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Utilization Reporting


    Memorandum

January 23, 2002


To: Grantee/Contractor Organizations Registered for Interagency Edison

From: Chief, Extramural Inventions and Technology Resources Branch
Office of Policy for Extramural Research Administration
National Institutes of Health

Subject: Bayh-Dole Invention Utilization Reporting




On July 21,1999 the Extramural Inventions and Technology Resources Branch of the Office of Policy for Extramural Research Administration (OPERA), NIH distributed an e-mail notification to all grantee/contractor organizations now using the Interagency Edison invention reporting system. The purpose of the e-mail was to encourage organizations to practice due diligence in the submission of invention utilization reports.

Since the e-mail was sent there has been a significant expression of concern regarding the basis for requiring utilization reports, the scope of information that is specified, as well as inquiries as to how the government will use the information. The reaction has prompted an extensive analysis of the requirements for reporting invention utilization, detailed discussions with representatives of the Association for University Technology Managers (AUTM) and the Council on Governmental Relations (COGR), as well as patent counsels from various federal agencies through the auspices of the Department of Commerce. While recognizing that utilization reporting is mandated within the Bayh-Dole regulatory provisions (37 CFR 401.14), the objective of these discussions has been to iterate the purpose of the report and further standardize the reporting requirements so as make them more widely applicable across the government.

The result of the discussions was a proposal put forward in May 2000 to codify consensus requirements, and promote consistent utilization reporting to cognizant federal agencies, either via paper or electronically using Interagency Edison. The remainder of this memo will describe the basis in law for utilization reporting, and introduce the corresponding reporting requirements that have been discussed with the AUTM Government Affairs Committee, and COGR Technology Transfer and Research Ethics Committee. As of May 2001, and based on suggestions for clarification, the first 8 data elements in the proposed report were finally agreed upon by the respective committees.

Within the last several months a ninth element has been introduced, based on a recommendation by Senator Ronald Wyden. This recommendation was for the utilization report to include the commercial name of any product arising from the invention that has reached the market. The basis for including this information request is discussed below.



Reporting on Utilization of Subject Inventions

The principal objective of the Bayh-Dole Act is to stimulate the commercialization of federally-funded inventions by ensuring the transfer of federally-funded technology to the private sector. Provisions of the Act, as promulgated by implementing regulations at 37CFR Section 401 et seq., allow for retention of rights by the grantee/contractor organization to any invention conceived or first reduced to practice through federal funding agreements (i.e. grants, cooperative agreements and contracts). This retention of rights, however, requires pursuit by the organization of the timely and effective transfer of the technology. Progress toward this end is formally acknowledged through two types of reporting activities as outlined in Section 401.14 of 37 CFR. First, language in this section provides guidance on identification of subject inventions and subsequent activities leading to transfer of technology, including timeframe for election of title, acknowledgement of patent application submission, the need for execution of a "government confirmatory license" and inclusion of a "government support clause" within the patent text.

The second type of reporting requirement, "Reporting on Utilization of Subject Inventions" is discussed at Section 401.14(h). While the paragraph does define the types of information items that pertain to the utilization report, the purpose of the report is not indicated in the regulation. The implication however is that reporting of the status of licensing and compensation received from federally-funded inventions provides an indicator of the success of the Bayh-Dole Act. Consistent with this notion, the NIH worked with AUTM and COGR representatives during the design phase of the Edison system (http://edison.gov) , in 1994, in an effort to define the scope of the utilization report. The essence of the report as defined in Edison, and now in Interagency Edison (http://iedison.gov) , is a "snap shot" of the utilization activity within a given fiscal year. So long as the fiscal year for the each affected invention is indicated, respective records can be archived and tracked as a cumulative profile of each invention.

Recent discussions with COGR and AUTM have reiterated the overall purpose of the utilization report. What with the increased scrutiny that federally-funded intellectual property is receiving from within the government and the private sector, it appears crucial to emphasize the benefits of the transfer of technology that derives from subject inventions. Changes in the information requirements that are now being adopted provide for further flexibility in reporting with emphasis on indicators of progress in the transfer of technology, rather than maintaining an exhaustive set of information about each subject invention.

Proposed Utilization Reporting Requirements

Based on language in 37CFR 401.14(h) and additional subsections, as well as recurring requests by government regulatory authorities (e.g. GAO and OIG), the following reporting requirements are being adopted. The 1994 version of the requirements that were implemented as part of Edison, and have been adopted by all 16 agencies involved in Interagency Edison, included an indicator of the relevant fiscal year plus 8 information items for each applicable subject invention. The current changes affect the content of 8 of the 9 items, and one has been deleted. In addition a new item has been added. The entire set of proposed requirements with citation of the relevant CFR paragraphs and justifications follows.

1. Frequency of Utilization Reporting

It is proposed that the utilization report be submitted annually. While the provision does allow for submissions less frequent than annually, in deference to annual cycles for governmental legislative concerns and business, annual reporting seems justified, and not at odds with language in 37CFR 401.14(h).

"The grantee institution/contractor agrees to submit on request periodic reports no more frequently than annually on the utilization of a subject invention or on efforts at obtaining such utilization that are being made by the grantee institution or its licensees or assignees...."


A related issue involves the timing of receipt of the annual report. In the original Edison design, the decision was made to standardize the submission according to the government fiscal year. Accordingly, it was prescribed that the utilization report should be submitted at the end of the government fiscal year, September 30. This decision was made to acknowledge the principal purpose of the information as part of reports to various Congressional oversight authorities. When the General Accounting Office or the Office of Inspector General requests such information of government agencies, the format of the data is routinely specified according to government fiscal year. Thus, capturing the raw data from grantee/contractor organizations on a similar basis greatly facilitates analysis and preparation of reports.

It has been pointed out on many occasions since the original introduction of this requirement that adhering to the government fiscal year for reporting of utilization is frequently at odds with the fiscal year by which grantee/contractor organizations collect and analyze records. To encourage compliance in light of this potential conflict, the requirements have been relaxed. It is now proposed that instead of being expected to conform to the government fiscal year as an annual reporting cycle, grantee/contractor organizations may report for the most recent 12-month period of their choosing.

2. An indication of the status of development of any products related to a particular invention.

An obvious indicator of the success of the Bayh-Dole Act's objective is provided by the status of the development of any products related to a particular subject invention. It would appear to be with this outcome in mind that 37CFR 401.14(h) specifically requires this type of information: "Such reports shall include information regarding the status of development...." In an attempt to standardize the responses to this request, the original requirement as presented in the Edison system provided a pick list of terms including: Basic R and D, Pre-clinical, Prototype, FDA (NDA/PLA), Clinical, Market.

In revisiting this list it has become apparent that such milestones are weighted toward the development of pharmaceuticals or other biomedically-related subject inventions, consistent with the initial deployment of Edison as a system to support NIH funded inventions. After much discussion to both define milestones that are more generally applicable to any subject invention, as well as to recognize the difficulties inherent in having to monitor the progress of the development of products through multiple milestone events, it was decided that the purpose of the regulation could still be aptly met with a much simplified set of milestones. Accordingly, the proposed status of development stages will be: not licensed, licensed, and commercialized. Extensive help text has also been crafted to assist with explanations of these generic indicators of progress in the transfer of technology. To further simplify this task, the user will be requested to provide only the latest stage of development, rather than having to maintain records to indicate when each stage was achieved.


3. The dollar amount of income received from a particular invention.

This requirement can also be found in 37CFR Section 401.14(h): "...Such reports shall include information regarding... gross royalties received by the grantee institution/contractor...." The only distinction that has been made in the current requirements relative to what was agreed upon in 1994 is a more all-inclusive reference to potential sources of income beyond just royalties. Specific mention is made of option agreements in light of the growing relevance of this alternative to standard royalties-based licensing agreements. The request for information will state: "In the designated reporting period, what was the total income received as a result of license or option agreements? Do not include specific patent costs
reimbursement."

4. Date of first commercial sale or use of any products that result from a particular invention.

Experience from licensing professionals suggest that it is difficult to accurately identify the exact date of first commercial sale or use as is specified in 37CFR Section 401.14(h): "...Such reports shall include information regarding... date of first commercial sale or use...." In an effort to limit inaccuracy, while still having this type of information as a further indicator of progress in the transfer of technology, the proposed requirement is limited to providing the calendar year of first commercial sale. It is acknowledged that this does to some extent compromise the degree of detail that might be rendered. However, by lessening the requirement a greater degree of compliance is anticipated.

5. Requests for waiver of the U.S. manufacture requirements.

In addition to the 4 elements provided for in Section 401.14(h) as described above, additional information relating to invention utilization is specified in other paragraphs of 37CFR Section 401.14. Section 401.14(i) refers to a preference for licensing to domestic manufacturers. As stated:

"Notwithstanding any other provision of this clause, the grantee institution agrees that neither it nor any assignee will grant to any person the exclusive right to use or sell any subject inventions in the United States unless such person agrees that any products embodying the subject invention or produced through the use of the subject invention will be manufactured substantially in the United States. However, in individual cases, the requirement for such an agreement may be waived by the federal agency upon a showing by the grantee institution or its assignee that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible."

This provision argues for the reporting of information to indicate that the grantee/contractor organization has taken steps to recognize the importance of domestic manufacturing in the licensing of products. The proposed requirement has not changed substantively from the version that was included in the original Edison implementation. Recommendations from COGR and AUTM have resulted in changing the wording of this item so as to clarify interpretation of the requirement. The exact wording that is being implemented is: "In the designated reporting period, did the grantee organization/contractor or any of the exclusive licensees request a waiver of the U.S. manufacturing requirements? How many such waivers were obtained?

6. Licenses and/or options executed by businesses with less than 500 people at the time the license is executed.

A preference for the transfer of technology to the small business community is also represented in 37CFR. Section 401.14(k) offers special provisions for grants/contracts with Non-profit organizations. Paragraph (k.4) specifies that:

"The Non-Profit organization will make efforts that are reasonable under the circumstances to attract licensees of subject invention that are small business firms and that it will give a preference to a small business firm when licensing a subject invention if the grantee institution determines that the small business firm has a plan or proposal for marketing the invention which, if executed, is equally as likely to bring the invention to practical application as any plans or proposals from applicants that are not small business firms; provided, that the grantee institution is also satisfied that the small business firm has the capability and resources to carry out its plan or proposal. The decision whether to give a preference in any specific case will be at the discretion of the grantee institution. However, the grantee institution agrees that the Secretary may review the grantee institution's licensing program and decisions regarding small business applicants, and the grantee institution will negotiate changes to its licensing policies, procedures, or practices with the Secretary when the Secretary's review discloses that the grantee institution could take reasonable steps to implement more effectively the requirements of this paragraph (k)(4)."

The only substantive change to this requirement relative to what has appeared in Edison and Interagency Edison since 1995 is the added recognition of options as a type of agreement that could be entered into with small businesses. Wording for the request has been modified to reflect this possibility. The exact wording of the requirement is: "In the designated reporting period, how many licenses and/or options of any type were awarded to small businesses (< 500 employees)?" Help text that has been written to accompany this item indicates that while any particular business may exceed small business status during the course of the license, the reporting of this change is not required.

7. Exclusive licenses and/or options that result from a particular invention.

This item is the first of two being proposed that are not based on specific requirements stated within 37CFR Section 401.14, but on recommendations that stem in part from a Congressional inquiry held in 1993 that involved invention reporting compliance practices at the NIH. As one outcome of the inquiry, the Congressional committee requested information of the NIH as to the numbers of both exclusive and non-exclusive licenses that had been executed by grantee/contractor organizations in relation to federally funded inventions. The inclusion of this information as part of the Edison implementation in 1994 was acknowledged by both COGR and AUTM. The request for this data has been retained in light of the Congress' continued interest in licensing statistics as an indicator of Bayh-Dole success. In an effort to keep this information within the "snap-shot" paradigm, grantee/contractor organizations will not be expected to indicate licenses that have expired, nor distinguish between full licenses and option agreements.

8. Non-exclusive licenses and/or options that result from a particular invention.

This item represents the companion to information related to numbers of exclusive licenses and/or options discussed in #7, above. The same parameters for reporting of non-exclusive licenses and/or option agreements will pertain.


9. Gross dollar sales of all products resulting from a particular invention.

As was indicated for the exact date of first commercial sale, licensing professionals similarly acknowledged that it is not feasible to identify the gross dollar sales of all products resulting from a particular invention. They suggested that most licensees consider such information confidential. In recognition of this fact, and the consequent likelihood that data would not be accurate, if reported at all, the decision was made to omit this requirement. Further, it was agreed that omission of this question does not detract significantly from the overall objective of the utilization report. Gross sales is but one of several indicators of the transfer of technology to the private sector.

10. Commercial name of any product arising from the invention.

Recently, there has been an expressed interest by congress to be able to determine a relative rate of return on the investment of taxpayer's resources. In the case of intellectual property that has been derived using federal funds, one way in which the value of the investment can be recognized is through the identification of specific products that result. It is not possible to conduct a complete analysis of rate of return for any product of this type due to the proprietary nature of the financial information involved [See 37 CFR Section 401.8(b)]. Income attributable to royalties is considered proprietary and therefore not subject to public release by companies that have developed, manufactured or marketed a product. As an alternative, one can at least see the value of the investment through the identification of important healthcare-related products that have resulted. Toward this end, and in deference to recommendations made by congress, the utilization report has been modified to now request the commercial name of any FDA-approved product arising from the invention that has reached the market.


In summary, these nine information items account for the entire content of the invention utilization report have been accepted and implemented through Interagency Edison for compliance by the extramural grantee/contractor organization community. In the earliest information requirements definition phase of the Edison system design, six years ago, the proposed amount of information was much more extensive, including names of individual licensees, duration of license agreements, the existence of sub-licensing agreements, royalty percentages, etc. This approach was not taken to honor a consensus that was arrived upon through discussions with grantee organization representatives of AUTM and COGR. The point of view expressed by these organizations, with concurrence by NIH, was that unless the requirements were clearly stated in the regulations, or unless the NIH could adequately justify the need and routine use of information, the submission of that information was not warranted. The current changes in utilization reporting continues in the same vein. The re-evaluation of the requirements has led to more flexibility in the way that information can be reported, and a reduction in the amount of information requested.

The burden associated with gathering and providing utilization information as part of Bayh-Dole Act-related reporting is fully recognized by federal agencies. Frequent audits place agencies too in the position of having to devote significant resources to administer invention utilization records. The apparent escalation in concern over utilization stems from impressions that future government audits could well focus on invention utilization information: data that document the success of the Bayh-Dole Act. As a critical step in the formal adoption of these requirements, it is crucial for grantee/contractor organizations to devote attention and resources to utilization reporting. As the agency that first developed Edison, and now administers the Interagency Edison system, we at the NIH want to work with grantee/contractor organizations now in anticipation of congressionally-mandated requests for invention utilization information. Consistent with arrival at a broad consensus by the grantee/contractor organization community, NIH has worked with the Department of Commence to achieve formal adoption of the standardized set of requirements by all cognizant government agencies.



APPROVED CHANGES IN UTILIZATION REPORTING REQUIREMENTS


Previous Implementation Approved/New Implementation
1 Report according to the government fiscal year (Oct. 1 - Sept. 30) Report according to grantee/contractor-defined 12-month reporting cycle
2 Latest stage of development of any product arising from any Invention Disclosure Number/patent: Basic R and D/Pre-clinical/Prototype/FDA (NDA/PLA) /Clinical /Market Please indicate the latest stage of development of any product arising from this invention, according to the following categories: Not Licensed/Licensed/Commercialized
3 Total income from all licenses under this Invention Disclosure Number/Patent(s): In the designated reporting period, what was the total income received as a result of license or option agreements? Do not include specific patent costs reimbursement.
4 Date of the first commercial sale of any product arising from any Invention Disclosure Number/patent: If any product arising from this invention has reached the market, what was the calendar year of the first commercial
5 How many of the exclusive licenses that have been awarded do not have a domestic manufacturing provision? In the designated reporting period, did the grantee organization/contractor or any of the exclusive licensees request a waiver of the U.S. manufacturing requirements? How many such waivers were obtained? In the designated reporting period, did the grantee organization/contractor or any of the exclusive licensees request a waiver of the U.S. manufacturing requirements? How many such waivers were obtained?
6 How many licensees are small businesses? (< 500 employees) In the designated reporting period, how many licenses and/or options of any type were awarded to small businesses (< 500 employees)?
7 How many exclusive licenses have been awarded in any field of use or territory? In the designated reporting period, how many exclusive licenses and/or options have been awarded? In the designated reporting period, how many exclusive licenses and/or options have been awarded?
8 How many non-exclusive licenses have been awarded? In the designated reporting period, how many non-exclusive licenses and/or options have been awarded?
9 Gross dollar sales of all products under this Invention Disclosure Number: OMIT
10 Not applicable Please provide the commercial name of any FDA-approved products, utilizing this invention, that have reached the market during the designated reporting period.

IEDISON- 1040