Report to Congressional Committees 

United States General Accounting Office 

GAO 

July 2003 TECHNOLOGY 

TRANSFER 

Agencies’ Rights to 

Federally Sponsored 

Biomedical Inventions 

GAO-03-536 
Federal agencies and their authorized funding recipients are eligible to use 

the government’s licenses to federally funded inventions for the benefit 

of the government. Government researchers can use the technology without 

paying a royalty, and federal agencies can authorize their funding recipients 

to use the government’s licenses for specific contracts, grant awards, 

or cooperative agreements meeting a federal government need. The 

government is not entitled to automatic price discounts simply because it 

purchases products that incorporate inventions in which it happens to hold 

a license. Furthermore, the government’s rights attach only to the inventions 

created by federally funded research and do not necessarily extend to later 

inventions based on them. Thus, the government may have no rights in a 

next-generation invention that builds on federally funded technology if the 

new invention were not itself created by federally sponsored research. 

Few of the biomedical products that federal agencies most commonly buy 

appear to incorporate federally funded inventions. In 2001 the government 

had licensing rights in only 6 brand name drugs associated with the top 100 

pharmaceuticals that VA procured and in 4 brand name drugs associated 

with the top 100 pharmaceuticals that DOD dispensed. GAO was unable to 

determine the extent to which the government had rights to other types of 

biomedical products because there are no databases showing the underlying 

patents for most of these products and such products may incorporate 

numerous components that might not be covered by identifiable patents. 

The federal government uses its licenses to biomedical inventions primarily 

for research; however, researchers generally do not document such usage. 

These licenses are valuable because researchers can use the inventions 

without concerns about possible challenges for unauthorized use. Neither 

VA nor DOD has used the government’s licenses to procure biomedical 

products because they cannot readily determine whether products use 

federally funded technologies and they believe they already receive 

favorable pricing through the Federal Supply Schedule and national 

contracts. Furthermore, neither VA nor DOD has used the government’s 

license to manufacture a biomedical product for its use. 

Rights to Federally Sponsored Inventions 

• Federal agencies and their authorized funding recipients can use the 

government’s license to federally funded inventions without paying 

a royalty. 

• Federal agencies can authorize their contractors to make products that 

incorporate federally funded inventions for government use without 

risking patent infringement. 

• The government’s license does not entitle federal agencies to automatic 

price discounts just because a product incorporates a federally funded 

invention. 

The Bayh-Dole Act gives federal 

contractors, grantees, and 

cooperative agreement funding 

recipients the option to retain 

ownership rights to inventions 

they create as part of a federally 

sponsored research project and 

profit from commercializing 

them. The act also protects the 

government’s interests, in part by 

requiring that federal agencies and 

their authorized funding recipients 

retain a license to practice the 

invention for government purposes. 

GAO examined (1) who is eligible 

to use and benefit from the 

government’s license to federally 

funded biomedical inventions, 

(2) the extent to which the federal 

government has licenses to those 

biomedical inventions it procures 

or uses most commonly, and 

(3) the extent to which federal 

agencies and authorized federal 

funding recipients have actually 

used or benefited from these 

licenses. GAO focused its work on 

the Department of Veterans Affairs 

(VA), the Department of Defense 

(DOD), and the National Institutes 

of Health (NIH). 

NIH commented that the report 

implies that the government’s right 

to use its license is more limited 

than it actually is. GAO recognizes 

that the right of federal agencies 

and their funding recipients to use 

a federally funded invention is 

unrestricted. However, GAO 

believes that these license rights 

can be used only to meet needs 

that are reasonably related to the 

requirements of federal programs. 

www.gao.gov/cgi-bin/getrpt?GAO-03-536.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Robin Nazzaro 

at (202) 512-3841 or nazzaror@gao.gov. 

Highlights of GAO-03-536, a report to 

Congressional Committees 

July 2003 

TECHNOLOGY TRANSFER

Agencies’ Rights to Federally Sponsored 

Biomedical Inventions 
Page i GAO-03-536 Technology Transfer 

Letter 1

Results in Brief 2

Background 3

The Government’s License Has Limited Applicability 5

The Government Appears to Hold Few Licenses to the Biomedical 

Products It Purchases 8

The Government Has Used Its Biomedical Licenses Primarily 

for Research 9

Observations 12

Agency Comments and Our Evaluation 13

Appendix I Objectives, Scope, and Methodology 15 

Appendix II The Top 100 Pharmaceuticals Procured by VA on 

the Basis of Dollar Value, Fiscal Year 2001 18 

Appendix III The Top 100 Pharmaceuticals Dispensed by DOD 

on the Basis of Dollar Value, July 1, 2001– 

June 30, 2002 21 

Appendix IV Comments from the National Institutes of Health 24 

Table 

Table 1: DOD’s and VA’s Expenditures on Drugs Incorporating 

Federally Sponsored Inventions, Fiscal Year 2001 9

Contents 
Page ii GAO-03-536 Technology Transfer 

Abbreviations 

AIDS acquired immunodeficiency syndrome 

DOD Department of Defense 

FDA Food and Drug Administration 

HHS Department of Health and Human Services 

HIV human immunodeficiency virus 

NIH National Institutes of Health 

USPTO U.S. Patent and Trademark Office 

VA Department of Veterans Affairs 

This is a work of the U.S. Government and is not subject to copyright protection in the 

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permission from GAO. It may contain copyrighted graphics, images or other materials. 

Permission from the copyright holder may be necessary should you wish to reproduce 

copyrighted materials separately from GAO’s product. 
Page 1 GAO-03-536 Technology Transfer 

July 1, 2003 

Congressional Committees 

Since 1980, the Bayh-Dole Act and subsequent executive actions generally 

have given federal contractors, grantees, and cooperative agreement 

funding recipients the option to retain ownership rights to, and profit 

from, commercializing the inventions they create as part of federally 

sponsored research projects. In return for these rights, they are required to 

file for patent protection, pursue commercialization of the inventions, give 

preferences to small businesses in licensing, ensure that any products 

resulting from the inventions are substantially manufactured in the United 

States, and comply with certain reporting requirements. The Bayh-Dole 

Act also provides federal agencies and their authorized funding recipients 

with a “nonexclusive, nontransferable, irrevocable, paid-up license” to 

practice these federally funded inventions for government purposes. 

We assessed (1) who is eligible to use and benefit from the government’s 

licenses to biomedical inventions created under federally sponsored 

research, (2) the extent to which the federal government has licenses 

to those biomedical inventions it procures or uses most commonly, and 

(3) the extent to which those eligible have actually used or benefited 

from these licenses. We focused our work on the Department of 

Veterans Affairs (VA) and the Department of Defense (DOD)—which are 

responsible for the bulk of the government’s biomedical procurements—

and the National Institutes of Health (NIH), within the Department of 

Health and Human Services (HHS), which funds most biomedical 

research. 

To determine who is eligible to use and benefit from the government’s 

licenses to biomedical inventions, we reviewed the Bayh-Dole Act, other 

statutes, federal agencies’ implementing regulations, applicable case law, 

and the positions taken by federal agencies in interpreting these laws. To 

assess the extent to which the government has licenses to the underlying 

inventions for the biomedical products it uses, we primarily analyzed the 

patents behind the top 100 pharmaceuticals that VA procured and DOD 

dispensed during 2001. For our analysis, we used databases maintained 

by the Food and Drug Administration (FDA) and the U.S. Patent and 

Trademark Office (USPTO) as well as VA, DOD, and NIH. Finally, to 

assess the extent to which eligible parties have used or benefited from 

the government’s licenses, we determined (1) whether VA and DOD 

United States General Accounting Office

Washington, DC 20548 
Page 2 GAO-03-536 Technology Transfer 

contracting personnel used them in procuring pharmaceuticals and 

medical devices and (2) whether VA, DOD, and NIH research personnel 

used them in conducting research. We conducted our review from 

April 2002 through April 2003 in accordance with generally accepted 

government auditing standards. Additional details on our scope and 

methodology are included in appendix I. 

Federal agencies and their authorized funding recipients are eligible to 

use the government’s licenses to federally funded inventions for the 

benefit of the government. Specifically, government researchers can use 

the technology without having to pay a royalty, and a federal agency can 

have a contractor produce the item for its use without obtaining a separate 

license. Third parties—contractors, grantees, and cooperative agreement 

funding recipients—can use the government’s licenses when granted this 

authority for a specific contract, grant award, or cooperative agreement 

meeting a federal government need. The government is not entitled to 

automatic price discounts simply because it purchases products that 

incorporate inventions in which it happens to holds a license. In addition, 

the government’s rights attach only to the inventions created by federally 

funded research and do not necessarily extend to later inventions based 

on them. Thus, the government may have no rights in a next-generation 

invention that builds on federally funded technology if the new invention 

were not itself created by federally sponsored research. 

Few of the biomedical products that the federal government most 

commonly buys appear to incorporate federally funded inventions. We 

found, for example, that federally funded inventions were used to make 

only 6 brand name drugs associated with the top 100 pharmaceuticals that 

VA procured for use by veterans and 4 brand name drugs associated with 

the top 100 pharmaceuticals that DOD dispensed in 2001. We could not 

determine the extent to which the federal government holds rights to other 

types of biomedical products, such as hospital beds and wheelchairs, 

because (1) there are no databases showing the underlying patents for 

most of these products and (2) the products may incorporate numerous 

components that might not be covered by identifiable patents. However, 

we found no federal government rights to the selected medical devices we 

examined; and VA and DOD officials told us that the government would 

rarely have patent rights in such products. 

The federal government uses its licenses to biomedical inventions 

primarily for performing research; however, the extent of such usage 

cannot be determined because researchers generally do not keep records, 

Results in Brief 
Page 3 GAO-03-536 Technology Transfer 

according to VA, DOD, and NIH officials. Citing a generally accepted 

practice among government and university scientists, government 

researchers have typically used the patented technologies of others 

without obtaining permission or a license. However, patent law does not 

appear to provide for such use without obtaining permission or a license 

from the patent owner. Agency officials said that when their scientists’ 

use of federally funded inventions is challenged, they inform the patent 

holders of the government’s license. Neither VA nor DOD has used the 

government’s licenses to procure biomedical products because they 

cannot readily determine if products incorporate federally funded 

technologies and they believe they already receive favorable pricing 

through the Federal Supply Schedule and national contracts. Furthermore, 

neither VA nor DOD has used the government’s license to hire a contractor 

to manufacture a biomedical product for its use. 

In commenting on a draft of this report, NIH stated that because we tie 

the exercise of the government’s license rights to the needs of the federal 

government, we give the impression that the government’s license rights 

are more limited than they actually are. While we agree with NIH that 

federal agencies and their funding recipients have unrestricted rights to 

use a federally funded invention for federal government purposes, it is 

important to recognize that they can use these rights only to meet needs 

that are reasonably related to the requirements of federal programs. 

Prior to 1980, federal agencies generally retained title to any inventions 

resulting from federally funded research—whether the research was 

conducted by contractors and grantees or by federal scientists in their 

own laboratories—although specific policies varied among the agencies. 

Increasingly, this situation was a source of dissatisfaction because of a 

general belief that technology resulting from federally funded research 

was not being transferred to U.S. businesses for developing new or 

improved commercial products. For example, there were concerns that 

biomedical and other technological advances resulting from federally 

funded research at universities were not leading to new products because 

the universities had little incentive to seek uses for inventions to which 

the government held title. Additionally, the complexity of the rules and 

regulations and the lack of a uniform policy for these inventions often 

frustrated those who did seek to use the research. 

Background 
Page 4 GAO-03-536 Technology Transfer 

In 1980, the Congress enacted two laws that have fostered the transfer of 

federal technology to U.S. businesses.1

 The Stevenson-Wydler Technology 

Innovation Act of 1980 (P.L. 96-480, Oct. 21, 1980) promoted the transfer of 

technology from federal laboratories to the private sector. The Bayh-Dole 

Act (P.L. 96-517, Dec. 12, 1980) gave universities, nonprofit organizations, 

and small businesses the option to retain title to inventions developed 

with federal funding. It also authorized federal agencies to grant exclusive 

licenses to patents on federally owned inventions that were made at 

federal laboratories or that federal agencies patented after a federal 

funding recipient opted not to retain title. 

To protect the public’s interest in commercializing federally funded 

technology, the Bayh-Dole Act required, among other things, that a 

contractor or grantee that retains title to a federally funded invention 

(1) file for patent protection and attempt commercialization and 

(2) comply with certain reporting requirements.2

 The act also specified 

that the government would retain “a nonexclusive, nontransferable, 

irrevocable, paid-up license to practice or have practiced for or on behalf 

of the United States any subject invention throughout the world.”3

 

The Bayh-Dole Act did not give large businesses the right to retain title 

to their federally funded inventions. Subsequently, in February 1983, 

President Reagan issued a memorandum on patent policy to executive 

agency heads stating that, to the extent permitted by law, the 

government’s policy is to extend the policy enunciated in the Bayh-Dole 

Act to all federally funded inventions arising under research and 

development contracts, grants, and cooperative agreements. In April 1987, 

President Reagan issued Executive Order 12591, which, among other 

things, requires executive agencies to promote the commercialization of 

federally funded inventions in accordance with the 1983 memorandum. 

 1

Technology transfer is a process through which research results, including inventions, 

computer software, and technical information, are provided to potential users in a manner 

that encourages and accelerates their evaluation and use. 

2

See 35 U.S.C. § 202(c)(1)-(3). In addition, 35 U.S.C. § 203 protects the public interest by 

authorizing a federal agency to “march in” and reassert control over a federally funded 

invention if, for example, a patent owner fails to take steps to commercialize the invention. 

If the government invokes its march-in rights, which is believed never to have happened, it 

could license a third party to commercialize the invention. 

3

35 U.S.C. § 202(c)(4). 
Page 5 GAO-03-536 Technology Transfer 

Our 1999 report noted that federal agencies were not always aware of 

the government’s licenses and could not tell us the circumstances under 

which these licenses had been employed.4

 Nevertheless, agency officials 

said that the government’s license to practice federally funded inventions 

is important because agency scientists could use these inventions without 

being concerned that such use would be challenged. 

Federal agencies and their authorized funding recipients have the right 

to benefit from the use of a federally funded invention without risk of 

infringing the patents. Government scientists can use these inventions 

in their research without having to pay royalties. Federal contractors, 

grantees, and cooperative agreement funding recipients may use the 

government’s license if they are authorized to do so. For example, 

federal agencies can contract with a third party to manufacture products 

containing such inventions. However, the government’s license to use a 

federally funded invention does not automatically entitle the government 

to price discounts when purchasing products that happen to incorporate 

the invention. The government’s license also does not necessarily extend 

to later inventions related to or based on the federally funded invention. 

The Bayh-Dole Act gives the government the right to “practice”—or use—a 

federally funded invention without being liable for patent infringement. 

There are two primary ways in which the government can use its right 

to practice an invention in which it has retained a license. First, the 

government can contract with a third party to make a product that 

incorporates the invention for or on behalf of the government without 

either the government or the contractor being liable for patent 

infringement. It is our understanding that this right has never been 

invoked for biomedical products. Second, the government can use the 

invention itself without obtaining a license from or paying a royalty to 

the patent owner. As discussed later in this report, federal research 

officials say that this is a common occurrence in the research arena, 

making the license to use federally funded inventions a valuable asset to 

the government. 

 4

See U.S. General Accounting Office, Technology Transfer: Reporting Requirements for 

Federally Sponsored Inventions Need Revision, GAO/RCED-99-242 (Washington, D.C.: 

Aug. 12, 1999). 

The Government’s 

License Has Limited 

Applicability 

The Government’s License 

Protects Its Right to 

Practice the Invention 
Page 6 GAO-03-536 Technology Transfer 

The government’s right to practice an invention is limited to federal 

agencies and their funding recipients specifically authorized to use the 

invention for federal government purposes. The Bayh-Dole Act provides 

that the license is “nontransferable,” which means that the government 

may not sell or otherwise authorize another to practice an invention in 

its stead. This concept is not unique to the Bayh-Dole Act. Such language 

appears frequently in patent practice, where nonexclusive licensing 

agreements are typically construed as restricting assignment of the 

license without the licensor’s consent. In the Bayh-Dole Act, the term 

“nontransferable” is followed immediately by qualifying text—language 

that allows the government to authorize others to practice the invention 

for or on its behalf but which restricts the purposes for which it may 

do so. 

Federal agencies typically have authorized contractors to use the 

government’s license to develop and produce mission-critical hardware, 

such as a weapon system. This use of the government’s license satisfies 

a legitimate federal governmental need in support of a congressionally 

authorized program. 

Such linkages to an agency’s mission are less prevalent when grants or 

cooperative agreements are used, as is typically the case with NIH, which 

sponsors biomedical research to benefit the public health. This research 

serves the public good through biomedical advances from publishing 

scientific results and developing new technology that improve people’s 

life. This good may represent a sufficient government need for NIH to 

authorize its grantees to use the government’s license as a basis for using 

federally funded inventions in their research. However, according to a 

senior NIH attorney, NIH does not use this rationale to authorize grantees 

to exercise the government’s licenses and has not included a clause in 

its grant agreements authorizing the use of federally funded inventions 

as part of the research. As a result, NIH’s grantees might be sued for 

infringement and must negotiate any licensing agreements they believe 

they need to support their work. Furthermore, the government’s license 

to use a federally funded invention generally does not apply to HHS’s 

purchases of drugs and vaccines because (1) HHS has never contracted 

for the manufacture of a pharmaceutical made with federal funds for the 

government’s use and (2) HHS’s funding assistance for acquiring drugs or 

The Government’s License 

Is Available to Federal 

Agencies and Authorized 

Funding Recipients 
Page 7 GAO-03-536 Technology Transfer 

vaccines for distribution is intended to assist the states’ public health 

services, rather than to meet a federal agency’s need.5

 

The “paid-up license” that the Bayh-Dole Act specifically confers on the 

federal government6

 is often referred to as a “royalty-free license.” The 

term “royalty-free” license (and even “paid-up license”) has sometimes 

been misinterpreted in a way that effectively eliminates the conditions set 

forth in the statute. The license for which the federal government is “paid 

up” entitles it to practice an invention itself, or to have others practice the 

invention on the government’s behalf. The statute does not give the federal 

government the far broader right to purchase, “off the shelf” and royalty 

free (i.e., at a discounted price), products that happen to incorporate a 

federally funded invention when they are not produced under the 

government’s license. 

An invention rarely represents a completely new form of technology 

because the inventor almost always has used “prior art” in developing 

the ideas that led to an invention. Prior art is the intellectual basis—the 

knowledge base—upon which the novelty of an invention is established 

or the basis that determines whether the “invention” would have been 

obvious to one skilled in the art. In making an invention, an inventor 

typically would build on the prior art in the particular technology, and 

some of this prior art might have been developed by either government 

scientists or federal funding recipients. However, an intellectual property 

interest in prior art does not in and of itself give one an interest in 

someone else’s subsequent invention. 

Also, an invention often is part of a family of related inventions. One 

research project may spawn multiple inventions that, for example, are 

separate and distinct or are further developments of a basic invention 

for specific applications. Similarly, the idea on which the original 

invention is based may trigger new inventions.7

 The question of whether 

the government has an interest in later inventions also arises in instances 

 5

For example, HHS provides funding for the states’ pediatric vaccine program. 

6

See 35 U.S.C. § 202(c)(4). 

7

The patent application for the first invention is referred to as the “parent” if a second 

application is filed on the basis of the same disclosure and at least one person is named as 

the inventor on both applications. 

The Government Is Not 

Automatically Entitled to 

Price Discounts 

The Government’s License 

May Not Extend to Related 

Inventions 
Page 8 GAO-03-536 Technology Transfer 

involving the same technologies when the patents to these inventions are 

related in some fashion. Patents may be related because they protect 

inventions springing from the same essential technologies or scientists 

discover additional uses for an invention. For example, while a patent 

application is pending at USPTO, the applicant may decide to clarify the 

description of an invention because what initially was viewed as a single 

invention is found to be two or more inventions or because the USPTO 

patent examiner determines that patent application claims must be 

separated and independently supported. 

Whether the government has the right to practice an invention because it 

retains a license to use it under the Bayh-Dole Act depends upon whether 

the invention was developed with federal funding and is, therefore, subject 

to the act. An invention is a “subject invention” if it is conceived or first 

actually reduced to practice “in the performance of work under a funding 

agreement” (contract, grant, or cooperative agreement) to which the act 

applies. Rights to the parent patent do not automatically generate rights 

vis-à-vis related subsequent patents. In this regard, the government is not 

entitled to any different protection than other entities that fund research. 

There is one exception to the general rule that inclusion depends upon 

whether each invention was itself conceived or first actually reduced to 

practice in performing federally funded research. This exception holds 

that while the owner of a “dominant patent” can block the unlicensed 

use of that patent and related patents, the owner may not assert that 

patent either to deprive its licensee’s right to a “subservient patent” or, 

similarly, block the government’s license to use a subservient patent for 

a federally funded invention. Thus, if the owner of a dominant patent 

subsequently makes a new invention in the course of work under a federal 

contract or other federal assistance, the owner cannot assert the dominant 

patent to frustrate the government’s exercise of its license to use the 

second invention. 

Although determining the extent to which the government has licenses 

in biomedical products is difficult, the number appears to be small. For 

pharmaceuticals, one of the largest sectors of the biomedical market, we 

found that the government had an interest—either because of its license 

under the Bayh-Dole Act or as the owner or “assignee” of the patent—in 

only 6 brand name drugs associated with the top 100 products, by dollar 

value, that VA procured in fiscal year 2001 and 4 brand name drugs 

associated with the top 100 products, by dollar value, that DOD dispensed 

from July 2001 to June 2002. (See apps. II and III.) All four of the DOD 

The Government 

Appears to Hold 

Few Licenses to the 

Biomedical Products 

It Purchases 
Page 9 GAO-03-536 Technology Transfer 

drugs were among the six federally funded pharmaceuticals that VA 

purchased. As shown in table 1, VA and DOD spent about $120 million on 

these six drugs in fiscal year 2001. 

Table 1: DOD’s and VA’s Expenditures on Drugs Incorporating Federally Sponsored Inventions, Fiscal Year 2001 

Dollars in millions 

Drug name Use 

DOD’s and VA’s 

expenditures

Procrit (epoetin alpha) Treats severe anemia caused by such conditions as cancer, acquired 

immunodeficiency syndrome (AIDS), or surgery 

$45.5

Xalatan (latanoprost) Treats eye conditions, including glaucoma and ocular hypertension, in which 

increased pressure can lead to a gradual loss of vision 

21.8

Epogen (epoetin alpha) Treats severe anemia caused by such conditions as cancer, AIDS, or surgery 15.6 

Neupogen (filgrastim) Decreases the chance of infection in patients with cancer by promoting the 

growth of white blood cells 

14.2 

Taxol (paclitaxel) Treats metastatic breast and ovarian cancer and Kaposi’s sarcoma, as well as 

head and neck cancer, non-small-cell lung cancer, small-cell lung cancer, and 

bladder cancer 

12.2

Zerit (stavudine) Treats infection caused by the human immunodeficiency virus (HIV) 10.2

Total $119.5

Sources: DOD and VA (data), GAO (analysis). 

Note: Drug names are presented in terms of brand name products, and the corresponding generic 

drug name is included in parentheses. 

We could not determine the extent to which the government holds 

rights to other types of biomedical products because (1) no databases 

exist showing the underlying patents for most of these products and 

(2) products such as hospital beds and wheelchairs may incorporate 

numerous components that might not be covered by identifiable patents. 

Our examination found no government rights to any of five medical 

devices for which the VA Medical Center in Milwaukee, Wisconsin, had 

spent more than $1 million during fiscal year 2002. The medical devices 

we analyzed included electric hospital beds, closed circuit televisions, 

blood pressure monitors, low-air-loss and air-pressure mattresses, and 

wheelchairs. Officials from VA and DOD believe that the government 

would rarely have patent rights to such products. 

Officials from VA, DOD, and NIH said that their agencies use the 

government’s licenses to biomedical inventions primarily in performing 

research. These officials could not tell us the extent of such usage, 

however, because researchers generally do not keep records. Instead, 

government researchers often use the technology and inform the patent 

owner of the government’s rights only if there is a claim of infringement 

The Government Has 

Used Its Biomedical 

Licenses Primarily 

for Research 
Page 10 GAO-03-536 Technology Transfer 

or other question regarding the government’s use. In fact, government 

scientists usually do not obtain licenses for any patented technology they 

may use in research. They told us that using technology for research 

purposes without obtaining permission is a generally accepted practice 

among both government and university scientists. 

VA and DOD officials said they do not consider the government’s licenses 

for procurements because they (1) would not be able to determine 

readily which products incorporate patented technologies or whether the 

government helped fund the technology’s development, (2) believe they 

already receive favorable pricing through the Federal Supply Schedule and 

national contracts, and (3) are not required by law to do so. Similarly, the 

VA and DOD officials said they had not used the government’s licenses to 

have a contractor manufacture biomedical products for federal use. 

DOD and NIH attorneys told us that the government primarily uses its 

biomedical licenses for research. According to these officials, the 

government’s licenses are valuable because they allow researchers to use 

the inventions without concern about possible challenges alleging that the 

use was unauthorized. However, no governmentwide database exists to 

track how often government researchers actually use the licenses, and 

agencies did not have records showing how often or under what 

circumstances these licenses have been employed. 

NIH officials said that their agency does not routinely document its 

researchers’ use of patented technologies. Thus, they have no way to 

readily determine which patented technologies have been used or whether 

the government had an interest in them. However, the NIH officials cited 

additional reasons why NIH researchers seldom obtain licenses to conduct 

research: First, NIH researchers may not really need a license because 

they can work with the underlying principles behind the technology simply 

by using the information that has been published. Second, there is a 

prevailing practice not to enforce patent rights among federal agencies 

and nonprofit organizations that conduct academic research. Third, under 

28 U.S.C. § 1498, federal agencies cannot be enjoined from using patented 

technology in conducting research; the patent owner’s only recourse is to 

sue the government for a reasonable royalty. 

An Army patent attorney told us that he advises researchers to inform him 

of any patented technologies they are using in their research. He also said, 

however, that this does not always happen in practice and that he and the 

researchers generally are not aware of a potentially infringing use until the 

Biomedical Licenses Are 

Primarily Used for 

Research 
Page 11 GAO-03-536 Technology Transfer 

patent owner informs them. At that time, he researches the matter and 

seeks permission, obtains a license, or informs the patent owner of the 

government’s interest if there is one. Because the attorney does not have 

records on government licenses, he has to research each case individually. 

He added that he had invoked the privileges of the licenses for research 

purposes but could not readily tell us how often this had occurred. 

A VA official said that, like NIH, VA researchers usually do not know 

whether the technology they use for research is patented. Furthermore, 

information about the government’s interest in the development of 

products is difficult to obtain because extensive research would be 

required. She said that VA procures some research materials using 

Material Transfer Agreements with universities. For the most part, 

however, VA simply goes about its research assuming it has the right to 

use the technologies of others unless there is a challenge. She was 

unaware of any patent infringement cases that had been filed against VA. 

VA, DOD, and NIH have each relied, to some extent, on the concept that 

a researcher could use patented technology for research as long as the 

research is for purely scientific endeavors. According to agency officials, 

such use is a generally accepted practice within the research community 

on the basis of what some believe is a “general research exception.” 

However, some agency officials questioned how this exception might be 

viewed in light of the decision rendered by the Court of Appeals for the 

Federal Circuit in Madey v. Duke University, 307 F.3d 1351 (Fed. Cir. 

2002). Concerning the availability of the experimental use exception to a 

university, the court ruled that the experimental use exception is very 

narrow and strictly limited, extending only to experimental uses that are 

not in furtherance of the infringer’s legitimate business and are solely 

for the infringer’s amusement, to satisfy idle curiosity, or for strictly 

philosophical inquiry. The court also stated that the profit or nonprofit 

status of the user is not determinative of whether the use qualifies for the 

experimental use exception. Experimental use may infringe a patent when 

the use furthers the infringer’s business. For example, the business of a 

research institution includes conducting research. 

Some patent owners believe that allowing others to use their patented 

technologies for research purposes may pose no threat and may actually 

be to their benefit. In fact, representatives from corporations involved in 

the research and development of products in the biomedical area told us 

that they welcome additional research that will continue to advance the 

state of the art as long as such use is not merely an attempt to use the 

The “General Research 

Exception” Is Cited 

in Using Patented 

Technologies 
Page 12 GAO-03-536 Technology Transfer 

patents for commercial purposes without obtaining a license. They 

said that there has been an unstated “gentlemen’s agreement” among 

researchers in this regard that will not be affected by the Madey case. If 

true, government researchers may, as a practical matter, be able in many 

cases to continue using the patented technologies of others without 

obtaining licenses. 

VA and DOD procurement officials were unaware of any instances in 

which a federal agency had used the government’s licenses to have 

contractors manufacture products that incorporate federally funded 

inventions. Furthermore, these procurement officials said that, as 

discussed above, the government’s license does not provide an automatic 

discount for federal government procurements. They added that even if 

they wanted to use the license for procurements, they would not know 

which products incorporate federally funded inventions. 

The VA and DOD officials also said that the government’s licenses would 

probably not significantly reduce their procurement costs because they 

believe they already receive favorable pricing through the Federal Supply 

Schedule and national contracts. In particular, for a branded 

pharmaceutical to be listed on the Federal Supply Schedule, the 

manufacturer must agree to give the government a 24-percent discount 

over the nonfederal average manufacturer price.8

 Furthermore, the federal 

government has negotiated national contracts that provide even greater 

discounts for some pharmaceuticals. 

The government’s license under the Bayh-Dole Act provides protection 

against claims of patent infringement when federal agencies or their 

authorized funding recipients use federally funded inventions. Scientists 

working for federal agencies and their contractors generally are 

authorized to use federally funded inventions; however, agencies have not 

necessarily provided similar authorization in their grant agreements for 

scientists at universities and other institutions. The decision rendered by 

the Court of Appeals for the Federal Circuit in Madey v. Duke University

calls into question the validity of the general research exception that many 

 8

The Veterans Health Care Act of 1992 (P.L. 102-585) established a 76-percent ceiling for 

Federal Supply Schedule prices. 

Licenses Have Not Been 

Used for Biomedical 

Procurements 

Observations 
Page 13 GAO-03-536 Technology Transfer 

scientists have cited as a basis for using the patented technology of others 

in their research. 

We provided NIH with a draft of this report for its review and comment. 

NIH stated that because our report ties the exercise of the government’s 

license rights to the needs of the federal government, we give the 

impression that the government’s license rights are more limited than they 

actually are. While we agree with NIH that federal agencies and their 

funding recipients have unrestricted rights to use a federally funded 

invention for federal government purposes, it is important to recognize 

that they can use these rights only to meet needs that are reasonably 

related to the requirements of federal programs. NIH also provided 

comments to improve the report’s technical accuracy, which we 

incorporated as appropriate. (See app. IV for NIH’s written comments 

and our responses.) 

We will send copies of this report to interested Members of Congress; the 

Secretary of Defense; the Secretary of Health and Human Services; the 

Secretary of Veterans Affairs; and the Director, Office of Management and 

Budget. We will also make copies available to others upon request. In 

addition, the report will be available at no charge on the GAO Web site at 

http://www.gao.gov. 

If you have any questions about this report, please contact me at 

(202) 512-3841. Key contributors to this report were Richard Cheston, 

Deborah Ortega, Bert Japikse, Frankie Fulton, and Lynne Schoenauer. 

Robin M. Nazzaro 

Director, Natural Resources 

 and Environment 

Agency Comments 

and Our Evaluation 
Page 14 GAO-03-536 Technology Transfer 

List of Congressional Committees 

The Honorable Orrin G. Hatch 

Chairman 

The Honorable Patrick J. Leahy 

Ranking Minority Member 

Committee on the Judiciary 

United States Senate 

The Honorable Sam Brownback 

Chairman 

The Honorable John B. Breaux 

Ranking Minority Member 

Subcommittee on Science, Technology, 

 and Space 

Committee on Commerce, Science, 

 and Transportation 

United States Senate 

The Honorable Lamar Smith 

Chairman 

The Honorable Howard L. Berman 

Ranking Minority Member 

Subcommittee on Courts, the Internet, 

 and Intellectual Property 

Committee on the Judiciary 

House of Representatives 

The Honorable Sherwood L. Boehlert 

Chairman 

The Honorable Ralph M. Hall 

Ranking Minority Member 

Committee on Science 

House of Representatives 
Appendix I: Objectives, Scope, and 

Methodology 

Page 15 GAO-03-536 Technology Transfer 

We examined the manner in which federal agencies administer, use, 

and benefit from intellectual property created under federally sponsored 

research programs related to public health, health care, and medical 

technology. Our objectives were to assess (1) who is eligible to use and 

benefit from the government’s licenses to biomedical inventions 

created under federally sponsored research, (2) the extent to which the 

government has licenses to those biomedical inventions it procures or 

uses most commonly, and (3) the extent to which those eligible have 

actually used or benefited from these licenses. 

To determine who is eligible to use and benefit from the government’s 

licenses, we reviewed the applicable laws, regulations, and procedures, 

including an examination of relevant case law. We also obtained the views 

of a senior attorney responsible for handling these cases in the Office of 

General Counsel of the Department of Health and Human Services. 

To assess the extent of the government’s licenses to biomedical 

inventions, we concentrated on pharmaceuticals because 

(1) pharmaceuticals represent a major component of the federal 

government’s biomedical procurements—an estimated $3.5 billion 

annually—and (2) government databases can be used to identify the 

underlying patents to pharmaceuticals approved by the Food and Drug 

Administration (FDA). In conducting our work, we first obtained data on 

the generic product name, total purchases by dollar amount, and number 

of prescriptions filled for the top 100 pharmaceuticals purchased by the 

Department of Veterans Affairs (VA) and the Department of Defense 

(DOD), which procure most of the government’s biomedical products 

for use by their hospitals and other medical facilities. VA’s data covered 

procurements for fiscal year 2001. DOD’s data covered the 12-month 

period from July 1, 2001, to June 30, 2002, because the agency began 

consolidating its pharmacy program sales data on July 1, 2001. 

For each of the VA and DOD pharmaceuticals, we used FDA’s Electronic 

Orange Book to identify the corresponding brand name product(s) and 

their patents. We focused on brand name products rather than generics 

because the former often utilize technologies with protected active 

patents and typically generate higher sales, whereas generic drugs often 

enter the market only after a product’s active patents have expired. We 

examined possible equivalent brand names to ensure that we identified the 

government’s licenses to available alternative products. FDA’s Electronic 

Orange Book included 210 of the 217 brand name products we reviewed. 

We also obtained patent numbers for three of the seven pharmaceuticals 

not included by examining their product Web sites. Using the patent 

Appendix I: Objectives, Scope, and 

Methodology 
Appendix I: Objectives, Scope, and 

Methodology 

Page 16 GAO-03-536 Technology Transfer 

numbers, we then accessed the patent records in the U.S. Patent and 

Trademark Office’s (USPTO) patent database to determine whether the 

government held any rights to the patented technologies of each brand 

name pharmaceutical. We identified any cases where the government was 

the owner or assignee or had a license to use the invention because it 

sponsored the research. 

In addition to our own assessment, we examined the National Institutes of 

Health’s (NIH) July 2001 report entitled NIH Response to the Conference 

Report Request for a Plan to Ensure Taxpayers’ Interests Are Protected. 

NIH assessed the return to the taxpayers for therapeutic drugs that use 

NIH-funded technology and have sales of at least $500 million per year, 

making them “blockbuster” drugs. From a survey of the pharmaceutical 

industry, FDA, USPTO, and its own databases, NIH determined that the 

government had rights to 4 of the 47 blockbuster drugs it identified for 

1999—Taxol, Epogen, Procrit, and Neupogen. We found that all 4 of these 

were among VA’s top 100 pharmaceutical procurements and all but Taxol 

were among DOD’s top 100. 

To determine the extent of the government’s ownership of or licenses to 

use other biomedical products, we explored several methods to locate 

relevant patent and licensing information for medical devices. However, 

we found that (1) there are no databases showing the underlying patents 

for most of these products and (2) products such as hospital beds and 

wheelchairs typically incorporate numerous components that may or 

may not be covered by identifiable patents. In addition, VA and DOD 

procurement officials informed us that they do not have agencywide data 

showing the most frequently purchased items because many devices are 

purchased at the local level. 

Because of these limitations, we identified five medical devices for 

which the VA Hospital in Milwaukee, Wisconsin—a major procurer of 

medical devices—had spent more than $1 million during fiscal year 2002. 

This approach also provided only limited information. We examined the 

government’s rights to each device by identifying it in the General Services 

Administration’s on-line supply catalog, which includes the items on 

the Federal Supply Schedule, and reviewing the corresponding item 

descriptions. However, we found that the catalog does not provide patent 

or licensing information for any of the products. We also were unable to 

determine from the USPTO patent database the specific patents used for 

each medical device. Finally, our examination of product Web sites found 

that they do not provide information on the products’ patented 
Appendix I: Objectives, Scope, and 

Methodology 

Page 17 GAO-03-536 Technology Transfer 

technologies or address whether the government has license rights 

to them. 

To examine how the government has used its licenses to federally funded 

inventions, we interviewed DOD, NIH, and VA officials who procure 

biomedical products or who are involved in scientific research. Also, we 

researched relevant statutes and case law and met with knowledgeable 

officials in NIH and industry to determine whether a general research 

exception exists regarding patent infringement that applies to government 

and other researchers conducting research for purely scientific reasons. 

We conducted our work from April 2002 through April 2003 in accordance 

with generally accepted government auditing standards. We did not 

independently verify the data that VA, DOD, or NIH provided or the data 

obtained from the USPTO and FDA databases. However, agency officials 

addressed each of our questions regarding their data. 
Appendix II: The Top 100 Pharmaceuticals 

Procured by VA on the Basis of Dollar Value, 

Fiscal Year 2001 

Page 18 GAO-03-536 Technology Transfer 

Dollars in millions 

Rank Drug name 

Amount 

procureda

Active 

government rights 

1 Simvastatin $121.7 No 

2 Olanzapine 99.6 No 

3 Lansoprazole 63.8 No 

4 Gabapentin 61.2 No 

5 Metformin hydrochloride 59.6 No 

6 Epoetin alfab 53.3 Yes 

7 Risperidone 49.9 No 

8 Sertraline hydrochloride 49.3 No 

9 Glucose testc 42.4 Unknown 

10 Fluoxetine hydrochloride 39.3 No 

11 Felodipine 36.5 No 

12 Clopidogrel bisulfate 36.1 No 

13 Ipratropium bromide 34.6 No 

14 Goserelin acetate 34.3 No 

15 Lisinopril 28.9 No 

16 Paroxetine hydrochloride 27.7 No 

17 Albuterol sulfate and ipratropium 

bromide 

24.8 No 

18 Divalproex sodium 24.0 No 

19 Rosiglitazone maleate 23.9 No 

20 Bupropion hydrochloride 22.0 No 

21 Amlodipine besylate 20.8 No 

22 Atorvastatin calcium 20.2 No 

23 Interferon alfa-2b and ribavirind 20.0 No 

24 Buspirone hydrochloride 19.5 No 

25 Insuline 19.4 No 

26 Bicalutamide 19.0 No 

27 Beclomethasone dipropionate 18.9 No 

28 Celecoxib 18.8 No 

29 Finasteride 17.4 No 

30 Salmeterol xinafoate 17.2 No 

31 Enoxaparin sodium 16.5 No 

32 Diltiazeme 16.3 No 

33 Oxycodone hydrochloride 16.0 No 

34 Latanoprostf 16.0 Yes 

35 Donepezil hydrochloride 15.7 No 

36 Lamivudine and zidovudine 15.4 No 

37 Nifedipine 15.2 No 

38 Fexofenadine hydrochloride 15.1 No 

39 Cyclosporine 15.0 No 

40 Fluticasone propionate 14.9 No 

Appendix II: The Top 100 Pharmaceuticals 

Procured by VA on the Basis of Dollar Value, 

Fiscal Year 2001 
Appendix II: The Top 100 Pharmaceuticals 

Procured by VA on the Basis of Dollar Value, 

Fiscal Year 2001 

Page 19 GAO-03-536 Technology Transfer 

Dollars in millions 

Rank Drug name 

Amount 

procureda

Active 

government rights 

41 Quetiapine fumarate $14.4 No 

42 Citalopram hydrobromide 14.3 No 

43 Carvedilol 14.0 No 

44 Fentanyle 13.5 No 

45 Venlafaxine hydrochloride 12.3 No 

46 Albuterole

 11.6 No 

47 Lovastatin 11.3 No 

48 Rofecoxib 11.2 No 

49 Levofloxacin 11.1 No 

50 Filgrastimg 11.1 Yes 

51 Triamcinolonee 10.7 No 

52 Fosinopril sodium 10.7 No 

53 Carbidopa and levodopa 10.2 No 

54 Terbinafine hydrochloride 10.2 No 

55 Interferon beta-1ac 10.1 Unknown 

56 Sumatriptane 10.0 No 

57 Warfarin sodium 10.0 No 

58 Paclitaxelh 9.5 Yes 

59 Tramadol hydrochloride 9.2 No 

60 Nefazodone hydrochloride 9.2 No 

61 Mycophenolate mofetile 8.7 No 

62 Amoxicillin and clavulanate 

potassium 

8.6 No 

63 Etanercepti 8.4 No 

64 Nitroglycerin 8.2 No 

65 Loratadine 8.1 No 

66 Stavudinej 7.9 Yes 

67 Fluconazole 7.9 No 

68 Alendronate sodium 7.5 No 

69 Lamivudine 7.4 No 

70 Efavirenz 7.4 No 

71 Irinotecan hydrochloride 7.3 No 

72 Ranitidine hydrochloride 7.3 No 

73 Tamsulosin hydrochloride 7.3 No 

74 Cetirizine hydrochloride 7.2 No 

75 Sotalol hydrochloride 7.0 No 

76 Phenytoine 6.9 No 

77 Terazosin hydrochloride 6.9 No 

78 Carbamazepine 6.9 No 

79 Clozapine 6.7 No 

80 Irbesartan 6.7 No 

81 Brimonidine tartrate 6.7 No 

82 Amiodarone hydrochloride 6.6 No 
Appendix II: The Top 100 Pharmaceuticals 

Procured by VA on the Basis of Dollar Value, 

Fiscal Year 2001 

Page 20 GAO-03-536 Technology Transfer 

Dollars in millions 

Rank Drug name 

Amount 

procureda

Active 

government rights 

83 Glipizide $6.5 No 

84 Mirtazapine 6.4 No 

85 Carboplatin 6.3 No 

86 Mesalamine 6.1 No 

87 Indinavir sulfate 5.8 No 

88 Potassium chloride 5.8 No 

89 Nelfinavir mesylate 5.6 No 

90 Rituximabc 5.6 Unknown 

91 Nicotine 5.6 No 

92 Omeprazole 5.6 No 

93 Tacrolimus 5.5 No 

94 Alprostadil 5.4 No 

95 Sildenafil citrate 5.1 No 

96 Rabeprazole sodium 5.0 No 

97 Azithromycin dihydrate 5.0 No 

98 Flutamide 4.2 No 

99 Ondansetrone 4.0 No 

100 Pioglitazone hydrochloride 3.5 No 

Sources: VA (data), GAO (analysis). 

Note: The table provides each drug’s name on the basis of the active ingredients as they are listed in 

FDA’s Electronic Orange Book. 

a

Based on VA’s prime vendor purchases, excluding any direct purchases. 

b

Patent and licensing information about epoetin alpha was obtained from NIH. Two brand name 

epoetin alpha products, Epogen and Procrit, appear to use federally sponsored technology. 

c

A patent search for this item was not completed because we did not find a related listing in the 

Orange Book or locate the product’s patent information. 

d

Interferon alpha-2b and ribavirin is not listed in the Orange Book. However, we obtained relevant 

patent information from the Web site devoted to the interferon/ribavirin product, Rebetron, 

http://www.rebetron.com/pro/rebetron/pi.html, accessed on August 26, 2002. 

e

Variations of the drug name appeared in the Orange Book, and we examined the patents underlying 

each relevant product. 

f

Xalatan, a brand name latanoprost product, appears to use federally sponsored technology. 

g

Patent and licensing information about filgrastim was obtained from NIH. A brand name filgrastim 

product, Neupogen, appears to use federally sponsored technology. 

h

Taxol, a brand name paclitaxel product, appears to use federally sponsored technology. 

i

Relevant patent information was obtained from the Web site for the etanercept brand name product, 

Enbrel, http://www.enbrel.com/hcp/about_enbrel/indications.jsp, accessed on August 1, 2002. 

j

Zerit, a brand name stavudine product, appears to use federally sponsored technology. 
Appendix III: The Top 100 Pharmaceuticals 

Dispensed by DOD on the Basis of Dollar 

Value, July 1, 2001–June 30, 2002 

Page 21 GAO-03-536 Technology Transfer 

Rank Drug name 

Active government 

rights 

1 Omeprazole No 

2 Simvastatin No 

3 Atorvastatin calcium No 

4 Celecoxib No 

5 Rofecoxib No 

6 Lansoprazole No 

7 Loratadine No 

8 Gabapentin No 

9 Esomeprazole magnesium No 

10 Clopidogrel bisulfate No 

11 Alendronate sodium No 

12 Fluoxetine hydrochloride No 

13 Sertraline hydrochloride No 

14 Paroxetine hydrochloride No 

15 Amlodipine besylate No 

16 Pravastatin sodium No 

17 Pioglitazone hydrochloride No 

18 Oxycodone hydrochloride No 

19 Fluticasone propionate and salmeterol xinafoate No 

20 Metformin hydrochloride No 

21 Rosiglitazone maleate No 

22 Venlafaxine hydrochloride No 

23 Olanzapine No 

24 Zolpidem tartrate No 

25 Amoxicillin and clavulanate potassium No 

26 Cetirizine hydrochloride No 

27 Lisinopril No 

28 Fluticasone propionate No 

29 Fexofenadine hydrochloride No 

30 Raloxifene hydrochloride No 

31 Tolterodine tartrate No 

32 Estrogens, conjugated No 

33 Bupropion hydrochloride No 

34 Ciprofloxacina No 

35 Pantoprazole sodium No 

36 Rabeprazole sodium No 

37 Levofloxacin No 

38 Diltiazem hydrochloride No 

39 Donepezil hydrochloride No 

40 Citalopram hydrobromide No 

41 Etanerceptb No 

42 Montelukast sodium No 

Appendix III: The Top 100 Pharmaceuticals 

Dispensed by DOD on the Basis of Dollar 

Value, July 1, 2001–June 30, 2002 
Appendix III: The Top 100 Pharmaceuticals 

Dispensed by DOD on the Basis of Dollar 

Value, July 1, 2001–June 30, 2002 

Page 22 GAO-03-536 Technology Transfer 

Rank Drug name 

Active government 

rights 

43 Epoetin alfac Yes 

44 Blood sugar diagnosticd Unknown 

45 Tamsulosin hydrochloride No 

46 Fentanyla No 

47 Azithromycin dihydrate No 

48 Risperidone No 

49 Loratadine and pseudoephedrine sulfate No 

50 Estrogens, conjugated and medroxyprogesterone 

acetate 

No 

51 Tramadol hydrochloride No 

52 Sumatriptana No 

53 Interferon beta-1a and albumind Unknown 

54 Somatropin recombinant No 

55 Losartan potassium No 

56 Sildenafil citrate No 

57 Oxybutynin chloride No 

58 Carvedilol No 

59 Fenofibratee No 

60 Amlodipine besylate and benazepril hydrochloride No 

61 Acetaminophen and hydrocodone bitartrate No 

62 Topiramate No 

63 Filgrastimf Yes 

64 Metoprolol succinate No 

65 Nifedipine No 

66 Tamoxifen citrate No 

67 Quetiapine fumarate No 

68 Valsartan No 

69 Budesonide No 

70 Salmeterol xinafoate No 

71 Latanoprostg Yes 

72 Bicalutamide No 

73 Clarithromycin No 

74 Mometasone furoate No 

75 Warfarin sodium No 

76 Calcitonin, salmon No 

77 Methylphenidate hydrochloride No 

78 Finasteride No 

79 Divalproex sodium No 

80 Mesalamine No 

81 Albuterol sulfate and ipratropium bromide No 

82 Mirtazapine No 

83 Amphetamine aspartate and amphetamine sulfate and 

dextroamphetamine saccharate and 

dextroamphetamine sulfate 

No 
Appendix III: The Top 100 Pharmaceuticals 

Dispensed by DOD on the Basis of Dollar 

Value, July 1, 2001–June 30, 2002 

Page 23 GAO-03-536 Technology Transfer 

Rank Drug name 

Active government 

rights 

84 Ipratropium bromide No 

85 Lorazepam No 

86 Potassium chloride No 

87 Hydrochlorothiazide and losartan potassium No 

88 Estradiola No 

89 Triamcinolonea No 

90 Verapamil hydrochloride No 

91 Isotretinoin No 

92 Enoxaparin sodium No 

93 Buspirone hydrochloride No 

94 Risedronate sodium No 

95 Meloxicam No 

96 Albuterola No 

97 Ethinyl estradiol and norgestimate No 

98 Ranitidine hydrochloride No 

99 Valacyclovir hydrochloride No 

100 Amiodarone hydrochloride No 

Sources: DOD (data), GAO (analysis). 

Note: The ranking of the drugs is based on the dollar sales volumes for prescriptions filled through 

national mail order pharmacies and the retail pharmacy network. Dollar sales volumes are not 

provided here because, at the time of the data request, complete information regarding DOD’s 

pharmaceutical-dispensing activities was not available. The table provides each drug’s name on the 

basis of the active ingredients as they are listed in FDA’s Electronic Orange Book. 

a

Variations of the drug’s name appeared in the Orange Book, and we examined the patents 

underlying each relevant product. 

b

Relevant patent information was obtained from the Web site for the etanercept brand name product, 

Enbrel, http://www.enbrel.com/hcp/about_enbrel/indications.jsp, accessed on August 1, 2002. 

c

Patent and licensing information about epoetin alpha was obtained from NIH. Two brand name 

epoetin alpha products, Epogen and Procrit, appear to use federally sponsored technology. 

d

A patent search for this item was not completed because we did not find a related listing in the 

Orange Book or locate the product’s patent information. 

e

DOD listed “fenofibrate, micronized,” while the Orange Book listed only “fenofibrate.” However, the 

Orange Book provided additional information specifying which fenofibrate products are micronized. 

Accordingly, we limited our work to such items. 

f

Patent and licensing information about filgrastim was obtained from NIH. A brand name filgrastim 

product, Neupogen, appears to use federally sponsored technology. 

g

Xalatan, a brand name latanoprost product, appears to use federally sponsored technology. 
Appendix IV: Comments from the National 

Institutes of Health 

Page 24 GAO-03-536 Technology Transfer 

Appendix IV: Comments from the National 

Institutes of Health 

Note: GAO comments 

supplementing those in 

the report text appear at 

the end of this appendix. 
Appendix IV: Comments from the National 

Institutes of Health 

Page 25 GAO-03-536 Technology Transfer 

Note: Page numbers in 

the draft report may differ 

from those in this report. 

See comment 4. 

See comment 3. 

See comment 2. 

See comment 1. 
Appendix IV: Comments from 

the National Institutes of 

Health 

Page 26 GAO-03-536 Technology Transfer 

The following are GAO’s comments on the National Institutes of Health’s 

letter dated April 22, 2003. 

1. We agree with NIH that federal agencies have unrestricted rights to 

use a federally funded invention for government purposes. It has, 

indeed, a “nontransferable, irrevocable, paid-up license” to practice the 

invention. Or it may authorize someone to practice the invention on its 

behalf. However, these rights cannot be taken so as to undermine the 

rights that the Bayh-Dole Act clearly intends to accord to inventors. 

Specifically, the government’s license permits it to practice the 

invention to meet its needs, i.e., to meet needs that are reasonably 

associated with the requirements of federal programs, not to act 

outside of those constraints that normally distinguish public- from 

private-sector activities. 

2. We deleted the footnote. 

3. We deleted “generally” from the sentence. 

4. We disagree. Related issues have been discussed in several court 

decisions. See, for example, AMP, Inc. v. United States, 389 F.2d 448, 

454 (Ct. Cl. 1968), cert. denied, 391 U.S. 964 (1968). Regarding NIH’s 

concern that adherence to these cases might have a chilling effect on 

the willingness of private entities to participate as funding recipients, 

we point out that the parties can negotiate intellectual property rights 

dealing with these issues on a case-by-case basis. Moreover, the 

scope of any exception is limited as required to permit use of the 

government’s license in the subservient patent. 

GAO’s Comments 

(360203) 
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