Veterans Affairs Research: Actions Needed to Help Better Identify Agency Inventions
Released: 2018-05-07T00:00:00

Letter

Background

Just after World War II, VA developed affiliations with medical schools to improve acute care and physical and mental rehabilitation for veterans. As part of the relationship, VA medical centers have contributed to the education of medical students and residents. Besides medical students and residents, other dual appointees—clinicians and researchers—spend either a full 40-hour week or a fraction of the work week at VA and other time at the affiliated university.

On January 23, 1950, Executive Order 10,096 established that the government shall obtain the entire right, title, and interest in and to all inventions made by government employees during working hours; with a contribution by the government of facilities, equipment, materials, funds, or information, or time and services of other government employees on official duty; or which bear a direct relation to or are made as a consequence of the employee’s duties. Since the early 1980s, the federal government has taken several actions related to technology transfer from federal laboratories.

Technology transfer is the process of transferring scientific findings from one organization to another for the purpose of further development and commercialization. In this regard, federal agencies are authorized to issue licenses to outside entities granting rights to make, use, or sell government owned inventions. One of the first technology transfer laws, the Stevenson-Wydler Technology Innovation Act of 1980, articulated the need for a strong national policy supporting domestic technology transfer. The law requires federal laboratories to establish an office of research and technology applications and devote budget and personnel resources to promoting technology cooperation and the transfer of technologies to private industry and state and local governments. In addition, the act requires federal agencies that operate or direct federal laboratories to report information on technology transfer performance annually to the Office of Management and Budget, as part of their annual budget submission. Copies of those reports should be transmitted to the Secretary of Commerce who must submit a summary report to Congress and the President.

For many years after the Stevenson-Wydler Technology Innovation Act of 1980, VA waived ownership rights to inventions generated by its researchers, leaving the responsibilities for patenting, marketing, and licensing with the inventor and the VA medical center’s university partner. As a result of this practice, according to former VA officials, some VA research was not commercialized because VA did not have a technology transfer program or other means to promote commercialization.

In 2000, VA created the VA Technology Transfer Program to facilitate the commercialization of VA inventions to benefit veterans and the American public. VA developed technology transfer agreements with universities to help facilitate technology transfer. Under the terms of the agreements, the universities can take the lead on patenting and commercialization, and VA can retain joint ownership of inventions. Among other things, the original agreements gave the universities the right of first refusal to apply for and manage patents, market the technologies, negotiate licenses, and collect royalties to be shared with VA.

As of November 2017, the VA Technology Transfer Office, located in Washington, D.C., employed five technology transfer specialists responsible for all technology transfer activities for VA’s solely owned inventions. These inventions may come from more than 3,000 VA researchers at over 100 VA medical centers, as well as from VA employees at other VA locations. In addition, the technology transfer specialists are responsible for coordinating with universities on inventions made by dually appointed researchers. According to VA officials, VA relies on affiliated universities for most of the technology transfer efforts connected with such inventions, since the universities have their own offices with expertise in technology transfer and are usually willing to take the lead.

Under a Veterans Health Administration 2002 policy on invention disclosures, which was revised in January 2017, VA employees who invent something are directed to disclose those inventions to VA using a disclosure form and complete a certification form to certify whether VA resources were used. VA employees are to disclose inventions to VA even if they were not created with VA resources. Affiliated universities may also require dually appointed researchers to disclose inventions to the university. Under agreements between the universities and VA, universities are required to disclose a dually appointed researcher’s invention to VA, as an additional assurance to aid VA in capturing relevant inventions. Similarly, VA is to notify the university when a dually appointed researcher’s invention comes to its attention.

According to VA policy, researchers’ supervisors or research administrators at VA medical centers are to review the disclosure forms and send them to the VA Technology Transfer Office. The office evaluates the information and provides a recommendation to VA’s General Counsel on whether VA should assert ownership. If General Counsel’s review finds that VA should assert ownership, the General Counsel notifies the VA researcher’s and the VA medical center’s research and development office of the determination. The Technology Transfer Office then notifies the researcher’s university about VA’s ownership of the invention. At this point the department expects the university to include VA as an owner during the patenting process, according to VA officials. Figure 1 shows VA’s process for determining ownership of inventions created by dually appointed researchers, according to VA policies.

If the university takes the lead on an invention of a dually appointed researcher, original VA agreements require universities to provide annual reports to update VA on commercialization activities, such as progress in licensing inventions or collecting royalties from licensees. While less commonly used, alternative processes for commercialization are shown in appendix I.

We and others have identified a number of challenges associated with technology transfer from federal research facilities. For example, we found that technology transfer is often not a priority for laboratory managers; researchers may not understand the potential commercial applicability of their innovations; or the technologies are often not developed enough for use in market-ready products and may require investment of additional time and money to develop. We also have reported that pharmaceutical inventions in particular may take a relatively long time to develop. For example, the entire discovery, development, and review process of a new drug can take up to 15 years.

VA Has Taken Steps to Educate Researchers and Universities about Requirements but Could Enhance Researchers’ Training

VA Has Taken Steps to Educate Researchers but Reported that Researchers Have Not Always Disclosed Their Inventions

Although VA has taken steps to educate researchers about disclosure of inventions, VA officials reported that the researchers have not consistently disclosed inventions to the department because they did not always fully understand VA’s disclosure policy. Officials from VA’s technology transfer office told us on multiple occasions that they believed researchers did not consistently disclose inventions. For example, in December 2016, VA officials said that once the technology transfer office began sending researchers e-mail notices about the need to disclose inventions, the number of disclosures increased, which they said suggested underreporting had been occurring. In March 2017, the officials told us that many of the inventions from more than 50 researchers during a 5-year period at one university had not been disclosed until VA checked with the university and discovered the error. By November 2017, VA technology transfer officials thought disclosure had improved throughout VA, but they were still not able to describe the extent of the problem.

The researchers we interviewed at the six medical centers in our sample generally believed that they had properly disclosed inventions. However, according to VA officials, a university official, and two VA researchers, there could be several reasons that contributed to researchers not consistently disclosing their inventions to VA, including the following:

Researchers may have disclosed inventions to their university, assuming the university would disclose them to VA on their behalf.

Researchers may have disclosed their inventions to the university because it was more convenient than disclosing to VA, as the university’s technology transfer officials were more accessible to answer questions.

Researchers were not familiar with VA’s invention disclosure process because the process was not routine to them.

Researchers may have believed they did not use VA resources and did not realize they were still required to disclose to VA.

VA research administrators may not always have reminded researchers of the need to disclose inventions, as they did not consider this requirement a priority.

VA made efforts since fiscal year 2016 to inform researchers about its disclosure policy. For example, according to VA officials, the department has increased its in-person communication with VA researchers. In the first 8 months of fiscal year 2017, VA staff made 26 visits to universities and VA medical centers to meet with researchers to encourage the disclosure of inventions. However, VA officials said participation rates among researchers at these voluntary meetings were low in some cases. At one medical center, only the research administrator and one other researcher attended the meeting, according to the administrator.

In addition, VA established an online training program in 2017 covering the invention disclosure process, but the training is not mandatory. VA provided us with a report from October 2017 indicating that out of over 3,000 eligible researchers, 130 had taken the training (about 4 percent). One VA research administrator said that mandatory training would be helpful. Under federal internal control standards, management is to internally communicate the necessary quality information to achieve the entity’s objectives, such as by communicating that information down and across reporting lines to enable personnel to perform key roles in achieving those objectives. Given that VA has not made the meetings or online training on disclosure policy mandatory, its importance may not be clear to all researchers. Also, because researchers do not make discoveries every year, and the process is not routine, taking such training once may not be sufficient to educate users. Without requiring researchers to take online training on the invention disclosure process annually, researchers may not be fully informed about the requirement to disclose inventions, which can result in lost technology transfer opportunities and lost royalties for VA if the inventions are not disclosed.

VA Has Taken Steps to Make Universities Aware of VA Researchers and Disclosure Requirements

Based on our interviews with VA and university officials in our sample, since fiscal year 2016, the department took steps to make universities aware of VA researchers and their disclosure requirements in an effort to improve university disclosures to VA. We reviewed 16 agreements between VA and affiliated universities, including the five universities with agreements in our sample, and all of the universities agreed to disclose joint inventions to the department. However, VA officials we interviewed said that universities may not always disclose all inventions to VA. Although they said they could not identify the extent of the problem, the officials highlighted one university in our sample that had not disclosed inventions to VA for at least 5 years. This university did not disclose inventions to VA, as agreed, until prompted by VA’s technology transfer office late in fiscal year 2016. Responsible university officials said they had assumed the dually appointed researchers were disclosing the inventions to VA. According to VA officials, when the VA technology transfer office received a report from the university in fiscal year 2017 that covered 5 years of disclosures, VA learned it had not received 80 percent of the disclosures from that university for that period. VA officials said they had not contacted the university sooner because their technology transfer office had been understaffed until early in calendar year 2016. VA officials from the technology transfer office had not identified a similar problem of this magnitude with the other universities, including those in our sample.

According to our interviews with VA and university officials, some of VA’s university partners may not have been aware of which researchers were also VA employees because the universities’ lists of VA researchers were not current and universities generally relied on the researchers to disclose whether they were VA employees. Furthermore, in some cases, the university disclosure forms did not specifically ask whether the researcher also worked at VA. For example, two of the six forms used by universities in our sample did not specifically ask the researcher to indicate whether they were VA employees. Upon recognizing some shortcomings in universities’ disclosures to VA, the department provided current lists of VA researchers at affiliated VA medical centers to their respective universities in fiscal year 2017, and VA technology transfer officials said they intend to provide such updated lists to the universities semi-annually. VA officials said that universities may not be using these lists, but they will not know until time has elapsed. VA technology transfer officials said their site visits to VA medical centers—they conducted 26 visits in fiscal year 2017—along with other communications with their counterparts at the universities should help the disclosure process.

VA Increased Communication with Universities about Reporting Commercialization Activities but Has Not Ensured that Such Activities Are Consistently Reported

VA has increased communication with universities since 2016 to help ensure that universities report information about commercialization activities for joint inventions, but universities’ reporting remained inconsistent as of January 2018, according to VA. Under the original agreements, such as the ones in our sample of eight agreements, universities have the exclusive right to license and commercialize joint inventions. VA’s awareness of the commercialization of such inventions depends on universities providing this information through annual reports, as required by the agreements. However, according to VA officials, prior to 2011, only about 20 percent of the 79 universities with which VA has agreements submitted annual reports. According to VA officials, VA made an effort to increase annual reporting, and by 2013 it was up to 80 percent. The officials said, however, that the percentage of universities submitting annual reports dropped again after losing staff in the technology transfer office—the office retained only three staff in subsequent years until fiscal year 2017 when there were 11 staff, including 5 technology transfer specialists.

In addition, VA officials we interviewed said that there was some confusion among universities regarding when they needed to submit annual reports. For example, they said that some universities may not have understood whether they needed to provide annual reports during years when there was no new patenting or licensing activity. The officials said that this was at least part of the reason some universities did not submit annual reports. VA officials told us that they expect universities to provide annual reports even when there is no new patenting or licensing activity, and in fiscal year 2016 technology transfer officials e-mailed universities to clarify this expectation. The officials also said that in October 2016 they sent a letter to each of the 79 universities with which the department has agreements to remind universities to submit the required annual reports. Further, as stated earlier, VA staff made 26 visits to VA medical centers and universities in the first 8 months of fiscal year 2017 to discuss reporting and disclosure requirements. However, VA reported that 24 percent of the 79 affiliated universities provided annual reports in fiscal year 2017 even after VA’s outreach. Because they did not always receive annual reports, VA officials said they were often not aware of a joint license until the university sent VA the first royalty check for a joint invention. VA officials said they plan to conduct audits to check the accuracy of university information.

Beginning in fiscal year 2015, VA began creating new agreements with universities to give VA enhanced responsibility in licensing and commercialization of joint inventions. By the end of fiscal year 2017, VA had new agreements in place with 11 of the 79 universities. Based on our review of 8 of the new agreements, VA will now, for the first time, have the option to take the lead in licensing joint inventions. For inventions for which VA does not take the lead role, under the new agreements, it will have the right to review and provide input on all joint licenses. This new provision improves VA’s awareness of any joint licenses created in the future. However, because original agreements did not include this provision, VA will still need to rely on accurate and updated annual reports from universities for information on licenses negotiated under those agreements.

In addition, the new agreements do not improve or clarify language from the original agreements about what details need to be included in the annual reports. According to our analysis, these eight new agreements, similar to the original eight agreements we reviewed, do not contain details on the specific information and format in which to present the annual report. For example, both the original and four of the new agreements we reviewed require universities to provide an annual report, but four other new agreements state that the universities will provide annual reports upon request. The original agreements as well as all eight of the new agreements indicate that reports should include the status of all patent prosecution, commercial development, and licensing activity on joint inventions but do not explain whether an annual report is needed if there has been no commercialization activity. As noted above, VA officials said universities were confused about whether they were required to report to VA if they had no new activity in a given period; however, VA officials told us they still need reports in these situations.

Furthermore, based on our analysis of 12 annual reports from eight universities, the format and content of the reports has been inconsistent. Four universities submitted reports in a spreadsheet format; two universities submitted reports in portable document format (PDF); one university submitted a report in a Word format; and one submitted five different documents, including both PDF and spreadsheet. In addition to differences in format, the annual reports differed considerably in the content they provided—the more detailed annual reports included patent application numbers, patent expenses, the status of patent applications, and information about whether the patent had been licensed. In contrast, the less detailed annual reports did not provide any of this information on patents for the joint inventions. Moreover, one university only included active license agreements in its annual report, while other universities also included license agreements that were terminated. VA officials we interviewed agreed that the reports are not very detailed or standardized but said they would like to eventually standardize the annual report format and content so they can use the reports to track and audit joint inventions The differences in annual reports exist because VA has not provided the universities with a standardized method for reporting, including the format that should be used for the annual reports and the content to include in them. Under federal standards for internal control, management should design control activities to achieve objectives and respond to risks. Such control activities include providing a standardized method that guides universities in fulfilling VA’s reporting requirements to ensure the objectives of the program are being achieved. Without providing a standardized method that clearly guides universities in fulfilling VA’s reporting requirements for these annual reports, including their format and content, the department will not be able to ensure detailed and standardized annual reports that include details about licenses and royalties. VA officials said that they were working on a template for universities to use in reporting on commercialization activities for joint inventions. However it is not clear whether the template would inform universities of VA’s requirements to submit an annual report even if they had no new commercialization activity in a given period.

Conclusions

VA manages a research program unique within the federal government in that most of its researchers are dually appointed to universities, and their inventions are jointly owned by VA and the universities, which typically take the lead on commercialization activities. While VA has taken steps to educate researchers about requirements for researchers and universities to disclose inventions to VA, VA officials reported that researchers have not consistently done so, because they did not always fully understand the policy. Given that VA has not made its online training on disclosure policy mandatory, the policy’s importance may not be clear to researchers. Also, because researchers do not make discoveries every year, and the process of disclosure is not routine, taking such training once may not be sufficient. Without requiring researchers to take online training on the invention disclosure process annually, researchers may not be fully informed about the requirement to disclose inventions, which can result in lost technology transfer opportunities as well as lost royalties for VA if the inventions are not disclosed.

VA has also taken steps to improve communication with universities to increase reporting of commercialization activities, but said that such reporting by universities is inconsistent, and VA may not have adequate information to account for all of its licenses and royalties. Without providing a standardized method that clearly guides universities in fulfilling VA’s reporting requirements for these annual reports, including their format and content, the department will not be able to ensure detailed and standardized annual reports.

Recommendations for Executive Action

We are making the following two recommendations to VA: The Under Secretary of Health should make VA’s online training on invention disclosure mandatory for researchers and require that it be completed annually. (Recommendation 1)

The Under Secretary of Health should provide a standardized method that guides universities in fulfilling VA’s reporting requirements for these annual reports, including their format and content. (Recommendation 2)

Agency Comments

We provided a draft of this report to the Department of Veterans Affairs for review and comment. In written comments reproduced in appendix II, VA agreed with our recommendations. Specifically, for our first recommendation, VA said it will develop a plan to ensure its researchers complete online technology transfer training on invention disclosure annually. Furthermore, the plan will contain contingencies for those who do not meet the requirements. The department expects to issue a training requirement, train staff, and also demonstrate training is done by September 2019. In addition, for our second recommendation, VA said it will develop a standardized method that guides universities in fulfilling VA’s reporting requirements for the university technology transfer annual reports. VA has a target completion date of December 2018. VA also provided technical comments, which we incorporated as appropriate.

As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At this time, we will send copies of this report to the appropriate congressional committees, the Secretary of Veterans Affairs, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.

If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or neumannj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to the report are listed in appendix III.

Appendix I: Department of Veterans Affairs Commercialization Process, Revenue, and Total Joint Patents with Universities

The process for commercializing a Department of Veterans Affairs (VA) invention can take several avenues. Generally a university takes the lead on inventions of dual appointees who work for VA and a university, and VA researchers who are not dually appointed rely on VA to patent and license their inventions. Also, VA can take the lead on joint inventions, for example, if the university is not interested in ownership. (see fig. 2).

VA received about $316,000 in royalties from 45 licenses for its inventions in fiscal year 2016 (see table 1). VA has U.S. and foreign patents. From calendar years 2000 through November 2017, the U.S. Patent and Trademark Office has granted VA 82 patents for which VA is the sole assignee, according to VA officials. Also, table 2 shows by university the breakdown of the 206 patents for which VA shares ownership with an affiliate.

Appendix II: Comments from the Department of Veterans Affairs

Appendix III: GAO Contacts and Staff Acknowledgments

GAO Contact

John Neumann, (202) 512-3841 or neumannj@gao.gov.

Staff Acknowledgments

In addition to the contact named above, Rob Marek (Assistant Director), Daniel Semick (Analyst in Charge), Ivelisse Aviles, Navaiyoti Barkakati, Kevin Bray, Ellen Fried, Matthew Hunter, Cynthia Saunders, Dan C. Royer, Ardith Spence, and Kiki Theodoropoulos made key contributions to this report.