The start of this article is here. The fourth installment is here.
[Bayh-Dole’s section 204 (35 USC 204) permits federal agencies to waive the requirement that exclusive licenses to use or sell in the United States must require product sourced from United States manufacturing. The waiver provisions are easy to meet and work against potential United States licensees. Section 204 ends up being an empty gesture.]
We have looked at the first sentence of section 204 of the Bayh-Dole Act, which purports to dedicate subject inventions to American industry for manufacturing, but actually does almost nothing for American industry while making a big flourish about it. Section 204 lays out a narrow framework for requiring American manufacture of products based on subject inventions–but only for a limited form of exclusive license–to use or to sell. There’s nothing in Bayh-Dole requiring subject invention *owners* making American when *they* use or sell in America. An owner of a subject invention can make product wherever it wants.
One would think that if a purpose of Bayh-Dole is to promote the commercial use and availability of subject inventions, then the US manufacturing requirement would apply to owners of subject inventions, and not just to a limited form of exclusive licensing. There’s nothing in Bayh-Dole requiring *non-exclusive* licensees to manufacture substantially in the U.S. So, if you own a subject invention, you can avoid the US manufacturing requirement by doing just one non-exclusive license and waiting a decade to see if you need to do another. Or do two non-exclusive licenses–one to a company that wants an exclusive commercial position and one to a company that, say, does research or, ahem, likes to collect licenses. Just because a company gets a license does not mean they have to *act on it.* The other non-exclusive license then has the effect of an exclusive commercial position–but isn’t an exclusive license, and so Bayh-Dole’s requirement doesn’t apply. Or a subject invention owner might just license non-exclusively to a bunch of companies, but none of them in the U.S., for sales to the U.S. Bayh-Dole in such a case does not require any U.S. manufacturing. Section 204 ignores all this practice obviousness.
Even with the requirements on those limited exclusive licenses to use or to sell, Section 204 is full of qualifications and ambiguities. Even the restriction on exclusive licenses can be waived by the federal agency that funds the research if a patent owner “shows” that they tried and failed or that they decided it wasn’t worth trying.
Of course, section 204 was drafted by lawyers, so they couldn’t use plain language like that. Let’s take a look at their work.
The Second Part: Waiver
Now for the major walk-back in section 204. For all that–the prohibition on exclusive licenses in the United States, except that yes, one can grant exclusive licenses in the United States but only if the licensee agrees to an ambiguously worded tie to the domestic manufacture of products–section 204 also authorizes federal agencies to waive the requirement altogether, but to do so the agency must meet at least one of two requirements. Here’s the start of the waiver in 204:
However, in individual cases, the requirement for such an agreement may be waived by the Federal agency under whose funding agreement the invention was made
You might wonder why it is that Bayh-Dole delegates decisions about this most important provision in the law to the federal agency that grants the funding. Why should that federal agency have any particular say in waiving the default requirement?
One might also begin to think that by placing all these provisions into a patent rights clause for each funding agreement and then allowing the granting federal agency to waive any of the public interest apparatus of that patent rights clause, Bayh-Dole lets federal agencies who don’t care for the public interest apparatus simply waive it–Bayh-Dole requires them to use the defaults in their funding agreement (unless they want to go through a heck of a lot of hoo-haw), but does not require the federal agencies to enforce those defaults. You see how it works. NIH attorney Latker drafts Bayh-Dole to make it appear that the public interest is protected, but knows that with this architecture the NIH can quietly choose not to enforce those provisions.
The public interest apparatus was necessary to get the law passed, but Congress foolishly assumed that federal agencies would enforce the required default patent rights clause. But they don’t. What would Bayh-Dole be without any of those public interest provisions? Pretty much a patent monopoly pipeline from federal funding to favorite companies, stripping inventors of rights, no public accountability, no basis for appeal–a multi-billion dollar industry public subsidy.
And to grant a waiver, each agency must have a procedure involving “a showing”:
upon a showing by the small business firm, nonprofit organization, or assignee
Of either of two conditions. First, “we tried”:
that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or
Second, “we didn’t bother trying because”:
that under the circumstances domestic manufacture is not commercially feasible.
These conditions are remarkably odd. Continue reading →
