Joint Statement of BIO, AAU, ACE, APLU, AUTM and COGR

Contributed by dbking

 Earlier today, the United States Supreme Court issued its opinion in the appeal of Stanford University against Roche Diagnostics. This case is of significant interest to the Biotechnology Industry Organization (BIO), Association of American Universities (AAU), American Council on Education (ACE), Association of Public and Land-grant Universities (APLU), Association of University Technology Managers (AUTM), and Council on Governmental Relations (COGR) because of its potential impact on university technology transfer, on development and commercialization of university-generated basic technology, and on scientific collaborations between university and private-sector scientists.

The biotechnology industry and the university community rely on effective collaborations to make the products of their research and development efforts available to the public.  The university’s mission of the discovery and dissemination of new knowledge is complementary to the biotechnology industry’s mission of translating basic science into products to benefit patients, farmers, and consumers. The discoveries arising from university research are most efficiently transformed into valuable new products with the participation of companies willing to invest in the long development process that is often necessary to bring new products to market.

By all accounts, the U.S. system of public-private technology transfer that was established under the 1980 Bayh-Dole Act has been extraordinarily successful in moving university discoveries from experimental laboratories to the marketplace through collaborations with private industry. This system has provided a rich return on public funding for basic research, in the form of countless innovative products that today benefit consumers, create jobs, and contribute to U.S. technological leadership internationally.  

Although BIO and the undersigned higher education associations held different views on the Stanford v. Roche case, the organizations are united in the desire to ensure that the U.S. technology transfer system continues to generate these public benefits through the robust provisions of the Bayh-Dole statute.  We are committed to working together in light of the Supreme Court’s decision to ensure the continued vibrancy of public-private partnerships and success of our shared objectives.

MEDIA CONTACTS

Biotechnology Industry Organization:

Stephanie Fischer, Director of Communications

(202) 312-9263

sfischer@bio.org

Association of American Universities:

Barry Toic, Vice President of Public Affairs

202-898-7847

barry_toiv@aau.edu

 

American Council on Education:

Erin Hennessy, Director of Public Affairs

202-939-9367

erin_hennessy@ace.nche.edu

Association of Public and Land-grant Universities:

Paul Hassen, Vice President of Public Affairs

202-478-6073

phassen@aplu.org

Association of University Technology Managers:

Jodi Talley, Marketing and Communications Manager

(847) 559-0846 x237

jtalley@autm.net

 

Council on Governmental Relations:

Robert Hardy, Director of Contracts and Intellectual Property

(202) 289-6655

rhardy@cogr.edu

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GAO Report on Bayh-Dole: Leverage to Promote Commercialization of Federally-Funded Inventions

The General Accountability Office submitted its report to Congress today on the administration of the regulations found under the Bayh-Dole Act, the foundation of all federally-funded research in the United States and one of the key factors in the creation (and boom) of biotechnology as both a research field and industry in the 1980s.

A little background on Bayh-Dole:

Technological innovation is widely seen as responsible for much of the economic growth and increased standard of living in modern societies. Patent rights give inventors, or other patent owners, exclusive control over the use of their inventions for about 20 years, which promotes commercialization of new ideas and allows inventors to profit from their ideas. Patent rights ownership encourages the additional, and often substantial, investment of time and money needed to transform the technological innovations developed in the laboratory into goods, services, and processes available in the marketplace.

Since its enactment in 1980, the Bayh-Dole Act has provided recipients of federal research and development funding…the option to retain patents on the inventions they create, provided they adhere to certain requirements. A main goal of the act is to promote the utilization of inventions arising from federal supported research or development, and observers have judged the act a success in their regard. Prior to 1980, when the government routinely retained the patents on federally sponsored inventions, only 5 percent of these patents were ever used in the private sector. In contrast, some stakeholders, including federal and technology transfer officials, today believe that invention that arise from federally funded research are routinely commercialized, although comprehensive data are not available on how often this happens…

The report was prompted  by a single issue not many outside of legal circles understand: march-in rights, or in vernacular, the government’s ability to “march-in” and revoke ownership of federally-funded research under certain, rare circumstances:

In exchange for the right to retain ownership of federally sponsored inventions under the Bayh-Dole Act, contractors must agree to certain reporting requirements. More specifically, contractors agree to notify the funding agency within 2 months after the contractor learns that an invention has been created and to notify the funding agency within 2 years after this notification of the contractor’s decision to retain title to the invention. In addition, contractors agree to apply for a patent on the invention typically within 1 year of the election of title, attempt to commercialize the invention, and to provide additional reports. These additional reports, if requested by the agency, can provide such information as utilization of the invention and patent-related information such as the filing date, patent application number and title, and patent number and issue date for the invention in any country in which the contractor has applied for a patent. Failure by the contractor to disclose the invention, elect title to it, or file a patent application within the times specified, or failure to follow through with the patent application process, allows the relevant federal agency to obtain ownership of the invention.

The Bayh-Dole Act also reserved certain rights for the government to protect the public’s interests. Specifically, the government retains “a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States any subject invention throughout the world,” also known as a nonexclusive royalty-free license. In addition, the act provides the government march-in authority. Under this authority, the federal agency that funded the development of an invention has the right to require the contractor or exclusive licensee to grant a license in any field of use to a responsible applicant upon terms that are reasonable under the circumstances, if the agency determines that:

• the contractor has not made, and is not expected to make, efforts to commercialize the invention within an agreed upon time frame;

• public health or safety needs are not reasonably satisfied by the contractor or licensee;

• the use of the invention is required by the federal government and the contractor or licensee cannot meet the government’s requirements; or

• the owner of an exclusive license is not ensuring that the invention is “manufactured substantially” in the United States and has not obtained the necessary waivers to do so.

Indeed these situations are so rare they’re non-existant, as the report points out:

None of the four agencies we reviewed has chosen to exercise march-in authority under the Bayh-Dole Act. DOD, DOE, and NASA have neither discovered nor received information that would lead them to initiate a march-in proceeding or exercise their march-in authority during the last 20 years. In contrast, NIH has been petitioned formally to exercise its march-in authority three times, but in each case determined that the statutory requirements for march-in proceedings had not been met. Nevertheless, officials at three of the four agencies told us they value the authority because, together with other tools, it provides them leverage to promote commercialization of federally funded inventions. In contrast, DOE officials do not believe march-in authority has significant value as leverage, in part, because no agency has ever exercised the authority.

Specifically, the report details the history of repeated and failed attempts to use march-in rights to gain access to patented technologies after they have been commercialized, including a recent petition in 2004 regarding public health care and access to technology:

In 2004, NIH received two more petitions, in which the petitioner expressed concern that the price of two drugs—one to treat HIV/AIDS and the other to treat glaucoma—made them unaffordable for many people living with these diseases, posing a threat to their health and safety. However, NIH determined that the drugs were already on the market and widely prescribed, and therefore marching in would not alleviate health and safety needs that were not already being satisfied by the producer [italics added]. NIH also stated in its decisions that drug pricing is an issue more appropriately left to the Congress. Furthermore, as NIH noted in its decision on the 1997 petition, the agency is “wary of forced attempts to influence the marketplace for the benefit of a single company.”

Since August 2007, however, a change of administration creates cause for concern:

As a result of changes mandated by the America COMPETES Act, the Technology Administration has been disbanded and Commerce has shifted responsibility for the Bayh-Dole Act to the National Institute of Standards and Technology (NIST). Officials from two technology transfer organizations told us that, as a result of this change, the department currently has little expertise on the march-in process. Specifically, technology transfer officials told us they were concerned that NIST did not have the knowledge and experience of the Technology Administration with regard to oversight of march-in procedures and officials at one organization believed that this might cause some ambiguity in facilitating agencies’ implementation of the act.

NIST officials acknowledged that no one currently in their office has any experience with the march-in authority and said the process appears to be very time-consuming and complex. However, these officials told us that when the Technology Administration was disbanded, the same lawyers who worked on Bayh-Dole issues continued to provide their services, which allowed continuity in the overall legal aspects of oversight for the act. They also noted that most of the questions they have addressed for agencies concern aspects of the act other than the march-in authority. They also believe that because agencies are not required to contact NIST with questions related to the Bayh-Dole Act, that NIST’s role in any future march-in proceedings will likely be very limited.

For further background, you can read BIO’s response to the 2004 petition here; also; read BIO’s statement to the House Science & Technology Committee in 2007 titled, “The Bayh-Dole Act: The Next 25 Years” here .

Bayh-Dole Can Bring Money for Research and Education

There is a movement out there among scientists who would like to see patents lifted, and have everything freely available. Let’s think about that for a minute. Would that really be a good idea? There is an article in the February 2 edition of the University of California at Los Angeles Daily Bruin, titled, “Inventions provide money, jobs for UC.”

Excellent point — if there is intellectual property, there must be money involved and it must from somewhere and go somewhere, but where does it come from and where does it go?
According to the Bruin, in 2007 the UC system earned an income of $116.9 million dollars from royalties for licensing patents, UCLA received around $12 million. Now while that is only a small fraction of the $900 million a year that UCLA receives in the form of research funding, according to the Bruin,

“The money is still significant because it is not designated for a specific purpose, unlike most sources of university funding.”

“(The school) may use it wherever they have a piercing research need,” said Kathryn Atchison, vice provost of intellectual property and industry relations and vice chancellor for research at the Office of Intellectual Property and Industry Sponsored Research.

“The royalty income that UCLA receives is only a small portion of the total amount and is obtained after the money has been divided according to several formulas, Weinstein [Earl Weinstein, assistant director of business development and licensing at the Office of Intellectual Property and Industry Sponsored Research] said.

After an invention has been created, the inventor files a patent, Weinstein said, before meeting with venture capitalists and entrepreneurs to “find the best home for the technology,” which sometimes involves licensing the patent.

Weinstein also said the most important criteria in selecting the best company to take the invention to the market is that the company be able to develop the technology quickly and really make an effort to put it in the market.

Another factor that contributes to the selection of a corporation for the product is the Bayh-Dole Act, which tends to favor smaller entities, Weinstein said.

A federal act established in 1980 by Sens. Birch Bayh (D-Ind.) and Bob Dole (R-Kan.), the Bayh-Dole Act also “allows a federally funded university to retain rights to intellectual property,” said William Tucker, executive director of the Technology Transfer and Research Administration at the University of California Office of the President.

Tucker said previously the federal government would retain the intellectual property rights, decreasing incentives for continued research and development.”

But regardless of the existence of a federal act, there are several nuances which govern how the royalty money is divided, such as the year in which the inventor joined the university, Tucker said.

For example, Tucker said, if the inventor joined the university in the last five years, the net royalty income would be divided by giving 15 percent to the department chair for future research development, 35 percent for the inventors on the patent and about 12.5 percent for the general University of California fund.

The remainder of the money goes to the dean of the school where the invention was created for the purposes of the “teaching and research mission,“ Atchison said.

The Bruin goes on to say that licensing of technology also creates local jobs which can employ faculty and students. In summary, the licensing of intellectual property, well it’s what makes research go ‘round. Assuming you agree that “inventions provide money and jobs” and make research go ‘round, wouldn’t it follow that universities make every effort to bolster tech transfer offices?