by Jennifer Zhou

Posted 18 July 2001

The Bayh-Dole Act was enacted in 1980 with the following objectives:

• To use the patent system to promote utilization of inventions arising from federally supported research
• To encourage maximum participation of small business firms in federally supported research and development efforts,
• To promote collaboration between commercial and non-profit organizations,
• To ensure that inventions made by non-profit organizations and small business firms are used in a manner that promotes free competition and enterprise,
• To promote commercialization and public availability of inventions made in the United States by United States industry and labor
• To ensure that the Government obtains sufficient rights in federally supported inventions to prevent the unreasonable use of inventions.

The Bayh-Dole Act applies to all inventions conceived or first actually reduced to practice in the performance of a federal grant, contract or cooperative agreement. It automatically grants first rights to a patent for an invention fully or partially funded by a Federal agency to the awardee organization. To obtain these benefits, the inventor and the organization have several reporting requirements that protect the rights of the government.

In the field of biomedical and behavioral research, The National Institutes of Health (NIH) is the principal funding agency within the Federal government. On November 8, 1994 the NIH published a notice in the Federal Register (59 FR 55673) titled "Developing Sponsored Research Agreements: Considerations for Recipients of NIH Research Grants and Contracts." This document is to provide guidance to recipients of NIH funding to ensure compliance with the Bayh-Dole requirements. The recipients are required by the Act to maximize the use of their research findings by making them available to the research community and the public at large by their timely and effective transfer to industry for development. Therefore, this document also addresses the relationship between the recipients and the commercial entities by providing the recipients with the issues and points to consider when developing sponsored research agreements with commercial entities. The term "sponsored research agreement" means a written document which describes the relationship between recipients and commercial entities in which recipients receive funding or other consideration to support their research in return for preferential access and/or rights to intellectual property deriving from recipient research results.

The Universal Points for Consideration highlights several requirements and issues that recipients should consider in all proposed sponsored research agreements. The five points:

1. Academic Freedom--recipients must ensure that sponsored research agreements preserve the freedom for academic researchers to select projects, collaborate with other scientists, determine the types of sponsored research activities in which they wish to participate, and communicate their research findings at meetings, and by publication and through other means.
2. Dissemination of Research Results--recipients must ensure that the timely dissemination of research findings is not adversely affected by the conditions of a sponsored research agreement.
3. Utilization--recipient must consider whether the organization has the experience, capability, and commitment to bring its likely inventions to commercial status in deciding whether to enter into an agreement with a commercial entity.
4. U.S. Manufacture--recipients must ensure that each agreement requires that any products embodying the subject invention or produced through the use of the subject invention will be manufactured substantially in the United States.
5. Notification Requirements and Records--recipients must fully notify the NIH in a timely manner when an invention, patent and license notification have been developed. Recipients must also document their compliance with the requirement of the Bayh-Dole Act.

Points for Special Consideration, which delineates circumstances which suggest heightened scrutiny, and Other Points Consideration by Non-Profit Recipients, which applies only to non-profit recipients, are also developed.

In implementing these considerations, NIH established the Interagency Edison system, an electronic reporting system whereby universities can enter data directly into a national database to satisfy their reporting obligations to those federal agencies.

For more information, please check the following web resources:

• DEVELOPING SPONSORED RESEARCH AGREEMENTS: CONSIDERATIONS FOR RECIPIENTS OF NIH RESEARCH GRANTS AND CONTRACTS NIH GUIDE, Volume 23, Number 25, July 1, 1994
• Invention Reporting Requirements Letter to SBIR/STTR Award Recipients
• Bayh-Dole Act
• Council on Governmental Relations

Technology Transfer Revolution and Legislation

The Bayh-Dole Act was a significant first step toward the evolution of technology transfer of federally funded research to private industry. However, it had several limitations. It did not allow big business to patent inventions resulting from federally funded research, only small businesses and non-profit organizations. Through Bayh-Dole, private parties retain patent rights via a "title in contractor" policy, while small businesses and non-profit organizations retain title to results from federally funded contracts. It further placed limitations on the licensing of government-owned technology by subjecting such procedures to lengthy public notice requirements and by granting only government-owned, government operated labs the authority to license such inventions.

In 1980, a second act was passed by Congress, the Stevenson-Wydler Technology Innovation Act. It involved the transfer of more general government research and ideas, and experienced multiple twists and turns, which included the Federal Technology Transfer Act (FTTA) of 1986. FTTA served as an amendment to the Stevenson-Wydler Act and created the Cooperative Research and Development Agreement (CRADA). The CRADA not only gave federal labs clear authority to enter into technology transfer agreements, it required that federal labs act vigorously and work more closely with industry for successful technology transfer. A business and a federal laboratory would enter into a cooperative research agreement in which the business would contribute personnel, services, intellectual property, tangible property and money in furtherance of the research. The government would not contribute money. Rather, the government would offer personnel, services, intellectual property, and tangible property in furtherance of the CRADA. At the outset of the CRADA, the collaborator was entitled to some licensing rights in any invention created by the CRADA.

In 1989, congress passed the National Competitiveness Transfer Act. It defined a collaborator's rights concerning proprietary information disclosed during a CRADA. As an exception to the Freedom of Information Act (FOIA), it prohibited the government from disclosing privileged and confidential information that a collaborator revealed to the government during a CRADA. The Act further authorized the government to maintain the confidentiality of information that results from research and development activities under a CRADA.

The future of the technology transfer revolution lies in the enforcement of rights to proprietary information obtained through CRADA. To date, there is no clear provision as to whether a collaborator can sue the government if the government discloses proprietary information under CRADA (because of the doctrine of sovereign immunity, a private citizen cannot sue the United States for damages unless Congress has expressly authorized such a suit). Another problem is that because of the FOIA, business competitors can file requests to obtain information that was supplied by the government in CRADA. Although the government is prohibited from disclosing information received under a CRADA from a collaborator, the government does not have the duty to protect information or refrain from disclosing information that it supplied to a CRADA.

Another concern regarding the effectiveness of intellectual property management and technology transfer policy is the Antitrust Laws. In 1984, Congress passed the National Cooperative Research Act, which justified exemption from antitrust enforcement that most research consortia focus on developing pre-competitive technologies that are generic and open to application by all US firms in a particular sector. Interestingly, companies will sometimes create a consortium for the sole purpose of entering into a CRADA with a federal laboratory. Since a patent is a legal form of a monopoly, sometimes, cross-licensing between two companies can invoke antitrust issues because the patent claims can constitute part of a larger plan to restrict entry to competition, as in the case between Schering-Plough and Hoffman-La Roche. Currently, DOJ is scrutinizing licensing activities that could lead to monopoly power over a research tool in an innovation market, with the potential for investigation of antitrust violations in cases where licenses threaten the competitive nature of these markets. There is no clear understanding or enforcement of antitrust law on technology transfer.

Useful Resources/Publications:

• Appendix A: Federal Technology Transfer Legislation
• Office of Technology Transfer: PHS/NIH

NIH Final Notice

Principles and guidelines for recipients of NIH Research Grants and Contracts on Obtaining and Disseminating Biomedical Research Resources: Final Notice (December 23, 1999).

This notice provided more specific implementation procedures to the 1995 Notice for Consideration. It emphasized the following principles:

• Ensure Academic Freedom and Publication--This applies to recipients of funding through cooperative agreements. Prompt publication and timely disclosure of research findings are required.
• Ensure Appropriate Implementation of the Bayh-Dole Act--Recipients are not discouraged from seeking patent protection that is necessary for development of a research tool as a potential product for sale and distribution. Rather they should license the intellectual property in a manner that maximizes the potential for broad distribution of the research tool. Basically, NIH has left considerable discretion to recipients in determine an intellectual property strategy.
• Minimize Administrative Impediments to Academic Research--Streamline the process of transferring technology through Uniform Biological Materials Transfer Agreement (UBMTA). Appendix of the notice gave many example languages.
• Ensure Dissemination of Research Resources Developed with NIH Funds--Again, the NIH has left considerable discretion to recipients. Recipients are entitled to capture the value of their invention as long as the action will ensure that the public will reap the benefit of its investment in government research.

Several people suggested that as a policy this Principles/Guidelines is not enforceable as law and that NIH should issue them as a regulation to ensure compliance. The NIH responded by saying that it does not believe that a regulation, enforceable as law, is required at this time to facilitate sharing and access to research tools for its recipients. The NIH has not precluded the possibility of engaging in the regulatory process if widespread problems continue in access to NIH-funded research tools by NIH recipients.

If a researcher were to violate the Bayh-Dole guidelines, what sanctions can the government place on that researcher? The Bayh-Dole Act gave government or NIH the "march-in" rights, which allow the government to reclaim title to inventions in exceptional circumstances such as when a private party who owns a federally funded invention does not attempt to make a practical application of the invention in a "reasonable time". The government has the capacity to "march-in" and mandatorily license a funding recipient's inventions to a third party.

The March-in provision was invoked by CellPro, a small biotech company, which sought to obtain a license to practice a certain stem-cell technology that was invented by a researcher at The Johns Hopkins University under an NIH grant. CellPro could not obtain license from John Hopkins and its sublicensee, Baxter Healthcare Corporation, and was found liable for infringement of the John Hopkins patents. In its petition under the Bayh-Dole Act, CellPro argued that march-in was warranted because the funding recipient failed to take reasonable steps to commercialize the technology. Alternatively, CellPro asserted that government action to grant CellPro a license was necessary to alleviate health or safety needs that were not being met by the recipient. CellPro had an FDA-approved product on the US market.

• View full account of the CellPro case.
• View NIH explanation of its denial of CellPro's petition.

In conclusion, the march-in authority is cumbersome to invoke, in part due to existing authorities, and has the potential to undermine the process of federal technology transfer by disrupting the existing synergy between the academic community and the private sector. The greatest value of march-in may well be as the proverbial Sword of Damocles, the threat it poses and the resulting incentives for funding recipients to ensure appropriate commercialization of federally funded inventions.