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Info-Policy-Notes | News from Consumer Project on Technology
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May 13, 1999
CPT comments on HR 209 and S.804
HR 209 passed the House of Representatives
by voice vote on Tuesday, May 11.
S. 804 is the verison introduced by Senators
Jay Rockefeller (D-WV) and William Frist (R-TN)
The legislation undermines the public's
rights in government funded inventions,
increases secrecy, and reduces competition.
The CPT comments end with a discussion about
pharmacuetical patents, but the legislation
is relevant to all federal technology transfer,
including those related to information technologies.
Jamie Love <[EMAIL PROTECTED]>
May 13, 1999
Senator John McCain
Senator Jay Rockefeller
Senator Byron Dorgan
Senator John Durkin
Senator Patrick Leahy
Senator William Frist
Dear Senators:
We are writing to express opposition to HR 209 and S. 804.
The fundamental thrust of the legislation is to water down or
eliminate a range of current public interest protections in the
licensing of taxpayer funded inventions.
1. The legislation reduces competition
Both HR 209 and S. 804 eliminate the statutory requirements in 35
USC 209(c)(1)(b) that before using an exclusive license, an
agency make a finding that:
the desired practical application has not been achieved, or
is not likely expeditiously to be achieved, under any
nonexclusive license which has been granted, or which may be
granted, on the invention;
This is an important change in existing law. It is currently
illegal to use an exclusive license if development is likely to
be expeditiously achieved with a non-exclusive license. However,
under the new bills, this will change, and it will be possible to
use an exclusive license merely by meeting the much lesser
requirement that "granting the license is a reasonable and
necessary incentive to . . . promote the invention's utilization
by the public." The consequence of this change will be fewer non-
exclusive licenses, less competition, and more monopolies on
taxpayer owned inventions.
2. The Public's rights to notice and comment on exclusive
licensing of government inventions is vastly reduced
HR 209 and S. 804 both gut public notice provisions for exclusive
license agreements from government owned inventions. Under
existing law, agencies are normally expected to provide 90 days
notice that the invention is available to the public for
licensing, followed by 60 days notice with an opportunity to file
objections for proposals to provide an exclusive license to a
particular party. [See: 37CFR404.7(a)(1)]
S. 804 and HR 209 reduce notice requirements to "in an
appropriate manner at least 15 days before the license is
granted." According to the House Report on HR 209, this
eliminates also the need to provide notice in the Federal
Register. S. 804 and HR 209 exempt even this modest requirement
for "licensing of inventions made under a cooperative research
and development agreement (CRADA) entered into under section 12
of the Stevenson-Wydler Technology Innovation Act of 1980 (15
U.S.C. 3710a)."
The change eliminates the effective rights of the public to raise
objections to the use of an exclusive license or to even question
the terms of the license (including the scope of the
exclusivity).
3. The increased secrecy on licenses undermines the public's
rights and reduces accountability.
There are a number of current cases where the public is seeking
information about government licenses, including such items as
the royalties or other considerations paid for the license, the
revenues from the invention, information the availability of the
invention to the public, or justification for prices charged
consumers.
HR 209 modifies existing statutory language to require that such
information be secret from the public. Language in 35 USC
Section 209 that says that information "may be treated by a
federal agency as . . . privileged and confidential and not
subject to disclosure under" the freedom of information act, is
changed to say that such information "shall be treated as
privileged and confidential...." NIH licensing officials claim
the change from "may" to "shall" will make a much broader amount
of information secret, including even basic information such as
the amount of money received by the government as payment for use
of a patent. Indeed, in Section 10 of HR 209, federal agencies
are not even permitted to report statistical information on
royalties received for licenses, if "such information would
reveal the amount of royalty income associated with an individual
license or licensee."
This is truly adding insult to injury. Not only will the public
be denied a practical opportunity to stop an agency from giving
an exclusive license on a government owned patent or to
effectively challenge the terms of the patent the public will
not even be permitted to know what the terms are!
4. Problems in licensing of federally funded inventions.
There are currently significant disputes regarding the use of
exclusive licenses for a wide range of government funded
inventions, including inventions in the areas of software,
computing equipment, biotechnology and medicines.
Our primary expertise is in the areas of licensing of government
funded medical inventions. The existence of public notice
permits consumers or potential competitors to object to the use
or scope of exclusive licensing. For example, when Bristol-Myers
(Squibb) sought an extension of its exclusive license to cis-
platin, a cancer drug developed at taxpayer expense, Adria
Laboratories, Stuart Pharmaceuticals, American Cyanamide, Elkins-
Sinn and Andrulis Research objected to the proposed extension,
arguing that the public interest would be served by non-exclusive
licensing. Andrulis suggested non-exclusive licensing be coupled
with higher royalties to fund cancer research. As a result of
the public comments, Bristol-Myers offered to lower the price of
cis-platin by 30 percent and fund $35 million in extramural
cancer research, in return for the extension of the license.
More recently there has been considerable controversy over
Bristol-Myers Squibb's licensing of government data and patents
relating to the cancer drug Taxol and the HIV drug ddI, as well
as Bristol-Myers policies regarding pricing of d4T, another
government funded HIV drug. Also, public health groups who are
interested in malaria are concerned about efforts by SmithKline
Beecham to obtain exclusive rights to new malaria drugs invented
by the US Army and Navy. In many of these controversies, public
health groups are seeking to obtain basic economic information,
such as the royalty rates paid on the licenses, the amount of
sales of the products, or the amount of money the company will
spend on subsequent development of the government invention.
These are not trivial disputes. Bristol-Myers Squibb claimed to
have spent $114 million to develop Taxol, but subsequent data
placed the BMS contributions at less than $10 million prior to
FDA approval of the drug. The decision by the NIH to grant BMS
exclusive rights to two "treatment regime" patents on doses of
Taxol extended the Taxol monopoly at least 30 months, costing
consumers and taxpayers $1.27 billion, according to one study
(Richard P. Rozek, Costs to the U.S. Health Care System of
Extending Marketing Exclusivity for Taxol, N.E.R.A., Washington,
DC, March 1997).
The current controversy with ddI, a US government patented AIDS
drug, illustrates some of these problems. The Bush
Administration granted Bristol-Myers 10 years of exclusivity on
ddI, beginning in 1989. Patient groups are trying to determine
when or if Bristol-Myers will seek to extend the exclusivity on
the patent. The pricing of ddI is considered highly suspect by
AIDS patients. Patient advocates would like to find out when
such a patent extension is proposed, and to insist on public
disclosures of revenues and development costs, to determine if
the exclusivity should be continued. Like all AIDS drugs, ddI is
expensive, both for consumers and for taxpayers who fund care for
many AIDS patients. Competition is expected to lead to
significant decreases in prices. Under HR 209, the extension of
the patent exclusivity could easily be done before patients could
even find out about the proposed extension. Indeed, this may
have already happened, due the difficulty in monitoring such
license extensions, and the unwillingness of the NIH to make it
easier to monitor these issues or even answer questions about the
licenses. But by reducing the notice requirements to 15 days,
the public will have no rights.
In some cases, NIH funded inventions are priced at more than
$100,000 per year. It won't be long before we see prices higher
than $1 million per year per patient for some drugs. How can the
US government justify issuing exclusive licenses for life and
death therapies, without giving the public the right to speak, or
to even find out what the terms of the license are? And why do
policy makers permit drug companies to make ludicrous and clearly
false public statements regarding the costs of bringing US
government pharmaceutical inventions to market, and then make all
data on the real costs a state secret?
If the purpose of HR 209 or S. 804 is to make it easier to get
exclusive rights on government property, the legislation
succeeds. If the purpose is to protect the public's rights in
taxpayer property, the legislation fails. We think the second
issue is the one that needs greater attention by our elected
members of Congress.
Sincerely,
James Love
Director
Consumer Project on Technolgy
http://www.cptech.org
202.387.8030, [EMAIL PROTECTED]
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