Intellectual Property and University Tech Transfer Robert Hardy Director, Contracts & IP Management Council on Governmental Relations May 9, 2008
A Word About COGR Council on Governmental Relations (COGR) Established in 1948; consists of more than 175 U.S. research universities and affiliated academic med. centers and research institutes Focuses on federal government regulations, policies and practices that affect research conducted d at member institutions Seeks to advocate for university research community with federal agencies es Staff of 5; several standing committees (Costing, Compliance, Intellectual Property)
U.S. University Technology Transfer in General Technology transfer by U.S. universities has long history Morrill Act of 1862 created land grant colleges, that were directed to apply technological developments to enhance U.S. agriculture Tech transfer also occurs through other means i.e. employment of students by companies, conferences and publications by researchers, which remain primary means for academic institutions and investigators Term technology transfer today usually refers to licensing i of discoveries i by a university it to a for-profit fit company for further development into commercial products
University Tech Transfer Goals Disseminate new and useful knowledge resulting from university research where further development is required (usually through use of the patent system) Promote practical application of university inventions (with milestones included in licensing terms to ensure due diligence) Assist states and geographic regions in economic development Provide revenue to support further research and education
The Licensing Process Evaluate invention disclosure for patentability and commercial potential File patent application, or relinquish title to inventors (waiver required if fed. funded) Identify and market to potential licensee(s) --consider potential for start-up, especially if there is no established company with which h to partner Negotiate the license (considerations include field of use, exclusive vs. non-exclusive, diligence provisions, royalties and fees vs. equity share (if start-up)) Market demand and manufacturing capability play a key role in these decisions and it is a long-term process
Licensing Strategies Case-by-case strategy for licensing and commercialization to assure greatest t utilization and public benefit Where broad applicability across sectors, non-exclusive licenses are preferable (e.g. Cohen-Boyer patent t on DNA cloning which enabled growth of biotech industry) Open sourcing distribution also may be most effective dissemination for software Exclusive licenses especially important for new therapeutic compounds because of significant resources required for FDA approval process University technology transfer is a risky, expensive activity that requires universities to be highly selective in patenting and licensing decisions
Bayh-Dole Act Bayh-Dole Act of 1980 (P.L. 96-517 35 USC 200-212) provides legal framework for title to and disposition of inventions made under U.S. government-funded research programs Trademark Clarification Act of 1986 (P.L. 98-62) assigned responsibility for implementing regulations to Commerce Department Implementing Regulations published March, 1987 (37 CFR 401)
Pre-Bayh-Dole No single government-wide policy regarding ownership of inventions made with federal government funding Government typically held title to inventions and made them available via non-exclusive licenses Result: in 1980 govt. held title to 28,000 patents, fewer than 5% of which were licensed for commercial development
Bayh-Dole Objectives Establish uniform government policy on ownership and patenting of inventions made with federal government support Allow universities and small business to work directly with the private sector in commercializing inventions made with federal funding Promote leverage of federal funding by private sector to encourage innovations
Basic Features of Bayh-Dole Non-profit organizations (including universities) and small businesses may elect to retain title to inventions developed under federally-funded research programs Universities are encouraged to collaborate with commercial firms to promote the utilization of such inventions by the public Universities must file patents on inventions that they elect to own (and report to government) In licensing inventions preference must be given to small business & products substantially manufactured in U.S. Government retains a non-exclusive world-wide license to practice the patent itself Government retains march-in rights
What Has Been the Result? Economist 12/2/02 edition: The (Bayh-Dole Act) is perhaps the most inspired piece of legislation to be enacted in America over the past half-century this unlocked all the inventions and discoveries that have been made in laboratories throughout the United States with the help of taxpayers money. More than anything, this single policy measure helped to reverse America s precipitous slide into industrial irrelevance.
December, 2006 Congressional Resolution (S. 1785) The Bayh-Dole Act has made substantial contributions to the advancement of scientific and technological l knowledge, fostered dramatic improvements in public health and safety, strengthened the higher education system in the United States, served as a catalyst for the development of new domestic industries that have created tens of thousands of new jobs for American citizens, strengthened States and local communities across the country, and benefited the economic and trade policies of the United States; and it is appropriate that the Congress reaffirm its commitment to the policies and objectives of the Bayh-Dole Act by acknowledging its contributions and commemorating the silver anniversary of its enactment.
Measures of Success U.S. universities signed almost 5000 new licenses in FY 2006 (1079 in FY 91) 697 new products introduced into the market in 2006 4,350 introduced from FY98 through FY06 553 new startup companies launched in 2006 (5,724 new spinouts from FY80 through h FY06) 3255 U.S. patents issued to U.S. universities in FY 2006 ((approx. 500 in FY 1980) Many individual product success stories (see AUTM Better World report)
Invention Revenue (Royalties) Bayh-Dole requires that all revenue from licensing of inventions be used to support research and education Bayh-Dole also requires that revenues be shared with inventors (as an incentive); does not specify specific amount--inventor(s) t share is typically 1/3 rd of net Relatively few blockbusters; COGR survey of 23 of top 25 HHS-funded institutions in FY99 showed average university share of royalty income = $9M Most universities do not make money on technology transfer (after subtracting expenses) Bottom line: tech transfer is part of a university s it service mission, and should not be viewed as a revenue producer
March-In Rights Bayh-Dole specifies (Section 203(a)) 4 conditions under which the government can march in to assure a federally funded invention is made available to the public Conditions are: 1) contractor or assignee has not taken effective steps to achieve practical application of the invention; 2) to alleviate health or safety needs; 3) to meet requirements for public use specified by Federal regulations; or 4) breach of U.S. manufacturing requirement.
More on March-in Government remedy: compulsory licensing (does not take ownership) U.S. government has never exercised its Bayh-Dole march-in rights NIH twice has received march-in requests; (in 1997 CellPro; 2004 Norvir/Xalatan); denied both requests 2004 cases involved drug pricing; i specifically whether excessive prices constitutes lack of practical application or failure to meet health or safety needs; NIH determined d that t since drug was available in the market there was no violation of Bayh-Dole In effect, march-in is not a remedy for pricing concerns
Government Use License Bayh-Dole gives the U.S. government a paid-up p nonexclusive license to practice or have practiced for or on behalf of the U.S. any invention subject to Bayh-Dole Right extends to government contractors Primary user has been the Department of Defense and defense contractors t Note: U.S. law provides (28 USC 1498) that sole remedy edy for infringement e of a U.S. patent t by a contractor with government authorization and consent is by suit against the U.S. government
Note on Other Forms of IP Protection Bayh-Dole deals only with patents Use of copyright in university technology transfer activities is increasing but patentable invention disclosures still substantially exceed copyrightable works and other types (i.e. biological materials) of disclosures Materials Transfer Agreements (MTAs) and protection of proprietary biological materials pose complex and increasing challenges Open source treatment of software gaining momentum; federal regulations anomalous in treatment of federally funded software
Patenting vs. Publishing Faculty need to publish always comes first at U.S. universities Not mutually exclusive; patent is a form of publication which grants exclusivity in return for teaching the public about the invention U.S. one-year grace period for patent applications and provisional i patent t application procedure also enables publication Data do not support claims that over-patenting t has hindered the progress of science, or that research tool patents have adversely affected research
Challenges to University Tech Transfer and Bayh-Dole Historic (pre-bayh-dole) view that publicly-funded technology should be freely available to the public and not owned exclusively by anyone retains force University research typically results in early stage technologies that t require years of further development and investment to generate commercial products (at least 5 7 years; longer for life science products) Development costs greatly exceed the government research investment and usually result in failure Public benefits from those products that are successful and benefits further from royalties paid on those products to universities that are used for research and education purposes
Challenges--continued Some critics concede basic validity of Bayh-Dole approach but argue that platform technologies should be non-exclusively licensed to encourage greater followon innovation and that government should exercise more oversight of university licensing decisions Presumes that government can predict platform inventions; Bayh-Dole premise is that these decisions are better left to research performers and the marketplace after the invention is known rather than government agencies in advance Also implies case-by-case approach to invention rights when goal of Bayh-Dole was uniformity in federal policy
Challenges--continued Criticisms of university tech transfer offices acting as gatekeepers who actually are barriers to commercialization Steady growth in university licenses, products and start- ups belies this criticism i Industry partners and investors value stability and predictability in relationships Compliance with government (Bayh-Dole) requirements requires necessary knowledge and experience Decentralizing the function or turning all rights over to inventors likely l to result in chaos and ineffectiveness (see Goldfarb & Henrekson in Research Policy 32 (2003) 639 658 )
University-Industry Relationships Bayh-Dole initiated new and successful era of collaboration among U.S. universities, government and industry Oh Other factors also are responsible for expanding university industry alliances: growth of science- based industries, increased costs of research, demise of corporate R&D labs, state and local government incentives for collaboration to stimulate t local l economies, global l competition Tensions have arisen recently in some U.S. university industry relationships
Industry Concerns Some sectors of industry claim that universities follow a one size fits all approach in licensing inventions based on the biomedical model that does not fit other industries Complaints include that universities insist on ownership of IP in negotiations for collaborative or industry sponsored research, they follow a home run approach to licensing inventions seeking to maximize revenue, and use Bayh-Dole and certain federal tax rules as negotiating tools to retain full control of IP Some allege that U.S. industries are off shoring R&D due to the difficulties dealing with U.S. universities
Responses to Industry Concerns Universities need to retain ownership to ensure academic objectives can be met (nonprofit research use, dissemination, etc.); they do not engage in work for hire Laws besides Bayh-Dole constrain universities, including tax laws pertaining to their nonprofit status and state laws (e.g. that restrict assignment of inventions) as well as obligations to other sponsors Companies may not acknowledge underlying investment in university research infrastructure that enables specific projects or need for oversight when multiple sponsors Retaining ownership helps maintain a relationship between the inventor and company scientists No evidence linking company decisions to off-shore R&D with negotiating difficulties with U.S. universities; market factors typically drive these decisions; other countries now are adopting Bayh-Dole approach and foreign entities are increasingly funding research at U.S. universities
Looking to the Future 40 universities (including several foreign) and a number of university associations have endorsed a Statement of Nine Points to Consider in Licensing University Technology While not Best Practices as such, the Statement sets forth core values and concepts for universities to consider Points cover reserving rights for nonprofits to practice licensed inventions, use of exclusive licenses, minimizing licensing of future improvements, managing conflict of interest, ensuring broad access to research tools, enforcement of patents, export regulations, working with patent aggregators, and addressing unmet needs of the developing world University Industry Demonstration Partnership (UIDP) established as forum to address some of the university industryindustry issues (www.uidp.org)
The Conflict of Interest Issue U.S. universities are under increasing gpressure to take an active role in local economic development by forming partnerships with industry, but this leads to growth in potential of conflict of interest issues in the performance and reporting of research U.S. universities typically require disclosure of financial interests by investigators and a plan to either manage or eliminate them, or to curtail the research activities if possibility of bias remains These issues are receiving increasing public and Congressional attention and likely to continue
One Prognosis Bayh-Dole represented a careful balancing of public and private benefit and has provided d flexibility to help universities develop creative responses to unanticipated new uses and technologies; need for care in making any changes that would upset this balance Contributions of Bayh-Dole not generally known or understood by federal policymakers or the public; more education needed to avoid disruptions University disclosure and reporting obligations in areas related to tech transfer i.e. invention reporting, conflict of interest are likely to receive increased attention Role of U.S. universities in technology transfer and economic development is evolving and likely to present further challenges
Resources www.cogr.edu: Bayh-Dole Act Guide (October, 1999) 21 Questions About University Technology Transfer ((July 2007) University Industry Research Relationships (Aug, 07) Tech Transfer Tutorial (September, 2000) Materials Transfer in Academia (Sept. 03) www.autm.net: -Annual Licensing Activities Survey -Better World Report -Tech Transfer Practice Manual -White Papers, Other Tech Transfer Resources -Uniform Biological Material Transfer Agreement
Questions/Comments Contact Information Robert Hardy Director, Contracts & Intellectual Property Mgt. Council on Governmental Relations (202) 289-6655 rhardy@cogr.edu