CONSIDERATIONS FOR RECIPIENTS OF NIH RESEARCH GRANTS AND CONTRACTS --RESPONSE TO COMMENTS



NIH GUIDE, Volume 23, Number 40, November 18, 1994



P.T. 34



Keywords:

  Grants Administration/Policy+ 



National Institutes of Health



The following is a reprint of the Notice that was published in the

Federal Register of November 8, 1994 (59 FR 55673).



SUMMARY:  The National Institutes of Health (NIH) published a

proposed draft of "Developing Sponsored Research Agreements:

Considerations for Recipients of NIH Research Grants and Contracts"

(hereafter referred to as Considerations) in the Federal Register on

June 27, 1994.  The document is to provide recipients of NIH grants

and contracts (hereafter referred to as Recipients) with issues and

points to consider in developing sponsored research agreements with

commercial entities, where such agreements may include research

activities which are fully or partially funded by NIH.  Comments on

the document were requested by July 27, 1994.  In response to that

Notice, NIH received comments from 18 respondents, two of whom

represented a large number of research intensive institutions.



In general, the comments were favorable and supportive of the NIH's

action to assist its grantees and contractors in administering their

activities in accordance with public law and the terms of their

awards.  There were a number of minor editorial comments that have

been given consideration and for the most part accepted.  A summary

of the comments and the NIH response are presented below.  The full

text of the final document is also presented.



FOR FURTHER INFORMATION CONTACT: Theodore J. Roumel, Assistant to the

Deputy Director for Science Policy and Technology Transfer, NIH, 6011

Executive Boulevard, Suite 325, Rockville, MD 20852-3804, (301) 496-

7057, ext. 203 (this is not a toll-free number).



Dated:



Daryl A. (Sandy) Chamblee, J.D.

Acting Deputy Director for Science Policy and Technology Transfer,

National Institutes of Health



Summary of Comments



In response to the June 27 Notice, NIH received 18 comments,

including two from organizations representing a large number of

research intensive institutions.  Below are the substantive comments

offered and NIH's response, broken down by the section of the

Considerations to which they pertain.



INTRODUCTION



In order to limit confusion as to requirements that may apply to

grantees and contractors, the term Grantee has been replaced by the

term Recipient.



One entity questioned the need for the issuance of the

Considerations.  As was stated in the document, the NIH, as a steward

of Federal funds, has the responsibility to advise Recipients as to

the requirements that attach to the receipt of NIH funds and to offer

technical assistance in adhering to those requirements.  Recipients

have varying levels of sophistication in their technology transfer

activities and the NIH is trying to assist those institutions in

addressing substantive issues based on an extensive review of

sponsored research agreements.  In keeping with its belief that:

"both the public and private sectors must work together to foster

rapid development and commercialization of useful products to benefit

human health, stimulate the economy, and enhance our international

competitiveness, while at the same time protecting taxpayers'

investment and safeguarding the principles of scientific integrity

and academic freedom",

the NIH has developed the Considerations to encourage Recipients to

address issues such as fair and open competition, dissemination and

commercialization of research results, and the maintenance of

academic freedom in developing sponsored research agreements with

commercial entities.



PURPOSE



Several institutions sought greater clarification as to the universe

to which the Considerations were addressed, e.g., NIH awards, all

Federal awards, or any sponsored program agreement.  The Bayh-Dole

Act applies to all Federal agencies.  However, the NIH can only

provide guidance to Recipients within its jurisdiction.  The

INTRODUCTION and PURPOSE sections of the document have been modified

to clearly indicate that the requirements of the Bayh-Dole Act and

its implementing regulations apply to all NIH sponsored research,

whether fully or partially funded.  The document provides information

on the Act and the regulations and guidance to institutions when

situations arise where NIH has fully or partially funded research

activities that may be included in a sponsored research agreement.



Three respondents commented on the definition of a sponsored research

agreement.  The existing definition in the INTRODUCTION section has

been modified to more clearly state what is meant by the term.  One

respondent proposed that the definition be used with NIH funding

only.  This was not accepted because the term is one of general

applicability while the guidance will deal with only those types of

agreements that may involve NIH funded activities.



One respondent urged that NIH point out that sponsored research

agreements differ from one another and must be viewed on a case by

case basis.  While it was our opinion that we had provided that

sense, we have modified the last paragraph of the PURPOSE section to

reflect that proposed sponsored research agreements should be

reviewed on a case by case basis and that provisions of those

documents should be reviewed both individually and in their totality.



BACKGROUND



Several of the respondents raised concerns about individual

situations and whether or not the Considerations should be used in

those situations.  In developing the Considerations, it was the

intent of the NIH to provide some general guidance for developing

agreements and not to specify how an agreement should be written, how

an institution should respond in certain situations, or prescribe any

special language that should be used other than that which is already

required by law and existing policy applicable to NIH funded

projects.  In addition, it was not the intent of the guidance to

interpret or otherwise explain the Bayh Dole implementing

regulations, which were issued by the Department of Commerce.  Issues

regarding the regulations and its requirements need to be addressed

to the Department of Commerce.



One respondent questioned how far the Federal rights extend to

sponsored activities not specifically funded by the Federal

government.  If research results from an NIH funded activity or a

piece of equipment purchased under an NIH funding agreement was later

used in a sponsored research agreement which was being funded solely

by the sponsor and this led to the development of a new invention,

would Federal rights apply to any new invention made under that

sponsored research agreement?  In general, Federal rights attach only

if an invention is conceived or first actually reduced to practice

under a Federal funding agreement.  Mere use of equipment, data, or

pre-existing inventions does not mean that all work under the

sponsored research agreement is subject to the requirements of the

Bayh Dole Act.



UNIVERSAL POINTS FOR CONSIDERATION



Dissemination of Research Results



Several respondents commented on the time frames related to possible

delays in disclosure of research findings and the period for

consideration of a license option.  Comments were mostly supportive,

however, there were several comments that the time frames offered

might be too tight.  It is of the utmost importance to the NIH to

have research results disseminated and innovations brought to

commercialization as rapidly as possible.  Time frames were provided

as guidance to institutions which need to exert their best efforts to

accommodate this important objective.  The Considerations recognize

that different situations may dictate a shorter or longer period of

time.  To protect intellectual property it may be necessary to grant

longer periods of time.  However, each situation must be reviewed on

a case by case basis and the institution must determine the

appropriateness of the time frames for those particular

circumstances.



On the basis of comments received, we have modified the time frame

for review under Dissemination of Research Results to read thirty

(30) to sixty (60) days, rather than thirty (30) days which was

viewed by several respondents as being too constraining.



Utilization



One respondent agreed with the idea of providing a commercial sponsor

of the research an option to license resulting intellectual property

with no second chance to license.  However, the respondent believes

that it would seem appropriate that the sponsor should be given an

equal opportunity with its competitors to make a bid on the license

when the terms of the license offered to a competitor differed from

the terms offered to the sponsor.



The rationale for the language in the Considerations was that if

negotiations, within a reasonable period of time, do not end in a

license with the sponsor, the Recipient should be free to negotiate

with others to ensure the rapid transfer of technology to

commercialization.  This would not preclude a Recipient, at its

discretion, from entering into new negotiations with the sponsor,

especially when the Recipient has modified the terms of the license

being offered to a competitor from that which it previously offered

to the sponsor.



Notification Requirements and Records



In response to one comment, the listing of timeliness considerations

has been revised to reflect more accurately the language in the Bayh

Dole Act and the implementing regulations.  One additional

consideration has been added, i.e., the specification in patent

applications that the invention was made with government support.

This is an important requirement which was omitted in the original

document.



Two respondents expressed concern over the requirement that a

Recipient disclose an invention to the NIH prior to the publication

of any description of the invention.  One of those respondents stated

that the language was incorrect.  The language cited in the

Considerations is a grants policy requirement, has been in place for

a number of years, and is consistent with the Bayh Dole requirements

for notification of inventions.  However, since this appears to have

raised a concern, we have deleted the subject sentence and inserted

information stating the source of the requirement.



The comments related to notification requirements and records

reinforce the need for institutions to have adequate systems to meet

Federal requirements.  Those institutions which have separated their

technology transfer activities from their sponsored research

administration activities may have difficulty in assuring

coordination of actions, submission of reports, and retention of

appropriate records.  Institutions need to ensure that they have

systems in place which coordinate actions involving technology

transfer and sponsored research administration to preserve the rights

of the government and be responsive to requests for information and

reporting.



POINTS FOR SPECIAL CONSIDERATION



Three respondents commented on their concern regarding the suggestion

that Recipients should avoid any other unusual practice or

stipulation that might generate public concern or undermine rather

the serve the public interest.  With innovation and creativity being

a major part of the evolving field of technology transfer, it is not

possible for this document to cover every specific problem, concern

or consideration that may occur in the future.  Therefore, this

language was written to encourage institutions to be constantly alert

in their review of potential agreements with special attention to

conformity with the Bayh Dole Act, implementing regulations, and NIH

funding requirements.



OTHER POINTS FOR CONSIDERATION BY NON-PROFIT RECIPIENTS



Three respondents expressed concern regarding the language on small

businesses.  One had general concerns about the small business

preference and offered some additional language.  A second also had

apprehensions with the small business preference being interpreted as

a "must use" requirement.  A third respondent was concerned that the

form and level of documentation be specified.



In the section on special provisions for non-profit organizations,

the regulation states that such organizations will make efforts to

execute a license with small businesses and, in certain

circumstances, provide a preference for such businesses.  However,

the decision to give a preference in any specific case is at the

discretion of the Recipient.  Additionally, the regulation states

that Recipients must be satisfied that the small business firms have

the capability and resources to carry out plans or proposals.  Having

documentation sufficient to support its decisions on small business

preferences is a key Recipient responsibility.



As noted above, these Considerations have been prepared for use by

Recipients; the regulations implementing the Bayh-Dole Act are issued

by the Department of Commerce and the NIH does not have authority to

modify their content.



The NIH appreciates the effort taken to provide comments on this

document and is pleased that the document is viewed as being a

valuable technical assistance tool.



DEVELOPING SPONSORED RESEARCH AGREEMENTS:  CONSIDERATIONS FOR

RECIPIENTS OF NIH RESEARCH GRANTS AND CONTRACTS



INTRODUCTION



The National Institutes of Health (NIH) is the principal biomedical

and behavioral research agency within the Federal Government.  Its

mission is to improve human health by increasing scientific knowledge

related to health and disease through the conduct and support of

biomedical and behavioral research.  The NIH advances its mission

through intramural research activity and the award of research grants

and contracts to institutions of higher education, research

institutes and foundations, and other non-profit and for-profit

organizations (hereafter referred to as Recipients).  Whenever a

Recipient's research work is funded either in whole or in part

through NIH research grants, contracts, and cooperative agreements,

that activity is subject to the requirements of Public Law 96-517,

known as the Bayh-Dole Act of 1980 (1) (hereafter referred to as

"Bayh-Dole" or "the Act").  Those Recipients are required to maximize

the use of their research findings by making them available to the

research community and the public at large and through their timely

and effective transfer to industry for development.



Recipients also have interactions with industry which may take many

forms, including industrial liaison programs, spinoff companies,

consortia, commercial licenses, material transfers, consultations,

and clinical trial agreements.  This document addresses one form of

Recipient/industry interaction, sponsored research agreements.  The

NIH has focused a substantial amount of its recent attention on this

relationship when NIH funds may also be involved.  The term sponsored

research agreement means a written document which describes the

relationship between Recipients and commercial entities in which

Recipients receive funding or other consideration to support their

research in return for preferential access and/or rights to

intellectual property deriving from Recipient research results.



Although Recipients are primarily responsible for the implementation

of the Bayh-Dole requirements, NIH, as a steward of Federal funds,

has a responsibility to provide guidance on issues which may place

Recipients at odds with Federal law and/or NIH funding requirements.



PURPOSE



The purpose of this document is to provide Recipients with issues and

points to consider in developing sponsored research agreements with

commercial entities, where such agreements may include research

activities which are fully or partially funded by NIH.  The intent is

to assist Recipients in ensuring that those agreements comply with

the requirements of the Bayh-Dole Act and NIH funding agreements

while upholding basic principles of academic freedom.



This document represents the culmination of various activities, under

the aegis of the NIH Task Force on Commercialization of Intellectual

Property Rights from NIH Supported Extramural Research, which

included the review and analysis of 375 sponsored research agreements

from 100 Recipients, meetings with industry, academia, and other

Government agencies, and a specially convened public forum involving

subject matter experts from outside of the NIH.



The NIH recognizes that sponsored research agreements are unique,

creative devices which reflect the needs and interests of the parties

involved and require a delicate balance of risks and benefits to all

of the parties.  Although this document identifies a number of points

to consider, with some necessitating more scrutiny than others, no

single point or issue is so dominant that it is likely to be fatal to

an agreement.  Rather, the juxtaposition of multiple factors or

clauses in an agreement and their synergy needs to be assessed.

Therefore, Recipients should review each proposed sponsored research

agreement on a case by case basis, and the provisions both

individually and in the context of the entire agreement.



BACKGROUND



While NIH policies on the use of research results have been in effect

for some time, commercial development of research results took a

major step forward with the passage of the Bayh-Dole Act.  Congress

passed the Act in response to significant concerns about the United

States' competitiveness and data indicating that rights to many

inventions developed under Federal grants and contracts and assigned

to the Federal government were not being commercialized.  In general,

the Act authorizes Recipients to retain title to inventions resulting

from their Federally funded research and to license such inventions

to commercial entities for development.



Specifically, the Act states that:



"It is the policy and objective of the Congress to use the patent

system to promote the utilization of inventions arising from

Federally supported research or development; to encourage maximum

participation of small business firms in Federally sponsored research

and development efforts; to promote collaboration between commercial

concerns and non-profit organizations, including universities; to

ensure that inventions made by non-profit organizations and small

business firms are used to promote free competition and enterprise;

to promote the commercialization and public availability of

inventions made in the United States by United States industry and

labor; to ensure that the Government obtains sufficient rights in

federally supported inventions to meet the needs of the Government

and protect against nonuse or unreasonable use of inventions; and to

minimize the costs of administering policies in this area."(2)



The provisions of the Act have been implemented through regulations

issued by the Department of Commerce and adopted by the Department of

Health and Human Services (3).



The Act serves the public not only by encouraging the development of

useful commercial products such as drugs and clinical diagnostic

materials, but also by providing economic benefits, and enhancing

U.S. competitiveness in the global market place.



Since its passage, the Bayh-Dole Act has been effective in promoting

the transfer of technology from Recipients to industry as evidenced

by the aggressive pursuit of patenting and licensing and the

proliferation of university/industry collaborations.(4)  In addition,

the development of many new and important drugs and devices has been

facilitated by increased industrial support for academic research (5)

and the explosion in the licensing of university owned inventions

(6).  Furthermore, statistics indicate that the Act has provided

significant economic benefits which are projected as increasing

between 25 to 30 percent per year (7).



RECIPIENT RESPONSIBILITIES



In keeping with the objectives and policies of Bayh-Dole,  it is

incumbent upon Recipients to effectively and efficiently transfer

technology to industry for commercial development.  However, in doing

so Recipients must also comply with the specific terms of the Act,

its implementing regulations, and the terms and conditions of each

NIH award and ensure that such compliance is reflected in their

agreements with commercial entities.



In carrying out that responsibility, at a minimum, Recipients need to

concern themselves with issues involving maintenance of academic

freedom for institutions and investigators, fair access to

information, timeliness of notification and reporting requirements,

rational licensing to commercial entities, and adherence to the

specific requirements of the Act and NIH funding agreements.



While sponsored research agreements frequently are used where basic

research is involved and no invention exists to disclose nor

intellectual property to license at the time the agreement is

executed, Recipients should anticipate such issues and consider the

following points in developing a sponsored research agreement.



The first section, Universal Points for Consideration, highlights

several requirements and issues that Recipients should consider in

all proposed sponsored research agreements.  The second section,

Points for Special Consideration, delineates circumstances which

suggest heightened scrutiny.  The third section, Other Points for

Consideration by Non-Profit Recipients,  contains additional

considerations which apply only to non-profit Recipients.



UNIVERSAL POINTS FOR CONSIDERATION



Academic Freedom

Academic research freedom based upon social collaboration within the

scientific community and the scrutiny of claims and beliefs by its

members is at the heart of scientific advancement within the United

States.  Primarily through Federal funding, academic institutions

have contributed to fundamental knowledge and techniques upon which

current and future scientific discoveries and technological

innovations depend.  Therefore, the  preservation of academic freedom

for Recipient institutions and researchers is of considerable concern

to the NIH.



Recipients should be aware that their interest in the scientific

endeavor covered by a sponsored research agreement and the interest

of the industrial sponsor may not be totally consonant.  As a result,

in general, Recipients should ensure that sponsored research

agreements preserve the freedom for academic researchers to select

projects, collaborate with other scientists, determine the types of

sponsored research activities in which they wish to participate, and

communicate their research findings at meetings, and by publication

and through other means (8). Academic researchers also should be made

aware of any agreements executed by their institutions which may

restrict their ability to pursue research activities and publish

research results.  Recipients also should maintain their independence

to pursue their own mission without undue influence or restraint by

their industrial sponsors.  For example, an agreement which gives an

industrial sponsor the ability to direct the research mission of a

Recipient would be inappropriate.



Dissemination of Research Results



Recipients must ensure that the timely dissemination of research

findings is not adversely affected by the conditions of a sponsored

research agreement.  For example, in the case of research grants, the

PHS Grants Policy Statement, incorporated as a condition of each NIH

research grant, details policies on publication of research results,

responsibilities to disseminate information on unique research

resources, and standards of conduct for the organization's employees.



Although an industrial sponsor's consideration of the commercial

applicability of specific research findings and/or the filing of a

patent application to secure intellectual property rights may justify

a need to delay disclosure of research findings, a delay of thirty

(30) to sixty (60) days is generally viewed as a reasonable period

for such activity.  Depending upon the individual circumstances,

Recipients could consider a shorter or longer period of time, as they

deem appropriate.  In addition to the timing, a sponsored research

agreement which requires the disclosure of inventions and research

findings developed with NIH funds to an industrial sponsor prior to

submission of the invention disclosure to the NIH, may be

inconsistent with the terms and conditions of the NIH grant or

contract.



Utilization



The NIH also has a concern that Federally funded technology be

developed and commercialized in an expedited and efficient manner.

In deciding to enter into an agreement with an commercial entity,

Recipients should consider whether the organization has the

experience, capability, and commitment to bring its likely inventions

to commercial status.



Additionally, Recipients should not enter into sponsored research

agreements that permit a sponsor to tie up the development of a

technology by acquiring exclusive licensing rights to the product of

given research results before deciding whether or not it will

actively develop and commercialize that product.  Recipients could

provide a sponsor with an option to pursue licensing rights.  It is

reasonable for such options to be limited to no more than six (6)

months after disclosure to the authorized representative of the

sponsor.  However, individual circumstances may dictate a shorter or

longer period of time.  After the option period expires, the

technology should become available for licensing to other entities.

Moreover, once a sponsor decides not to exercise its option,

normally, the agreement should not provide for a second opportunity

to obtain licensing rights by matching other parties' offers for the

rights.  Such actions enable Grantees to license to companies

presenting a bona fide commercialization plan, thus expediting the

availability of products to the public.



In order to ensure that technology is developed rapidly and is not

being subjected to delays, Recipients should also establish,

maintain, and actively administer policies and procedures which

ensure that licenses arising from sponsored research agreements

contain due diligence requirements and benchmarks to monitor

performance.  When future rights to as yet undiscovered inventions

are included in a sponsored research agreement, benchmarks for

development of each such invention should be established as they

become available for commercial development.  In addition, Recipients

should actively monitor licensees in accordance with those

requirements and benchmarks to assure compliance with Recipient

obligations under the Act.



Recipients also need to ensure that they have internal systems to

provide required utilization reports to the NIH on each invention.

Those reports are required by Department of Commerce regulation and

include such items as the status of development, first commercial

sale, and amount of gross royalties received.  Detailed information

about the precise utilization report requirements can be obtained

from the NIH Office of Extramural Research.



U.S. Manufacture



The Bayh-Dole Act requires that products developed with Federal funds

and used and sold in the United States, be substantially manufactured

here.  In granting exclusive rights to use or sell any subject

invention in the United States, Recipients must ensure that each

agreement requires that any products embodying the subject invention

or produced through the use of the subject invention will be

manufactured substantially in the United States.  In individual

cases, a request for waiver may be considered by the NIH.  A

determination will be made based upon a showing by the Recipient that

reasonable but unsuccessful efforts have been made to grant licenses

on similar terms to potential licensees that would be likely to

manufacture substantially in the United States or that under the

circumstances domestic manufacture is not commercially feasible.  In

granting a waiver of the U.S. manufacture requirement, the NIH may

consider other benefits conferred on the United States by the

potential license including the rapid availability of a product of

benefit to the health of the American people.



Notification Requirements and Records



In sponsored research agreements, as in other contexts, Recipients

must also ensure that invention, patent and license notification

requirements are adhered to in a timely manner.  Timeliness

considerations include prompt (1) employee notification to Recipient

administrators of an invention made under NIH funding, (2) written

disclosure to NIH in sufficient technical detail to adequately

describe the invention, (3) written election to the NIH of whether or

not the Recipient will retain title to such invention, (4) adherence

to time frames for initial filing of patent applications in the

United States and the filing of foreign patent applications, (5)

execution and delivery of all instruments necessary to establish or

confirm NIH rights throughout the world in the subject inventions to

which the Recipient has elected to retain title, (6) notification to

the NIH of any decision not to continue patent prosecution, pay fees,

or defend the patent in a reexamination or opposition proceeding on a

patent, in any country, (7) conveyance of title to NIH when

requested, and (8) specification in any United States patent

applications and any patent issuing thereon covering a subject

invention that the invention was made with government support (9).



Specifically, as conditions of NIH grants and cooperative agreements,

Recipients must fully notify the NIH in a timely manner when an

invention has been developed.  In addition, PHS grants policy

requires that when applying for continued funding in each subsequent

funding period, the institution must also provide either a listing of

all inventions made during the preceding budget period or a

certification that no inventions were made during the applicable

period.  A final invention statement and certification listing all

inventions that were conceived or first actually reduced to practice

during the course of work under the funding agreement is required

within ninety (90) days following the expiration or termination of

support on an applicable project.  Additionally, Recipients need to

adhere to the specific requirements contained in the patent clauses

of their contracts as well as the general provisions of the Federal

Acquisition Regulations.



Furthermore, Recipients must also document their compliance with the

requirements of the Act, regulations, and terms and conditions of NIH

awards, generally and as related to sponsored research agreements.

Recipient records must be available for review by authorized Federal

officials in accordance with the terms and conditions of the award.

For example, concerning access and retention of records under NIH

grants and cooperative agreements,  regulations require grantees to

retain financial and programmatic records, supporting documents,

statistical records, and all other grantee records which may

reasonably be considered pertinent to a grant or subgrant (10).



POINTS FOR SPECIAL CONSIDERATION



The NIH has identified several situations, outlined below, in which

Recipients should exercise heightened sensitivity and scrutiny in the

development of sponsored research agreements.  Such an exercise

should confirm that a sponsored research agreement does not adversely

impact NIH funded activities and Recipient concerns such as academic

freedom, or shift control of the Recipient's scientific activities,

management, and independence into the hands of the sponsor.  While

there is no requirement that Recipients submit proposed sponsored

research agreements to the NIH for review, at the discretion of the

Recipient, the NIH Deputy Director for Extramural Research may be

consulted for additional clarification in instances where special

considerations warrant.



First, Recipients should subject their sponsored research agreements

to heightened scrutiny when one or more of the following threshold

criteria apply:



(a) the amount of financial support from the sponsor meets or exceeds

$5 million in any one year, or, $50 million total over the total

period of funding under the agreement;



(b) the proportion of funding by the sponsor exceeds 20 per cent of

the Recipient's total research funding;



(c) the sponsor's prospective licensing rights cover all technologies

developed by a major group or component of the Recipient

organization, such as a large laboratory, department or center, or

the technologies in question represent a substantial proportion of

the anticipated intellectual output of the Recipient's research

staff; or



(d) the duration of the proposed agreement is for more than 5 years.



If one or more of these criteria apply, it is more likely that the

proposed sponsored research agreement will adversely affect open

commercial access, especially for small businesses, to a Recipient's

Federally funded research activities and may delay or impede the

rapid development and commercialization of technology.



Second, Recipients should be concerned if the scope of the sponsored

research agreement is so broad that the subsequent exclusive

licensing of technology under the agreement provides a single sponsor

with access to a wide array of Recipient research findings and

technologies that effectively exclude other organizations from

reasonable access to a Recipient's technology.  This type of

arrangement can also delay commercialization if the sponsor does not

have the interest or the capability to develop the technology.



Third, if the sponsor's contribution of funds is to support a

Recipient's general operations rather than specifically defined

research projects, the Recipient should consider the amount of the

sponsor's general funding in relation to funds from other sources

when determining what prospective intellectual property rights the

sponsor will obtain from the results of the Recipient research.

There should be a reasonable relationship between the amount of money

contributed by the sponsor and the rights that it is granted both to

review and license resulting technology or inventions.  Additionally,

Recipients should also consider the level of risk that the sponsor

will be assuming in order to obtain rights.  In general, the greater

the restrictions on a sponsor's rights, the higher the sponsor's risk

in receiving benefit from its support.  As an extreme example, a

sponsor should not be able to provide 5 percent of the Recipient's

total support, review 100 percent of the Recipient's inventions, and

receive rights or a first option to 50 percent of the research

results generated by the Recipient.  Where general funding is

involved, a Recipient may consider a number of alternative actions,

including establishing some mechanism to limit the review and

licensing rights of the sponsor to a particular segment or percentage

of the inventions for a set period of time.  For example, the

Recipient may require the sponsor to select those research areas on

projects to which its general funding rights would attach in advance,

thereby freeing up research areas that may be of interest to other

commercial entities.  Because, by its nature, general funding is less

directed and its results more imprecise, Recipients should carefully

monitor the impact on open competition and fair access by small

business of the sponsor's licensing practices for technology

supported by general funding.



Fourth, Recipients should avoid any other unusual practice or

stipulation that might generate public concern or undermine rather

than serve the public interest.



OTHER POINTS FOR CONSIDERATION BY NON-PROFIT RECIPIENTS



The following points are to aid non-profit Recipients in

administering the Act and in complying with the requirements of NIH

funding agreements.



First, Recipients must ensure that the rights to inventions resulting

from Federal funding are not assigned without NIH approval.  An

exception to this is when the assignment is made to an organization

which has as one of its primary functions the management of

inventions, in which case, the assignee will be subject to the same

provisions as the Recipient.



Second, Recipients must share royalties collected on NIH supported

inventions with the inventors and the balance of any royalties or

income earned, after payment of expenses, including payment to

inventors and incidental expenses to the administration of subject

inventions, must be utilized for the support of scientific research

or education.



Third, Recipients must employ reasonable efforts to attract licensees

of subject inventions that are small business firms.  Additionally,

Recipients must provide a preference to small business firms when

licensing a subject invention if Recipients determine that small

business firms have plans or proposals for marketing the invention

which, if executed, are equally as likely to bring the invention to

practical application as any plans or proposals from applicants that

are not small business firms.  However, Recipients must be satisfied

that the small business firms have the capability and resources to

carry out plans or proposals.  The decision whether to give a

preference in any specific case is at the discretion of the

Recipient.  However, since sponsored research agreements typically

provide exclusive licenses or options to such rights to the sponsor,

Recipients should seriously consider and provide for these issues

when negotiating such agreements.



CONCLUSION



Technology transfer is a vehicle through which the fruits of NIH

funded research are transferred to industry to be ultimately

developed into preventive, diagnostic and therapeutic products to

advance human health.  In a dynamic and multinational marketplace, if

the United States is to remain a world leader in technological and

scientific innovation, both the public and private sectors must work

together to foster rapid development and commercialization of useful

products to benefit human health, stimulate the economy, and enhance

our international competitiveness, while at the same time protecting

taxpayers' investment and safeguarding the principles of scientific

integrity and academic freedom.



It is in this spirit that the NIH encourages Recipients to address

the issues and apply the points for consideration identified in this

document when developing sponsored research agreements with

commercial entities.



FOOTNOTES



1.  Public Law 96-517, enacted December 12, 1980, Chapter 18--Patent

Rights in Inventions Made with Federal Assistance.



2.  Public Law 96-517, Chapter 18, Patent Rights in Inventions Made

With Federal Assistance, Sec. 200.



3.  The Department of Commerce regulations are at 37 Code of Federal

Regulations (CFR) Part 401 and supersede applicable portions of 45

CFR Parts 6 and 8.



4.  Approximately one in every four university patents issued in the

late 1980s was for a biomedical or health related invention.  In the

early 1970s, the ratio was one in eight.  Source: Science and

Engineering Indicators, 1993, National Science Foundation.



5.  While still representing less than 10 percent of the total

funding for academic research, it is estimated that nearly 2 percent

of United States industry's expenditures for R&D now goes to academic

institutions, as compared with less than 1 percent in 1971.  Source:

Science and Engineering Indicators, 1993, National Science

Foundation.



6.  Over 1000 licenses or options were executed in Fiscal Year 1992

by 260 academic institutions surveyed.  The institutions also

reported that they had over 5000 active licenses in place at the time

of the survey.  Source: Association of University Transfer Managers

Licensing Survey FY 1991-1992,  published October, 1993.



7.  In FY 1992 sales and employment attributable to the Act were

estimated to be as follows: between $9 and $13 billion in sales and

50-100,000 jobs, with an annual increase of between 25 and 30

percent.  Source: Dr. Ashley J. Stevens, Director, Office of

Technology Transfer, Dana-Farber Cancer Institute, Association of

University Technology Managers Winter Meeting, 1994.



8.  The NIH recognizes that there may be certain instances when it

may be reasonable for a Grantee institution to agree to minimally

restrict a researcher from collaborating with another industrial

partner when the subject matter of such collaboration overlaps with

that of the sponsored research agreement.



9.  The regulation, 37 CFR 401.14(F)(4), requires that the following

clause be used:  "This invention was made with government support

under (identify the grant, contract, or cooperative agreement)

awarded by (identify the Institute or Center), National Institutes of

Health.  The government has certain rights in the invention."



10.  The regulations are set forth at 45 CFR Part 74, Subpart D and

45 CFR Part 92.42.



.

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