Pissed at NIST, short form

Posted on April 13, 2018 by Gerald Barnett

Supreme Court: Bayh-Dole applies only to subject inventions. Subject inventions are ones owned by a contractor. Congress did not intend a sea-change in initial invention ownership. Bayh-Dole does not apply to inventions made in projects with federal support until contractors own them. There’s no vesting. There’s no special right under Bayh-Dole for a contractor to acquire title. Bayh-Dole deals only with the priority of title between a contractor and a federal agency after the contractor has acquired title. Nothing more.

NIST: Now, suddenly, inventors must be made to agree to assign subject inventions to the contractor.

Research Enterprise: Total hash!

Subject inventions are *only* those inventions already owned by the contractor. NIST makes an empty requirement. There’s no authority under Bayh-Dole to make inventors assign inventions to make those inventions “subject” inventions. Thus, the revised rule states that inventors must agree to assign to contractors inventions that the contractors already own. Big whoop.

But bet on it–NIST and university patent administrators and their legal advisors will insist that the new rule requires universities to require inventors to assign inventions made with federal support to their university–even though Bayh-Dole does not provide any authority for NIST to make this requirement, and even though the wording itself makes a hash of the requirement. Faux Bayh-Dole. Continue reading →

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NIST makes Bayh-Dole a vesting statute

Posted on April 12, 2018 by Gerald Barnett

NIST has issued its final rule on Bayh-Dole and disregards the Supreme Court on the ownership of subject inventions. The Supreme Court was clear that Bayh-Dole’s definition of subject invention means that an invention must be “owned by the contractor” to be a subject invention and that Bayh-Dole does not apply to any invention that is not a subject invention:

But because the Bayh-Dole Act, including §210(a), applies only to “subject inventions”—“inventions of the contractor”—it does not displace an inventor’s antecedent title to his invention. Only when an invention belongs to the contractor does the Bayh-Dole Act come into play. 

Here’s NIST’s revision to (f)(2) of the standard patent rights clause:

to assign to the contractor the entire right, title and interest in and to each subject invention made under contract

It’s really a nonsense change. Think about it. A subject invention is one owned by a contractor. Thus, inventors are now required make a written agreement “to protect the government’s interest” to assign to contractors the inventions the contractors already own.  Continue reading →

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The Faster Cures FAQ on Bayh-Dole, 4

Posted on April 12, 2018 by Gerald Barnett

We are working through the Faster Cures FAQ on Bayh-Dole.

5. What are march-in rights, and what does Bayh-Dole say about them? Has the government ever exercised its march-in rights?

Bayh-Dole requires federal agencies to include a right to “march-in” and require a contractor to grant licenses in cases of nonuse, unreasonable use, or non-compliant licensing. Final question: No. The government has never used march-in, despite rampant nonuse and unreasonable use of subject inventions. Ho-hum for the public!

“March-in rights” refer to the rights granted under Bayh-Dole that allow the federal funding agency to grant additional licenses to a “responsible applicant” if the agency determines that one of four triggering circumstances has occurred.viii

There are no “rights” “granted” under Bayh-Dole. Bayh-Dole dictates default patent rights clauses. One clause permits a federal agency to require a contractor to grant additional licenses–and get paid for those licenses–and if the contractor cannot or will not do so, then the agency may do so–and the contractor won’t get paid, then, for the licenses. The granting of rights is not restricted to a single “applicant”: the provision reads “responsible applicant or applicants.” Continue reading →

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The Faster Cures FAQ on Bayh-Dole, 3

Posted on April 11, 2018 by Gerald Barnett

We are working through the Faster Cures FAQ on Bayh-Dole.

4. What requirements does Bayh-Dole place on universities?

None. Bayh-Dole applies to federal agencies, not to universities. It’s only loose chatter to say that Bayh-Dole requires universities to do anything. Bayh-Dole authorizes federal agencies to license exclusively inventions owned by the government. Bayh-Dole requires federal agencies to use a standard patent rights clause in their contracting for research or development unless they can justify an exception. Bayh-Dole places limits on the property rights in patents on inventions arising in federally supported (in whole or in part) research or development projects. Nothing about universities. No requirements. The bit in 35 USC 200 that mentions universities is to call out universities as part of nonprofits generally in a statement of policy and purpose. Not requirement. The core gesture of permitting a contractor to retain title to a subject invention becomes effective only after a university has taken action to (i) acquire the invention or (ii) join the inventors as parties to the funding agreement. A university does not have to acquire any invention. But even here, retaining title is not a requirement. It is at best an opportunity, an option, a voluntary choice. No requirements under Bayh-Dole for universities.

The implementing regulations of the Bayh-Dole Act outline the requirements for inventions arising from federally funded research projects.

Federal agencies must use the standard patent rights clauses established by the Secretary of Commerce unless they can justify an exception. There is nothing particularly uniform about the exceptions other than the procedure for excepting–and that federal agencies generally don’t bother to find any exceptions (there are instances, but not much recently). There are presently four such patent rights clauses–one for naval nuclear propulsion and weapons; one for small businesses; one for nonprofits; and one for inventors. Federal agencies may tailor these clauses, and may use entirely different clauses so long as they follow Bayh-Dole’s requirements to do so. The patent rights clause in each funding agreement–however it reads–establishes a university’s obligations for that funding agreement.  Continue reading →

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The Faster Cures FAQ on Bayh-Dole, 2

Posted on April 10, 2018 by Gerald Barnett

We are working through the Faster Cures FAQ on Bayh-Dole.

2. What does Bayh-Dole say about the ownership of inventions and technologies?

Pursuant to Bayh-Dole, universities and other nonprofit organizations that receive federal funding, may “elect to retain title to any subject invention.”

Bayh-Dole addresses “patentable inventions” (and plant varieties), not “technologies.” In a sense, Bayh-Dole breaks up technologies into newly patentable fragments. As a federal agency distributes research work to many nonprofits, Bayh-Dole’s effect is to fragment any emerging technology into patentable bits and unpatentable bits. The patentable bits then end up being owned by many different nonprofits, making it virtually impossible for any company to acquire all the rights necessary to practice any particular bit of the technology–and it’s an even greater problem if a company desires to develop a product for sale. Can you think of any slower way to create a “cure”?

Thus, we might say that Bayh-Dole “says” that ownership of bits and pieces of emerging technologies should be fragmented among competing nonprofits, giving preference to each nonprofit pursuing its own financial interest in favor of combining all such ownership positions in a single entity. In prior executive branch patent policy, outside of procurement from commercial firms and the IPA program, the effort was to consolidate patent ownership claims in the federal government and then release for public use the consolidated package of rights–everyone got the same package deal to research, use, develop, compete over, obtain patents on improvements and applications, and develop standards.

If a nonprofit acquires title–making a given invention become a subject invention– Bayh-Dole requires federal agencies to allow the nonprofit to “elect to retain title,” subject to the public covenant that runs with subject inventions as expressed in the standard patent rights clause. Continue reading →

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The Faster Cures FAQ on Bayh-Dole, 1

Posted on April 9, 2018 by Gerald Barnett

Faster Cures has at its web site a FAQ on Bayh-Dole. Let’s work through their account of Bayh-Dole and help them where they appear challenged.

1. What is the Bayh-Dole Act?

Co-sponsored by Senators Birch Bayh of Indiana and Robert Dole of Kansas, The Patent and Trademark Law Amendments Act of 1980, more commonly known as the Bayh-Dole Act or simply “Bayh-Dole,” is legislation that shifted the ownership of inventions made with federally funded research.

No. This is slant. Bayh-Dole did not shift ownership of inventions. Bayh-Dole does deal with ownership of inventions, but only second hand, after a contractor has acquired ownership of an invention in the good old conventional way. Instead Bayh-Dole limits how federal agencies may, in contracts for research or development, require assignment to the federal government of inventions already acquired by contractors. That is, Bayh-Dole is about how federal agencies contract for inventions contractors have come to own. We might say Bayh-Dole restricts how federal contracts may require assignment of inventions by contractors. While assignment does indeed “shift the ownership” of inventions, one has to be clear that the effect of Bayh-Dole is to limit how federal agencies contract for assignment once ownership has already been shifted.

In contrast, faux Bayh-Dole claims that the law changes federal common law so that the organizations that host federally funded research own (or have a right to own, or have a right of first refusal, or whatever) inventions made with federal support. In faux Bayh-Dole, the organization does not have to have an independent claim to equitable ownership–not authority to direct employees to invent, not patent agreements, not a financial investment, not a foreseeable business direction. Nothing. The Faster Cures FAQ starts, then, by reciting a basic tenet of faux Bayh-Dole. Continue reading →

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Political bluffing as Bayh-Dole policy advice, 2

Posted on April 6, 2018 by Gerald Barnett

This, then, is the “policy” of Bayh-Dole that Allen champions–that nonprofits can and should deal in patent monopolies. Some historical bluffing from Allen’s policy advice (his emphasis):

At that time the federal government funded about half of the R&D in the country (it’s now a third) and the vast majority of basic research where breakthrough products are discovered. We found that 28,000 inventions had been taken by the government with less than 5% ever being licensed. We also discovered that not a single new drug had ever been developed under these policies. That was a tragic waste of billions of taxpayer’s dollars spent annually on government R&D.

Most of the 28,000 patents were defense related. For those, the contractors declined to take title and patent the inventions. A federal official testified that the patenting was done for “defensive” purposes and probably did not need to have been done. In all of those patents, according to Rebecca Eisenberg, there were 325 presumptively biomedical inventions, and the licensing rate for these was 23%:

For example, 325 of the 28,000 patents in the government’s
portfolio were from HEW, and seventy-five (or twenty-three percent) of these HEW patents were licensed as of the end of fiscal year 1976.

In the decade that the revived IPA program was in operation, universities reported 4 commercial products from 96 inventions. One can’t quite compare the 4% university rate resulting in commercial product (of whatever sort) with the 23% federal licensing rate (meaning, apparently, just granting an exclusive license without regard for outcome), but there’s a suggestion that the federal government was doing a way better job with inventions that it sponsored than the universities were doing.

“Licensed” in all these statistics is of course nearly meaningless. What matters is that something comes of the license–use, contributions to the technology, product development, new products. That a license has been granted and counted is meaningless. Continue reading →

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Political bluffing as Bayh-Dole policy advice, 1

Posted on April 5, 2018 by Gerald Barnett

In a once-notorious essay (“Is Business Bluffing Ethical“) Albert Carr, a former presidential advisor, argues that business “bluffing” is ethical because business is based on games, and in games bluffing is perfectly acceptable. Same for politics. If everyone expects everyone else to bluff (or lie, or deceive), then it cannot be unethical to do so, because no one involved could possibly rely on what people say in such circumstances. If everyone aims to deceive, then no one can possibly be deceived.

Here’s Joseph Allen, a former political aide to Senator Birch Bayh, giving advice to President-elect Trump in December 2016:

Because of Bayh-Dole policies, when Stanford and the University of California came up with the basic process for biotechnology they were able to own and manage it.

The reference, of course, is to the Cohen-Boyer “gene-splicing” patents. But Allen is bluffing. Here’s an account of Cohen-Boyer’s patents (my emphasis):

The patent application was filed on 4th November 1974, with Cohen and Boyer as inventors. If a patent was issued it was to be assigned to Stanford University. In 1976, Boyer co-founded Genentech with Robert Swanson, a venture capitalist.

Six years after the 1974 patent application was filed, the first patent titled “Process for producing biologically functional molecular chimeras” (US Patent No. 4,237,224) was granted on 2nd December 1980.

The second titled “Biologically functional molecular chimeras” was granted on 28 August 1984, and the third was granted on 26 April 1988, all three of which would expire in 1997 and assigned to Stanford University.

Bayh-Dole came into effect July 1, 1981. Cohen-Boyer was not invented under Bayh-Dole “policies.” The patents are not subject to Bayh-Dole. The Cohen-Boyer invention has nothing to do with Bayh-Dole. Continue reading →

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The Basic Policy Question Behind Bayh-Dole

Posted on April 4, 2018 by Gerald Barnett

There’s one simple issue:

Should the federal government subsidize with public funding for nonprofit research the creation of patent monopolies?

There it is. The answer that has dominated for thirty-five years is “Yes.” How comfortable are you with that? Gut-level? Reasoning? If the answer is so obviously “Yes,” then why doesn’t anyone come out and state the proposition bluntly? What’s to fear? Why hide it? Why not out and say, “The best thing the federal government can do is to provide public funding that offsets the expense and risk of private speculation on the future value of patents to exclude competition and enable maximum pricing, especially in areas of acute public need, such as healthcare”? Why not call it “federal welfare for patent speculators”? Why not add, “And it is an inspired idea for nonprofit institutions to become part of this speculation on patents”?

I want to put an edge on this policy issue because it is frequently obscured in abstractions, truisms, and fantasy history. In its obscured form, the policy issue comes across as something more like this:

How can the public benefit from the results of federally supported research if those results are made available to all and therefore provide no incentive for private risk capital to develop them into useful and beneficial products?

That is, without speculation on the future value of patents on federally supported research inventions to attract private investment capital, the public cannot benefit and all that investment by the public in research is wasted. Without commercialization, public research funding is wasted. Without nonprofit institutions taking ownership of patentable inventions to secure patents to be offered to attract private investment capital willing to pay the nonprofits a fair market value for those patents, public research funding is wasted. Nonprofit patenting for the enticement of speculative investors on the future value of those patents–speculators who would otherwise not invest–becomes the reason-for-being for federally sponsored research.

This is the world view that dominates the university patent administration community. Continue reading →

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Institutional patent derangement syndrome

Posted on April 3, 2018 by Gerald Barnett

The discussion of university ownership of patents on inventions made in faculty-led research invariably adopts the singular. Consider one invention at one university. Now, doesn’t it make sense that university administrators should take over that invention for the good of the people? Shouldn’t they, not some poor inventor, file patent applications? Shouldn’t these administrators, not some foolish inventor, decide who should receive the benefit of a patent monopoly and thus be induced to spend their money on making beneficial products for the people and not for whatever other wasteful thing they might do with their money? Shouldn’t these administrators, and not some greedy inventor, take the lion’s share of whatever–if any–money gets made from their university research results, so that administrators have ever more money with which to finance more patent applications and thus serve the public with more and more beneficial products? Should not inventors be pleased with these results and not desire to have control of such inventions, given that they work for the public good and administrators, not inventors, are best positioned to represent that public good?

Somewhere in this mess of questions, you see the argument. Institutions that host research will do a better job managing patents on research inventions than will anyone else–better than the inventors, better than the investigators in the project, better than outside invention management organizations, better than companies squarely in whatever lines of business for which the inventions might have application, better than a professional society or standards organization or nonprofit foundation. The argument does not depend on an institution making an effort to have the specialized resources necessary to deal with any particular research invention–the argument is general. Institutions that host research should control the inventive results of that research–because they will be better at it (without regard to their administrators’ talents and resources) than anyone else. Continue reading →

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