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Jobs Council Seeks Open Source Approach to Tech Transfer


Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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Posted: October 20, 2011 @ 3:47 pm
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Recently the President’s Council on Jobs and Competitiveness, otherwise known as the Jobs Council, issued an interim report outlining a number of suggestions and recommendations.  Some of the suggestions are quite good, although hardly revolutionary.  Indeed, one obvious recommendation is for Congress and the Obama Administration to explore tax reforms that would increase the competitiveness of businesses locating in the United States.  I guess it is that type of outside-the-box thinking that only a Presidential blue-ribbon panel could come up with!

Indeed, many of the ideas in the interim report are quite broad and vague, but on the tax issue there were at least a couple specific recommendations.  The Jobs Council recommends eliminating capital gains taxes on investments of $25 million or less in privately held companies where the investment is held for 5 years or longer (see page 19).  Also recommended is eliminating corporate taxes for the first year a company is in existence and reduce corporate taxes by 50% in the second and third year of existence (see page 19).  The thinking here is that by reducing tax burden during the first three years companies will be able to invest in growth and expansion, which seems reasonable and also calculated to lead to job creation given that start-ups disproportionately are responsible for creating new jobs.  Unfortunately, being reasonable and calculated to lead to job creation likely means that it has no realistic chance of being implemented.

The reports also contains some observations and supporting evidence should sound alarm bells, such as for example the fact that the United States awards a smaller share of degrees in engineering compared to other countries and 35% of students who enroll in science, engineering and math programs leave after their first year (see page 33).

The interim report also gives some glimmer of hope relative to outsourcing, explaining that both China and India are experiencing “skyrocketing” wage inflation, which is expected to continue.  This is coupled with the reality that the cost to transport goods from China and India has grown and is becoming more and more volatile (see page 24).  On the other hand, the report is rather candid explaining that the United States does not have a coherent national strategy to attract businesses to locate in the U.S., saying: “[L]et’s face it: At the national level, our efforts to attract investment from the world’s best companies simply aren’t serious today.”

As far as these types of reports go, there is a lot to like about the interim report from the Jobs Council, but will it do any good?  Likely not.  Congress and the Obama Administration, as well as the Bush Administration before it and the Clinton Administration before that, seem uninterested and unwilling participants in the future of America.  Politicians spend more and more time raising money to run for office and less and less time actually doing anything once elected.  Anyone who doubts the nature of the pay-for-play world of politics needs only to hear that those politicians that make up the so-called “supercommittee,” the group looking for $1.2 trillion in budget cuts, are bringing in handsome donations.  According to Politico, “A review of both Democratic and Republican leadership PAC filings for September found that the members of the supercommittee are taking cash from lobbyists, PACs and industries that may be affected by the panel’s deficit-reduction proposal.”

It would be bad enough if politicians did nothing once elected, but it seems that they have a knack for doing those things that will do the most harm.  That is why one of the recommendations in the interim report has me rather concerned.  On page 21 of the report the Jobs Council recommends: “the Administration should test an ‘open source’ approach to tech transfer and commercializations.”  What does that even mean?  It might sound good to some, and certainly is the “in thing” to recommend I suppose.  After all, “open source” is the solution to all the problems of the world, right?  Never mind that the open source community has yet to identify a long term, stable business model that makes money.

If you read on in the report you start to get at least some sense for what the Jobs Council was thinking, assuming they actually did think this part of the report through in any kind of deliberate manner, which is far from obvious.  On page 22 the report says:

America’s colleges and universities, funded with federal dollars, have produced many of the great breakthroughs in clean energy, information technology, biotechnology and nanotechnology that have led to new industries and jobs across the country. However, all too often potentially groundbreaking research that could find market success lingers in university labs.

The Council recommends allowing research that is funded with federal dollars to be presented to any university technology transfer office (not just the ones in which the research has taken place).

With a recommendation like that, which if implemented would turn technology transfer on its head as we know it, you would probably expect some kind of finds of fact to support the conclusion.  You might even settle for anecdotal evidence or one or more illustrative examples some underlying problem. That, of course, would be reasonable.  Unfortunately, there are no facts, anecdotes or discussions of a problem whatsoever.  In short, there is absolutely nothing in the report that would lead anyone to conclude that allowing researchers to shop around to the technology transfer office of their choosing is likely to lead to anything good.  There is no evidence that there is even a problem that needs addressing.

The Jobs Council seems to just assume that giving federal researchers more flexibility will result in more federally funded research getting out to start-up companies and small businesses.  The naivety of that assumption demonstrates that no one on the Jobs Council understands technology transfer operations, or the law as it pertains to invention and ownership of invention rights.

Just this year the United States Supreme Court issued a decision in Stanford v. Roche, which addressed whether the Bayh-Dole Act automatically vested ownership of patent rights in Universities when the underlying research was federally funded.  The Supreme Court once and for all settled the law by determining that Bayh-Dole does not automatically vest title, which was really the appropriate decision.  Chief Justice Roberts explained that any other ruling would only upset 200+ years of U.S. patent law, which has always held that initial ownership vests in the inventor.

But why is Stanford v. Roche relevant to the Jobs Council?  Simply stated, it doesn’t seem that it was considered relevant because if it were they wouldn’t have come up with a naked recommendation that researchers be allowed to shop around their inventions.  The nightmare that was the the convoluted fact pattern in Stanford v. Roche unfolded due to a particularly tortured and lengthy relationship where invention rights were not well documented.  The readers digest version (taking some liberties) is that Researcher invents and assigns to University.  Researcher then needs access to equipment and data held by private company, who requires Researcher to agree to assign rights to any invention resulting from use of equipment/data.  So now Researcher has two different obligations to assign rights.  University winds up not being able to sue company Researcher gave rights to.  For a more thorough treatment see: Supreme Court Affirms CAFC in Stanford v. Roche on Bayh-Dole.

The relationships and dispute at the core of Stanford v. Roche spanned from 1985 through 2011, with a great many twists and turns, including intervening acquisition of rights.  You see, as it turns out, tracking invention rights isn’t all that easy, particularly when there is a joint venture or partners involved.  Can you imagine the nightmare if researchers were allowed to take federal money, through employment have an obligation to assign to their own University and then subsequently solicit and receive help from a technology transfer department at another university?  Would this second technology transfer department be tasked with collecting royalties and remitting to the first University who it the owner of the rights in the underlying innovation?  Why would a second technology transfer department want to work for free and turn over royalties?  Would the second technology transfer department acquire some kind of ownership interest in the underlying intellectual property?  Would there be some kind of time-limit or right of first refusal for the researcher’s University employer to act to preserve rights?  There are a great number of questions that need to be answered, and any change would strike at the heart of Bayh-Dole.

On top of the litany of questions that need to be considered, but seem to be unappreciated, who in their right mind thinks any technology transfer department has enough time and enough resources to even maximize the innovation at their own institutions let alone being solicited by outside researchers?

In terms of the underlying law, I wonder if the Jobs Council envisions re-writing Bayh-Dole in order to bring this nebulous “open source” idea into being?  If yes, which parts of Bayh-Dole would be re-written?  Would the Supreme Court decision in Stanford v. Roche be legislated away?  With a change of this magnitude, which would have to in some ways address ownership rights, pursuing this idea would essentially unravel Bayh-Dole.

It is not at all an exaggeration to say that Bayh-Dole is one of the most successful pieces of domestic legislation ever enacted into law.  The Bayh-Dole Act, which was enacted on December 12, 1980, was revolutionary in its outside-the-box thinking, creating an entirely new way to conceptualize the innovation to marketplace cycle.  Prior to Bayh-Dole, which grants ownership rights in patented innovations to Universities, it was nearly impossible for federally funded research to be licensed.  The process wasn’t working.  In my interview with Senator Birch Bayh (ret.), who was the driving force behind the Bayh-Dole legislation, he explained to me that it was certainly logical to believe that since taxpayer dollars funded the innovation any inventions coming therefrom should be freely available.  The business reality, however, was that federally funded innovations were not being licensed, which meant that federally funded research was largely not benefiting anyone. Senator Bayh was willing to explore a new solution, indeed a counter-intuitive solution, that leveraged ownership and exclusive rights.  The result has been a staggering success of epic proportions.

In the 30+ years since Bayh-Dole was enacted it is responsible for the creation of 7,000 new businesses based on the research conducted at U.S. Universities. As a direct result of the passage of Bayh-Dole countless technologies have been commercialized, including many life saving cures and treatments for a variety of diseases and afflictions. In fact, the Economist in 2002 called Bayh-Dole the most inspired and successful legislation over the previous half-century. Everyone who is fair-minded and comes to this with no agenda and no preconceived notions can do anything other than conclude that Bayh-Dole has been a success beyond the wildest imagination of even the most imagineering optimist.  Why would we want to set about undoing Bayh-Dole in order to take a shot with an “open source approach to tech transfer and commercialization”?

It seems the Jobs Council doesn’t have a clue what it would entail to even begin to think about this tech transfer recommendation. My fear, however, is that because the recommendation uses some critical buzz words many will want to embrace the brave new world of “open source innovation” and simply change lanes.  Change for the sake of change is rarely wise, and here it would be downright stupid.  Thus, it likely has a real chance of happening, which is a sad commentary in and of itself.

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Posted in: Gene Quinn, IP News, IPWatchdog.com Articles, Licensing, Patents, Technology & Innovation, Technology Transfer, US Economy

About the Author

is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.

 

5 comments
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  1. You make excellent points; more Stanford-v.-Roche farragoes we don’t need. And it’s always worried me a bit that the PTO doesn’t conflict-check assignments as they’re recorded, though I get why they don’t. But I can envision versions of the tech-transfer “forum shopping” scenario that could enable more inventions to commercialize and NOT make a big snarl:
    Say, instead of alpha-to-omega control over its own researchers’ inventions, each university instead has a right of first refusal. If they want to pursue a tech transfer of an invention, they get it, the end. But if they pass on it, THEN they should carve it out of the assignment obligation and let the inventor shop it around to other Tech Transfer offices – who will of course verify that the inventor really got the rights back before taking things any further.
    Why bother at all? Good question since the committee report sounds like it might not have been clear. This may or may not be one of their reasons, but it’s been my experience on both sides of Patent Committee tables that inventions get rejected for many reasons other than improbability of commercial success. They’re peripheral or tangential to the organization ‘s core foci and licensees don’t immediately spring to mind. They’re in a technology the Committee members don’t know well, or don’t esteem. The inventor lacks status or may not be well liked or respected (some university faculties put the Hatfields and McCoys to shame) . All kinds of extraneous factors come into play “at home” that might be nonexistent or irrelevant somewhere else. Forum shopping, **conditioned on rejection by the originating U.,** would give the invention a better chance to find more fertile ground and succeed or fail on its own merits. That’s my take; what do you think?

  2. My experience with Tech Transfer offices is that they are all too often an impediment to the commercialization of inventions. The reasons seem to include chronic high turnover of staff, inexperience of staff, lack of training of staff, other bureaucratic pressures put on staff and distrust of staff by university researchers.

    Maybe if the tech transfer offices had to compete with each other to market their researchers’ technologies, they could shape up to be efficient and effective. But that is just a maybe.

  3. Liz-

    Thanks for your comment.

    I don’t have a problem philosophically with a right of first refusal. I know patent committees decide things for a variety of reasons. I know one person who sits on one who tells me that his vote is largely influenced by who makes a better presentation because he is a business person, not a techie, so he doesn’t have the ability to evaluate the underlying technology.

    I question whether having a right of first refusal and then a system that allows shopping around to other tech transfer offices is the right way to go though. My experience with tech transfer offices is that they are overworked as it is. Everyone I know who operates in tech transfer has more work than they can handle. If they had more time they would beat more bushes at their own institutions. So it seems like a foolish strategy to allow that kind of shopping, although I definitely like a right of first refusal.

    If the owner of the right is going to bury the right then why not give the inventors the rights? If for whatever reason the University does not want to pursue the innovation within a certain period of time then the rights should revert to someone who could then pursue it on their own, perhaps with some kind of nominal payment back to the University for releasing ownership rights in the event the innovation becomes valuable. A timeline could be created — if a provisional patent application is not filed within X weeks or Y months of disclosure then rights automatically revert. If a nonprovisional patent application is not filed within 9 or 10 months after filing the first provisional then rights automatically revert. I think if this happened what you would see is a private University technology transfer system open up. I know there are those in the private sector quite interested in trying to work with unwanted university technologies. This could potentially work.

    Thoughts anyone?

    -Gene

  4. Gene, your proposal at 11:52 sounds pretty reasonable to me. Any university can unilaterally adopt such a policy. It does not take a Blue Ribbon White House panel to make it so.

  5. Bayh-Dole provides that if the university isn’t interested in the technology, the inventor can request that it be waived to them. The process is that the university notifies the sponsoring federal agency, which has the second option. The agencies are normally not looking to pick up more inventions to manage and typically acceed to the inventor’s request. The agency still enjoys the right to use the technology royalty free for governmental purposes,which usually means conducting more research in the field. I’ve never heard of a case where the Feds use the license in procurements since it’s easier to buy from the patent owner.