Repeal or reform Bayh-Dole?

Posted on March 7, 2017 by Gerald Barnett

It seems repealing is the activity of the moment when it comes to health care insurance, but it’s not at all clear that the replacement law will do much for the price of prescription drugs. And the problem is not simply that of patents, since some generic drug prices also remain high in the U.S. We might throw in other factors to consider, such as the cost of regulatory approval, the management of research and development, the choice of targets for research and product development, and advertising in all its varied forms from the use of media to indirect efforts to sway physicians. In short, repeal of a law doesn’t mean everything becomes peaches and cream.

Consider, then, the repeal of Bayh-Dole. Some folks think that would be a good thing. I’m inclined to go along with them, but repeal doesn’t begin to get at the problem that Bayh-Dole has created, and repeal doesn’t even land us back where we were under the Kennedy/Nixon executive branch patent policy, and repeal doesn’t address the problems we had back then nor the problems we have got now. [With repeal, we do indeed end up back under the Nixon patent policy, such as by operation of 15 USC 2216(d). But we do so without the codification of that policy which was in the Federal Procurement Regulations–that codification was abandoned when the FPR was replaced by the Federal Acquisition Regulations in 1987, and the FAR codified only Bayh-Dole and forgot entirely that Bayh-Dole did not repeal but only preempted other statutes, and that preemption only took place for inventions made under federal contract when a contractor acquired title to those inventions. Thus, repeal ends back with Nixon policy (because Reagan’s executive order to require Bayh-Dole practices for all contractors becomes moot if there’s no Bayh-Dole) and the conditionally preempted statutes, but without codification and without the administrative apparatus that knew how those statutes operated. Of course, NIST, which had been delegated to administrate Bayh-Dole’s regulations for the Secretary of Commerce, shows little indication that it knows how anything pertaining to Bayh-Dole operates, or why, so we may lose not so much by repeal anyway.]

There will have to be some insightful thinking on the matter–and insightful thinking has not been a major element of public policy on government funded inventions since, say, after the Kennedy patent policy in 1963.

Here are five issues involved in the repeal of Bayh-Dole, along with some possible directions for people to consider. Continue reading →

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Geez, folks, figure it out. Bayh-Dole’s purpose is high drug prices.

Posted on February 27, 2017 by Gerald Barnett

In 1992, Howard Bremer gave a talk to a Texas technology transfer group in which he recounted his involvement in the creation of the Bayh-Dole Act. Two comments stand out. First, Bremer made it clear that the federal government had to be prevented from creating effective march-in procedures (my emphasis):

As a consequence, much greater attention was given to the regulations by a university group which built into the regulations protection against both arbitrary exemptions to the law at agency discretion and to the exercise of march-in rights.

The regulations had to have “protection against . . . to the exercise of march-in rights.” Bremer’s grammar is twisted into a knot here, and there’s no way to parse the sentence, but the sense is pretty clear whether the worry was the “arbitrary” exercise of march-in rights or whether it was simply the exercise of march-in rights. The “arbitrary” makes sense with regard to exemptions from the law, but doesn’t with regard to march-in rights. Bayh-Dole makes clear (35 USC 203) both the conditions under which a federal agency may intervene, and a patent-holding contractor’s remedy–to bring an action in federal claims court. But Bremer and his university friends added an additional layer of regulations to march-in making the procedures all but impossible to undertake.  Continue reading →

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CRISPR and Bayh-Dole

Posted on February 26, 2017 by Gerald Barnett

Michael Eisen has an insightful discussion on his It is NOT Junk site on the CRISPR patent dispute between the University of California and the Broad Institute (Harvard, MIT). It is well worth the read. Behind the discussion lurks the Bayh-Dole Act and its effects on university licensing mindsets. The universities involved in the patent dispute are fighting over who should have the right to troll industry for patent royalties (and, of course, to pocket the money). As Eisen puts it

The academic quest for patents is no longer the side story. Where once technology licensing staff rushed to secure intellectual property before scientists blab about their work, patents now, in many quarters, dominate the game. Experiments are done to stake out claims, new discoveries are held in secrecy and talks and publication are delayed so as not to interfere with patent claims. This is bad enough. But the most worrying trend has been the willingness of some researchers and research institutions to distort history, demean their colleagues and misrepresent the scientific process to support these efforts.

. . .

Encouraged by a small number of patents that made huge sums, universities developed massive infrastructure to profit from their researchers. Not only do they spend millions on patents, they’ve turned every interaction scientists have with each other into an intellectual property transaction. Everything I get from or send to a colleague at another academic institution involves a complex legal agreement whose purpose is not to promote science but to protect the university’s ability to profit from hypothetical inventions that might arise from scientists doing what we’re supposed to do – share our work with each other.

These are concerning observations that show the effect of the universities’ decisions about how to manage inventions after the Bayh-Dole Act. Bayh-Dole permitted universities to own inventions made with federal support (and therefore gave administrators incentives to forcibly take inventions from investigators and deny those investigators the opportunity to decide whether the invention should be made open, assigned to the government (to be made open, in all likelihood), or split up into a public use part and a commercial part for development). Instead of investigator choice, or inventor choice, Bayh-Dole gave us bureaucrat choice, as if this would be the key to unlock American innovation from academic research. Continue reading →

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Government Interest Patent Activity 1976 to 2016, Part 4

Posted on February 25, 2017 by Gerald Barnett

In a portfolio model, 1 invention in 200 becoming a commercial product is acceptable, if the 1 is a big hit. In an agent model, 1 in 200 is unacceptable and borders on malpractice or fraud unless inventors willingly turn over their inventions even knowing these odds. Given that Bayh-Dole’s policy objective is practical application, not an increase in unlicensed patents, it would appear that the growth in patents on subject inventions within the “portfolios” of universities points to a failure of the Act.

Unless universities can show that the increased patenting leads to increased products on the market from those patents, the observation is that the patenting is diverting what would have been–and ought to be–public domain or commons-based (standards, platforms, and the like) inventions into portfolios to prevent access to university research outputs. The growth in university patent holdings is public information. The burden is on the universities to show that this growth is justified in terms of public benefit on reasonable terms from the use of these inventions.

Thus far, it does not appear that universities have data to support such a justification. Continue reading →

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Government Interest Patent Activity 1976 to 2016, Part 3

Posted on February 24, 2017 by Gerald Barnett

With this context, let’s return to our patent activity graphs. University and nonprofit patents with a government interest have grown from 10% of all patents citing a government interest to over 50%. This level of activity leveled off around 1998 and has stayed around the 50% level since.

Despite Bayh-Dole being expanded by executive order to all companies, it appears that for-profit companies are doing *less* patenting, comparatively, of federally funded inventions than universities and other nonprofits. Why might that be? Is it an artifact of the way we are looking at the data? Should we normalize for the amount of federal research funding directed at universities compared with the funding going to companies? Perhaps. Or maybe it is the case that companies, having a view toward their own products and future commercial activity, are more selective in what inventions to patent, while universities, having no products or commercial activity, have to work harder to be selective. So long as the cost to file a patent application is less than the cost to sit on a patent for years without licensing it, universities will file patent applications “just in case” something turns out later to be “valuable” (most likely meaning that someone might make money threatening infringement). Continue reading →

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Government Interest Patent Activity 1976 to 2016, Part 2

Posted on February 23, 2017 by Gerald Barnett

Let’s turn to Research Corporation now. For decades, Research Corporation was the dominant invention management broker for universities. Even where universities created research foundations to manage inventions, those foundations often contracted with Research Corporation to do the actual patent work. By 1976, a few universities were developing their own internal licensing operations–notably MIT, University of California (1960), and Stanford (1972). The Stanford approach, to be called the Reimers model, was just beginning to catch hold. Things heat up after Stanford starts its non-exclusive licensing program for the Cohen-Boyer gene splicing patents, just before Bayh-Dole becomes effective. Here’s a graph of Research Corporation patent activity. Not all Research Corporation patents are necessarily from universities, but many are.

During our study period, Research Corporation doubled its patenting activity, while universities and other nonprofits increased their patenting activity 15x. There’s nothing at all distinctive, however, about the onset of the Bayh-Dole Act in 1981. There’s an uptick in 1996 that’s significant, but that can hardly be the result of Bayh-Dole.

What about Research Corporation’s work with subject inventions? Continue reading →

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Government Interest Patent Activity 1976 to 2016, Part 1

Posted on February 22, 2017 by Gerald Barnett

I ran some patent numbers over the past week using the USPTO web search interface. It’s not the easiest search environment to use, and I don’t expect the numbers to be precise. But I expect the numbers are accurate enough to see major trends. The USPTO database populates most of fields starting in 1976, so that’s where I’ll start–though I’d love to have data starting in 1945.

Since 1976, patenting has increased about 5x, from the mid 60,000s to the 330,000s of utility patents issued each year.

Things are flat until about 1984, and then there’s a steady increase until then about 2009, and then a steeper increase. Since issued patents lag filings by about three years, we might look to 2006 or earlier for causes for the increase in the increase. Continue reading →

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On Exclusive Licenses For Research Technology

Posted on February 21, 2017 by Gerald Barnett

Here’s a response I wrote for a research team that is working through issues regarding the licensing of their inventive technology. The team is spread across multiple institutions in multiple countries, working on an enabling technology in medical engineering.

*****

The question of exclusive licenses is important and challenging. There’s a great lure in hoping for a single company to show up, take an exclusive license, and pay good money for it. That money will be real money, and inventors can expect to share about 1/3 of it, depending on university royalty policies. If a share of money from such a deal is the immediate goal, or at least a goal that’s “good enough,” then an exclusive license is a satisfying outcome.

But exclusive licenses have other effects, as well. Once you have an exclusive license with one company, then other companies have little reason to work with you. In fact, they may have good reason to work against your further research, to undermine what you have done, to avoid it, to make it worthless. If the exclusive license crosses the line and becomes an assignment (and many universities ignore the line altogether, or deny there even is one, despite the case law), then you and your exclusive licensee, by contract, may have created a pact to “go after” competitors who attempt to use your licensed inventions–that is, sue to prevent the use of your research. What, then, do you expect these competitors to do, but to work against your interests in return? Continue reading →

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MoFo’s New Bayh-Dole Fakefographic

Posted on February 17, 2017 by Gerald Barnett

Morrison & Foerster, a big law firm (revenue near $1b per year, around 1,000 attorneys), has an infographic out about the Bayh-Dole Act, subtitled “5 Steps to Retain Title.” Here’s a bit of their advice–steps 1 to 3. It looks relatively straightforward:

Notify the government, elect to retain title, and file a patent application. It’s just that this advice omits a fundamental step. To “retain” title, an organization has to already have that title, and as the Supreme Court made clear in Stanford v Roche, to get title, one has to acquire it by assignment–there’s no vesting of title in Bayh-Dole or even of a right to take title from inventors.

Thus, somewhere before step 2, there must be another step–call it step 0, or step 1.5–in which the organization acquires title to an invention. Once an organization acquires title, according the Supreme Court, then the invention, if made in the performance of work under a funding agreement, becomes a subject invention.

This is a big obvious omission from the MoFo infographic, but it is only part of the misinformation put out by the firm. An invention becomes a subject invention, according to Bayh-Dole, when it is owned by a contractor, and according to the definitions in Bayh-Dole, a contractor is any party to a funding agreement, including by assignment, substitution, or subcontract. Continue reading →

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Bayh-Dole’s Mandate to Break-up Patent Monopolies on Subject Inventions

Posted on February 15, 2017 by Gerald Barnett

In the past few months, I have spent a good deal of time on the Bayh-Dole Act. One of the great challenges of dealing with Bayh-Dole is to get past what university patent brokers say the law “is” and get at not only what the law says, but also what the law does–when implemented, and when ignored (and most university officials ignore large swaths of the law–call it ignore-ance).

Bayh-Dole is a set of requirements having to do with inventions and contracting regarding inventions, patents, licensing, and money from inventions and patents. University patent brokers have selected a few bits to emphasize. But the other bits are there, too, even if university patent brokers don’t call them out. And it turns out, the other bits are rather more important than the bits that university patent brokers focus on in their talks and their articles and in their policies and in their “training materials” and in their talks at AUTM.

If we listen to university patent brokers, we get repeated assertions that Bayh-Dole gives universities the right to take title to inventions made with federal support (which isn’t true–universities have a conditional contractual right, not a statutory right, to keep title to inventions if they obtain that title). We see articles and slide decks and policy documents that explain that Bayh-Dole gives universities incentives to commercialize inventions (though there’s nothing in Bayh-Dole about incentives and commercialization is not a stated objective of the law–Bayh-Dole places restrictions on university management of inventions and makes commercial use as important as commercial sale). The patent brokers mention the government license (without including “practice and have practiced” or what “practice” means) and the dread march-in procedures (which were designed not to work and in three decades have worked as designed and have never been successfully used). And we see odd bits and pieces about compliance, such as the time period in which to elect to retain title, when patent applications must be filed, and the substantial U.S. manufacturing requirement for exclusive U.S. licenses (often omitting the limitation “to use or sell”).

In fact, almost everything university patent brokers claim about Bayh-Dole turns out to be wrong, skewed, spun, repeated out of context, or just made up. It’s rather remarkable. I have been through hundreds of university policy and guidance documents–and written up my findings here at Research Enterprise.  Continue reading →

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