Got an interesting email today and have decided to post my reply here as
well, as I get this question a lot. I’ve expanded and linked the email
out.
We’ve been discussing the issue of upstream licensing, especially from
universities. More specifically, if we received an offer for a patent
that had not yet been translated into a product, would it be practically
(and legally) feasible to draft a license agreement that would ensure
access to any products that came from the patent?
To the first point, it is certainly possible to draft a patent license
that requests access to products that ensue from a patent. This is done
in the “closed” context all the time, and is known as a
“reach-through”
- it’s also regularly included in aggressive materials transfer
agreements (MTAs). It is a fairly standard way to extract rents from
downstream products. Here’s a nice analysis of the ways
that reach-throughs
get examined.
We spent several years on both MTAs and
patent licenses at Science
Commons, and eventually reached the conclusion that reach-through terms
were not something that would work particularly well for “open” patent
licenses, whether in attempting to simply retain rights to improvements
to the patented technology (which would appear to be the simple case) or
to products ensuing from the patented technology. The reasons have
little to do with whether or not one could draft such a license, but
with whether or not such a license would actually be effective in real
life.
There are several reasons for
this.
The first is that lots of patents bear on most
products, from lots of sources. It is almost never that case that one
technology leads directly to one product. When there is a lot of money
on the line, everyone is happy to negotiate, and it is not unusual to
see anywhere from
15-20% of total
revenues paid back in license fees in biotech products. But if one of
those patents were to include a patent-left term, the odds are strong
that it would never be part of the process or licensed, because it
removes the economic incentive (or perceived economic incentive as the
case may be) to include the technology in downstream product
creation.
We have an example of patent-left in action
in the
BIOS
patent license created at CAMBIA for agricultural biotechnology. It was
a set of fundamental
gene transfer technologies, patented in order to be made open, and
released under a license that granted licensees the right to make and
patent products without prejudice or reach through, and only asked that
if licensees patented improvements to the underlying technology that
those improvements be made available back to all the other licensees.
While many signed the license to use the technology, no improvements
were licensed back. And that’s not even *product* reach
through, where the real money
is.
PIPRA is an example
of something that is working in biotechnology, which is a pool that
allocates resources and works to create greater access through
transaction cost reduction rather than through the creation of
reach-through or patent-left terms.
Another reason is
that patents are not *enabling* rights in the same way that
copyrights are. Although copyrights grant the right to prevent others
from making copies, the creator who owns the rights owns all the rights
needed to license the rights fully to another person, including the
right to require them to share alike (copyleft). But in a patent
context, especially in a medicines context, the odds are that the right
to produce a product is dependent on dozens of patents and materials
transfer agreements.
This means that even if you could
get a patent on a fundamental technology and convince the owner to
license it openly, the production of the product can be blocked by
someone outside the “open” transactional circle. Think in terms of
chairs. I have a patent on chairs generally, and four-legged chairs
specifically. You patent a new kind of chair - a three legged one - and
license it openly under patent-left. Your patent keeps me from making a
three legged chair unless I sign your license, but my patent lets me
keep you, and anyone who licenses your patent, from making any chairs at
all unless you license my patent on my terms. (this example is owed to
Richard
Jefferson from CAMBIA, who has forgotten more about open patents than
most will ever know).
The third reason is basic
economics, which is that unlike copyrights, patents cost a lot to
acquire and thus tend to be acquired by those with little philosophical
or economic incentive to make those patents available openly. Copyrights
are free and instant, and the advent of digital networks and cheap PCs
and cheap digital cameras mean that it’s fast and easy to share stuff,
and that we don’t need a large percentage of total content creators
sharing in order to have a vast commons. Patents are far more scarce,
and far more pricey, and far less likely to be individually
owned.
All of this taken together is why we worked on
systems that reduced transaction cost, increased transparency,
facilitated e-commerce-like effects, and in general encouraged people to
think about patent rights as something that they should license non
exclusively, but did not attempt to include reach-throughs or
patent-left.
The folks at CAMBIA have a new project called the
Initiative for
Open Innovation which is one of the more cutting edge projects in the
open patent space. The idea here is that being able to see the forest of
patents is job one, moreso than licensing. Their Patent Lens project is
going to change a lot of things. Go look around. It’s worth the time.