[Federal Register Volume 59, Number 122 (Monday, June 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-15466]
[[Page Unknown]]
[Federal Register: June 27, 1994]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
National Institutes of Health
Office of Science Policy and Technology Transfer; Developing
Sponsored Research Agreements: Considerations for Recipients of NIH
Research Grants and Contracts
AGENCY: National Institutes of Health, Public Health Service, DHHS.
ACTION: Notice.
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SUMMARY: The National Institutes of Health (NIH) intends to publish a
document which provides institutions which receive funding from the NIH
a number of issues and points to consider when they review proposed
sponsored agreements with commercial organizations. The document is
presented below.
DATES: Comments on the document must be received on or before July 27,
1994.
ADDRESSES: Comments should be sent to 6011 Executive Boulevard, Suite
325, Rockville, Maryland 20852-3804.
FOR FURTHER INFORMATION CONTACT: Theodore J. Roumel, Assistant to the
Deputy Director for Science Policy and Technology Transfer, NIH, 6011
Executive Boulevard, Suite 325, Rockville Maryland 20852-3804, (301)
496-7057, ext. 203 (this is not a toll-free number).
Dated: June 20, 1994.
Daryl A. Chamblee,
Acting Deputy Director for Science Policy and Technology Transfer,
National Institutes of Health.
Developing Sponsored Research Agreements
Considerations for Recipients of NIH Research Grants and Contracts
Introduction
The National Institutes of Health (NIH) is the principal biomedical
and behavioral research agency within the Federal Government. Its
mission is to improve human health by increasing scientific knowledge
related to health and disease through the conduct and support of
biomedical and behavioral research. The NIH advances its mission
through intramural research activity and the award of research grants
and contracts to institutions of higher education, research institutes
and foundations, and other non-profit and for-profit organizations.
Entities funded through NIH research grants, contracts, and cooperative
agreements (hereafter collectively referred to as Grantees) are
required to maximize the use of their research findings by making them
available to the research community and the public at large and through
their timely and effective transfer to industry for development.
In general, interactions between Grantees and industry take many
forms, including industrial liaison programs, spinoff companies,
consortia, commercial licenses, material transfers, consultations, and
clinical trial agreements. This document addresses one form of Grantee/
industry interaction, sponsored research agreements, on which the NIH
has focused a substantial amount of its recent attention. Sponsored
research agreements are agreements between Grantees and commercial
entities in which Grantees receive funding or other consideration to
support their research in return for preferential access and/or rights
to intellectual property deriving from their research results.
In developing sponsored research agreements, Grantees must consider
the Bayh-Dole Act of 19801 (hereafter referred to as ``Bayh-Dole''
or ``the Act'') and NIH funding agreements and refrain from engaging in
activities which undermine a Grantee's ability to fulfill its
responsibilities and obligations to the Federal government. Although
Grantees are primarily responsible for the implementation of the Act,
NIH, as a steward of Federal funds, has a responsibility to provide
guidance on issues regarding sponsored research agreements which may
put Grantees at odds with the Act or NIH funding requirements.
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\1\Public Law 96-517, enacted December 12, 1980, Chapter 38--
Patent Rights in Inventions Made with Federal Assistance.
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Purpose
The purpose of this document is to provide Grantees with issues and
points to consider in developing sponsored research agreements with
commercial entities. The intent is to assist Grantees in ensuring that
those agreements comply with the requirements of the Act and NIH
funding agreements while upholding basic principles of academic
freedom.
This document represents the culmination of various activities,
under the aegis of the NIH Task Force on Commercialization of
Intellectual Property Rights from NIH Supported Extramural Research,
which included the review and analysis of 375 sponsored research
agreements from 100 Grantees, meetings with industry, academia, and
other Government agencies, and a specially convened public forum
involving subject matter experts from outside of the NIH.
The NIH recognizes that sponsored research agreements are unique,
creative devices which reflect the needs and interests of the parties
involved and require a delicate balance of risks and benefits to all of
the parties. Although this document identifies a number of points to
consider, with some necessitating more scrutiny than others, no single
point or issue is so dominant that it is likely to be fatal to an
agreement. Rather, the juxtaposition of multiple factors or clauses in
an agreement and their synergy needs to be assessed. Therefore,
Grantees should review the provisions of proposed sponsored research
agreements both individually and in their totality.
Background
While NIH policies on the use of research results have been in
effect for some time, commercial development of research results took a
major step forward with the passage of the Bayh-Dole Act. Congress
passed the Act in response to significant concerns about the United
States' competitiveness and data indicating that rights to many
inventions developed under Federal grants and contracts and assigned to
the Federal government were not being commercialized. In general, the
Act authorizes Grantees to retain title to inventions resulting from
their Federally funded research and to license such inventions to
commercial entities for development.
Specifically, the policy and objective of the Bayh-Dole are to:
Promote collaboration between commercial concerns and
nonprofit organizations, including universities;
Promote the utilization of inventions arising from
Federally supported research or development;
Encourage maximum participation of small business firms in
Federally sponsored research and development efforts;
Ensure that inventions made by nonprofit organizations and
small business firms are used to promote free competition and
enterprise;
Promote the commercialization and public availability of
inventions made in the United States by United States industry and
labor;
Ensure that the Government obtains sufficient rights in
Federally sponsored inventions to meet the needs of the Government and
protect the public against nonuse or unreasonable use of inventions;
and
Minimize the costs of administering policies in this area.
The provisions of the Act have been implemented through regulations
issued by the Department of Commerce and adopted by the Department of
Health and Human Services2.
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\2\The Department of Commerce regulations are at 37 Code of
Federal Regulations (CFR) Part 401 and supersede applicable portions
of 45 CFR Parts 6 and 8.
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The Act serves the public not only by encouraging the development
of useful commercial products such as drugs and clinical diagnostic
materials, but also by providing economic benefits, and enhancing U.S.
competitiveness in the global market place.
Since its passage, the Bayh-Dole Act has been effective in
promoting the transfer of technology from Grantees to industry as
evidenced by the aggressive pursuit of patenting and licensing and the
proliferation of university/industry collaborations.3 In addition,
the development of many new and important drugs and devices have been
facilitated by increased industrial support for academic research4
and the explosion in the licensing of university owned
inventions.5 Furthermore, statistics indicate that the Act has
provided significant economic benefits which are projected as
increasing between 25 to 30 percent per year.6
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\3\Approximately one in every four university patents issued in
the late 1980s was for a biomedical or health related invention. In
the early 1970's, the ratio was one in eight. Source: Science and
Engineering Indicators, 1993, National Science Foundation.
\4\While still representing less than 10 percent of the total
funding for academic research, it is estimated that nearly 2 percent
of United States industry's expenditures for R&D now goes to
academic institutions, as compared with less than 1 percent in 1971.
Source: Science and Engineering Indicators, 1993, National Science
Foundation.
\5\Over 1000 licenses or options were executed in Fiscal Year
1992 by 260 academic institutions surveyed. The institutions also
reported that they had over 5000 active licenses in place at the
time of the survey.
Source: Association of University Transfer Managers Licensing
Survey FY 1991-1992, published October, 1993.
\6\In FY 1992 sales and employment attributable to the Act were
estimated to be as follows: between $9 and $13 billion in sales and
50-100,000 jobs, with an annual increase of between 25 and 30
percent. Source: Dr. Ashley J. Stevens, Director, Office of
Technology Transfer, Dana-Farber Cancer Institute, Association of
University Technology Managers Winter Meeting, 1994.
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Grantee Responsibilities
In keeping with the objectives and policy of Bayh-Dole, it is
incumbent upon Grantees to effectively and efficiently transfer
technology to industry for commercial development. However, in doing so
Grantees must also comply with the specific terms of the Act, its
implementing regulations, and the terms and conditions of each NIH
award and ensure that such compliance is reflected in their agreements
with commercial entities.
In carrying out that responsibility, at a minimum, Grantees need to
concern themselves with issues involving maintenance of academic
freedom for institutions and investigators, fair access to information,
timeliness of notification and other requirements, rational licensing
to commercial entities, and adherence to the specific requirements of
the Act and NIH funding agreements.
While sponsored research agreements frequently are used where basic
research is involved and no invention exists to disclose nor
intellectual property to license at the time the agreement is executed,
Grantees should anticipate such issues to arise and use the following
points for consideration in developing a sponsored research agreement.
The first section, Universal Points for Consideration, highlights
several requirements and issues that Grantees should consider in all
proposed sponsored research agreements. The second section, Points for
Special Consideration, delineates circumstances which suggest
heightened scrutiny. The third section, Other Points for Consideration
by Non Profit Grantees, contains additional considerations which apply
only to non profit Grantees.
Universal Points for Consideration
Academic Freedom
Academic research freedom based upon social collaboration within
the scientific community and the scrutiny of claims and beliefs by its
members is at the heart of scientific advancement within the United
States. Primarily through Federal funding, academic institutions have
contributed to fundamental knowledge and techniques upon which current
and future scientific discoveries and technological innovations depend.
Therefore, the preservation of academic freedom for Grantee
institutions and researchers is of considerable concern to the NIH.
Grantees should be aware that their interest in the scientific
endeavor covered by a sponsored research agreement and the interest of
the industrial sponsor may not be totally consonant. As a result, in
general, Grantees should ensure that sponsored research agreements
preserve the freedom for academic researchers to select projects,
collaborate with other scientists, determine the types of sponsored
research activities in which they wish to participate, and communicate
their research findings at meetings, and by publication and through
other means.7 Academic researchers also should be made aware of
any agreements executed by their institutions which may restrict their
ability to pursue research activities and publish research results.
Grantees also should maintain their independence to pursue their own
mission without undue influence or restraint by their industrial
sponsors. For example, an agreement which gives an industrial sponsor
the ability to direct the research mission of a Grantee would be
inappropriate.
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\7\The NIH recognizes that there may be certain instances when
it may be reasonable for a Grantee institution to agree to minimally
restrict a researcher from collaborating with another industrial
partner when the subject matter of such collaboration overlaps with
that of the sponsored research agreement.
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Dissemination of Research Results
Grantees must ensure that the timely dissemination of research
findings is not adversely affected by the conditions of a sponsored
research agreement. For example, the PHS Grants Policy Statement,
incorporated as a condition of each NIH research grant, details
policies on publication of research results, responsibilities to
disseminate information on unique research resources, and standards of
conduct for Grantee employees. Although an industrial sponsor's
consideration of the commercial applicability of specific research
findings and/or the filing of a patent application to secure
intellectual property rights may justify a need to delay disclosure of
research findings, a delay of up to thirty (30) days is generally
viewed as a reasonable period for such activity. Depending upon the
individual circumstances, Grantees could consider a shorter or longer
period of time, as they deem appropriate. In addition to the timing, a
sponsored research agreement which requires the disclosure of
inventions and research findings developed with NIH funds to an
industrial sponsor prior to submission of the invention disclosure to
the NIH, may be inconsistent with the terms and conditions of the NIH
grant or contract.
Utilization
The NIH also has a concern that Federally funded technology be
developed and commercialized in an expedited and efficient manner. In
deciding to enter into an agreement with an commercial entity, Grantees
should consider whether the organization has the experience,
capability, and commitment to bring its likely inventions to commercial
status.
Additionally, Grantees should not enter into sponsored research
agreements that permit a sponsor to tie up the development of a
technology by acquiring exclusive licensing rights to the product of
given research results before deciding whether or not it will actively
develop and commercialize that product. Grantees should provide a
sponsor with an option to pursue licensing rights. It is reasonable for
such options to be limited to no more than six (6) months. However,
individual circumstances may dictate a shorter or longer period of
time. After the option period expires, the technology should become
available for licensing to other entities. Moreover, once a sponsor
decides not to exercise its option, it should not be given a second
opportunity to obtain licensing rights by matching other parties'
offers for the rights. Such requirements enable Grantees to license to
companies presenting a bona fide commercialization plan, thus
expediting the availability of products to the public.
In order to ensure that technology is developed rapidly and is not
being subjected to delays, Grantees should also establish, maintain,
and actively administer policies and procedures which ensure that
licenses arising from sponsored research agreements contain due
diligence requirements and benchmarks to monitor performance. When
future rights to as yet undiscovered inventions are included in a
sponsored research agreement, benchmarks for development of each such
invention should be established as it becomes available for commercial
development. In addition, Grantees should actively monitor licensees in
accordance with those requirements and benchmarks to assure compliance
with Grantee obligations under the Act.
U.S. Manufacture
The Bayh-Dole Act requires that products developed with Federal
funds and used and sold in the United States, be substantially
manufactured here. In granting exclusive rights to use or sell any
subject invention in the United States, Grantees must ensure that each
agreement requires that any products embodying the subject invention or
produced through the use of the subject invention will be manufactured
substantially in the United States. In individual cases, a request for
waiver may be considered by the NIH. A determination will be made based
upon a showing by the Grantee that reasonable but unsuccessful efforts
have been made to grant licenses on similar terms to potential
licensees that would be likely to manufacture substantially in the
United States or that under the circumstances domestic manufacture is
not commercially feasible. In granting a waiver of the U.S. manufacture
requirement, the NIH may consider other benefits conferred on the
United States by the potential license including the rapid availability
of a product of benefit to the health of the American people.
Notification Requirements and Records
In sponsored research agreements, as in other contexts, Grantees
must also ensure that invention, patent and license notification
requirements are adhered to in a timely manner. Timeliness
considerations include prompt (1) employee notification to Grantee
administrators of an invention made under NIH funding, (2) written
disclosure to NIH of an invention and the intent to retain or convey to
the Government title to the invention, (3) adherence to time frames for
initial filing of patent applications in the United States and the
filing of foreign patent applications, (4) execution and confirmation
throughout the world of NIH license rights in the results of the
research, and (5) notification to the NIH of any decision not to
continue patent prosecution, pay fees, or defend the patent in
reexamination.
Specifically, as conditions of NIH grants and cooperative
agreements, Grantees must fully notify the NIH in a timely manner when
an invention has been developed. In any event, disclosure to the NIH
must be prior to the publication of any description of the invention.
When applying for continued funding in each subsequent funding period,
the institution must also provide either a listing of all inventions
made during the preceding budget period or a certification that no
inventions were made during the applicable period. A final invention
statement and certification listing all inventions that were conceived
or first actually reduced to practice during the course of work under
the funding agreement is required within ninety (90) days following the
expiration or termination of support on an applicable project.
Additionally, Grantees need to adhere to the specific requirements
contained in the patent clauses of their contracts as well as the
general provisions of the Federal Acquisition Regulations.
Furthermore, Grantees must also document their compliance with the
requirements of the Act, regulations, and terms and conditions of NIH
awards, generally and as related to sponsored research agreements. Such
Grantee records must be available for review by authorized Federal
officials in accordance with the terms and conditions of the award. For
example, concerning access and retention of records under NIH grants
and cooperative agreements, regulations require grantees to retain
financial and programmatic records, supporting documents, statistical
records, and all other grantee records which may reasonably be
considered pertinent to a grant or subgrant.8
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\8\The regulations are set forth at 45 CFR Part 74, Subpart D
and 45 CFR 92.42.
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Points for Special Consideration
The NIH has identified several situations, outlined below, in which
Grantees should exercise heightened sensitivity and scrutiny in the
development of sponsored research agreements. Such an exercise should
confirm that a sponsored research agreement does not adversely impact
NIH funded activities and Grantee concerns such as academic freedom, or
shift control of the Grantee's scientific activities, management, and
independence into the hands of the sponsor. While there is no
requirement that Grantees submit proposed sponsored research agreements
to the NIH for review, at the discretion of the Grantee, the NIH may be
consulted for additional clarification in instances where special
considerations warrant.
First, Grantees should subject their sponsored research agreements
to heightened scrutiny when one or more of the following threshold
criteria apply:
(a) the amount of financial support from the sponsor meets or
exceeds $5 million in any one year, or, $50 million total over the
total period of funding under the agreement;
(b) the proportion of funding by the sponsor exceeds 20 per cent of
the Grantee's total research funding;
(c) the sponsor's prospective licensing rights cover all
technologies developed by a major group or component of the Grantee
organization, such as a large laboratory, department or center, or the
technologies in question represent a substantial proportion of the
anticipated intellectual output of the Grantee's research staff; or
(d) the duration of the agreement is for 5 or more years.
If one or more of these criteria apply, it is more likely that the
proposed sponsored research agreement will adversely affect open
commercial access, especially for small businesses, to a Grantee's
Federally funded research activities and may delay or impede the rapid
development and commercialization of technology.
Second, Grantees should be concerned if the scope of the sponsored
research agreement is so broad that the subsequent exclusive licensing
of technology under the agreement provides a single sponsor with access
to a wide array of Grantee research findings and technologies that
effectively exclude other organizations from reasonable access to a
Grantee's technology. This type of arrangement can also delay
commercialization if the sponsor does not have the interest or the
capability to develop the technology.
Third, if the sponsor contributes funds to support a Grantee's
general operations rather than specifically defined research projects,
the Grantee should consider the amount of the sponsor's general funding
in relation to funds contributed from other sources when determining
what prospective intellectual property rights the (sponsor will receive
in the results of the Grantee's entire research portfolio. There should
be a reasonable relationship between the amount of money contributed by
the sponsor and the rights that it is granted both to review and
license resulting technology or inventions. As an extreme example, a
sponsor should not be able to provide 5 percent of the Grantee's total
support, review 100 percent of the Grantee's inventions, and receive
rights or a first option to 50 percent of the research results
generated by the Grantee. Where general funding is involved, a Grantee
should consider establishing some mechanism to limit the review and
licensing rights of the sponsor to a particular segment or percentage
of the inventions and for a set period of time. For example, the
Grantee may require the sponsor to select those research areas or
projects to which its general funding rights would attach in advance,
thereby freeing up research areas that may be of interest to other
commercial entities. Because, by its nature, general funding is less
directed and its results more imprecise, Grantees should carefully
monitor the impact on open competition and fair access by small
business of the sponsor's licensing practices for technology supported
by general funding.
Fourth, Grantees should avoid any other unusual practice or
stipulation that might generate public concern or undermine rather than
serve the public interest.
Other Points for Consideration by Non-Profit Grantees
The following points are to aid non-profit Grantees in
administering the Act and in complying with the requirements of NIH
funding agreements.
First, Grantees must ensure that the rights to inventions resulting
from Federal funding are not assigned without NIH approval. An
exception to this is when the assignment is made to an organization
which has as one of its primary functions the management of inventions,
in which case, the assignee will be subject to the same provisions as
the Grantee.
Second, Grantees must share royalties collected on NIH supported
inventions with the inventors and the balance of any royalties or
income earned, after payment of expenses, including payment to
inventors and incidental expenses to the administration of subject
inventions, must be utilized for the support of scientific research or
education.
Third, Grantees must employ reasonable efforts to attract licensees
of subject inventions that are small business firms. Additionally,
Grantees must provide a preference to small business firms when
licensing a subject invention if Grantees determine that small business
firms have plans or proposals for marketing the invention which, if
executed, are equally as likely to bring the invention to practical
application as any plans or proposals from applicants that are not
small business firms. However, Grantees must be satisfied that the
small business firms have the capability and resources to carry out
plans or proposals. The decision whether to give a preference in any
specific case is at the discretion of the Grantee. However, since
sponsored research agreements typically provide exclusive licenses or
options to such rights to the sponsor, Grantees should seriously
consider and provide for these issues when negotiating such agreements.
Conclusion
Technology transfer is a vehicle through which the fruits of NIH
funded research are transferred to industry to be ultimately developed
into preventive, diagnostic and therapeutic products to advance human
health. In a dynamic and multinational marketplace, if the United
States is to remain a world leader in technological and scientific
innovation, both the public and private sectors must work together to
foster rapid development and commercialization of useful products to
benefit human health, stimulate the economy, and enhance our
international competitiveness, while at the same time protecting
taxpayers' investment and safeguarding the principles of scientific
integrity and academic freedom.
It is in this spirit that the NIH encourages Grantees to address
the issues and apply the points for consideration identified in this
document when developing sponsored research agreements with commercial
entities.
[FR Doc. 94-15466 Filed 6-24-94; 8:45 am]
BILLING CODE 4140-01-P