How Bayh-Dole went wrong and what might be done, 3

Posted on May 31, 2017 by Gerald Barnett

Patents the government issues to itself

The attributes of ordinary patents make little sense in the context of the federal government issuing to itself a patent. The government has no profit motive from the patent system. The U.S. patent system was set up to preclude the government from taxing technological inventions as a source of revenue (maybe the government should revisit that–the government makes millions from patenting fees alone–imagine what the government’s income would be with a 5% tax on the profits from patented products–for licensed patents, the government could double dip and tax the seller first and then the licensor as well. Given the patent marking requirement, it’s a wonder this hasn’t been seriously considered). If the patent system was set up so that the government did not have a financial interest in the use of any given patent, then how could it be that when the government issues a patent to itself, this principle should change? (It has changed, of course, but that change came with Bayh-Dole, thirty-five years later.)

Patents issued by the government to itself should be used to promote use rather than prevent use, should be used without an immediate profit motive by the government, and in terms of public purpose should give access to all and not play favorites, should break up monopolies where those monopolies held onto obsolete or overly expensive products, and should selectively invite private initiatives to participate in the development of new things, but with only such exclusive rights as needed to justify the private investment–meaning, the prospect of a reasonable return that justifies the commitment of the money and recognizes the risks undertaken and the other opportunities set aside.

If the government issues a patent to itself and the licenses that patent exclusively (or even assigns that patent) it is in essence re-issuing the patent, but now not to the inventor (or even the inventor’s employer, if that would matter), but to a favorite, to someone chosen by the government to undertake whatever dealings the government believes to be in the public interest–use the invention, develop the invention for public benefit, break up the patent monopoly faster and better than the government could, and once the work is done, release the exclusive position, the patent property monopoly, and get back to work in a better, richer public commons. Continue reading →

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How Bayh-Dole went wrong and what might be done, 2

Posted on May 30, 2017 by Gerald Barnett

The nature of federal research contracts

Let’s work through how Bayh-Dole might have been structured. We start with the nature of federal contracts. A federal contract is not quite like a conventional contract formed under state laws. The federal government stipulates the provisions of each funding agreement by means of regulations. For grants, there’s not much more. Contracts consist largely selections of alternatives provided by the regulations, with blanks filled in for specifics of each deal. For grants to universities, 2 CFR 200 sets out the requirements. Combined with the proposal that sets out the statement of work, approval by an officer of the federal agency, and acceptance by the university, we have a “funding agreement” in the form of a federal contract.

Here’s an early instance, from a Public Health Service regulation from 1963 (emphasis of the last sentence (shown here as not italic)) is in the original; I’ve added some blank lines for easier reading):

1. Formal reports of inventions. Department of Health, Education, and Welfare regulations (45 CFR, parts 6 and 8) provide that all inventions arising out of the activities assisted by Public Health Service grants and awards shall be promptly and fully reported to the Surgeon General.

In respect to inventions reported, the institution and the principal investigator agree either:

(a) To refer the inventions to the Surgeon General for determination, in accordance with Department patent regulations, of the ownership and manner of disposition of all rights therein and whether patent protection on such inventions shall be sought, and, if so, the manner of obtaining, administering, and disposing of the patents in the public interest; or

(b) where the institution has a separate formal patent agreement with the Surgeon General covering inventions deriving from Public Health Service support, to make a determination of ownership and disposition in
accordance with its policies as approved or as modified by such agreement. In no event, shall patent applications be filed on inventions reported under (a) above, without prior written consent of the Surgeon General.

These regulations form part of each PHS funding agreement with a university. Notice that the funding agreement is actually made with both the university and the “principal investigator”–both are involved. Continue reading →

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How Bayh-Dole went wrong and what might be done, 1

Posted on May 29, 2017 by Gerald Barnett

This article starts a series on structural problems in Bayh-Dole. As an architecture to take ownership of inventions from university investigators, Bayh-Dole suffers from significant flaws. The effort by university patent brokers and their biotech partners has been to cover the flaws with a rhetoric of good intentions and beneficial outcomes, while ensuring that the actual data that would document practices and outcomes is kept a government secret and the apparatus put forward as a means to protect the public interest is made so cumbersome that it does not operate. If we set aside the fundamental argument that university patent brokers should not have any right to take ownership of inventions made with federal support–that doing so is bad for science, for innovation, for universities as public institutions, for making money, for the public–we can consider what architecture Bayh-Dole ought to have to ensure that bureaucrats, not inventors, control the inventive results of federally supported research.

I know, this looks like helping the enemy–“how to run an architecturally sound plantation based on slave labor.” But really, it’s not. Describing the architecture Bayh-Dole ought to have used shows the limitations in the thinking of those that advocate for the law but don’t know how to pull it off. We still have the broader problem, that the ideas put forward in support of the law don’t hold up. It’s just an all-around mess, a disaster, a pile of blistering blue barnacles. Even if we get to the point that inventors ought to own their inventions, even those made with federal support, we still have to deal with the equally pernicious concept of the “public interest” and the efforts to reshape patent property rights for inventions made with federal support. Apparently the patent system as it is just isn’t in the public interest when public money is involved.

If, however, the government takes ownership of inventions made with federal support, then the government is in essence issuing patents to itself. If the government then exclusively licenses or assigns its self-issued patents, then it is by-passing the patent system and as it were re-issuing patents to whomever is its licensing favorite, based not on who has invented (the basis of the patent system) but based on who shows that it loves the government best (the King Lear problem). And Bayh-Dole, in those portions of the law directed at federal agency ownership and licensing of patents (35 USC 207, 209), makes clear that re-issue of patents by means of exclusive licenses (with the right to enforce the patent) is in fact the motivating and distinguishing feature of the law. Thus, Bayh-Dole, in claiming to “use the patent system” ends up repudiating the patent system in two fundamental ways: (1) disenfranchising inventors when they receive federal support; (2) permitting re-issue of patents to government favorites and with a government profit motive, both things that the patent system was designed to prevent. Continue reading →

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The IPA and Wisconsin’s 1969 Patent Policy, 14

Posted on May 28, 2017 by Gerald Barnett

The start is here:

The IPA and Wisconsin’s 1969 Patent Policy, 1

Three sorts of university invention

We can then distinguish three sorts of invention arising in federally funded research at universities: inventive tools, inventive tools that can be sold as products, and articles that can be used only as products. An inventive tool is anything useful for a purpose. In research, the proximate purpose is the research activity itself. Thus, resistive touch materials were developed initially to more easily mark x-y coordinates. As an inventive tool, such new technology has an immediate use–conduct better “research with” the tool. Closely related, others may use the tool to verify the claims made about the research (and thus also examine the tool for its reliability)–“evaluation of.” And others may study the tool to learn how it operates and how it might be improved, extended, or adapted–“research on.”

In terms of the Harbridge House accounting, where an inventive tool is useful for the government’s purposes, but not for much else, then allowing the contractor to retain rights to the tool for private market development beyond research uses makes sense. Where the inventive tool has been developed by government contracts with an eye for that private market all along, then allowing any one contractor to monopolize that market makes much less sense. Even if private market development was not a purpose of the federal research, if the inventive tool can be used broadly in research–then, there too we might expect that the tool should be made available non-exclusively. And this, in fact, is just what the NIH advocates for what it calls “biomedical research resources.”

Follow-through on government research funding

We are left, then with what we should do if all the government does is fund a tiny bit of initial work in an area that has both commercial and public implications, and the government does not bother to pursue either. This is not a situation of “basic” research as Vannevar Bush described it, but rather of research that has a public policy purpose (such as alleviation of suffering) but also runs parallel to companies that make their livelihood in this same “market” and rely on patents to preserve their financial positions. We might say this is a highly specialized set of conditions. Harbridge House identified two agencies that do this sort of thing–HEW and Interior: Continue reading →

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The IPA and Wisconsin’s 1969 Patent Policy, 13

Posted on May 27, 2017 by Gerald Barnett

Things start here:

The IPA and Wisconsin’s 1969 Patent Policy, 1

The Harbridge House report

According to the Harbridge House report on federal patent policy, from the 1930s until the 1950s, the pharmaceutical industry was the primary source of funding for university investigators in the area of medicinal chemistry–looking for compounds that might become prescription drugs. The pharmaceutical industry operating model relied on patents, and drug companies offered free “screening” services to university faculty in exchange for exclusive rights in any compound that turned out to have biological importance.

An invention in this area generally was not a single compound but a class of compounds–hundreds, perhaps thousands. The standard form of claiming a chemical invention involved the use of a “Markush” claim, first used in 1925, allowing broad groups of chemicals to be combined in many arrangements, each combination covered by the claim. Thus, once one had identified one potential compound of interest, a patent could be secured on hundreds (or more) variations on that compound. Those variations, then, might be subject to screening efforts to identify those with significant biological activity. The number of combinations, however, means that it is possible one would never get through screening all of them using a systematic, brute-force method.

The Harbridge House report cites one drug company that of 6,500 compounds obtained from university research (out of 40,000 total), 2 had resulted in products, 2 more were in development, and 2 more were of some interest. Thus, researchers could produce many compounds of potential interest, but only a very few might be of any importance. We might think, then, of such research as one of securing mining claims–finding some evidence of possible biological action (such as collecting a sample of a compound in use for another purpose, such as Brazilian tribes that used pit viper venom on arrow tips–later to become Captopril, a medicine to treat high blood pressure)–and then creating a patent claim that extends to as many conceivable variations on that compound as possible. The patent “protects” not only a future potential compound, which may be one in thousands, but also the exclusive right to look for that compound among all the ones that have been claimed (and thus are not available to anyone else). Continue reading →

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The IPA and Wisconsin’s 1969 Patent Policy, 12

Posted on May 26, 2017 by Gerald Barnett

This series starts here:

The IPA and Wisconsin’s 1969 Patent Policy, 1

How history informs the present

Why spend all this time on a lost university policy from 1969 in response to a canceled IPA program? After all, we have the wildly successful Bayh-Dole law now, with university policies all changed to “comply” with the law. Why not focus on that and leave history alone? What university research administrator reads history, other than the twisted political history made up by Bayh-Dole advocates in lobbying to preserve Bayh-Dole, Billy Joel fashion, just the way it is? Here are some reasons:

First, because WARF’s behavior illustrates the reasons why the Public Health Service and then the Department of Health, Education, and Welfare instituted policies in the early 1960s to preclude private patent monopolies on federally supported inventions directed at improving public health.

Second, because the circumvention of PHS/HEW patent policies morphed into NIH’s revised IPA program, which gave universities a clear shot at enabling private patent monopolies and gave them a financial incentive to do so, all the while making it appear that there was a substantial apparatus to protect the public interest, making a show of a default non-exclusive patenting program–which never happened.

Third, because the revised IPA program, when folks aimed to make it government-wide (under the guise of needing a uniform–meaning arbitrary– federal patent policy), resulted instead in the statutory scheme called Bayh-Dole, embedded in federal patent law, designed to prevent the executive branch from asserting rights in inventions made with federal support and further designed to make it difficult or impossible for federal agencies to enforce the various public protections that Bayh-Dole makes a show of providing. As a result, Bayh-Dole is a do WTF you want sort of law, allowing universities to exploit patents on federally supported inventions at will–to do nothing with them, to troll industry, to enable private patent monopolies, to assign patent rights under the guise of exclusive licenses, and to benefit financially from all these things regardless of whether any product ever reaches the market or if in reaching the market it is offered on less than monopoly terms.

Finally, it is worth seeing the history because even if those arguments for circumventing PHS/HEW patent policy might appear in their way reasonable, the circumstances have changed–for instance, there is Bayh-Dole–so the reasoning about university-side patent policies must also change. Holding onto old arguments in changed circumstances can lead to failed management, and that’s what we have at universities. Yes, the university licensing programs have slick web sites and in many cases capable people–but the fundamentals of the activity are skew from the reality that presents. It’s like having well run plantations with orderly slave labor in a time of freedom, and machines–there’s both a moral argument for change and a pragmatic (if not financial) argument for change. Continue reading →

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The IPA and Wisconsin’s 1969 Patent Policy, 11

Posted on May 25, 2017 by Gerald Barnett

The article starts way back at 1:

The IPA and Wisconsin’s 1969 Patent Policy, 1

Capitalism and commons

The dichotomy between capitalism and commons is even evident in the history of WARF. Here’s a footnote from Cronon and Jenkins on the problem WARF faced.

Here in one sentence we see both elements at play–WARF criticized for being a monopoly even when it acquires lands to be held in trust and kept away from “commercial development.” That is, uses ownership to *prevent* commercial development in favor of creating a commons for all to enjoy (which, in my youth, I visited and had a great time–thank you for the memories, WARF). For patents, WARF makes the argument that monopoly enables commercial development, but when things are “clearly in the public good” (as that’s considered by the authors), WARF is holding property in trust, for public access and to preserve “natural beauty.” Continue reading →

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Fair pricing and the Army’s Zika vaccine

Posted on May 24, 2017 by Gerald Barnett

Summary: The Army does not need to require fair pricing in general as a condition of an exclusive patent license with Sanofi for its Zika vaccine inventions. To achieve fair pricing, the Army must intend to exercise its government license to practice and have practiced these inventions plus any made in the CRADA. By commissioning others to make and sell Zika vaccine on behalf of the United States Government, the Army can effectively achieve fair pricing for the federal marketplace–everywhere the federal government is authorized to supply (or pay for) vaccine for a government purpose. If the Army has no intention to use its government license, then it is in effect allowing Sanofi to create a private monopoly designed to extract monopoly prices. The Army’s own action with regard to the government license creates the conditions under which fair pricing may be achieved. But all this might not matter–there are plenty of other Zika vaccines in development. Who knows which of these, if any, will make it “to the market”?

Army Funds Zika Vaccine Development

There is much complexity and detail here that’s not readily available. Thus, it’s easy for what follows to be off. If I get more information that requires changes to the Zika facts and analysis, I’ll add it here in [ ]s. But the general analysis is worth consideration regardless.

The Army is funding Sanofi Pasteur to develop a Zika vaccine–so far $43m under a cooperative research and development agreement with perhaps another $130m to come. According to news reports, the Army is considering granting Sanofi an exclusive license, but wants Sanofi to agree to “fair pricing.” Sanofi has rejected that idea. According to a letter written by Robert Speer, Acting Secretary of the Army, to Senator Bernie Sanders, the vaccine is based on inventions made at Walter Reed Army Hospital, subject now to two provisional patent applications. The Army refuses to release details of the contemplated exclusive license, citing “Federal law”–again, the problem of secrecy in the business dealings of government around exclusive licensing. Continue reading →

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The IPA and Wisconsin’s 1969 Patent Policy, 10

Posted on May 24, 2017 by Gerald Barnett

This series starts here:

The IPA and Wisconsin’s 1969 Patent Policy, 1

Medicinal chemistry drives the whole of federal patent policy

The IPA program, revived in 1968 by the NIH following the Harbridge House report, which singled out medicinal chemistry as one of the few areas where there had been a disagreement by industry with government patenting policy, addressed both patent term and public access. But the IPA did so by pushing the limits toward private control. Where the Kennedy patent policy said three years from patent issuance, the IPA ignored that term and substituted the sooner of three years from the date of first commercial sale or eight years from the date of an exclusive license. One could then, with option terms and the like, run a patent monopoly for close to fourteen years rather than six. Extension of the monopoly also became a matter of agency approval, without any provision for public input. March-in rights were a matter of the government exercising its non-exclusive license. The government could break any private patent monopoly at any time for any government purpose. That is, the government could choose to expand the government-side approach to health care and break or shorten exclusive positions that the government had permitted patent owners to take up on the premise that the government was not operating in those areas (yet).

Bayh-Dole effectively obscures the public covenants on exclusive patent license term and invention use altogether, while retaining an apparatus that makes it appear that those public covenants still operate. The original version of Bayh-Dole contained a term limitation for exclusive licenses–five years now (rather than three under the Kennedy patent policy) from date of first commercial sale, or eight years overall. That limitation was removed from Bayh-Dole four years later, along with other changes that gutted the public covenant and public oversight (such as making all information in use reports exempt from public disclosure rather than only the privileged or confidential portions of those reports).

Because Bayh-Dole is structured as requirements to be placed into a federal funding contract as defaults rather than as a statute that expressly limits the patent rights available on inventions made in federal subvention funding, there’s nothing in Bayh-Dole that requires federal agencies to enforce any aspects of the patent rights clause in any funding agreement. Agencies appear to enforce consistently only the placement of a federal funding statement in patent applications and substantial U.S. manufacture for exclusive licenses to use or sell in the U.S.–and even U.S. manufacture Bayh-Dole allows to be waived. Continue reading →

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The Bush Engine of Technology Innovation

Posted on May 23, 2017 by Gerald Barnett

Vannevar Bush argued that it was a proper role for the federal government to support scientific research. This proposition today is regarded as a truth that hardly needs justification. But in Science the Endless Frontier, Bush was not arguing for the value of scientific research in general, but rather a particular area of research and a means to accomplish that research. What Bush argued is so radical that it has largely been rejected, ignored, and converted into a general truism about the importance of research.

President Roosevelt asked Bush whether he could develop a technology innovation engine for civilian use comparable to the one he had created to develop new technology during World War 2 for military use. Bush’s answer was the radical argument in Science the Endless Frontier. In Bush’s approach, there are three elements. The first is an established order–the military (and the companies that supply it), professional medicine (and the companies that supply it), information management (and the companies that supply it), or government (and the companies that supply it). An established order has needs, a leadership mindful of those needs, and resources to address those needs.

The second element in Bush’s engine is what we might call a skunk works. It is a technology innovation engine that stands outside an established order to produce new things that the established order could not specify for itself or even imagine, much less shift resources from pressing needs in an attempt to make. In an established order, people with influence make claims on resources based on where their activities fall in a ranking of the established order’s needs. Outliers rank last, with the nutcases and the clueless. By contrast, a Bush Engine of Technology Innovation (a BETI) is purposely placed outside the reach of an established order, but makes a study of that established order to examine its purposes and practices, as well as its problems–but not just the problems that it sees for itself, but also its problems in seeing what it needs.  Continue reading →

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