by Gary Jones
FLC Washington, DC Representative
Greetings from DC. The Bayh-Dole Act has come under congressional scrutiny for the second time in four months. On October 24, the Senate Judiciary Committee held a hearing on "The Role of Federally Funded University Research in the Patent System" to a packed room. There was an oversight hearing in the House on Bayh-Dole in July; see the August "DC on T2" column.
While this hearing was focused on a particular provision in the Act, it provided another opportunity for discussion on the Act in general. As all parties that participate in federally funded university research are aware, Bayh-Dole allows universities to take title to inventions developed on federal funding and to retain all licensing profits associated with that invention—with one exception. Under Bayh-Dole, universities that run government labs (i.e., government-owned, contractor-operated labs, or GOCOs) are required to return a portion of those licensing proceeds to the government when those proceeds exceed 5 percent of the lab's budget. This provision, and more specifically whether the 5 percent mark is appropriate, was the primary topic of the hearing.
Chair Patrick Leahy (D-Vt) highlighted the work of Ames Laboratory, a Department of Energy facility operated by Iowa State University, stating that "[T]hrough its ingenuity and successful commercialization, … last year exceeded the 5 percent royalty mark and, as a result, repaid the taxpayers nearly $1 million, becoming the first such facility to do so." Ames Lab is currently the only facility to have reached the 5 percent cap.
Elizabeth Hoffman, Executive Vice President and Provost, Iowa State University, spoke on behalf of Ames Lab — and possibly for other university GOCOs affected by this provision in the future when she said, "[I] am here to propose a limited, technical fix that would eliminate a restriction that we believe has an unintended, inequitable, negative impact on small [GOCOs]; namely, the current limit imposed on retaining royalties resulting from technology transfer activities." She suggested that the royalty limitation "be increased to 15 percent of the annual budget for GOCO contractors with annual budgets of less than $40 million." She also reminded the committee that by law the monies retained by the lab under these provisions are to be used for research and educational purposes. Returning them to the government makes them unavailable for that purpose.
Other witnesses included Arti Rai, Professor, Duke Law School; Dr. Charles Louis, Vice Chancellor for Research, University of California, Riverside; and Robert Weissman, Director, Essential Action, a nonprofit advocacy group. While noting the primary topic of the hearing, they took the opportunity to address other issues as well.
Professor Rai stated that while "there is little reason to believe we need a major overhaul of the current system of technology transfer," some "tweaks" to the system might be worth studying. She specifically pointed to two provisions, the "exceptional circumstances" provision and the "march-in rights" provision. Currently, federal agencies are required to prove "exceptional circumstances" before declaring that patenting is the wrong approach to commercialization; she questioned whether such a high bar is necessary. Regarding the provisions that allow compulsory licensing in the event a patentee is not commercializing appropriately (i.e., "march-in rights"); while acknowledging they have never been used, she still cautioned against any attempts to weaken them.
Dr. Louis testified strongly in favor of Bayh-Dole, suggesting that the policies and objectives of the Act are as applicable today as when it was passed, e.g., using patent law to promote the utilization of inventions arising from federally funded research and collaboration between commercial concerns and nonprofits, including universities. Further, he stated that there are sufficient safeguard provisions (such as the march-in rights provisions) to protect against abuse. He said that from the University of California's perspective, "any efforts that would undermine the effectiveness and proven success of the Bayh-Dole Act would not be in the public's interest." Mr. Weissman's testimony was in direct opposition to the other witnesses' perspectives—he was very critical of the Act and its consequences, particularly in the area of pharmaceutical research and pricing. As he stated in written testimony, although federal agencies have "embraced the Bayh-Dole mission of licensing federally funded inventions to private corporations, our experience shows that the government has abrogated its duty to ensure that pharmaceuticals incorporating federally funded inventions are reasonably priced." He went on to urge the use of march-in rights by federal agencies.
While it's unclear at the moment exactly where this focus on Bayh-Dole (and technology transfer) may be headed, folks in DC make a living out of trying to read between the lines on comments from the Hill. As Chairman Leahy said in his opening statement, this hearing "gives the Committee a longoverdue opportunity to begin an examination of the success, as well as any shortcomings, of the tech transfer provisions of Bayh-Dole in general." It appears there may be more to come. See Chairman Leahy's opening statement and all witness testimony on the Senate Judiciary Committee website, http://judiciary.senate.gov/hearing.cfm?id=2998.
Gary can be reached at gkjones@federallabs.org.
