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43–657 PDF 2008

S. HRG. 110–470 

THE ROLE OF FEDERALLY FUNDED UNIVERSITY 

RESEARCH IN THE PATENT SYSTEM 

HEARING 

BEFORE THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

OCTOBER 24, 2007 

Serial No. J–110–58 

Printed for the use of the Committee on the Judiciary 

( 

(II) 

COMMITTEE ON THE JUDICIARY 

PATRICK J. LEAHY, Vermont, Chairman 

EDWARD M. KENNEDY, Massachusetts 

JOSEPH R. BIDEN, JR., Delaware 

HERB KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

BENJAMIN L. CARDIN, Maryland 

SHELDON WHITEHOUSE, Rhode Island 

ARLEN SPECTER, Pennsylvania 

ORRIN G. HATCH, Utah 

CHARLES E. GRASSLEY, Iowa 

JON KYL, Arizona 

JEFF SESSIONS, Alabama 

LINDSEY O. GRAHAM, South Carolina 

JOHN CORNYN, Texas 

SAM BROWNBACK, Kansas 

TOM COBURN, Oklahoma 

BRUCE A. COHEN, Chief Counsel and Staff Director 

MICHAEL O’NEILL, Republican Chief Counsel and Staff Director 

(III) 

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page 

Grassley, Hon. Charles E., a U.S. Senator from the State of Iowa ..................... 2 

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont .................... 1 

prepared statement .......................................................................................... 107 

WITNESSES 

Hoffman, Elizabeth, Executive Vice President and Provost, Professor of Economics, Iowa State University, Ames, Iowa ...................................................... 6 

Louis, Charles F., Vice Chancellor for Research, University of California, 

Riverside, Riverside, California .......................................................................... 10 

Rai, Arti K., Professor of Law, Duke University School of Law, Durham, 

North Carolina ..................................................................................................... 4 

Weissman, Robert, Director, Essential Action, Washington, D.C. ....................... 8 

QUESTIONS AND ANSWERS 

Responses of Elizabeth Hoffman to questions submitted by Senators Leahy, 

Grassley and Hatch ............................................................................................. 24 

Responses of Charles Louis to questions submitted by Senators Hatch and 

Grassley ................................................................................................................ 41 

Responses of Arti K. Rai to questions submitted by Senators Leahy, Hatch 

and Grassley ......................................................................................................... 59 

Responses of Robert Weissman to questions submitted by Senators Grassley 

and Hatch ............................................................................................................. 64 

SUBMISSIONS FOR THE RECORD 

Biotechnology Industry Organization, Washington, D.C., statement .................. 71 

Gulbrandsen, Carl E., Managing Director, Wisconsin Alumni Research Foundation, Madison, Wisconsin, statement .............................................................. 77 

Harkin, Hon. Tom, a U.S. Senator from the State of of Iowa, prepared 

statement .............................................................................................................. 92 

Hoffman, Elizabeth, Executive Vice President and Provost, Professor of Economics, Iowa State University, Ames, Iowa, statement and attachments ...... 94 

Latham, Hon. Tom, a Representative in Congress from the State of Iowa, 

letter ...................................................................................................................... 108 

Louis, Charles F., Vice Chancellor for Research, University of California, 

Riverside, Riverside, California, statement ....................................................... 110 

Rai, Arti K., Professor of Law, Duke University School of Law, Durham, 

North Carolina, statement and attachments ..................................................... 126 

Weissman, Robert, Director, Essential Action, Washington, D.C., statement .... 158 

(1) 

THE ROLE OF FEDERALLY FUNDED UNIVERSITY RESEARCH IN THE PATENT SYSTEM 

WEDNESDAY, OCTOBER 24, 2007 

U.S. SENATE, COMMITTEE ON THE JUDICIARY, Washington, D.C. 

The Committee met, Pursuant to notice, at 1:40 p.m., in room 

SD–226, Dirksen Senate Office Building, Hon. Patrick J. Leahy, 

Chairman of the Committee, presiding. 

Present: Senators Leahy, Cardin, and Grassley. 

OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. 

SENATOR FROM THE STATE OF VERMONT 

Chairman LEAHY. Thank you all for being here. Senator Cardin, 

thank you, and I know that Senator Grassley will be joining us. 

As we know, universities conduct much of the research that advances our understanding of the world around us. Since the passage of the Bayh-Dole Act in 1980—and I remember that one 

well—they have played an increasingly important role in the patent system and commercializing innovation. 

Under Bayh-Dole, universities may take title to inventions developed with Federal funds, and they can retain all the profits from 

licensing those inventions, without reimbursing the Government. 

There is, of course, one exception to that rule, and that is when the 

university’s work is being done in a facility that is actually owned 

by the Federal Government. Then the university has to return a 

portion of the royalties from the invention if those royalties exceed 

5 percent of the facility’s budget. 

Iowa State University operates such a Federal facility—Ames 

Laboratory—and they showed a great deal of ingenuity and commercialization. Ames last year exceeded the 5-percent mark and, as 

a result, repaid the taxpayers nearly $1 million. They actually became the first such facility to do that. At the close of the last Congress, the House had hoped to raise the threshold to 15 percent, 

so Iowa State would not have had to make any reimbursement. 

The bill was introduced on December 8th and it was passed on December 9th. I said at the time that regardless of whether the 

threshold should be 5 percent or 15 percent, we should not make 

that kind of a step at the 11th hour, because process is important. 

It will illuminate and let the public know if we are going to make 

such substantive changes. 

So this hearing gives us that kind of process. It will give us a 

long overdue opportunity to begin an examination of the successes, 

as well as any shortcomings, of the tech transfer provisions. 

2 

In saying that, I do want to acknowledge that American research 

universities are the envy of the world. I hear about them everywhere I go in the world. Patented inventions developed at these 

universities with Federal dollars have created businesses and jobs; 

they have boosted local economies. Medicines developed there have 

saved lives. Federal taxpayers fund more than 60 percent of research at universities, however, so it is proper to ask whether the 

taxpayer is getting an adequate refund. 

At the end of the 109th Congress, I introduced the Public Research in the Public Interest Act to ensure that medical product innovations created with Federal funds were available in developing 

countries at the lowest possible cost. I imagine that will be a matter of debate here. 

[The prepared statement of Senator Leahy appears as a submission for the record.] 

We were speaking of Ames, Iowa, and as we spoke of Iowa State 

University at Ames, in walked the senior Senator from Iowa. Senator Grassley, I will yield to you for any kind of a statement you 

wish to make. Of course, Dr. Hoffman, the Vice President and Provost of Iowa State is here. 

STATEMENT OF HON. CHARLES E. GRASSLEY, A U.S. SENATOR 

FROM THE STATE OF IOWA 

Senator GRASSLEY. Thank you very much. 

Well, first of all, I appreciate your willingness to hold this hearing on the Bayh-Dole Act and include in that hearing a discussion 

of a patent issue that has been before Congress for a few years now 

concerning Iowa State University. You said you would hold a hearing, and I know you always keep your word, and you surely have 

and I think you need to know that I really appreciate that very 

much. 

This is an important hearing that you have noticed today because of the many benefits that have been derived since enactment 

of the Bayh-Dole Act. The Bayh-Dole Act promotes the utilization 

of inventions arising from federally supported research and development. This law has proven to be a very effective incentive for 

small businesses and nonprofit organizations, including universities, to collaborate in researching and developing new products 

and technology with the support of our Federal Government. Ultimately, promoting university-based innovation and technology 

transfer to industry helps boost the Nation’s economy and gives us 

a better world through new cures and inventions. 

The Chairman has assembled an impressive list of witnesses. I 

thank all of you for being present. In particular, I am pleased to 

welcome, as has already been mentioned, Dr. Elizabeth Hoffman, 

who is Executive Vice President and Provost at Iowa State University. She is going to discuss the patent issues around Iowa State’s 

concerns and the legislative fix that they would like to see in the 

Bayh-Dole Act. 

As you know, in the 109th Congress, the House of Representatives passed a bill that would have changed the royalty formula 

under Bayh-Dole for small or nonprofits because they saw a basic 

issue of fairness. I agree with that assessment. In fact, I circulated 

the same language of that bill as an amendment to a comprehenVerDate Aug 31 2005 12:13 Sep 02, 2008 Jkt 043987 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43657.TXT SJUD1 PsN: CMORC
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sive patent reform bill that was considered by the Judiciary Committee earlier this year. The change that Iowa State University is 

seeking to the Bayh-Dole law would allow for a modest increase in 

the royalty threshold for smaller budgets, thus preserving the necessary incentive for smaller institutions and laboratories to continue investing in cutting-edge research and development. 

Currently, the Bayh-Dole Act allows nonprofits to patent any 

new discoveries, sell and license the inventions, and keep a portion 

of the profits. The law places a limitation on the amount of royalty 

income that can be retained in a given fiscal year once a ceiling of 

5 percent of a Government-owned, contractor-operated laboratory 

budget has been reached. Seventy-five percent of the remaining income is paid to the U.S. treasury. The remaining 25 percent is 

shared between the laboratory and the university nonprofit. 

Unfortunately, this one-size-fits-all ceiling creates a situation 

where smaller institutions end up paying royalties back to the Government a lot sooner than institutions with much larger budgets. 

Smaller contracts should not be penalized for their successes just 

because they naturally will reach the current statutory ceiling 

much more quickly than the larger contracts of hundreds of millions of dollars. 

The bill that the House of Representatives passed last year 

would have allowed small Government-owned, contractor-operated 

labs and their affiliated universities or nonprofits to receive a fair 

percentage of revenue from successful patents that they license. 

Specifically, the legislation raises the threshold for smaller annual 

budgets, $40 million or less, from 5 percent to 15 percent for BayhDole. The bill left in place the current 5-percent threshold for budgets over $40 million. In this way, everyone would pay back to the 

Federal treasury once revenues reached a certain amount, as is appropriate. 

I know this is just one small issue in the scheme of things, but 

I do think that such a tweak to the Bayh-Dole Act will produce an 

equitable result for small entities that perform research in many 

scientific technological fields. This small but important modification in the law will allow these institutions to continue to reinvest 

in their research and educational operations, which, of course, 

greatly benefit our public. 

I look forward to Provost Hoffman’s more detailed testimony on 

this issue and how a modest change in law will improve the incentive for little people to continue reinventing in their research and 

development activities. I also look forward to all the testimony of 

witnesses on Bayh-Dole, and I ask permission, Mr. Chairman, for 

the Congressman that includes Story County and Ames, Iowa, 

where Iowa State University is, Congressman Latham, for a statement of his to be inserted in the record. 

Chairman LEAHY. Without objection, it will be. 

Senator GRASSLEY. Thank you, Mr. Chairman. 

Chairman LEAHY. Professor Rai, we will start with you. 

Did I pronounce that correctly? Is it ‘‘Ray’’? 

Ms. RAI. ‘‘Rye,’’ as in the bread. 

Chairman LEAHY. Thank you. 

4 

STATEMENT OF ARTI K. RAI, PROFESSOR OF LAW, DUKE 

UNIVERSITY SCHOOL OF LAW, DURHAM, NORTH CAROLINA 

Ms. RAI. Good afternoon, Mr. Chairman and distinguished members of the Committee. Thank you for the opportunity to speak on 

the role of federally funded university research in the patent system. 

I am Arti Rai, a law professor at Duke Law School. I have studied technology transfer issues for the last 10 years. Currently, I am 

funded by both the NIH and the Kauffman Foundation to study 

these issues in both the life sciences and in information technology. 

So my current research is examining both sides of the life sciences 

versus information technology divide that we sometimes see in debates over patent issues. 

Before I delve into the details of my testimony, let me state my 

bottom-line conclusions. 

First, although I do not think that we need a major overhaul of 

the current system, we do need to recognize that a patent and exclusive licensing model is not necessarily appropriate for all technologies. 

Second, one mechanism of ensuring that universities pay attention to the idea that ‘‘one size does not fit all’’ might involve bolstering particular provisions of Bayh-Dole that allow funding agencies to be attentive to differences between technologies. 

Third, we need to be cautious about efforts to recoup royalties 

from technology transfer efforts. I understand that the immediate 

catalyst for the hearing today surrounds this question of royalties. 

In the context of Government-owned, contractor-operated facilities, 

there is a recoupment provision. In general, however, there are no 

recoupment provisions in Bayh-Dole, so this is an important question. 

In order to understand whether we should have more or less 

recoupment by the Government, I think it is important to understand why we have Bayh-Dole and Stevenson-Wydler. Both of these 

statutes aim, one, to promote university-industry collaboration and, 

two, to commercialize federally funded research through the use of 

patents. The theory is that if federally funded research is patented, 

then private sector firms will have a powerful financial incentive 

to collaborate and to commercialize. 

For certain types of inventions, this commercialization theory 

makes a lot of sense. Drugs are the classic example. Outside of the 

life sciences, however, the importance of patents for collaboration 

and commercialization is not as clear. And even within the life 

sciences, commercialization of certain basic scientific research tools 

might be achieved through the lure of more downstream patents on 

specific applications of those tools. 

So one size does not fit all. Unfortunately, it is not clear that universities always pay attention to these differences. In fact, there 

have been some recent court cases in which it appears that the university patent did not so much aid in technology transfer as it allowed the university to extract money from an entity that had already commercialized. 

In the recently settled case of Eolas v. Microsoft, for example, 

Microsoft and various other firms did not need an exclusive license 

to commercialize the Web browser software that was the subject of 

5 

the patent dispute. Of course, one never knows how representative 

litigated cases are. Universities may generally be doing a good job, 

with these litigated cases being the exception. 

A more troubling indicator emerges from some research I have 

done which indicates that the most important predictor of the number of university software patents that are sought is simply how 

many other patents the university tech transfer office has. In other 

words, large tech transfer offices just patent a lot of what comes 

in the door. They do use a one-size-fits-all approach to their invention. And so it should come as no surprise that some prominent information technology firms are somewhat troubled by what universities are doing. 

Even so, I would not endorse taking the decision about patenting 

away from universities. The question is always a comparative one, 

and Federal agencies are not always or even generally better 

placed to make these decisions. 

There is also reason to believe that universities are beginning to 

understand that technologies differ from one another and that not 

all of them should be promoted through a patent and exclusive licensing model. 

Still, it might be worth doing some tweaking of particular provisions of Bayh-Dole and giving Federal agencies a little more authority in certain circumstances to work with the universities in 

determining situations in which one size does not fit all. 

Let me conclude by returning briefly to the issue of royalty 

recoupment. Currently, outside of special circumstances like 

GOCOs, Bayh-Dole does not provide for such recoupment. One 

might argue that the Federal Government should get a return on 

its investment. However, there is little evidence to support the idea 

that the Federal Government would be making large sums of 

money even if it did have a general recoupment provision. 

More importantly, part of the problem that I see with current 

university tech transfer efforts is that there is sometimes too much 

focus on generating revenue. I have mentioned, for example, some 

cases in the software context where these patents appear to be 

used as a mechanism for revenue extraction rather than a mechanism for promoting collaboration and commercialization. So anything that gets universities to pay even more attention to their revenue generation seems to me a bad idea. 

In sum, I think there is little reason to do a major overhaul of 

the current mechanism for technology transfer that we have. However, universities should be educated about the reality that one size 

does not fit all, and some tweaks in Bayh-Dole might help with 

that education. Relatedly, I think because we do not want universities to focus on generating revenue but, rather, on commercialization and collaboration, we should be cautious about using technology transfer as a mechanism for raising revenue. 

Thank you very much. 

[The prepared statement of Ms. Rai appears as a submission for 

the record.] 

Chairman LEAHY. Thank you. And, Professor Rai, your full statement and the appendage you had for it will be part of the record. 

I should have noted that Professor Rai is a Professor of Law at 

the Duke University School of Law, where she teaches courses in 

6 

administrative and patent law. Her publications have concentrated 

on intellectual property law, and her current research focuses on 

IP issues raised by collaborative research and development. 

Dr. Hoffman, as Senator Grassley pointed out, is the Executive 

Vice President and Provost of Iowa State. She earned her Ph.D. in 

history from the University of Pennsylvania, and a Ph.D. in economics from the California Institute of Technology. Prior to coming 

to Iowa State, Dr. Hoffman served as the 20th President of the 

University of Colorado System. I know Senator Harkin also wanted 

to be here today. He is down at a place where I am going to be 

leaving for in a few minutes, in the Senate Agriculture Committee, 

where we are trying to mark up a farm bill. I will place a statement from Senator Harkin in the record. 

Dr. Hoffman, please go ahead. 

Incidentally, I should note that at some point I will have to 

leave. When I do, I will turn the gavel over to Senator Grassley, 

who has had as much experience as I have had in handling a gavel 

and will continue the hearings. 

STATEMENT OF ELIZABETH HOFFMAN, EXECUTIVE VICE 

PRESIDENT AND PROVOST, PROFESSOR OF ECONOMICS, 

IOWA STATE UNIVERSITY, AMES, IOWA 

Ms. HOFFMAN. Thank you, Mr. Chairman, Senator Grassley, distinguished members of the Committee. I am Elizabeth Hoffman, 

Executive Vice President and Provost of Iowa State University. I 

am here first to convey our emphatic support for the Bayh-Dole 

Act. I am here also to propose a limited, technical fix that would 

eliminate a restriction we believe has an inequitable impact on 

small, Government-owned, contractor-operated laboratories—namely, the current limit imposed on retaining royalties that result from 

tech transfer activities. 

My colleague Charles Louis will address the broader benefits of 

Bayh-Dole, and we have included our support in our written testimony. I will speak to the experience of Iowa State and Ames Laboratory. 

The effectiveness of Bayh-Dole incentives can be seen in the upward trend in technology disclosures and licenses at Iowa State 

University. Technology disclosures increased from 46 per year in 

the 1970s, prior to the adoption of Bayh-Dole, to 118 per year from 

2000 to 2007. In 2005, Iowa State University was second in the Nation—behind the entire University of California System—in licenses and options with 218, and we were sixth nationally in the 

total number of active licenses, with 245. In the past 8 years alone, 

fully 20 new companies have been started on the basis of 41 licensed technologies, contributing to the economy of our State and 

our Nation. 

Now I would like to turn to look more closely at the Ames Laboratory. No better illustration of the success of Bayh-Dole can be 

found than the example of lead-free solder, a result of Federal support that has been developed jointly at the Ames Laboratory and 

Sandia National Laboratory. The research team that created this 

remarkable and remarkably marketable innovation was led by 

Ames metallurgist Iver Anderson. You are all familiar with the enVerDate Aug 31 2005 12:13 Sep 02, 2008 Jkt 043987 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43657.TXT SJUD1 PsN: CMORC
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vironmental impact of leaded solder in landfills. By removing the 

lead, we protect the environment and avoid a serious health risk. 

The so-called Iver Patent for this lead-free solder is licensed by 

Iowa State to 28 companies under very reasonable financial terms, 

and over 60 companies around the world—including a small company in Iowa—use the patent. Thus, our experience has been that 

the principles, practice, and impact of Bayh-Dole are sound. 

However, we want to discuss with you today one technical concern that we believe can have an unfair impact on small GOCO 

Federal laboratories and that has had an inequitable impact on the 

Ames Laboratory. 

As mentioned before, Bayh-Dole, as modified in 1984, limits the 

earnings from royalties for these laboratories to 5 percent of their 

annual budget; and then after reaching the 5 percent threshold, 75 

percent of additional royalties are returned to the Federal Government. All royalties retained by the contractor must be expended for 

research, education, and technology transfer purposes. 

Because of its small budget and successful patent portfolio, as 

the Senator mentioned, the Ames Laboratory is alone in the Nation 

in coming up against the 5-percent royalty cap. Last year, we returned nearly $1 million to the Federal Government, and we anticipate returning about the same amount per year for the foreseeable 

future. 

My contention today, which I respectfully offer for your consideration, is that the authors of Bayh-Dole and subsequent modifying 

legislation did not intend to incorporate a provision that would 

have a disparate and deleterious impact on the smallest of the 

DOE laboratories. Therefore, we ask you to re-examine this technical clause and to modify the limitation in accord with the spirit 

of Bayh-Dole. 

To bring home the inequitable impact of this technical limitation 

on small, successful, federally funded research centers, let me point 

out that Ames Laboratory’s partner in the development of lead-free 

solder—Sandia National Laboratory—has not had to return any of 

their royalty stream to the Government. Sandia has a much larger 

budget—$2.27 billion—as compared to Ames’s approximately $30 

million. In this successful, partnership, then, is a case illustration 

of our contention that the 5-percent royalty cap is a discriminatory 

tax on small, successful, nonprofit laboratories. Accordingly, I propose for your consideration that the royalty limitation in the House 

legislation be increased to 15 percent of the annual budget for 

GOCO contractors with annual budgets of less than $40 million. If 

the Committee, in its wisdom, feels that these exact numbers are 

not the right ones but accepts our basic argument and request for 

relief from inequitable impact, we will be immensely gratified. 

Thank you for your attention and for your leadership here in 

Washington. Thank you, Mr. Chairman. 

[The prepared statement of Ms. Hoffman appears as a submission for the record.] 

Chairman LEAHY. Thank you very much, Doctor. 

Mr. Robert Weissman is Director of Essential Action, a nonprofit 

advocacy organization that works to promote access to medicines. 

Through Essential Action, he has experience petitioning the NIH 

and other Government agencies to exercise their rights under proVerDate Aug 31 2005 12:13 Sep 02, 2008 Jkt 043987 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43657.TXT SJUD1 PsN: CMORC
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visions of the Bayh-Dole Act. A graduate of Harvard College, Harvard Law School, Mr. Weissman, please go ahead, sir. 

STATEMENT OF ROBERT WEISSMAN, DIRECTOR, ESSENTIAL 

ACTION, WASHINGTON, D.C. 

Mr. WEISSMAN. Thank you, Mr. Chairman. Thank you for inviting me to be here today. 

At the time of passage of Bayh-Dole and the years leading up to 

passage, there was even by proponents a recognition that there 

were serious risks in the proposal to enact the Bayh-Dole approach. 

There were concerns about whether the Government would get a 

fair return on its investment, about whether there would be reasonable pricing of Government-sponsored inventions and access to 

the fruits of Government-sponsored inventions. There was concern 

about windfall profits for those who gained exclusive rights to Government-funded inventions, and concern about whether those exclusive rights might lead to market concentration and anticompetitive behavior. 

The final bill included safeguards to deal with many of these concerns, not so much on recoupment but on many of the other key 

issues. Unfortunately, it has been our experience and I think the 

global experience that the Government has failed to exercise the 

safeguards that were included. 

In the area of pharmaceutical products, the result is that the 

Government uses taxpayer money to develop important new medicines. It gives away the inventions. Then the companies that take 

the federally sponsored inventions charge very high prices, pricegouge the very taxpayers that have paid a considerable part of the 

development, and even the Government itself, which is the largest 

buyer of pharmaceuticals in the world. Our experience is that even 

in the worst cases of abuse, the Government has failed to exercise 

the safeguards designed to limit these kinds of problems. 

Our organizations have requested that the National Institutes of 

Health use its rights to license inventions to the World Health Organization to enable access to cheap medicines in developing countries. That request was declined. We have requested that the Office 

of Management and Budget use the Government rights to purchase 

generic versions of pharmaceuticals that it helped develop. That request went unanswered. And we petitioned on two occasions for the 

NIH to exercise march-in rights where there were particular cases 

of pricing and market concentration abuses. 

One example involved an Abbott Laboratories product, the generic name of which is ritonavir. That is an anti-AIDS drug. It 

went on the market in 1996. The company in 2003 suddenly announced a 400-percent price increase for the drug, which would 

have made it as a stand-alone drug cost $45,000 a year per person. 

However, ritonavir’s main role is not as a stand-alone drug but as 

a booster to be used in conjunction with other pharmaceutical products. As a booster, the price went from roughly $1,500 a year per 

person to more than $8,000 a year per person. However, Abbott did 

not apply the price increase uniformly. It did not apply if the booster ritonavir was to be used in conjunction with Abbott’s own product. As a result, the combination of Abbott’s drug with this 

ritonavir booster is much cheaper than competitors in the same 

9 

class who want to combine with ritonavir. The effect is a massive 

price increase for all other medications except for the Abbott product. It has tilted buying and prescription decisions, and it has, unfortunately, limited investment by other pharmaceutical companies 

in this category of medicine because they know they cannot compete with the Abbott product. 

We petitioned in this circumstance for NIH to exercise its marchin rights. The Abbott product was developed with a high degree of 

Federal support, and the Government does have Bayh-Dole rights 

in the invention. The National Institutes of Health declined our petition. They said in their written response that Abbott was meeting 

its requirements to achieve practical application of the invention by 

simple virtue of putting the product on the market. Whatever price 

Abbott charged from NIH’s point of view was irrelevant. 

Unfortunately, NIH read out of the statute the definition of practical application, which specifies that it means putting a product on 

the market on reasonable terms available to the public. There is no 

way, in our view, that the Abbott pricing arrangement could be 

considered reasonable. It is not clear that NIH thinks it reasonable 

either. They did not address the issue at all. 

As I discuss in my written testimony, we think there are a number of reforms that should be made to the Bayh-Dole Act to address 

this and other concerns. Generally, there needs to be much more 

purposeful management of the Government’s patent portfolio and 

the products in which it holds intellectual property rights. The 

basic principle should be that there should be some reciprocity for 

the Government’s funding of R&D. It does not need to be in the 

form of royalties. Much more important from our point of view is 

the area of pricing and access. 

The requirement for reciprocity should apply in more than the 

worst-case circumstances as well. In our petition on the march-in, 

we proposed a standard that the march-in should be exercised 

where U.S. Government-funded inventions were priced more for 

U.S. consumers who paid for them than they are for other consumers in other high-income countries. Whatever is done in this 

area, we think there needs to be specific direction on the use of the 

march-in right. 

Finally, one other point. There are other areas that need careful 

investigation, as Dr. Rai suggested, besides pharmaceuticals. There 

are going to be major increases in Federal research money devoted 

to climate change-related technologies. It will be hugely important 

to consider how those resulting technologies are managed and licensed to look for ways to promote open and collaborative means 

of development rather than relying exclusively on exclusive models. 

Thank you very much. 

[The prepared statement of Mr. Weissman appears as a submission for the record.] 

Chairman LEAHY. Thank you, Mr. Weissman. 

Dr. Charles Louis is the Vice Chancellor for Research at the University of California, Riverside, holds an appointment as professor 

of cell biology and neuroscience. As Vice Chancellor, he is responsible for advancing the research mission of the university, including technology commercialization. He received degrees from Trinity 

10 

College in Ireland—the only one of my colleagues whom I know of 

that studied at Trinity is Senator Cochran. 

Mr. LOUIS. I was unaware of that. 

Chairman LEAHY. The senior Senator from Mississippi. 

He reminds me of that any time we have been in Dublin walking 

by Trinity. Dr. Louis also received a degree from Oxford University 

in England, and received his postdoctoral training at Stanford University. Doctor, the floor is yours. And as with everybody, your 

whole statement and any additional material you have will be put 

in the record as though read. 

STATEMENT OF CHARLES F. LOUIS, VICE CHANCELLOR FOR 

RESEARCH, UNIVERSITY OF CALIFORNIA, RIVERSIDE, CALIFORNIA 

Mr. LOUIS. Thank you so much. Good afternoon, Chairman 

Leahy and Senator Grassley, and thanks for this opportunity to 

speak before you today. 

Thanks to the support of Congress, I have been very fortunate 

over 25 years of continuous NIH funding to support a biomedical 

research program that has allowed me to train a large group of 

graduate students and postdoctoral fellows. I would also like to 

thank the U.S. Senate, and this Committee in particular, for its 

hard work in passing the Bayh-Dole Act almost 30 years ago, 

which first allowed universities to take title in federally funded inventions and translate them into good and useful products for the 

public. It is a privilege to be able to thank so many of the original 

sponsors of this law in person here today, including yourself, Mr. 

Chairman, because I am also an inventor of a patent with colleagues at the other Iowa University—the University of Iowa—and 

also the University of Minnesota, where I spent many years. 

According to the Economist magazine, the Bayh-Dole Act is ‘‘perhaps the most inspired piece of legislation to be enacted in America 

over the past half-century.’’ The piece goes on to state that ‘‘[m]ore 

than anything, this single policy measure helped to reverse America’s precipitous slide into industrial irrelevance.’’ 

The benefits of this Act are well recognized by our economic competitors around the world for converting early stage inventions into 

products. My written testimony documents many of the well-known 

products that have resulted from these inventions. 

Prior to Bayh-Dole, few of the federally funded patents, less than 

5 percent in 1980, were ever licensed for development, in part due 

to the Government’s prior practice of issuing only non-exclusive licenses. This practice failed to provide an incentive for a company 

to risk investing its own money in resources in commercializing a 

technology because its competitors could reap the benefits of its development efforts for free. Bayh-Dole established a consistent and 

uniform policy across agencies, allowing universities to elect to retain title in inventions created by their researchers in the course 

of federally funded research, on the condition that the universities 

diligently work with private industry to ensure that the technology 

is developed in a timely and beneficial manner. 

This shifted development of the technology from distant Federal 

agencies with little knowledge of the applicability of the invention, 

to the local university which possessed the most knowledge about 

11 

the technology and could more effectively determine what inventions to patent or not. 

While U.S. universities have a mission of conducting research 

and furthering human knowledge, they are neither positioned nor 

equipped to develop their discoveries into commercial products that 

can be used by the general public, and this is where the partnership with industry comes in. 

As a result of the Bayh-Dole Act, university technology transfer 

activities skyrocketed. More than 230 universities have technology 

transfer offices. The University of California is very proud to have 

one of the top offices in the country. Indeed, 4,300 new products 

were introduced between 1998 and 2006, with over 5,700 new spinoff companies created in the U.S. since 1980 as the result of university technology transfer efforts. 

A personal example. At the University of California, Riverside, 

Dr. David Bocian has been doing research in creating molecularscale features that can function as the circuit elements in microelectronic chips. The technology will lead to significant advances in 

memory capability, playing a key role in new generations of electronic devices, both large and small. And UC Riverside has licensed 

this technology to a startup company. 

Dr. Rai suggests that universities focus on making money, and 

many outside observers make the erroneous assumption that technology transfer is undertaken by universities to do just this. Well, 

at the University of California, Riverside, like the majority of university technology transfer offices, licensing income rarely covers 

the costs of the office. In fact, we view technology transfer in both 

the licenses we issue and the students we train as an important 

means to advance the university’s mission and serve the public interest. Universities do not have the resources to file patents on everything that is discovered by their researchers, and we have to 

pick and choose the ones which have the potential for commercialization. I would love to have so much money I had the flexibility 

to license everything that came in the door, but we have to be far 

more sensitive. 

Any policy changes that would make it harder for universities to 

engage financially in technology transfer efforts or reduce the certainty that the public currently has in a patent’s validity would 

serve to undermine the Bayh-Dole Act’s effectiveness. Any legislative or regulatory actions that increase a company’s risk or uncertainty or reduce their incentive to invest in a university’s inherently early stage technology, such action would certainly undermine the current success of the Bayh-Dole Act. The Bayh-Dole Act 

lays a solid foundation for the success of technology transfer, including elements that ensure that the public interest is preserved, 

while at the same time providing recipients of Federal funding with 

tremendous flexibility to craft the best business approach to maximize utilization of a federally funded invention. 

The Act was an inspired piece of legislation that has provided incentives and rewards for risk taking that has led to successful 

products. I am speaking for all of the University of California in 

asking the Congress to continue to nurture its success. 

Thank you. 

12 

[The prepared statement of Mr. Louis appears as a submission 

for the record.] 

Chairman LEAHY. Thank you very much, Doctor. And before I 

leave, Dr. Hoffman, you said in your testimony that the 5-percent 

limitation for small laboratories means, and I quote, ‘‘an atrophied 

incentive for innovation.’’ Has Iowa State ever decided not to commercialize an invention because it might have to reimburse a portion of the royalties to taxpayers? 

Ms. HOFFMAN. No, Senator, but much of our technology transfer 

is not through the Ames Laboratory. The lead-free solder technology is the first time that Iowa State or, as far as we know, any 

other federally funded laboratory has run up against the 5 percent. 

So we really view this as a future disincentive, especially for the 

Ames Laboratory. 

Chairman LEAHY. Well, if it gets even more successful—say the 

next time it is—say we changed it to 15 percent; and then you run 

up against the 15 percent, won’t you want to change it again? 

Ms. HOFFMAN. Senator, I hope we are so successful. At this point 

in time, we would be happy with the 15 percent. 

Chairman LEAHY. At this point. 

[Laughter.] 

Chairman LEAHY. I understand. Of course, I always ask the obvious question, and I was one of the people voting for Bayh-Dole in 

the first place that as the taxpayers put money into this, shouldn’t 

they have some reimbursement of that, just so you understand. But 

I am going to turn the gavel over to Chairman Grassley, who I am 

sure has a number of questions. Chuck, thank you for requesting 

this hearing. 

Ms. HOFFMAN. Thank you, Senator. 

Senator GRASSLEY. [Presiding.] First I will start with Dr. Hoffman. The Trademark Clarification Act of 1984 amended Bayh-Dole, 

requiring return of royalties from Government contractors that exceed 5 percent of a contractor’s operating budget. That law also 

stipulated how royalties retained shall be reinvested. Can you explain how the law functions in this regard and how Iowa State 

University specifically uses royalty income from federally funded 

research? 

Ms. HOFFMAN. Thank you, Mr. Chairman. As mentioned, we are 

required to use the funds for scientific research, education, and further technology transfer. Under our contract with the Department 

of Energy, the royalties that have been earned by the Ames Laboratory in the last few years of approximately $7 million have been 

used, about $6 million, to support research, about $120 thousand 

to support education, and about $670 thousand to support further 

tech transfer. 

To give you a few examples, one of the things that Ames Laboratory is doing now is teaming up with our biofuels group in our 

Plant Sciences Institute to provide seed funding for research in biomaterials to replace the use of petroleum in the development of 

things like plastics. 

We also are testing materials for photonics, and this has been 

very important in retaining one of our key faculty members, Dr. 

Costas Soukoulis, who is one of the world’s leaders in photonics 

technology in the experimental area. We have a world-renowned 

13 

theoretical group, and we are investing in further experimental 

work in photonics. 

The numbers, of course, do not tell the whole story. We purchase 

or create specialized equipment. We provide this broad seed funding. We support graduate students’ and postdocs’ education as a 

very important part of what we do. And, of course, we provide seed 

funding for additional technology transfer so that more faculty can 

bring their technology to the marketplace. 

So we have invested it as required by the law, and it has been 

immensely valuable in furthering technology transfer and research 

in the State of Iowa. Thank you, Senator. 

Senator GRASSLEY. Thank you. 

Now I would turn to you once again and to Dr. Louis. You understand that an investor is looking for an optimal return on investment. How would you describe the public’s return on investment 

for the Federal Government’s investment in projects at your institutions? Dr. Hoffman first. 

Ms. HOFFMAN. Could you repeat that? I am sorry, sir. 

Senator GRASSLEY. Yes. How would you describe the public’s return on investment for the Federal Government’s investment in 

projects at your university? 

Ms. HOFFMAN. The return has been very high. I do not have the 

exact numbers, but if you would like us to look into that, I would 

be happy to. But, of course, if you look at the Government’s investment in Iowa State very broadly, one of the largest investments of 

the Federal Government in Iowa State has been through agriculture-related research. The Green Revolution really started at 

Iowa State with the research of Henry Wallace and the development of Pioneer seed. We have partnered with Monsanto, with 

many small ethanol producers. Hawkeye Renewables is relocating 

to the city of Ames in order to take advantage of Iowa State’s technology in biofuels. 

Many of our faculty are very involved in working in developing 

new technologies for biofuels, new technologies for environmental 

protection, new technologies to improve land fertility, to sequester 

carbon in the land, all of which will have huge benefits to Iowa agriculture. 

We work very closely with industry bringing our technology to 

Iowa industries, and as noted, we were ranked second in the country behind the University of California System in bringing our 

technology to the marketplace. 

So that is the return on the investment. I do not have an exact 

figure for you. Thank you very much. 

Senator GRASSLEY. That is good enough. 

Dr. Louis? 

Mr. LOUIS. Senator Grassley, the University of California obviously has been one of the leading universities in the United States. 

At the current time, it has 7,500 active inventions in its portfolio; 

80 percent of these have generated interest, either the private or 

public sector. Of those interests generating inventions, over 50 percent have resulted in a financial investment in the development of 

a product. As of fiscal year 2003, over 700 products have been developed out of these discoveries. And I was looking earlier at a 

2000 congressional Joint Economic Committee report on the beneVerDate Aug 31 2005 12:13 Sep 02, 2008 Jkt 043987 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43657.TXT SJUD1 PsN: CMORC
14 

fits of medical research and the role of the NIH where it estimates 

a return of as much as $240 billion in increased life expectancy 

benefits contributable to NIH-funded research, 15 times actually 

the very large budget of the NIH, even as it is at this point in time. 

So I think the examples—and we could also quote many of the 

great discoveries such as a vaccination for potentially fatal hepatitis B disease and the Cohen-Boyer original DNA methodology. 

Our own campus actually has a fertilizer which has produced superior qualities for plant growth. 

So many, many inventions across the spectrum, from agriculture 

through engineering and human health. 

Senator GRASSLEY. Dr. Hoffman, to take off from where Senator 

Leahy left off with a question, and that is in regard to changing 

the percentage from 5 to 15 percent for budgets less than $40 million. Could you explain the rationale behind the suggested cap? Is 

it kind of picked out of thin air, or is there a rational to 15 percent 

and the limit on the size of the operating budget? 

Ms. HOFFMAN. Well, the idea for the 15 percent and the limit on 

the size of the operating budget was to continue to respect many 

of the issues that have been addressed today; the need for the Federal Government to be able to recoup some of its investment, especially for Government-owned laboratories. And so by raising it from 

5 to 15 percent, we felt that it would not have an extensive impact 

on the Federal Treasury, but would remove this serious inequity. 

By limiting it to $40 million, you really are limiting it to small laboratories. 

The average size of the DOE laboratories is over $500 million per 

year, so at $30 million, Ames is a very, very small laboratory. But 

we happen to have an extraordinarily successful patent portfolio in 

comparison. So when look at Sandia, for example, that is $2.27 billion, even if they are modestly successful, they are not going to run 

up against even the 15-percent cap. 

So we were trying to balance the legitimate needs of the Federal 

Government to recoup their investment in the Government-owned 

laboratories against what we believe is an unfair tax. 

Senator GRASSLEY. I think you have answered my next question. 

I will ask my staff to look at Question 4, but I think that that answers that. I would go back to you and to Dr. Louis again on how 

has Bayh-Dole affected opportunities at your two universities to 

partner with industry, and I think you have touched on this already with your examples of partnering with other industries. Do 

you hear concerns from your industry partners about the challenges in licensing and developing institution patents? How does 

the university strike an appropriate balance between partnering 

with and serving industry and preserving its core mission of research, service, and education? 

Ms. HOFFMAN. The only complaint we tend to hear is that it 

takes a long time sometimes to reach an agreement. But over 90 

percent of the time, research agreements are executed. In the last 

5 years, we have executed 824 license agreements and options on 

Iowa State technology. So it is very, very rare not to reach agreement, and Bayh-Dole is generally not the problem. It is generally 

that we just simply cannot agree on which piece of the technology 

15 

belongs to whom and how much should be paid for it rather than 

the issues surrounding Bayh-Dole. 

We do work very hard to balance research, education, and outreach with technology transfer. A lot of the royalty money goes to 

support graduate students. It goes to support the startup of new 

faculty members. It goes to seed new research funding. So there is 

a very important synergistic relationship, plus the young generation of scholars, particularly in engineering, life sciences, veterinary science, and agriculture, are very interested in being able to 

commercialize their technology. And by allowing them to do so, we 

retain them as researchers, teachers, and contributors, in our case 

to the Iowa economy; whereas, otherwise they might sever their 

ties with the university. 

Senator GRASSLEY. Dr. Louis? 

Mr. LOUIS. Yes, I would mirror what Dr. Hoffman says. The vast 

majority of our contracts with industry are successfully negotiated. 

I think, you know, my experience in academy is that industry and 

universities are very different animals. They have very different 

cultures. Industry is there to make a profit, and that is its goal, 

to be a successful company. For a university, of course, it is education, research, discovery, and then communication to the general 

public of what that information is. 

So I think we do come from different backgrounds. If the industry with which we are negotiating understands that at the outset, 

the negotiations are always much easier. But I think I would mirror Dr. Hoffman’s—the issues which tend to stick, and it is also 

publications. The University of California, we have a very strong 

belief that what is produced has to be published, and sometimes for 

an industry that may be restrictive and may break terms, but very, 

very rarely. Usually we can successfully negotiate. 

Senator GRASSLEY. Can I ask all of you to listen to this question? 

Some of the witnesses feel that the Bayh-Dole Act has beneficially 

influenced university research, encouraged collaboration academically and with industry, and created productive partnerships. Others on the panel do not necessarily share the view. How do the 

panelists who support Bayh-Dole respond to those with concerns 

about it? And how do panelists who think there are issues respond? 

More specifically, has Bayh-Dole promoted innovation or created 

barriers? Would you start, Professor Rai? And then let’s just go 

across the table. 

Ms. RAI. I think in many cases Bayh-Dole is the elephant and 

we are all blind men examining different parts of the elephant. So 

in the information technology industries, I think it is fair to say— 

and if you look at the testimony, for example, of Wayne Johnson 

from Hewlett-Packard before the House Committee on Science and 

Technology this past May, I think it is fair to say that in information technology there has been some frustration. IBM has specifically sponsored particular research collaborations with the explicit 

requirement that there be no patents because in information technology patents just have a very different role than they do in the 

life sciences. And so if you examine the part of the elephant that 

is information technology, you will think it is one thing. And if you 

examine the part of the elephant that is life sciences, you will 

think it is quite another. 

16 

I have also suggested—and sometimes in the life sciences not everything is an end product drug that should be patented and exclusively licensed. But that is actually a relatively minor problem relative to the divide. And you have seen, I am sure you on the Judiciary Committee have seen this divide over and over again in the 

context of the patent system reform bill. The divide between the 

life sciences and information technology is quite acute when it 

comes to how they view patents. 

Thank you. 

Senator GRASSLEY. Now Dr. Hoffman. 

Ms. HOFFMAN. Mr. Chairman, my experience at several different 

universities has been very strong partnerships between industry 

and the universities. I mentioned a number of the partners that 

Iowa State has. Pioneer, of course, grew out of Iowa State technology, in 1924 was formed by Henry Wallace, who had developed 

the new seeds with Iowa State technology. We have worked with 

Monsanto on the development of low-linolenic acid soybean oil, 

which is, of course, extremely important in the prevention of heart 

disease. While we have a little bit of dispute about that, we have 

worked it out, and we are very satisfied with the partnership that 

we have with Monsanto. 

As I noted, we have partnerships with many, many, many ethanol producers and bio-based product producers in the State of 

Iowa. At our Research Park, we have spawned many new companies. Engineering Animation, which was acquired by EDS, began— 

this is a good example of an information technology patent that 

created a very successful computer that was then acquired by another very successful company based on Iowa State patented technology. 

So while I am sure there are examples of instances where there 

are disputes between universities and the industry, our experience 

is that we work those out and that we continue to have extremely 

profitable and valuable relationship, longstanding relationships 

with our industrial partners. 

Senator GRASSLEY. Mr. Weissman? 

Mr. WEISSMAN. I think there is no question that the university 

contribution to innovation has been extraordinary and that the 

public investment from the United States has been extraordinary. 

It is really one of the great stories of American Government. 

It is not necessarily the case, though, that every university invention or federally sponsored invention would not have come to 

market but for Bayh-Dole. The Pioneer example, of course, predates Bayh-Dole. There are many examples that do. I think we 

would agree with Dr. Rai, thinking globally, that it makes sense to 

think that different industries and different industry sectors have 

different models of development, that whether you have exclusive 

or non-exclusive licensing arrangements makes sense in different 

contexts or less sense in other contexts. 

The pharmaceutical development sector is the best case, the 

strongest case for exclusive licensing, and it is one that we have 

focused on. And even there we feel like there are very severe 

abuses and a failure to exercise the checks that exist in Bayh-Dole 

to curb those abuses. I think an overriding principle, as I mentioned, should be that where the Government is making investVerDate Aug 31 2005 12:13 Sep 02, 2008 Jkt 043987 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43657.TXT SJUD1 PsN: CMORC
17 

ments, even though the public may get some downstream return, 

there has to be some reciprocity from the recipient of the license, 

from the licensee. They, after all, are getting something of considerable value. In the area of pharmaceuticals, the most important 

kind of return is both restraints on price, ensuring access, and preventing anticompetitive behavior. 

And again, also to reiterate a comment from before, as the Committee looks forward on this matter and as the Congress looks forward to greater investment in the area of energy technologies, it 

is going to be, I think, quite important to think very carefully about 

whether exclusive licensing regimes are always the best way to 

proceed, and if there are maybe other models of development that 

could promote more open and collaborative sharing approaches to 

moving early stage inventions to the marketplace. 

Senator GRASSLEY. Dr. Louis? 

Mr. LOUIS. Senator, many of the complaints stem from companies who want to be guaranteed university-developed technologies 

for free, including ownership, free licenses, and background rights. 

I can comment from the University of California that has entered 

into many agreements with for-profit companies, and really it has 

only been a handful where there are contentious negotiations. And 

in a university environment where there is a commingling of funds 

in a research laboratory with various sponsors funding projects 

within the research laboratory to get differing results, it is difficult 

for a university to make such promises at the time a research 

agreement is negotiated. And I read that testimony too, and I was 

really amused by the individual from HP who commented, well, of 

course, the university should know exactly where everything is. 

And while that is true, usually there is a commingling, and so 

there has to be a very careful analysis before one could commit 

something that maybe, because of Bayh-Dole, we already have committed. 

Finally, some foreign universities will either provide the sponsoring company with sole ownership, joint ownership, or guaranteed exclusive rights. But as foreign countries adopt Bayh-Dole 

laws—and increasingly now the numbers are—they are going to become more savvy in their licensing operations. Understanding the 

importance of retaining ownership of their invention, they may be 

less likely to assign away ownership. And because there has been 

a suggestion, well, the companies are, therefore, going overseas to 

do their research because it is easier to get the inventions, I would 

point out the University of California is seeing an increasing 

amount of foreign-sponsored research by industrial corporations on 

our campuses, which I think is an indication that they understand 

that the structure of Bayh-Dole is one that they can work very well 

with and will be to the advantage of those companies. 

Senator GRASSLEY. Professor Rai and Mr. Weissman, in looking 

at your testimony, it appears to me that you make a distinction between biotech and pharmaceutical patents and those generated by 

tech and software companies. Is it your view that Congress should 

consider creating product-specific or industry-specific patent rules? 

Ms. RAI. I think in general, whether within the context of BayhDole or within the context of patent reform more generally, industry-specific legislation is probably a bad idea simply because there 

18 

are all sorts of ways that I think it cannot foresee the ways that 

industries will develop, because what may look like an information 

science industry 1 day may look like a nanotech industry the next 

day and so forth. So I don’t think industry-specific legislation is the 

way to go. However, I do think that other actors in the system need 

to be sensitive to industry context, and in that way, I think that 

universities are beginning to do a better job. My research has indicated and I think there is some evidence that universities are doing 

a better job about being sensitive to context. It may be also that 

Federal agencies could work with universities to make them sensitive to context. 

I don’t think that congressional legislation can adapt to the ways 

that industries adapt as quickly as it needs to. So I think it should 

be done at the private sector level in the case—the private-public 

sector level in the case of universities, and also in conjunction with 

the agencies that fund the research. 

Senator GRASSLEY. What about Government oversight? Before I 

get to Mr. Weissman. 

Ms. RAI. I think that is very important. I think it is very important for the agencies that are funding this research to look to see 

how the research is being licensed out in the context—I am most 

familiar with NIH and in the context of certain research that it 

funds. For example, in software it will say this software has to be 

open-source software, which is a way of developing software without patents. I think that agencies should have that flexibility because they may know in certain cases that this is the type of research that would be better developed. I don’t think they should 

have the only word. Universities should also have some input. But 

it seems to me that both sides, both the Federal agencies and universities, can show sensitivity to these contexts and work together 

to show sensitivity. 

Senator GRASSLEY. OK. Mr. Weissman, back to my original question. 

Mr. WEISSMAN. Well, I think in general it would be—it is quite 

a challenge for Congress to make those kinds of nuanced distinctions because it involves a kind of hands-on engagement with 

issues that are specific and technical and Congress is busy. But I 

do think that the oversight—very busy. 

[Laughter.] 

Mr. WEISSMAN. The oversight issue is one that needs a lot of attention. In our experience with NIH, where the Congress has given 

significant authority to the agency to exercise march-in rights, the 

NIH has re-read the statute to not take into account the requirement that inventions be made available to the public on reasonable 

terms. For us that would be a priority area of oversight. It is a possible area for additional legislation or one where there should at 

least be some congressional engagement with the agency to ensure 

that the original language in the statute is acknowledged, implemented, and relied on. We think more direct tests about how the 

march-in rights should be used should be a priority area. 

There is one caveat to my statement, again, about focusing on 

specific industry areas. It is an inevitability that there will be 

major increases in Federal spending on energy-related technologies, 

and it is just going to be very important to think about those issues 

19 

with an open mind rather than just relying on the historic BayhDole framework, which may or may not make sense as Congress 

moves forward on a variety of programs that we cannot yet envision. 

Senator GRASSLEY. Dr. Louis, do you want to comment? 

Mr. LOUIS. Yes, I would like to comment, and I think, you know, 

sometimes in these discussions it is forgotten that in 1980, these 

sorts of discussions, as I understand from reading the literature 

and reading things that Senator Birch Bayh has written are exactly the discussions that went on at that time. And some of the 

concerns of march-in, for example, or some of the issues of price 

controls have sent fears through the community because of the concern that would weaken the strength of the patents and that, quite 

frankly, anything that weakened the security for what is often—as 

you know, with Bayh-Dole the goal is for small startup companies, 

small businesses such as the one I referred to from UC Riverside, 

those companies need to be very sure that the patent that they are 

licensing from the university is secure and that it will be defended 

and that that is certain. But if there is a possibility that, well, that 

might not be so and there might be situations where the Government or some agency would have to step in and set price or make 

some rules that could potentially minimize the value of that patent, 

that suddenly makes it a much weaker patent. And for the small 

business—and a very high percentage of the startups that come out 

of the University of California as result of patents and inventions 

in the university are to small businesses—they want that security. 

So I guess my word of caution would be that I would much prefer 

that—and I think it is an evolving situation. I think the nine 

points, the principles that the research universities and many of 

the professional organizations enunciated and have published now 

address some of these issues and sort of the philosophy that we 

hope is the way to go; in other words, that the universities are very 

sensitive to these types of issues. But the Bayh-Dole was brilliant 

and we would prefer that those issues not be further altered. 

Senator GRASSLEY. OK. Professor Rai and Mr. Weissman, and 

other panelists ought to listen, and if you want to respond, and I 

want to ask specifically these two witnesses: Have patent ownership rights provided by Bayh-Dole interfered with traditional operation procedures of academia and led to conflicts of interest? 

Ms. RAI. That is an excellent question. There has been no systematic study, as far as I am aware, of exactly how conflicts of interest have been dealt with in some of these cases. One hears anecdotal reports of situations where professors or graduate students 

are asked to hold off on publication until a patent filing can be 

made, which is obviously an issue. It is not quite a conflict of interest issue, but it is an issue. It reflects a tension between the goals 

of academia and the goals of commercialization, but possibly inevitable and a tension we have to live with. 

The one piece that I am happy to say has been systematically 

studied and I think has come out in favor of Bayh-Dole is that it 

does not appear—as far as we can tell, anyway—that the emphasis 

on commercialization has changed the research agendas of faculty. 

In other words, the faculty that patent also tend to be faculty that 

20 

are doing ground-breaking research, publishing in the best journals, et cetera, et cetera. 

One fear about Bayh-Dole was that it would make, you know, 

otherwise potential Nobel Prize winners into something else, which 

is not something we would want. And that does not appear to have 

been borne out. On the other hand, there are tensions, and I think 

those have to be monitored as well. 

Senator GRASSLEY. Mr. Weissman? 

Mr. WEISSMAN. I think there is pretty good data that concerns 

with secrecy have risen quite significantly since passage of BayhDole, that the proprietary nature of patenting has changed the culture of university science in ways that are not for the better. This 

is not an area of my focus and expertise, so I cannot comment on 

ultimately how serious that is. 

I would highlight one area, though, where I think congressional 

attention is merited and where there are institutional conflicts that 

arise beyond those which may relate to any individual professor. 

That is university investment in the start-ups that then receive 

Bayh-Dole rights, and in massive corporate-sponsored research 

agreements, including one, for example, that the University of California, Berkeley, has proposed with BP. The $500 million investment by BP would involve BP building facilities on campus, having 

its own researchers on the campus engaged in proprietary undertakings that would not be published. They will be commingled and 

intermingling with university scientists who will be receiving Federal funds and engaged in Bayh-Dole-implicated research. 

I think it is just very hard to see, assuming best intentions by 

everybody involved, how those arrangements cannot raise major 

challenges and institutional biases about how intellectual property 

is managed and rights are allocated. I think that would be an area 

worth further scrutiny. We are seeing a couple of these mega 

agreements on the order of half a billion dollars which are going 

to, of course, change the local university culture, but also directly 

implicate the patent issues and the control of Government-funded 

inventions. 

Mr. LOUIS. Senator Grassley, could I make one comment? 

Senator GRASSLEY. Yes. I invited you to if you wanted to, and Dr. 

Hoffman, too. But go ahead, Dr. Louis. 

Mr. LOUIS. I was going to make the point that I have the privilege of being the institutional official in my university, which is the 

individual where the buck stops, because the conflict of interest 

committee, conflict of commitment, report to me. I want to assure 

you that I take that responsibility very, very seriously, and particularly when we have industry contracts and we have entrepreneurial faculty, there are challenging and more challenging issues 

that do require oversight. 

I make sure that the committees—when I appoint the conflict of 

interest committee, I make sure it has senior faculty who are very 

understanding of this issue. I closely oversee how they operate and 

function. We put management committees in place that meet with 

the faculty to discuss the students and the progress on the research, if it is Federal and if it is industry research. And we make 

sure that that conflict is effectively managed and does not impact 

the students, the faculty members’ performance in the university. 

21 

So I think I could speak certainly for all of the University of California and universities in the country. It is something that we are 

very sensitive to. But as the Vice Chancellor for Research, I can 

speak personally. It is something that I take very seriously, and my 

colleagues around the country take very seriously. 

So something we are very aware of, and we deal with it increasingly. 

Senator GRASSLEY. OK. Dr. Hoffman? 

Ms. HOFFMAN. Well, as a land grant university, Iowa State has 

a long tradition of partnering with industry, and, yes, it does predate Bayh-Dole. It goes back to the formation of the Extension 

Service, the Agricultural Experiment Stations under the Hatch Act 

in 1887, the Cooperative Extension Service under the Smith-Level 

Act of 1914. All of the various industry partnerships I have already 

enumerated have long traditions at Iowa State. So Bayh-Dole has 

not in any way changed the focus of the research. What it has done 

is to allow our innovative researchers to be able to take advantage 

of the fruits of their invention. It has provided them with an incentive to actually commercialize those inventions that they may not 

have had before. And as I mentioned, it is helping us to keep this 

young generation of faculty who want to be both the great scientists, as Professor Rai mentioned, and innovators. 

And as Dr. Louis indicated, every university with which I have 

been associated has had a very strong conflict of interest policy. We 

at Iowa State are in the process of reviewing our conflict of interest 

and our proprietary research policy to make sure that it is stateof-the-art and that the kind of safeguards that Dr. Louis mentioned 

are definitely in place. We believe they are. We think it is extremely important to maintain the publication of research, that any 

proprietary research should be published within a reasonable 

amount of time, that junior faculty, graduate students, and 

postdocs should be protected from any restrictions on their ability 

to publish. 

As Dr. Louis mentioned, sometimes the negotiations break down 

over the issue of publication, which we think is an extremely important part of our mission. So I do not see that Bayh-Dole has 

changed the mission of Iowa State or the other universities with 

which I have been affiliated. 

Senator GRASSLEY. OK. I am going to have one last question. It 

is only half the questions I had to ask, but I have got to go where 

Senator Leahy just went, to the Agriculture Committee. So if all 

of you would take a whack at this one, and it may be an easy one 

to answer, but we still need this information. 

Are there any changes in Bayh-Dole that Congress should consider to improve the goals of this law? I will start with Professor 

Rai and go across the table. 

Ms. RAI. Sure. Let me just also add—I do not mean to take up 

more time than I should, but let me add one point about the conflict of interest issue. There is one study, just to note it for the 

record, by the Thursbys at Georgia Tech on provisions restricting 

publication in industry-sponsored research conducted in universities, and that is a little bit disappointing in terms of there is 

some—I do not recall the exact numbers, but the study does indicate some significant percentage of those agreements include reVerDate Aug 31 2005 12:13 Sep 02, 2008 Jkt 043987 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43657.TXT SJUD1 PsN: CMORC
22 

strictions on publication. And that just came to mind so I bring 

that up. 

Now, with respect to changes to Bayh-Dole, I do not think that 

anything needs to be done immediately. However, I do think that— 

and this goes back to something that Rob Weissman was talking 

about a little bit—that agencies should not be as shy about using 

their powers under Bayh-Dole as they currently seem to be, whether in the context of march-in rights or in the context of stating that 

certain types of research is not best commercialized through patents. So if agencies fund software research, for example, it might 

be the case that they should be emboldened and say, you know, 

this particular software research is best disseminated through an 

open-source model. And I would guess that those agencies would 

have a lot of support from industry on that score. 

Senator GRASSLEY. Dr. Hoffman? 

Ms. HOFFMAN. Senator, I definitely do not want to keep you from 

the farm bill, which, of course, is extremely important to the State 

of Iowa, so let me just reiterate that the one change that we are 

requesting is increasing the cap on GOCO laboratories from 5 percent to 15 percent for the $40 million or smaller laboratories. 

Thank you very much. 

Senator GRASSLEY. And for the record, I want you to say, ‘‘Chuck 

Grassley, you better get that bill passed or else.’’ 

[Laughter.] 

Ms. HOFFMAN. Thank you, Senator Grassley. I will let you read 

that into the record. 

Senator GRASSLEY. Well, if you say it, that is for the benefits of 

my colleagues, see. 

Ms. HOFFMAN. For the benefit of your colleagues, please. Thank 

you. 

Senator GRASSLEY. OK. Robert Weissman? 

Mr. WEISSMAN. I do not want to delay you from your other engagements but a few suggestions, which may or may not be legislative. They certainly involve oversight and more direction to the 

agencies, and probably also some legislative reforms. 

First is that the march-in right has to not be a dormant right. 

It must be used in some circumstances, and I think there should 

be direction from Congress on guidelines for how the agency should 

use that. 

Second, relatedly, is the Federal Government has the right to use 

the inventions it pays for. At the time Bayh-Dole was passed, that 

was viewed, even by proponents, as the most important right to 

maintain for the Government. But it is not using that, at least on 

the biomedical side. 

Third is thinking intelligently about how to manage the IP portfolio of the Government to facilitate U.S. global health policy objectives. I think the legislation that Senator Leahy introduced is one 

very promising way to do that. There are other ways that one 

might do it, including better use of existing Bayh-Dole rights. 

A fourth area, probably not legislative, is there is very inadequate reporting, that is public at least, about what we get out of 

Bayh-Dole. There is quite good reporting, I think, to NIH, but it 

is all treated as proprietary for reasons that are not obvious to me. 

23 

And, finally, I think it is worth the Committee examining the 

areas where there is substantial Government funding, but the Government funding does not directly lead to a patentable invention. 

Bayh-Dole is an on-and-off switch. Right now the Government gets 

no rights if its funding does not lead to the invention directly. 

There is a logic to that, but it is also useful to complement the existing Bayh-Dole rights with other rights, contractual or otherwise, 

where the Government is putting substantial moneys into R&D. 

Senator GRASSLEY. OK. Dr. Louis? I am sorry I mispronounced 

your name. For a person like me who minored in French and cannot say a word, if I can say— 

Mr. LOUIS. Do not worry. I have been called far worse by my students. I will also strongly endorse Dr. Hoffman’s comment of getting to the farm bill. California agriculture is still our No. 1 industry, so it is a very important bill for our State. 

I would say that— 

Senator GRASSLEY. Make sure your congressional delegation 

votes that way. 

[Laughter.] 

Mr. LOUIS. Thank you, Senator. I think you will gather the University of California and I personally strongly support Bayh-Dole 

as it currently is. I think the modifications that Dr. Hoffman suggests, we would accept those because that certainly would be something we would support. But any march-in price controls or modifications that would undercut the strength of patents, which is the 

brilliance of Bayh-Dole, would, quite frankly, likely destroy what is 

its greatest ability. So that should be done with great, great caution, even thinking of it. 

And, finally, on the issue of pharma and drug control prices, I 

think the reminder is that of the nine points in the consider document, it encourages universities to consider in their licensing arrangements provisions that meet unmet needs. But university and 

research is just a tiny piece of the investment. For that invention 

to get to market, big pharma can invest $1 billion for a single drug 

and, you know, I think the argument is not with the universities, 

but maybe it is the cost of producing drugs, and we would love that 

to be less. But, again, that is not an issue with Bayh-Dole, I would 

argue. 

Thank you, Senator Grassley. 

Senator GRASSLEY. Two things before you go. One, myself included, any members of the Committee will have some questions 

maybe for you in writing, and within a week you might get some 

questions, and then I presume the answer to how long to get the 

answers back is as fast as you can, but keep open your testimony. 

The second thing is for Senator Leahy, this Senator, and the 

whole Committee, thank you very much for your testimony. 

The hearing is adjourned. 

[Whereupon, at 3 p.m., the Committee was adjourned.] 

[Questions and answers and submissions for the record follow.] 

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