The Bayh-Dole Act’s Protection of Intellectual Property Rights Impacted the Role of Scientists in Society

The Bayh-Dole Act of 1980, known officially as The Patent and Trademark Law Amendments Act (P.L. 96-517) in the United States Congress, became effective on July 1, 1981. (ref 1) The policy objective was “to use the patent system to promote the utilization of inventions arising from federally funded research.” (ref 2) Amendments were made in 1984 with P.L. 98-620 (ref 1) and the Trademark Clarification Act of 1986 (P.L. 98-62) as well as by a 1983 presidential memorandum and E.O. 12591 in 1987. (ref 3) The current regulations, according to the Council on Governmental Relations (see note), implement federal patent and licensing policy as follows: • The provisions apply to all inventions conceived, or first used, with funding from a federal grant, contract, or cooperative agreement, even if it was not the sole source of funding. • The university has an obligation to have written agreements with its faculty and staff requiring disclosure and assignment of inventions. • The university must also disclose each new invention to the federal funding agency within two months after it is disclosed to the university in writing by the inventor. Within two years after disclosure to the agency, a decision must be made whether to retain the title. The time may be shortened, due to publication or public use, to at least 60 days before the end of the one-year U.S. statutory patent bar. If electing to retain title, the university must file a patent application within one year or prior to the end of any statutory period. • Within ten months of filing the U.S. patent, the university must notify the agency whether foreign patents will be filed. If the university does not file foreign applications, the agency may file on behalf of the United States. If electing to retain title, universities must include in the patent specifications a notification of government support and government rights in the invention. The university must provide the government, through a confirmatory license, a “non-exclusive, non-transferable, irrevocable paid-up right to practice or have practiced the invention” on behalf of the U.S. throughout the world. • The university must submit periodic reports on the use of the invention, as requested by the funding agency, but not more often than annually. • Any company holding an exclusive license to a patent that involves selling a product in the U.S. must substantially manufacture that product in the U.S. unless it is not economically feasible or it can be shown that reasonable, but unsuccessful, efforts had been made to do so. Waivers may be granted by the federal agency. • Universities must give preference to small business firms in the marketing of an invention, unless a large company has provided research support hat led to the invention, then that company must be awarded the license. • Ownership of inventions may not be assigned to third parties by the university, except to patent management organizations. • The inventor must receive a portion of any licensing revenue. Any remaining revenue, after expenses, must be used to support scientific research or education.(ref 1) • The funding agency may file an “exceptional circumstance” determination if it decides the title is best vested in the federal agency. The decision can be made up front and become part of the funding agreement with the university.(ref 4) • The federal government maintains “march-in rights” (see note) where it can require the university to grant a license to a third party or take the title and grant licenses itself. This might occur if the invention is not brought to practical use in a reasonable amount of time, if health and safety issues arise, or if public use of the invention is in jeopardy.(ref 1) Note: The Council on Governmental Relations is an association of research universities which, since its inception in 1948, has been “continuously involved in the development of all major financial and administrative aspects of federally funded research.” (ref 1) March-in rights were to prevent companies from licensing academic know-how merely to block rival firms from doing so. The government has never exercised this right.(ref 8)

The Center for Regulatory Effectiveness claims that the Bayh-Dole Act is one of three blanket protections (see note)for intellectual property interests. The Act contains confidentiality provisions protecting researchers’ patent applications and the statutory trump card “precedence of chapter” - the Bayh-Dole Act takes precedence over new data access law unless a Bayh-Dole override is expressly stated in the law.(ref 2) The formal concept of technology transfer in U.S. academics supposedly originated in Vannevar Bush’s 1945 report to the President entitled “Science – The Endless Frontier.” Some U.S. universities were moving science from the lab to the market as early as the 1920s.(ref 1) In fact, in 1912; the Research Corporation was founded by a U.C. Berkeley professor named Frederick Cottrell to commercialize his innovations. The company served as a leading broker and licensor of inventions by U.S. universities until 1987 when Research Corporation Technologies was founded. Historically, industry-university collaboration focused on the engineering and applied sciences,(ref 5) but the Manhattan Project(see note) showed the benefit of science on national defense and Bush recognized its economic value. The idea was that the economy could be enhanced by supporting basic research and increasing the flow of knowledge to industry. Bush’s report stimulated the formation of federal agencies such as the National Institutes of Health (NIH), the National Science Foundation (NSF), and the Office of Naval Research (ONR).(ref 1) Debate surrounded federal patent policies in the 1960s and 70s. The major concern was the government’s lack of success in promoting industry to adopt new technologies produced by academic research. There were inconsistencies in policies and practices among the various federal funding agencies which limited the flow of government funded inventions to the private sector. The University of California required all employees to report patentable inventions starting in 1926. In the 1960s, the Department of Defense began allowing universities to retain title and by the 1970s the Department of Health, Education and Welfare, now known as the Dept of Health and Human Services, and the National Science Foundation allowed patenting and licensing by academic institutions under the terms of Institutional Patent Agreements (IPAs). Tensions between some major IPA participants, such as the University of California and federal sponsors, were not eliminated by this negotiation.(ref 5) Also, there were restrictions imposed on licensing and agency reluctance to permit ownership. Generally, companies did not have exclusive rights to develop, manufacture, and sell products resulting from government patents because inventions were available through non-exclusive licenses to anyone, so competitors had equal access. In 1980, the federal government held title to approximately 28,000 patents, but less than 5% were licensed to industry for development of commercial products.(ref 1) Skeptics of the Bayh-Dole Act point out that many of those patents had been ceded to the federal government by private contractors who had not invoked their rights under the current Defense Department policies.(ref 5) However, it is evident that the government did not have the resources to develop and market the inventions themselves(ref 7) and were in need of collaboration. Senators Birch Bayh of Indiana and Robert Dole of Kansas(ref 6) proposed P.L. 96-517 in order for research, paid for by federal tax money, to benefit the public good. The policy would permit researchers and universities to elect to retain ownership of inventions and have direct involvement in the commercialization process, as well as permit exclusive licensing. Because of years of debate, safeguards were included to prevent exclusive licenses from leading to monopolies and higher prices, to insure taxpayers get their fair share, to prevent foreign industry from benefiting unduly, and to insure that ownership of inventions by a contractor is not anti-competitive. The benefit of the policy, because of the certainty to title, would be a protection of the scientists’ right to continue to use and to build on a specific line of inquiry, which is important since there are multiple funding sources. However, each federal agency is still responsible for maintaining and monitoring its own repository of information on inventions developed under its funding and has the authority to periodically audit grantees and contractors for Bayh-Dole Act compliance.(ref 1) The Bayh-Dole Act set up a reliable technology transfer mechanism and a uniform set of federal rules to make the process work.(ref 7) Note: The other blanket protections cited are the Freedom of Information Act and agency conforming regulations. The Center for Regulatory Effectiveness was formed in 1996, after the passage of the Congressional Review Act, to provide congress with independent analyses of agency regulations (http://www.cre.org). According to the online encyclopedia, Wikipedia (http://en.wikipedia.org), the Manhattan Project, formally known as the Manhattan Engineering District, was an effort by the United States, Canada, and the United Kingdom during World War II to develop the first nuclear weapons. The result of the research into nuclear fission was the development of the atomic bomb, two of which were detonated over Japan, ending the war.

Results attributed to the Bayh-Dole Act include the creation of more than 2200 companies, more than 1000 products on the market, and more than 8000 U.S patents (see note)based on the licensing of academic institutions’ inventions.(ref 1) The increase in patents has led to the creation of 260,000 jobs, contributes $40 billion annually to the U.S. economy,(ref 8)and contributes $5 billion in tax revenue.(ref 3) Universities established new technology transfer offices(ref 1) to manage their patenting and licensing which helped speed up the commercialization process and helped new industries(see note) develop quicker.(ref 7) In 1980, about 25-30 universities were involved in technology transfer. This number increased to 200 by 1992.(ref 4) However, empirical analysis of university-industrial collaboration before 1980 suggests that “this growth represented an acceleration of a trend that predated the passage of Bayh-Dole.” The number of patents issued to U.S. universities grew by approximately one-third between 1969 and 1974, more than doubled between 1979 and 1984, doubled again between 1984 and 1989, and continued the trend by doubling again between 1989 and 1997. This was “one part of a broader shift in U.S. policy toward stronger intellectual property rights,”(ref 5) but economists consider the act to be an important part of reversing America’s “slide into industrial irrelevance.”(ref 8) This viewpoint reinforces the idea that economic interests rather than an interest in academic science were the driving forces for the policy. This is further supported by the fact that the regulations are maintained by the Department of Commerce with a requirement of the Comptroller General in the General Accounting Office to review the implementation of the Bayh-Dole Act at least once every (ref 5) years and report its findings to the Judiciary Committees of the House and Senate.(ref 1) Opponents of the policy believe that it has resulted in the restricted dissemination of research, restricting the flow of knowledge due to delayed publication and diluted information to protect economic interests, and changing the direction of faculty research toward research with commercial potential. (ref 9) Inarguably the result of the Bayh-Dole Act is that the “consideration of inventions for patenting and licensing became the presumption, rather than the exception”(ref 5) and that the policy has promoted an increase in technology transfer from universities to industry and subsequently to the public as products become available.(ref 4) The control mechanisms of the policy have not always been effective, as seen in an example when questionable ethics exist in the pricing of commercial products resulting from research. Acquired Immune Deficiency Syndrome (AIDS), the disease caused by HIV, is a serious health concern and a major component of public policy debate. In 2004, President George W. Bush offered $20 million in emergency funding for financially strained domestic programs that provide HIV medication. As of July 2004, in 11 states 1,629 people were being refused medication, against the treatment guidelines set by the Department of Health and Human Services. HIV/AIDS patients have been forced onto waiting lists to receive medication. On average, 25% of the 40,000 people who test HIV positive each year in the U.S. will be far enough progressed in the disease to require immediate treatment. Those who receive treatment early in the disease exhibit a high success rate which significantly lowers the cost of their lifetime treatment. The standard treatment today, highly active antiretroviral therapy (HAART),(see note) has an average yearly cost of $14,000 in early treatments and can reach $34,000 late in the disease. The largest public payer of HIV/AIDS care and medications are Medicaid programs, which cover 55% of persons with the disease and 90% of children with AIDS. A problem though is that HIV positive patients are not eligible for Medicaid until they become seriously ill and are diagnosed with advanced stages of the disease, thus increasing the cost of treatment for tax payers. Another major mechanism for dispensing medications to the uninsured and those who are underinsured, and yet ineligible for Medicaid, is the AIDS Drug Assistance Program (ADAP).(see note) The National Alliance of State and Territorial AIDS Directors (NASTAD) report that as of November 2003, some patients on the ADAP waitlist had died and that there were still 700 people awaiting funds for treatment. Under the expectations of the Bayh-Dole Act to have research benefit the public, the availability of treatment should not be as limited. As shown by states with better funding and more generous drug coverage, appropriate medication distribution can lower the death rate by more than 66%.(ref 10) Note: Between 1993 and 1997. According to another source, American universities have seen a ten-fold increase in the patents they generate since 1980.(ref 8) Some effects of the Bayh-Dole Act are indirect, such as the spawning of the biotechnology industry and advances in the medical, engineering, chemical, computing and software industries. Investments in new start-up companies and spin-off to service industries has allowed the new drugs, medical treatments, and consumer products benefit the public good as intended. Licensing under the Bayh-Dole Act can be extrapolated to $2.5 billion in sales.(ref 4) HAART is a combination of 3 or more drugs that became standard treatment in 1996 when protease inhibitors were introduced. It has resulted in a greater than 64% decrease in AIDS related deaths and a 154% increase in the use of government budgeted funding (ADAP) for treatment.(ref 10) ADAPs became a part of the Ryan White Comprehensive AIDS Resources Emergency (CARE) Act when it was enacted in 1990. CARE is a discretionary program that has to operate within a budgetary constraint. Funding increased from $50M in 1996 to $750M in 2004, but was still inadequate by $180M.(ref 10)

The cost of the AIDS epidemic is exaggerated by the pricing of medications by the drug companies. Abbott Laboratories developed ritonavir (Norvir(TM)) with the use of $3.47 million in NIH grants. Abbott spent $300 million for clinical trials and getting the drug to the market. (ref 11) Norvir (see note) is used to boost the levels of other drugs in the blood of patients undergoing treatment with anti-HIV combinations. It has been found to be especially effective for those with few existing treatment options whose viruses had become resistant. A seeming success story for the argument to allow industry to retain title to government funded research in order to entice investment and bring publicly beneficial products to the market. However, Norvir’s typical 200mg daily dose once cost $130 per month, but the U.S. wholesale price was raised on December 4, 2003 by 500% to $650 per month.(ref 10) This greatly increased the cost of several widely used treatments. “Abbott did not raise the price of the small ritonavir dose (see note)in Abbott’s Kaletra product – immediately putting competitors’ protease inhibitors at a major disadvantage if they use the boosted dosing most doctors now recommend. Abbott just added another $2500, $5000, or $10,000 per year to the price of the competitors’ products.(ref 12) Under the Bayh-Dole Act, the Secretary of Health and Human Services, of which the NIH is a part of, could exercise the government’s “march-in” rights and grant license for the development of a generic form of the drug. In fact, the generic medicine supplier Essential Inventions, Inc filed a petition requesting the allowance of a generic version of Norvir and the NIH has held hearings.(ref 10) However, former Sen. Birch Bayh noted at the hearings that the intention of the legislation was not to have the government set prices.(ref 11) The author has to agree with Illinois Attorney General Lisa Madigan that “Norvir is not like hay fever medicine that people take to lessen symptoms to be more comfortable. It is a drug they take to survive.”(ref 10) The Abbott-Novir situation would fall under the provision of “march-in” rights that public use of the invention is in jeopardy. The Bayh-Dole Act of 1980 was enacted to preserve intellectual property rights. The trend in the government’s recognition of the researchers’ ownership of their ideas and work is a positive one and the control mechanisms and amendments have been successful in maintaining a successful union between universities, industry, and the government. Science and the public have benefited from government funding and the investment of businesses. However, some ethically questionable, if not morally questionable, practices involving drug pricing opens the door for debate about the need of the government’s intervention. Pharmaceutical companies now have more Federal lobbyists (623) than there are members of Congress (535).(ref 12) Three months after increasing the price of Novir five-fold, Abbot announced that chief executive Miles White’s total pay had increased 20% to $3.4 million(ref 10) and the return on Novir has been more than 400%. In the world of AIDS treatment, with so many new diagnoses a year, the survival of hundreds of thousands of people depends on the availability of treatment. If the government does not exercise its right to step in, then we are moving “toward a world where the big advances of 21st century medicine will routinely be reserved for a rich or well-insured minority”(see note) and where the bottom line is more important than life. The impact of the Bayh-Dole Act on ethics can be larger than affecting intellectual property rights; it can further define the role of industrial scientists in society by placing the end results of research above economic interests. Note: Norvir was originally approved in 1996 and had estimated sales of $1.3 billion as of January 2004.(ref 12) The Food and Drug Administration issued a warning about Abbott’s literature, which touted the low price version of Norvir, that this dose offers no anti-HIV activity.(ref 10) Quote attributed to John S. James, the editor of AIDS Treatment News and a member of Save ADAP.(ref 10)

References

1.Council on Governmental Relations, 1999, posted by the University of California. 2.Center for Regulatory Effectiveness, 1999. 3.Robert Hardy, Associate Director, Council on Governmental Relations. Federal Demonstration Partnership, 2002. 4.Council on Governmental Relations (COGR), posted by University of West Florida. 5.David C. Mowery, et al. The Growth of Patenting and Licensing by U.S. Universities: An Assessment of the Effects of the Bayh-Dole Act of 1980. 1998 6.Association of University Technology Managers 7.COGR University Technology Transfer: Questions and Answers, October 1999. 2003 Colorado State University Research Foundation. 8.The Economist Technology Quarterly – Science, opinion, Dec 12, 2002. 9.Presentation available here 10.Gary Karch, “Where Have all the AIDS Drugs Gone? The other prescription drug crisis.” Z vol 17 no. 9 (2004). 11.Ray Keating, “Government Research and Drug Pricing”, Small Business Advocate. 12.John S. James, “Abbot Laboratories Increases Norvir Price Fivefold” AIDS Treatment News 2004.