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(The George Washington University Logo)

175TH ANNIVERSARY 1821-1996

MEDICAL CENTER

DEPARTMENT OF BIOCHEMISTRY AND MOLECULAR BIOLOGY

November 15, 1995

Mr. Michael Pettit

Dear Mike,

As a follow-up to our conversation I am enclosing some comments about the Bayh-Dole bill which may be helpful. I look forward to seeing you tomorrow to discuss these issues further. Your colleague Bryan Culp was kind enough to send me some background archival information on the Bayh/Dole Act, which I incorporated into a plenary talk I gave at a meeting on Ethical Issues in Research Relationships between Universities and Industry sponsored by the University of Maryland at Baltimore, Center for Biomedical Ethics and held on Friday and Saturday, November 3-4, 1995 (see enclosed program).

Because of my experience both as an academician and as the founder of a biotechnology company, I was asked to make a case presentation entitled: "Academic Scientist as Industrialist: Experience at the Interface." In this presentation I discussed my own experiences as a scientist and educator over the past 30 years, which have been an extraordinarily exciting growth period of our country's history with regard to discovery and application of new technology.

It is obvious to those of us in science that for the foreseeable future the global economy is fueled and will continue to be fueled by technological advances, which in turn are based upon graduate education and creativity and the spirit of discovery, all products that we have plenty of in the USA. We are fortunate that most of the world's great universities are located in the U.S. (= 125 of the top 150 at last count). The vast majority (>75%) of all new inventions come out of our nation's university-based laboratories. The vast majority of important inventions (probably >95%) are developed with the help of industry.

Having been fortunate enough to be at the right place at the right time, when so many advances were being made in my own field of biochemistry and molecular biology, I was able to present my own experiences to the meeting. The major basic science discoveries of the 1960s resulted in the development of new life saving pharmaceuticals and technologies and have also spawned the development of hundreds of new companies focusing on biotechnology. Thanks to American creativity the United States has been able to maintain a significant lead in many cutting-edge technologies under development worldwide. The best young scientists (paragraph continues on next page)

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in the world still come to the U.S. for advanced training. The biotechnology sector has already created tens of thousands of new high-paying jobs, provided hundreds of millions of dollars of vitally needed funds to universities, provided billions of dollars of revenues to industry and government, and provided our economy with an enormous boost at a critical time in our nation's history.

One of the key milestones I discussed which helped fuel the application of this scientific revolution was the Bayh/Dole Act of 1980, which gave title to Universities of discoveries (patents) developed by faculty with government funding, allowing for the licensing of these patents to industry. Before this, the transfer of research results from Universities to the public sector was virtually nonexistent because there was no clear government policy regarding ownership of inventions made with federal funding. Senators Bayh and Dole, through their wisdom, created a mechanism through the Bayh/Dole Act that allowed for uniform patent policy among the many federal agencies that fund research. The result was a major incentive for Universities to engage in government-sponsored research. Under the act, small businesses and nonprofit organizations, in addition to Universities, were also able to retain patents derived from federal funding, and license these inventions to the private marketplace. Before this Act, there was uncertainty as to whether a commercial entity would be able to retain patent rights to an important discovery. This prevented most companies from investing the large amounts of money necessary to further develop basic research with potential commercial applications and thus denied the public access to new medicines and technologies derived from federally-funded research.

In the fifteen years since the passage of the Bayh/Dole Act, there has been an enormous increase in the number of patents issued to Universities, which has allowed valuable discoveries and new technologies to reach the public in record time. Without this Act, a number of fast-growing and cutting-edge high-tech industries such as biotechnology probably would not exist in the form they do today.

In my letter to Bryan Culp, I indicated that most Americans probably don't know the important role Senator Dole had in making this American success story possible. For some reason it has been a well-kept secret! I think that Senator Dole's contribution and support of this key legislation and his creativity in helping to design and pass this key legislation is a wonderful example of how a government policy, if carefully thought out and designed, can have a major impact on improving the quality of life for so many Americans. Senators Dole and Bayh's work has resulted in not only improving the health of the American family via the development of new drugs and treatments of life-threatening diseases but also creating a better economic environment via providing the incentive needed to develop new companies with high-paying professional jobs.

Having had the experience of assigning patents for discoveries developed with government funding to my Universities (University of Texas Medical Branch in Galveston and The George Washington University) and also of testifying at hearings Senators Bayh and Dole convened which dealt with this legislation, I know personally the importance of this legislation. In 1984 I was pleased to nominate Senator Dole for the Distinguished Public Service Award of The George Washington University, which was presented to him at an international (paragraph continues on next page)

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scientific meeting in the health sciences sponsored by my Department. I wanted to recognize Senator Dole not only for his leadership and for his overall outstanding achievements in the U.S. Senate, but for his particularly insightful support for this most important patent legislation. which has become known as the 1980 Bayh/Dole Act. At this scientific meeting about 700 scientists from the U.S. and thirty other countries were pleased to honor the Senator, because even then, the Act had already caused a beneficial impact on the rapid growth of basic and applied biotechnology in the United States and around the world. Now ten years later, I am even more pleased that we honored Senator Dole so soon after the passing of this important legislation, as the fruits of his work are even more important today when federal funds for research are waning. The Bayh/Dole Act resulted in highly significant growth in funding by industry and growth of industrial/academic ties that are helping to nurture Universities at a time when federal funding is declining. American industry, thanks to this bill, has been encouraged to invest significantly in University-stage technology despite the fact that most research of this type is embryonic and, in most cases, its practical utility has not been proven and the financial investment is consequently high-risk. Although these increased University/Industrial relationships are resulting in new conflicts of interest, the conflicts are by and large good ones and are currently being sorted out by academia, industry, and government.

Senator Orrin Hatch, at Senate hearings in 1994 reviewing the Bayh/Dole Act, said "The pharmaceutical drug industry is one of the great American success stories of the American economy. In large part this success is the result of the foresight of Senators Bayh and Dole when they recognized that without adding some economic incentive, some old fashioned capitalism, if you will, to the pharmaceutical research and development process, the public would never receive the benefits of the basic research that they were paying for." Furthermore, he said that, "Bayh/Dole has established a marketplace that benefits University research centers and independent research labs, and benefits American business in general. The marketplace mechanism does this without costing the American taxpayer huge sums of money."

Senator Edward Kennedy, at the same hearings, pointed out that, "The Universities have been one of America's greatest success stories in the post-World War II period. Of the 150 major universities in the world, 126 of them are in the United States." He also said that, "It has been the combination of research; the combination of the very creative ways we have gone about it in terms of encouraging young people to go through Universities; and it has been involving the private sector as well, with universities that has really been unique." Furthermore, he said, "And in the very precise area of trying to move innovativeness and new technologies into the private sector, which will ultimately enhance our capacity, is certainly something that is enormously important for us." He finished his comments by commending Senators Bayh and Dole for the development of this legislation. He referred to the bill as being an "enormously important trigger in terms of the movement of technology and innovativeness in the commercial world."

As of 1994 it is estimated that the economic impact of the Act has resulted in the creation of markets of between $9 and 13 billion dollars in product sales, between 50,000 and 100,000 new jobs, and tax revenues of over $2 billion to federal, state, and local entities.

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The objectives of the Bayh/Dole Act were very straightforward. Through this Act, the Congress was able to govern the transfer of technology from NIH-funded research institutions to industry. The key points of the act are as follows:

· To encourage collaboration between commercial concerns and nonprofit organizations such as Universities

· To promote the patenting and licensing of inventions developed with government funding

· To give preference in such activities to small business firms and those that manufacture in the United States

In order to expedite technology transfer and minimize costs, under the Bayh/Dole Act nonprofit institutions were automatically granted first rights to inventions made by their employees without the funding agency's prior approval. In short, the institutions had the right to own the inventions developed through federal funds.

The successes of the Bayh/Dole Act have been many. According to a recent NSF report, one in four university patents issued in the 1980s was for biomedical or health related inventions. In the early 1970s the ratio was about one in eight. Over the past fifteen years, the development of many new important drugs and devices by both large and small commercial enterprises has been facilitated by the explosion of licensing of university-owned inventions. According to a survey by the Association of University Technology Managers, well over 1,000 licenses or options were executed in fiscal year 1992 by the 260 institutions that were surveyed. In addition, these institutions reported that they had over 5,000 active licenses in place at the time of the survey. Also a key success is the trend by which industrial funding of academic research is increasing including support of fundamental research at Universities and at medical research centers. This increase is important because NIH appropriations have not kept pace with the rapidly expanding research opportunities. Thus, institutions have been able to look to industry for vitally needed financial support, Industrial support for University research is now estimated to be over 10%, up from ~2% a decade ago, and is growing significantly.

Some of the major success stories resulting from this act have occurred in California. The University of California ranks second only to MIT in numbers of patents issued to American universities. Patents issued to U.S. Universities are increasing at a rapid pace, and returns from successful drugs are already returning to Universities not only as royalties, which are currently over $350 million per year nationally, but also individually from academic entrepreneurs such as Dr. Herbert Boyer, Professor of Biochemistry at UC San Francisco School of Medicine, co-founder of Genentech, and the co-discoverer of a key patent in the area of DNA technology. Dr. Boyer has given the largest single gift, $25 million, to the University of California San Francisco, his home University.

Other reasons for the success of the Bayh/Dole Act included the direct interfacing of inventors in the process of technology transfer with the licensee, a situation that could not (paragraph continues on next page)

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happen when government agencies were taking title to inventions made with federal funds. The Bayh/Dole Act carefully balanced the interests of Universities, the private sector, and the government, and is as viable and timely today as it was when the Act was passed in 1980. It is truly a model example of good legislation by government. It was also the first piece of legislation that explicitly conveyed to the government the right to own patents. This has allowed many useful patents developed by government scientists as well to be licensed to industry via the process of CRADAs.

The principles of the Bayh/Dole Act, as discussed by Dr. Howard Bremmer (American Association of University Technology Managers) at the 1994 Senate review of the Act, "recognized the shortcomings of existing government patent policies, and represented a recognition by Congress that imagination and creativity are truly a national resource." He said that "the patent system is the vehicle that permits the delivery of that resource to the public, that placing the stewardship of the results of basic research in the hands of Universities and small business is in the public interest; and that perhaps most significantly the existing patent policy was placing the nation in peril during a time when innovation was becoming the preferred currency in foreign affairs."

Also in discussing the Bayh/Dole Act, it is important to note what prompted it. The major impetus was the lack of capability on the part of the Federal Government to transfer technologies for which it had assumed ownership. Hundreds of potentially valuable patents were sitting unused on the shelf because the government that sponsored the research that led to the discovery lacked the resources and links with industry needed for development and marketing of the invention. Senators Dole and Bayh recognized this. In 1981, fewer than 250 patents per year were issued to universities. A decade later that number was almost 1,600 and nearly 80% of these were from federally funded research. Over the past ten years, the number of Universities participating in the patent effort has increased significantly. In 1992, over 200 American Universities had at least one patent issued annually and the number is growing rapidly.

I would hope that as Senator Dole's campaign moves forward his leadership role in passing this important bill becomes better known. I hope my comments are helpful. I look forward to meeting you.

Sincerely, 
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Allan L. Goldstein, Ph.D.
Professor and Chairman

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