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5 CIRM's Intellectual Property Policies
Pages 105-126

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From page 105...
... Intellectual property is a policy tool for motivating investments in innovation. Patents and trade secrecy are two forms of legal protection for intellectual property.
From page 106...
... The difficulty of disentangling federal funding from other funding sources makes it prudent for institutions that receive federal research funding to comply with the terms of the Bayh-Dole Act whenever there is any question about the source of funding for a particular invention so as to avoid potential liability to the federal government. DESCRIPTION OF CIRM'S INTELLECTUAL PROPERTY POLICIES CIRM's intellectual property policies follow the broad contours of the Bayh-Dole regime by allowing grantees to retain ownership of inventions and by giving them considerable discretion in deciding when to pursue, 1  The Bayh-Dole Act of 1980 allows grantees to retain ownership of patents on governmentsponsored inventions in certain circumstances, while the Stevenson-Wydler Act of 1980 promotes patenting by government agencies of inventions arising in intramural research.
From page 107...
... the provision of such drugs to eligible Californians and to those purchasing the drugs in California with public funds at prices established in the California Discount Prescription Drug Program.5 These requirements originated in CIRM regulations rather than in the text of Proposition 71 as approved by the voters, but a requirement 3  California Legislature (Sen.
From page 108...
... . Finally, to monitor and enforce compliance with its intellectual property policies, CIRM has established reporting requirements that allow it to keep track of CIRM-funded inventions and related patents, patent applications, licenses, commercialization efforts, and revenues.8 As noted, CIRM also has march-in rights that allow it to grant licenses to use CIRM-funded inventions in certain circumstances, including if a grantee, collaborator, or exclusive licensee has not made reasonable efforts to achieve practical application of an invention or has failed to provide or comply with an access plan.9 To the extent that these march-in rights allow CIRM to enforce obligations with no counterpart in federal law (such as the access plan requirement)
From page 109...
... CIRM initially drafted separate intellectual property regulations for nonprofit organizations (17 California Code of Regulations §§ 100300100306) and for-profit organizations (17 California Code of Regulations §§ 100400-100410)
From page 110...
... For example, the revenuesharing provisions apply to "CIRM-funded inventions," "CIRM-funded technology," and "results of CIRM-funded research." These terms are broadly defined to capture any intellectual property that arises directly or indirectly from CIRM funding. For example, the term "CIRM-funded invention" includes any invention, whether patentable or not, that is either "(1)
From page 111...
... Those comments provide a window on the distinct interests and values of the various commentators, as well as their perceptions of the practical impact of the proposed regulations. REVENUE SHARING CIRM's intellectual property regulations call for revenue sharing with provisions that distinguish between inventions that are licensed by a grantee and those that are "self-commercialized." In this manner, they effectively distinguish in many cases between the intellectual property of academic institutions (which ordinarily do not commercialize inventions and must license them to firms to earn revenue from them)
From page 112...
... On the other hand, the state stem cell programs in New York and Maryland do not impose revenue-sharing obligations on their grantees. Instead, grant recipients in these programs are free to pursue and com 24  California Health and Safety Code § 125290.30(j)
From page 113...
... , which drew far more opposition from both commercial firms and academic institutions. Academic institutions also spoke out more forcefully in opposition to provisions in the intellectual property regulations 27  See, e.g., letters dated June 15, 2006, October 5, 2007, and November 21, 2007, from the California Healthcare Institute expressing concern that the calculation of "net commercial revenues" may underestimate the expenses of drug development and noting that "direct revenue sharing and royalty provisions may actually reduce the public benefit of Prop 71 funded research" and "could create unnecessary obstacles for commercial enterprises working with the government"; a letter dated April 30, 2007, from the Alliance for Research Innovation (on behalf of a group of life sciences companies)
From page 114...
... .30 Although it may be premature to assess whether the revenue-sharing provisions will ultimately dampen incentives for commercialization of CIRM-funded inventions, at this point they do not appear to rank high among the concerns of potential grantees and licensees. ACCESS PLANS Perhaps the most controversial aspect of CIRM's intellectual property provisions is the requirement that grantees and their exclusive licensees submit to CIRM access plans that will afford access to any drug resulting from CIRM-funded research to "Californians who have no other means to purchase the drug."31 The term "drug" is broadly defined to include "blood, blood products, and cells," but does not include medical services.32 Proposition 71 does not explicitly call for access plans, but CIRM introduced the requirement in its intellectual property regulations,33 and 30  See, e.g., a letter dated July 31, 2009, from the University of California Office of Technology Transfer.
From page 115...
... The ICOC may also waive the requirement following a public hearing if it determines "that in the absence of the waiver, development and broad delivery of the drug will be unreasonably hindered or that the waiver will provide significant benefits that equal or exceed the benefits that would otherwise flow to the state."35 CIRM regulations further require that the grantee, collaborator, or exclusive licensee provide the drug to eligible Californians and to those purchasing the drug in California with public funds at a price provided in the California Discount Prescription Drug Program.36 Federal law and other state-funded stem cell programs have no comparable provisions. The closest parallel in recent memory is the policy of the National Institutes of Health (NIH)
From page 116...
... ; a letter dated November 21, 2007, from BIOCOM (noting that pricing under the California Discount Prescription Drug Program enjoys statutory protection under California law as confidential and corporate proprietary information and would not be made available to CIRM to use as a benchmark) ; and a letter dated October 5, 2007, from the California Healthcare Institute (noting that without clarification of these provisions, "it would be difficult to attract private investment to develop CIRM-funded technology," that "there is no evidence that an industry standard exists" for access plans, and that the references to prices under the California Discount Prescription Drug Program are forms of price control that "will create a substantial disincentive to commercial interest in licensing CIRM-funded inventions from for-profit grantees")
From page 117...
... . 45  See, e.g., letters dated October 5, 2007, and November 21, 2007, from the California Healthcare Initiative (stating that inclusion of failure to adhere to pricing and access plans as triggering events for march-in rights distinguishes CIRM provisions from those of the BayhDole Act, increases the risk of litigation, and adds another layer of risk and uncertainty to commercial transactions)
From page 118...
... ; letters dated October 5, 2007, and November 21, 2007, from StemCells (arguing that the march-in rights, "especially those tied to public access and public health, are overly burdensome, unclear, unworkable, and risky as well as beyond the statutory mandate of Proposition 71") ; and a letter dated April 30, 2007, from Geron (noting differences between CIRM and Bayh-Dole march-in provisions that create uncertainty for firms contemplating commercialization)
From page 119...
... Like the requirement for access plans, the march-in rights provisions thus raise considerable uncertainty about the future implementation of rights that may outlive CIRM itself. DISSEMINATION OF BIOMEDICAL MATERIALS WITHIN CALIFORNIA Another distinctive feature of CIRM's intellectual property policies is the requirement for distribution of publication-related biomedical materials,50 a term that is broadly defined to include "tangible research material of biomedical relevance first produced in the course of CIRM-Funded Research including but not limited to unique research resources (such as synthetic compounds, organisms, cell lines, viruses, cell products, cloned DNA, as well as DNA sequences, mapping information, crystallographic coordinates, and spectroscopic data)
From page 120...
... .57 The provision on sharing biomedical materials for research purposes is the sole remaining vestige of an earlier proposal in draft intellectual property regulations for a broader research exemption for the use of all CIRM-funded intellectual property for research purposes. Many comments criticized this earlier proposal, arguing that it would undermine the commercial dissemination of research tools (ARI, 2007; CHI, 2007b; Invitrogen, 2007)
From page 121...
... Departures from the Bayh-Dole approach may put CIRM-funded inventions at a growing disadvantage in the future as funding from other states and the federal government yield competing candidates for commercial development that are available for licensing on more favorable terms. The most significant departures from that approach from the perspective of grantees and licensees -- those pertaining to revenue-sharing and access plans -- are required by California law and evidently popular with the California legislature, posing a considerable political challenge if CIRM seeks to modify them at this point.
From page 122...
... Recommendation 5-2.60 Consider Harmonizing Intellectual Property Policies with Policies of Bayh-Dole Act. As other sources of funding for stem cell research become available and as the field of regenerative medicine advances from the laboratory to the clinic, the ICOC should 59  In the committee's view, this recommendation can be carried out by CIRM without legislative action.
From page 123...
... 2006a. Comments to proposed CIRM regulation enti tled: Intellectual property policy for non-profit organizations [California Code of Regula tions, Title 17 -- public health, division 4 -- California Institute for Regenerative Medicine, Chapter 3]
From page 124...
... Access requirements for products de veloped by for-profit grantees. CIRM's response to IOM's data request: For-profit public comments on CIRM's intellectual property policy (dated June 25, 2008)
From page 125...
... CIRM's response to IOM's data request: Non-profit public comments on CIRM's intellectual property policy (dated June 19, 2006)


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