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TWENTY-FIVE YEARS TWENTY-FIVE YEARS SINCE BAYH-DOLESINCE BAYH-DOLE

How Far Have We Come ?.How Far Have We Come ?.

Where Do We Go From Here ?Where Do We Go From Here ?

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What is Bayh-Dole:Overview/Objectives

> The Bayh-Dole Act, passed on December 12, 1980, is a collection of amendments to the U.S. patent laws.

> Congress’s objectives in passing the Act were:

To promote the dissemination and commercial development of inventions arising from government-sponsored research at universities, and

To foster greater collaboration between universities and industry.

What Did the Law Change to Enable These Objectives to be Achieved?

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What is Bayh-Dole:Three Major Framework Changes

> FIRST – DELEGATION OF AUTHORITY CHANGED

> Pre-Bayh-Dole – When a government agency awarded a research grant, and the grant resulted in a patentable invention, the government agency had the principal authority to decide whether and on what terms an invention should be patented and licensed. The university invented it on behalf of the federal government.

> Bayh-Dole’s Change – Institutions that are the recipients of government grants are given the right to retain title to the invention and to control the licensing of it.

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What is Bayh-Dole:Three Major Framework Changes

> SECOND – THE ACT PROVIDED FOR BALANCED ECONOMIC INCENTIVES SO THAT NEWLY DELEGATED AUTHORITY WOULD BE EXERCISED PRUDENTLY

> Pre-Bayh-Dole – If a government agency wanted to patent and license an invention, additional gov’t funds would be needed and gov’t agency was not well equipped to know market conditions for licenses.

> Bayh-Dole’s Change –The Act requires the University to share net royalties with inventors, and also requires University to pay for the costs associated with patenting and licensing, so a University has the incentive to pursue inventions with the most promising commercial potential. The technology can also be taken forward with no added cost to the government. Inventors have economic incentive too.

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What is Bayh-Dole:Three Major Framework Changes

> THREE – THE ACT PROVIDED CLARITY AND UNIFORMITY TO THE PATENT AND LICENSING PROCEDURES

> Pre-Bayh-Dole – Rules governing patenting and licensing of inventions varied greatly among government agencies and exclusive licensing was rare. Industry was not motivated to seek Intellectual Property from the government.

> Bayh-Dole’s Change –The Act provides simplified rules that allow Universities to own the invention and determine the licensing terms, including exclusivity terms. This made licensing more predictable and transparent.

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Additional Bayh-Dole Provisions

> Some additional provisions:

University must retain ownership of any invention.

University has several disclosure and reporting obligations back to the funding agency – some of which are necessary to secure title to the invention.

University must acknowledge government’s retention of nonexclusive license and “march-in rights.”

Royalties must be shared with inventors.

Net income generated by licensing (after related expenses and inventor royalties) must be used to support scientific research or education.

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Technology Transfer Offices at Universities Are Born

> Technology Transfer functions at almost all major research universities were created in the years following the passage of Bayh-Dole.

> Tech transfer “process” matured so that a stream-lined system was created to:

gather invention disclosures, and assess patent potential,

patent inventions,

market inventions to industry,

foster start-ups, and

collect and share royalty revenues.

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So Was It A Good Law?Results are Quantifiable

Patents

On average, fewer than 250 patents were issued annually to U.S. universities in the years that preceded the enactment of Bayh-Dole.

According to Association of University Technology Managers (AUTM), more than 30,000 patents were obtained by Universities from FY1993 to FY2003. In FY2004, about 3,200 patents were obtained.

Corresponding increase in number of invention disclosures within universities (1993 – about 8,200 invention disclosures filed 2004 – about 14,700).

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So Was It A Good Law?Results are Quantifiable

License and Options

According to AUTM, there were almost 26,000 active licenses and options to university-held inventions in FY2004.

Approximately one-quarter to one-third of a typical university’s patent portfolio is under license or option to industry.

Licenses typically require commercialization plan from licensee and true diligence requirements to bring the technology to the market as soon as practical.

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So Was It A Good Law?Results are Quantifiable

Commercial Products

Again according to AUTM, there were more about 470 commercial products using university-owned technologies that were introduced to the market in FY2003.

The total number of products using university-owned technologies that have been introduced between 1998 and 2003 totals around 2,230.

Examples abound and cover the areas of health care, electronics, software, agriculture, energy and Gatorade™.

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So Was It A Good Law?Results are Quantifiable

Royalty Revenue

Royalties from university-owned technologies have provided an additional source of funding for universities.

Gross licensing income from university-licensed technologies was approximately $1.1 billion for FY2004.

This income is shared with inventors and ploughed back into research and education.

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So Was It A Good Law?Results are Quantifiable

Start-Ups and Economic Development

According to AUTM, more than 4,000 new companies have been formed based on technologies licensed from academic institutions.

412 company startups were created in FY2004.

The creation of new companies spurs economic development through the creation of jobs and the attraction of equity investment. AUTM estimated that more than $40 billion was contributed to the US economy in 1999.

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University of Rochester’s ResultsFY2004

> 139 Invention Disclosures Received

> 47 US Patent applications filed, 56 provisional patent applications filed and 25 US Patents issued

> 29 Licenses/Options executed

> $34.1 million received in royalties

> 7 start-ups formed

U of R’s Royalty revenue was among top 10 universities in the country. Our statistics were generally higher than most universities that spent twice as much or more than we did in sponsored research (gov’t and non-gov’t)

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It All Adds Up

> Economic development depends on our ability to develop and apply new technologies – there is a government role in funding this development.

> Universities are at the heart of research and innovation – and so must be lynchpin of technology transfer.

> Industry has the muscle to bring innovation to the marketplace.

> The Bayh-Dole Act was exceedingly successful in transferring technology from research universities into the commercial world.

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Critics to Bayh-Dole Have Their Day

> Argument that taxpayers pay for the invention of a promising technological advancement, then the law allows Universities to give a marketing monopoly to one company who price gouges.

> Universities have become too greedy and aggressive in prosecuting their patents. “What used to be a scientific community of free and open debate now often seems like a litigious scrum of data-hoarding and suspicion” Fortune Magazine, Sept. 7, 2005.

> Universities have fallen off their responsibility to support open science and to allow for the advancement of scientific ideas for reasons other than commercial potential.

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Rebuttal to the Critics

> Recent survey of scientists undertaken by the American Association for the Advancement of Science showed that, by a 2-to-1 ratio, industry scientists reported having more problems gaining access to patented technologies than did academic scientists. In addition, university scientists still tend to disseminate their research findings by informal means or by publishing them. Licensing is not the most common way academics acquire or spread new scientific technologies.

> NSF statistics also show that the composition of academic research has remained generally consistent since 1980 – with about 2/3 of academic research classified as “basic” and 1/3 classified as “applied”.

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LET’S LOOK TO THE FUTURE . . .

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Looking into the Crystal BallWhat Does the Future Hold?> Decrease in Federal Funding of Scientific Research –

deficit-spending economy with focus on defense and national security. What will that mean for Federal research funding?

Increased reliance on industry $$? Increased pressure to produce licensing revenues?

Federal Agencies press for authority to be exempt from Bayh-Dole. – Defense Advanced Research Project Agency (DARPA) is exempt from Bayh-Dole to protect secret information that shouldn’t be disclosed in patents. Departments of Defense and Homeland Security have this authority as well.

> Increasing public pressure to force government to use march-in rights if pricing too high – especially in pharmaceutical products and devices.

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Looking into the Crystal BallWhat Does the Future Hold?

> Legislative Reforms are always lurking (e.g., patent reform legislation).

> Increasing Strain on Patent System – extreme view is that our current patent system is broken.

The 2002 cases of Madey v. Duke University cast doubt over the continued life of the common-law experimental use exemption. Universities may be violating patents even if they are researching for purely scientific reasons.

Compare this with June, 2005 Supreme Court decision of Merck KGaA v. Integra LifeSciences case where court broadly interpreted a patent law exception for research using others’ patents in clinical testing to supply information to the FDA.

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Summary

> Technology transfer is here to stay at Universities BUT

> As it continues to “succeed” it will face increasing legal and competitive challenges and increasing public scrutiny and criticism.

> Universities MUST clearly define the missions and measurements of success in technology transfer. It’s not just $$. Internal understanding and support of these missions and measurements will be important in order to communicate to the public why technology transfer from universities to industry is critical to the US economy.

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QUESTIONS??

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University of Rochester Medical CenterOffice of Technology Transfer

>30 Corporate Woods, Suite 310>Contact us at 585.784.8850>Or on the web at >www.urmc.rochester.edu/techtransfer

>Coming 8 December 2005 in this room:>Meet the OTT/ORPA/OCA staff