sponsoring inventions if those inventions are all exclusively licensed to foreign companies who then import their licensed products into the United States? How the heck does doing that advance American industry or technology leadership?

We might note, then, that when the NSF all but forces the universities hosting cooperative research centers to grant each industry member a non-exclusive license to any inventions that get made by the center, the NSF is also requiring universities to avoid the “manufactured substantially” requirement. Continue reading →

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What the NIH says about Bayh-Dole, 3

Posted on October 24, 2018 by Gerald Barnett

Now we arrive at the source of the NIH’s conflation in its most recent “background” misrepresentation of Bayh-Dole. We are deep into the federally owned invention side of Bayh-Dole, section 209(a), in a list of the requirements that must be met before a federal agency can grant an exclusive license. It’s here that we start to find requirements that an exclusive licensee must commit to “pursue” practical application:

(3) the applicant makes a commitment to achieve practical application of the invention within a reasonable time, which time may be extended by the agency upon the applicant’s request and the applicant’s demonstration that the refusal of such extension would be unreasonable;

This is the bit in which an exclusive licensee must agree to achieve practical application–and within a “reasonable” time, whatever that is. In the Kennedy patent policy, it was three years from the date of patent issue. In the Latker-drafted NIH IPA program, circumventing the Kennedy patent policy, it was the shorter of three years from the date of first commercial sale or eight years from the date of the exclusive license, with a limited right of appeal by the patent owner. In the original version of the Latker-drafted Bayh-Dole, it was a limit only for nonprofit exclusive licenses to large companies and then the sooner of five years from the date of first first commercial sale or eight years from the date of the exclusive license, with the opportunity to extend the time of exclusivity on appeal by the invention owner. That provision was amended away three years after Bayh-Dole passed–before it could ever come into operation. On the federal side, “reasonable” is left indeterminate–whatever someone at the NIH, say, thinks is reasonable. Continue reading →

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What the NIH says about Bayh-Dole, 2

Posted on October 23, 2018 by Gerald Barnett

We are working through the NIH’s most recent misrepresentation of the Bayh-Dole Act. In the first part of this effort, we looked at the NIH’s bungling of the basic premise of Bayh-Dole and the concept of practical application. Bayh-Dole’s first stated policy objective is the use of inventions. When a funding recipient gains ownership of an invention made in work supported with federal funding, Bayh-Dole then applies. Failure to achieve practical application is the standard upon which a federal agency may, but never has to, compel the owner of a subject invention to grant licenses on reasonable terms.

Now to untangle. Bayh-Dole deals not only with contractor owned inventions–subject inventions–but also with federally owned inventions, including those that the federal government obtains through the operation of Bayh-Dole when a contractor fails to disclose, or does not elect to retain title that the contractor already has gone to the bother to obtain, and the like. For federally owned inventions, Bayh-Dole authorizes federal agencies to grant licenses, including exclusive licenses and exclusive licenses that are in fact assignments, 35 USC 207:

grant nonexclusive, exclusive, or partially exclusive licenses under federally owned inventions, royalty-free or for royalties or other consideration, and on such terms and conditions, including the grant to the licensee of the right of enforcement pursuant to the provisions of chapter 29 as determined appropriate in the public interest;

The implementing regulations for sections 207 and 209 make it clear that federal policy for federally owned inventions is utilization:

It is the policy and objective of this subpart to use the patent system to promote the utilization of inventions arising from federally supported research or development.

Skip all that stuff in Bayh-Dole 35 USC 200 about free competition and enterprise, for instance. Yes, Bayh-Dole still references that stuff (35 USC 209(a)(4), (b), and (c)), but the CFR treats these like an afterthought, not as the fulfillment of a broad statutory policy.

An exclusive license that conveys the right of enforcement means that the invention has been assigned–the owner of an invention has the right of enforcement. That’s pretty well established in the courts. Bayh-Dole then slips in that federal agencies have the right to assign inventions–but cannot actually use the term “assign” and so we get exclusive license with right to enforce–which amounts to the same thing. See–section 207 is directed to federally owned inventions–not to federally owned patents, and not to subject inventions. Continue reading →

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What about inventions made on equipment purchased with federal funds?

Posted on October 22, 2018 by Gerald Barnett

How does the Bayh-Dole Act apply to inventions made using equipment purchased with federal funding?

Here’s the thing–Bayh-Dole applies to inventions owned by a contractor–a party to a federal funding agreement for research or development. If the inventor is not a contractor and does not assign an invention made using contractor equipment purchased with federal funds to a contractor operating under a federal funding agreement, the invention cannot be a subject invention. Bayh-Dole doesn’t come into play. See the definition of subject invention, 35 USC 201(e). See the Supreme Court decision in Stanford v Roche.

Furthermore, nothing in Bayh-Dole requires a contractor to demand assignment of inventions, even inventions made on equipment purchased with federal funds. Even if those inventions were made under the same funding agreement through which the equipment was purchased.

There’s no assignment requirement in Bayh-Dole. In the standard patent rights clause authorized by Bayh-Dole, NIST has placed an assignment clause, but it is directed only to subject inventions–inventions a contractor already owns! Figure that. And no matter, no university I know complies with the standard patent rights clause on this point. Continue reading →

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What the NIH says about Bayh-Dole, 1

Posted on October 22, 2018 by Gerald Barnett

The NIH has published comments on the NIST changes to the regulations that implement the Bayh-Dole Act and the standard patent rights clause. Jamie Love at Knowledge Ecology International calls out in a tweet a passage in the “Background” section in those comments. The passage is pretty much the entire “background.” Let’s have a look at what the NIH says about Bayh-Dole:

Recipients of NIH funded research awards are required to report all inventions that result from NIH funded projects. See the Bayh-Dole Act  at 35 U.S.C. § 200-212.

The Bayh-Dole Act permits all funding recipients i.e., universities, nonprofit research institutions, and large and small businesses to retain ownership of the inventions made under federally funded research grants or contract programs, while also giving the government a license to practice the Subject Invention. In return for retaining ownership, funding recipients are required to pursue the invention to practical application, such as by licensing the invention under reasonable terms for the benefit of public health whether the invention is patented or treated as an unpatented biological material or research tool.

Pretty much every statement here is untrue, misleading, or deceptive. If you see how, good for you. Go do something important in the world or relax with your friends and family–that’s important, too. Your work here is done. If not, or you can’t help but be curious, read on at your peril.

Recipients of NIH funded research awards are required to report all inventions that result from NIH funded projects. See the Bayh-Dole Act  at 35 U.S.C. § 200-212.

That’s not true–at least not with respect to the Bayh-Dole Act. Bayh-Dole requires federal agencies to use a standard patent rights clause that requires contractors to disclose subject inventions–inventions that the contractor owns. Not all inventions. See, here at 35 USC 202(c)(1): Continue reading →

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Alternatives to Intellectual Property

Posted on October 19, 2018 by Gerald Barnett

I wrote a Quora answer to the question “What are the alternatives to intellectual property?” I cross-post it here.

*****

Let’s divide things into intellectual property (IP—patents, copyrights, trademarks) and non-IP intangible assets (NIPIA). NIPIA assets include all sorts of things—things you know but keep secret (broader than a trade secret), complexity, centrality in a network, quality of weak ties—who you know but who doesn’t know you really well—recognition of a distinctive opportunity, luck, likability, articulateness, timing, leverage (BATNAs—great alternatives to negotiated agreements), selectiveness of who you choose to deal with.

Let’s look at some of these bits of NIPIA. The idea of the patent developed in response to trade guild secrets. “Come to our city state with the secrets of your trade guild in a competing city state and we will give you a monopoly in our city state.” Later, the patent served as an encouragement for inventors to both publish and teach inventions that might otherwise languish through disinterest—a sort of secret that’s not a trade secret because there’s no effort to prevent disclosure, just a disinterest. So, don’t blab what you know. Be selective who you show your ideas and your work to. A patent is a blab that gives people a chance to design around you, obtain patents to block development of your invention, undermine you, exclude you from standards.

Complexity is a wonderful bit of NIPIA. Composers can (and have) limited the opportunities of musicians to copy their work by composing works that only select musicians have the capability to play. If someone wants to practice for years to have the chance to join the elite few, more power to them. You know—Eddie Van Halen doesn’t need a copyright in “Eruption”—go ahead and try. More broadly, there is a “mystery” to excellent craft that transcends textbooks, published patents, and the like. The medieval craft guilds understood this, too. Magicians and card sharks know it. If someone rises to that level of excellence, those with excellence can see it, and those who lack the mystery usually cannot distinguish excellence from fakery. Continue reading →

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Patent agreements in Federal Procurement Regulations and Bayh-Dole, 2

Posted on October 18, 2018 by Gerald Barnett

If we return for a moment to O’Connor’s article–it is a great read for what it aims to do, but for O’Connor’s theme of abstract mistaken assumptions rather than providing a specific account of Latker’s lack of drafting ability–there is a set of elements that influence the direction O’Connor takes his study.

O’Connor does not take into account the role of Norman Latker and Howard Bremer, both of whom had a primary hand in developing the revived IPA program, then Bayh-Dole, and then Bayh-Dole’s implementing regulations. O’Connor makes it appear that Bayh-Dole emerged from abstract policy debates, evidenced by formal reports. In practice, however, Latker played a cat-and-mouse game with his HEW supervisors to end-run public policy with what he considered a better policy–delivering inventions made in NIH-supported work as patent monopolies for the pharma industry, using gullible university administrators as the lusty enablers.

Furthermore, O’Connor apparently imagines that university administrators bumbled along attempting to make sense of all the complexity of Bayh-Dole. But that wasn’t the case. University administrators were told what Bayh-Dole did by Howard Bremer, by the Council on Government Relations, and by the Society of University Patent Administrators, later renamed the Association of University Technology Managers. If O’Connor had been at any AUTM conference, he would have heard the repeated refrains regarding Bayh-Dole. It was announced that federal law required university inventors to assign their inventions to the university, as a formality, to comply with the law. There was no analysis of the law. Few read the law and those that did already had the idea in their head that Bayh-Dole vested ownership rights with the university. Senator Bayh as late as 2010 in his amicus brief in Stanford v Roche insisted that Bayh-Dole happily vested rights in contractors and disenfranchised inventors. The Supreme Court read the law and disagreed. Continue reading →

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Patent agreements in Federal Procurement Regulations and Bayh-Dole, 1

Posted on October 17, 2018 by Gerald Barnett

Sean O’Connor starts an excellent article that gives a detailed account of history behind the Bayh-Dole Act (“Mistaken Assumptions: the Roots of Stanford v. Roche in Post-War Government Patent Policy“) this way:

The Bayh-Dole Act of 1980 was built on a mistaken assumption that “contractors”—recipients of federal funding—were securing assignments of inventions from their employees.

Despite O’Connor’s arguments, I don’t find evidence for any “mistaken assumption” in the run-up to Bayh-Dole. Drafting mistakes–yes, but not ones arising from mistaken assumptions–but just plain failure to execute a plan. Whatever the executive branch patent policy was, in 1968, when Norman Latker at the NIH and Howard Bremer from the Wisconsin Alumni Research Foundation collaborated to revive the lapsed NIH Institutional Patent Agreement program, the template IPA agreement for use with nonprofits–the future targets of Bayh-Dole–included a requirement that the nonprofit have a patent agreement with employees (Section VI(a)):

The Grantee shall require assignment to it of all right, title and interest in and to each subject invention on which it elects to file any patent application for administration by it in accordance with and subject to the terms and conditions herein set forth.

Latker claimed later that the IPA provided the basis for Bayh-Dole. If that was the case, then Latker, at least, had no mistaken assumptions packed in his bags. Furthermore, when the Nixon revisions (1971) of the Kennedy executive branch patent policy (1963) were codified at 41 CFR 9-1, the required patent rights clause included a requirement that contractors have a patent agreement with employees (9-1.107-5(a)(e)(3)):

The Contractor shall obtain patent agreements to effectuate the provisions of this clause from all persons in his employ who perform any part of the work under this contract except nontechnical personnel such as clerical employees and manual laborers.

Patent agreements are agreements under which employees promise to assign their inventions to their employer. In the case of the standard patent rights clause at 9-1.107-5(a), the contractor has an obligation to assign inventions to the federal government, so to “effectuate the provisions,” the contractor has to obtain title from its employee inventors. It’s pretty clear, isn’t it? Continue reading →

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