BioPharm International - October 2021

BioPharm-October 2021-Regulatory-Sourcebook

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Page 26 of 33 October 2021 eBook BioPharm International 27 federal government in all cases retains "a nonexclusive, nontransferable, irrevoca- ble, paid-up license to practice or have practiced for or on behalf of the United States any subject invention throughout the world." In the event that the con- tractor elects not to retain title, it may pass to the inventors. There is an express preference for US industry for any license from the contractor to entities capable of commercialization, except under condi- tions where no US company is willing to enter into a license (§204) (2). Section 203, regarding march-in rights, is the source of recent, albeit recurrent, controversy. This provision states that under circumstances set forth by regulation the federal granting agency has the right to "grant a nonexclusive, partially exclusive, or exclusive license in any field of use to a responsible appli- cant or applicants, upon terms that are reasonable under the circumstances, and if the contractor, assignee, or exclusive licensee refuses such request, to grant such a license itself." These "march-in" rights are limited to circumstances where the contractor fails to take "effective steps" for achieving a "practical applica- tion" of the invention; or there are health or safety concerns not satisfied by the contractor; or there is a needed public use not satisfied by the contractor; or the provisions of Section 204 preferring US industry have not been met or have been breached. Objections to the assertion of march-in rights by the federal govern- ment are heard exclusively before the U.S. Court of Federal Claims. ROLE OF NIST IN REGULATING THE OPERATION OF THE BAYH-DOLE ACT The Secretary of Commerce, pursuant to the provisions of Section §201 of the Act, has delegated to the direc- tor of NIST the authority to pro- mulgate implementing regulations under the Bayh-Dole Act. These regulations are codified in 37 Code of Federal Regulations (CFR) §400 et seq. and march-in rights regulations are found in §401.6. The relevant pro- visions inc lude a requirement for notice to the contractor and time for response (§401.6b); the mechanics of march-in involving licensing third par- ties, including a statement of reasons (§401.6c) to be given to the contractor and the field or fields where a license is contemplated by the agency and the timing thereof and an opportunity for the contractor to rebut (§401.6d); fact- finding in support of or rebutting the reasons the agency is contemplating third-party licensing (§401.6e), provi- sions for those findings to be provided in writing (§401.6f ); and a determina- tion by the head of the granting agency to license third parties (§401.6g) (3). THE NIST PROPOSAL REGARDING MARCH-IN RIGHTS The proposed rulemaking (1) is the result of a nearly three-year effort by NIST to improve federal technology transfer and the commercialization of federally funded inventions. These efforts included four public hearings, a summit hosted by NIST, and as described in the Federal Register notice "extensive consultations with inter- agency working groups responsible for technology transfer issues, and multi- ple stakeholder engagement sessions." The agency issued in April 2019 a com- prehensive assessment, NIST Special Publication No. 1234 entitled "Return on Investment Initiative to Advance the President's Management Agenda" (4). This document reviewed federal research efforts and made detailed rec- ommendations to maximize the taxpay- ers' return on investment. This NIST Green Paper outlined 15 findings related to "unleashing" American innovation, seven of which related to Bayh-Dole and were directed to "improve compliance, enhance a con- tractor's ability to commercialize subject inventions, and increase the return on investment of federal funding through new goods and services to the public." Of these findings, four are involved in the current rulemaking. Many of these involved with updating regulations to be consistent with electronic filing and other formalities. The most relevant to this discussion is the following: "Clarify § 401.6 to include a pro- vision that march-in rights shall not be exercised by an agency exclusively on the basis of business decisions of a contractor regarding the pricing of commercial goods and services arising f rom the practical application of the invention" (4). COMMENTS ON PROPOSED CHANGES The comments received by NIST during the 90-day comment period sug- gest that the proposal raises more issues than it clarifies. The agency also held a public meeting on Feb. 25, 2021, to hear testimony regarding the proposal. While there are too many comments to discuss comprehensively, certain com- mentators made relevant and informative presentations and submissions (5). Joe Allen provided a unique per- spective as a member of Senator Bayh's staff during drafting and enactment of the Bayh-Dole Act (and later director of the Office of Technology Commercialization at the Department of Commerce during implementation of the provisions of the Act). Allen explained in the comments that there is a common misunderstanding regard- ing the march-in rights provision, which was intended to be employed Regulatory Sourcebook BioBusiness There is an express preference for US industry for any license from the contractor to entities capable of commercialization.

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