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Medical Research and Human Experimentation Law

Report of the National Institutes of Health (NIH)
Working Group on Research Tools

Presented to the Advisory Committee to the Director
June 4, 1998

Contents


Executive Summary

Background

Scope of Report

Competing Interests at Stake

Analysis of NIH Options Under Current Law

Recommendations

Appendices

A. Basic Guidelines for the Transfer of Research Tools to and from Recipients of NIH Funds

B. Definitions Related to Technology Transfer and Research Tools

C. Description of Information Gathering

D. Analysis of NIH Options Under Current Law

D.1. Patent Policy

D.2. Licensing Policy

D.3. Unique Research Resources Distribution

D.4. Biological Materials

D.5. Inventor Waivers

E. Working Group Members


EXECUTIVE SUMMARY

Summary of Problems

Summary of Recommendations

  1. NIH should promote free dissemination of research tools without legal agreements whenever possible, especially when the prospect of commercial gain is remote.

  2. NIH should promote use of the Uniform Biological Materials Transfer Agreement (UBMTA) and the development of other standard agreements to reduce the need for case-by-case review and negotiations.

  3. NIH should develop and disseminate guidelines1 for recipients of NIH funds as to reasonable terms in licenses and MTAs, addressing both importing of research tools from other institutions and exporting of research tools created with NIH funds.

  4. NIH should review its policies with regard to dissemination of research tools generated under its intramural and extramural funding, and revise and strengthen those policies consistent with the recommendations in this report.

  5. NIH should promote the establishment of a research tools forum for the biomedical research and development community



1A proposed set of guidelines is attached to this report at Appendix A.


BACKGROUND

Advances in biomedical science continuously yield new research tools that play a critical role in the furtherance of knowledge and innovation in both the public and private sectors. We use the term "research tool" in its broadest sense to embrace the full range of resources that scientists use in the laboratory, while recognizing that from other perspectives the same resources may be viewed as "end products." For our purposes, the term may thus include cell lines, monoclonal antibodies, reagents, animal models, growth factors, combinatorial chemistry libraries, drugs and drug targets, clones and cloning tools (such as PCR), methods, laboratory equipment and machines, databases and computer software. Although competitive pressures have always given scientists an incentive to withhold new research tools from their rivals, past practices allowed for relatively free exchange, typically without formal agreements and without explicit consideration of commercial rights or potential financial benefits.

In the mid-1970s, scientists and investors began to realize the potential impact of advances in molecular biology on the development of products for the improvement of human health. Biomedical researchers increasingly chose to collaborate with entrepreneurial companies that understood and valued basic science, or to leave academia and join these firms as founders or employees. Many biotechnology companies emerged with strong ties to the academic world. At the same time, Congress enacted legislation encouraging universities and federal laboratories to patent their inventions and to license them to private firms. These developments have encouraged exchange of materials and information between scientists in industry and academia, while at the same time encouraging institutions and researchers in both sectors to be alert to the potential commercial value of research tools.

The result has been increasing use of the patent system to obtain proprietary rights in research tools and increasing use of license agreements and material transfer agreements (MTAs) delineating the terms and conditions under which research tools can be used.2 These agreements, which have long been standard practice for private companies, seem to be becoming standard practice for universities and government laboratories as well. Many institutions use these agreements effectively to disseminate patented or unpatented materials on reasonable terms. It seems to be increasingly common, however, for the terms of these agreements to interfere with the widespread dissemination of research tools among scientists, either because owners and users are unable to reach agreement on fair terms or because the negotiations are difficult and cause protracted delays.

In response to this issue, the Director, National Institutes of Health (NIH), through the Advisory Committee to the Director, formed a Working Group on Research Tools (Working Group). The charge to the Working Group was to:

Inquire into problems encountered by NIH-funded investigators in obtaining access to patented research tools, including refusals to license, onerous royalty obligations, restrictions on the dissemination of materials and information, restrictions on the ability to collaborate with commercial firms, and advance commitments regarding intellectual property rights in future discoveries. Identify and assess possible NIH responses in light of the competing interests of intellectual property owners and research users and the role of NIH as a public institution and research sponsor. Prepare a report and frame the issues for discussion at the next meeting of the Advisory Committee to the Director.

This is the Report of the Working Group, presented to the Director, NIH, through the Advisory Committee to the Director.



2A glossary of some of the terms used in this report is set forth at Appendix B.


SCOPE OF REPORT

The problem that we address has many facets, most of them not subject to direct control by NIH. Proprietary restrictions on access to research tools arise from a complex interaction of many forces, including patent law as interpreted by the Patent and Trademark Office (PTO) and the courts, Congressional directives concerning ownership of discoveries resulting from federally-sponsored research, the shifting balance of public and private funding for biomedical research, and shifting institutional goals in both the public and private sectors. Some members of the Working Group, and some of the people with whom we spoke, believe, for example, that the problem of proprietary restrictions on the availability of research tools has been aggravated by the issuance of excessively broad patent claims. This is an issue that has implications beyond the context of research tools, and one on which reasonable minds might differ.

In order to stay within our charge and to keep our inquiry to a manageable scope, the Working Group decided to focus our analysis primarily on the terms of access to research tools in transactions involving NIH grantees, without fully engaging the broader legal and institutional questions in which this issue is embedded. In so confining our own attention, we do not mean to suggest that broader inquiries would not be worthwhile. Quite the contrary, in the course of our more narrowly focused inquiries we have detected considerable dissatisfaction with the current operation of the patent system in biomedical research from many quarters, suggesting that there may be considerable room for improvement. In leaving these broader issues for another day, we are simply attempting to set boundaries that correspond as closely as possible to the interests and authority of NIH in the problem put before us.

COMPETING INTERESTS AT STAKE

In preparing this report, the Working Group has gathered information on problems encountered in the dissemination and use of proprietary research tools and the competing interests underlying these problems from three sets of stakeholders: bench scientists, university technology transfer professionals, and private firms.3 The problem of access to research tools looks quite different from each of these perspectives, and there is considerable variation among individuals and institutions within each of these categories.

The very term "research tool" connotes a user perspective rather than a provider perspective. What a user sees as a research tool, a provider may see as a valuable end product for sale to customers. A striking example of this difference in perspective arises when a scientist in a university wants to use a candidate pharmaceutical compound in research. From the perspective of the university and the scientist, the compound is a mere research tool, potentially useful in making future discoveries. But from the perspective of the firm, the compound may be a very precious end product, the payoff from significant investments of time and shareholder dollars in its own research.

The label "research tool" may apply less equivocally to the multitude of biological discoveries that precede the identification of new therapeutic compounds, including DNA sequences, databases, clones, cell lines, animal models, receptors and ligands involved in disease pathways, or laboratory techniques used to create or identify these discoveries. But even these "upstream" discoveries might seem like commercial end products to the institutions that discover them. Some of these materials might ultimately prove to be therapeutic or diagnostic products in their own right, marketable to consumers for use outside the laboratory. Others might have, or appear to have, sufficient commercial value as resources for use in the discovery of future products to motivate some firms to invest in their identification and development for sale or license to other firms for use in further research. What counts as a research tool and what counts as an end product thus varies from one institution to the next. Inevitably, each institution minimizes the value of the discoveries it borrows from others, while seeing great value in its own past and future discoveries.


3A description of how the Working Group gathered information is attached to this Report at Appendix C.

Scientists

The tools of the trade in biomedical research and development are crucial for all bench scientists, and access to new tools has a dramatic impact on the progress of research. At the same time, it is increasingly common for scientists to identify particular research tools as "intellectual property," a phenomenon that can both benefit inventors and their institutions and create obstacles to rapid access to new tools. Bench scientists may import new tools from other institutions and/or export tools that they have developed or refined. These different perspectives are discussed separately below.

Scientists as importers of research tools.

When they seek to import research tools from other institutions, bench scientists have relatively simple goals. They want to use the best tools for the problem at hand, they want to acquire tools rapidly, and they want to avoid restrictions on use, publication, and dissemination of results. There is a rising frustration among bench scientists about the ascendancy of "intellectual property issues" that impede their access to state-of-the-art research tools.

Some scientists begin from a normative position that past discoveries, once published, should be freely available for use in subsequent research. When the new tools consist of methods and data, publication may be all it takes to provide access. If the tools have been patented, the use might be infringing, but until someone asserts patent rights, many scientists will simply assume that they are free to use whatever methods and information are in their possession.

When tangible materials or unpublished information are involved, however, it may be necessary to turn to the owner for access. Control over physical access provides an easy mechanism for identifying users and imposing restrictions on the dissemination and use of proprietary materials and data. It is thus unsurprising that many scientists have had greater experience with restrictions on the use of research tools in the terms of MTAs and database access agreements (whether or not the underlying materials or data are patented) than in the terms of patent license agreements.

Most scientists are not skilled at reading license agreements and distilling the legal implications of their language, even in consultation with their own institutional representatives. They typically have little patience for such matters, and they greatly resent delays in their research pending negotiations over provisions whose impact on themselves and their institutions is remote and uncertain. From the scientists' perspective, the source of the impediment to research is unclear: their own institutions, the scientists who created the tool, the institution controlling the intellectual property associated with the tool, or a combination thereof. The responses to our queries from academic scientists reflect considerable irritation with their own institutions for taking too long to get the paperwork in order, thereby delaying research. Rather than seeing technology transfer professionals within their institutions as facilitators who enable them to gain access to research tools and as guardians of their best interests, they see them, in the words of one scientist, as "paper pushers who sit on these documents and try to find errors."

Although we did not hear directly from scientists in industry, a number of industry representatives with whom we spoke reported considerable frustration on the part of their scientists with restrictions on access to research tools created in NIH-funded research. Industry scientists find it unfair that their own use of taxpayer-funded research tools should have to await protracted negotiations over terms, particularly when the same tools are freely available to academic scientists.

There is little dispute that most bench scientists, whether in academia or industry, would like to see their access to research tools streamlined, expedited, and rationalized. Yet scientists have shown less alacrity in responding to our requests for information than have university technology transfer professionals. We do not interpret this limited response as reflecting indifference or satisfaction with the current situation. Rather, we suspect that many scientists view disputes over the terms of access to research tools as an annoying distraction from their work that already consumes more of their time than it should, and they would rather avoid the issue than engage it.

Scientists as exporters of research tools.

The perspectives of bench scientists who export new research tools that they have developed are much more diverse. Some hold traditional views that tools should be freely distributed, consistent with their desire for unimpeded access to tools developed by others. At the other end of the spectrum, some scientists seek to capture the market value of research tools that they have developed for themselves and their institutions through the terms of patent licenses and/or formal MTAs. Scientists in this latter group may sometimes have hidden agendas of maintaining an edge in scientific competition as well as a desire for economic return. For example, despite norms (and often formal requirements) to distribute published research tools, some scientists use MTA clauses to delay or even block distribution to a competitor while maintaining a nominal willingness to cooperate.

Unrealistic valuations, inspired by occasional cases of institutions earning extraordinary financial returns, often present an obstacle to prompt dissemination of research tools. This problem arises not only in the transfer of tools to the private sector (whether to the research products industry for generalized distribution or to commercial institutions for use in their own research), but increasingly complicates exchange of tools between non-profits. Those who develop new tools tend to overvalue them, without taking into account all the other tools necessary to study a particular biological problem. Moreover, the relative value of research tools is often difficult to predict and even more difficult to agree upon.

There is no consensus among scientists who export research tools about how to distribute them and how to value them, and some individuals have inconsistent views on the issue depending on whether they are exporting their own tools or importing tools from others. The lack of accepted standards is a growing source of frustration to the research community.

University Technology Transfer Professionals

The most extensive responses to the inquiries of the Working Group have come from technology transfer professionals working in universities. These individuals spend a good deal of their time processing licenses and MTAs for research tools on behalf of universities and have a front-line familiarity with the problems that these transactions present. It is important to recognize, however, that they occupy a particular niche within large, complex institutions with multi-faceted missions. As publicly-supported institutions of higher learning, universities have a longstanding mission to foster research and the dissemination of new knowledge. Since 1980, the Bayh-Dole Act has directed universities to take on the further mission of promoting commercial development of the discoveries that they make with federal funds. In furtherance of this new mission, federal law encourages universities to patent their discoveries and to license them to firms in the private sector. Many universities have established technology transfer offices to market the discoveries of their scientists in accordance with the Bayh-Dole Act.

Universities both import tools from other institutions and export tools of their own. Sometimes the same offices and the same professional staff handle both types of transactions, but not always. In some universities exporting of research tools may be handled by a technology transfer office, while importing is handled by an office of sponsored research.

Responses to our inquiries from universities focused overwhelmingly on problems arising in the course of importing research tools from other institutions. Sometimes the provider is another university, but most of the complaints concerned research tools provided by private firms. From the perspective of the people who review and negotiate these agreements on behalf of universities, the growing use of license agreements and MTAs for the acquisition and use of research tools presents a number of problems.

Administrative burden and resulting delays.

An immediate concern is the administrative burden of reviewing and negotiating the terms of numerous incoming agreements. Even when the negotiations culminate in a mutually satisfactory agreement, each negotiation delays the moment when scientists are able to put research tools to use. Scientists who exchange research tools are eager to get the tools they need to proceed with their research, yet they often lack the expertise to evaluate the terms of agreements and the authority to bind the university to agreements. Universities have limited resources to devote to reviewing and negotiating these agreements, and the growing volume of agreements calling for review creates bottlenecks that slow the pace of research. The University of Pennsylvania reported that it reviewed 425 MTAs in the past year compared to 197 in the prior year, an increase of over 115%. The University of Washington estimated its annual volume of incoming MTAs at around 1,000. The administrative burden that this volume of agreements presents is aggravated by the fact that each institution has its own form of agreement, requiring review and negotiation on a case by case basis. Rutgers University reports that the time required to negotiate an MTA often equals or exceeds the time involved in negotiating a comprehensive research sponsorship agreement.

A related concern for many universities is the lack of mechanisms for keeping track of the agreements that are being signed throughout the university and the obligations that these agreements impose upon the university and its employees. Researchers may be signing agreements that compromise their own interests and the interests of the university or put them in violation of previously signed agreements without fully understanding what they are doing.

Beyond these administrative problems, universities identified a number of substantive concerns about the terms of licenses and MTAs that they are asked to approve:

Delays and restrictions on publication.

Limitations on publication or other dissemination of the results of university research are a major concern of universities, although this issue rarely proves intractable in negotiating the terms of agreements. Freedom to publish and talk about research results is obviously a cherished value within the academic community and central to the progress of science. Many universities have policies that limit their ability to agree to restrictions on publication of research results. Objectionable terms in proposed agreements include: confidentiality provisions that are so far-reaching in their coverage as to interfere with effective publication of research results, presentations at conferences, or validation of results by other investigators; requirements for approval from the provider prior to submission of manuscripts for publication; and unreasonable delays in publication. Some universities will not agree to any restrictions or delays in publication, but most will agree to delays of 30, 60 or even 90 days to permit the provider to request deletion of company confidential information that it supplied or to get a patent application on file.

Rights to future intellectual property.

Far more intractable disagreements arise in negotiations about rights in future discoveries made in the course of research using the provider's tools. Sometimes the issue is who will own future discoveries, and sometimes the issue is license rights rather than ownership. Proposed agreements may purport to give the provider outright ownership of future discoveries either by demanding an assignment of rights or by defining "the Material" that the provider owns broadly to include other materials derived through use of the transferred materials. Signing such agreements would often put the university in violation of prior commitments to research sponsors. If the research is sponsored by the federal government, the university generally cannot agree to assign ownership of discoveries made in the course of the project without violating the Bayh-Dole Act.

Another mechanism for achieving similar results without requiring an outright assignment of ownership is to grant the provider an automatic license to use future discoveries. Such a license might be exclusive or nonexclusive, with or without a right to sublicense, and royalty-bearing or royalty-free. A typical proposed agreement might give the provider an automatic nonexclusive, non-royalty-bearing license with right to sublicense and an option or right of first refusal to acquire a royalty-bearing exclusive license. Such an agreement might violate prior commitments to research sponsors, particularly when research is sponsored by private firms, although ordinarily the parties would be aware of sponsor commitments at the time of the agreement and could address the rights of the sponsor explicitly. Arguably, precommitments to license future discoveries made in the course of NIH-funded research to particular firms violate the Bayh-Dole Act. At the very least, such promises would have to be subject to the retained rights of the federal government to the inventions of grantees under the Bayh-Dole Act, including a paid-up, nonexclusive license to use the invention or authorize its use on behalf of the United States and federal march-in rights to grant licenses to other firms as necessary to ensure practical application of the invention and to meet health or safety needs.

Apart from obligations to current or past research sponsors, many universities fear that precommitments to license future discoveries to providers of research tools will undermine opportunities for future research funding from other firms, interfere with future technology transfer to other firms, and conflict with the university's stewardship of its inventions for the public benefit. Precommitted licenses undermine opportunities for private research funding because firms are unlikely to agree to pay for university research when resulting discoveries have already been promised to other firms. Precommitted licenses undermine opportunities for technology transfer of future discoveries either by their express terms (in the case of an exclusive license that prohibits transfer to other firms) or by preventing a university from conveying a commercially viable exclusive license to another firm that would otherwise be willing to develop the discovery (in the case of a nonexclusive license). Often these potential problems may be kept within tolerable boundaries by limiting the scope and duration of any grant-back or automatic license provisions. But if the precommitted license rights reach far ahead to embrace future inventions that do not directly incorporate the transferred materials or technologies, the university might find itself foreclosed from dealing with firms that would make far more substantial contributions to the support of research and product development related to an investigator's work because they have mortgaged their future intellectual property to gain access to a research tool. One university explains "[i]t does not seem reasonable for a materials provider, who simply loaned a material for a specific research project, to acquire greater rights in inventions resulting from that project than would the sponsor which funded the entire project." Moreover, if such precommitments become routine, it could become difficult to track the pedigree of inventions that were made in the course of an extended project making use of research tools from many sources, and therefore difficult to warrant to other potential licensees that the university is free to convey the licenses they seek.

Options or rights of first refusal to license future discoveries raise some of the same problems as precommitted licenses. The advantage of an option is that it permits the university to negotiate the terms of a license after the discovery has been identified when its value can be assessed more fairly. On the other hand, if the provider of a research tool holds an option to a license on a discovery, it may be difficult to negotiate in earnest with another firm that stands to lose the license if the option holder merely meets its terms. Moreover, it is only possible to convey one option for an exclusive license to a future discovery; once one such option has been conveyed under a single MTA, the university may no longer enter into research funding agreements, license agreements, or MTAs that lay claim to discoveries covered by the option.

Although universities appear to be unanimous in identifying claims to future discoveries as a source of difficulty in negotiating for access to research tools, they are far from unanimous in how they respond to such claims. Many universities distinguish between future discoveries that actually incorporate the research tool or material and discoveries that merely result from past use of the research tool, or between discoveries that relate directly to use of the research tool and those for which the connection is more remote and attenuated. Plainly, universities feel that the demands of providers of research tools for rights in future discoveries are out of proportion to the contributions their materials make to those discoveries, but their outrage seems to be fading as the demands become more routine. One university reports that it used to refuse demands for a royalty-free non-exclusive license with an option to obtain a royalty-bearing exclusive license on a consistent basis, but now leaves it up to the investigator if the investigator provides a letter stating she/he does not anticipate making any inventions that would be covered by the provision. Another university states that it is willing to grant non-exclusive, royalty-free licenses when the materials to be transferred are drugs in clinical development and the company has invested or will invest significantly in the commercial development of the materials, but not otherwise. Many universities are willing to grant royalty-free, non-exclusive licenses for internal research purposes, but not for commercial purposes. Some universities are willing to grant options for exclusive licenses to discoveries that follow directly from use of the tool, but only for a limited time, after which the university is free to license the discovery to other firms. Some universities require payment of patent costs as a condition of maintaining an option.

This appears to be an area of ongoing negotiation between universities and firms in which there are no clear rules and the norms are shifting. In contrast to restrictions on publication, which trouble scientists as well as universities and are easy to refuse on grounds of principle, contract provisions that govern the allocation of future intellectual property rights in potential discoveries that may never be made are often of greater concern to technology transfer professionals than they are to scientists who have little patience for protracted negotiations over speculative contingencies. Without the support of scientists, technology transfer professionals find it difficult to bargain hard on this issue with companies that may be indifferent to whether the university takes their agreement or leaves it. Some universities ultimately relent and mortgage their speculative future intellectual property so that the research may go forward, while others are unable to arrive at mutually agreeable terms and have to tell their scientists to forego use of certain research tools entirely.

Restrictions on use of research tools.

Restrictions on how research tools may be used are ubiquitous in licenses and MTAs. Typical provisions prohibit sharing materials with other researchers, sending them to other institutions, using them for commercial purposes, or using them in research sponsored by another firm. Many agreements specifically restrict permission to a particular experiment or study as described in the agreement. Some universities worry that materials transferred for specified uses only may be used in other, unauthorized experiments by scientists who are unaccustomed to restrictions on what they can do with materials once they are in the lab. One university reported receiving an agreement that gave the provider even broader rights in discoveries made through unauthorized use of the materials, rationalized by the provider as a means of discouraging users from going beyond the originally agreed uses without coming back for further permission.

Many agreements are limited to use for "research purposes" and exclude use for "commercial purposes," sometimes without defining those terms. Some agreements define the excluded "commercial purposes" in ways that are counterintuitive to scientists and therefore difficult for universities to control. For example, many agreements include in the definition of prohibited commercial uses, use in research that is subject to licensing obligations to another firm. This would not only prohibit use in research that is sponsored by another firm, but might also prohibit use in research that is subject to a licensing commitment arising from a prior MTA. Combined with an expansive definition of the provider's "material" that includes derivatives and modifications, such restrictions on use could give the provider considerable power over the future directions of the user's research.

Indemnification.

One of the most consistent complaints of universities is that agreements call for universities to indemnify providers against liability arising from their use of research tools. Some state universities are prohibited by law from signing such agreements; many universities seem to feel that it is not worth putting their endowments at risk to gain access to a research tool. Although we did not hear any horror stories of university endowments actually being depleted as a result of indemnity claims, the concern of universities is understandable, especially in the case of dangerous materials. Some universities ultimately resolve this issue by persuading the provider to accept alternative language that leaves each party responsible for liability resulting from its own negligence, or by limiting the university's indemnity obligation to wilful breach of safety provisions of the agreement (such as a prohibition against use in humans). But such negotiations take time and delay the progress of research.

This particular stumbling block to the use of research tools does not implicate the interests of NIH in promoting biomedical research and product development as directly as restrictions on publication, restrictions on use, impediments to future collaborations between universities and firms, and licensing commitments that interfere with options for future technology transfer. Nonetheless, to the extent that it is a recurring problem for recipients of NIH funds, it is likely to slow the pace of research.

Exporting of research tools by universities.

University technology transfer professionals were far more circumspect in providing information to the Working Group about problems arising when a university is the provider of the research tool. Although acknowledging that other universities sometimes present agreements that raise the same problems as the agreements they receive from industry, they generally maintain that they have little difficulty concluding satisfactory agreements with other universities after negotiation.

Although university technology transfer professionals would direct our attention primarily to the terms of agreements coming from industry, we have heard both from industry and from academic scientists that similar agreements from universities and other nonprofit institutions are a growing part of the problem. We have received copies of MTAs sent by universities and nonprofit institutions to researchers in other universities that present just about every type of clause that universities cite as problematic in the MTAs and licenses that they receive from industry, including: requirements to submit manuscripts to the provider for review and comment for a specified period prior to submission for publication or other disclosure, and to delay release for a further period of time to permit the provider to file a patent application; broad definitions of the material owned by the provider that include derivatives; allocations to the provider of ownership in future discoveries made through use of the materials; rights of first refusal for the provider to license subsequent discoveries; prohibitions on use in research that is subject to licensing obligations to another institution; prohibitions on commingling the material and derivatives with other biological material without written permission from the provider; prohibitions on transfer to other investigators or other institutions; and indemnification clauses that hold the provider harmless against liability. It may well be that the provider institutions would back down from these provisions if the technology transfer professional at the user's institution balked at signing and pointed out the same problems that they cited to us in complaining about agreements from industry. But meanwhile, the use of research tools is delayed pending administrative review and renegotiation. This sort of delay was supposed to be avoided by use of the Public Health Service Uniform Biological Materials Transfer Agreement (UBMTA). Yet although many universities have signed the UBMTA, few seem actually to use it even for routine exchanges of materials.

We have mixed information on how prevalent these problems are in agreements between universities. University technology transfer professionals report that the problem is small; academic scientists report that it is significant and spreading rapidly. Even if the terms of inter-university exchanges are a relatively small part of the overall problem of proprietary restrictions on access to research tools, the trend is disturbing and poses a potentially serious threat to productive habits of free exchange of materials among academic researchers.

It is worth noting that sometimes universities are constrained in the terms of license agreements and MTAs that they offer to other universities by obligations to sponsors of the research that yielded particular research tools, or by obligations to licensees that are developing the research tools for commercial distribution. If so, the constraints might sometimes, although not always, be avoided by foresight on the part of universities when they negotiate the terms of sponsored research agreements and license agreements. Universities might, for example, retain the right to provide research tools to scientists at other universities and nonprofit institutions in the language of these agreements. But if the sponsor or licensee plans to develop the research tool as a commercial product for sale to researchers, it may be unwilling to permit the university to undercut its position in this particular market by giving the tool away to potential paying customers. We detect a perception that sometimes the aggressive language in agreements is not required by sponsors or licensees at all, but simply reflects an effort on the part of universities themselves to recover as much value as possible from the distribution of their discoveries.

Many universities are more aggressive in the language of licenses and MTAs when they provide research tools to private firms than when they provide research tools to other universities. For example, a number of major research universities routinely seek reach-through royalties from firms on products developed through use of a research tool, although firms do not necessarily agree to such provisions.4 Other universities seek reach-through royalties on some sorts of tools, such as drug screening tools, or on tools that are used directly to produce a product, such as a cell line used to produce an antibody that is sold commercially, but not on more basic research tools that have a more remote relationship to commercial products. Universities report that they encounter considerable resistance to reach-through royalties, particularly from pharmaceutical firms. The perspectives of private firms are analyzed below.

Private Firms

The perspectives of private firms on access to research tools vary widely depending on the nature of the tool, the relationship of the tool to the firm's business strategy, and the importance to the firm of university-based research using the tool. There is significant variation even within the pharmaceutical industry on this issue, and considerably greater variation in the perspectives of biotechnology firms. Some biotechnology firms sell or hope to sell pharmaceutical products to end users; the interests of such firms will often be closely parallel to those of major pharmaceutical firms. Others have business strategies that involve the development and marketing of research tools or the use of research tools to create a package of technology and products that will be licensed to other firms for further development and marketing. While some firms - particularly those whose primary business is selling research tools - may be eager to claim royalties on future products that their discoveries facilitate, many firms that use research tools in an effort to develop future products are reluctant to incur such royalty obligations.

From the perspective of private firms, the category "research tool" is itself problematic. Many individuals that we spoke to asked at the outset how we define research tools and took exception to a broad definition that included things such as therapeutic compounds that they regard as end products. Some people further noted that it is often hard to tell the difference between things that are used only in the laboratory and things that might potentially be sold to non-research consumers. For example, a DNA sequence that is currently of use only to researchers ultimately may prove to be a diagnostic marker or to encode a therapeutic protein. Moreover, even something that is used exclusively by researchers rather than by ordinary consumers may have considerable competitive value to a firm.

All firms have some materials, data, or methods that they regard as crucial to their strategy for maintaining a competitive advantage and earning a profit for their shareholders and therefore highly proprietary, whether these resources are called "research tools" or "end products." The types of information and materials that are in this category vary considerably from one firm to the next. Making these crown jewels available to other institutions for use in research presents considerable risk to the future profits of these firms. If they are willing to make them available to researchers in other institutions at all, they are likely to seek to maintain a high degree of control over dissemination, use and disclosure as a means of managing these risks, as well as to recover some value in return.



4 One university reported that "the University's boilerplate MTA which does have 'reach-through' IP provisions is in the process of being toned down" following a talk at an NCURA meeting in which Dr. Varmus disapproved of this practice, and an article in Science on the same topic.


Benefits to firms.

Private firms have a fiduciary duty to use their resources so as to maximize value to shareholders. The willingness of firms to make proprietary research tools available to NIH-funded investigators thus depends in significant part on their perceptions of what they might gain thereby. If they have (or think they have) little to gain, they will have little reason to compromise on the terms of license agreements and MTAs, particularly if they think that they have a lot to lose from free dissemination.

The firms that we spoke to differed in their perceptions of the value to them of making research tools available to scientists in universities, and often noted that the value varies from one situation to the next. One major pharmaceutical firm that we spoke to assesses the value of disseminating research tools from a broad perspective, noting that its own internal research generates only a small part of the knowledge base that it requires and that it feels a social responsibility to do its part to keep information and materials flowing within the larger research community. This firm has a policy of making research tools available, even to its competitors, consistent with its belief that "what goes around, comes around." One major biotechnology firm that we spoke to assesses value from a more local perspective. This firm reports that it has never made any money out of making materials available to university scientists and that it has had internal discussions about whether it is worthwhile to continue doing so as negotiations over the terms of MTAs and licenses become more protracted. Some firms reported that they have little expectation of benefit in cases in which they would use an MTA; that if they care about what the recipient is doing with the tool, they are likely to use a more elaborate (and more restrictive) agreement, perhaps involving research sponsorship.

Most firms do transfer materials and research tools to universities, generally without requiring payment of an up-front fee, and we therefore suspect that they perceive some value in doing so. At a minimum, firms may attach value to the intangible good will that they get from contributing to biomedical research in the public sector. Companies both large and small cited the need to collaborate with academia to further the research interests of their scientists, to obtain certain research capabilities and expertise, and to stay abreast of the most important advances in science. Many biotechnology firms have their origins in academic science and feel strong pressure from their scientists to maintain ties to the academy. Indeed, we heard from lawyers in biotechnology firms that they believe that their scientists sometimes send materials out to their university counterparts without any written agreements, although legal departments typically frown on this practice. Collaborations with academic scientists give scientists in private firms opportunities to work with gifted people, to co-author research papers, and to enhance their scientific reputations. Some firms reported that providing materials helps them to develop and maintain relationships with academic laboratories that may lead to more fruitful and extensive collaborations, and perhaps even products, in the future. We also heard that making materials available to academic scientists helps firms identify investigators to do clinical trials.

Another reported benefit is the opportunity to learn more about the firm's products from experts in a particular area. Biotechnology firms often have limited internal research capabilities for exploring the fundamental biology questions related to their products and potential products, and even large pharmaceutical companies find that academic scientists can sometimes perform research that they are not set up to handle in-house. Giving research tools to an academic scientist who is not affiliated with a competitor may in effect expand the research capabilities of the company, giving them expertise and data that they would miss if they tried to do everything internally. The value of this benefit to the firm is closely connected to issues of dissemination and future intellectual property licensing rights, which may lead firms to impose restrictions in the terms of accompanying agreements.

Finally, providing research tools to academic scientists may lead to discoveries with potential commercial applications from which the firm might profit. Some firms have not yet obtained a commercially valuable discovery from a university as a result of providing a research tool, but many firms count this possibility as an essential quid pro quo for providing their proprietary tools to a university free of charge.

Risks to firms.

Firms differ in their assessments of the risks to them of providing proprietary research tools to academic scientists depending on the type of firm, the materials involved, the research that the scientist is doing, and the competitive value of the material to the firm and its commercial partners. All firms perceive risks, but different risks are more salient to different firms.

Many firms expressed concern that their own proprietary tools would be used in ways that advance the interests of a competitor, thereby dissipating the competitive advantage that ownership of the tools provides. Sometimes the competitor may be another commercial firm that has an ongoing relationship with the investigator, unbeknownst to the firm that owns the research tool. One person from a pharmaceutical firm observed that sometimes an investigator who has a known relationship with a competitor will use graduate students to seek access to research tools, and that materials from his firm have found their way into the hands of competitors through this sort of subterfuge. People from other firms noted that they had been "burned" by scientists who entered into deals with multiple companies. Many firms try to manage this risk by forbidding the use of their tools in research that is subject to licensing obligations to other firms.

Sometimes the competitor may be the university itself, particularly if the academic scientist does research that is closely related to that of the firm that owns the tool. Many firms will not make their research tools available to a scientist who plans to do research that competes with their own internal programs. But academic research often takes unexpected turns, and a scientist who obtains a tool for one experiment might keep it around and use it for something else. As one lawyer for a small biotechnology company noted, scientists in universities are unlikely to consult the terms of a prior MTA when research results suggest a follow-up experiment that was not contemplated initially. The subsequent experiment, which was never cleared with the firm, may be closely related to the firm's own proprietary research. This creates a risk that the scientist will want to publish results that would compromise the firm's proprietary position, or the university may even become a competitor for patent rights. Firms try to manage this risk by explicitly limiting what may be done with the tool and by requiring return or destruction of leftover materials.

A related worry is that future intellectual property rights in discoveries made by academic investigators using proprietary research tools will be licensed to competitors rather than to the owner of the tool. A typical response to this concern is to seek a first option for an exclusive license under future intellectual property rights resulting from use of the firm's tool.

Many firms worry that by making tools available to academic scientists they will lose proprietary rights. This might occur through publication of trade secret information supplied to the scientist by the firm, or through publication of discoveries in which the firm has an interest (as an owner, licensee, or option holder) without preserving patent rights. Or, the university could become a competitor for patent rights in future discoveries.

Finally, many firms worry about the risk of liability for harm caused by the use of their tools by scientists and institutions whose activities they cannot control. This concern explains the almost universal use of indemnification clauses in licenses and MTAs, requiring recipients of research tools to agree to indemnify the provider against any liability that the provider incurs as a result of the activities of the recipient. Although we have not heard any stories of liability resulting from harms occurring from the use of research tools, many firms seem to feel strongly that when they supply research tools free of charge to a university, they should be protected from the risk of liability. This appears to be a point of strong conflict between universities and private providers of research tools.

Therapeutic compounds as research tools.

Some risks are particularly salient to firms that supply samples of therapeutic compounds to scientists for use in research. Firms that develop these compounds generally regard them as significantly different from biological research reagents such as enzymes, receptors, or manufacturing and cloning vectors and often seem to regard it as a category mistake to call these compounds "research tools." Provisions covering these compounds are likely to be quite restrictive, particularly for compounds in late stage clinical development. These compounds are usually provided only for the purpose of conducting specific experiments.

One risk that is particularly galling to pharmaceutical firms is that a university might use the firm's proprietary compound to discover and patent a new use or indication, permitting the university to block the firm from fully developing its own product. A typical mechanism for managing this risk is to seek a grant-back of a nonexclusive, royalty-free license to any improvements and new uses of the proprietary materials. A pharmaceutical firm that has a dominant patent position in the product itself may view such a nonexclusive license as sufficient to ensure that the firm is able to pursue all indications for its product, although many firms seem to regard an option to acquire an exclusive license as critical. Firms seem to have little sympathy for the reticence of universities to accept these terms, noting that the basis for objection is not a core academic value such as publication, but rather a desire to establish future intellectual property rights that will permit the university to collect royalties from the firm. In the words of a lawyer for a pharmaceutical firm, "if universities are in competition with us, rather than simply out to publish their research results, why should we go along with that?"

Another major risk associated with providing potential pharmaceutical products to academic researchers is loss of control over how the compound is used and what is done with it, with the potential for generating and disclosing data that could create problems for the firm in seeking FDA approval. Many pharmaceutical firms are so concerned about this particular risk that they simply will not make compounds for which they are seeking FDA approval available for use outside their own clinical testing protocol.

Biologicals and drug targets as research tools.

The risks to a firm from facilitating future discoveries by universities are more complex when the research tool is not a patented therapeutic product, but a molecule (such as a receptor) that plays a role in a disease pathway that is not yet fully understood. Many major pharmaceutical companies feel that the use of a drug target as a research tool should not trigger a royalty obligation on products identified through use of the target. But many biotechnology firms see drug targets and assays developed from them as their end products, and pharmaceutical firms as their customers.

A firm that has expended considerable resources to identify a molecule that gives it or its customers a significant competitive advantage in the search for therapeutic products is likely to regard the molecule as an important proprietary discovery. Yet if the ultimate therapeutic product is not covered by a patent on the molecule itself, the firm will quickly lose its competitive advantage if the product is discovered elsewhere through use of the molecule as a research tool. A nonexclusive license to new uses may also be of little value in such a situation. Some firms will simply keep the proprietary molecule for their own exclusive use, or perhaps share it with commercial collaborators. If the firm makes the molecule available to a university scientist, the only way to ensure that it is not undermining its own proprietary advantage may be to secure some form of reach-through rights to future discoveries.

Broad spectrum research tools.

The battle over reach-through rights appears to be most contentious in the terms of access to broad spectrum research tools that are neither therapeutic end products nor biological materials created to facilitate the search for products directed against particular diseases. These research tools, which may include new techniques, databases, instruments and reagents, are useful in pursuing a wide range of research problems, and could potentially aid in the discovery a wide range of future products. Although some of these future products may require ongoing use of the tool in the later stages of development or commercial production, many will not. The research tools themselves may have been costly to develop, and they may have a significant market among private firms for research use.

It is not obvious how to profit from such a research tool while making it available at little or no charge to NIH-funded investigators. If the claims of the patent are broad enough to cover future products arising from its use, as was the case for the Cohen-Boyer patents on fundamental recombinant DNA techniques, it may be possible to make the technology freely available for use in research, while collecting royalties on resulting commercial products. But if a significant part of the value of the technology lies in facilitating discoveries that fall outside of its claims, the only opportunity to capture that value is in the terms of license agreements covering use in research. Some users might be willing to pay a substantial up-front fee for access to the tool, but that strategy might place the tool beyond the reach of nonprofit research institutions and small firms.

An alternative strategy that seems to be increasingly common in agreements with users that cannot pay a substantial up-front fee is the use of reach-through provisions that give the provider of the tool either ownership, license rights or royalties in future discoveries made by the recipient. In effect, this approach calls for payment in future intellectual property rights or royalties on future products in lieu of cash. The primary motive for these reach-through provisions appears to be to obtain something of value for the firm in exchange for the contribution of a valuable asset. Recognizing that most academic users will not discover anything of commercial value, the owner of the tool seeks to recover a substantial profit in the rare case when a valuable discovery is made in order to cover the costs of all the other, unprofitable transfers.

A major risk that arises for the owners of such research tools when they make them available to academic researchers is that they will undermine sales to paying customers, who will use the data generated by the academic researchers rather than buying the tool for use in their own internal research. Firms seek to control these risks by maintaining control over release of data and future intellectual property rights.

Importing research tools from universities.

If there was one point on which virtually every private firm that we spoke to was in agreement, it was that universities take inconsistent positions on fair terms of access to research tools depending on whether they are importing tools or exporting them. Over and over again, firms complained to us that universities "wear the mortarboard" when they seek access to tools developed by others, yet they impose the same sorts of restrictions when they enter into agreements to give firms access to their own tools. As one lawyer for a small biotechnology firm put it,

"Universities want it both ways. They want to be commercial institutes when it comes to licensing their technology, but to be academic environments when it comes to accessing technology that others have developed.... They throw the same things in the way of small companies."

A related complaint was that it is unfair for universities to charge private firms for access to research tools that they would provide free of charge to academic researchers. Scientists in private firms feel that they should be no less entitled than their university counterparts to put the tools created through NIH-funded research to work in their own laboratories.

Many firms complained that universities overestimate the value of their tools and underestimate the other costs and risks associated with commercial product development. The result is excessive demands for both up-front payments and reach-through royalties. Firms also complained that universities underestimate the time line for developing commercial products and therefore impose unrealistic diligence obligations.

Several firms expressed concern that universities have distorted the spirit (and perhaps the letter) of the Bayh-Dole Act to the point that their focus on generating revenues from technology transfer is getting in the way of widespread dissemination of research tools. Some were sympathetic to the interest of universities in finding new sources of research funding, but many were sharply critical of "greed" on the part of universities and a lack of appreciation of the total costs and risks associated with product development.

Another recurring observation was that universities are unduly slow and cautious in negotiating each deal, and that they thereby limit the number of deals that they are able to do and discourage many firms from doing business with them. Some firms attributed this problem to understaffing or inexperienced staff in university technology transfer offices. Many firms complained that university technology transfer professionals do not understand business and do not know how to do deals, that they worry more about maximizing returns to the university in the unlikely event of a blockbuster product than about concluding each deal quickly and moving on to the next one. Several people noted that technology transfer offices have a conservative orientation. One attorney for a biotechnology firm observed that "they would rather pass up ten good deals than make one mistake."

A number of specific licensing practices of universities drew criticism. Many companies complained about universities granting exclusive licenses for government-funded research tools, arguing that such tools should be made broadly available on "reasonable" terms. One firm that has long taken the position that research tools should be licensed nonexclusively noted that universities seem to be coming around to this view, although another major pharmaceutical firm observed a growing problem of universities granting exclusive licenses on research tools to firms that refuses to grant sublicenses.

Another practice that was roundly criticized, especially by pharmaceutical firms, was the demand for shared ownership of future discoveries and reach-through royalties on future products. Some biotechnology firms might prefer to agree to a reach-through royalty in lieu of a steep up-front fee, perhaps hoping to transfer the future royalty obligation to a pharmaceutical firm if and when a potential end product comes into view. But stacking royalty obligations can make a significant dent in the profit expectations of firms that might develop and market the end products themselves, thereby undermining the commercial attractiveness of potential products.

Many firms noted that universities vary widely in their sophistication and experience in technology transfer and the quality of the people that they assign to the job. A number of people expressed frustration that university technology transfer offices put routine license agreements and MTAs on the back burner while they pursue transactions that they believe are more likely to be lucrative, when in fact their priorities should be reversed in the interest of expediting research. These agreements might be processed more expeditiously if they were promptly referred to able, experienced people with authority to negotiate their terms.

Virtually every firm that we spoke with believed that restricted access to research tools is impeding the rapid advance of research and that the problem is getting worse.


ANALYSIS OF NIH OPTIONS UNDER CURRENT LAW

NIH has multiple roles in biomedical research that suggest a number of options for facilitating the dissemination of research tools. Through its intramural research program, NIH is an end user of research tools as well as a leading producer and supplier of new tools. As a sponsor of biomedical research in extramural laboratories, NIH has an interest in how its grantees and contractors obtain research tools from other institutions and how they disseminate the tools created in NIH-funded research. As an agency of the Federal government, NIH may invoke additional legal authorities for advancing its interests related to research tools. Existing law also restricts NIH's authority in certain respects. NIH has considerable authority over how it manages its own intellectual property rights and what agreements it enters into to acquire research tools for use in its intramural programs. NIH's authority over the activities of grantees is somewhat more constrained, and its authority over privately-funded activities is more limited still.

A full discussion of the options available to the NIH to improve access to research tools is at Appendix D. The following is a brief index of the options discussed.

Intramural Authorities

Grants Authorities

The Bayh-Dole Act

Other Authorities

In summary, NIH has numerous legal authorities available to improve access to research tools. The exercise of some may be welcomed by the extramural community and viewed as a positive source of guidance. The exercise of others may be perceived as extreme, and may implicate other issues with far-reaching and perhaps unpredictable consequences.


RECOMMENDATIONS

The growing difficulties encountered by scientists in gaining access to proprietary research tools reflect cautious and perhaps short-sighted responses of institutions and individuals involved in biomedical research to complex and shifting currents. These underlying currents, which include evolutionary shifts in the patent law, the Bayh-Dole Act, the missions of universities, the strategies of private firms, and the relationship between public and private research funding, are not directly controlled by NIH. Efforts on the part of NIH to alter the underlying currents - for example, by proposing changes to the patent laws or the Bayh-Dole Act - would certainly be divisive and might well be unsuccessful. Nonetheless, NIH is a major player in biomedical research, and other players cannot ignore the course that it steers.

After some discussion, the members of the Working Group have concluded that the best course for NIH to follow at this time is to use its influence and authority to guide other institutions involved in biomedical research as they respond to the shifting currents. This is partly a matter of education and appeals to enlightened self-interest, and partly a matter of using more aggressively the considerable powers that NIH holds under existing law.5

More specifically, we recommend the following steps:

  1. NIH should promote free dissemination of research tools without legal agreements whenever possible, especially when the prospect of commercial gain is remote.

    Many impediments to the prompt dissemination and utilization of research tools result from efforts on the part of providers of research tools to preserve a share of potential financial gains from research that is far removed from the development of commercial products. When the prospect of financial gain is remote, as is often the case for research tools generated in the course of NIH-funded research in nonprofit institutions, it hardly seems worthwhile to restrict their use by rationing access to them and delaying their transfer pending the negotiation of agreements. The use of restrictive agreements seems particularly senseless in transactions between nonprofit institutions over research tools created with government funds. These institutions have no duty to return value to shareholders, and their principal obligation under the Bayh-Dole Act is to promote utilization, not to maximize financial returns. It hardly seems consistent with the purposes of the Bayh-Dole Act to impose proprietary restrictions on research tools that would be widely utilized if freely disseminated. Technology transfer need not be a revenue source to be successful.

  2. NIH should promote use of the UBMTA and the development of other standard agreements to reduce the need for case-by-case review and negotiations.

    Institutions in both the public and private sectors report significant delays in the transfer of research tools arising from backlogs in reviewing and negotiating the provisions of license agreements and MTAs. Such delays could be avoided through the use of standard agreements that have been preapproved by both institutions. Such an agreement exists for transfers between nonprofit institutions in the form of the Uniform Biological Materials Transfer Agreement (UBMTA). But although many universities have approved the terms of the UBMTA, most continue to use their own form agreements in routine transactions. NIH should consider implementing regulations that make use of the UBMTA the rule rather than the exception for transfers of research tools generated with NIH funding, while recognizing that the UBMTA was only intended to cover most, and not all, such transfers. Such regulations might, for example, provide exceptions for resources that are licensed to companies for the express purpose of manufacture and sale to the research community.

    If the UBMTA is unsuitable for routine use, another form should be developed that better meets the needs of nonprofit institutions. It might, for example, be useful to modify the UBMTA to ensure that potential commercial uses of patented unique research resources are preserved.

  3. NIH should develop and disseminate guidelines for recipients of NIH funds as to what terms are reasonable in licenses and MTAs, addressing both importing of research tools owned by other institutions and exporting of research tools created with NIH funds.

    Negotiations between providers and users of research tools are repeatedly stalled over a small number of contract terms governing publication, disclosure and future intellectual property rights. Often these negotiations are complicated by confusion on the part of both nonprofit institutions and private firms as to the requirements of the Bayh-Dole Act and the responsibilities of institutions that receive NIH funds. Guidelines from NIH might help the negotiators to reduce the number of iterations required to arrive at mutually agreeable terms.

    We have prepared a draft set of Guidelines that are appended to this report as Appendix I. Our draft includes basic guidelines that identify the interests of NIH in publication, dissemination of research tools, ownership and licensing of inventions made with NIH funds, and preservation of incentives for commercial development, followed by guidance to recipients of NIH funds as to how these interests might be affected by the terms of agreements. We then set forth a number of specific suggestions for how to minimize administrative impediments to research in importing and exporting research tools.

    NIH might want to consider modifying the proposed guidelines in a number of ways, including: (1) providing a more extensive discussion of the rights and obligations of recipients of NIH funds with respect to the dissemination of research tools in light of the goals and provisions of the Bayh-Dole Act; (2) adding guidelines about when it makes sense to patent research tools and when the goals of the Bayh-Dole Act might be better served by disseminating them under MTAs or making them freely available in the public domain; (3) adding guidelines about research tools created in research that commingles NIH funding and funding from another source; (4) specifying additional requirements of the Bayh-Dole Act that need to be addressed in the terms of agreements, such as U.S. manufacturing requirements and retained government rights; and (5) supplying model terms for agreements. Our draft guidelines are by no means exhaustive, but we have attempted to address the primary difficulties that have come to our attention in our investigation of problems of access to proprietary research tools.

  4. NIH should review its policies with regard to dissemination of research tools generated under its intramural and extramural funding, and revise and strengthen those policies consistent with the recommendations in this report.

    Specifically, the NIH should consider: 1) developing a standard "term and condition" for grants requiring that recipients provide the NIH with samples of unique research resources upon request to facilitate the government use license; 2) replacing the current "encouragements" to recipients to disseminate unique research resources with stronger requirements to the same effect; 3) revising its policies with regard to election of title under the Bayh-Dole Act to ensure that NIH elects title to unique research resources and takes necessary action to ensure that the research community is not blocked from using such resources, including dedication to the public domain or deposit in an appropriate repository; 4) using its "exceptional circumstances" authority for particular funding agreements where the purpose of the grant is to generate unique research resources. NIH should also consider less intrusive means of ensuring appropriate dissemination, such as consultation with potential recipients to obtain dissemination plans or negotiating mutually agreed upon terms and conditions of the funding agreement.

  5. NIH should promote the establishment of a research tools forum for the biomedical research and development community

    The Working Group detects widespread agreement across the segments of the biomedical research community that the current trend toward the protection by both for-profit and non-profit entities of intellectual property rights in research tools has resulted in burdensome review and negotiation of agreements in connection with transferring or licensing a wide range of research tools. Even when negotiations are successful, the process has the undesirable effect of slowing the pace at which parties can pursue their scientific objectives. In extreme cases, when negotiations fail, the parties may be blocked from pursuing their objectives entirely. All segments also seem to agree that the stacking of intellectual property obligations as successive tools are used in the course of an extended research project has the potential to impede or even preclude the development of new and better diagnostic and therapeutic products.

    Despite this general agreement that current practices have had certain undesirable results, there appears to be no consensus on what is wrong with current practices and what should be done about them. Indeed, scientists, university technology transfer officials, and private firms express sharply divergent views as to the source of the problems that they all recognize. Moreover, because many issues relating to the transfer of research tools implicate core values of each of these groups, views are not only sharply divergent but very firmly held. These factors make it difficult to fashion mutually acceptable resolutions, even though the problems are evident to all concerned.

    Nevertheless, we believe that current trends pose a serious threat to the best interests of the biomedical research and development community as a whole. The gravity of this threat is sufficient to warrant the participation of all segments of the community in the very difficult task of developing a set of mutually acceptable general principles to guide the community in the transfer of research tools.

    The Working Group therefore recommends that the NIH strongly encourage the creation of an independent Research Tools Forum (RTF). The RTF would include experienced representatives of the various affected groups within the biomedical research community, including scientists, university technology transfer professionals, the NIH, and private firms. The initial task of the RTF would be to establish and disseminate a set of general principles for valuing, protecting, and distributing research tools on equitable terms. These guiding principles, which must acknowledge and take into account the legitimate expectations of the affected parties, would establish community norms by which parties can evaluate their own and others' behavior.

    After establishing these guiding principles, the RTF's mandate would be to 1) educate institutions (both non-profit and for-profit) and scientists about these principles and the means by which they might be implemented in particular situations and transactions; 2) explore mechanisms for streamlining the administrative burdens associated with gaining access to research tools, including the development of standard agreements, cross-licensing arrangements and patent pools; 3) provide a mediation resource for parties seeking to resolve disputes over the value of a research tool or the terms under which it should be transferred; and 4) bring to the attention of the biomedical research and development community practices that clearly violate the spirit of the guiding principles.

    The constitution, organizational framework, financial support mechanisms, resource requirements, and modes of action of the RTF remain to be defined. The sense of the Working Group is that the RTF would have a very difficult task but, if successful, it would provide an invaluable service to all segments of the biomedical science community.



5 Two members of the Working Group, John Barton and Douglas Hanahan, would, in contrast, go further. Their position is based on the judgment that the research and commercialization issues discussed in the text arise as much from the way in which standards of patent law have been applied in the biotechnology area as they do from the terms of MTAs and license agreements. The development of specific recommendations for appropriate ways to finetune and improve the patent system in biotechnology would require analysis by a group more broadly based than this Working Group. Examples of issues that might be further considered are standards for nonobviousness, criteria for defining the appropriate scope of patent claims, the design of better mechanisms to review the scope of claims, the interpretation of the utility requirement, and clarification of the research exemption. These two members therefore believe that the Working Group should make an additional recommendation calling for such an analysis, perhaps to be conducted by a National Academy of Science panel. At the same time, they wholeheartedly endorse the recommendations of this report.

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