Proposed Framework on March-In Rights Dubbed ‘Unprecedented’ by U.S. Chamber

The National Institute of Standards & Technology (NIST) and the Department of Commerce today published a draft version of a Federal Register Notice seeking comments on a proposed framework for deciding whether and when to exercise march-in rights under the Bayh-Dole Act that would significantly broaden the criteria for compulsory licensing of patented technology developed with federal funding.

While Bayh-Dole contemplates march-in rights, the law strictly limits the situations in which they can be exercised and does not make any reference to pricing as a criterion for marching in. But under the proposed framework, an agency may consider “[a]t what price and on what terms has the product utilizing the subject invention been sold or offered for sale in the U.S.” and whether “the contractor or licensee [has] made the product available only to a narrow set of consumers or customers because of high pricing or other extenuating factors”.

The agency may also consider whether “the contractor or licensee has provided any justification for the product’s price or background on any extenuating factors which might be unreasonably limiting availability of the subject invention to consumers or customers”.

This language prompted a statement from the U.S. Chamber of Commerce today calling the implications of the framework “government confiscation” and accusing the Biden Administration of making the “unprecedented decision to seize certain drug patents.”

The Chamber’s Executive Vice President and Chief Policy Officer Neil Bradley said the following:

“The Biden administration’s conclusion that they have the authority to seize patents for certain medicines not only contradicts the law, it contradicts the conclusion of prior Republican and Democratic administrations. This move will result in fewer medical breakthroughs, ultimately hurting patients.

“Let’s be clear, seizing patents is a confiscation of property. If patents for medicine are seized today, what property will the government seize tomorrow? The Chamber will use every tool at our disposal to stop the Administration from destroying America’s ability to discover the next breakthrough treatment or cure.”

NIST published a Final Rule on the regulations that support Bayh-Dole in March of this year, but did not adopt a proposed change that would have prohibited the use of march-in rights “on the sole basis of pricing.”

As IPWatchdog authors have reported previously, and today’s draft FRN concedes, the march-in provision has never been exercised in the history of the Bayh-Dole Act. But the new framework would make it easier to do so by encouraging agencies to consider additional factors.

The FRN includes seven hypothetical scenarios in which agencies might consider march-in a viable option, including when prices have jumped considerably.

IPWatchdog author Joseph Allen, who was integral to passage of the Bayh-Dole Act as a staffer for Senator Birch Bayh (D-IN) at the time, has explained that neither Senator Bayh or the Act’s co-sponsor, Senator Bob Dole (R-KS), intended for the march-in provision to be exercised due to pricing. Allen wrote in 2021:

“Twenty years after Bayh-Dole’s enactment, its opponents claimed to have discovered a previously hidden meaning in the law giving the government price control authority. When that argument appeared in The Washington Post, it was immediately rejected by Senators Bayh and Dole who replied in “Our Law Helps Patients Get New Drugs Sooner:”

Bayh-Dole did not intend that the government set prices on resulting products. The law makes no reference to a reasonable price that should be dictated by the government. This omission was intentional…

In a NIST press release issued today, U.S. Secretary of Commerce Gina Raimondo said the draft guidance and request for comment is meant to solicit “continued stakeholder input to ultimately provide greater clarity on march-in rights and maintain a balance between incentivizing companies to innovate and making sure those innovations serve the American people.”

U.S. Secretary of Health and Human Services Xavier Becerra was slightly more explicit in his view that march-in rights should be used as a tool to ensure fair pricing:

“March-in authority is one powerful tool to ensure that the American taxpayer is getting a fair return on their investment in research and development. Today’s call for comments is an opportunity to better understand how march-in authorities can impact price and better promote equitable access to prescription drugs. The feedback received will help us build a framework that increases access to high-quality, affordable health care for all Americans.”

Allen, who is also Executive Director of the Bayh-Dole Coalition, said in a statement today that the Coalition “is saddened by the Biden administration’s proposed framework for march-in use” and that “it casts a shadow of uncertainty over America’s innovation system.”

Today’s announcement also got an icy reception from the Council for Innovation Promotion (C4IP), which was formed in 2022 to educate on the importance of innovation to the U.S. economy and to help counter the often-negative public narrative about the role of IP in access to innovation.

Frank Cullen, C4IP executive director, said that “C4IP vehemently opposes the Biden administration’s attempt to misuse the Bayh-Dole Act to impose price controls on groundbreaking inventions,” calling the proposals “a grave threat to American innovation, precisely at a time when we need more innovation to compete with China and others challenging our technological lead.”

C4IP’s statement also said the proposed framework “contravenes the plain text of the law” and “runs counter to the explicit intent of Bayh-Dole’s authors and decades-long bipartisan consensus on the appropriate limits of government intervention through march-in.”

NIST will host an informational webinar on Dec. 13, 2023, to “walk through the framework and explain the type of feedback being sought.” The 60-day comment period closes on February 6, 2024.

IPWatchdog will provide further analysis of the FRN in the coming days.

This article has been updated since publication with statements from C4IP and the Bayh-Dole Coalition.