PATENT UTILIZATION-LICENSING

NASA's program for licensing inventions to which it has acquired title is based on Section 305 of the Space Act and is implemented by NASA Patent Licensing Regulations (14 C.F.R. 1245.2). Both nonexclusive and exclusive licenses are available.

In order to locate prospective licensees who want to commercialize an invention, NASA uses a variety of methods to inform the public of its technology available for licensing. Abstracts of the agency's inventions appear in its publications. Additionally, NASA inventions available for licensing are listed in the Federal Register and the Official Gazette of the U.S. Patent and Trademark Office.

The National Technical Information Service also publishes a weekly journal entitled "Government Inventions for Licensing" which includes NASA abstracts and licensing information. NASA said that it has not been able to identify or relate any licensing inquiries for agency owned inventions to the NTIS journal. NASA also said it holds and participates in licensing conferences and workshops and its Industrial Applications Centers disseminate both abstracts of inventions available for licensing and information on how to obtain licenses.

NASA promotes nonexclusive licenses, but may grant exclusive licenses if it determines that the invention is not likely to be brought to commercialization under a nonexclusive license or by further Government funding and that the exclusive license will provide the necessary risk capital to achieve commercial use of the invention. NASHA normally does not require royalties for a nonexclusive license but may for an exclusive license.

DOMESTIC LICENSING

Each application for a domestic license is initially reviewed in NASA's Office of General Counsel. If the application conforms to the regulations and the license requested appears appropriate, the application is forwarded to the Inventions and Contributions Board. The ICB recommends to the Administrator whether a nonexclusive or exclusive license should be granted and any terms and conditions of the license.

If a determination is made to grant a nonexclusive license, the terms and con. ditions are negotiated by the Office of General Counsel. If the determination is made to grant an exclusive license, notice of this intent, along with the identification of the invention, license, and special terms and conditions, are published in the Federal Register. The exclusive license will be granted unless, within 30 days of the notice, a statement is received from any person setting forth reasons why it would not be in the interest of the United States to grant the proposed license, or an application for a nonexclusive license is received which states that the invention is likely to be brought to practical application within a reasonable period of time.

As of December 31, 1978, NASA had 251 licenses in force on 133 of its 3.512 domestic patents and applications. Nine of these licenses were exclusive and 242 nonexclusive.

NASA negotiates a specific date for commercialization with its licensees and requires that the invention be practiced for the term of the license, which usually is less than the term of the patent. Licensees are required to report annually on their progress in commercializing the inventions. NASA recently inquired about commercialization efforts of its 242 nonexclusive licensees; 138 or 57 percent responded. Fifty, or about 20 pecent of the total licensees, reported they were pursuing development and marketing efforts.

FOREIGN LICENSING

Inventions on which NASA obtained patents in foreign countries are available for licensing in those countries. NASA's foreign licensing objectives are to further the interests of U.S. industry, enhance U.S. economic interests, and advance U.S. international relationships.

Foreign licenses can be either exclusive or nonexclusive. In granting foreign licenses, preference is given to the applicant who has previously been granted a license for the invention in the United States. NASA requires royalties or some other consideration under all foreign licenses.

As of December 31, 1978, NASA had 787 foreign patents on 184 inventions. Fifty-nine were licensed exclusively to 7 licensees.

PATENT UTILIZATION-WAIVERS

Where NASA waives property rights to inventions made under its contracts, the Inventions and Contributions Board periodically monitors the waiver recip ients. Through 1977 NASA waived rights to 1,046 inventions, but subsequently voided 258 of these. NASA said that 193 or about 18.5 percent of its waived inventions were utilized or commercialized.

NASA's data on 523 inventions waived prior to 1975 showed: 84 in use in a commercial process, product, or service; 15 fully developed with Government use; 91 under development; 68 available for licensing; 228 without active commercialization or licensing efforts; and 37 obsolete.

Waiver recipients reported that the 15 fully developed inventions were ready for commercial use, but they had found only Government use in addition to NASA's use.

Most of the 91 inventions under development were being developed by the waiver recipient. Where development was being done by licensees, the inventions resulted primarily from university and nonprofit research organizations.

The only effort being undertaken for 68 inventions was to find a licensee. Many of these inventions resulted from universities and research organizations which did not have manufacturing capability. In some cases where the waiver recipient was a manufacturer, the invention was reported as being outside of its business or manufacturing activity.

NASA believed the 228 inventions without commercialization or licensing activity may have some utility. The agency, however, attributed the lack of interest in these to the following: no commercial need or market; inventions too costly to develop; inventions not cost competitive; technology too sophisticated; market too small to justify production; funding not available; and invention shelved indefinitely because of other priorities.

Thirty-seven inventions were obsolete because (1) other or better products and methods were available; (2) they were superseded by other technology; (3) they were not compatible with present systems; or (4) the state-of-the-art had passed them by.

MARCH-IN RIGHTS

NASA includes march-in rights in its waiver instrument. The Administrator reserves the right to require the granting of a nonexclusive or exclusive license for the practice of the invention:

(1) Unless, within 3 years after the patent is issued, the waiver recipient has taken effective steps to bring the invention to the point of commercial application and thereafter continues to make its benefits reasonably accessible to the public, or

(2) Unless, within 3 years after the patent is issued, the waiver recipient has taken effective steps to make such patent available for licensing on terms that are reasonable, or

(3) As may be appropriate to satisfy governmental regulation for public use or as may be necessary to fulfill health or safety needs or other public purposes.

Under the terms of the waiver instrument, the recipient agrees, if requested by NASA, to provide a written report to the agency not more often than annually on the commercial use of the invention. NASA evaluates these reports to ascertain compliance with conditions of the waiver.

NASA has not enforced its "march-in" rights by directing waiver recipients to license others under the conditions specified in the waiver instrument. Rather. when the recipient does not comply with requirements, the waiver is voided and title to the invention is taken back by NASA. The invention then is made available for licensing to third parties under the agency's licensing regulations. On December 31, 1977, NASA had voided 258 waivers. All of these were voluntary on the part of the waiver recipient. NASA said that most of the waivers were voided at the request of the recipient and not for failure to comply with "marchin" provisions in the waiver instrument.

Senator BAYH. Our next witnesses are a panel of witnesses in the area of health research: Dr. Leland C. Clark, Jr.; Dr. Hector F. DeLuca; and Dr. H. Donald Putney.

Dr. Leland C. Clark, Jr., received a Ph. D. from the University of Rochester in 1944 and has published nearly 300 scientific papers and is author or coauthor of a number of patents. He is currently professor of research pediatrics at the Children's Hospital Research Foundation, in the Cincinnati College of Medicine, Cincinnati, Ohio. Dr. Clark is well-known for his invention, the Clark electrode, which is used worldwide for measuring oxygen in blood, streams and rivers, and food products. He also invented the first bubble-defoam heart lung machine and pioneered its use in some of the first animal and human open-heart surgery.

Dr. Hector F. DeLuca is the chairman of the Biochemistry Department of the University of Wisconsin in Madison, Wis. He is an honors graduate of the University of Colorado and received a Ph. D. in biochemistry from the University of Wisconsin. Dr. DeLuca has been involved in a number of important discoveries in the field of vitamins and their effect on the human metabolism. Dr. DeLuca is also credited with over 350 publications in his field of expertise.

Mr. H. Donald Putney is a graduate of the University of Kansas and is presently serving as the senior vice president of the Fox Chase Cancer Center in Philadelphia, Pa. Mr. Putney has been very involved with cancer research at the center and was kind enough to fill in for his colleague, Dr. Baruch S. Blumberg, who was unable to attend. today's hearing.

Senator BAYH. We appreciate it, doctors, that you are with us today. I have no preference as to who shall speak first.

Mr. PUTNEY. I might suggest, Mr. Chairman, that since Dr. DeLuca has a plane to catch this afternoon, he be first to lead off. Senator BAYH. That is the most practical protocol I have heard in a long time. [Laughter.]

TESTIMONY OF DR. HECTOR F. DELUCA, CHAIRMAN, BIO-CHEMISTRY DEPARTMENT, UNIVERSITY OF WISCONSIN, MADISON; DR. LELAND C, CLARK, JR., PROFESSOR OF RESEARCH PEDIATRICS, CHILDREN'S HOSPITAL RESEARCH FOUNDATION, CINCINNATI, OHIO; MR. H. DONALD PUTNEY, SENIOR VICE PRESIDENT, THE FOX CHASE CANCER CENTER, PHILADELPHIA, PA.

Mr. DELUCA. Thank you very much, Mr. Chairman.

It is a great pleasure to speak on behalf of Senate bill No. 414 dedicated to the maximum utilization of scientific information generated from federally supported gifts, grants, and contracts.

I am a recipient of Government support in the health research area and have, through my efforts and the efforts of my colleagues, been able to generate some 23 U.S. patents and 80 foreign patents. This work was supported with a combination of funds from the University of Wisconsin and U.S. Government grants, primarily from the Department of Health, Education, and Welfare.

In addition, I have had the experience of dealing with the National Institutes of Health on a case-by-case basis for permission to file and assign patents to the nonprofit organization, Wisconsin Alumni Re

search Foundation. I have also had considerable experience with the use of the Institutional Patent Agreement between the University of Wisconsin, with WARF as the designee of the university under this agreement, and DHEW. My experience could therefore be of benefit to those of you considering bill No. 414 since it will illustrate the effectiveness of the IPA system.

As an introduction, I am a Harry Steenbock research professor and chairman of the Department of Biochemistry at the University of Wisconsin-Madison. I have recently been honored by being elected to the National Academy of Sciences and have received other awards in recognition of my contributions to the field of nutrition and biochemistry.

My work has been devoted to understanding how vitamin D works to promote healthy bone, muscle, and nervous tissue. During the course of our investigation we learned that vitamin D had to be changed in the body to functional forms before it could work. This led to the isolation, identification, and chemical synthesis of the active forms of vitamin D.

One of these proved to be a new hormone necessary for bone growth and development and for regulating the blood levels of calcium and phosphorus. These active forms of vitamin D and chemical synthetic analogs have been the basis for the patents referred to above. In addition, we have conceived many divergent uses for those activated forms of vitamin D both in medicine and agriculture.

In 1968 we isolated and identified a form of vitamin D called 25hydroxy-vitamin D. At that time all patents resulting from NIH-supported work were the property of the Federal Government. Application for rights to the patent seemed difficult since previous attempts by WARF and the university with other inventions from the university were rejected.

To meet deadline dates we risked filing the patent application at our own expense. We then applied on a single case basis for permision to file a patent and assign patent rights to WARF, a nonprofit organization that contributes research moneys to the University of Wisconsin.

After a considerable length of time, and primarily because of the foresight of an NIH Administrator. N. Latker, permission was granted. This compound has not yet made its appearance on the market in the United States but has finally appeared in France as a treatment for bone disease.

The timespan is essentially 10 years without a product available to the U.S. public. Much of this delay is due to the uncertainty by drug companies regarding investment of capital to develop the compound as a drug without adequate protection.

In our continuing work we isolated and identified the most active form of vitamin D found in the body; namely, 1,25-dihydroxyvitamin D3 in 1971. By that time we enjoyed an IPA with DHEW. WARF was able to quickly negotiate with Hoffmann-La Roche, Nutley, New Jersey, and assign them a nonexclusive license to develop this substance for the treatment of disease. Roche was, therefore, assured that their investment would be protected and spent considerable sums of money to develop the product by devising a commercially feasible

method of preparation, and by carrying out the Food and Drug Administration required toxicology and testing.

This resulted in a product called Rocaltrol now available to the American public for treatment of debilitating and previously unmanaged bone disease caused by kidney failure. In large measure therefore the IPA route resulted in an important new medical breakthrough available to the American public in 7 years, a remarkably short time for the development of a drug under the American-FDA system.

Most important, an industrial company was willing to invest its time and funds to develop the compound. This compound is now being readied for wide use in the treatment of a variety of bone diseases with great promise. Thus the American public, who invested their tax dollars to support our research, will receive in return the benefit of their investment quickly by using the American patent system to its full advantage.

Furthermore, from the foreign filings we anticipate that the U.S. will receive considerable income from royalties paid for use of American-developed technology. The IPA has worked extremely well between the University of Wisconsin and NIH and there are several reasons why. I would like to enumerate these reasons.

(1) To begin with, an inventor or research investigator supported by Federal research grants is not encouraged to develop new and novel patentable ideas unless there is an institutional agreement that serves as an inducement for that inventor to conceive and to divulge new inventions.

Under Government ownership of patents there is no feedback of funds to the institution or to the inventor and thus the inventor is deprived of an important inducement to conceive and develop inventions. I believe that without the IPA I would not have been encouraged to file any of the patent applications which are now resulting in clear benefits to the American population and to the United States in gen

eral.

(2) Especially in the health science field, industrial companies are reluctant to invest large sums of money required to carry out the tests needed for approval by the FDA for a new therapeutic substance unless their investment is protected from invasion by other companies.

It is of considerable interest to note that very few Governmentowned patents are picked up and developed by industry as has been demonstrated by Senators Bayh and Dole. If, however, patent protection is available, the companies are willing to invest their funds to develop a new substance for market and treatment of disease, a necessary sten for the public to benefit from NIH-supported research.

(3) When an inventor files applications both in the United States. and foreign countries, foreign industries utilizing American technology are forced to pay royalties to the United States, thus giving an important boost to the balance of payments.

Furthermore, it provides an equal opportunity, if not an advantage, for our companies to compete with foreign companies for the development of American inventions. If patents are not filed by an inventor, or are filed only in the United States-as with most Government-owned patents foreign companies can file ancillary patents, develop an in