NIH has multiple roles in biomedical research that suggest a number of options for facilitating the dissemination of research tools. Through its intramural research program, NIH is an end user of research tools as well as a leading producer and supplier of new tools. As a sponsor of biomedical research in extramural laboratories, NIH has an interest in how its grantees and contractors obtain research tools from other institutions and how they disseminate the tools created in NIH-funded research. As an agency of the Federal government, NIH may invoke additional legal authorities for advancing its interests related to research tools. Existing law also restricts NIH's authority in certain respects. NIH has considerable authority over how it manages its own intellectual property rights what sorts of agreements it enters into to acquire research tools for use in its intramural programs. NIH's authority over the activities of grantees is somewhat more constrained, and its authority over privately-funded activities is more limited still.

Intramural Authorities

First and foremost, NIH has authority⁶ to determine the patent, license, publication, and distribution policies to apply to the tools that NIH intramural scientists develop. By implementing and publicizing policies that promote widespread access for use in research,⁷ NIH can set an example and encourage others to follow its lead. In general, NIH does not file patent applications on technologies that are useful primarily as research tools and maintains a non-exclusive licensing policy for patented technologies that might be used as research tools. Further, when it enters into exclusive commercialization licenses, NIH reserves continuing rights over research uses, and when it grants exclusive license options on future discoveries, it seeks to ensure that the options do not attach to technologies primarily useful as research tools.

Second, as a user of research tools generated by others, NIH can determine the terms that it will accept in entering into license agreements and MTAs. As a matter of policy, NIH generally avoids giving an advance promise of future commercialization rights as a condition for obtaining a research tool. Although NIH has the authority to enter into such an agreement under the Cooperative Research and Development Agreement (CRADA) mechanism authorized by the FTTA, it will do so only upon a finding that the tool is a unique research resource not reasonably available from any other source. NIH generally seeks access to research tools either through ordinary procurement mechanisms or under its model material transfer agreements (MTAs), neither of which transfers or otherwise promises future intellectual property rights to the provider. By using the FTTA authorities strategically to enhance access to research tools, NIH may influence the policies of others in the biomedical research community through moral suasion.

As a funding agency charged with monitoring the use of grant funds and ensuring that the purposes of grants are carried out, NIH can set terms and conditions on grants and promulgate grants policies. In this capacity, NIH has put in place several different policies that encourage the widespread dissemination of research tools. These policies are somewhat constrained by the Bayh-Dole Act, which gives the recipients of federal funds considerable discretion in their handling of patentable "subject inventions" made in federally supported research. Many research tools generated under NIH-funded research projects can be defined as both a "unique research resource" for purposes of the grants policy statements, and a patentable "subject invention" for purposes of the Bayh-Dole Act. In the latter case, NIH policies are limited.

The PHS Grants Policy Statement explains in full PHS policy with regard to the distribution of research resources developed with PHS funds.⁸ Although the policy statement encourages recipients of federal funding to make unique research resources available to others for continuing research, it also encourages the commercialization of research results, in acknowledgment of the Bayh-Dole Act. Indeed, the policy statement goes beyond what the Bayh-Dole Act requires by giving grantees the same latitude in licensing unpatented resources that the Bayh-Dole Act gives them for patented "subject inventions."

The NIH Procedures for Handling Non-Election of Title to Patentable Biological Materials⁹ sets forth NIH policy and procedures regarding conditions under which NIH will refrain from electing title to patentable, but unpatented, research tools that the funding recipient wishes to license as a biological material. Under the Bayh-Dole Act, a recipient of NIH funds may elect title to inventions developed with NIH funding, but must file a patent application within one year of such election. Where the recipient elects not to file a patent application, the NIH may request title to the invention. Typically, the recipient's election not to file a patent application on an invention is an indication that the recipient is not interested in retaining domain over the invention. However, this is not necessarily the case with regard to patentable biological materials, which may frequently be licensed for commercial use without patent protection.

The NIH policy allows the recipient to retain title only if the recipient agrees to ensure the continuing availability of the research tool for non-profit research use. The recipient must make information about the invention publicly available and must provide for independent maintenance of the material, whether at a national repository or at the originating grantee laboratory. Finally, the policy requires that the recipient provide sufficient quantities of the biological material to the NIH, and reserves the right of the government to distribute the material itself if the conditions of the non-election are not met.

Another policy that encourages the dissemination of research tools is NIH Procedures for Handling Inventor Requests for Retention of Title in an Extramural Invention,¹⁰ which governs review and disposition of requests to allow employee inventors to retain title to extramural inventions. Under the Bayh-Dole Act, the NIH may permit a recipient to grant requests by an inventor for title to an invention when NIH does not wish to obtain title itself. 35 U.S.C. ?202(d). Among the criteria set by NIH for allowing retention of title is a requirement that NIH determine that retention of title by the inventor will foster the rapid and appropriate commercialization of the invention, particularly with regard to inventions primarily useful as research tools. In addition, in order to retain title the inventor must certify that he or she will ensure the continuing availability of inventions useful primarily as research tools. NIH imposes similar requirements when its intramural inventors seek to retain title.

Although NIH has taken significant steps to ensure the appropriate dissemination of research tools arising from its grants, the policies currently in place apply piecemeal to isolated circumstances and have not to date been integrated into a strong, cohesive policy directive in this area. NIH could do more to clarify its expectations that appropriate grant stewardship includes ensuring the appropriate dissemination of research tools. In addition, NIH currently grants virtually all requests by recipients of its funding to allow employee-inventors to retain title to their inventions. NIH could revise this policy and routinely retain title to any research tool offered by the recipient, in order to ensure dissemination. These policies would be consistent with both the Bayh-Dole and NIH grant objectives, in that they implement the commercialization provisions of the Act in light of the public policy goals of appropriate access.

The Bayh-Dole Act ("Act") provides the statutory basis and framework for federal technology transfer activities, including the patenting and licensing of federally funded inventions by recipient organizations. The Act permits recipients of federal grants and contracts to elect title to patentable "subject inventions" that arise with the use of federal funds. If recipients elect title, the Act requires them to file patent applications, seek commercialization opportunities, and report back to the funding agency on efforts to obtain utilization of their inventions. The Act also retains for the funding agency certain residual rights in subject inventions.

Exceptional Circumstances

The Bayh-Dole Act gives NIH authority either to limit the recipient's right to elect title, or to retain title itself, to subject inventions in the terms of a funding agreement "in exceptional circumstances when it is determined by the agency that restriction or elimination of the right to retain title to any subject invention will better promote the policy and objectives of this chapter."¹¹ NIH could use this authority to retain title in the terms of grants that have a specific purpose of generating research tools for broad dissemination. As owner of these inventions, NIH could then decide for itself what patenting and licensing strategies make the most sense to ensure continuing availability of particular tools for further research, as well as to ensure incentives for commercialization.

Although NIH has not yet used its "exceptional circumstances" authority as a means of ensuring dissemination of research tools, in light of the restrictive practices of many grantees in licensing NIH-funded research tools, there is some force to the argument that the purposes of the Bayh-Dole Act would be better served if NIH were to retain title to these inventions itself. These purposes, as set forth in the language of the statute, include

"to promote the utilization of inventions arising from federally supported research or development; to encourage maximum participation of small business firms in federally supported research or development efforts; to promote collaboration between commercial concerns and nonprofit organizations, including universities; to ensure that inventions made by nonprofit organizations and small business firms are used in a manner 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 the public against nonuse or unreasonable use of inventions; and to minimize the costs of administering policies in this area." ¹²

Particularly if the primary purpose of the grant is to generate specific research tools, or an entire class of tools, that are likely to be widely disseminated and utilized if left in the public domain, it is hard to see how the stated purposes of the Bayh-Dole Act would be better served by giving grantees the option to retain title and restrict access as they see fit.

On the other hand, for discoveries that require substantial commercial investment to achieve practical utilization, the purposes of the Bayh-Dole Act might ordinarily be better served by leaving title in the institution where the research was done so that it will get a patent and find a licensee. A declaration of exceptional circumstances must be made at the time of the grant award, and it might be difficult at that point to predict that a particular grant might give rise to a research tool. One way around this dilemma might be for NIH to develop standard grant language that declared exceptional circumstances for research tools as a category. NIH could thereby retain title to all research tools (or impose a lesser restraint), while leaving title to other subject inventions with the recipient. The difficulty with this approach, as elaborated above, is that it requires an ability to distinguish research tools from other discoveries. Moreover, some research tools might require the sort of private investment that is unlikely in the absence of an exclusive license before they will be developed to the point of achieving practical utilization. A less extreme step for NIH to take would be to delineate the circumstances under which the recipient could request greater rights, for example, if the recipient agrees to ensure the continuing availability of the research tool.

Declaration of exceptional circumstances, either on a case by case or standardized basis, would be a provocative step by NIH, which to date has scrupulously respected the rights of grantees to retain title to inventions. Nevertheless, when the purpose of the grant is to generate research tools for widespread distribution, experience suggests that there are certain circumstances in which the policy and objectives of the Bayh-Dole Act will be better served through retention of title by the funding agency. Given the magnitude of the potential adverse consequences to competition, free enterprise, and public availability that continuing restraints on access to important research tools would pose, it is likely that a well-crafted declaration of exceptional circumstances would survive the inevitable legal challenge from recipients accustomed to deciding their own patent strategies.

Apart from the exceptional circumstances authority, for all inventions made in the course of NIH-funded research, the Bayh-Dole Act retains "a non-exclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States any subject invention throughout the world." ¹³ This license gives the NIH, and any other agency of the Federal government, the right to use any patented research tool arising in the course of federally-sponsored research without liability for patent infringement. In practice, however, this license has been of little practical value to NIH in obtaining research tools from its grantees, either for its own intramural scientists or for dissemination to others. Some grantees have taken the position that the statute provides protection from infringement only, and have refused to provide samples of the materials in question to facilitate the actual use.

This interpretation seems to defeat the purpose of the retained license and rests on questionable logic. If NIH's retained rights to subject inventions under the Bayh-Dole Act do not extend to tangible materials, it is difficult to see how the Act gives grant recipients rights in such materials. If the recipients' position is based on ordinary tangible property rights rather than Bayh-Dole rights, then the Act does not constrain NIH from seeking an assignment of such rights by contract. NIH should explore whether a standard grants clause could be developed and placed as a condition of all grants to the effect that the recipient agrees to provide to NIH, upon request, samples of any unique research resource developed under the funding. This would facilitate not only the use of patented materials by NIH under its retained license, but also broad dissemination of unpatented research materials that are not "subject inventions."

It is not clear whether NIH's retained license "to practice or have practiced for or on behalf of the United States any subject invention throughout the world" allows NIH to authorize use of subject inventions by other recipients of NIH grants. Some agencies take the position that the activities of grantees are covered by the exemption, but NIH has considered it an open question. Government contracts are clearly considered to be for the purpose of fulfilling a government purpose under The Federal Grant and Cooperative Agreements Act of 1977, which directs federal agencies to use a contract "whenever the principal purpose of the instrument is the acquisition, by purchase, lease, or barter of property or services for the direct benefit or use of the Federal Government," 31 U.S.C. ? 6303. On the other hand, this same law states that grants are to be used when "the principal purpose of the relationship is the transfer of money...in order to accomplish a public purpose of support or stimulation authorized by Federal statute...." and there is no substantial involvement on the part of the federal government. 31 U.S.C. ? 6304. This language suggests an essential distinction between a direct Federal benefit obtained under a contract and a broader "public purpose" benefit under a grant, which may provide authority for limiting the useful scope of the retained license "for or on behalf of the United States" under the Bayh-Dole Act to the activities of government agencies and contractors. ¹⁴

The Bayh-Dole Act also has a mandatory licensing provision commonly referred to as the "march-in" authority, at 35 U.S.C. 203(1). ¹⁵ The purpose of the march-in authority is to prevent the underutilization of federally funded inventions. Like the government use license, march-in would apply only to those research tools that could be defined as patentable "subject inventions." Prior to exercising march-in rights, the agency must determine that such action is necessary because of the failure of the contractor or its licensees to take effective steps to achieve practical application of the inventions in a particular field of use, to satisfy health or safety needs, or to meet requirements for public use specified by Federal regulations.

The march-in authority might be of use on a case by case basis to improve access to particular research tools, but it is a cumbersome mechanism that does not lend itself to routine use. In order to exercise march-in rights, the funding agency must comply with a lengthy administrative process and make one of the determinations described above. Each particular case can be expected to be lengthy and uncertain. Although administratively burdensome, march-in has one advantage over the exercise of the government use license, in that it is not limited to use for a government purpose. If the funding agency were successful in asserting march-in rights for a patented research tool, a third party licensee could manufacture that tool and make it available for sale to the research community at large.

¹⁵ Section 203(1) states in pertinent part:

[w]ith respect to any subject invention in which a [grantee] has acquired title under this chapter, the Federal agency under whose funding agreement the subject invention was made shall have the right ... to require the contractor, an assignee or exclusive licensee of a subject invention 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, and if the contractor, assignee or exclusive licensee refuses such request, to grant such a licensee itself, if the Federal agency determines that such--