So I got this urge to do some snorkeling in the waters of Black’s Legal Dictionary. Just a little recreational reading. But I’d barely got into the waters–first page, in the A’s–when I hit up against this rock:
Abbroachment. The act of forestalling the market by buying wholesale merchandise to sell it at retail as the only vendor.
That led me to “forestalling the market” (citations omitted):
Forestalling the Market. The act of the buying or contracting for any merchandise or provision on its way to the market, with the intention of selling it again at a higher price; or the dissuading persons from bringing their goods or provisions there; or persuading them to enhance the price when there. This was formerly an indictable offense in England, but is now abolished…
Forestalling differs from “engrossing,” in that the latter consists in buying up large quantities of merchandise already on the market, with a view to effecting a monopoly or acquiring so large a quantity as to be able to dictate prices. Both forestalling and engrossing may enter into the manipulation of what is now called a “corner.”
Once you have engrossed a market, you then can “corner” it.
Cornering the Market. The act or process of acquiring ownership or control of a large portion of the available supply of a commodity or security, permitting manipulation of the commodity’s or security’s price.
I went back to abbroachment. The Encyclopedia Americana gives an etymology for broker:
The “broker” acts in the name of another. The broker does not deal in the goods directly, but makes the arrangements by which goods may be transferred from buyer to seller. The “factor” does things differently. A “factor” steps in between buyer and seller. Investopedia gives an example–company A sells $1M of goods to company B, but needs immediate payment. Factor F pays a portion of the $1M to A, and when B pays F, F pays most of the remainder to A, keeping some as a commission. In this way, A gets paid something quickly, and F pays attention to collecting from B to cover F’s money at risk.
The Encyclopedia Americana has a fascinating entry for “cat” that uses the term “factor.” Here is bit:
Cats must be kept. Yes. But I kept my focus on a different meaning of “factor.”
A factor buys a receivable. Often, the receivable is in the form of an invoice. The factor then obtains the right to collect on the invoice, taking the risk of non-payment, but paying less to the seller than the seller would have received directly from the buyer, keeping the difference as a fee. There are variations of all sorts. But main drift, though is, that there is profit in the deal for the factor if things work out. The seller gets cash flow. The factor gets a profit. The buyer deals with the feisty factor rather than the happy but cash-strapped seller. A recent article traces factoring back to trading in accounts in the Code of Hammurabi. The idea is this: if the customer is credit-worthy, and the seller needs money, then it makes sense to buy into the deal and stand in for the seller. It’s only a tiny stroke of insight to then bundle a set of factor deals, each with a risk of failure, and create a security for purchase for those who want to bet for or against the risk markup.
Floating there near “Abbroachment,” I had an insight. The university technology transfer offices that advocate for an IP policy that makes comprehensive, compulsory claims on the ownership of inventions and works of authorship or anything related are engaged in abbroachment. The university aims to acquire inventions wholesale, if you will, from faculty, staff, and student inventors, so as to be the only vendor for these results of creative and research work. The university IP officers then can corner the market on these assets, allowing them to raise the price charged for access to the IP. Few are willing to pay the higher price, but that does not stop the technology transfer officers from sticking with their abbroachment-based system.
University administrations that adopt an abbroachment model are not brokers, since they demand ownership of the IP before they will engage in further transactions. They are not even factors, as they do not pay to inventors (at a discount) what a future customer might pay for the invention: the university typically pays nothing at all. Sharing royalties with inventors is a shadow of a past environment in which universities referred faculty inventors to invention management agents, such as Research Corporation, who offered management services and a share of royalties in exchange for assignment. When universities offered their own invention management services, they copied the agent model. But especially after Bayh-Dole, universities abandoned the idea that faculty had a choice, or that sharing royalties were part of the deal by which the university negotiated for ownership.
University administrators revised their IP policies so that paying a share of royalties is not consideration for assignment of invention. IP policies demand assignment based on employment or use of resources. Employment, in particular, was expressly excluded as a basis for assignment of inventions by the Supreme Court:
We have rejected the idea that mere employment is sufficient to vest title to an employee’s invention in the employer. (10)
It is difficult to see how use of university resources, such as laboratory facilities, that are provided by the university as part of the offer of employment. In the case of extramural research contracts, the university commits as a contractual obligation to provide the research facilities, and is compensated for doing so through the indirect cost charge taken from the funds the sponsor provides for the research. How then can a university claim that those same facilities, provided under contract, can also be something additional to employment that creates an obligation to assign all inventions to the university? It cannot. But nothing rules out university administrations becoming comfortable with strong-arm tactics. Faculty must assign. It’s that simple. It’s not legal, it’s not good public policy, it’s not good for innovation or economic development. It is not even good for university technology transfer offices. But that’s where we are.
Instead of consideration for assignment, royalty sharing is depicted in university IP policies as institutional largesse. Companies are not so generous with their inventors, the argument goes. Unlike universities, most companies, when they obtain patents, do so for defensive purposes, not to license out, and when companies do license patents, they frequently contribute to standards or in cross-licensing arrangements, so there is not substantial income to pay out anyway. University IP policies simply demand ownership. There is no consideration.
By claiming all–or nearly all–of the inventions made by those doing research (or anything else) at the university, universities get the inventions too soon, and attempt to control too many. In becoming the sole vendor, which allows the university to run up both costs and prices, a university also becomes a bottleneck. No amount of reorganization, re-branding, or dedication to efficiency by a technology transfer can compensate for the bottleneck. Rather than cornering a market, university administrators have effectively forestalled it. Rather than increasing value, they have increased costs. For the handful of deals that have be declared a “success,” thousands of private opportunities have been destroyed.
