Federal Technology Transfer Mechanisms

[From the introductory sections to the book].

An overview of some of the mechanisms of federal technology transfer is provided below. Patent licenses and Collaborative Research and Development Agreements (CRADAs) are legal agreements concerning transfer of intellectual property rights and related compensation, and appropriate legal counsel should be consulted by those with intentions to enter into a licensing or CRADA agreement.

The federal government includes over 500 laboratory facilities, employing over 100,000 scientists or about 20% of scientists in the U.S. These laboratories receive about $25 billion of research and development funding annually. This does not include the much larger federal funding of research grants and contracts provided to academic and other research organizations. Besides patent licenses and CRADAs (which usually involve licensing of resulting patents), the federal government transfers technology by a number of other mechanisms. These include more routine forms of technology and information transfer--dedication of inventions to the public domain by virtue of publication, informal research collaborations, workshops, briefings, problem-solving assistance, providing access to special facilities and research resources, information clearinghouses and databases, and many other methods (not covered by this Directory).

Federal laboratory research, development and technology transfer in the biomedical and life sciences is considerable, but is still only a small part of total federal R&D. The federal government currently spends about $2 billion (less than or about 10% of total R&D) annually on biomedical and related or basic biotechnology within federal laboratories (the areas covered by this Directory). Most of this biomedical/biotechnology funding goes to the intramural research of the Public Health Service (within the Department of Health and Human Services) with most of this going to the National Institutes of Health (NIH) which has an intramural research budget of over $1.1 billion. The great majority of federal laboratory funding still goes to the Department of Defense (over $10 billion annually) and other agencies involved in military and related industrial technologies, such as the Department of Energy (DOE) and the National Aeronautics and Space Administration (NASA).

Essentially all federal inventions are available for licensing for commercialization by U.S. and foreign companies and organizations. The federal government licenses its patent properties on much the same terms as do universities, other research organizations and industrial firms. Licensing usually involves payment of certain fees to the parent federal agency often including royalties based on sales or other parameters. In return, rights to use an invention are licensed or transferred to the licensees.

Federal agencies are mandated whenever possible to preferentially grant nonexclusive licenses, involving granting of licenses with few or no restrictions on the number of licenses which may be granted and no assurances of exclusivity. The majority of federal invention licenses are nonexclusive in nature. Federal agencies are required to preferentially license inventions to U.S.-based firms, particularly those which will develop and manufacture licensed products in the U.S. However, in appropriate circumstances, foreign firms may receive licenses, including broad exclusive licenses, for the countries in which they operate or even receive exclusive worldwide licenses where no U.S. organizations express sufficient licensing interest.

Various licensing terms may be negotiated. Exclusive licenses may often be restricted to certain fields of use, territories, or have other limitations. Licenses may be granted for a limited time period with some licenses allowing options or time for commercial evaluation by the licensee. License exclusivity may also be granted for different geographic areas, such as development and marketing rights in the U.S. or foreign territories. Co-exclusive and partially exclusive licenses, where exclusive rights to commercialize a technology may be shared by several organizations or restricted by area of use, territory or other terms, may also be granted. In some cases, several exclusive licenses for the same invention may be granted to different companies for different (or even the same) fields of use. For example, one company may obtain exclusive rights to a growth factor for human therapeutic uses while another exclusively licenses it for diagnostic uses, or several companies may co-exclusively license the same invention for the same uses leading to competition in the marketplace.

Federal licensing royalties are generally in line with those charged by universities, other research organizations and the private sector--on the order of 5-10% of sales for exclusive licenses and often lower for nonexclusive licenses. Exclusive licensees are expected to reimburse federal agencies for patent and legal expenses and may be permitted to offset these costs against future product royalties or other fees.

Other types of licenses and transfer agreements are available for inventions which may not be covered by a pending or granted patent. This primarily applies to biological materials, such as cell lines, microorganisms, clones and recombinant vectors. Biological Materials Licenses (BMLs) from the Public Health Service (PHS/NIH) and Materials Transfer Agreements (MTAs) from a major Army laboratory are included in this Directory. BMLs are nonexclusive royalty-bearing licenses granting rights to use or commercialize unpatented biological materials. BMLs generally grant to companies the right to commercially develop the materials, while still enabling the federal laboratory to continue to distribute the materials for research purposes. MTAs involve exchanges of materials and can occur from the company to the federal laboratory (such as where a firm is providing materials for study or clinical trials), from the federal laboratory to the company, or in both directions. Materials licenses and transfer agreements often stipulate what the provided materials may be used (and may not be used) for and provide a framework for assignment of patent rights/royalties for inventions developed using the materials.

CRADAs (or CRDAs as used by Department of Defense agencies) are legal agreements between a government laboratory and a non-government organization, usually a for-profit company, to collaborate jointly on a defined research and/or development project. As defined by the Federal Technology Transfer Act (FTTA), 15 U.S.C. at Section 3710(d)(1), "a CRADA means any agreement between one or more Federal laboratories and one or more non-Federal parties, under which the Government provides personnel, services, facilities, equipment or other resources (but not funds), and the non-Federal parties provide funds, personnel, services, facilities, equipment or other resources toward the conduct of specified research or development efforts." CRADAs require the commercial collaborator to truly collaborate and share scientific or technological expertise and resources, rather than just providing funding for the federal laboratory.

The subject matter, scope and scale of CRADAs can vary greatly--from a simple framework for scientific collaboration, funding, personnel exchanges, testing or clinical trials, to large-scale technology development efforts, clinical trials and other research, development and testing. Private sector collaborator expenditures of resources and funding provided to federal laboratories can range from negligible to some CRADAs involving millions of dollars (e.g., the CRADA for taxol).

CRADAs enable companies of all sizes to leverage their in-house research efforts and have access to unique government expertise, research capabilities and resources. CRADA partners may obtain options and negotiate terms to exclusively license inventions which result from the collaboration--often the primary reason for entering into a CRADA. CRADAs provide the government with increased opportunities to develop and transfer basic research and technology which would often otherwise languish undeveloped or unused; accelerate commercialization of products and technology which serve the agency's mission or public good (e.g., improved public health); increase federal researcher and laboratory familiarization with commercialization and the needs of the marketplace; and enable agencies to receive patent licensing royalty income from inventions which would never have been made or commercialized without collaboration with private sector firms which have their own specialized research, development and marketing expertise and resources.

CRADAs enable the commercial collaborator to negotiate exclusive licenses, including terms, for inventions that may arise from the collaborative research. This exclusive licensing is negotiated up-front and without the need for public (Federal Register) announcement and competitive offering of the inventions, as is required for granting of exclusive licenses for patent properties already held by federal agencies. CRADA research results generally are disseminated freely through publication in the scientific literature and other scientific communications. Brief delays in the dissemination of research results may be permitted under a CRADA as necessary to allow for filing of patent applications. CRADAs, especially those involving exclusive licensing, may require months to a year or more to negotiate and finalize, although scientific collaboration often continues during this period.

Exclusive patent licenses, particularly those negotiated through CRADAs with the Public Health Service, generally include clauses requiring licensees to reasonably price resulting products, particularly breakthrough drugs and biopharmaceuticals protected from competition by exclusive license and/or where the government is providing significant assistance. There has been and will continue to be much discussion in Congress and elsewhere of what constitutes fair and reasonable pricing for federal inventions and products developed with federal involvement, and whether and to what extent the federal government should make judgments and enforce reasonable pricing and fair access. Reasonable pricing regulations have yet to be defined, implemented or enforced.

Patents, licenses and CRADAs involve considerable and often complicated legal procedures and issues. Those with serious interests in licensing federal inventions or negotiating CRADAs should seek knowledgeable legal counsel or other advice. Various laws and regulations govern invention licensing, CRADAs and other aspects of federal technology transfer. These were designed to facilitate transfer of federal technologies and inventions to the private sector where they can be fully commercialized and developed for the public benefit and to enhance U.S. competitiveness in the world marketplace for products and technology. Prior to enactment and implementation of many of the federal laws and regulations concerning technology transfer, many federal inventions remained undeveloped because they were unprotected or unavailable. Laws which govern federal technology transfer include:

* The Stevenson-Wydler Technology Innovation Act of 1980 (P.L. 96-48)

* The Bayh-Dole Act of 1980 (P.L. 96-517)

* Cooperative Research Act of 1984 (P.L. 98-462)

* Trademark Clarification Act of 1984 (P.L. 98-62) which amended Bayh-Dole to expand federal laboratories involvement and rights in patent licensing

* Federal Technology Transfer Act of 1986 (P.L. 99-502) which further amended Bayh-Dole to formally make technology transfer a responsibility of federal laboratories and workers and provided the framework for Collaborative Research and Development Agreements (CRADAs)

* Executive Order 12591 of 1987 which further implemented CRADAs

* Omnibus Trade and Competitiveness Act of 1988 (P.L. 100-418)

Regulations concerning technology transfer, particularly licensing and CRADAs, are codified in the U.S. Code of Regulations (CFR), Title 37, Part 404 and the U.S. Code Annotated, Title 15, Commerce and Trade Chapter, Section 3701-3715. Copies of the major regulations are available free from the Federal Laboratory Consortium (see above).

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