Technology Transfer: Agencies' Rights to Federally Sponsored	 
Biomedical Inventions (01-JUL-03, GAO-03-536).			 
                                                                 
The Bayh-Dole Act gives federal contractors, grantees, and	 
cooperative agreement funding recipients the option to retain	 
ownership rights to inventions they create as part of a federally
sponsored research project and profit from commercializing them. 
The act also protects the government's interests, in part by	 
requiring that federal agencies and their authorized funding	 
recipients retain a license to practice the invention for	 
government purposes. GAO examined (1) who is eligible to use and 
benefit from the government's license to federally funded	 
biomedical inventions, (2) the extent to which the federal	 
government has licenses to those biomedical inventions it	 
procures or uses most commonly, and (3) the extent to which	 
federal agencies and authorized federal funding recipients have  
actually used or benefited from these licenses. GAO focused its  
work on the Department of Veterans Affairs (VA), the Department  
of Defense (DOD), and the National Institutes of Health (NIH).	 
NIH commented that the report implies that the government's right
to use its license is more limited than it actually is. GAO	 
recognizes that the right of federal agencies and their funding  
recipients to use a federally funded invention is unrestricted.  
However, GAO believes that these license rights can be used only 
to meet needs that are reasonably related to the requirements of 
federal programs.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-536 					        
    ACCNO:   A07462						        
  TITLE:     Technology Transfer: Agencies' Rights to Federally       
Sponsored Biomedical Inventions 				 
     DATE:   07/01/2003 
  SUBJECT:   Biomedical research				 
	     Federal funds					 
	     Federal procurement				 
	     Funds management					 
	     License agreements 				 
	     Licenses						 
	     Research and development				 
	     Technology transfer				 

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GAO-03-536

Report to Congressional Committees

United States General Accounting Office

GAO

July 2003 TECHNOLOGY TRANSFER

Agencies* Rights to Federally Sponsored Biomedical Inventions

GAO- 03- 536

Federal agencies and their authorized funding recipients are eligible to
use the government*s licenses to federally funded inventions for the
benefit of the government. Government researchers can use the technology
without paying a royalty, and federal agencies can authorize their funding
recipients to use the government*s licenses for specific contracts, grant
awards, or cooperative agreements meeting a federal government need. The
government is not entitled to automatic price discounts simply because it
purchases products that incorporate inventions in which it happens to hold
a license. Furthermore, the government*s rights attach only to the
inventions created by federally funded research and do not necessarily
extend to later inventions based on them. Thus, the government may have no
rights in a next- generation invention that builds on federally funded
technology if the

new invention were not itself created by federally sponsored research. Few
of the biomedical products that federal agencies most commonly buy appear
to incorporate federally funded inventions. In 2001 the government had
licensing rights in only 6 brand name drugs associated with the top 100
pharmaceuticals that VA procured and in 4 brand name drugs associated with
the top 100 pharmaceuticals that DOD dispensed. GAO was unable to
determine the extent to which the government had rights to other types of
biomedical products because there are no databases showing the underlying
patents for most of these products and such products may incorporate
numerous components that might not be covered by identifiable patents.

The federal government uses its licenses to biomedical inventions
primarily for research; however, researchers generally do not document
such usage. These licenses are valuable because researchers can use the
inventions without concerns about possible challenges for unauthorized
use. Neither VA nor DOD has used the government*s licenses to procure
biomedical products because they cannot readily determine whether products
use federally funded technologies and they believe they already receive
favorable pricing through the Federal Supply Schedule and national
contracts. Furthermore, neither VA nor DOD has used the government*s
license to manufacture a biomedical product for its use.

Rights to Federally Sponsored Inventions

 Federal agencies and their authorized funding recipients can use the
government*s license to federally funded inventions without paying a
royalty.  Federal agencies can authorize their contractors to make
products that

incorporate federally funded inventions for government use without risking
patent infringement.  The government*s license does not entitle federal
agencies to automatic

price discounts just because a product incorporates a federally funded
invention. The Bayh- Dole Act gives federal contractors, grantees, and

cooperative agreement funding recipients the option to retain ownership
rights to inventions they create as part of a federally sponsored research
project and profit from commercializing them. The act also protects the

government*s interests, in part by requiring that federal agencies and
their authorized funding recipients retain a license to practice the
invention for government purposes. GAO examined (1) who is eligible to use
and benefit from the

government*s license to federally funded biomedical inventions, (2) the
extent to which the federal government has licenses to those biomedical
inventions it procures or uses most commonly, and

(3) the extent to which federal agencies and authorized federal funding
recipients have actually used or benefited from these licenses. GAO
focused its work on

the Department of Veterans Affairs (VA), the Department of Defense (DOD),
and the National Institutes of Health (NIH). NIH commented that the report

implies that the government*s right to use its license is more limited
than it actually is. GAO recognizes that the right of federal agencies and
their funding recipients to use

a federally funded invention is unrestricted. However, GAO believes that
these license rights can be used only to meet needs

that are reasonably related to the requirements of federal programs.

www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 536. To view the full product,
including the scope and methodology, click on the link above. For more
information, contact Robin Nazzaro at (202) 512- 3841 or nazzaror@ gao.
gov. Highlights of GAO- 03- 536, a report to

Congressional Committees

July 2003

TECHNOLOGY TRANSFER

Agencies* Rights to Federally Sponsored Biomedical Inventions

Page i GAO- 03- 536 Technology Transfer Letter 1 Results in Brief 2
Background 3 The Government*s License Has Limited Applicability 5 The
Government Appears to Hold Few Licenses to the Biomedical

Products It Purchases 8 The Government Has Used Its Biomedical Licenses
Primarily for Research 9 Observations 12 Agency Comments and Our
Evaluation 13 Appendix I Objectives, Scope, and Methodology 15

Appendix II The Top 100 Pharmaceuticals Procured by VA on the Basis of
Dollar Value, Fiscal Year 2001 18

Appendix III The Top 100 Pharmaceuticals Dispensed by DOD on the Basis of
Dollar Value, July 1, 2001* June 30, 2002 21

Appendix IV Comments from the National Institutes of Health 24

Table

Table 1: DOD*s and VA*s Expenditures on Drugs Incorporating Federally
Sponsored Inventions, Fiscal Year 2001 9 Contents

Page ii GAO- 03- 536 Technology Transfer Abbreviations

AIDS acquired immunodeficiency syndrome DOD Department of Defense FDA Food
and Drug Administration HHS Department of Health and Human Services HIV
human immunodeficiency virus NIH National Institutes of Health USPTO U. S.
Patent and Trademark Office VA Department of Veterans Affairs

This is a work of the U. S. Government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. It may contain
copyrighted graphics, images or other materials. Permission from the
copyright holder may be necessary should you wish to reproduce copyrighted
materials separately from GAO*s product.

Page 1 GAO- 03- 536 Technology Transfer

July 1, 2003 Congressional Committees Since 1980, the Bayh- Dole Act and
subsequent executive actions generally have given federal contractors,
grantees, and cooperative agreement funding recipients the option to
retain ownership rights to, and profit from, commercializing the
inventions they create as part of federally sponsored research projects.
In return for these rights, they are required to file for patent
protection, pursue commercialization of the inventions, give

preferences to small businesses in licensing, ensure that any products
resulting from the inventions are substantially manufactured in the United
States, and comply with certain reporting requirements. The Bayh- Dole

Act also provides federal agencies and their authorized funding recipients
with a *nonexclusive, nontransferable, irrevocable, paid- up license* to
practice these federally funded inventions for government purposes.

We assessed (1) who is eligible to use and benefit from the government*s
licenses to biomedical inventions created under federally sponsored
research, (2) the extent to which the federal government has licenses to
those biomedical inventions it procures or uses most commonly, and (3) the
extent to which those eligible have actually used or benefited from these
licenses. We focused our work on the Department of Veterans Affairs (VA)
and the Department of Defense (DOD)* which are responsible for the bulk of
the government*s biomedical procurements* and the National Institutes of
Health (NIH), within the Department of Health and Human Services (HHS),
which funds most biomedical research.

To determine who is eligible to use and benefit from the government*s
licenses to biomedical inventions, we reviewed the Bayh- Dole Act, other
statutes, federal agencies* implementing regulations, applicable case law,
and the positions taken by federal agencies in interpreting these laws. To
assess the extent to which the government has licenses to the underlying
inventions for the biomedical products it uses, we primarily analyzed the

patents behind the top 100 pharmaceuticals that VA procured and DOD
dispensed during 2001. For our analysis, we used databases maintained by
the Food and Drug Administration (FDA) and the U. S. Patent and Trademark
Office (USPTO) as well as VA, DOD, and NIH. Finally, to assess the extent
to which eligible parties have used or benefited from the government*s
licenses, we determined (1) whether VA and DOD

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 03- 536 Technology Transfer

contracting personnel used them in procuring pharmaceuticals and medical
devices and (2) whether VA, DOD, and NIH research personnel used them in
conducting research. We conducted our review from April 2002 through April
2003 in accordance with generally accepted government auditing standards.
Additional details on our scope and methodology are included in appendix
I.

Federal agencies and their authorized funding recipients are eligible to
use the government*s licenses to federally funded inventions for the
benefit of the government. Specifically, government researchers can use
the technology without having to pay a royalty, and a federal agency can
have a contractor produce the item for its use without obtaining a
separate license. Third parties* contractors, grantees, and cooperative
agreement

funding recipients* can use the government*s licenses when granted this
authority for a specific contract, grant award, or cooperative agreement
meeting a federal government need. The government is not entitled to
automatic price discounts simply because it purchases products that
incorporate inventions in which it happens to holds a license. In
addition, the government*s rights attach only to the inventions created by
federally funded research and do not necessarily extend to later
inventions based on them. Thus, the government may have no rights in a
next- generation invention that builds on federally funded technology if
the new invention were not itself created by federally sponsored research.

Few of the biomedical products that the federal government most commonly
buys appear to incorporate federally funded inventions. We found, for
example, that federally funded inventions were used to make only 6 brand
name drugs associated with the top 100 pharmaceuticals that VA procured
for use by veterans and 4 brand name drugs associated with

the top 100 pharmaceuticals that DOD dispensed in 2001. We could not
determine the extent to which the federal government holds rights to other
types of biomedical products, such as hospital beds and wheelchairs,
because (1) there are no databases showing the underlying patents for most
of these products and (2) the products may incorporate numerous components
that might not be covered by identifiable patents. However, we found no
federal government rights to the selected medical devices we examined; and
VA and DOD officials told us that the government would rarely have patent
rights in such products.

The federal government uses its licenses to biomedical inventions
primarily for performing research; however, the extent of such usage
cannot be determined because researchers generally do not keep records,
Results in Brief

Page 3 GAO- 03- 536 Technology Transfer

according to VA, DOD, and NIH officials. Citing a generally accepted
practice among government and university scientists, government
researchers have typically used the patented technologies of others
without obtaining permission or a license. However, patent law does not
appear to provide for such use without obtaining permission or a license
from the patent owner. Agency officials said that when their scientists*
use of federally funded inventions is challenged, they inform the patent
holders of the government*s license. Neither VA nor DOD has used the
government*s licenses to procure biomedical products because they cannot
readily determine if products incorporate federally funded technologies
and they believe they already receive favorable pricing through the
Federal Supply Schedule and national contracts. Furthermore, neither VA
nor DOD has used the government*s license to hire a contractor to
manufacture a biomedical product for its use.

In commenting on a draft of this report, NIH stated that because we tie
the exercise of the government*s license rights to the needs of the
federal government, we give the impression that the government*s license
rights

are more limited than they actually are. While we agree with NIH that
federal agencies and their funding recipients have unrestricted rights to
use a federally funded invention for federal government purposes, it is
important to recognize that they can use these rights only to meet needs
that are reasonably related to the requirements of federal programs.

Prior to 1980, federal agencies generally retained title to any inventions
resulting from federally funded research* whether the research was
conducted by contractors and grantees or by federal scientists in their
own laboratories* although specific policies varied among the agencies.
Increasingly, this situation was a source of dissatisfaction because of a
general belief that technology resulting from federally funded research
was not being transferred to U. S. businesses for developing new or
improved commercial products. For example, there were concerns that
biomedical and other technological advances resulting from federally
funded research at universities were not leading to new products because
the universities had little incentive to seek uses for inventions to which

the government held title. Additionally, the complexity of the rules and
regulations and the lack of a uniform policy for these inventions often
frustrated those who did seek to use the research. Background

Page 4 GAO- 03- 536 Technology Transfer

In 1980, the Congress enacted two laws that have fostered the transfer of
federal technology to U. S. businesses. 1 The Stevenson- Wydler Technology
Innovation Act of 1980 (P. L. 96- 480, Oct. 21, 1980) promoted the
transfer of technology from federal laboratories to the private sector.
The Bayh- Dole Act (P. L. 96- 517, Dec. 12, 1980) gave universities,
nonprofit organizations, and small businesses the option to retain title
to inventions developed with federal funding. It also authorized federal
agencies to grant exclusive licenses to patents on federally owned
inventions that were made at federal laboratories or that federal agencies
patented after a federal funding recipient opted not to retain title.

To protect the public*s interest in commercializing federally funded
technology, the Bayh- Dole Act required, among other things, that a
contractor or grantee that retains title to a federally funded invention
(1) file for patent protection and attempt commercialization and (2)
comply with certain reporting requirements. 2 The act also specified that
the government would retain *a nonexclusive, nontransferable, irrevocable,
paid- up license to practice or have practiced for or on behalf of the
United States any subject invention throughout the world.* 3 The Bayh-
Dole Act did not give large businesses the right to retain title

to their federally funded inventions. Subsequently, in February 1983,
President Reagan issued a memorandum on patent policy to executive agency
heads stating that, to the extent permitted by law, the government*s
policy is to extend the policy enunciated in the Bayh- Dole Act to all
federally funded inventions arising under research and development
contracts, grants, and cooperative agreements. In April 1987, President
Reagan issued Executive Order 12591, which, among other things, requires
executive agencies to promote the commercialization of federally funded
inventions in accordance with the 1983 memorandum.

1 Technology transfer is a process through which research results,
including inventions, computer software, and technical information, are
provided to potential users in a manner that encourages and accelerates
their evaluation and use. 2 See 35 U. S. C. S: 202( c)( 1)-( 3). In
addition, 35 U. S. C. S: 203 protects the public interest by authorizing a
federal agency to *march in* and reassert control over a federally funded
invention if, for example, a patent owner fails to take steps to
commercialize the invention.

If the government invokes its march- in rights, which is believed never to
have happened, it could license a third party to commercialize the
invention. 3 35 U. S. C. S: 202( c)( 4).

Page 5 GAO- 03- 536 Technology Transfer

Our 1999 report noted that federal agencies were not always aware of the
government*s licenses and could not tell us the circumstances under which
these licenses had been employed. 4 Nevertheless, agency officials said
that the government*s license to practice federally funded inventions is
important because agency scientists could use these inventions without

being concerned that such use would be challenged. Federal agencies and
their authorized funding recipients have the right to benefit from the use
of a federally funded invention without risk of infringing the patents.
Government scientists can use these inventions in their research without
having to pay royalties. Federal contractors, grantees, and cooperative
agreement funding recipients may use the government*s license if they are
authorized to do so. For example, federal agencies can contract with a
third party to manufacture products containing such inventions. However,
the government*s license to use a federally funded invention does not
automatically entitle the government to price discounts when purchasing
products that happen to incorporate the invention. The government*s
license also does not necessarily extend to later inventions related to or
based on the federally funded invention. The Bayh- Dole Act gives the
government the right to *practice** or use* a

federally funded invention without being liable for patent infringement.
There are two primary ways in which the government can use its right to
practice an invention in which it has retained a license. First, the
government can contract with a third party to make a product that
incorporates the invention for or on behalf of the government without
either the government or the contractor being liable for patent
infringement. It is our understanding that this right has never been

invoked for biomedical products. Second, the government can use the
invention itself without obtaining a license from or paying a royalty to
the patent owner. As discussed later in this report, federal research
officials say that this is a common occurrence in the research arena,
making the license to use federally funded inventions a valuable asset to
the government.

4 See U. S. General Accounting Office, Technology Transfer: Reporting
Requirements for Federally Sponsored Inventions Need Revision, GAO/ RCED-
99- 242 (Washington, D. C.: Aug. 12, 1999). The Government*s License Has
Limited

Applicability The Government*s License Protects Its Right to Practice the
Invention

Page 6 GAO- 03- 536 Technology Transfer

The government*s right to practice an invention is limited to federal
agencies and their funding recipients specifically authorized to use the
invention for federal government purposes. The Bayh- Dole Act provides
that the license is *nontransferable,* which means that the government may
not sell or otherwise authorize another to practice an invention in its
stead. This concept is not unique to the Bayh- Dole Act. Such language
appears frequently in patent practice, where nonexclusive licensing
agreements are typically construed as restricting assignment of the
license without the licensor*s consent. In the Bayh- Dole Act, the term
*nontransferable* is followed immediately by qualifying text* language
that allows the government to authorize others to practice the invention
for or on its behalf but which restricts the purposes for which it may

do so. Federal agencies typically have authorized contractors to use the
government*s license to develop and produce mission- critical hardware,
such as a weapon system. This use of the government*s license satisfies a
legitimate federal governmental need in support of a congressionally
authorized program.

Such linkages to an agency*s mission are less prevalent when grants or
cooperative agreements are used, as is typically the case with NIH, which
sponsors biomedical research to benefit the public health. This research
serves the public good through biomedical advances from publishing
scientific results and developing new technology that improve people*s
life. This good may represent a sufficient government need for NIH to
authorize its grantees to use the government*s license as a basis for
using federally funded inventions in their research. However, according to
a senior NIH attorney, NIH does not use this rationale to authorize
grantees to exercise the government*s licenses and has not included a
clause in its grant agreements authorizing the use of federally funded
inventions as part of the research. As a result, NIH*s grantees might be
sued for infringement and must negotiate any licensing agreements they
believe they need to support their work. Furthermore, the government*s
license to use a federally funded invention generally does not apply to
HHS*s purchases of drugs and vaccines because (1) HHS has never contracted
for the manufacture of a pharmaceutical made with federal funds for the

government*s use and (2) HHS*s funding assistance for acquiring drugs or
The Government*s License

Is Available to Federal Agencies and Authorized Funding Recipients

Page 7 GAO- 03- 536 Technology Transfer

vaccines for distribution is intended to assist the states* public health
services, rather than to meet a federal agency*s need. 5 The *paid- up
license* that the Bayh- Dole Act specifically confers on the

federal government 6 is often referred to as a *royalty- free license.*
The term *royalty- free* license (and even *paid- up license*) has
sometimes been misinterpreted in a way that effectively eliminates the
conditions set forth in the statute. The license for which the federal
government is *paid up* entitles it to practice an invention itself, or to
have others practice the invention on the government*s behalf. The statute
does not give the federal government the far broader right to purchase,
*off the shelf* and royalty free (i. e., at a discounted price), products
that happen to incorporate a

federally funded invention when they are not produced under the
government*s license.

An invention rarely represents a completely new form of technology because
the inventor almost always has used *prior art* in developing the ideas
that led to an invention. Prior art is the intellectual basis* the
knowledge base* upon which the novelty of an invention is established or
the basis that determines whether the *invention* would have been obvious
to one skilled in the art. In making an invention, an inventor typically
would build on the prior art in the particular technology, and some of
this prior art might have been developed by either government scientists
or federal funding recipients. However, an intellectual property interest
in prior art does not in and of itself give one an interest in someone
else*s subsequent invention. Also, an invention often is part of a family
of related inventions. One

research project may spawn multiple inventions that, for example, are
separate and distinct or are further developments of a basic invention for
specific applications. Similarly, the idea on which the original invention
is based may trigger new inventions. 7 The question of whether the
government has an interest in later inventions also arises in instances

5 For example, HHS provides funding for the states* pediatric vaccine
program. 6 See 35 U. S. C. S: 202( c)( 4). 7 The patent application for
the first invention is referred to as the *parent* if a second application
is filed on the basis of the same disclosure and at least one person is
named as the inventor on both applications. The Government Is Not

Automatically Entitled to Price Discounts

The Government*s License May Not Extend to Related Inventions

Page 8 GAO- 03- 536 Technology Transfer

involving the same technologies when the patents to these inventions are
related in some fashion. Patents may be related because they protect
inventions springing from the same essential technologies or scientists
discover additional uses for an invention. For example, while a patent
application is pending at USPTO, the applicant may decide to clarify the

description of an invention because what initially was viewed as a single
invention is found to be two or more inventions or because the USPTO
patent examiner determines that patent application claims must be
separated and independently supported.

Whether the government has the right to practice an invention because it
retains a license to use it under the Bayh- Dole Act depends upon whether
the invention was developed with federal funding and is, therefore,
subject to the act. An invention is a *subject invention* if it is
conceived or first actually reduced to practice *in the performance of
work under a funding agreement* (contract, grant, or cooperative
agreement) to which the act applies. Rights to the parent patent do not
automatically generate rights vis- `a- vis related subsequent patents. In
this regard, the government is not

entitled to any different protection than other entities that fund
research. There is one exception to the general rule that inclusion
depends upon whether each invention was itself conceived or first actually
reduced to practice in performing federally funded research. This
exception holds that while the owner of a *dominant patent* can block the
unlicensed use of that patent and related patents, the owner may not
assert that patent either to deprive its licensee*s right to a
*subservient patent* or, similarly, block the government*s license to use
a subservient patent for a federally funded invention. Thus, if the owner
of a dominant patent subsequently makes a new invention in the course of
work under a federal contract or other federal assistance, the owner
cannot assert the dominant patent to frustrate the government*s exercise
of its license to use the second invention.

Although determining the extent to which the government has licenses in
biomedical products is difficult, the number appears to be small. For
pharmaceuticals, one of the largest sectors of the biomedical market, we
found that the government had an interest* either because of its license
under the Bayh- Dole Act or as the owner or *assignee* of the patent* in
only 6 brand name drugs associated with the top 100 products, by dollar
value, that VA procured in fiscal year 2001 and 4 brand name drugs
associated with the top 100 products, by dollar value, that DOD dispensed
from July 2001 to June 2002. (See apps. II and III.) All four of the DOD
The Government

Appears to Hold Few Licenses to the Biomedical Products It Purchases

Page 9 GAO- 03- 536 Technology Transfer

drugs were among the six federally funded pharmaceuticals that VA
purchased. As shown in table 1, VA and DOD spent about $120 million on
these six drugs in fiscal year 2001.

Table 1: DOD*s and VA*s Expenditures on Drugs Incorporating Federally
Sponsored Inventions, Fiscal Year 2001

Dollars in millions

Drug name Use DOD*s and VA*s expenditures

Procrit (epoetin alpha) Treats severe anemia caused by such conditions as
cancer, acquired immunodeficiency syndrome (AIDS), or surgery $45.5
Xalatan (latanoprost) Treats eye conditions, including glaucoma and ocular
hypertension, in which

increased pressure can lead to a gradual loss of vision 21.8 Epogen
(epoetin alpha) Treats severe anemia caused by such conditions as cancer,
AIDS, or surgery 15.6 Neupogen (filgrastim) Decreases the chance of
infection in patients with cancer by promoting the

growth of white blood cells 14.2 Taxol (paclitaxel) Treats metastatic
breast and ovarian cancer and Kaposi*s sarcoma, as well as

head and neck cancer, non- small- cell lung cancer, small- cell lung
cancer, and bladder cancer 12.2 Zerit (stavudine) Treats infection caused
by the human immunodeficiency virus (HIV) 10.2

Total $119.5

Sources: DOD and VA (data), GAO (analysis). Note: Drug names are presented
in terms of brand name products, and the corresponding generic drug name
is included in parentheses.

We could not determine the extent to which the government holds rights to
other types of biomedical products because (1) no databases exist showing
the underlying patents for most of these products and (2) products such as
hospital beds and wheelchairs may incorporate numerous components that
might not be covered by identifiable patents. Our examination found no
government rights to any of five medical devices for which the VA Medical
Center in Milwaukee, Wisconsin, had spent more than $1 million during
fiscal year 2002. The medical devices we analyzed included electric
hospital beds, closed circuit televisions, blood pressure monitors, low-
air- loss and air- pressure mattresses, and wheelchairs. Officials from VA
and DOD believe that the government would rarely have patent rights to
such products. Officials from VA, DOD, and NIH said that their agencies
use the

government*s licenses to biomedical inventions primarily in performing
research. These officials could not tell us the extent of such usage,
however, because researchers generally do not keep records. Instead,
government researchers often use the technology and inform the patent
owner of the government*s rights only if there is a claim of infringement
The Government Has

Used Its Biomedical Licenses Primarily for Research

Page 10 GAO- 03- 536 Technology Transfer

or other question regarding the government*s use. In fact, government
scientists usually do not obtain licenses for any patented technology they
may use in research. They told us that using technology for research
purposes without obtaining permission is a generally accepted practice
among both government and university scientists.

VA and DOD officials said they do not consider the government*s licenses
for procurements because they (1) would not be able to determine readily
which products incorporate patented technologies or whether the government
helped fund the technology*s development, (2) believe they already receive
favorable pricing through the Federal Supply Schedule and national
contracts, and (3) are not required by law to do so. Similarly, the VA and
DOD officials said they had not used the government*s licenses to have a
contractor manufacture biomedical products for federal use.

DOD and NIH attorneys told us that the government primarily uses its
biomedical licenses for research. According to these officials, the
government*s licenses are valuable because they allow researchers to use
the inventions without concern about possible challenges alleging that the
use was unauthorized. However, no governmentwide database exists to track
how often government researchers actually use the licenses, and agencies
did not have records showing how often or under what circumstances these
licenses have been employed.

NIH officials said that their agency does not routinely document its
researchers* use of patented technologies. Thus, they have no way to
readily determine which patented technologies have been used or whether
the government had an interest in them. However, the NIH officials cited
additional reasons why NIH researchers seldom obtain licenses to conduct
research: First, NIH researchers may not really need a license because

they can work with the underlying principles behind the technology simply
by using the information that has been published. Second, there is a
prevailing practice not to enforce patent rights among federal agencies
and nonprofit organizations that conduct academic research. Third, under
28 U. S. C. S: 1498, federal agencies cannot be enjoined from using
patented technology in conducting research; the patent owner*s only
recourse is to

sue the government for a reasonable royalty. An Army patent attorney told
us that he advises researchers to inform him of any patented technologies
they are using in their research. He also said, however, that this does
not always happen in practice and that he and the

researchers generally are not aware of a potentially infringing use until
the Biomedical Licenses Are

Primarily Used for Research

Page 11 GAO- 03- 536 Technology Transfer

patent owner informs them. At that time, he researches the matter and
seeks permission, obtains a license, or informs the patent owner of the
government*s interest if there is one. Because the attorney does not have
records on government licenses, he has to research each case individually.
He added that he had invoked the privileges of the licenses for research

purposes but could not readily tell us how often this had occurred. A VA
official said that, like NIH, VA researchers usually do not know whether
the technology they use for research is patented. Furthermore, information
about the government*s interest in the development of products is
difficult to obtain because extensive research would be required. She said
that VA procures some research materials using Material Transfer
Agreements with universities. For the most part, however, VA simply goes
about its research assuming it has the right to use the technologies of
others unless there is a challenge. She was unaware of any patent
infringement cases that had been filed against VA.

VA, DOD, and NIH have each relied, to some extent, on the concept that a
researcher could use patented technology for research as long as the
research is for purely scientific endeavors. According to agency
officials, such use is a generally accepted practice within the research
community on the basis of what some believe is a *general research
exception.* However, some agency officials questioned how this exception
might be viewed in light of the decision rendered by the Court of Appeals
for the Federal Circuit in Madey v. Duke University, 307 F. 3d 1351 (Fed.
Cir. 2002). Concerning the availability of the experimental use exception
to a university, the court ruled that the experimental use exception is
very narrow and strictly limited, extending only to experimental uses that
are not in furtherance of the infringer*s legitimate business and are
solely for the infringer*s amusement, to satisfy idle curiosity, or for
strictly philosophical inquiry. The court also stated that the profit or
nonprofit status of the user is not determinative of whether the use
qualifies for the experimental use exception. Experimental use may
infringe a patent when the use furthers the infringer*s business. For
example, the business of a

research institution includes conducting research. Some patent owners
believe that allowing others to use their patented technologies for
research purposes may pose no threat and may actually be to their benefit.
In fact, representatives from corporations involved in the research and
development of products in the biomedical area told us that they welcome
additional research that will continue to advance the state of the art as
long as such use is not merely an attempt to use the The *General Research

Exception* Is Cited in Using Patented Technologies

Page 12 GAO- 03- 536 Technology Transfer

patents for commercial purposes without obtaining a license. They said
that there has been an unstated *gentlemen*s agreement* among researchers
in this regard that will not be affected by the Madey case. If true,
government researchers may, as a practical matter, be able in many cases
to continue using the patented technologies of others without obtaining
licenses.

VA and DOD procurement officials were unaware of any instances in which a
federal agency had used the government*s licenses to have contractors
manufacture products that incorporate federally funded inventions.
Furthermore, these procurement officials said that, as discussed above,
the government*s license does not provide an automatic discount for
federal government procurements. They added that even if they wanted to
use the license for procurements, they would not know which products
incorporate federally funded inventions.

The VA and DOD officials also said that the government*s licenses would
probably not significantly reduce their procurement costs because they
believe they already receive favorable pricing through the Federal Supply
Schedule and national contracts. In particular, for a branded
pharmaceutical to be listed on the Federal Supply Schedule, the

manufacturer must agree to give the government a 24- percent discount over
the nonfederal average manufacturer price. 8 Furthermore, the federal
government has negotiated national contracts that provide even greater
discounts for some pharmaceuticals. The government*s license under the
Bayh- Dole Act provides protection

against claims of patent infringement when federal agencies or their
authorized funding recipients use federally funded inventions. Scientists
working for federal agencies and their contractors generally are
authorized to use federally funded inventions; however, agencies have not
necessarily provided similar authorization in their grant agreements for
scientists at universities and other institutions. The decision rendered
by the Court of Appeals for the Federal Circuit in Madey v. Duke
University calls into question the validity of the general research
exception that many

8 The Veterans Health Care Act of 1992 (P. L. 102- 585) established a 76-
percent ceiling for Federal Supply Schedule prices. Licenses Have Not Been

Used for Biomedical Procurements

Observations

Page 13 GAO- 03- 536 Technology Transfer

scientists have cited as a basis for using the patented technology of
others in their research.

We provided NIH with a draft of this report for its review and comment.
NIH stated that because our report ties the exercise of the government*s
license rights to the needs of the federal government, we give the
impression that the government*s license rights are more limited than they
actually are. While we agree with NIH that federal agencies and their

funding recipients have unrestricted rights to use a federally funded
invention for federal government purposes, it is important to recognize
that they can use these rights only to meet needs that are reasonably
related to the requirements of federal programs. NIH also provided
comments to improve the report*s technical accuracy, which we incorporated
as appropriate. (See app. IV for NIH*s written comments and our
responses.)

We will send copies of this report to interested Members of Congress; the
Secretary of Defense; the Secretary of Health and Human Services; the
Secretary of Veterans Affairs; and the Director, Office of Management and
Budget. We will also make copies available to others upon request. In
addition, the report will be available at no charge on the GAO Web site at
http:// www. gao. gov.

If you have any questions about this report, please contact me at (202)
512- 3841. Key contributors to this report were Richard Cheston, Deborah
Ortega, Bert Japikse, Frankie Fulton, and Lynne Schoenauer.

Robin M. Nazzaro Director, Natural Resources

and Environment Agency Comments

and Our Evaluation

Page 14 GAO- 03- 536 Technology Transfer

List of Congressional Committees The Honorable Orrin G. Hatch Chairman The
Honorable Patrick J. Leahy Ranking Minority Member Committee on the
Judiciary United States Senate

The Honorable Sam Brownback Chairman The Honorable John B. Breaux Ranking
Minority Member Subcommittee on Science, Technology,

and Space Committee on Commerce, Science, and Transportation

United States Senate The Honorable Lamar Smith Chairman The Honorable
Howard L. Berman Ranking Minority Member Subcommittee on Courts, the
Internet,

and Intellectual Property Committee on the Judiciary House of
Representatives

The Honorable Sherwood L. Boehlert Chairman The Honorable Ralph M. Hall
Ranking Minority Member Committee on Science House of Representatives

Appendix I: Objectives, Scope, and Methodology

Page 15 GAO- 03- 536 Technology Transfer

We examined the manner in which federal agencies administer, use, and
benefit from intellectual property created under federally sponsored
research programs related to public health, health care, and medical
technology. Our objectives were to assess (1) who is eligible to use and
benefit from the government*s licenses to biomedical inventions created
under federally sponsored research, (2) the extent to which the government
has licenses to those biomedical inventions it procures or uses most
commonly, and (3) the extent to which those eligible have actually used or
benefited from these licenses.

To determine who is eligible to use and benefit from the government*s
licenses, we reviewed the applicable laws, regulations, and procedures,
including an examination of relevant case law. We also obtained the views
of a senior attorney responsible for handling these cases in the Office of
General Counsel of the Department of Health and Human Services.

To assess the extent of the government*s licenses to biomedical
inventions, we concentrated on pharmaceuticals because (1) pharmaceuticals
represent a major component of the federal government*s biomedical
procurements* an estimated $3.5 billion annually* and (2) government
databases can be used to identify the underlying patents to
pharmaceuticals approved by the Food and Drug Administration (FDA). In
conducting our work, we first obtained data on the generic product name,
total purchases by dollar amount, and number of prescriptions filled for
the top 100 pharmaceuticals purchased by the Department of Veterans
Affairs (VA) and the Department of Defense (DOD), which procure most of
the government*s biomedical products for use by their hospitals and other
medical facilities. VA*s data covered procurements for fiscal year 2001.
DOD*s data covered the 12- month period from July 1, 2001, to June 30,
2002, because the agency began consolidating its pharmacy program sales
data on July 1, 2001.

For each of the VA and DOD pharmaceuticals, we used FDA*s Electronic
Orange Book to identify the corresponding brand name product( s) and their
patents. We focused on brand name products rather than generics because
the former often utilize technologies with protected active patents and
typically generate higher sales, whereas generic drugs often enter the
market only after a product*s active patents have expired. We examined
possible equivalent brand names to ensure that we identified the
government*s licenses to available alternative products. FDA*s Electronic
Orange Book included 210 of the 217 brand name products we reviewed. We
also obtained patent numbers for three of the seven pharmaceuticals not
included by examining their product Web sites. Using the patent Appendix
I: Objectives, Scope, and

Methodology

Appendix I: Objectives, Scope, and Methodology

Page 16 GAO- 03- 536 Technology Transfer

numbers, we then accessed the patent records in the U. S. Patent and
Trademark Office*s (USPTO) patent database to determine whether the
government held any rights to the patented technologies of each brand name
pharmaceutical. We identified any cases where the government was the owner
or assignee or had a license to use the invention because it sponsored the
research. In addition to our own assessment, we examined the National
Institutes of

Health*s (NIH) July 2001 report entitled NIH Response to the Conference
Report Request for a Plan to Ensure Taxpayers* Interests Are Protected.

NIH assessed the return to the taxpayers for therapeutic drugs that use
NIH- funded technology and have sales of at least $500 million per year,
making them *blockbuster* drugs. From a survey of the pharmaceutical
industry, FDA, USPTO, and its own databases, NIH determined that the
government had rights to 4 of the 47 blockbuster drugs it identified for
1999* Taxol, Epogen, Procrit, and Neupogen. We found that all 4 of these
were among VA*s top 100 pharmaceutical procurements and all but Taxol were
among DOD*s top 100.

To determine the extent of the government*s ownership of or licenses to
use other biomedical products, we explored several methods to locate
relevant patent and licensing information for medical devices. However, we
found that (1) there are no databases showing the underlying patents for
most of these products and (2) products such as hospital beds and
wheelchairs typically incorporate numerous components that may or may not
be covered by identifiable patents. In addition, VA and DOD procurement
officials informed us that they do not have agencywide data showing the
most frequently purchased items because many devices are

purchased at the local level. Because of these limitations, we identified
five medical devices for which the VA Hospital in Milwaukee, Wisconsin* a
major procurer of medical devices* had spent more than $1 million during
fiscal year 2002. This approach also provided only limited information. We
examined the government*s rights to each device by identifying it in the
General Services Administration*s on- line supply catalog, which includes
the items on

the Federal Supply Schedule, and reviewing the corresponding item
descriptions. However, we found that the catalog does not provide patent
or licensing information for any of the products. We also were unable to

determine from the USPTO patent database the specific patents used for
each medical device. Finally, our examination of product Web sites found
that they do not provide information on the products* patented

Appendix I: Objectives, Scope, and Methodology

Page 17 GAO- 03- 536 Technology Transfer

technologies or address whether the government has license rights to them.

To examine how the government has used its licenses to federally funded
inventions, we interviewed DOD, NIH, and VA officials who procure
biomedical products or who are involved in scientific research. Also, we
researched relevant statutes and case law and met with knowledgeable
officials in NIH and industry to determine whether a general research
exception exists regarding patent infringement that applies to government
and other researchers conducting research for purely scientific reasons.

We conducted our work from April 2002 through April 2003 in accordance
with generally accepted government auditing standards. We did not
independently verify the data that VA, DOD, or NIH provided or the data
obtained from the USPTO and FDA databases. However, agency officials
addressed each of our questions regarding their data.

Appendix II: The Top 100 Pharmaceuticals Procured by VA on the Basis of
Dollar Value, Fiscal Year 2001

Page 18 GAO- 03- 536 Technology Transfer

Dollars in millions

Rank Drug name Amount procured a Active

government rights

1 Simvastatin $121.7 No 2 Olanzapine 99.6 No 3 Lansoprazole 63.8 No 4
Gabapentin 61.2 No 5 Metformin hydrochloride 59.6 No 6 Epoetin alfa b 53.3
Yes 7 Risperidone 49.9 No 8 Sertraline hydrochloride 49.3 No 9 Glucose
test c 42.4 Unknown 10 Fluoxetine hydrochloride 39.3 No 11 Felodipine 36.5
No 12 Clopidogrel bisulfate 36.1 No 13 Ipratropium bromide 34.6 No 14
Goserelin acetate 34.3 No 15 Lisinopril 28.9 No 16 Paroxetine
hydrochloride 27.7 No 17 Albuterol sulfate and ipratropium

bromide 24.8 No 18 Divalproex sodium 24.0 No 19 Rosiglitazone maleate 23.9
No 20 Bupropion hydrochloride 22.0 No 21 Amlodipine besylate 20.8 No 22
Atorvastatin calcium 20.2 No 23 Interferon alfa- 2b and ribavirin d 20.0
No 24 Buspirone hydrochloride 19.5 No 25 Insulin e 19.4 No 26 Bicalutamide
19.0 No 27 Beclomethasone dipropionate 18.9 No 28 Celecoxib 18.8 No 29
Finasteride 17.4 No 30 Salmeterol xinafoate 17.2 No 31 Enoxaparin sodium
16.5 No 32 Diltiazem e 16.3 No 33 Oxycodone hydrochloride 16.0 No 34
Latanoprost f 16.0 Yes 35 Donepezil hydrochloride 15.7 No 36 Lamivudine
and zidovudine 15.4 No 37 Nifedipine 15.2 No 38 Fexofenadine hydrochloride
15.1 No 39 Cyclosporine 15.0 No 40 Fluticasone propionate 14.9 No

Appendix II: The Top 100 Pharmaceuticals Procured by VA on the Basis of
Dollar Value, Fiscal Year 2001

Appendix II: The Top 100 Pharmaceuticals Procured by VA on the Basis of
Dollar Value, Fiscal Year 2001

Page 19 GAO- 03- 536 Technology Transfer

Dollars in millions

Rank Drug name Amount procured a Active

government rights

41 Quetiapine fumarate $14.4 No 42 Citalopram hydrobromide 14.3 No 43
Carvedilol 14.0 No 44 Fentanyl e 13.5 No 45 Venlafaxine hydrochloride 12.3
No 46 Albuterol e 11.6 No 47 Lovastatin 11.3 No 48 Rofecoxib 11.2 No 49
Levofloxacin 11.1 No 50 Filgrastim g 11.1 Yes 51 Triamcinolone e 10.7 No
52 Fosinopril sodium 10.7 No 53 Carbidopa and levodopa 10.2 No 54
Terbinafine hydrochloride 10.2 No 55 Interferon beta- 1a c 10.1 Unknown 56
Sumatriptan e 10.0 No 57 Warfarin sodium 10.0 No 58 Paclitaxel h 9.5 Yes
59 Tramadol hydrochloride 9.2 No 60 Nefazodone hydrochloride 9.2 No 61
Mycophenolate mofetil e 8.7 No 62 Amoxicillin and clavulanate

potassium 8.6 No 63 Etanercept i 8.4 No 64 Nitroglycerin 8.2 No 65
Loratadine 8.1 No 66 Stavudine j 7.9 Yes 67 Fluconazole 7.9 No 68
Alendronate sodium 7.5 No 69 Lamivudine 7.4 No 70 Efavirenz 7.4 No 71
Irinotecan hydrochloride 7.3 No 72 Ranitidine hydrochloride 7.3 No 73
Tamsulosin hydrochloride 7.3 No 74 Cetirizine hydrochloride 7.2 No 75
Sotalol hydrochloride 7.0 No 76 Phenytoin e 6.9 No 77 Terazosin
hydrochloride 6.9 No 78 Carbamazepine 6.9 No 79 Clozapine 6.7 No 80
Irbesartan 6.7 No 81 Brimonidine tartrate 6.7 No 82 Amiodarone
hydrochloride 6.6 No

Appendix II: The Top 100 Pharmaceuticals Procured by VA on the Basis of
Dollar Value, Fiscal Year 2001

Page 20 GAO- 03- 536 Technology Transfer

Dollars in millions

Rank Drug name Amount procured a Active

government rights

83 Glipizide $6.5 No 84 Mirtazapine 6.4 No 85 Carboplatin 6.3 No 86
Mesalamine 6.1 No 87 Indinavir sulfate 5.8 No 88 Potassium chloride 5.8 No
89 Nelfinavir mesylate 5.6 No 90 Rituximab c 5.6 Unknown 91 Nicotine 5.6
No 92 Omeprazole 5.6 No 93 Tacrolimus 5.5 No 94 Alprostadil 5.4 No 95
Sildenafil citrate 5.1 No 96 Rabeprazole sodium 5.0 No 97 Azithromycin
dihydrate 5.0 No 98 Flutamide 4.2 No 99 Ondansetron e 4.0 No 100
Pioglitazone hydrochloride 3.5 No Sources: VA (data), GAO (analysis).
Note: The table provides each drug*s name on the basis of the active
ingredients as they are listed in FDA*s Electronic Orange Book. a Based on
VA*s prime vendor purchases, excluding any direct purchases.

b Patent and licensing information about epoetin alpha was obtained from
NIH. Two brand name epoetin alpha products, Epogen and Procrit, appear to
use federally sponsored technology. c A patent search for this item was
not completed because we did not find a related listing in the

Orange Book or locate the product*s patent information. d Interferon
alpha- 2b and ribavirin is not listed in the Orange Book. However, we
obtained relevant

patent information from the Web site devoted to the interferon/ ribavirin
product, Rebetron, http:// www. rebetron. com/ pro/ rebetron/ pi. html,
accessed on August 26, 2002. e Variations of the drug name appeared in the
Orange Book, and we examined the patents underlying

each relevant product. f Xalatan, a brand name latanoprost product,
appears to use federally sponsored technology.

g Patent and licensing information about filgrastim was obtained from NIH.
A brand name filgrastim product, Neupogen, appears to use federally
sponsored technology. h Taxol, a brand name paclitaxel product, appears to
use federally sponsored technology.

i Relevant patent information was obtained from the Web site for the
etanercept brand name product, Enbrel, http:// www. enbrel. com/ hcp/
about_ enbrel/ indications. jsp, accessed on August 1, 2002. j Zerit, a
brand name stavudine product, appears to use federally sponsored
technology.

Appendix III: The Top 100 Pharmaceuticals Dispensed by DOD on the Basis of
Dollar Value, July 1, 2001* June 30, 2002 Page 21 GAO- 03- 536 Technology
Transfer

Rank Drug name Active government rights

1 Omeprazole No 2 Simvastatin No 3 Atorvastatin calcium No 4 Celecoxib No
5 Rofecoxib No 6 Lansoprazole No 7 Loratadine No 8 Gabapentin No 9
Esomeprazole magnesium No 10 Clopidogrel bisulfate No 11 Alendronate
sodium No 12 Fluoxetine hydrochloride No 13 Sertraline hydrochloride No 14
Paroxetine hydrochloride No 15 Amlodipine besylate No 16 Pravastatin
sodium No 17 Pioglitazone hydrochloride No 18 Oxycodone hydrochloride No
19 Fluticasone propionate and salmeterol xinafoate No 20 Metformin
hydrochloride No 21 Rosiglitazone maleate No 22 Venlafaxine hydrochloride
No 23 Olanzapine No 24 Zolpidem tartrate No 25 Amoxicillin and clavulanate
potassium No 26 Cetirizine hydrochloride No 27 Lisinopril No 28
Fluticasone propionate No 29 Fexofenadine hydrochloride No 30 Raloxifene
hydrochloride No 31 Tolterodine tartrate No 32 Estrogens, conjugated No 33
Bupropion hydrochloride No 34 Ciprofloxacin a No 35 Pantoprazole sodium No
36 Rabeprazole sodium No 37 Levofloxacin No 38 Diltiazem hydrochloride No
39 Donepezil hydrochloride No 40 Citalopram hydrobromide No 41 Etanercept
b No 42 Montelukast sodium No

Appendix III: The Top 100 Pharmaceuticals Dispensed by DOD on the Basis of
Dollar Value, July 1, 2001* June 30, 2002

Appendix III: The Top 100 Pharmaceuticals Dispensed by DOD on the Basis of
Dollar Value, July 1, 2001* June 30, 2002 Page 22 GAO- 03- 536 Technology
Transfer

Rank Drug name Active government rights

43 Epoetin alfa c Yes 44 Blood sugar diagnostic d Unknown 45 Tamsulosin
hydrochloride No 46 Fentanyl a No 47 Azithromycin dihydrate No 48
Risperidone No 49 Loratadine and pseudoephedrine sulfate No 50 Estrogens,
conjugated and medroxyprogesterone

acetate No 51 Tramadol hydrochloride No 52 Sumatriptan a No 53 Interferon
beta- 1a and albumin d Unknown 54 Somatropin recombinant No 55 Losartan
potassium No 56 Sildenafil citrate No 57 Oxybutynin chloride No 58
Carvedilol No 59 Fenofibrate e No 60 Amlodipine besylate and benazepril
hydrochloride No 61 Acetaminophen and hydrocodone bitartrate No 62
Topiramate No 63 Filgrastim f Yes 64 Metoprolol succinate No 65 Nifedipine
No 66 Tamoxifen citrate No 67 Quetiapine fumarate No 68 Valsartan No 69
Budesonide No 70 Salmeterol xinafoate No 71 Latanoprost g Yes 72
Bicalutamide No 73 Clarithromycin No 74 Mometasone furoate No 75 Warfarin
sodium No 76 Calcitonin, salmon No 77 Methylphenidate hydrochloride No 78
Finasteride No 79 Divalproex sodium No 80 Mesalamine No 81 Albuterol
sulfate and ipratropium bromide No 82 Mirtazapine No 83 Amphetamine
aspartate and amphetamine sulfate and

dextroamphetamine saccharate and dextroamphetamine sulfate

No

Appendix III: The Top 100 Pharmaceuticals Dispensed by DOD on the Basis of
Dollar Value, July 1, 2001* June 30, 2002 Page 23 GAO- 03- 536 Technology
Transfer

Rank Drug name Active government rights

84 Ipratropium bromide No 85 Lorazepam No 86 Potassium chloride No 87
Hydrochlorothiazide and losartan potassium No 88 Estradiol a No 89
Triamcinolone a No 90 Verapamil hydrochloride No 91 Isotretinoin No 92
Enoxaparin sodium No 93 Buspirone hydrochloride No 94 Risedronate sodium
No 95 Meloxicam No 96 Albuterol a No 97 Ethinyl estradiol and norgestimate
No 98 Ranitidine hydrochloride No 99 Valacyclovir hydrochloride No 100
Amiodarone hydrochloride No Sources: DOD (data), GAO (analysis).

Note: The ranking of the drugs is based on the dollar sales volumes for
prescriptions filled through national mail order pharmacies and the retail
pharmacy network. Dollar sales volumes are not provided here because, at
the time of the data request, complete information regarding DOD*s
pharmaceutical- dispensing activities was not available. The table
provides each drug*s name on the basis of the active ingredients as they
are listed in FDA*s Electronic Orange Book.

a Variations of the drug*s name appeared in the Orange Book, and we
examined the patents underlying each relevant product. b Relevant patent
information was obtained from the Web site for the etanercept brand name
product, Enbrel, http:// www. enbrel. com/ hcp/ about_ enbrel/
indications. jsp, accessed on August 1, 2002.

c Patent and licensing information about epoetin alpha was obtained from
NIH. Two brand name epoetin alpha products, Epogen and Procrit, appear to
use federally sponsored technology. d A patent search for this item was
not completed because we did not find a related listing in the

Orange Book or locate the product*s patent information. e DOD listed
*fenofibrate, micronized,* while the Orange Book listed only
*fenofibrate.* However, the

Orange Book provided additional information specifying which fenofibrate
products are micronized. Accordingly, we limited our work to such items. f
Patent and licensing information about filgrastim was obtained from NIH. A
brand name filgrastim

product, Neupogen, appears to use federally sponsored technology. g
Xalatan, a brand name latanoprost product, appears to use federally
sponsored technology.

Appendix IV: Comments from the National Institutes of Health

Page 24 GAO- 03- 536 Technology Transfer

Appendix IV: Comments from the National Institutes of Health

Note: GAO comments supplementing those in the report text appear at the
end of this appendix.

Appendix IV: Comments from the National Institutes of Health

Page 25 GAO- 03- 536 Technology Transfer

Note: Page numbers in the draft report may differ from those in this
report.

See comment 4. See comment 3.

See comment 2. See comment 1.

Appendix IV: Comments from the National Institutes of Health

Page 26 GAO- 03- 536 Technology Transfer

The following are GAO*s comments on the National Institutes of Health*s
letter dated April 22, 2003.

1. We agree with NIH that federal agencies have unrestricted rights to use
a federally funded invention for government purposes. It has, indeed, a
*nontransferable, irrevocable, paid- up license* to practice the
invention. Or it may authorize someone to practice the invention on its
behalf. However, these rights cannot be taken so as to undermine the
rights that the Bayh- Dole Act clearly intends to accord to inventors.
Specifically, the government*s license permits it to practice the
invention to meet its needs, i. e., to meet needs that are reasonably

associated with the requirements of federal programs, not to act outside
of those constraints that normally distinguish public- from private-
sector activities. 2. We deleted the footnote. 3. We deleted *generally*
from the sentence.

4. We disagree. Related issues have been discussed in several court
decisions. See, for example, AMP, Inc. v. United States, 389 F. 2d 448,
454 (Ct. Cl. 1968), cert. denied, 391 U. S. 964 (1968). Regarding NIH*s
concern that adherence to these cases might have a chilling effect on the
willingness of private entities to participate as funding recipients, we
point out that the parties can negotiate intellectual property rights
dealing with these issues on a case- by- case basis. Moreover, the scope
of any exception is limited as required to permit use of the government*s
license in the subservient patent. GAO*s Comments

(360203)

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