MEMORANDUM

Carl E. Gulbrandsen

Managing Director

Wisconsin Alumni Research Foundation

March 14, 2002

RE: Testimony to the Judiciary Subcommittee on Courts, the Internet and Intellectual Property Hearing on Patent Law and Non-Profit Research Collaboration

Mr. Chairman, thank you for the opportunity to testify before your Subcommittee on the important topic of “patent law and non-profit research collaboration.”

My name is Carl E. Gulbrandsen. I am the Managing Director of the Wisconsin Alumni Research Foundation, known as WARF. WARF is the patent management organization for the University of Wisconsin-Madison. My statement today is being made on behalf of WARF and the Council on Governmental Relations known as COGR. COGR is an association of 145 research-intensive universities in the United States. They promote policies and practices in research administration that balance accountability and recognition of the interests of all parties in achieving the maximum scientific benefit from both federal and institutional investments in research. Neither WARF nor COGR have received any federal grants, or engaged in any federal contracts or subcontracts that require reporting under House rules.

I. Background

WARF was founded in 1925 and is one of the earliest organizations engaged in university technology transfer. WARF exists to support scientific research at the University of Wisconsin-Madison. This mission is carried out by transferring university technology to the marketplace for the benefit of the university, the inventors and the public. Licensing income is returned to the university to fund further scientific research.

Over its 76-year existence, WARF has contributed over $600 million of licensing income to UW-Madison scientific research; but of greater significance is the fact that WARF’s technology transfer successes have had a profound and positive effect upon the welfare, health and safety of humankind. Included among university inventions patented and licensed by WARF are: Professor Harry Steenbock’s Vitamin-D invention which essentially eradicated rickets as a childhood disease; Professor Karl Elvehjem’s copper-iron complexes which improved the physiological assimilation of iron in humans; Professor Karl-Paul Link’s discovery of Coumadin®, the most widely used blood-thinner for treatment of cardiovascular disease, and its counterpart Warfarin, still the most widely used rodenticide world-wide; Professor Charles Mistretta’s digital vascular imaging technology which enabled accurate diagnosis of blockage of the vessels of the heart; Professor Hector DeLuca’s Vitamin-D derivatives which are widely used to treat osteoporosis, renal disease and other diseases; and currently, Professor James Thompson’s human embryonic stem cell lines which have unprecedented potential for research and clinical application of presently untreatable diseases such as Parkinson’s disease and diabetes. In total, the benefit to the public derived from these and other inventions is incalculable.

The success of bringing these and countless university inventions to the marketplace has depended on rich collaborations among scientists within the university; collaborations among scientists at different universities and collaborations among university and industry scientists. Collaboration among scientists in husbanding research dollars makes good sense with the cost and complexity of research today especially with various institutions engaged in essentially the same technological areas. Moreover, the evolution of science has made interdisciplinary research more and more common and, in fact essential, if solutions to complex problems are to be found. A very recent stunning example of this is the sequencing of the human genome.

Collaborative research among, private, public and non-profit entities is quantifiably important to the U.S. economy. In 2000, non-profits and universities spent a record $28.1 billion on research and development much of which involved collaborations among private, public and non-profit entities. The positive effects of these collaborations on the U.S. economy are substantial. For example, in 2000, sales from products developed from inventions that were transferred from university research centers resulted in revenues of about $42 billion, [1] and U.S. universities, hospitals and research institutes realized almost $1.2 billion in gross license income much of which was used to fund additional research.[2]

Public funding of university research and the encouragement of collaborations among scientists at public, private and non-profit entities has been a keystone of the United States strength and leadership in high technology and biotechnology. With the bulk of university research being supported through federal grants and contracts, to be prudent with the taxpayer’s money, it again makes good policy sense to encourage collaboration among scientists for the public interest. And actually, there has been an increase in the number of collaborations. Today WARF has over 70 inter-institutional agreements reflecting such collaborations. In these inter-institutional agreements, there is joint ownership of the results of the research by the

collaborating scientists since most institutions operate under the provisions of law that give the institution the right to retain title to any invention made with federal funds. That is the applicable rule even where the institution is in a sub-contracting situation where the prime contractor is the recipient of federal funds. Thus, in collaboration on an invention, each party may hold ownership rights.

II. University Patent Licensing

University patent licensing as we know it today has its roots in enactment in 1980 of Pub. L. No. 96-517, the Patent and Trademark Law Amendments Act, and amendments included in Pub. L. No. 98-628, enacted into law in 1984. See 35 U.S.C. §§ 200-212. This Subcommittee played an instrumental role in the crafting of a chapter of the Patent Act relating to patent rights in inventions made with federal assistance (chapter 18) (referred to as the Bayh-Dole Act), and its cardinal principle that the public benefits from a policy that permits universities and small businesses to elect ownership of inventions made under federal funding and to become participants in the commercialization process. After 1984, universities and colleges developed and strengthened the internal expertise needed to engage effectively in the patenting and licensing of inventions. A measure of the success of Bayh-Dole Act is the growth of the Association of University Technology Managers (“AUTM”) from 113 members in 1979 to over 1800 today. The Act, so successful in the transfer of university technology to industry, encourages collaborations between industry and university scientists. It is well known that industry depends heavily on collaborations with universities for basic research. In the pharmaceutical, biotech and hi-technology areas, America’s universities are the engines of cutting-edge ideas that have kept this country’s industries the world leader in new technology. These collaborations between scientists at separate universities and between industrial and university scientists often result in joint inventions.

III. A Threat to Collaborative Research

In spite of the trend toward scientific collaboration and the economic and practical necessity for such collaborations, a recent decision of the U.S. Court of Appeals for the Federal Circuit threatens to chill such collaborative activity. This decision, which cries for correction, is Oddzon Products, Inc. v. Just Toys, Inc[3]. Oddzon interpreted subsection 103(c) of the Patent Act to hold that prior art under subsections 102 (f) and (g)[4] could be used to determine the obviousness of an invention where:

a. there was no common ownership or assignment of the invention and information being shared among collaborators; and

b. the information exchanged was not publicly known.

That holding made it clear that information under 102 (f) or (g) could invalidate a patent in the circumstances of joint collaborative research. The Oddzon decision has been viewed as creating a significant threat for the loss of intellectual property rights for inventors who engage in joint research and development projects with scientists not employed by the same entity, be it a university or corporation. Thus, while the need for collaborative research in the public interest is becoming more and more evident, the Oddzon decision exerts a substantial chilling effect on collaborative efforts among universities, the private sector and the government.

This is clearly not what Congress, and this Subcommittee, intended when it amended section 103(c) in 1984 in the Patent Law Amendments Act of 1984 [5] in order to encourage open communication among members of research teams working in corporations, universities or other organizations. See Remarks of Robert W. Kastenmeier, 129 Cong. Rec. E5777 (daily ed., Nov. 18, 1983). It was considered at that time important to the economic interests of our country to encourage collaborative research. This provision of the patent law was particularly important for large corporations that rely on open communication and collaboration among various research teams within the corporation and has succeeded in encouraging free communication among the employees of large corporations and within universities.

A bit of legislative and judicial background is in order. The current quandary regarding section 103 had its roots in a decision of the caselaw of the U.S. Court of Customs and Patent Appeals, the forerunner of the Federal Circuit, which interpreted section 103 to mean that earlier inventions made by individual members of a research team would be used under section 103 to preclude the team’s invention from being patented.[6] This caselaw was a significant concern to entities, both public and private, that utilize team research. Seeking reform, they approached this Subcommittee. And the Subcommittee responded, producing a legislative proposal that was enacted into law. See P.L. No. 98-622, 98^th Cong., 2d Sess. (1984), 98 Stat. 3383. Section 103 was amended by adding the current subsection 103(c) to address the problem created by the CCPA’s interpretation related to team research within an organization. The legislative history of the 1984 amendment clearly establishes that subsection 103(c) was designed to help encourage teamwork at least within organizations. Given the text of subsection 103(c) and its legislative history, it is clear that the enactment of subsection 103(c) sought to encourage teamwork among researchers, rather than stifle team research. In floor debate, Rep. Kastenmeier (who served as floor manager) characterized the amendment as being broader than teamwork “within” organizations, stating that the “change will be of material benefit to university and corporate research laboratories where the free exchange of ideas and concepts may have been hampered by the current state of the law with respect to what constitutes ‘prior art.’” See 130 Cong. Rec. H10522, 10529 (daily ed. , Oct. 1, 1984), section-by-section analysis inserted in the record by Rep. Kastenmeier. Thus, it can safely be assumed that certain inter-organizational exchanges were not expressly exempted because there was a different research paradigm in place at the time of enactment.

However, after the passage of thirteen years, the Oddzon court held that prior art under sections 102(f) or (g) could be used to determine the obviousness of an invention in situations where (a) there was no common ownership or assignment of the invention and information being shared among the collaborators, and (b) the information exchanged was not publicly known. Effectively, the Oddzon decision creates a significant threat for the loss of intellectual property rights for inventors that engage in joint research projects with scientist from a different company or institution.

The solution is a legislative one. The Oddzon court itself invited Congress to review its decision stating that “it is sometimes more important that a close question be settled one way or another than which way it is settled. We settle the issue here (subject of course to any late intervention by Congress …).” 122 F.3d at 1403.

Government-led initiatives to encourage the unhindered flow of information among scientists in the interest of meeting the technological needs of the country and maintain its technological leadership in the world are key elements in the consideration of the present initiative to recognize the adverse impact that the Oddzon decision is having on those broad goals. More immediate to the university sector is the potential loss of invaluable intellectual property rights and the delays or failure to achieve research goals where a collaborative effort would offer an opportunity to efficaciously move ahead.

Chapter 18 of the Patent Act is of great value for universities as it provides retention of title of their intellectual property. Universities are also keenly aware of its objective, which is to utilize the patent system to transfer technology to the private sector for development of the technology in the marketplace. The private sector is fully aware of the Chapter 18 having interfaced with it for over 20 years, and appreciates that it affords a basis for protecting marketplace development and investment efforts. A significant factor in that university-private sector relationship is the willingness and opportunity to define ownership of an invention made jointly by those entities and the disposition of such jointly-owned inventions should the need arise. That opportunity under the proposed legislation should lay to rest voiced concerns about two patents directed to the same subject matter issuing to different parties in the event a collaborative arrangement is dissolved and afford a further spur to greater collaboration between the university and private sectors. This could readily result in more efficient development of products utilizing tax supported research results, and an increase in the transfer of technology for the public good.

Towards this end, we would propose a clarifying amendment to section 103 (c) that would result in:

· increasing the flow of information among scientists at different institutions;

· increasing the collaboration of scientists both within and without a given

institution;

· promoting collaborations between the university and the private sector;

· promoting collaborations between government laboratories and the private sector

as well as with the university sector; and

· enhancing the national pool of knowledge because of the greater unhindered flow

of information among scientists.

The proposed amendment should be prospective only. Further, the amendment should not affect any final decision of a court or the Patent & Trademark Office that is rendered prior to the date of enactment and, should not affect the right of any party in any case pending before the PTO or a court on the date of enactment to have rights determined on the basis of the substantive law prior to the date of enactment.

IV. Related Issues

There is widespread recognition that the Bayh-Dole Act has been and continues to be successful beyond all expectations. It is unique in the world and is an essential component in the United States’ global leadership in technology. At WARF, we receive numerous visitors each year from around the world. Invariably, our foreign visitors ask about statutory provisions in the patent law relating to patent rights in inventions made with federal assistance and express the wish that their own countries would adopt such forward-thinking legislation. This committee can be justifiably proud of the role it played in passing such a successful, landmark piece of legislation.

Yet, in spite of its undisputed success, there are continued attempts to alter the statutory framework so as to favor certain industries or groups. I trust that this Committee in its wisdom will safeguard such an important legacy of this committee and oppose any legislation that compromises its demonstrated success.

V. Conclusion

Mr. Chairman, thank you again for your time and attention. In conclusion, I leave you with three recommendations:

· an amendment to the Patent Act is necessary to promote collaborative research amongst the university and non-profit sector, the private sector and the government to achieve the promise of the 1984 amendments of this Subcommittee;

· an amendment which will, prospectively, reverse the holding in the Oddzon decision; and

· protection of Chapter 18 of the Patent Act from amendments that compromise its demonstrated success.

If there are any questions, I will be pleased to answer them.

[1] Calculated on the realized gross license income applying an average of 3% as the royalty charge.

[2] Citing AUTM Licensing Survey 2000, Association of University Technology Managers, Inc., Norwalk, CN (2000).

[3] 122 F.3d 1396, 43 U.S. P.Q. 2d 1641 (Fed. Cir. 1997).

[4] Section 103(c) was amended by the American Inventors Protection Act of 1999 to add Section (e) to the 103(c) exclusions.

[5] P.L. No. 98-622, 98^th Cong., 2^nd Sess. (1984), 98 Stat 3383

[6] See In re Bass, 474 F.2d 1276 (CCPA 1973) and In re Clemens, 622 F.2d 1029 (CCPA 1980).