U.S. Bayh-Dole Act

Michael C. Barrett

Partner, Austin, Texas, U.S.A.

Fulbright & Jaworski L.L.P.

Lisbon, Portugal February 27, 2012

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Outline

• History of Bayh-Dole Act

• Provisions

• Effects

• Complaints

• Lessons

History

• “Possibly the most inspired piece of legislation to

be enacted in America over the past half-century

was the Bayh-Dole Act of 1980.” – The Economist, January 6, 2003

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History

• Federal government support is the largest area of

support for academic research and development

funding

• Accounts for over 60% of funding

• $147 Billion: estimated government funding of

R&D, 2011 * R&D Magazine

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History

• Prior to 1980, the US government owned IP

resultant from grant-based/sponsored research.

• There was no unified policy of tech transfer for

government granting agencies

– At one point had to deal with 26 different agency

policies

• Granting agencies controlled licensing

• Non-exclusive licenses were favored

• In 1980 the US owned 28,000 patents, of which

fewer than 5% were licensed

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History

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History

• 1963: JFK’s science advisor Jerome Wiesner takes

steps towards patent policy unification

• Continuing through Nixon in 1971

• University of Wisconsin-Madison in 1968 and

1971 entered into “Institutional Patent

Agreements” with government agencies that

included provisions to let the university retain title

to subject inventions

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History

Bayh-Dole Act 1980

• Birch Bayh (D) Indiana; Bob Dole (R) Kansas

• Created uniform federal intellectual property policy

• Small business and non-profits (universities) can

elect title to inventions and license (exclusively or

nonexclusively) technology for commercialization

• In return, reporting, patenting, and other

requirements

• Government can “march in” to protect public

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History

• 1982: standard reporting requirements

• 1982: extended Act to all federal contractors

• 1984: removed limitations on exclusive licenses;

Department of Commerce oversees implementation

of Act

• 1987: consolidation of regulations

• 2000: streamline certain processes of Act

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History

• Gives universities, small businesses, and other non-

profits control of IP from US-funded research

• Reversed presumption of ownership

– Report subjection invention

– Elect to retain ownership

– File for patent & grant government a license

– Commercialize with preference to small business

• Instrumental in creating the system of university

technology transfer in the US

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Provisions: Objectives

• 35 U.S.C. 200 Policy and Objective

It is the policy and objective of Congress to:

• Promote utilization of inventions arising from

federal research

• Encourage maximum participation of small

business firms in R&D efforts

• Promote collaboration of industry and non-profits

• Promote national commercialization /

manufacturing

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Provisions: Objectives

• Ensure government obtains sufficient rights

• Protect public against nonuse of inventions

• Minimize administration costs

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Provisions: Scope

Funding Agreement

• Any contract, grant or cooperative agreement

between any Federal agency and any contractor for

experimental, developmental, or research work

funded in whole or in part by the Federal

government

• Includes any assignment, substitution of parties, or

subcontract

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Provisions: Scope

Subject Invention

• Any invention of the contractor conceived or first

actually reduced to practice in the performance of

work under the funding agreement

Practical Application

• To manufacture (product or composition), to

practice (method or process), or to operate

(machine or system) . . . so that it is utilized and its

benefits are available to the public on reasonable

terms

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Provisions: Report

Disclosure of invention

• Within 2 months after an inventor discloses the

invention to the Tech Transfer Office

– Grant number

– Description of invention

– Inventor names

– Information about publications, sales, public use

– Information about submitted manuscripts

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Provisions: Elect

Election of title

• Within 2 years of the disclosure to the federal

agency

– Many times done along with patent application

• Time frames different when facing a “bar date”

– 60 days prior to “bar date”

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Provisions: Elect

Exceptions to retention of title

• When a contractor is not located in the U.S. or does

not have a place of business in the U.S. or is

subject to the control of a foreign government

• In “exceptional circumstances”

– National security

– Navy nuclear propulsion or weapons programs

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Provisions: File

Patent applications

• Within one year after election of title

• Must cite: (a) invention made with federal funds

and (b) U.S. government has certain rights

• “This invention was made with government support

under contract number ___ awarded by ___. The

government has certain rights in the invention.”

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Provisions: (License)

License to the government

• Federal agency receives nonexclusive,

nontransferable, irrevocable, paid-up license to

practice or have practiced any subject invention

throughout the world

• Confirmatory license must be submitted to the

federal agency and is recorded with the Patent

Office

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Provisions: Commercialize

Commercialize (implied duty)

• Small businesses preferred

• Exclusive licensing allowed

• No assignments except to an organization which

has as one of its primary functions the management

of inventions

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Provisions: Commercialize

Preference for small businesses

• When licensing, a preference to small business

firms “except where it proves infeasible after a

reasonable inquiry”

• Preference given when the small business has a

plan for marketing that is equally likely to bring the

invention to practical application

• Federal agency can review licensing program to see

if preference given to small business

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Provisions: Commercialize

Preference for U.S. Industry

• No grant of an exclusive license to use or sell an

invention in the U.S. unless licensee agrees that the

invention will be manufactured substantially in the

U.S.

• Waived if (a) reasonable but unsuccessful efforts or

(b) “under the circumstances domestic manufacture

is not commercially feasible”

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Provisions

Sharing of royalties

• Contractor must share royalties with the inventor

• Balance of any royalties or income, after payment

of expenses incidental to administration (including

payment to inventor), must be utilized for “the

support of scientific research or education”

• Most universities have a royalty distribution

formula

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Provisions

Reporting

• Annual reports (not more often) if requested

• Status of commercial development

• Date of first commercial sale or use

• Royalties received by the nonprofit

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Provisions

March-in rights

• Federal agency can “march-in” and license a

subject invention itself

• If contractor has not taken or is not expected to take

effective steps to achieve “practical application” of

the invention

• To alleviate health or safety needs

• To meet requirements for public use

• Thus: actively promote and commercialize

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Provisions

March-in rights cases

• CellPro case: university and licensee not

commercializing (enough) – denied

• NORVIR case: Abbott raised price of AIDS drug

by 400% for U.S. customers – denied

• Xalatan case: Pfizer’s glaucoma drug sold in the

U.S. for 2-5x price of drug abroad – denied

• Fabrazyme case: licensee could not make enough

drug to treat patients - denied

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Provisions

Government may obtain title

• If the contractor fails to disclose or elect title with

the times specified, or elects not to retain title;

provided that the agency requests title within 60

days of learning of the failure to disclose or elect

• In the countries where contractor fails to file a

patent application or decides not to continue

prosecution (nonpayment of maintenance fees)

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Provisions

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Provisions

Stanford v. Roche

• “The Bayh-Dole Act does not confer title to

federally funded inventions on contractors or

authorize contractors to unilaterally take title to

those inventions; it simply assures contractors that

they may keep title to whatever it is they already

have . . . Only when an invention belongs to the

contractor does the Bayh-Dole Act come into

play.”

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Provisions: Recap

• Report each invention to the funding agency

• Elect to retain title in writing within a statutory

period

• File for patent protection & grant the U.S.

government a nonexclusive, nontransferable,

irrevocable paid up license throughout the world

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Provisions: Recap

• Actively promote and attempt to commercialize

• Share royalties with the inventor

• Use any remaining income for education and

research

• Give preference in licensing to U.S. industry and

small businesses

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Effects

Technology Transfer

• Sharing of skills, knowledge, and technology

among institutions to ensure that scientific and

technological developments are accessible to a

wider audience

• Identify research that has a potential commercial

interest and develop a strategy to maximize

utilization

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Effects

• Economist’s statement

• Increase in U.S. academic patenting, licensing, and

licensing revenues

• Other countries adopting similar policies

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Effects

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Effects

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Effects

• Citracal calcium supplement (UTSW Medical)

• Taxol production process (FL State)

• Prostate specific antigen test (HRI/Roswell Park)

• rDNA technology (Stanford)

• Vitamin D metabolics (Univ. WI)

• Hepatitis B vaccine (Univ. CA and Univ. WA)

• Synthetic penicillin (MIT)

• Engineered human growth hormone (City of Hope)

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Complaints

• This is not the business of Universities

• The strategy is flawed and slants efforts towards

“big-hits,” not research

• Misleading figures about lack of licensing prior to

Bayh-Dole Act

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Complaints

• No nexus

– Ability to patent novel organisms

– Increased spending on biomedical research

• Drug prices too high, considering the government’s

contribution to the research that made the drugs

• Gives away public-funded research to corporations

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Complaints

• Research exemption needed or reservation of

research rights

• Access to research tools

• Anticommons – multiple parties involved leads to

large transaction costs and delay

• Humanitarian access – cost of products

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Lessons

• Bayh-Dole brought about a fundamental change

that has taken ~30 years to mature

• There may be tweaks to Bayh-Dole, but there will

likely be no return to pure government ownership

or non-exclusive licenses

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Lessons

• Where does the money come from:

– Granting Agency (Government or other)?

– Industry Sponsor?

• Who will own the IP or have rights to it?

– Exclusive/non-exclusive, assign?

• Who administers the IP?

– Reporting, databases

• Flow of money?

• Protection of public?

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Lessons

• Research exemption

• Upstream inventions and research tools, and access

to them

• The “anti-commons” effect

• Access for humanitarian purposes

• Cost controls

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Questions?

Michael C. Barrett

Fulbright & Jaworski L.L.P.

98 San Jacinto Blvd., Suite 9800

Austin, Texas USA 78701

512-536-3018

mbarrett@fulbright.com

www.fulbright.com/mbarrett

www.fulbright.com

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