Inside Higher Ed, DC
10-25-07
Patent Reform and University Research
With Congress weighing legislation that would alter federal laws governing the
process of patenting inventions, including the fruits of university research, there
might have been any number of reasons why the Senate Judiciary Committee
would hold a seemingly broad-based discussion like the one it scheduled
Wednesday afternoon, entitled “The Role of Federally Funded University
But as the discussion unfolded, it became clear that there was a very specific
explanation for the hearing — an effort by one prominent senator to draw
attention to the plight of one of his constituents, Iowa State University. Sen.
Charles Grassley (R-Iowa) was not shy about thanking the committee’s
Democratic chairman, Sen. Patrick Leahy of Vermont ("You said you’d hold a
hearing, and you always keep your word") for essentially concocting a framework
in which Iowa State officials could balk at a provision in federal patent law that
requires nonprofit entities that operate federally owned labs to return funds to the
government if the royalties they earn on federally licensed inventions exceed 5
percent of their annual budget.
Ames Laboratory, an Energy Department lab that Iowa State operates for the
government, is the only such lab that has ever hit the threshold, paying the U.S.
Treasury $1 million in 2006 because of its success in licensing the rights to a
lead-free solder that was developed in part by researchers at the lab.
With encouragement from Grassley, Elizabeth Hoffman, executive vice
president and provost at Iowa State, testified at Wednesday’s hearing that the
5 percent limitation unfairly affects small labs like Ames, while mammoth labs like
Sandia National Laboratory, its partner on the solder research, never get close to
the 5 percent threshold because their operating budgets are so much larger. She
urged lawmakers to amend the Bayh-Dole Act — the 1980 law that set the
guidelines for how nonprofit institutions have retained title to inventions resulting
from federally funded research, filed patents and sold licensing rights to small
businesses and corporations — by raising that threshold to 15 percent for
“government-owned, contractor-operated” labs with annual budgets of under $40
million.
“Any such limitation must not discriminate against only a portion of governmentowned, contractor-operated, nonprofit entities,” she said. “Certainly, it should not
have an inequitable impact on a single, small and successful national laboratory.”
While Grassley endorsed Hoffman’s proposal — which was modeled on
legislation that has been approved by the House of Representatives and
introduced by Grassley in the Senate — Leahy, the only other senator to attend
Wednesday’s hearing, expressed skepticism about it. If Congress raises the
royalty threshold to 15 percent of a nonprofit’s budget instead of 5 percent, and
Iowa State strikes gold with another invention, “won’t you want to change [the
threshold] again?” Leahy asked.
“I hope we’re so successful,” Hoffman said. “At this point in time, we would be
happy with the 15 percent.”
“At this point ... I understand,” Leahy said with a smile.
Aside from the Iowa-centered pretext for Wednesday’s hearing, the discussion
that unfolded did not point to any major transformative changes in the Bayh-Dole
Act, even from witnesses who criticized some aspects of the law. Hoffman and
the other witness who spoke on behalf of a university, Charles F. Louis, vice
chancellor for research at the University of California at Riverside, heralded
Bayh-Dole as an “inspired piece of legislation,” as Louis put it, that has helped
universities transform the financial research support of the federal government
into inventions and spinoff companies that have reaped huge benefits for
taxpayers and the country. They, echoing calls by major higher education
groups, urged Congress to take a hands-off policy and avoid any changes that
would make it harder for universities to protect their patents and the rights to their
inventions.
Arti K. Rai, a professor of law at Duke University School of Law, agreed that
there was no need for lawmakers to contemplate “a major overhaul of the current
system” by which universities patent government-funded research. But she
argued that the incentive the government gives universities to patent inventions
may not be as appropriate in all fields of research, singling out information
technology in particular as an area in which the federal interest may lie more in
having discoveries hit the market as open source applications rather than as
patented products.
“At universities, there is sometimes too much emphasis on generating revenue,”
Rai said. “Federal agencies and universities should show more sensitivity” to the
idea that certain types of research might be better developed in non-commercial
ways.
Robert Weissman, director of Essential Action, a nonprofit group that focuses on
improving access to medical treatments and drugs, among other corporate
issues, said Bayh-Dole had contributed to a situation in which medicines
invented by university researchers have been licensed by drug companies that
have priced the treatments out of the reach of many potential beneficiaries, in
America and abroad. He also argued that the commercialization of university
research, encouraged by the law, has helped create a culture of secrecy and
increased institutional conflicts of interest.
He urged government officials — though not necessarily Congress — to ensure
that the federal government does not let inventions it has helped pay for be
priced and controlled in ways that rip off the government and its citizens, a threat
that he envisioned increasing as the government sponsors more research into
energy technologies in the coming years. “To address the frightening perils of
climate change, we will need robust, competitive and efficient energy and energy
services markets,” Weissman said. “There should be a presumption favoring
open and collaborative development models that enable market players to obtain
compensation through means other than enclosing the information commons and
monopoly pricing.”
— Doug Lederman