Three Truths the Kamala Harris Clip WON'T Tell You About Patents

A 19-second clip from a 2019 stump speech by Presidential hopeful Kamala Harris in 2019 has been resurrected to galvanize conservative voters on the eve of. In the clip, Harris says, “I will snatch their patents,” which is a terrifying thought to big businesses and small-scale inventors alike.

But what did Harris mean?

Is there actually a mechanism in US law which would make such an IP land grab as she suggests into a viable threat?

What recourse would patent holders have in such a situation?

And could this quote, and the furor raging around it, be the tipping point that helps decide what may be the highest-stakes Presidential race in American history?

Truth #1: Yeah, She Said That.

The clip is unequivocal: Harris at a Biden-Harris campaign event in Iowa, telling the crowd that if drug companies didn’t want to play by the government’s rules, then the Biden-Harris administration would be willing to step in and seize their patents. It hasn’t been doctored or manipulated in any way that anyone has been able to credibly demonstrate.

Harris hasn’t stepped forward to disavow the video, or argue that she was under the influence of Ambien a la Roseanne Barr, or claim she was being used as an unwitting spiritual channel to Karl Marx, or suggest that her body double had gotten excited and gone off-script while giving the speech in her stead.

Ceteris paribus, we must accept that the clip, and the longer speech and video it came from, are genuine and representative of Harris’s own thoughts, beliefs, and intentions.

However, we all know, or at least we should know, about the dangers of relying on a quote taken from a larger work and thus stripped of its context. Harris wasn’t declaring war on all pharmaceutical companies, all big business, or all patent and intellectual property holders. Her broader remarks were very tightly targeted to a specific subset of pharmaceutical companies: those who had used federal funds (read: taxpayer money) to create drugs which they then sold to Americans at beyond-premium rates.

This is a common tactic among pharmaceutical companies. They say, “Well, we spend X billion dollars on R&D every year, but out of Y compounds we come up with, only Z make it through the regulatory gauntlet of testing and trials and final approvals before finally getting to the open market. These drugs help pay for more R&D, and cover our costs from the other Y minus Z compounds or processes we tried which turned out to be boondoggles.”?

Okay, this is fair play to them for that part–as far as it goes. Research isn’t cheap. It requires facilities and resources and raw materials and the wages and salaries of human beings to do all the brain-, leg-, and scut-work associated with creating and testing new medicines. The price tag of an emergent medication is set, and expected, to help repay a portion of everything from Internet access and power bills to staff compensation to the bonuses and benefits that accrue to the C-suite contingent when a new game-changing medication hits the market. Drug R&D which pays off is a goldmine.?

Whereas drugs that turn out not to work as expected, or get tossed into oblivion’s gaping maw because some horrendous side effect is revealed during double-blind clinical trials, are money pits.?

These medical dead ends cost money to develop and suck up resources just the same as working medications do, but unlike their successful siblings, they don’t yield a profit at the end of the experimental cycle. I’m reminded here of Edison’s notorious “I have not failed – I've just found 10,000 (ways) that won't work” quote. If Edison had brought that mentality to modern-day drug research in the private sector, he’d have been out on his ear long before he came up with any breakthroughs–the private sector, as Dan Aykroyd’s character in Ghostbusters laconically remarked, expects results, not philosophical shoulder shrugs.

But when the drugs in question result partially or wholly from taxpayer-funded research, meaning that the pharmaceutical company’s own coffers contributed lightly or not at all to the drugs’ discovery, the equation changes considerably. Harris was not arguing that drug companies making a profit from their discoveries is inherently bad–she was stating a firmly held belief that when taxpayers have already helped foot the bill for the creation of these drugs on the front end, it makes no sense to turn around and price-gouge those who could benefit from those drugs on the back end. Part of her plan required that drug companies be willing to reduce consumer prices in the US to the global average for those drugs–or leave their creations vulnerable to government commandeering.

For those who find this a nightmare scenario already, this next revelation will be anything but comforting.

Truth #2: Yeah, They Can Do That*

While some may find it tempting or even to dismiss Harris’s threat as hyperbolic campaign-trail rhetoric, the truth is that yes, mechanisms exist in US law which would allow exactly such a government takeover of intellectual property as Harris suggested. These are 28 USC §1498 and the Bayh-Dole Act.

28 USC §1498 could fairly and succinctly be surmised as “eminent domain for intellectual property.” What it says, in essence, is that if the government perceives a need for the use of a specific invention for the benefit of the nation, the government may do so at its discretion, without seeking permission from the patent holder. Like eminent domain, where the government can step in and take property from citizens if a pressing public interest is perceived, the government must pay a fair market value for such use. Unlike eminent domain, private patent holders often have to sue to receive this benefit, and are prohibited by 35 USC §217 from seeking or gaining punitive damages or injunctive relief over and above the fair market value of the invention.?

To the ears of most patent holders, the Bayh-Dole Act seems downright benevolent by contrast. This law, formally known as the Patent and Trademark Act Amendments, was intended to stimulate research and innovation in American universities at a time when America’s economy and leadership of the innovation field was perceived to be endangered.?

Of particular concern to many policymakers and their constituents was Japan, whose rapid resurgence from a defeated and humbled aggressor nation to a major power in the business and economic spheres of the post-World War II era alarmed many Americans and fueled strident demand for America to maintain its pride of place in the global marketplace. Yet problematically and paradoxically, universities, small private businesses, and nonprofit research organizations were disincentivized by law from developing or patent innovations which came about as a result of projects funded partially or completely by federal research grants.?

Why? Because any inventions or processes arising from such projects immediately became the wholly-owned property of the US government! These entities couldn’t own the patents, which meant they couldn’t license or profit from them, making the innovations they had created nearly valueless to them on any practical level. While the government had deep pockets for front-end research, the lack of tangible benefit to these entities on the back end made applying for government research funds a zero-sum game–and American economic stagnation a near certainty.

The Bayh-Dole Act proposed to overturn this grim state of affairs by permitting researchers to patent, publish, and profit from their work beyond government grant payouts.

In place of the existing system, the Bayh-Dole Act proposed that in exchange for federal grant money, the recipients of such grants would be not simply expected, but required by law to a) make serious attempts to market and monetize their inventions, and b) agree to grant the government a special license known as a confirmatory license.

The concept was simple: Similarly to the way private corporations typically own the patents their employees create while on company time or premises using company resources, the government had already purchased the license by funding the research and development which made the invention possible. Under such a license, the government would hold a non-transferable, irrevocable, fully paid-up, nonexclusive right to utilize any invention or derivative descendant invention arising from the research for which the grant paid.

The Act also included a clause which permitted the government to march in and commandeer a patent under very explicitly defined circumstances. This clause, informally known as the “march in” rule for this very reason, is the stick on the other end of the Act’s carrot, and gives the otherwise compromise-minded Act some serious teeth. We’ll discuss this more in the next section; for now, the fact that clause exists is enough.?

As compromises go, the Bayh-Dole Act offered the best of both worlds to everyone concerned–and more to the point, it is widely held up as one of the most successful pieces of bipartisan legislation in American history. Grant application rates exploded overnight, and America came out of its research slump swinging for the cheap seats.

*sort of

Truth #3: Yeah, it can be done–but it hasn’t…yet.

When COVID-19 was declared a public health emergency, eyes in the C-suites of the major pharmaceutical companies quickly lit up, their pupils replaced by dollar signs. Nothing spurs technological R&D in fields like communications and transportation like a war; a global health crisis means golden time for drug manufacturers. Federal research grant requests fell like snowflakes on Washington, D.C., with everyone from Johns Hopkins to Pfizer to the Oregon Primate Research Center trying to get a piece of the action–and checks drawn on the US Treasury flew out again with breakneck speed.?

For Big Pharma, even though the front-end money to be made was virtually nil and in fact they could expect to lose money doing so, COVID vaccine research was a no-brainer. The first company to come up with and patent a workable vaccine could expect to score a massive public relations coup and a sharp uptick in demand for drugs they already had on the market. All while doing wonders to rehabilitate Big Pharma’s checkered image with the general public.? Besides, they were hardly starting from zero: Research on everything from HIV to Ebola and Zika had given these companies a sizable leg up on working out the mechanisms they needed to target and the best means for doing so. They applied alongside universities, epidemiology labs, and other concerns, and their facilities and name recognition netted them a substantial chunk of the grant appropriations spilling out of the government coffers.?

Then word broke that Congress was considering an appropriations bill earmarked explicitly for COVID-related research, including detection tests and vaccines, with a Titanic $8.3 billion price tag to taxpayers. There was just one catch: Nearly all of the draft versions of the bill contained a clause limiting how much companies could charge for COVID tests and vaccines, with some variation on the “fair market price” theme. But some drafts of the bill verbiage included a specific and pointed “march-in” clause that echoed and reaffirmed the Bayh-Dole Act’s version while adding an even sharper bite.

While a more moderately framed bill draft was ultimately adopted and ratified, the debate over whether to include the “march-in” clause would undoubtedly have put pharma CEOs on notice that they were being offered eye-watering sums of money by the federal government on one hand, and being watched with a very careful and jaundiced eye on the other. Wisely, everyone seems to have chosen to toe the line rather than risk being the test case for just how much actual pull the “march-in” provision would have in a court of law.

And there’s the big surprise: Although the “march-in” clause posited by Bayh and Dole has been on the federal books for over four decades, it has never been tested in litigation–because this clause has never been invoked by the government. The simple fact of its existence seems to be enough to convince most people that they don’t want to be the guinea pig in that particular legal experiment. Even those who might be tempted to risk it are unlikely to want to jeopardize their patents’ good standing and the IP protection they afford on such a huge roll of the dice.

Would this work in reality?

To picture what a real-world application of these laws might look like, the Bruce Willis blockbuster film Armageddon is a good starting point. While the film falls well short of reality in the realms of both science and the law (and let’s face it, realism is hardly a quality one looks for in a Michael Bay-directed movie at the best of times), one scene stands out to me in light of the Kamala Harris video.?

The scene centers on a tense exchange between a visibly irate Bruce Willis and Billy Bob Thornton regarding an outright “theft” of intellectual property. (Technically "commandeering," since it was done by the government as a matter of law and the exigencies of an extreme circumstance rather than private citizens acting of their own accord). Willis’s character, who invented a special drill rig which he now finds in the possession of NASA, demands to know, “What’d you do, steal a key to the Patent Office?” Thornton, who looks far too cool and composed to be facing off under these circumstances with the guy who rained down hell on earth on terrorists in an LA skyscraper on Christmas Eve (while barefoot, no less, and yes, I know we’re not talking about the same movie now; just go with it), says calmly, “Yeah, basically.”?

Of course, no such thing happened. In such a situation as the impending extinction of humanity and the destruction of the Earth itself, NASA wouldn’t need to “steal” anything, let alone a key to the USPTO.

As a government agency, they’ve already GOT one, because of one point of US law.

?You’ll recall that we discussed earlier how, under 28 USC §1498, the US government can use any patented invention without any requirement to seek or secure the patent owner’s permission or license to do so. However, the patent’s owner can demand compensation for such use, and even sue the government for actual losses and damages incurred by such use. Suits of this type are relatively rare since the law precludes patent owners from obtaining injunctive relief to stop the government from further use of the invention or being awarded punitive damages. Overwhelmingly, these cases tend to be settled out of court.?

The Bottom Line

Between the laws we discussed earlier, there are a number of guardrails preventing the government from just storming in and taking whatever patented inventions it wants with no consequences. 28 USC §1498 is invoked only rarely, and those cases almost never make headlines, likely because hefty Treasury checks and non-disclosure agreements laden with ominous phrases like “subject to criminal penalties under federal law” are involved. (I’m just guessing here.) To the best of my knowledge, no one has ever tested the “march-in” clause of Bayh-Dole.?

This means that while according to the letter of federal law, the government absolutely can come in and take or force an owner to “share” their patent with them, the exact formula for how this combination of laws might be enforced and litigated doesn’t exist. The court confronted with the first case of this kind would be in the heady, and highly uncomfortable, position of establishing a precedent and determining the scope, reach, and limits of these laws.?

What Kamala Harris proposed in 2019, and what was threatened a year later by some members of the House and Senate while the $8.3 billion COVID research bill was being hashed out on Capitol Hill, is within the realm of legal possibility. But only just. Using the law in such a way would almost certainly generate more interest in a number of circles than even the most tightly crafted NDA could squelch. It would also do severe and possibly irreparable damage to the perceived integrity of the patent and intellectual property system in this country. If large companies, inventors, and innovators didn’t feel secure in their rights under that system, they would hardly rely on it to secure their inventions. They would attempt other means and methods, such as patenting their inventions in or even relocating their primary domiciles and major operations to other countries–with potentially devastating consequences for our own.?

So, yes, the government could technically force Big Pharma to play ball using these mechanisms.

However, the chilling effect on creativity and innovation such an action would precipitate would almost inevitably trigger a financial and intellectual crisis here at home which would send shockwaves far beyond our shores. I’m not saying it couldn’t happen, but action to curb Big Pharma’s current pricing approach would likely better be accomplished through legislation than these more draconian methods.

It would certainly keep everyone calmer!??

About the Author

John Rizvi is a Registered and Board Certified Patent Attorney, Adjunct Professor of Intellectual Property Law, best-selling author, and featured speaker on topics of interest to inventors and entrepreneurs (including TEDx).

His books include "Escaping the Gray" and "Think and Grow Rich for Inventors" and have won critical acclaim including an endorsement from Kevin Harrington, one of the original sharks on the hit TV show - Shark Tank, responsible for the successful launch of over 500 products resulting in more than $5 billion in sales worldwide. You can learn more about Professor Rizvi his patent law practice at www.ThePatentProfessor.com

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