NIH/ADAMHA Patent Policy Board April 24, 1989 APPENDIX C FINANCIAL AND STAFFING CONTRIBUTIONS OF THE PARTIES Mr. WALGREN. Thank you very much. Each of you come from some different perspectives, I gather, all except Dr. Brewen. We've heard the GAO say that some of the agencies have said that they have not had the legal expertise to develop an active, cooperative research arrangement. Has that been the experience in your particular Federal agencies? Is that a good reason, in your view, for a lack of involvement to date in this program? Maybe I ought to address it to Dr. Schmid, and then if any others have any comments, you can feel free to make them. Dr. SCHMID. I can only report from what I gather from talking to the labs and agencies, since we're not a Government agency, per se. I guess my impression is that if you want to stop from going into cooperative research agreements because you don't have the expertise to do it, that provides a reason. I think I tried to make the point that I see situations where the lack of regulations and so on are used as an opportunity to develop the procedures that are necessary to implement it. I think the Consortium provides a useful mechanism whereby we can help those people, without the right terms and clauses and that sort of thing, to get that from those who have that advice. And so that by networking and interacting with those that have the experience to do it, provide those that can gather the experience from those people. Mr. WALGREN. Well, it would seem that if you have a pretty extensive clearinghouse operation, there should be lots of legal models around to choose from, and little reason to say that they don't have the expertise within the agency to deal with that kind of thing. Dr. SCHMID. That's right. They have to be motivated, of course, to ask for that expertise. We are in the process of collecting various model sorts of agreements that we can provide people in those situations. The National Institute of Standards and Technology, of course, is a good example of having lots of different types of agreements related to partnerships and that sort of thing with industry, and they have made those available to us so that we can just, you know, give them out to others that would like to see them as well. Part of our first model demonstration experiment, the one where by the law we're obligated to provide some funding for these demonstrations, that first one also provided, in a software way, related to licensing model sort of statements and so on. So there are mechanisms whereby that sort of information can be transferred as well. Mr. WALGREN. This effort is not new in-the Federal laboratory consortium has existed for 18 years. Certainly the Monmouth operation has been active for years, as has the agricultural groups. Can you comment on any of the difficulties that prevented development in the past that still remain? What sort of-We've had some positive testimony about how things can happen. What are the difficulties that still face the development of more active, cooperative research in particular, I think. Mr. Stern, would you respond to that? Mr. STERN. Yes. I think most of the barriers have been removed now. We have delegation of authority and we have interim guidelines. But one thing I see hovering in the future is not the lack of expertise in a legal counsel office but lack of personnel. We have a backlog of nearly a hundred invention disclosures just from our laboratory alone. We produce about 27 inventions-patents a year, and we have a backlog. We have three people on the legal staff. The average age is 61. So you can see what's going to happen in a few years, and there aren't new people coming into the legal for many different reasons, in the Government legal staff offices. So this is a problem that's going to come up. Initially, we had to have a shift. It took a number of months for the legal staff to shift into the tech transfer mode, to put lawyers into this area of working on CRDA's and patent licensing and so forth and so on. That's well taken care of. But the lack of personnel and a worsening of that situation in the future is going to hamper us. Mr. WALGREN. Are there other comments on the difficulties that you still face in the Agricultural Service, NIH? I appreciate your having raised computer software and the inability, as I understand it, to copyright that. Is that a factor that you all would like to see brought under this umbrella? Is there any disagreement on that? And would that be felt to be a substantial activity? Dr. ADLER. Well, speaking for the NIH, it would be a very welcome addition to our technology transfer efforts. If I might just mention, for us at NIH, it was very, very helpful to develop a policy statement that we distributed to industry as well as circulated in our own house, that explains positions on treatment of confidential information from companies, what time periods there are to publish the results of research, reviews for patentability matters as well, and that document, I think, has expedited our approval. Just as a logistical matter, without these sort of standardized policies and forms, just to review individual documents crafted by the attorneys at numbers of outside companies takes a great deal of time and does so at different levels of review. So for us, it was almost-let me not exaggerated-it was very, very helpful to have a standardized form in terms of putting the word out about our policy and approaches to different matters. Our rate-limited step, I think, was simply reviewing documents in the past. Mr. WALGREN. Thank you very much. The Chair recognizes the gentleman from California, Mr. Campbell. Mr. CAMPBELL. Thank you, Mr. Chairman, and thank you for holding these hearings. I have a question directed particularly to Dr. Adler and Mr. Stern, but the other panel members might be able to comment on it. I've spent a fair amount of time dealing with the consortium issue from the point of view of high technology in particular. My district represents Silicon Valley and EPRI, in particular. And the following scenario has been described to me. I wonder if you could tell me whether it's been true in your experience or not. And that is that some consortia get the second-best idea from independent industry, not their first-best idea. That is to say, not the ideas you develop on your own, but those that come in from commercial industry might be not the very first best because of the risk that, if it is given to a consortium, it would then have an obli gation to be shared with other companies, and they might lose the advantage of the market-leading technology. Whereas the secondbest idea, fine. If they get a free ride, somebody else develops it, we'll all share in it. This scenario intrigues me, and I'll address it particularly to Dr. Adler, because it was described to me as being true in the area of AIDS research, that some pharmaceutical companies were holding back on what might be their very most prominent idea because, much as everyone would like to see a cure for that disease as quickly as possible, there is a commercial aspect that you don't want to give your absolute best idea to somebody who might then beat you to the commercialization of it. All right. That has been described to me. It's an intriguing theoretic possibility. I would like to have your insight as to whether it's a realistic fact. Dr. ADLER. I can't give you statistics on that, but I can respond somewhat anecdotally. For some companies, the CRADA research project is essentially all the research the company does, and this tends to be some of the smaller, biotechnology companies or newer companies. For some of the larger companies, I don't believe that the quality of our collaborative research project is a second-tier project, but it may or may not be the crown jewel research project of the company. And there is a fear on the part of many companies, particularly expressed by the Pharmaceutical Manufacturers Association, for instance, that relates to the rights and inventions that are retained by the Government. The FTTA talks about reserving the right of a non-exclusive, royalty free, worldwide license for Government purposes, and some of the companies are concerned that this language has not been well characterized in the courts or the legislative history, and they, frankly, are a little bit leery about entering into a project with an agency that also funds health care and is concerned about pricing, et cetera, when there is somewhat of a nebulous grant of rights that the Government reserves. Mr. CAMPBELL. Thank you. Mr. Stern, do you have any observation on that point? Mr. STERN. No, not really. We don't have that second-best situation. A lot of the companies we deal with are small businesses initially and we get good innovators there and we don't have that situation, really. Mr. CAMPBELL. I take it your members would be more like the first group that Dr. Adler described Mr. STERN. Yeah. Mr. CAMPBELL. -those who view your consortium as the way in which they'll do research. Mr. STERN. Right. Mr. CAMPBELL. Fine. The context in which I had this described to me was the second group that Dr. Adler identified, where you have a large company that could do its own research as well and chose to put particular projects into a consortium and withhold others. Would the other doctors have any comment on this? Dr. BREWEN. I would like to make a comment on two points. One, the concept of the second-best idea, our consortium, of course, |