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Director, Office of Technology Transfer, National Institutes of Health, Department of Health and Human Services
NIH makes available a full range of licenses for commercial evaluation and for the sale of commercial products and services.
The National Institutes of Health (NIH), an agency of the US Department of Health and Human Services, is widely known as the largest single resource for biomedical research—its budget in fiscal year 2006 was nearly $29 billion. NIH may not be as well known as a source of innovative technologies used in biomedical products and services. Yet, almost 200 products that incorporate NIH-licensed technologies have reached the market. FDA has approved 25 of these products,1 with most of the remainder representing research reagents and tools. NIH licensees report a combined total of almost $5 billion in sales of these products.
Mark L. Rohrbaugh, PhD
Through its 27 institutes and centers, ranging from mental health and cancer to infectious and chronic diseases, the NIH funds research mostly at US universities and hospitals, but also at companies and foreign research institutions. The research conducted by outside entities under grants and contracts constitutes the extramural program. In addition, about 10% of NIH's nearly $29 billion budget funds research conducted through the intramural program, which involves approximately 6,000 doctoral-level scientists.
This article describes opportunities for licensing these inhouse scientists' inventions, and for collaborating on research to invent new technologies or add value to existing ones.
The NIH intramural program has a long history of innovative accomplishments in the medical sciences. It is also home to the largest hospital in the world dedicated solely to biomedical research.2 Through the years, clinical trials conducted at the hospital have led to innovative medical treatments and an impressive series of "firsts," including: a cure for childhood leukemia; the implant of an artificial mitral heart valve; the use of lithium to treat bipolar disorder; gene therapy clinical trials; and the use of antiretroviral therapy to treat HIV.
While groundbreaking clinical research is conducted at the NIH Clinical Center, much of NIH research is basic: it establishes the scientific foundation for later research. Sometimes, the research results in inventions like tools used in academic and industrial laboratories. Examples include the HIV protease gene and protein used to develop HIV protease inhibitors; a multidrug resistant (MDR) tumor cell line used to test chemotherapeutic drugs for their ability to overcome MDR; and vectors derived from vaccinia virus used to produce recombinant proteins. Other inventions benefit the public through their commercialization by the private sector. Through the Office of Technology Transfer, the NIH licenses inventions made by its scientists. Table 1 provides examples of commercialized therapies based on unique NIH technologies.
Table 1. Innovative NIH technologies commercialized by companies
Through the Office of Technology Transfer (OTT), NIH makes available a full range of licenses for commercial evaluation and for the sale of commercial products and services. These may be patent licenses, in the case of claims covered by pending or issued patents, or biological material licenses for materials when no patent has been filed. NIH typically seeks patent protection in the US, Canada, at least some countries of the EU, Australia, Japan, and occasionally in some emerging market or developing countries, such as Mexico, China, and India. The breadth of filings is usually influenced by the willingness of a licensee to pay the costs of extensive foreign filing. Biological material licenses are available for the manufacture and sale of products in countries where no patent protection is obtained and the invention is embodied in a unique biological material.
Policy and market dynamics influence which type of license is used to grant commercial access to a given technology. The NIH uses exclusive licensing as a market incentive when a higher degree of investment and risk are required to commercialize the technology. As with any exclusive license to a federally funded invention, there is a preference by law for small US companies (no more than 500 employees).3 Yet, there are still many opportunities for large, non-US companies to obtain licenses. Among the portfolio of approximately 1,600 active licenses, about half are with small companies, and 15% are with companies outside the US. Another legal requirement for licenses of government-funded inventions is that any product sold in the US must be "substantially manufactured" in the US.4 If a licensee desires a waiver from this requirement, it must submit the request to the funding agency, in this case the NIH. Such waivers are granted only when the licensee provides sufficient justification that it would be in the best interest of the US public to grant the manufacturing waiver. For example, one company's request for a waiver for its biologic was granted based on the company's justification that a requirement to build a new manufacturing plant in the US, instead of using the existing one in Europe, would have added costs to the product and delayed the introduction of an important new product in the US.
The licensing process begins when a company identifies a technology of interest.5 There are many ways of learning about technologies available for licensing. There is an email list-serve that one can subscribe to from selecting "Join the OTT Listserve" from the main web site (www.ott.nih.gov). There are also licensing opportunities listed on the OTT web site (by selecting "Licensing & Royalties" and then "Licensing Opportunities") and published in the Federal Register.6 The licensing specialist listed with each licensing opportunity may be contacted for more information about that or related technologies. Or, marketing specialists are available to assist potential licensees in conducting a guided search of opportunities.7
The next step is to complete a formal license application, which can be found online and contains submission instructions. A Confidential Disclosure Agreement is required to review unpublished patent applications. License negotiations begin with the model agreements found on the web site. Whereas the grant of an exclusive license requires publication of the intent to grant, usually for 60 days, to allow for public comment, nonexclusive licensing is more straightforward. A company that does not require an exclusive license to NIH technology to adequately protect the product can save time and money by electing a nonexclusive license.
Following public notice of the intent to grant an exclusive license, it is unusual for the response to public comments to lead to a substantial alteration in the proposed license. Even when another potential licensee responds to the notice, separate fields of use often can be negotiated to accommodate the second request. In some cases, the licensees may agree to coexclusive licenses. There are times, however, when OTT will have to decide whether to grant one applicant a license for a particular field of use based on the development plans submitted, before any discussion begins about the financial terms of a license.
While competition for the same field of use of a license is uncommon, when it does occur, the outcome will not be resolved by an "auction" for who will offer the highest royalty payments. The process focuses on the technical and business development plan, because the goal of licensing at the NIH is to promote the development of new products and services to benefit the public. NIH expects a reasonable financial return under a license, but these royalties are secondary to the public benefit garnered through the availability of a new technology to improve public health. Licensees that are willing to extend their normal risk and expense in a manner that has the potential for greater public health benefit may be granted more favorable terms that reflect this higher risk and greater public benefit.
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 Inventions.11
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.
The government can be an active partner in developing or adding value to early-stage technologies, or finding new uses for existing technologies. In particular, NIH intramural scientists collaborate with companies in conducting both basic and applied research through collaboration agreements, Clinical Trials Agreements, Material Transfer Agreements, and Cooperative Research, and Development Agreements (CRADAs). These agreements are negotiated and executed at the individual NIH Institutes and Centers. Thus, inquiries regarding opportunities for specific research collaborations should be directed to the relevant Institute and Center, particularly the Technology Development Coordinator.14 None of these agreements permits the NIH to engage in industry sponsored research that is not collaborative. CRADAs must involve a proprietary or intellectual contribution from both parties. It is important to note that the new ethics guidelines at NIH eliminated outside consulting, but did not change an intramural scientist's ability to engage in collaborations with companies as part of official NIH duties.15
CRADAs are required in order for the Government (1) to grant the collaborator the right to license inventions that may be made by the government researcher within the collaboration, or (2) to receive money from a collaborator to cover some of the costs of research, but a financial contribution to the NIH laboratory is not a general requirement.16 The license option grant is important because the government otherwise must advertise and receive public comment on its intent to grant an exclusive license to a party.17 When the intent to grant an exclusive license to an invention is open for public comment, there is a risk that a highly qualified party may request a license as well.
Several products have been brought to market through licensing and collaborative research and development under CRADAs. Havrix, GlaxoSmithKline's hepatitis A vaccine, includes background technology licensed nonexclusively by GSK and improvement technology invented and licensed exclusively to GSK under a CRADA with the National Institute of Allergy and Infectious Diseases. Taxus Express, a paclitaxel-eluting cardiovascular stent, was licensed by Angiotech, a Canadian company, and developed under a CRADA with the inventor's laboratory in the National Institute of Aging. It was then brought to market under a sublicense to Boston Scientific.18
The CRADA has been a successful mechanism, but is not the only method companies can use to collaborate with NIH scientists. Since 1990, the NIH has entered into more than 1,600 CRADAs with about 350 companies. There are currently about 230 active CRADAs at NIH. Beginning in 1996, NIH developed a special model CRADA agreement, a Materials-CRADA or "M-CRADA," when the collaboration involves only the transfer of proprietary materials from a company and in return, the company wants the right to elect an exclusive license to any new inventions. CRADAs run the full gamut of research—they may involve basic or clinical research, test a scientific hypothesis, or involve the development of an existing technology.
Among all types of CRADAs, only about 10% have resulted in inventions made by NIH scientists. Half of these inventions have arisen in CRADAs with small US companies, even though they represent 38% of the total; about one-third of the inventions were made under CRADAs with large US companies. The remaining inventions fall equally between CRADAs with foreign large and small companies. It appears that this mechanism is important in preserving the option for a collaborator to elect an exclusive license should one arise, rather than having been driven by the expectation of an important invention being made.
It is useful to remember a few points related to the CRADA mechanism, in the context of licensing regulations. The NIH model agreements for CRADAs and M-CRADAs can be found on the OTT web site19 and represent a staring point for negotiating the CRADA with an Institute or Center for a particular collaboration. NIH will agree to keep company proprietary information confidential to the extent permitted by law.20 With respect to information generated by its scientists, NIH can agree to file patent applications as appropriate and allow the collaborator to review and comment on documents prior to public disclosure; but NIH does not allow the collaborator to have veto power over the publication.
With respect to the license option, the company is given the opportunity to elect an exclusive or nonexclusive license. Some companies have misunderstood this option to mean that the NIH decides what type of license is offered. The company elects the type of license, and in the event the company and NIH cannot agree on the terms of the license, which has been quite rare, licensing is governed by the general statutory provisions. Namely, any intended grant of an exclusive license to another, non-CRADA party would require public notice (typically 90 days) whereby the CRADA partner could comment. The NIH cannot secretly license the technology on an exclusive basis to someone else.
Any company interested in acquiring early stage biomedical technologies should review the extensive portfolio arising from the NIH intramural program. These technologies are available for internal research purposes or commercialization of products and services. The opportunity to collaborate with NIH scientists adds further value to such technologies or can be an opportunity to leverage resources to develop new intellectual property. Even when inventions are not made under CRADAs, valuable information is often generated to add value to technologies.
The extensive track record of collaboration and licensing at NIH has resulted in a number of products that have improved public health and research tools used in both academic and commercial R&D. While there are rights reserved by the government that some companies might prefer to live without, there are far many advantages than potential disadvantages in collaborating with the NIH such that the opportunity should not be overlooked.
Mark L. Rohrbaugh, PhD, JD, is the director of the Office of Technology Transfer at the National Institutes of Health, Rockville, MD, 20852, 301.435.4485, Mark.Rohrbaugh@mail.nih.gov
1. FDA Approved Products Developed with Technologies from the NIH Intramural Research Program. Washington, DC: National Institutes of Health. Available from www.ott.nih.gov/about_nih/fda_approved_products.html
2. For more information about the Clinical Center, see http://clinicalcenter.nih.gov/
3. 35 USC §202(c)(4) and §209(d)(1)
4. 35 USC §204 and §209(b)
5. See flowchart and directions at www.ott.nih.gov/licensing_royalties/flowchart_licproc.html
6. The Federal Register can be searched at www.archives.gov/federal-register/
7. General inquiries can be made by submitting an email request to NIHOTT@mail.nih.gov.
8. NIH Licensing Policy. Washington, DC: National Institutes of Health. Available from: www.ott.nih.gov/policy/phslic_policy.html
9. 35 USC §209(a)(2)
10. NIH Guidelines for Sharing of Biomedical Resources.Washington, DC: National Institutes of Health. Available from: www.ott.nih.gov/policy/research_tool.html
11. Best Practices for the Licensing of Genomic Inventions: Final Notice. Washington, DC: NIH. Available from: www.ott.nih.gov/policy/lic_gen.html
12. 35 USC §202(c)(4) and §209(d)(1)
13. 28 USC §1498
14. For a list of the NIH Technology Development Coordinators for each of the Institutes and Centers and their contact information, see www.ott.nih.gov/nih_staff/tdc.html
15. Conflict of Interest Information and Resources. Washington, DC: NIH. Available from: www.nih.gov/about/ethics_COI.htm
16. 15 USC §3710a.
17. 28 USC §209(e).
18. For these and other success stories, see www.ott.nih.gov/about_nih/success_stories.html
19. Cooperative Research and Development Agreements and Material Transfer Agreements. Washington, DC: NIH. Available from: www.ott.nih.gov/cradas/model_agree.html
20. The Government won a court challenge to keep company proprietary information from disclosure under the Freedom of Information Act. Public Citizen Health Research Group vs. National Institutes of Health and Johnson & Johnson, U.S. Ct D.C., March 12, 2002. Available from: www.ott.nih.gov/foia/PCHRGopinion.pdf