Patents and Prescription Drug Importation (CRS Report for Congress)
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| Release Date |
Revised Oct. 4, 2016 |
| Report Number |
R44640 |
| Report Type |
Report |
| Authors |
John R. Thomas, Visiting Scholar |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
Congress approved the Bayh-Dole Act, P.L. 96-517, in order to address concerns about the
commercialization of technology developed with public funds. This 1980 legislation awards title
to inventions made with federal government support if the contractor consists of a small business,
a university, or other non-profit institution. A subsequent presidential memorandum extended this
policy to all federal government contractors. As a result, the contractor may obtain a patent on its
invention, providing it an exclusive right in the invention during the patent’s term. The BayhDole
Act endeavors to use patent ownership as an incentive for private sector development and
commercialization of federally funded research and development (R&D).
The federal government retains certain rights in inventions produced with its financial assistance
under the Bayh-Dole Act. The government retains a “nonexclusive, nontransferable, irrevocable,
paid-up license” for its own benefit. The Bayh-Dole Act also provides federal agencies with
“march-in rights,” codified at 35 U.S.C. §203. March-in rights allow the government, in specified
circumstances, to require the contractor or successors in title to the patent to grant a
“nonexclusive, partially exclusive, or exclusive license” to a “responsible applicant or
applicants.” If the patent owner refuses to do so, the government may grant the license itself.
No federal agency has ever exercised its power to march in and license patent rights to others. In
particular, the National Institutes of Health (NIH) has received six march-in petitions and has
denied each one. A 2016 exchange of correspondence between Members of Congress and the
Department of Health and Human Services suggests a difference of views related to agency
authority under the march-in provision. Supporters of the use of march-in rights assert that they
provide an unused mechanism for combatting high drug prices and ensuring that U.S. citizens
enjoy the benefits of public R&D funding. Others assert that march-in rights do not provide such
a broad authority, but rather are limited to four circumstances identified in the statute. They are
also concerned that use of march-in rights might discourage private investment in the often
considerable effort needed to bring early-stage technologies to the marketplace.
Congress possesses a number of options with respect to march-in rights. If the current situation is
deemed acceptable, then no action need be taken. Congress could also consider amending the
Bayh-Dole Act by specifying in greater detail the precise circumstances in which march-in rights
should be exercised. Congress may also take such steps as transferring authority over the
administration of march-in rights, requiring government contractors to submit periodic reports
regarding the commercialization of inventions achieved through public funding, creating a
centralized database of inventions subject to the Bayh-Dole Act, and taking steps to ensure that
patents on inventions developed through government funding are licensed to the most capable
enterprise.
