Thursday, July 19, 2007

Notes from Congressional Hearing on Bayh-Dole Act

This is the first posting of a test blog for PIJIP, the Program on Information Justice and Intellectual Property and the American University Washington College of Law. It is sort of a test-run. The blog will focus on IP, human rights, social justice, and access to the products of innovation.


Yesterday, I went to a hearing on the Bayh-Dole Act at the House Science and Technology Committee's Subcommittee on Technology and Innovation. The Chairman's press release about the hearing is here:

My notes on the hearing are below.

-Mike Palmedo

“Bayh-Dole: The Next 25 Years”

July 17, 2007 hearing before the House Committee on Science and Technology, Subcommittee on Technology and Innovation

The Subcommittee Chair, David Wu (D-OR) and the Ranking Minority Member Phil Gingrey (R-GA), were the only Members present. David Wu has a science and technology background, seems very interested in Tech Transfer, and said repeatedly that he wants to hold more hearings on tech transfer.

The witnesses were:

· Arundeep Pradham, Oregon Health & Science University. [Where gleevec was invented, partially with government funds.]

· Susan Butts, Dow Chemical.

· Wayne Johnson, Hewlett-Packard.

· Mark Lemley, Stanford.

· Mark Allen, Georgia Tech.

Chairman Wu opened by praising the Bayh-Dole Act, which he says has led to great leaps in innovation. When we was a tech lawyer in Silicon Valley (and Oregon) in the late 1970s, everyone was afraid that the US was losing its edge, esp. to Germans and the Japanese, but since the Bayh-Dole Act has gone into effect, out technology-driven economy has taken off. The key questions to keep in mind are:

  • What’s the current impact of Bayh-Dole on commercialization?
  • To what extend are US firms turning to overseas universities for research collaboration? To what extent are foreign firms turning to US universities for research collaboration? How does the Bayh-Dole Act fit in to the current situation?
  • How can we improve technology transfer for the next 25 year?

Ranking Minority Member Gingrey also opened by praising the Bayh-Dole Act, which the Economist magazine says is the most inspired piece of legislation in the second half of the 20th century. Prior to the Bayh-Dole Act, only 5% of ugovernment patents were ever used in the private sector. Since the Bayh-Dole Act, this number has increased tenfold.

The law must be able to meet 21st century needs, which may be evolving as companies are starting to internationalize global research. And also according to the Economist, every one dollar of university research must be matched by $10,000 of private funds in order for a product to be brought to market.

Arundeep Prahham said the law is still instrumental in driving innovation in the US. Its responsible for the existence of 5,000 companies that bring 1.2 products to market a day. The Biotechnology Industry Organization has identified over 350 drugs (some approved, some still in the pipeline) that the Bayh-Dole Act is responsible for. A positive but unexpected consequence is further investment by states – the Oregon Innovation Council, for instance, is active in many research areas including nanotechnology and drug development.

Differences that come up between universities and companies usually involve tensions between the right for scientists to publish their work and the right of companies to protect intellectual property. This is not a result of the Bayh-Dole Act, but a result of the fact that universities and businesses have different cultures.

The Bayh-Dole Act works in its current form and “should not be substantially altered.” If anything, the act should be strengthened, for instance, by increasing oversight of tech transfer among government agencies.

Susan Butts (Dow Chemical) was not as enthusiastic about Bayh-Dole as the others, saying that while the law allows licensing, it also sets expectations for the firms that engage in research partnerships. In other countries, the businesses are granted stronger intellectual property rights when they partner with universities, so businesses prefer to invest abroad. The Bayh-Dole Act is frequently misapplied to research that is privately funded by companies, not government funded at the university. Bottom line: business need more control.

It is important to realize that industries affected by the Bayh-Dole Act differ considerably. The pharmaceutical and chemical industries depend on IP to protect pipeline products for a long time, while the information technology sector moves much more rapidly.

Wayne Johnson (HP) says the information technology sector does not operate with the “homerun” patent in mind. A typical product will be covered by hundreds of small, patented innovations. Cross-licensing is key – everyone in the sector has numerous licenses with their competitors. In this environment, it is frustratingly hard to set up collaborations with American universities. It can take 2 years to set up a university collaboration in the US, or 2 days to set one up in Russia.

The future of successful innovation, though, requires collaboration. Intellectual property rules should not be changed just because a business is collaborating with a university. IP protection is still important, and there should be a uniform approach to ownership.

The future focus should be centered on innovation, not licensing.

Mark Lemley (Stanford) begins by pointing out that universities are now granted 16 times as many patents as they were before the Bayh-Dole Act, and they earn billions in licensing. The Bayh-Dole act has addressed the problem of unused IP – there used to be a lot of uncommercialized innovation.

The problem with the Bayh-Dole act is that universities are often too quick to cash in by licensing their inventions immediately, instead of seeking to advance learning in the best way. Universities should seek to maximize the public good. Depending on the situation, this could be done by granting an exclusive license, granting a non-exclusive license (for instance, for intermediate scientific advances, monoclonal antibodies), or by giving up patent rights in the first place.

There’s a widely different view of the Bayh-Dole Act between industries. The need for the law is greatest in medical technologies and weakest for information technologies.

The government should use its March In rights when it is necessary for the public good.

Mark Allen (GA Tech) said his invention was patented by GA Tech, then licensed to the Department of Defense. It is now used by NASA. Later, it was realized it could have a medical use as well, so he started a medical company, and developed a product. The ratio of private to public spending on the commercialization of his medical product was 100 to 1. (not 10,000 to 1) He view Bayh-Dole as a great success and notes that other nations are copying it.


Wu: The views of the success of BD not shared by everyone. Where are there problems and where are there not?

Pradhan: There’s more collaboration between universities and business now than ever before. In the last 3 years, collaborations involving OHSU have doubled, including much in the clinical development of new drugs. IP itself is not a stumbling block.

Butts: The growth in the number of partnerships is a coincidence, and it is not only happening in the US, it is worldwide, including countries with no equivalent to BD. In negotiations, both the businesses and the universities are trying to do what’s right for themselves. Development timelines in each of the sectors is very different.

Johnson: The IT sector is much different than others. We license our technologies to our own competitors, our cost per unit keeps falling, and the time from development to market can be three months. Since IT is global, we seek opportunities everywhere, looking to get work done rapidly. Also, globalization of research is not necessarily a bad thing.

Lemley: Not all patents are “homeruns,” or really successful ones. Problems arise when universities try to treat smaller, less significant patents like “homerun” patents.

Allen: Universities and businesses need to learn their roles and the roles of patents.

Gingrey: Should Congress seek different tech transfer policies for different industries?

Lemley: Maybe, but only as a last resort. Its better to solve these problems at the university level. (Allen and Pradhan agree.)

Butts: Agrees, but would like to see more flexibility in the system that would allow businesses and universities to reach mutually beneficial terms.

Johnson: There’s already flexibility in BD, but real world negotiations always start with one side demanding exclusive rights. This slows the negotiations. Often , negotiators don’t see the big picture. In the California school system, they’ve kicked negotiations upstream to the provosts, and this seems to have worked. Provosts get the big picture better than lawyers/negotiators from Tech transfer offices.

Wu: What do successful universities do differently?

Johnson: They hire excellent staff, and they understand the strategic, long-term relationship between the school and the company.

Butts: Universities are comfortable offering us the option of getting an exclusive license, which is not enough. We’ve already invested heavily and can’t take the uncertainty.

Lemley: There is a big problem of structures and incentives. If a tech transfer office is judged by how much cash it raises, then that’s what it will focus on.

Gingrey: Basically same question about what do successful schools do well. What does Georgia Tech do right?

Allen: You need long relationships with companies that are based on a broad spectrum o scientific expertise, including applied science. You need a sense among the faculty that tech transfer is part of the role of the university – not that revenue from licensing is a main driver of revenue for the university.

Butts: GA Tech realizes the importance of quickly commercializing research.

Wu: What kind of oversight could help tech transfer?

Allen: Trade associations may be able to fulfill an oversight role. Concern about reputation (not the strong arm of the government) may motivate universities and businesses.

Lemley: March In rights are important in theory, though they have never been used. They keep a threat hanging over the heads of both inventors and companies. Unfortunately, there has been timidity among government agencies afraid of being the first to use March In rights.

Wu: Would government guidelines be helpful?

Butts: Problems don’t come up when we license federal research. Problems come up with intellectual property. BD should not apply in situations where businesses are paying for most of the research.

Pradhan: Its not the role of Congress to determine what happens when universities and businesses collaborate.

Gingrey: When the federal government sponsors university research and a homerun occurs, how do taxpayers get reimbursed for their investment?

Pradhan: Every academic invention need substantial investments. When a university does hit a homerun, most of the funds it receives are pumped back into further research.

Butts: Consumers gain from access to new products that would not exist without the business-university collaboration.

Johnson: The university/company collaborations create a lot of jobs.

Lemley: All of the other answers people have given, but only if alternatives are product or no product. This is why the March In rights are important.

Wu: What can be done do make universities focus on the big picture for Tech Transfer?

Lemley: There should be best practices benchmarks set up by universities. Also, the more isolated a tech transfer office is from the rest of the university, the more likely it will have a short-term focus. Definitely discourage the outsourcing of tech transfer.

Johnson: There is a problem of metrics – you get what you measure. This is 90% of the problem with the actual negotiations. People are being judged by the numbers, but the money they raise.

Gingrey: Why do US firms find it easier to negotiate overseas?

Johnson: There are many reasons. Overseas universities are eager to collaborate and compete with other schools. Partnerships move faster.

Butts: Useful inventions that are close to a commercial product are rare. Foreign universities want research partnerships as opposed to patents.

Wu: To what extend is overseas collaboration driven by hunger for research, and to what extent do Non-Tariff Barriers require it?

Butts: NTBs are not a big problem. The products and research that we collaborate with universities on is very far upstream.

Johnson: That comes up sometimes, but not much. However, there is an implicit assumption that companies and universities in some countries will have a working relationship with each other. In Brazil, they give us really good tax breaks when we collaborate with their universities. So we do a lot of collaborations there.

At this point, Chairman Wu stopped the hearing, somewhat abruptly. There were a number of votes that afternoon. Wu promised further hearings on tech transfer.