The NIH’s complicity in faux Bayh-Dole and high drug prices

Posted on June 9, 2017 by Gerald Barnett

Here’s “A ’20-20′ View of Invention Reporting to the National Institutes of Health”–published by the NIH in 1995.

2.  WHAT IS THE BAYH-DOLE ACT AND WHY IS IT IMPORTANT?

The Bayh-Dole Act encourages researchers to patent and market their
inventions by guaranteeing patent rights.  This Act automatically
grants first rights to a patent for an invention fully or partially
funded by a Federal agency to the awardee organization.  To obtain
these benefits, however, the inventor and the organization have
several reporting requirements that protect the rights of the
Government.

What’s wrong with this answer? First Bayh-Dole says nothing whatsoever about whether researchers should “patent and market” their inventions. Bayh-Dole applies to federal agencies, requiring them to use a standard patent rights clause created (now) by the Department of Commerce (delegated to NIST). And Bayh-Dole creates “subject” inventions, a new category of patentable invention in federal patent law, and states a policy that governs subject inventions. There’s nothing in Bayh-Dole about researchers, for that matter. The basic definition is “contractor” and the reference made to anything close to “researchers” is the “employee/inventor” stuff of 35 USC 202(d)–when inventors can request “retention of rights.”

The fun stuff comes next. The researchers might be encouraged to patent and market their inventions, but according to the NIH, Bayh-Dole doesn’t even do that–it takes inventions from researchers before they ever have any rights in them:

This Act automatically grants first rights to a patent for an invention fully or partially funded by a Federal agency to the awardee organization.

Well, that’s totally wrong. Continue reading →

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The banal myth of the necessary institutional monopoly

Posted on June 8, 2017 by Gerald Barnett

Louis Rosenfeld wrote an insightful article in Clinical Chemistry on the discovery of insulin “Insulin: Discovery and Controversy.” Three collaborators in the research had a disagreement over inventive contributions to various portions of the work and to settle their disputes gave over the patent rights to the University of Toronto for $1 each.

Here’s the rationale that was made for seeking a patent:

A patent was necessary to restrict manufacture of insulin to reputable pharmaceutical houses who could guarantee the purity and potency of their products. It would also prevent unscrupulous drug manufacturers from making or patenting an impotent or weakened version of this potentially dangerous drug and calling it insulin.

That is, a patent was used to control quality, not to create a monopoly to be sold off to a business partner.

This is a remarkably different argument than the one we commonly see today, that patents are necessary to “call forth private capital” to develop inventions that otherwise would “sit on the shelf.” Here is the first Q and A in a Brown University FAQ (“prepared for Cornell University by the law firm of Wolf, Greenfield & Sacks, P.C.” and reposted on a Rice University server) on the matter: Continue reading →

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Bayh-Dole nonsense in a talk at the University of Pittsburgh

Posted on June 7, 2017 by Gerald Barnett

Last year (March 2016), Joe Allen gave a talk at the University of Pittsburgh, “Patent Ownership Under Bayh-Dole, reported in the University Times. Called “a key architect of the Bayh-Dole Act,” Allen manages to fill a talk summary with mostly nonsense–but nonsense not so much silly as it is damaging, as this sort of thing harms inventors and university licensing practices otherwise built on solid foundations.

“If you’re taking federal funding, you have obligations: one of which under Bayh-Dole is you will report the invention, and you will assign the invention to the University, the contractor. And if the University doesn’t want the invention and the federal government doesn’t want it, then the inventor can get it back,” said Joe Allen.

Now, I don’t know if the quote is accurate or not, but whatever, the information isn’t true. There is no requirement that inventors assign to contractors in Bayh-Dole. The Supreme Court in Stanford v Roche make that absolutely clear. For all that, Bayh-Dole doesn’t apply to inventors or even to universities. It applies to federal agencies, requiring agencies to use a standard patent rights clause (SPRC, 37 CFR 401.14) as a default, what must be in that patent rights clause, and the procedures for varying from that clause or intervening if a university is not complying with that clause. The standard patent rights clause is authorized by Bayh-Dole but isn’t in Bayh-Dole at all.  Continue reading →

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The Special Special Case

Posted on June 6, 2017 by Gerald Barnett

Of all the university research findings possible, inventions–because of patents–attract the attention. Everything else about research–data, findings, experimental setups, reports, how to do things–is pretty much ignored. No one spent time worrying about whether data or findings would be “made available” on reasonable terms–even though withholding data turns out to be a huge problem. Copyright and trade secret weren’t big concerns–the government could publish reports, and in any event, before the 1976 Copyright Act, folks could publish reports without copyright notices and registration and the text would enter the public domain–rather like what is still the case with inventions now (but for a year “grace” period in which bureaucrats can work to prevent an invention getting to the public domain in the U.S., at least). But more so, there was absolutely nothing about how non-patentable research findings might be presented to industry for advantageous use. Nothing about how industry might use something that had no patent position for its benefit. Nothing about how such things might form valuable products or features to products, even without a monopoly position–as if nothing done by industry could possibly be done without a monopoly position. If a company was not the only one, and couldn’t remain the only one, then, why, nothing new would happen.

This sort of thinking never comes out directly. No one was foolish enough to actually say or write things this way. Yet this view is the strange attractor around which circle the arguments for patents, commercialization, innovation, and public benefit. We find all the time that companies and the general public adopt things that have no monopoly position. Indeed, imitation is a primary method of dissemination. The “free rider” issue–so threatening to monopoly thinking–is in fact a primary driver of widespread dissemination and public use. If a monopoly is so essential to commercial success, why is it that companies are happy to copy technology and products in use by others? If a monopoly was essential, wouldn’t they forgo such imitation and instead focus on developing something in which they had a monopoly? Of course, the answer is that monopolies are not all that important to the diffusion of a technology where the technology has shown itself to be useful. Continue reading →

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The bogus argument for “mixing” research funds, 3

Posted on June 5, 2017 by Gerald Barnett

This third form of mixing–intentional–created the problem for the PHS and universities in the area of medicinal chemistry. It was not mixing in the abstract; not mixing in an open university environment, but rather intentional mixing. The drug industry had supported academic work in medicinal chemistry for twenty years. Its deal was that it would provide free screening services for testing classes of compounds for biological activity in exchange for an exclusive option to develop anything that appeared interesting. Since screening services were limited outside of industry, and since there weren’t always funds for screening on top of discovery (though the cost was modest for initial screening), the industry arrangement made some sense. Besides, a class of compounds could be in the thousands, and synthesizing each variant itself was time consuming and generally not so publishable–or supportable by grants that expected “discoveries” not “systematic grinding out of variations 300 to 400 for a class of compounds that may or may not have any therapeutic significance.” A company might do this; academics not so readily.

What’s mystifying, then, is why the advocates for the IPA program, who then went on to draft Bayh-Dole, tried to make the IPA program government-wide, and when that failed, succeeded with Bayh-Dole. The Harbridge House report was clear that in many areas, the government’s patent policy worked fine. In the service departments, such as the Department of Agriculture, all inventions studied made it to commercial product without any exclusive patent position. The Harbridge House report identified six different approaches by industry to patents, ranging from indifference to extreme reliance. No single government policy, the report concluded, would address all of these industry attitudes and respond to the varying government purposes behind the provision of funds for research.

Why then did the Bayh-Dole advocates turn a local problem–how the Public Health Service (and its successor organizations) funded “discovery” research–into a government-wide issue, so that every invention would be claimed to “sit on the shelf” but for university patent brokers creating private patent monopolies in the form of exclusive licenses to favored companies? Why should every invention be called “early stage” when many inventions were, from the moment they were recognized, available for use as tools, as DIY technology? Why should every invention be characterized as requiring “substantial private investment” for there to be any public benefit when this just wasn’t (and isn’t) so? Why should “commercialization” become the dominant theme, rather than “use”? Why should there be such an attack on open innovation that a federal law should all but shut down open innovation in favor of “commercialization” through patent monopolies (even if Bayh-Dole does not openly advocate such a thing, but instead provides the means to enable such a thing and make almost impossible anything else)? Why should all inventions made in public discovery research be characterized as in need of “valley of death” funding between discovery and creating something sufficiently interesting that private investment funds will even take a look? And what is that “gap” funding for, but to make new inventions with their own patent positions that also would be reserved for a favored monopoly partner? Continue reading →

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The bogus argument for “mixing” research funds, 2

Posted on June 4, 2017 by Gerald Barnett

We can distinguish three forms of “mixing” of funding.

(1) Two or more projects, each funded on different terms, in which their participants, having the freedom of the university, talk with one another, learn things, and apply what they learn in their own project. Thus, one project’s ideas (and findings) might “contaminate” another project, and so provide that project with “support” and in doing so might then be said to form a right by the sponsor of the first project to the patentable inventions made in the second project.

(2) A single project, funded by and with commitments to a single sponsor, that draws on resources (money, equipment, personnel) that have conflicting conditions on their use. For instance, a software development project that has agreed to be open source draws on a proprietary library of functions; or, a software development project that has agreed to be proprietary incorporates an open source library of functions that requires the entire code base to be open. Or imagine a project that has made a commitment to its sponsor that the sponsor will have the first right to negotiate a license to any patentable invention, but that project then uses a commercial instrument provided to the university on the condition that the company receives a royalty-free license to use any invention made using that instrument.

(3) A single project, funded by and with commitments to a single sponsor, in which investigators without the sponsor’s permission, farm out work to another organization that, to do the work, requires commitments that violate the commitments made to the sponsor. In this case, the investigators, rather than doing the work themselves, choose to involve others to do some of the work instead, without flowing down their sponsor’s requirements.

Each of these instances might be called “mixing” of funding sources. Continue reading →

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There are no Bayh-Doles in Canada

Posted on June 3, 2017 by Gerald Barnett

In a recent hearing held by the Canadian House of Commons Standing Committee on Industry, Science and Technology, Michael Geist, a law professor at the University of Ottawa, made some valuable remarks, which he has published at his blog.

Geist argues that the emphasis on Bayh-Dole style patent commercialization is misplaced, and what is needed is a stronger emphasis on knowledge transfer and protections against what he calls “IP abuse.” These are worthwhile things to consider. Here’s Geist on Bayh-Dole:

Further, the potential emphasis on the U.S. Bayh-Dole approach is misplaced. As you heard from department officials, there is little evidence that the policies governing who owns IP rights have an overriding impact on the success of tech transfer as measured by the volume of patents and licenses.

There’s little evidence because Bayh-Dole makes the evidence subject to FOIA exclusions (well, not really–Bayh-Dole bungles the FOIA exclusion but since everyone “knows what was meant” the words don’t actually matter much). The evidence that’s out there–in bits and pieces–indicates that most university patented inventions are never licensed and of the few that are, most never become the basis for a commercial product. The effect of the patent, then, is to ensure that no casual user can practice an American university invention. A bureaucrat’s thumb must be in every innovation pie. That’s a handy way to put it (so to speak). Continue reading →

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The bogus argument for “mixing” research funds, 1

Posted on June 3, 2017 by Gerald Barnett

The Council on Government Relations, a university front group, published a “tutorial” that advocated that universities adopt a “uniform” policy on patents. COGR’s argument was that since administrators wanted to be able to “mix” funding from different sources, and the government placed certain conditions on its funding, then universities must adopt a single policy with regard to inventions that gave the priority to this government funding. All other sources of funding must be subordinated to the government’s requirements. Thus, there could be only one patent policy, and that patent policy must “comply” with the government’s requirements.

COGR’s tutorial tutors nonsense, but it is a clever nonsense–even an effective nonsense. Look at university patent policies. They have become, just as COGR argued, “uniform” in that sense of “uniform” that means “arbitrary.” The cleverness, however, lies in the claim that university patent policies must become uniform to comply with federal regulations. This part is simply not true. The Bayh-Dole Act requires federal agencies to use a default standard patent rights clause in funding agreements for research conducted at universities. That standard patent rights clause then is a matter of federal contract, not law. No one has to accept the clause (or the money that comes along with it); the clause is not a law imposed on the unwitting, but on those that volunteer and accept its terms and conditions knowingly. Continue reading →

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How Bayh-Dole went wrong and what might be done, 5

Posted on June 2, 2017 by Gerald Barnett

Moving to a new platform that’s really what Vannever Bush first proposed

If you see this difference between an approach that transfers the government’s right and the Bayh-Dole approach, which attempts to transfer ownership of patentable inventions directly to institutions, then you can see how stunk up the IPA and Bayh-Dole both are. We’ve had nearly sixty years of such stunkupidness. Perhaps, however, you know someone with delicate feelings about the government just designating organizations to take over patenting of inventions made with public support. Let’s help sort out their feelings. The outcome is roughly the same as in present practice, but the funding relationship with universities and inventors is much more convoluted with Bayh-Dole. In the approach I’ve outlined, the conditions run with the option on the government’s rights. Instead of issuing a patent to itself, the government designates a non-federal entity to which it will issue the patent. Then it’s up to the non-federal entity to do something with the patent that meets with public approval, however that standard is defined in the option–make a lot of money, scare the bejeezus out of industry on behalf of the government, develop the invention into a commercial product while excluding all other uses, license non-exclusively to create a standard or commons, or release the invention with butterflies and rainbows for everyone to use.

In present practice, Bayh-Dole leaves the exploitation of a patent on a subject invention up to the patent owner. Under Bayh-Dole, a patent owner can do pretty much WTF it wants, including assigning the invention to someone else (call it an exclusive license and everyone ignores the transaction), and the assignee then decides how to manage the invention, including sublicensing the invention to yet someone else or selling off a part of the company including the exclusive license agreement. The patent monopoly can thus be traded multiple times, so “technology transfer” can involve patent speculation for a number of transactions without any actual use of the invention or sale of product based on the invention. That wouldn’t necessarily change under a simpler federal option approach–it’s just that the transaction would be much more out in the open. The research host gets rights because it is offered access to the federal government’s rights, not because it is given out the appearance that it is entitled to those rights because it is also an employer or is in the business of profiting from research inventions, or is a public entity that cannot permit anyone to benefit personally from the use of public resources. It would hold rights because the federal government designated it to hold and manage the federal government’s rights. Continue reading →

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How Bayh-Dole went wrong and what might be done, 4

Posted on June 1, 2017 by Gerald Barnett

Bayh-Dole’s method of operation

The IPA did not disturb patent law–it imposed its public convent requirements on the use of patents as a matter of federal contract. Bayh-Dole was different in two ways. First, Bayh-Dole dictated executive branch contracting policy. It expressly preempted (35 USC 210) all existing federal laws regarding inventions made in federally funded research:

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, including but not necessarily limited to the following: [a long list].

Notice the wording–“rights in subject inventions of small business firms or nonprofit organizations contractors”–yes, garble of course (it is Bayh-Dole, after all), but there’s that “of” again–a double of, as it were, since “subject inventions” are defined as inventions “of a contractor” and now we have subject inventions “of contractors”–that would be inventions of a contractor of a contractor. It’s clear that the precedence applies only to inventions once they are owned by a contractor. Without any other guidance, Bayh-Dole does not preempt any statute with regard to non-small for-profit companies (that comes with Reagan’s executive order). Does Bayh-Dole also preempt the Kennedy-Nixon executive branch patent policy, with its public covenant? Yes. Does it preempt federal agency regulations with regard to the obligations of principal investigators? That’s not so clear. Bayh-Dole does stipulate that federal agencies may permit inventors to retain ownership (35 USC 202(d)), and thus Bayh-Dole preempts any federal agency regulation that does not allow for inventors to retain ownership of their inventions.

But there’s more. Bayh-Dole works in two ways, by new policy and by a contracting apparatus. Continue reading →

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