The Bayh-Dole Act also provides the U.S. government “march-in” rights which allow the federal agency, in special circumstances, to require the patent owner to grant a “nonexclusive, partially exclusive, or exclusive license in any field of use to a responsible applicant or applicants.” In other words, the federal government can “march in” with a compulsory license for research funded by the federal grant. In situations where “action is necessary to alleviate health or safety needs,” the government has the ability to force the company with the inventions generated by public funding to license its rights to a third party to bring the patented invention to market “upon terms that are reasonable under the circumstances.” If the company holding the patent refuses to do so, the government may grant the license to the third party itself.
The COVID-19 pandemic could prompt the federal government to invoke its march-in authority if the invention company does not make the technology available for production. As explained above, under the Bayh-Dole Act, the federal government can retain ownership rights in some patents for inventions produced by government-funded research. It should be noted that no federal agency has yet used this mechanism to license patent rights to others during the history of the Bayh-Dole Act. However, given the severity of the current health crisis, companies receiving federal funding in coronavirus-related research and development, should consider the possibility of the federal government stepping in and taking control of the ownership of the patent.1
While the point of Bayh-Dole was to hasten the harnessing of basic research, it also sent the price of drugs soaring. Spending on prescription drugs had been largely stable at around 0.4% of GDP from 1960 to 1980. In the decade after Bayh-Dole, it had doubled to 0.8%, and it doubled again in the next decade.
In the past, discovery for its own sake provided academic motivation, but today’s universities function more like corporate research laboratories. Rather than freely sharing techniques and results, researchers increasingly keep new findings under wraps to maintain a competitive edge. What used to be peer-reviewed is now proprietary. “Share and share alike” has devolved into “every laboratory for itself.”
In trying to power the innovation economy, we have turned America’s universities into cutthroat business competitors, zealously guarding the very innovations we so desperately want behind a hopelessly tangled web of patents and royalty licenses.
Of course, there is precedent for scientific secrecy, notes Daniel S. Greenberg , author of “Science for Sale: The Perils, Rewards and Delusions of Campus Capitalism” (University of Chicago Press, 2007). When James Watson and Francis Crick were homing in on DNA’s double-helix structure in the 1950s, they zealously guarded their work from prying eyes until they could publish their findings, to be certain that they would get the credit for making the discovery.
“They didn’t try to patent it,” Mr. Greenberg notes, “but somebody doing the same work today would certainly take a crack at patenting the double helix.”
In fact, it was the life sciences — in particular, biotechnology — that started universities down the slippery commercial slope in the first place. Even before the Bayh-Dole Act, pharmaceutical companies were eagerly trolling campuses, looking for projects to finance. After the law was passed, they stepped up their efforts, but now with renewed zeal for keeping potential trade secrets from competitors.
While patients have benefited from the growing supply of new medications, the universities have obtained patents not only for the actual substances but also for the processes and methods used to make them, potentially hampering discovery of even more beneficial treatments.
“Bayh-Dole tore down the taboos that existed against universities engaging in overtly commercial activity. Universities really thought that they were going to make it rich,” said Jennifer Washburn, author of “University Inc.: The Corporate Corruption of Higher Education” (Basic Books, 2005). “Each school was convinced that if they came up with that one blockbuster invention, they could solve all their financial problems.”
Ms. Washburn says that was “extremely wrong-headed.” Initially reacting to the law by slapping patents on every possible innovation, universities quickly discovered that patents were an expensive proposition. The fees and legal costs involved in obtaining a single patent can run upward of $15,000, and that doesn’t count the salaries of administrative staff members. Instead of bringing home the bacon, university tech transfer offices were throwing money into the void with little hope of returns.
To date, Ms. Washburn says, data gathered by the Association of University Technology Managers, a trade group, show that fewer than half of the 300 research universities actively seeking patents have managed to break even from technology transfer efforts. Instead, two-thirds of the revenue tracked by the association has gone to only 13 institutions.
Part of the problem has been a lingering misunderstanding about where the value lies in innovation. Patenting a new basic science technique, or platform technology, puts it out of the reach of graduate students who might have made tremendous progress using it.
Similarly, exclusive licensing of a discovery to a single company thwarts that innovation’s use in any number of other fields. R. Stanley Williams, a nanotechnologist from Hewlett-Packard, testified to Congress in 2002 that much of the academic research to which H.P. has had difficulty gaining access could be licensed to several companies without eroding its intellectual property value.
“Severe disagreements have arisen over conflicting interpretations of the Bayh-Dole Act,” he said. “Large U.S.-based corporations have become so disheartened and disgusted with the situation, they are now working with foreign universities, especially the elite institutions in France, Russia and China.”
THE issue is further clouded by “reach through” licenses, complex arrangements used by many tech transfer offices. A reach-through lets the patent holder claim a share of any profits that result from using, say, an enabling technology, even if those profits come several steps down the market transfer line. Several universities are already embroiled in messy lawsuits trying to sort out who is entitled to what.
Perhaps the most troublesome aspect of campus commercialization is that research decisions are now being based on possible profits, not on the inherent value of knowledge. “Blue sky” research — the kind of basic experimentation that leads to a greater understanding of how the world works — has largely been set aside in favor of projects considered to have more immediate market potential.
In academia’s continuing pursuit of profit, the wonder of simple serendipitous discovery has been left on the curb.
(Mike Masnick) I’m all for heavily compensating whoever comes up with an effective treatment or vaccine for COVID-19, but our existing setup seems designed to encourage scamming and grifting. For years, we’ve talked about the evil that is the Bayh-Dole Act, which encouraged universities to patent every damn thing (most of which was funded from federal government grants) and then sell off those patents to industry. While it’s made a bunch of people rich, it’s been such a disaster in so many other ways. First it’s done massive harm to university research (rather than the opposite as its backers promised). It significantly decreased information sharing and collaboration (keys to innovation breakthroughs) because universities kept demanding ideas be kept secret so they could patent them and lock up the output of any (again, mostly taxpayer funded) research.
A key result of Bayh-Dole is that many, many universities all set up “tech transfer” offices, in the belief that they’d be able to cash in on all these patents being licensed to industry. But, of course, like so many patent holders, universities vastly over-estimate the value of the patent, and under-estimate the value of actual execution. So almost all (with just a few limited exceptions) university tech transfer offices have been dismal failures, and lost universities money, rather than being profit centers. Of course, that created an opportunity… for patent trolls. One of the world’s largest patent trolls, Intellectual Ventures, was literally built off of this scam: swooping in to “rescue” desperate tech transfer offices at universities, buying their patents off them for pennies, and amassing a huge collection to shakedown actual innovators. And of course, some universities — including the University of California — got directly into the patent trolling business themselves.
If you want to see a case study on how this works in the age of COVID-19, look no further than the story of the antiviral therapy called EIDD-2801. My and your taxpayer money helped fund the development of the drug (taken in pill form, originally for the flu), by a grant from the federal government to Emory University for $30 million (only about half of which has been spent). But, just as the COVID-19 situation heated up, there was a recognition that pharma firms might be eager to find new drugs to treat the disease. George Painter heads Emory’s tech transfer operation, and also (coinkydinks) holds some patents related to EIDD-2801. In what lots of people considered to be a weird move, he quickly sold off the rights to EIDD-2801 to a “biotherapeutics” company called Ridgeback Biotherapeutics, that didn’t seem to have much in the way of, well, anything:
Ridgeback Biotherapeutics had no laboratories, no manufacturing facility of its own and a minimal track record when it struck a deal in March with Emory University to license an experimental coronavirus pill invented by university researchers…
What Ridgeback did seem to have was close connections to the Trump administration. And a wealthy couple who “founded” the firm.
Wayne Holman, who holds a medical degree from New York University, is a hedge-fund manager with a long track record of investing in pharmaceutical stocks. He founded his fund Ridgeback Capital Management in 2006. Wendy Holman, chief executive of Ridgeback Biotherapeutics, is a former investment manager who was named to President Trump’s advisory council on HIV/AIDS in 2019.
The Holmans live on Miami’s exclusive Star Island, where they bought two mansions for a combined $47 million in 2014 and tore one of them down. Ridgeback Capital’s headquarters is in a small office building not far away in Coconut Grove, near a private school where Wendy Holman serves on the board of trustees.
The story of Emory and Ridgeback came to attention only because of Rick Bright, the whistleblower who was removed from his job as the director of the US Biomedical Advanced Research and Development Authority for challenging the US’s approach to dealing with COVID-19. Among the things he blew the whistle on was Ridgeback’s sketchy and insistent push for a lot more money from BARDA, despite not even drawing down the remaining $14 million of the existing grant:
Ridgeback’s involvement burst into the broader public sphere in early May, when Bright, the ousted head of BARDA, filed his explosive whistleblower complaint. Bright alleged that he clashed with Robert Kadlec, the Health and Human Services assistant secretary for preparedness and response, over demands that he award BARDA contracts to well-connected companies. HHS has said it “strongly disagrees” with Bright’s allegations.
In his complaint, Bright cited attempts to secure money for EIDD-2801 — first by Painter in November 2019, and then by Wendy Holman in early April — among episodes of alleged political pressure.
Bright said he rejected requests to fund EIDD-2801 because Emory had already received pledges of $30 million from the National Institute of Allergy and Infectious Diseases and the Department of Defense to cover development of the drug, including human safety testing. Without first seeing safety results, Bright said, it did not make sense to back the drug with new infusions of federal cash.
The story includes quotes from a series of emails that Holman sent pushing for more taxpayer funds to run clinical trials.
Bright said in his complaint that Ridgeback had been seeking $100 million to further the drug’s development. In an April 13 email, a BARDA official said the proposal from Ridgeback could obligate the government to pay the company more than $300 million. The contract official objected to the outlay because Ridgeback had not followed proper application procedures.
Even so, it appears that Ridgeback was able to cash in by flipping the rights to EIDD-2801 to pharma giant Merck after just about two months:
That wager paid off with extraordinary speed in May when, just two months after acquiring the antiviral therapy called EIDD-2801 from Emory, Ridgeback sold exclusive worldwide rights to drug giant Merck.
Nice work if you can get it.
And, again, I’m all for investing in the development of a successful treatment of this disease, which remains a massive threat. But, let’s go back to the basics here: the research was paid for by taxpayers. But the benefit seems to be accruing to private companies entirely, and where the incentives get sketchy super quick. It seems that a much better system is to not involve patents and sketchy licensing deals that give off the appearance of self-dealing. Why not just offer massive prizes, along with some initial incentive grants to do the necessary work, and then whoever comes up with a treatment can claim a massive prize, along with the promise that the actual treatment be made widely available for free or at a nominal price. That seems a lot more effective with much less risk of arbitrage and flipping, and privatizing that which was paid for by public funds.
(Dr. Mikovits:) It is a conflict of interest. And in fact, this is one of the things that I’ve been saying and would like to say to President Trump, repeal the Bayh-Dole Act. (Bayh–Dole Act or Patent and Trademark Law Amendments Act (Pub. L. 96-517, December 12, 1980) is United States legislation dealing with inventions arising from federal government-funded research.
(From TV excerpt:) Bayh-Dole fundamentally changed the way universities approach technology transfer, and you can see that best in the statistics. Universities obtained 16 times as many patents today as they did in 1980. Now everybody’s getting more patents but still, universities’ share of all patents in the United States is more than five times greater than it was before Bayh-Dole. The situation has gotten so bad that one information technology industry official has publicly referred to universities as “crack addicts” driven by “small-minded tech transfer offices addicted to patents royalties”.
(Dr. Mikovits:) That Act gave government workers the right to patent their discoveries, so to claim intellectual property for discoveries that the taxpayer paid for. Ever since that happened in the early eighties it destroyed science. And this allowed the development of those conflicts of interests. And this is the crime behind letting somebody like Bill Gates with billions of dollars – nobody elected him – he has no medical background, he has no expertise, but we let people like that have a voice in this country while we destroy the lives of millions of people.
(Bill Gates:) Normalcy only returns when we’ve largely vaccinated the entire global population.