An Effect of Petty University Patent Monopolies

Posted on November 9, 2016 by Gerald Barnett

We have discussed the idea that university ownership of patents ought to be different from just any ownership of patents. Universities ought not use patents to exclude all use, for instance, or to license or assign to someone who will exclude all use–even for lots of money. In the same vein, there’s a problem if a university licenses a patent exclusively and the licensee never develops a product. In that case, not only has the invention not been used as it ought, but it has been kept from others who perhaps would have used it.

This is the problem of creating petty patent monopolies–all the folks who are excluded then are given the motivation to design around the patent, or to isolate the invention, or to make the invention commercially valueless. Researchers and companies alike are given this motivation. It may be a strange way of promoting the progress of the useful arts, but patent law allows petty monopolies–except for where Bayh-Dole modifies patent law. Bayh-Dole expects that the patent system will be used so that subject inventions get used, not just that patent owners may suck money out of trading petty monopolies. Bayh-Dole certainly does not allow patent rights to be used to motivate people not to use the subject invention and by creating barriers to use to ensure that the invention won’t ever get used during the life of the patent.

Think about that. Monopoly licensing, where it does not result in a widely available commercial product, creates just the opposite of what Bayh-Dole requires: such licensing creates nonuse and creates incentives for everyone else to find ways not to use what federal funds has supported. Continue reading →

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Royalty sharing as federally mandated divisiveness

Posted on November 8, 2016 by Gerald Barnett

Here’s a sliver of divisiveness in Bayh-Dole (35 USC 202(c)(7)).

In the case of a nonprofit organization, …. (B) a requirement that the contractor share royalties with the inventor

On the face of it, this seems to be a happy requirement. But it’s anything but. First, we note that federal law singles out universities and other nonprofits for this requirement (not small businesses). Why should patent law require sharing of patent royalties earned by nonprofits? It is as if, without such a requirement, universities would not share. That speaks volumes.

But there’s more. There’s no guidance whatsoever on what the royalty sharing should be. It could be 100% or it could be $1. Sharing is sharing. Senator Bayh in his amicus brief in Stanford v Roche insisted that inventors could “negotiate” their share. How? In what possible way? An inventor could negotiate a share of royalties if the inventor had freedom to contract–if an inventor could take his (or her) invention to any invention management agent and the university made a bid to be that agent. The sharing of royalties would be consideration for the assignment; the sharing of royalties would be caught up in the university acting as an agent on behalf of the inventor; the sharing of royalties would have to do with the university’s diligence in carrying out a strategy to accomplish a strategy that produced the desired royalty-generating activity.  Continue reading →

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Bayh-Dole, federal welfare for patent bureaucrats

Posted on November 7, 2016 by Gerald Barnett

There is a vast public literature–academic, legal, and popular–that claims Bayh-Dole is a wild success. That literature claims that compliance with Bayh-Dole requires commercialization, and that it is by commercialization that public benefit from federal research comes about. That argument reduces to the following:

  • innovation requires bureaucrats everywhere
  • federally supported research requires profit-taking before the public may benefit
  • federal agencies as a matter of law may not challenge these claims

Consider the role of bureaucrats.

Here’s Bremer:

bremer-middlemen-3

Here’s Latker: Continue reading →

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On Crossing the Commons

Posted on November 6, 2016 by Gerald Barnett

I was in a conversation with some folks associated with the University of Alaska and wrote the following bit about my past work. With a bit of editing for a different context, and the usual expansion to flesh things out a bit (about crossing commons, in particular) I thought it might be worth posting here.

I pulled out my copy of the exec summary and appendices for the 2004 consulting report on University of Alaska technology transfer. The report noted among other things the absence of any senior UA official that advocated for technology transfer efforts. The report also listed a range of areas that appeared ripe for development but were mentioned almost off-hand, as if no one actually was prepared to do anything (or knew what might be done).

The report includes a copy of an article that the Chronicle of Higher Education (here, paywalled, sorry) wrote about my work at UW and UC Santa Cruz. The approach I developed (by necessity) involved helping investigator-led projects create working relationships with capable audiences, often *before* patentable stuff shows up. This approach runs contrary to the normal “get disclosures, file patents, try to find anyone to take a license” approach that now dominates. That “normal” approach is expensive, slow, and largely ineffective. The commercialization rates at the best university programs are on the order of 0.5%–1 in 200 inventions. And those programs can appear financially successful with only 1 big deal every 20 years–1 big deal in 1,000 or more inventions. That’s not so much tech transfer as it is speculative prospecting across a portfolio. Continue reading →

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Poppy fields forever

Posted on November 4, 2016 by Gerald Barnett

flammarionThe great challenge with a received view is to see the world afresh, without the habitual cognitive anchors–to move free of the anchors–the assumptions, the chosen dichotomies, the methods of classifying, the rationales, the take on historical context–to work out what we should do today without requiring tomorrow to be another variation on the same theme. It may be that some of us don’t want any change–we’ll take things as they are, with all the problems and unknowns and forgottens along with all the habits, the rules, and the hopes. But even then perhaps it is worth trying to see where we are from a different perspective, to check out whether there’s water flowing underground, as it were, following unknown courses that if only we knew, we would take into account.

When it comes to Bayh-Dole, federal contracting for research, and what’s to be done about patents, it is all too easy to get caught up in defending or attacking the present apparatus. Or perhaps folks think that the apparatus is almost working, so all that’s needed is just tweaking the apparatus a bit to improve performance (changing unclear wording, better addressing a given issue, or even with perfect prose and forethought, recognizing changing conditions in law, market, or practice). Tweaking might work if we are talking about interest rates, but not if we are talking slavery. Or, of course, we might consider dismantling the apparatus and replacing it with new apparatus (assuming that what’s needed must involve an apparatus), or with nothing, nothing, nothing at all. Continue reading →

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What we have lost

Posted on November 2, 2016 by Gerald Barnett

Before their efforts turned to Bayh-Dole, the folks advocating invention mining at universities aimed to make the IPA a standard across all government agencies. Yes, “uniform” policy was what they argued for, but that was the politics. What they wanted was to improve their ability as patent brokers to gain access to inventions made with federal support–and which generally flowed to the public domain or to a federal patent commons. In the federal patent commons, 4% to 5% of patents ended up being “commercialized” in some way. We don’t have figures, however, on how many of the underlying inventions were being used. The 4% figure represents about the same rate of “commercial” use as patents from all sources have generally. That is, without much trying, the federal government was doing about as good as independent and corporate inventors. Contemplate that.

Meanwhile, under the HEW IPA, which over 70 non-profit institutions had signed off on (and another 18 apparently held in an early, customized form), the commercialization rate was, ahem, also about 4% to 5% (4 products from 96 inventions). The head of Research Corporation, Willard Marcy, testified that only “50 to 67” of 2,000 university discoveries per year (in 1978) “might get to the marketplace.”  Or, 5 to 7 or so in 200 patentable inventions, or 3%.

When Norman Latker, patent counsel at the NIH, made an effort to have the General Services Administration adopt a template IPA for all federal agencies to use, the Senate Select Committee on Small Business stepped in to question the move. Not only was the GSA not the proper authority for making the decision–that would be the Office of Management and Budget–but also the regulation was being adopted without public notice or an opportunity for other than universities and related parties to comment on the matter. Senator Gaylord Nelson (Wisconsin) chaired the Senate committee and wrote to Lester Fettig in the OMB with his concerns after the committee had held hearings on the issues.  Continue reading →

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Nanopore subject invention patent battles

Posted on November 1, 2016 by Gerald Barnett

Illumina is suing Oxford Nanopore over nanopore technology for DNA sequencing.

Here’s what is interesting. Illumina licensed patents from the University of Washington and University of Alabama (joint owners). The underlying inventions were made with federal support. Oxford Nanopore licensed patents from the University of California and Harvard. And those underlying inventions also were made with federal support. So we are talking about an infringement dispute involving two separate sets of patents on subject inventions. Federal policy is suing itself. Neat–that must be a net positive for the public somehow.

Knowing how universities license patents, I expect that all the university licenses involved are exclusive, royalty-bearing deals that have no room for companies to settle disputes through cross-licensing. The dispute will be one big cock fight–patents may die, investors will surely lose out somewhere, prices will go up, technology will be delayed, and public benefits will also be delayed or blocked. It’s a collision of interests between various American universities fighting over a piece of a patent pie rather than licensing for broader public interest. (Not that the universities weren’t also fighting behind the scenes over who should get what share of royalties or if there might not be a way to cut other universities out of the money, ahem). Illumina and Oxford Nanopore are just another set of proxies in this fight, the cocks that get to cut and slash each other for the benefit of their university licensors.

This sort of dispute is a direct consequence of federal patent policy as set forth by Bayh-Dole. Continue reading →

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3 Ways to Get at Bayh-Dole Abuses

Posted on October 31, 2016 by Gerald Barnett

Here are three approaches to get at abuse of Bayh-Dole by patent brokers.

1. Invoke the non-use march-in condition. 35 USC 203(a)(1)

Demand federal march-in for nonuse (35 USC 203(a)(1)) for all subject inventions claimed by universities that do not meet the definition of “practical application” within three years of patent issuance.

The non-use march-in hits all subject inventions that universities have not licensed or have licensed exclusively but which have not been developed. This also hits all subject inventions that have become a commercial product, but that product fails to meet the statutory definition of “practical application.” Hit university patent practice everywhere, not just in a special interest. We are talking about 99% of subject inventions. We are talking thousands of subject inventions that have never been “commercialized.” Send the universities scrambling until it really hurts.

Bayh-Dole defines “practical application” (35 USC 201(f)) to mean (1) use of an invention (2) that can be established (3) with benefits (4) available to the public (5) on reasonable terms. For Bayh-Dole’s policy and objectives to be met, a subject invention must meet the definition of practical application.

Bayh-Dole identifies four conditions under which a federal agency can intervene in the university management of patents on subject inventions. Most attention has been directed at the march-in procedures directed at availability. But that’s the most protected direction. Consider then nonuse.

An invention that fails any of the required elements of “practical application” has not achieved “practical application.” Continue reading →

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Don’t think it will be easy to get at Bayh-Dole

Posted on October 31, 2016 by Gerald Barnett

Bayh-Dole was designed to create private patent monopolies for the pharmaceutical industry that operate without public oversight or accountability.

Almost everything about Bayh-Dole is a corruption of prior federal and university practice. Sure, it is possible that university administrators might stand up and use Bayh-Dole in a non-corrupt way. They could actually implement Bayh-Dole. They could read Bayh-Dole carefully–or, hey, even read it once. But no, that hasn’t happened much. Even those few university patent administrators that do focus on public interest come in for criticism by the corrupt monopoly heads. And senior university officials, for the most part, would rather deal with celebrity elites rather than with common folk. It’s more important to seek the money from elites to do the public’s work than to just do the public’s work. Talk about universities losing their moral compasses.

Anyone thinking that Bayh-Dole can be used to address high drug prices is suffering from an illusion–the illusion about the usual narrative about Bayh-Dole. High drug prices are an intended effect of the law. High drug prices are just about the only basis on which Bayh-Dole might be judged a success–well, high prices and the bloatification of university patent licensing operations and the destruction of the discussion of any other way to do things.

Bayh-Dole justifies the wholesale taking of inventions–the private property of university inventors. The Supreme Court overruled this practice, but the patent attorneys feeding off Bayh-Dole doubled down with the claim that present assignments were necessary for universities to comply with Bayh-Dole. At least with the federal patent commons, inventors had access to their own inventions. Under Bayh-Dole, they don’t.

Bayh-Dole diverts inventions that would have reached the public domain or the federal patent commons–available to all–to speculative university monopolies, where they are held in the hopes of attracting speculative investors who will make billions and share millions with the patent brokers, with some left over for inventors and universities.

Bayh-Dole creates monopolies with particular focus on exploiting human suffering as a market. The sweet spot is to create drugs that make acute conditions chronic. The public good is served when patent brokers make a lot of money and the patent exploiters make much, much more money.

Everything by way of gesture and apparatus in Bayh-Dole is there create a cloak of concern for the public welfare. Continue reading →

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To fix Bayh-Dole on reasonable pricing, why not start by enforcing the law?

Posted on October 31, 2016 by Gerald Barnett

I spent some time working through whether Bayh-Dole requires reasonable pricing. The simple answer is “No.”

Of course, the simple answer isn’t very helpful, or accurate.

Bayh-Dole does not require reasonable pricing by design of those drafting the bill. The march-in procedures, advertised as protecting the public, do nothing of the sort. The march-in procedures are reduced to dealing only with a failure to create the expectation of taking effective steps to “achieve practical application,”or with a failure to make inventions “reasonably available” to the public when a federal agency determines there’s a need. And even then, the procedures were made so complicated (with university patent administrator help) that they could not possibly operate. On top of that, Bayh-Dole makes usage reports optional and secret when they are required.

But Bayh-Dole is a three-tined law. One tine of it–the tine that gets attention in Bayh-Dole compliance training and in standard descriptions of what the law requires–concerns the construction of a standard patent rights clause. This part of the law appears similar to the IPA (though there are all sorts of subtle changes). A second tine involves federal agency management of inventions owned by the federal government. That tine basically authorizes federal agencies to deal in patent monopolies. But the third tine of Bayh-Dole has to do with the patent property right in inventions subject to Bayh-Dole. Bayh-Dole is, after all, a part of federal patent law. This third tine of the law establishes a public covenant that attaches to patents on inventions arising in federally supported research or development–stating a working requirement, a requirement to promote free competition, a requirement to favor US manufacturing, and a requirement to grant rights to the federal government. This tine takes the form of Congressional policy, taking precedence over the executive branch policy anchored by the Kennedy statement of patent policy. Under Bayh-Dole, the policy requirements are made by Congress, in the form of law, rather than by the President, in the form of executive order.  Continue reading →

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