When a university and a company love America so much that they produce usable technology and dedicate it to be practiced for any government purpose, 2

Posted on November 8, 2017 by Gerald Barnett

How would one know whether a project is a big project, or a subject invention is a big subject invention, or a commercial product just another instance of that big subject invention, with a full license already granted to the federal government? Easy. Three classes of document.

First, the documents that describe the project established by the university. The request for proposals. The research proposal submitted and approved. The articles written by the investigators and by university officials regarding the project. The reports to the Government. The stated goals of the university’s invention licensing program. These together provide a written expression of the scope of the project.

Second, the patent applications and issued patents. If the claims are drafted to cover therapeutic drugs, then it’s clear that the university intends that the project will move to development of therapeutic drugs–the scope of the subject invention includes commercial products, however these might be developed. Separate accounting doesn’t matter. The time relationship is not an important determinant.

Third, the licensing agreement(s). If there is an instrument labeled “Exclusive Patent License” but the document itself grants all substantial rights in the invention, then the instrument assigns the invention, and Bayh-Dole requires that its ownership provisions follow that assignment–and the ownership provision in Bayh-Dole carries with it, in the same provision, the Government’s license to practice and have practiced the subject invention. It does not matter what downstream patents get filed on the subject invention–so long as there is a common project that includes creating a commercial product and a formal line of patenting and assigning of the invention in performance of that project. It does not matter that money was spent by an assignee not the university; it does not matter that the assignee did its work later, adding to what the university had done–the project is still to create a commercial product, a prescription drug, a “usable technology” and the commercial development “more comprehensively” accomplishes the objective of the project.

One might avoid this outcome in any number of ways. Continue reading →

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When a university and a company love America so much that they produce usable technology and dedicate it to be practiced for any government purpose, 1

Posted on November 7, 2017 by Gerald Barnett

Bayh-Dole requires federal agencies to require that owners of subject inventions grant to the government a license in those inventions. Sounds easy, and really, it is. But people are fickle and university patent administrators can be more fickler than most, especially with nearly unlimited legal budgets to force their fickles on the rest of us.

Here’s Bayh-Dole (35 USC 202(c)(4)):

With respect to any invention in which the contractor elects rights, the Federal agency shall have a nonexclusive, nontransferrable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States any subject invention throughout the world:…

That is, federal agencies are required to use a patent rights clause that “effectuates” this license. Notice that the license is directed to the subject invention, not to any particular patent right in the subject invention.

Notice as well that the license is required as a condition of the contractor’s “electing” to retain ownership of the subject invention. That is, the license happens, generally, before any patent has issued on the subject invention.

The license is to the invention as disclosed and acquired by the contractor.

That is, regardless of whatever rights the contractor might develop in the invention. Why does this matter?

In the late 1940s, when the Department of Defense expanded its contracting for research, it included an “anticipation” clause–the DoD required a license to any invention made with federal funding or in anticipation of federal funding. One could not rush to file patent applications based on a proposal for federal support and thereby frustrate the federal government’s license in whatever work was done under the contract after it was awarded. Makes sense, especially if one is working in a world full of fickle university administrators. Continue reading →

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Drift as a city’s economic driver

Posted on November 6, 2017 by Gerald Barnett

Some years ago, Jane Jacobs published a series of books that take up the issue of how cities contribute to regional and national economies. In particular, Jacobs argued that a particular kind of city behavior was crucial for a regional economy to thrive. That city was one that pursues two systems of production, exporting, importing, and import replacement that leads to new exports. Here are two diagrams from The Economy of Cities. The first diagram identifies a system by which produced goods “P” are exported, resulting in new income for the city, which it then can use to increase its imports of whatever it wants–raw materials, manufactured goods, and the like:

The second system then feeds on the financial resources and opportunities made available by the first system: Continue reading →

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Lower drug development costs than industry reports–shock!

Posted on November 3, 2017 by Gerald Barnett

At the SciScip discussion group notice has been given to an article published in September 2017 in JAMA that has determined the median cost to develop a new cancer drug at $648m, much lower than the pharmaceutical industry reports for the cost to develop new drugs in general. After FDA approval, these ten drugs generated a median revenue of $1.7 billion. Since the article is paywalled, I don’t know what time period that income was over.

The authors looked at 10 drugs developed by companies to reach their finding. We might then wonder if the “sample size” is too small to draw a general conclusion. Fine. But if there are 10 more drugs out there to bring the median up to the billion or so dollars that the industry touts as its numbers, those ten drugs will have to be running on the up side of a billion dollars–say $1.4 billion or so–for the industry’s figure to be close to accurate.

The authors then use this finding to conclude that there’s more profit than it costs to develop the drugs. This in itself is about as bland a “meaning” as we could have. We might wonder if the authors first looked for drugs that had modestly good commercial lives, then did their analysis for costs, and then reached the conclusion that the costs were less than income. If so, big wow on the methodology. Continue reading →

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Two ways to turn an invention into a subject invention, 2

Posted on November 2, 2017 by Gerald Barnett

The complicated (f)(2) approach

Now consider the complicated approach under (f)(2). The university has to somehow compel inventors to assign all inventions to the university, even though (f)(2) requires the university to require inventors to promise to establish the government’s rights in subject inventions–by assignment to the government or licensing to the government. How can an inventor be required by the university to exercise this power if the university has a second agreement under which the inventor  is required to give up this power? It can be done, but it takes hand-waving and administrative farting and legal bullying and defying other parts of university policy. Employees must be hired to invent, must be assigned to the federally supported project, and the invention must be within the scope of what the university has hired the employee to do (whether on the federal project or otherwise). For faculty and volunteers, this is a tough nut to crack.

The effect of the (f)(2) agreement requirement is that a university gives up the power to claim ownership of inventions (or force employees to give up ownership) as a condition of federal funding or access to the federally funded activities of a given project. Compare the same requirement for subcontracts in (g). If there’s going to be compulsion or a prior agreement, it has to be entirely outside the federally funded project–not the funding and not the use of the resources made available by the university as a condition of obtaining the funding. That takes some doing. Of course, by not complying with (f)(2), a university may well undermine any claim that it does have to an invention made with federal support. I’m waiting for one of the big companies sued by a university for infringement of such an invention to contest the university’s ownership based on a failure to comply with its federal funding agreement. That will send university legal counsel scurrying for the cracks in the floorboards. Continue reading →

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Two ways to turn an invention into a subject invention, 1

Posted on November 1, 2017 by Gerald Barnett

[this article refers to Bayh-Dole’s implementing regulations before NIST’s May 2018 changes–37 CFR 401.14(a) becomes 37 CFR 401.14, and NIST adds a goofball assignment clause under which contractors must require inventors to assign subject inventions–inventions that the contractors already own. NIST is strange, but then so is Bayh-Dole, so perhaps there’s a match there.]

Bayh-Dole applies to patent property rights in subject inventions and to the contracting defaults that federal agencies must use in treating inventions as research deliverables. 35 USC 202(a) provides that universities may “elect to retain title to any subject invention.” The Supreme Court in 2011 ruled that a “subject invention” is an invention owned by a contractor, an invention “of the contractor,” where “of” indicates ownership.

Here are the two methods by which an invention may become a subject invention:

1) a  university may obtain ownership of an invention by assignment

Assignment may be voluntary, or university administrators may find a way to compel assignment–even though federal funding agreements do not require assignment and do not require university administrators to compel anyone to assign [even with NIST’s strange new language on assignment–inventors have to be made to promise to assign, but a university does not have to call in that promise].

2) a university may comply with the (f)(2) written agreement requirement in the standard patent rights clause

When university administrators comply with the (f)(2) requirement, they make each potential research inventor a party to the funding agreement, and therefore by definition, a contractor. Whenever a contractor-inventor makes an invention, and therefore owns the invention, the invention becomes a subject invention. In this second case, the contractor that matters is the inventor, not the university.

If a contractor does not own an invention made in federally supported work, that invention is not a subject invention and does not come within the scope of Bayh-Dole. Whatever federal law applies to such inventions, it is not Bayh-Dole, and nothing in Bayh-Dole requires any contractor to turn such inventions into subject inventions.  Continue reading →

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“Compliance with Bayh-Dole”

Posted on October 31, 2017 by Gerald Barnett

There are folks out there making money by offering compliance services for Bayh-Dole. At one level, it’s understandable. University administrators make a big deal about compliance. They see a complicated world. Many administrators aren’t prepared to read regulations carefully and implement the proper procedures. It makes sense, then, to hire professionals who have worked things out.

And of course, if there weren’t any big issues with compliance, there wouldn’t be a need for a lot of administrators. Hey! That suggests a public policy strategy! How about implementing federal research programs with compliance any researcher can do? Roll back all the useless pages and pages and pages of regulations governing federal research grants to universities. If you think about it, those pages of regulations are not directed at university investigators for the most part, but at administrators. The implication is that university administrators cannot be trusted to exercise judgment to see that federal money is well used by researchers to do what they proposed to do. Oh, but if we rolled back all those regulations (and doing so would result in nothing adverse for research), then a lot of federal administrators also would be out of work–so the strategy will have to be tweaked somehow to prevent too many administrators from tumbling into the private sector job pool.

On another level, university Bayh-Dole compliance is super silly. Bayh-Dole doesn’t apply to universities–it is directed at inventions made with federal support and at federal agencies that provide that federal support. Anything that a university must comply with is in the patent rights clause put in each federal funding agreement. Bayh-Dole requires federal agencies to use a default patent rights clause unless an agency can demonstrate that it must use a different clause. Bayh-Dole and its implementing regulations make it difficult–almost but not quite administratively impossible–for federal agencies to vary from the default patent rights clause. Continue reading →

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There Is No Bayh-Dole Compliance for Universities

Posted on October 30, 2017 by Gerald Barnett

There is no Bayh-Dole compliance for universities. I know. This goes against everything you’ve heard. But really, let’s get real. Five points.

  1. Bayh-Dole applies to federal agencies and to the scope of patent property rights, not to universities. Bayh-Dole applies to federal agencies and changes property rights in patents on inventions made with federal support, authorizes federal agencies to grant exclusive licenses, and dictates how federal agencies may contract for rights in patentable inventions. There is nothing in Bayh-Dole for universities to comply with. The law does not apply to universities. It boggles that university administrators can’t grasp this point.
  2. It’s the patent rights clause in each funding agreement that matters. The requirements of Bayh-Dole are conveyed to universities in the form of a nonprofit patent rights clause that is made part of each federal funding contract. Federal agencies are required to use a standard patent rights clause unless they can justify a variation. Universities must comply with the patent rights clause in each agreement. Furthermore, there are requirements in the patent rights clause that are not in Bayh-Dole (see for instance (e), (f), and (g) of the standard patent rights clause at 37 CFR 401.14(a)). University compliance is a matter of federal contract formed from regulations, not with a federal statute. One has to read the federal contract, not the law. It boggles that even law professors cannot fathom this bit of basic contracting diligence.
  3. Federal agencies don’t enforce the key parts of the patent rights clauses, have the right to waive most everything else, and so what? While Bayh-Dole requires federal agencies to use a standard patent rights clause in funding agreements for research or development, Bayh-Dole does not require federal agencies to enforce the patent rights clause. The GAO in 1998 reported as much. In fact, Bayh-Dole walks back the requirements for most provisions in the standard patent rights clause, and the implementing regulations and standard nonprofit patent rights clause walks back these requirements even more. Other than loss of ownership of inventions for not reporting subject inventions (walk back: only if the federal agency requests ownership within 60 days of the “discovery” of a failure to report), there is no other material consequence for failing to comply with a patent rights clause. Thus, for almost all substantive elements of the patent rights clause, there’s a waiver, a walk-back, or no enforcement, which makes compliance talk mostly about maintaining appearances.
  4. And universities routinely ignore patent right clause compliance and federal agencies routinely ignore university non-compliance. Universities refuse to comply with the (f)(2) written agreement requirement–central to making all inventions “subject inventions” without forcing university ownership. Universities routinely assign inventions without federal agency approval under the cover of labeling the subject invention assignment an “exclusive patent license.” But the standard patent rights clause is specific to subject inventions; and requires nonprofits to pass through the nonprofit patent rights clause when they do assign, and universities often don’t do that either. Universities routinely ignore the requirements for the use of royalty and other income arising from the exploitation of subject inventions. Universities routinely ignore small business licensing preferences, making no effort to attract small business licensees when a large business licensee is in hand and substituting their own startups rather than attempting to attract existing small businesses. No matter–federal agencies don’t bother checking up on these things. Given how much universities refuse to comply with, their “compliance” talk is empty.
  5. Federal agencies routinely ignore the rights provided to them under the standard patent rights clause. Federal agencies make no use of the invention disclosure or invention use reporting requirements. They do not protect the public for nonuse or unreasonable use by marching-in to carry forward a public purpose. They do not practice and have practiced subject inventions. They see no benefit in the standard patent rights clause. A university can jitter away about the prospect of march-in, but march-in never happens. Compliance, if and when a federal agency insists on it, is for compliance’s sake, for appearances. No one cares. Inventions in university research are that inconsequential to government purposes.

In short, federal agencies and university administrators don’t care about Bayh-Dole compliance beyond making a show of reporting inventions, “electing to retain title” in them, and putting a federal funding notice in patent applications. None of these “compliance” things have an ounce of anything to do with making inventions available for public benefit. They are administrative waste effort, put forward as virtue. If putting a meaningless statement in patent applications about federal support helps inventions get used, we ought to put some such statement in even more patent applications! But, sadly, federal funding statements in patent applications have no beneficial purpose. They are make-work when it comes to innovation. Making a big deal out of “Bayh-Dole” compliance is just another way to waste money on administrators and consultants to do their work for them.

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University of Misery’s IP Policy Scam, 17

Posted on October 27, 2017 by Gerald Barnett

We are pretty much through with the University of Missouri’s policy scam. Let’s clean up a few last gobbets of policy ugliness. To review. The University of Missouri’s patent policy provides only two conditions under which the university may claim ownership of inventions: (1) when the invention is in an assigned inquiry and relevant to the general field of that inquiry and (2) when made or developed in a substantial degree with university facilities, financing, time, or non-public university information. These two conditions are defined by policy as “the general scope of duties to the University.” But university administrators claim the university owns “all intellectual property”:

MU owns all intellectual property created utilizing University facilities by an employee or student of the University of Missouri.

We have seen this is nonsense. The university’s policies don’t claim all intellectual property created using university facilities. The university’s claim is not based solely on use of facilities, either. They botch even their botches. No matter, clever university administrators require all inventions to be reported on a special form, and to complete that form, inventors have to assign the invention to the university, even if by policy the university has no claim on it.

There’s more. Continue reading →

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University of Misery’s IP Policy Scam, 16

Posted on October 26, 2017 by Gerald Barnett

University administrators insist that they, unlike their corporate counterparts, can expand their institutional claim on inventions to be anything that’s invented, and faculty must agree to this claim as a condition of employment. That is, administrators claim the right to fire faculty members who do not accept this broad unconditional, compulsory, institutional invention ownership claim. The premise of the claim is that because the university has an invention licensing office, then any invention is in the foreseeable direction of the university’s business, couched in terms such as “public service” and “economic development.” If companies made this same move, then there would be no “free” inventions–all inventions would be gobbled up by the company on the premise that in addition to whatever other business it had, it also had a business trying to make money from the licensing or sale of inventions. In some states–California and Washington among them–if businesses made this same move, it would be illegal, as these states have laws that restrict what an employer can claim in an employment agreement. Not to be deterred, administrators at the University of California and at the University of Washington recite these laws in their patent policy documents–even while thumbing their noses at them.

If all a business needs to do is to proclaim that its business includes trying to profit from any invention any employee makes–whether engineer or janitor–then laws aiming to protect inventor rights are worthless. But just because university administrators up and announce that “technology transfer” or “economic development” is a new fourth mission of the university does not change a university’s charter or its non-profit registration materials–and does not change, therefore, the university’s formally stated “business.” Rather, if a university is operated with a “technology transfer” program that is formalized as regular business, then the tax-exempt status of the university should be called into question. The claim to all inventions arising from any employee, and the tie of that claim to systematic profit-making efforts justifies revoking a university’s tax-exempt status for all budgetary activity implicated in the claim–all salary, all research funding, all facilities and equipment financing. It is absurd that the IRS gets all fussy about whether a university can have vending machines operated by for-profit companies in its buildings financed with tax-exempt bonds but doesn’t give a rat’s ass that the same university can claim all employee inventions with the purpose of entering into monopoly-sharing deals with companies to make as much money as it can.

The reality is that compulsory, comprehensive institutional ownership of faculty inventions has turned out to be a really bad idea. It’s such a bad idea that university licensing operations won’t release the basic data, and instead try to deceive the public with a continuous refrain about success and making progress. The University of Utah and University of Washington were both notorious for making claims designed to deceive the public, the faculty, and their state legislators. The University of Washington claimed its “Center for Commercialization” was a rousing success right up until it forced out the apparently wildly successful leader of the “Center” and re-organized it out of existence. Other than a handful of “big hit” deals–which likely would have come about despite the university’s administrators buzzing about–most institutionally claimed inventions are killed by the very process that is touted to help them. Death by administrative process. Continue reading →

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