The focus on public health benefits also means that the NIH takes a longer-term, flexible approach to structuring deals based
on the needs of the licensee.8 For example, NIH has licensed technologies to a number of start-up companies or those that require capital to be raised
through an offering or by partnering in order to bring the product to market. NIH is willing to share the risk in developing
technologies under these terms by back-end loading the more significant financial payments under the license. The raising
of capital, however, may be a milestone requirement under such a license. NIH will not accept equity in the company or ask
for reach through terms for research tools. At the other end of the spectrum, large pharmaceutical companies may prefer to
load the financials more to the front-end of the deal. The point is that OTT is flexible in structuring licenses as long as
the return to the NIH, and the taxpayer indirectly, is reasonable overall.
NIH will also try to maximize the products that are developed from a more broad-based or platform technology. By law, government
agencies must grant only the scope of exclusivity in a license that would be "reasonably necessary to provide the incentive
for bringing the invention to practical application."9 A technology that could be used in many different products—an adjuvant, for example—will typically be licensed nonexclusively.
On the other hand, a technology that represents the core component of a treatment for multiple diseases may be licensed to
several companies, each with a different subset of indications, such as neural versus cardiovascular. A license to multiple
indications can be given to a company that provides an acceptable business and technical plan to develop the technology in
this manner. Acceptance of the plan will depend on the public health importance of the indications, the likelihood that others
may be interested in developing the other indications separately, and whether the product format will vary with indication.
The company may itself develop the various indications, or indirectly through partnering and sublicensing.
Companies sometimes raise concerns about the residual rights in inventions retained by the government. For example, NIH will
retain the right to grant nonexclusive internal research licenses to any outside entity for all of its technologies. The goal
is to ensure that technologies will be available for further research and in doing so maximize the ultimate benefits that
might accrue to the scientific community and the public at large. These provisions are also consistent with the NIH Research
Tools Guidelines10 that apply to both intramural and extramural inventions funded by the NIH, and the Best Practices for the Licensing of Genomic
For all inventions made with federal funding, whether made by government employees, contractors, or grantees, the US government
retains by law a royalty-free license to use the invention for government purposes.12 The government will assert this license to defend against an infringement claim based on its own activities or those acting
with its authorization and consent, a class that is typically limited to government contractors. Grantees generally do not
act on behalf of the government. The use of this license should not be seen as a significant threat to industrial activity,
particularly for biomedical products. Government R&D, whether or not under contract, would rarely compete directly with an
established company providing the product or service and may in fact add value to a existing intellectual property. Moreover,
government funded inventions may be part of some commercial products but rarely comprise all of the intellectual property
needed to make the product.
The government-use license should be considered in the context of other government authorities related to the use of intellectual
property. Under a contract, the government can authorize the contractor to use any necessary US patent. For privately funded
research, where the government does not already have a license, the patent owner's only legal remedy for the infringement
is to sue the US government in the US Court of Federal Claims in Washington, DC, for a reasonable royalty. The patent owner
cannot obtain an injunction or lost profits for the government or its contractor's infringement.13 Placed in this context, the government's royalty-free license for inventions it funded is not a significant impediment to
the commercial development of a technology by the private sector.