When Big Brother Comes Marching In: Patent Challenges on Entrepreneurial Campuses

Senator Birch Bayh (right) with staffer Joe Allen (left) circa 1980.

Senator Birch Bayh (right) with staffer Joe Allen (left) circa 1980.

There is often the assumption that all university research is “basic” research, when in reality it is becoming increasingly common for “applied” research (that is research that seeks to provide a solution to a real-world problem) to be developed on campuses. One can simply turn to their local grocery store (Clearfield rice -Louisiana State University Agricultural Center), pharmacy (nicotine patch – University of California; anti-histamine drug Allegra – Georgetown University) or doctor’s office (CyberKnife – Stanford University) for examples of how university inventions improve our lives and the lives of the world around us.

As universities increasingly become stakeholders in a global commercial marketplace, they will encounter more and more commercialization challenges.

Marching In: Attacks on Bayh-Dole

The commercialization of university-derived technologies finds its roots in the Bayh-Dole Act of 1980. Sponsored by Senators Birch Bayh and Bob Dole, Bayh-Dole granted ownership of inventions developed using federal dollars to the institution itself, rather than the federal government. Of particular concern to both universities and licensees alike, Bayh-Dole has recently come under attack, as some are trying to highjack certain provisions to be used as a cost control measure for novel therapeutics as the cost of drugs skyrocket.

Under Bayh-Dole, the government retains some rights to the federally funded technology, and the university has to fulfill certain obligations, such as invention reporting. One such right provides a mechanism by which the federal funding agency can “march in” to direct the institution-controlled commercialization process, in specified circumstances, and require the grant of licenses to a federally funded invention. With the ever-increasing cost of drugs, some advocacy groups propose using the federal government’s march-in right as a cost-controlling measure, arguing that the high cost of therapeutics limits the availability of such federally funded inventions to the public. Opponents argue, however, that the federal march-in right was never intended to be a cost-controlling measure, but is instead intended to stimulate the commercial development of federally funded inventions.

As a major provider of research dollars for the development of innovative treatments, the National Institutes of Health (NIH) is at the center of this debate. In early 2016, 51 members of Congress urged the Director of the NIH to utilize the “existing statutory authority to respond to the soaring cost of pharmaceuticals.” As of now, the NIH maintains that the march-in right is not a cost control measure but is instead a measure to ensure federally funded inventions are made available to the public. In response to the most recent march-in request, Dr. Francis Collins, the Director of the NIH, cited the increasing sales of the prostate cancer drug Xtandi as evidence of its public availability and public use (see letter from Dr. Collins in response to Xtandi petition).

In yet another attempt to undermine Bayh-Dole, Senator Angus King proposed an amendment to the 2018 National Defense Authorization Act (NDAA) with a provision that “directs the Department of Defense to [issue licenses to] third parties to use inventions that benefited from department funding whenever the price of a drug, vaccine or other medical technology is higher in the U.S. than the median price charged in the seven largest economies that have a per capita income at least half the per capita income of the U.S.” Again, federal research dollars are being used as the platform by which advocacy groups (and politicians wanting to appease such) aim to target technologies that are developed with federal dollars in order to reign in medication costs.

Should the federal government actually march in on an exclusive license covering a federally funded technology, there will be rippling effects throughout many industries. For example, a pharmaceutical company would seriously question taking a license and investing billions of research and development dollars in a promising therapeutic compound developed with federal funds, if the federal government could march in if it believed the cost of the product to be too high. Academic institutions will also reassess the value in investing resources and energy in the commercialization process if they struggle to secure a licensee for their federally funded technologies. The biggest effect, however, will most likely be felt by the general public, as they will no longer benefit from the research their tax dollars have funded for decades, but will instead be on the hook for funding the development of once promising, but now languishing, inventions.

University technology transfer offices and SBIR/STTR-recipients alike are also keeping an eye on the fallout from a current investigation into a private, nonprofit research institution that apparently failed to meet their reporting obligations under Bayh-Dole. Cold Spring Harbor was accused of failing to disclose funding of multiple patented inventions, including multiple patents covering the drug Sprinraza. Sprinraza is the first approved treatment for Spinal Muscular Atrophy, a rare and often fatal neuromuscular disorder. What remains unknown is the result (if any) from this investigation. A challenging road lies ahead should a federal agency decide to challenge the failure to report an invention, including fact finding, oral arguments, written notices and the like, as well as the costs and human labor associated with each. However, a claim of ownership by the federal government stands to highlight the importance of proper Bayh-Dole compliance when receiving federal funds.

A Defense Against Inter Partes Review?

Entrepreneurs and established companies alike see universities as fertile grounds for obtaining cutting-edge technologies, and recent developments at the United States Patent Trial and Appeal Board (PTAB) appear to make intellectual property owned by public universities more attractive investments for commercialization efforts. For example, in recent PTAB decisions (though not precedential), the Administrative Patent Judges found that the Eleventh Amendment sovereign immunity can be invoked by public universities in inter partes review (IPR) proceedings, thus deeming such public university-owned patents immune to IPR proceedings. The PTAB looked to the Eleventh Amendment of the U.S. Constitution, which largely shields states and its actors from lawsuits in federal courts without their consent.

University technology transfer offices at public institutions have surely taken note of such decisions, as their patents are presently less likely to be the subject of costly post-grant proceeding and thus less risky (and thus more valuable) investments for licensees. Further, patents owned by state universities are stronger and more attractive to enforce. All of this is welcome news to cash-strapped university spinouts and entrepreneurs seeking new commercial opportunities, as companies founded on technology licensed from state universities should be able to focus their capital on research and commercialization efforts rather than costly patent challenges should they emerge.

However, it remains to be seen what effects, if any, the recent claims of tribal immunity by the Saint Regis Mohawk Tribe in six separate IPR proceedings (relating to the Allergan drug Restasis) will have on a public university’s claim of sovereign immunity. In the immediate wake of the claim, U.S. Senator Claire McCaskill drafted a bill aiming to curb the use of tribal immunity to block U.S. Patent and Trademark Office reviews of a patent. The one sentence bill states: 

Notwithstanding any other provision of law, an Indian tribe may not assert sovereign immunity as a defense in a review that is conducted under chapter 31 of title 35, United Stated Code.

Whether Congress uses this as an opportunity to address the broader issue of sovereign immunity as a defense against PTAB proceedings remains to be seen.


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