The monopoly meme, 4

Posted on September 25, 2018 by Gerald Barnett

We are nearing the end of examining Howard Bremer’s Senate subcommittee testimony from 1979 on a bill that was remarkably like Bayh-Dole. Bremer’s testimony is useful in helping us get at the rhetorical effect of the monopoly meme–that without a patent monopoly, no research-originated invention would ever be used or developed or benefit the public or something or anything like that.

Eight, that the less restrictive a Government patent policy is, the
greater is the transfer of technology under the policy;

Here Bremer gets interesting. What makes a patent policy “restrictive”? Is it that the government insists on owning inventions made with public funding? If so, then how is it possible that a university patent policy that demands ownership of inventions even when not made with *university* funding is less “restrictive”? No, that would be a *more* “restrictive” policy.

If Bremer were arguing that inventors should be free of all restrictions on their inventions made with federal support, that would be something. Then, at least on the terms he premises here, technology transfer would be the most engreatened, as it were. But Bremer argues for trading government “restriction” for university “restriction”–using the power of the government to enable it! The government “restriction” on ownership is “everyone has access, including the investigators, the inventors, collaborators, and others competing to get federal grants or industry funding.” The university “restriction” that Bremer argues for and casts as “free enterprise environment” is “the university owns and only one company may get access, otherwise the invention will not be developed and the public won’t benefit, and the only acceptable alternative, short of government march-in, is that no one gets access.” Continue reading →

Posted in Bayh-Dole, Freedom, History, Policy | Tagged , , | Comments Off on The monopoly meme, 4

The monopoly meme, 3

Posted on September 24, 2018 by Gerald Barnett

We are working through Howard Bremer’s testimony before a Senate subcommittee with regard to a bill remarkably like what would become Bayh-Dole. The point is to explore how the monopoly meme works in practice. Bremer gives nine principles that ought to govern federal regulation of inventions made in federally supported research.

Bremer:

Four, that the absence of a uniform Government patent policy
has been a serious disincentive to successful technology transfer
from the university to the public and has, in fact, often deprived
the public of the fruits of basic research;

Bremer here insists that a “uniform” policy is lacking and that this lack has “often” deprived the public of the “fruits” of “basic research.” It’s a bizarre claim. First, as Bremer keenly knew, the NIH and NSF had operated the Institutional Patent Agreement program for a decade–the NIH revived the IPA program in 1968, the NSF joined later, and the program was shut down in 1978 as ineffective when Latker attempted to get the program endorsed government wide and was blocked by Congress asking telling questions. The IPA program, in turn, operated under the Kennedy (with later Nixon re-editing) executive branch patent policy. Just about any university or nonprofit that mattered was in the IPA program.

The Department of Defense allowed contractor ownership, following the Kennedy policy. Other agencies–the Department of the Interior, Department of Agriculture–showed substantial public benefits by taking ownership of inventions and developing them to the point that they could be released for commercial production–think new fertilizers and the like. For NASA and DOE, there were statutes that required the federal government to own inventions–the premise was that there was no commercial market for nuclear weapons and space ships, so leaving patent ownership with contractors just meant they could mess with each other in bidding on government contracts. And NASA and DOE had programs to review inventions and allow contractors to own, on a case-by-case basis–again, following the Kennedy patent policy. We could go on. Continue reading →

Posted in Bayh-Dole, Freedom, History, Policy | Tagged , , , | Comments Off on The monopoly meme, 3

The monopoly meme, 2

Posted on September 21, 2018 by Gerald Barnett

To get at the rhetorical workings of the monopoly meme, we are working our way through Howard Bremer’s testimony before a Senate subcommittee discussing S. 1215, an alternative bill to Bayh-Dole that was being considered after S. 414 had failed to pass.

To summarize: Bayh-Dole does not allocate or vest ownership of inventions–the Supreme Court was clear on that–but rather Bayh-Dole stipulates that obtaining ownership of such an invention is sufficient to render moot all other public purposes. The owner of a subject invention has the freedom to decide what to do, how to use the patent system–federal agencies, inventors, and the general public have no say in the matter. The monopoly meme does not show up in Bayh-Dole. Rather, the monopoly meme co-opts Bayh-Dole as a means to enable monopoly meme practices.

Even the public interest apparatus in Bayh-Dole appears to require practices that run against the monopoly meme. Sure, it’s clear that the patent system (patent monopoly) might be used to promote “utilization”–that’s just what the monopoly meme argues. According to the monopoly meme, there won’t be any use of an invention without first obtaining a patent monopoly to “protect” the invention–that is, to “protect” in the future a company’s investment in developing the invention for commercial use or as a commercial product. Without a substantial post-invention development cost, the monopoly meme falls apart. It’s in the interest of the monopoly meme, then, to find situations in which development costs are great compared to research costs or invention-making costs and then make these situations stand for the general case. It does not much matter whether development (to the extent that’s even needed) might take place for very little expense, or very little expense if done some other way–what matters is that those selected to consider development swear to the gods that development is, in general, really expensive. These are the folks the monopoly meme trots out to the public.

But what then do you make of Bayh-Dole’s policy requirements concerning using the patent system to promote free competition and enterprise? Or to maximize the participation of small businesses in federally supported development? Or how about that if a company hasn’t taken effective steps to achieve utilization of a given invention, the federal government could march-in and require the patent owner to grant non-exclusive licenses–wouldn’t those licenses absolutely destroy any chance that the invention would ever be used or developed? Wouldn’t the mere fact that one other company still had the right to use and develop the invention destroy the interest of any other company to take a non-exclusive license? Oh, wait, maybe a foreign company that has already developed the invention for use outside the United States might be willing to take a non-exclusive license to sell in the U.S. But then Bayh-Dole’s policy claim to bolster American global technology leadership has failed.  Continue reading →

Posted in Bayh-Dole, Freedom, History | Tagged , , , | Comments Off on The monopoly meme, 2

The monopoly meme, 1

Posted on September 20, 2018 by Gerald Barnett

There’s a meme that has floated around patent management discussions for decades. It goes something like this:

“What is available to all will be used by none.”

Here’s an instance from the National Patent Planning Commission report (c. 1945):

It often happens, however, particularly in new fields, that what is available for exploitation by everyone is undertaken by no one.

Variations include “What is available to all will be developed by none” and “Non-exclusive licensing is just a tax.” There’s never actual data to back up the claim–just the bare assertion, followed by other assertions that doesn’t hold up to any sort of scrutiny, such as it costs way more to “develop” an invention than it costs to pay for research in which inventions are made.

The meme insists that patent monopolies are a necessary pathway to all things good, especially things arising from scientific research. In a way, it is baffling. “That which is new, useful, and non-obvious won’t be used by anyone because others can also use it.” Huh? “A cure for cancer won’t be used unless only one company controls the rights to cure cancer.” Huh? “If there is free competition and enterprise with regard to something new and useful, then no one will develop it.” Huh?

Think about that last one. If no one would develop something available to all, then there wouldn’t be any competition once any one company began development. All the rest would slump their fictitious shoulders and slink away. One wouldn’t even need a patent monopoly at that point. If no one would develop something because someone else was already developing it, then all an inventor would need to do is be the first to develop. For that, trade secret would work as well as anything. Why publish an invention through the patent system for all to inspect when one could keep the invention secret and start development–since, according to the monopoly meme, no one else would ever develop something that was available to all (and thus, available to even one other company, such as the one the inventor creates or chooses). If the monopoly meme were generally true, all one would need would be trade secret and “first mover” status. No one would dare try to imitate. Doesn’t hold up to the laugh test.  Continue reading →

Posted in Bayh-Dole, Bozonet | Tagged , , , , , | Comments Off on The monopoly meme, 1

Federally supported inventions and public trusts

Posted on September 19, 2018 by Gerald Barnett

In 1933, the Supreme Court considered a claim by the United States that two employees of the National Bureau of Standards must give up a patent they had obtained on improvements to radio technology (United States v Dubilier Condenser Corp). The United States claimed, among other things, that the invention should be held in trust on behalf of the public. The Court disagreed:

 It is claimed that, as the work of the Bureau, including all that Dunmore and Lowell did, was in the public interest, these public servants had dedicated the offspring of their brains to the public, and so held their patents in trust for the common weal, represented here in a corporate capacity by the United States. The patentees, we are told, should surrender the patents for cancellation, and the respondent must also give up its rights under the patents.

The trust cannot be express. Every fact in the case negatives the existence of one. Nor can it arise ex maleficio.

That was 1933. Now consider the present situation for federal grants. Here’s the first sentence of 2 CFR 200.316:

Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved.

“Intangible property” in turn is defined at 2 CFR 200.59 as

property having no physical existence, such as trademarks, copyrights, patents and patent applications and property, such as loans, notes and other debt instruments, lease agreements, stock and other instruments of property ownership (whether the property is tangible or intangible).

It would appear that the federal government has addressed the shortfall in its argument in Dubilier. There is, expressly, the expectation of a trust whenever a “non-federal entity” that has received a grant acquires or improves an invention “with a Federal award.” If a university then asserts ownership of an invention as a condition of a federal grant, or the use of resources made available for use in the performance of work supported by a federal grant, then the university acquires or improves the intangible property with the federal award. A property trust relationship is established.

Now, the question is whether Bayh-Dole preempts 2 CFR 200.316. Here’s Bayh-Dole, 35 USC 210:

This chapter shall take precedence over any other Act which would require a disposition of rights in subject inventions of small business firms or nonprofit organizations contractors in a manner that is inconsistent with this chapter . . .

And then a list of statutes, and then some walkback–the precedence applies only to contracts with nonprofits and small businesses, and does not apply to Stevenson-Wydler, among other things.

So, is a property trust relationship a “disposition of rights” “inconsistent with this chapter”–i.e., Chapter 18 of 35 USC–“Bayh-Dole”? Who can say?

One might argue that university appropriation of inventions made in work receiving federal support for the purpose of commercialization complies with the property trust requirement, and therefore the issue is moot for most everything. One might also argue that holding an invention in trust is entirely consistent with promoting free competition and enterprise. It would appear that there’s actually nothing in 2 CFR 200.316 that ends up altering what a university might do with a subject invention as a “trustee.” There’s an odd argument that it is in the interest of the beneficiaries of a project receiving federal funds that they pay a premium to obtain a commercial version of what was discovered or invented with federal funds–and that no other access to the discovery or invention is allowed. Such an outcome must be enforced on the public, so this argument goes, or there will not be money to repeat the process of making beneficiaries pay a premium for other discoveries or inventions.

According to this reasoning, university fulfills its role as trustee for beneficiaries of a project by working to ensure that beneficiaries must pay as much as they can bear to obtain the benefit of discoveries and inventions made in projects receiving federal support, and to that end, no one may have access for any other purpose to those discoveries and inventions: “Patients must pay as much as they can for new medicines because otherwise there won’t be the money available to universities as an incentive to repeat the process for other new medicines.”

Thus, even after the federal government addresses the “trust” problem, Bayh-Dole ends up preempting the trust requirement. And even if Bayh-Dole doesn’t preempt the trust requirement, it appears that the “trust” required by 2 CFR 200.316 applies only after a university has “acquired or improved” an invention, and then can be interpreted pretty much any way university administrators want to, so long as they cast their interpretation in terms of benefits for beneficiaries. It just happens that the greatest benefit for beneficiaries, in the university administrator’s mind’s eye, also happens to be one that offers the greatest financial return to the university.

 

 

Posted in Bayh-Dole, History, Policy | Tagged , , | Comments Off on Federally supported inventions and public trusts

Undisclosed subject inventions made in development and commercialization contracts

Posted on September 18, 2018 by Gerald Barnett

A note on subject inventions not disclosed under Bayh-Dole–and a place for auditors to romp and play as auditors are wont to do, if auditors were ever to romp and play with regard to anything consequential in Bayh-Dole. What follows then is a sort of fantasy because no one ever audits Bayh-Dole for anything consequential!

Under Bayh-Dole, any party to a federal “funding agreement” (a “contractor”) may extend at will the funding agreement to add additional parties to the funding agreement. See the definition of funding agreement at 35 USC 201(b).

New parties to a funding agreement may be added by “any assignment, substitution of parties, or subcontract of any type.” For instance, the (f)(2) agreement requirement in the standard patent rights clause in effect requires institutional contractors to make specified potential inventor employees parties to the funding agreement via the patent rights clause. More so, and expressly, Bayh-Dole requires assignees of nonprofit-owned subject inventions to accept the nonprofit patent rights clause–and therefore those assignees become parties to the funding agreement, and therefore contractors. See 35 USC 202(c)(7)(A).

An exclusive license to all substantial rights in an invention conveys ownership of the invention–is an assignment. There are a number of court decisions, some looking directly at university licensing practices. Most–almost all–university-granted exclusive licenses to inventions are assignments. That means that inventions made in development work by a company that has accepted assignment of a subject invention from a nonprofit, when those inventions are acquired by the company, are also subject inventions. Those inventions are just as “made under contract” or “made in performance of . . . work funded in whole or in part by the Federal government.”

How a contractor manages the scope of any federally supported project therefore has significant consequences for a determination of what work is “under contract.” A university contractor does not have to assign any subject invention to a company as part of “commercialization” efforts. That’s a university’s choice. And when it does assign, the company becomes another party to the funding agreement and any inventions made in the development work, when acquired by the company, have the same requirements as if they were made by the university itself. They are nonprofit subject inventions.  Continue reading →

Posted in Bayh-Dole | Tagged , , , | Comments Off on Undisclosed subject inventions made in development and commercialization contracts

Bayh-Dole’s Ruby Slippers

Posted on September 17, 2018 by Gerald Barnett

This is a story about 35 USC 201(b), 35 USC 202(a), 37 CFR 401.9, and 37 CFR 401.14(f)(2) and (g)(1). These provisions of Bayh-Dole, implementing regulations, and standard patent rights clause, when read together, create ruby slippers. [I’ve revised the Written Agreement to reflect NIST’s efforts to introduce an assignment requirement not authorized by Bayh-Dole–or, really, antagonistic to Bayh-Dole.]

The story requires the usual build up by way of documentation. If you can’t stand the tension, scroll down to the stars.

Here’s the (f)(2) requirement, for each funding agreement (broken up into readable units):

The contractor agrees to require,

That is, the institutional contractor agrees to require–meaning, under the funding agreement containing the standard patent rights clause, the institutional contractor must take a positive action to require, and therefore cannot require anything else–

by written agreement,

That is, the requirement is a written agreement–not merely a policy statement, not something general–and the written agreement establishes the responsibilities of individuals who may invent when they do invent:

its employees, other than clerical and nontechnical employees,

That is, not all employees, but rather only those for which it would be proper for the government to expect an invention deliverable–a clerical or nontechnical employee could not reasonably invent within the scope of his or her employment for the purposes of the federal contract, so no deliverable for them.

And now the delegations:

to disclose promptly in writing to personnel identified as responsible for the administration of patent matters and in a format suggested by the contractor each subject invention made under contract

Only an inventor can disclose an invention–it’s what the inventor has conceived. An institution can only guess on what the inventor has done until the inventor has documented the invention.  Continue reading →

Posted in Bayh-Dole | Tagged , , , , , | Comments Off on Bayh-Dole’s Ruby Slippers

More Impractical Advice About NIST’s Changes to Bayh-Dole’s Regulations

Posted on September 14, 2018 by Gerald Barnett

NIST–can’t live with them, but law firms sure can.

Here’s another law firm popping off about NIST’s recent revisions to Bayh-Dole’s implementing regulations and standard patent rights clause. Keep in mind that NIST’s chief counsel is already on record not understanding the law or the Supreme Court’s decision in Stanford v Roche. Keep in mind as well that I have yet to meet a law firm willing to offer free advice to faculty about how to beat back predatory administrators. Every law firm that publishes free advice about Bayh-Dole seems to want a contract with a university administration or already has one. (See this “Success Story”–probably this.) Thus, law firms are motivated to write stuff like “Practical Advice Regarding Changes to Bayh-Dole Act Obligations”:

Another aspect of the regulation changes is that Contractors must now ensure an employee is under a written obligation to presently assign any Subject Inventions for the entirety of the funding agreement period.

With all due respect, this is bungled nonsense. Here’s the NIST requirement, inserted into the (f)(2) requirement of the standard patent rights clause–and having no statutory antecedent in Bayh-Dole:

The contractor agrees to require, by written agreement, its employees, other than clerical and nontechnical employees, to disclose promptly in writing to personnel identified as responsible for the administration of patent matters and in a format suggested by the contractor each subject invention made under contract in order that the contractor can comply with the disclosure provisions of paragraph (c) of this clause, to assign to the contractor the entire right, title and interest in and to each subject invention made under contract, and to execute all papers necessary to file patent applications on subject inventions and to establish the government’s rights in the subject inventions.

Let’s count the screwups. 1) There is no present assignment. It is an agreement that requires assignment, not a present assignment of all future inventions. NIST might have wanted folks to add a present assignment, but NIST did not put that wording into the revised patent rights clause requirement. Even if they had–it would be a present assignment to a future invention that was already one owned by the contractor–it has to be this way. See below.  Continue reading →

Posted in Bayh-Dole, Bozonet, Stanford v Roche | Tagged , , , , , , , | Comments Off on More Impractical Advice About NIST’s Changes to Bayh-Dole’s Regulations

Illusions of Bayh-Dole: “manufactured substantially” 4

Posted on September 13, 2018 by Gerald Barnett

Previous articles in the series are here, here, and here. The series continues here and here.

There’s a simple point to make about Bayh-Dole’s section 204 requirement that exclusive licenses to use or sell products based on a subject invention in the United States include an agreement by the licensee that those products will be manufactured substantially in the United States. The section 204 requirement does not apply to the making, using, and selling of a subject invention by the owner of the invention. Any for-profit company, then, owning a subject invention, is exempt from what is put forth as the foundational requirement of Bayh-Dole, the very essence of what Sen. Bayh claimed that the law was all about, restoring American technology leadership. For that leadership, one would think, Americans would not be licensing their research inventions to the rest of the world for their happy use without somehow having products based on those inventions made in America.

In this sense, Bayh-Dole ought to be a law that expects American companies to make in the United States products based on subject inventions and export those products to the rest of the world–not to take out patent positions globally, license to foreign companies to manufacture products, import those foreign manufactured products, and sell those foreign manufactured products in America. But that’s exactly what Bayh-Dole permits when done by the owner of a subject invention. Bayh-Dole makes a meaningless flourish about United States industry and labor and goes off and does something else.

And here’s the simple point. Since section 204 is specific to exclusive licensees to use or to sell in the United States, it does not apply to owners of subject inventions. That means that when a university assigns a subject invention under the heading of granting an exclusive patent license, the assignee has no obligation under section 204 for its own exploitation of the invention. As numerous courts have held, an exclusive license to the substantial rights in an invention constitutes an assignment. It doesn’t matter that the written document is labeled “exclusive license.” One can license a patent exclusively and in doing so assign the underlying invention if the “license” conveys the exclusive rights to make, use, and sell. With that transfer of ownership comes the right to enforce the patent, which only the owner of an invention may do. Nearly every university patent license that’s exclusive is also an assignment of the invention on which the patent (or patents) is based.

See the result? When universities exclusively license patents on subject inventions, they also invariably assign the related subject inventions. The “licensees” of the patents are “assignees” of the subject inventions. They do not hold exclusive licenses to use or sell product based on a subject invention–they hold ownership of the subject invention. They are assignees. They can manufacture wherever they want. Section 204 does not apply so long as they do not grant exclusive licenses to use or to sell in the United States. Continue reading →

Posted in Bayh-Dole, Bozonet | Tagged , , , , | Comments Off on Illusions of Bayh-Dole: “manufactured substantially” 4

Ten Year Note

Posted on September 12, 2018 by Gerald Barnett

Ten years ago, on September 4, 2008, I started the Research Enterprise blog. My idea was to use the blog to document what I had learned about university-based technology transfer over 15 years of licensing practice, and to describe ways to do a better job at helping researchers, entrepreneurs, professionals, and companies get on with working with what they make, create, author, discover, realize, collect, produce, develop, improve, and invent.

Since that first post, I’ve written over 1,300 articles. I have looked at the history of university technology transfer, at the development of university patent policies, the nature of federal research funding, methods of managing intangible assets in a research setting, the dismal monster called the Bayh-Dole Act, and the nature of innovation. Among the most popular articles are these:

Bayh-Dole Guide

A guide to the Bayh-Dole Act. Not like the crazy COGR guide or the mealy-mouthed AUTM descriptions. Not like the misrepresentations of Bayh-Dole offered up by many university technology transfer offices. In the next revision of the Guide, I think I will finally have got all the pieces in place. Core: Bayh-Dole replaced the IPA program. In that, Bayh-Dole was nothing new. Anyone who says university practice with regard to federally funded inventions suddenly changed is full of it. Bayh-Dole was created by the NIH to restore a patent monopoly pipeline from federal funding to the pharma industry, laundered through universities by patent brokers such as those at WARF. Everything else is just fluff to obscure the agenda.

In particular, the public interest apparatus in Bayh-Dole is designed not operate. The public interest apparatus has never operated–not in Bayh-Dole, not in the IPA program, not in the Kennedy patent policy dating from 1963. The public interest apparatus, too, is just fluff. Anyone thinking that the NIH will act on an apparatus that the NIH designed not to operate fails to understand the situation. Finally, Bayh-Dole has been a dismal failure on its own stated objectives. The proxy data put forward by AUTM and advocates of Bayh-Dole is often fake and always intended to mislead. Academics accepting AUTM metrics as generally valid are barking up a tree with no squirrels. Continue reading →

Posted in Bayh-Dole, Innovation, Policy, Technology Transfer | Tagged , , , , , | Comments Off on Ten Year Note