[Congressional Record (Bound Edition), Volume 145 (1999), Part 7]
[Extensions of Remarks]
[Page 10009]
[From the U.S. Government Publishing Office, www.gpo.gov]


[[Page 10009]]

   TECHNOLOGY TRANSFER COMMERCIALIZATION ACT WOULD ELIMINATE PUBLIC 
    INTEREST PROTECTIONS ON LICENSING OF INVENTIONS RESULTING FROM 
                        TAXPAYER-FUNDED RESEARCH

                                 ______
                                 

                        HON. DENNIS J. KUCINICH

                                of ohio

                    in the house of representatives

                         Tuesday, May 18, 1999

  Mr. KUCINICH. Mr. Speaker, on May 11, 1999, the House of 
Representatives approved H.R. 209, the Technology Transfer 
Commercialization Act, by a voice vote after it was placed on the 
Suspension Calendar. Further analysis of this measure indicates that 
its fundamental thrust is to water down or eliminate a range of public 
interest protections that currently are in effect. If enacted in its 
current form, H.R. 209--and its companion bill, S. 804, currently being 
considered by the other body--would allow the government to act behind 
the scenes, with little public oversight, to grant exclusive licenses 
to firms that wish to commercialize products that have been developed 
through taxpayer-funded research. These provisions do not serve the 
public interest. Congress needs to take a closer look at the 
implications of H.R. 209 and S. 804. The following analysis explains 
the problems with the bill in detail.

  Analysis of Technology Transfer Commercialization Act (H.R. 209) by 
                     Consumer Project on Technology

                            (By James Love)


                1. The legislation reduces competition.

       Both H.R. 209 and S. 804 eliminate the statutory 
     requirements in 35 U.S.C. 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

       H.R. 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 H.R. 209 reduce notice requirements to ``in an 
     appropriate manner at least 15 days before the license is 
     granted.'' According to the House Report on H.R. 209, this 
     eliminates also the need to provide notice in the Federal 
     Register. S. 804 and H.R. 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 virtually eliminates the practical 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 about 
     the availability of the invention to the public, or 
     justification for prices charged consumers.
       H.R. 209 modifies existing statutory language to require 
     that such information be secret from the public. Language in 
     35 U.S.C. 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 H.R. 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--
     taxpayers 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.
       Regarding 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 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 to 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.





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