Technology Transfer: Agencies' Rights to Federally Sponsored Biomedical Inventions
Published: 2003-07-01T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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.

section_title: Letter
paragraphs: 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  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.
subsections: section_title: Background
paragraphs: 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.
In 1980, the Congress enacted two laws that have fostered the transfer of  federal technology to U.S. businesses. 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. 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.”
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.
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. 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.
section_title: The Government’s License Has Limited Applicability
paragraphs: 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.
subsections: section_title: The Government’s License Protects Its Right to Practice the Invention
paragraphs: 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.
section_title: The Government’s License Is Available to Federal Agencies and Authorized Funding Recipients
paragraphs: 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  vaccines for distribution is intended to assist the states’ public health  services, rather than to meet a federal agency’s need.
section_title: The Government Is Not Automatically Entitled to Price Discounts
paragraphs: The “paid-up license” that the Bayh-Dole Act specifically confers on the  federal government 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.
section_title: The Government’s License May Not Extend to Related Inventions
paragraphs: 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. The question of whether  the government has an interest in later inventions also arises in instances  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.
section_title: The Government Appears to Hold Few Licenses to the Biomedical Products It Purchases
paragraphs: 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  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.
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.
section_title: The Government Has Used Its Biomedical Licenses Primarily for Research
paragraphs: 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  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.
subsections: section_title: Biomedical Licenses Are Primarily Used for Research
paragraphs: 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  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.
section_title: The “General Research Exception” Is Cited in Using Patented Technologies
paragraphs: 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  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.
section_title: Licenses Have Not Been Used for Biomedical Procurements
paragraphs: 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. Furthermore, the federal  government has negotiated national contracts that provide even greater  discounts for some pharmaceuticals.
section_title: Observations
paragraphs: 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  scientists have cited as a basis for using the patented technology of others  in their research.
section_title: Agency Comments and Our Evaluation
paragraphs: 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.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: 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  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  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.
section_title: Appendix II: The Top 100 Pharmaceuticals Procured by VA on the Basis of Dollar Value, Fiscal Year 2001
section_title: Appendix III: The Top 100 Pharmaceuticals Dispensed by DOD on the Basis of Dollar Value, July 1, 2001–June 30, 2002
section_title: Appendix IV: Comments from the National Institutes of Health
paragraphs: The following are GAO’s comments on the National Institutes of Health’s  letter dated April 22, 2003.
subsections: section_title: GAO’s Comments
paragraphs: 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.