by Erin Herdeman
Bayh Dole is the most well-known Act by which Congress can limit or infiltrate the “temporary monopoly” that is created by a patent. The use of a government march-in power created by this Act has been raised recently in various debates surrounding the race to a COVID-19 vaccine. Prior to Bayh Dole, the Government retained ownership of any patents received by any entity that used federal funds, which lead to many such inventions going unpracticed. The Act allows those who receive federal funding to maintain ownership of their intellectual property, while giving the funding organization (the Government) the power to freely license the invention. The main goal is to promote the utilization and commercialization of federally funded inventions.
The Bayh Dole Act specifically allows Congress to promote the utilization of any inventions that arise from federal funding, encourage small businesses to participate in federal funding programs, promote collaboration between commercial concerns and nonprofit organizations, ensure that inventions are used to promote free competition, promote commercialization and public availability, ensure the government obtains rights to protect from nonuse or unreasonable use, and to minimize the costs of policies. Any business (regardless of size), non-profit organization, research institution or university that collects federal funding, ultimately grants a royalty-free license to the funding agency (the Government) to utilize the invention.
There are four elements of the Act:
- The Federal Government receives a license in subject inventions,
- The private party must notify the Government of inventions,
- The preference for U.S. industry that is found in all technology transfer programs is included, and
- The Federal Government retains march-in rights.
Although it has been an element of the Bayh Dole Act since it was passed in 1980, the march-in rights provisions have yet to be utilized. In the event that a Federal agency has provided funding, the contractor, an assignee or exclusive licensee of an invention funded by the Act may be required to grant a nonexclusive, partially exclusive, or exclusive license in any field of use to a responsible applicant or applicants, upon terms that are reasonable under the circumstances. If the party refuses to grant the license, the Federal agency may determine it necessary to invoke these march-in rights if:
- The assignee has not taken reasonable steps to practice the invention,
- The invention is needed to alleviate health or safety needs, and the assignee cannot meet those requirements,
- There are specific requirements for public use (according to federal regulations) and the assignee is not meeting said requirements, or
- Non-compliance with section 204 (preference for US industry).
An assignee can appeal a march-in rights determination under section 203(b) but, if the case is that of a failure to practice, or a failure to meet requirements for public use, the agency’s determination shall be held in abeyance pending the exhaustion of appeals. The appeal must be completed within 60 days of the written determination to the US Court of Federal Claims.
The Race to a COVID-19 Vaccine
Commentators are split as to whether march-in rights would slow down the race to a vaccine, or play an important, and positive role. The biggest challenge/concern raised by those who want to undermine Bayh Dole? Price gouging.
However, Congress never intended for march-in rights to be used to protect against price going, and the Bayh Dole Act includes no clause or stipulation that would allow the government to cap drugs or vaccines at a “fair price”. While the potential for price gouging has happened with other aspects of medical supplies during the COVID pandemic, there has not been widespread concern that any of the current pharma players are looking to make a large profit off of the vaccine. Based on the various supply agreements recently negotiated for production of the leading vaccine candidates, it appears that most of the vaccines will be purchased by the Federal Government at relatively low prices ($10-$20/dosage) and that the big pharma players are more interested in the volume of vaccines needed, and in regaining the trust of consumers by providing these vaccines as quickly and reasonably priced as they can.
Many activist groups that are asking the government to seize the patent rights of those developing vaccines may not understand how much this would disrupt the innovation ecosystem. Since tracking of the benefits of the Act begin in 1996, Bayh Dole has helped create 100,000 academic patents, 420,000 invention disclosures and the launch of 13,000 companies. More specifically, 200 drugs have been created and brought to market through Bayh Dole.
While 2020 has presented a variety of “firsts” in a series of unprecedented events, it may also present some of the most complicated cases of IP protection we have seen march-in-rights may be practiced, and there will be a need to strike a balance between the protection of IP, and halting the worst pandemic of our lifetimes.