Draft NIH

We are often asked by readers how to explain Bayh-Dole commercialization’s importance to Members of Congress when they know so little about patent law or policy. As is always essential to conducting any successful sale it helps to begin with where the customer is. Most members favor federal research and development funding known as “R&D funding” This is an approach that has worked for us. For the past ten years, federal R&D grants have been level-funded at $130 and 140 billion annually. NIH typically receives about $30 billion. Most members appreciate and value the work of NIH whose job it is to convert that funding into economic and medical progress. After setting aside approximately 10% for its research, NIH distributes specific project financing to research institutions and universities for peer-reviewed competitive research proposals. Such grants for basic scientific research may run from 2 to 5 years. Grants include creating antidotes to “super bugs,” cures for cancer, diabetes and presently incurable diseases like Alzheimer’s. Such research may have a promising hypothesis but it is not yet proven or enough advanced to attract private sector development funding. The government begins the process through federal grants, but the bulk of the risk and expense of moving it from lab bench to bedside is assumed in the private sector. Here’s how:

For the past ten years, federal R&D grants have been level-funded at $130 and 140 billion annually. NIH typically receives about $30 billion. Most members appreciate and value the work of NIH whose job it is to convert that funding into economic and medical progress. After setting aside approximately 10% for its research, NIH distributes specific project financing to research institutions and universities for peer-reviewed competitive research proposals. Such grants for basic scientific research may run from 2 to 5 years. Grants include creating antidotes to “super bugs,” cures for cancer, diabetes and presently incurable diseases like Alzheimer’s. Such research may have a promising hypothesis but it is not yet proven or enough advanced to attract private sector development funding. The government begins the process through federal grants, but the bulk of the risk and expense of moving it from lab bench to bedside is assumed in the private sector.

Here’s how:

When such basic federally-funded research shows promising results, commercialization under the Bayh-Dole’s directives begins. The university patents the newly discovered compound and licenses it to voluntary private venture capital investors, existing drug manufacturers or even to a startup company. In virtually all cases the private sector licensee will have to raise and spend many multiples of the original NIH grant to conduct applied scientific research and advanced developmental testing while raising additional funding as the risk of failure lessens. If their work is successful, it may lead to clinical testing and FDA approval which is rare. Such high-risk development may take eight to ten years and consume 2 to 5 billion dollars. Most projects fail to get to the finish line. If one succeeds it then must be priced, accepted in insurance formularies and distributed.

Whatever time remains in the patent’s term of exclusivity is when the private sector investment must be recovered with an adequate return on the investment. (ROI) The public benefits from new therapies, economic development, jobs, training of next generation scientists and based on the patent’s public disclosure, new pathways to more advanced therapies. The private sector financial return is allocated according to contracts made with the investors along the way.

If the original patent is not enforceable for any reason (including its court costs) or is otherwise rendered unreliable by the court or statutory changes made in the interim the resulting uncertainty deters the private sector investment needed to convert the federal grants into the economic and medical benefit Congress sought when the original grant was made.

If Congress weakens patents, making them unreliable to protect the patent holder’s exclusive use of the patented subject matter especially after its long and risky development, early stage investments will never be attracted. This failure cancels the purpose of the member’s congressional R&D appropriation and her reason for supporting it.

Commercialization is a bridge where a small federally funded on-ramp can result in investment that leads it to an off-ramp leading to economic and medical progress. If you still have the member’s attention, you can then tell him a success story that has occurred within her district and that you will shortly supply her staff with hard data s about this and other successes.

And yes, there are bad actors who use patents to extort license payments from unsuspecting users of patented technology, but their conduct is adequately addressed by state and federal (FTC) unfair and deceptive practices laws which have treble damages sanctions. Trolls cannot be defined without deterring investment in all patented technology, but their predatory conduct can be defined and punished. We do not have to punish all patent holders, and if we do, we will undo the purposes of R&D funding of otherwise non-investable basic scientific research.

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