Patent Incentives, the Universities, and the Public Availability of Inventions

by John Willinsky   June 30, 2011

I have been working over the last few years on what I feel is a latent distinction within our concept of intellectual property. This distinction sets apart the properties produced in educational institutions from commercial properties. The “intellectual properties of learning,” as I term them, often have, if inconsistently, a distinct economic and legal status to them, whether in copyright or patent law, tax-exemption or incentive. The distinctions made around the public good of learning have a long history, dating back in the West, I am finding, to the medieval monasteries, but they hit the headlines last week.

On June 6^th, 2011, the United States Supreme Court ruled against Stanford University in Stanford v. Roche Molecular Systems, No. 09-1159. The Court denied Stanford University’s intellectual property claim that Roche Molecular Systems had infringed on its rights by marketing a H.I.V. test developed by Mark Holodniy when he was a research fellow in its department of infectious diseases. On coming to Stanford, Holodniy signed a statement saying that he “agree[d] to assign” intellectual property rights to Stanford for any inventions. When the university sent him to the Cetus Corporation to work in a new area, he signed a similar statement declaring that he “will assign and do[es] hereby assign” all rights for any invention to Cetus. While at Cetus, Holodniy developed a test that helps to determine how well AIDS drugs were working, and Cetus sold its rights to this test to Roche Molecular Systems, which created what is now a widely used test kit. The Court’s decision weighs heavily on the wording of the two rights agreements Holodniy signed, and I leave it to you to review the quoted parts from the rights agreements in this paragraph to see why the Court upheld Roche over Stanford on a fine grammatical point.

However, at the root of the case, and closer to my interests in it, is the Bayh-Dole Act of 1980, which is a legislative measure that exemplifies the distinct and privileged economic realm that learning occupies. This Act establishes the right of universities and small businesses to retain rights over inventions that result from federal funding. In ruling against Stanford’s claim, Chief Justice Roberts charged that the university had wrongly assumed the Act granted it exclusive rights over inventions resulting from federal grants awarded to it. 

Without commenting on the ruling itself, I think the case speaks to how the Act favors learning in a qualified and particularly American way. The Act is intended to “promote the utilization of inventions arising from federally supported research” 35 U. S. C. §200. And to do so, the Act allows contractors (“any person, small business firm, or nonprofit organization that is a party to a funding agreement”) to “elect to retain title to any subject invention” §202(a). This retention of that title is not cast as a natural or moral right, but is framed as an economic incentive intended “to promote the commercialization and public availability of inventions” §200. 

The law plays on the university’s distinctive intellectual property position. The universities are well positioned to obtain federal grants that lead to patented inventions, they have competitive advantage in the marketplace without affecting their non-profit, tax-exempt status. There are those, such as Derek Bok, who cite the risk posed by the Bayh-Dole Act, as it sends the institution in pursuit of profitable patents, rather than doing a world of good in pursuit of knowledge in a more disinterested form, while warranting reductions in state support. 

The danger may seem to be reinforced, perhaps, by a secondary goal of the Act, which is “to promote collaboration between commercial concerns and nonprofit organizations, including universities” in the name of “free competition and enterprise” §200. This is the road that Stanford started down when it sent Holodniy to Cetus, and the considerable sales of the resulting HIV/AIDS test was what the government had in mind with this Act.

Yet just when learned distinctions appear to collapse in such enterprising collaborations, the Act is also strikingly clear that “the balance of royalties or income earned” by non-profits such as the university should, after expenses, “be utilized for the support of scientific research and education” §202 (7)(c) in ways that are “consistent with the research and development mission and objectives of the facility” (e)(i). There are to be no gains in all of this for the university that cannot be shown to advance the mission and objectives of learning. So even as the Bayh-Dole Act does draw the universities further into realm of the marketplace, it upholds the distinctive place of learning. 

When the “public availability of inventions” produced by the university is at all at risk, I do think that the universities should collaborate with small businesses to commercialize inventions in the spirit of the Act. But those cases will be the exception, and the public availability of inventions and knowledge, more generally, can be achieved far more readily on a daily basis by the universities simply by pursuing open access policies, creative commons licenses, and related measures. By making its work as public as possible – so that professionals and policymakers, teachers and students, and interested readers can find and use it — the universities provide the state and the world with the necessary incentive to support their learned efforts. By this move, American universities would be employing both the incentive structure of intellectual property law to the advantage of learning’s distinctive properties.