Despite evidence that the Bayh-Dole Act has successfully stimulated the translation of academic research to commercial products, the legislation has put a strain on academic-industry relations in the US, mostly due to differences in the bill’s interpretation and implementation, according to participants in a US House of Representatives subcommittee hearing held last week.
In addition, some industry representatives at the hearing testified that it has become increasingly difficult to negotiate licensing agreements with US universities — a trend that is driving industry to seek academic collaborators overseas, and thus counteracts one of the main goals of the Bayh-Dole Act.
The hearings are only the first in a series planned for the coming months, however, and a decision about whether Congress will legislate on Bayh-Dole is not imminent, according to a spokesperson for the House subcommittee.
The oversight hearings were held last Tuesday by the Subcommittee on Technology and Innovation of the US House of Representatives’ Committee on Science and Technology, chaired by Congressman David Wu (D-Ore.).
Witnesses from the university, industry, and legal arenas testified on a broad array of issues surrounding Bayh-Dole, including its impact on the commercialization of federally funded research, how it has shaped university-industry relations, its impact on the globalization of research, and its effect on basic university research trends.
In addition, the subcommittee called for witnesses to share their thoughts on what changes, if any, should be implemented in the Bayh-Dole Act for the next 25 years “to promote innovation, commercialization of federally funded research, and US economic development,” according to a charter for the hearing.
One area that the witnesses seemed to agree upon was that Bayh-Dole has had a positive impact on the US economy in terms of creating jobs and introducing into the marketplace new products that have benefited society, particularly in the biomedical area.
Arundeep Pradhan, director of technology and research collaborations at the Oregon Health & Science Univeristy, and Joseph Pettie, a professor of electrical and computer engineering at the Georgia Institute of Technology, each cited statistics from recent reports by organizations such as the Association of University Technology Managers, the National Academies of Sciences, the Biotechnology Industry Organization, and the President’s Council of Advisors on Science and Technology.
These reports provide both raw economic impact numbers and plentiful real-world examples of how modern technology transfer has positively impacted the US economy and the greater social good, Pradhan and Pettie said.
Specifically, Pradhan quoted an AUTM report that stated US universities have spun off more than 5,000 companies since 1980, when the Bayh Dole Act was introduced into law. These companies, he said, have been responsible for the introduction of 1.25 products per day into the marketplace and have contributed to the creation of more than 260,000 jobs, which has contributed more than $40 billion to the US economy.
Prahdan also cited a BIO study that identified 60 current marketed drugs derived from university research, and he said that there are currently more than 300 biotechnology therapeutic products based on federally funded research in clinical trials.
In addition, Pettie shared his experience forming the company Cardiomems to commercialize microelectromechanical systems, or MEMS, research that had been conducted at Georgia Tech with US Department of Defense funding. The funding was for a different project, but Georgia Tech patented many of the resulting technologies in accordance with the provisions of the Bayh-Dole Act, technologies that were later licensed by Cardiomems as a basis for developing wireless pressure sensors for aneurysm sensing.
The original funding provided by the US Army Research office for the project was approximately $500,000, according to Pettie. Cardiomems, he said, went on to receive about $50 million in private equity investment, a ratio of approximately $100 of private investment for each $1 of government investment.
“Without this strong position, enabled by licensing the critical technologies from Georgia Tech, it is my opinion that it would have been impossible for [Cardiomems] to have raised funding for this product,” Pettie said. “Due in part to the strong IP position the company holds as enabled by the Bayh-Dole Act, the medical community now has a commercial device that has helped thousands of people.”
As such, Pettie and Pradhan both recommended that Bayh-Dole remain unchanged and, if anything, should be strengthened to ensure that university-spawned technologies can be appropriately packaged and commercialized, Pradhan said.
A Strained Relationship
Industry representatives Susan Butts, senior director of external science and technology programs for the Dow Chemical Company, and Wayne Johnson, vice president of worldwide university relations for Hewlett-Packard, were a bit more critical of Bayh-Dole, particularly the way it has shaped industry-academic relations.
According to Butts, “although the Bayh-Dole Act has enabled the transfer of technology developed with federal funds from US universities to industry it has also contributed to a contentious climate around the issue of intellectual property rights, which discourages research collaborations between industry and US universities.”
Specifically, she said that the main problem arises not from Bayh-Dole itself, but from the way it is often interpreted by university tech-transfer offices, and how it is applied to instances of industry-sponsored research at universities as opposed to government-sponsored research.
“There is a fundamental difference between federally funded research and company-funded research,” Butts testified. “In the former case, the funding comes from tax dollars so it is reasonable to promote a use of resulting inventions in a manner that generally benefits society.
“In the latter case … the research funding comes from the company’s owners or shareholders, and not US taxpayers in general,” she continued. “Company profits pay for the research investment, and company owners/shareholders expect this investment to produce a return which generally comes from a competitive advantage for its products in the marketplace.”
Among Butts’ assertions were that US universities tend to claim ownership of inventions made during the course of industry-sponsored research while the company assumes not only the original cost of the research, but also patent filing costs, trade secrets, labor, and consultation. Subsequently a university may only give the sponsor a limited amount of time to negotiate what it considers a reasonable licensing agreement for technology derived from the research, after which it may license it to another company, including a competitor of the original sponsor.
Butts said that this can lead to a “nightmare scenario” for a sponsoring company because “although it framed the research problem and paid for the research activity, the resulting invention could give a competitive advantage to its competitor.”
Hewlett-Packard’s Johnson provided a disclaimer that his opinions were ”from an information technology industry perspective, and were not intended to reflect the issues and concerns of other industries such as life sciences … which we understand to have very different needs.”
Nevertheless, Johnson criticized the university “home-run” mentality of attempting to capture specific IP that may provide significant financial windfall. This alleged behavior has come under fire from other organizations, as well, such as the Ewing Marion Kauffman Foundation (see BTW, 4/16/2007), but Johnson said that in particular such a mentality is not conducive to IT licensing agreements.
“Due to the large number of patents in a typical IT product, companies will not pursue royalty-bearing licenses with universities,” Johnson said. “Also, the IP in IT products is unlikely to be clearly unique and defensible, since other approaches are generally feasible, making it difficult and expensive to protect.”
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“The need for Bayh-Dole is the greatest in the biomedical industry, where the [Food and Drug Administration] approval process and the hundreds of millions of dollars required to develop new drugs means that few will see an idea through to fruition without the promise of exclusivity.” |
The net result of this strained industry-academic relationship, Butts and Johnson testified, is that US corporations are increasingly seeking IP licensing deals with foreign universities, thus counteracting the Bayh-Dole Act’s intent to capitalize on US research and stimulate the US economy.
Good and Bad
Mark Lemley, a professor of law at Stanford Law School and director of Stanford’s program in law, science, and technology presented dual perspectives. On one hand, he said, “It seems clear that [Bayh-Dole] has achieved its goal of encouraging university inventors to patent those inventions and to license [them] to private companies that can make use of them.”
On the other hand, he said that “universities have too often looked to the short-run bottom line in setting their licensing priorities, granting exclusive rights to breakthrough technologies to businesses that may not be best suited to exploit them for the benefit of society as a whole.”
Lemley said that his problem is not with Bayh-Dole per se; rather, it is with the way it has been sometimes implemented without sufficient sensitivity to different industry segments. “The need for Bayh-Dole is the greatest in the biomedical industry, where the [Food and Drug Administration] approval process and the hundreds of millions of dollars required to develop new drugs means that few will see an idea through to fruition without the promise of exclusivity.” In contrast, he said, in a field such as computer software, exclusivity not only is unnecessary, but may actively interfere with the use of the technology.
Both Lemley and OHSU’s Pradhan called for increased oversight of Bayh-Dole on the part of Congress. “Bayh-Dole contains various provisions intended to limit the exclusive licensing of federally owned inventions and to step in to require reasonable licensing of a university-owned invention,” Lemley said. “To date, those provisions have not been used to exercise effective oversight over university licensing. But they could be.”
The full testimonies of the subcommittee panel can be seen here.
No Imminent Action
Despite last week’s subcommittee hearing, it appears as if Bayh-Dole in its current form is not in danger of being revised in the near future.
Two weeks ago, Vicki Loise, executive director of AUTM, told BTW that the hearings were intended to be “purely within the oversight duties” of the subcommittee, and are not perceived as a threat to Bayh-Dole (see BTW, 7/9/2007).
Last week, a spokesperson for Congressman David Wu corroborated Loise’s comments.
“This is the first of a series of hearings,” she said. “A decision about whether or not we’ll actually legislate on this issue is going to come well into next year, if we do decide to do that. We’re really exploring and listening at this point.”
The spokesperson added that Wu is “unclear at this point” as to whether he would even consider submitting legislation proposing changes to Bayh-Dole.
“There are a variety of perspectives at this point, and again, we’re just listening,” the spokesperson said. “It has been 28 years since Bayh-Dole was passed, so it’s time to take a look at it, test the waters, and see if there is anything that needs to be done. It could go either way.”