Commenters on Bayh-Dole Rule Object to Mention of ‘Pricing’ in March-In Provision

By James Edwards
March 31, 2021

“Eagle Forum Education and Legal Defense Fund calls the proposed injection of price into march-in decisions ‘the bad apple on an otherwise fruitful tree.’”

march-in op-ed - https://depositphotos.com/27960071/stock-photo-mixed-messages.htmlTwo organizations with which I work have filed comments with NIST on its Bayh-Dole regulatory proposals.

The National Institute of Standards and Technology, or NIST, approaches completion of its two-and-a-half-year effort known as the Return on Investment Initiative, as the regulatory revision stage nears its close. NIST has conducted a commendable process and proposed mostly constructive or reasonable updating to rules associated with the Bayh-Dole Act.

But one proposal puts at risk the continued success of the storied law for democratizing technology transfer and commercializing inventions coming from federally sponsored research. That is, this law facilitates bringing to practical use inventions that otherwise would sit on shelves.

March-In’s Long History

Eagle Forum Education and Legal Defense Fund and Conservatives for Property Rights each submitted comment letters. Their comments similarly focus on the march-in regulatory rewrite. This is the provision at odds with the remainder of NIST’s positive proposals.

There is a history concerning the law’s march-in provisions. Activists and ideologues who have little regard for intellectual property — or just plain property rights — have repeatedly tried to expand the very limited grounds for the government to reclaim IP rights over resulting inventions well after the fact.

These activists seek march-in use on account of the commercialized invention’s product price. They aim primarily at brand-name biopharmaceuticals.

No surprise, then, that these same activists have tried to advance their agenda through the ROI Initiative’s efforts. Unfortunately, NIST succumbed to their pressure.

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The Bad Apple

The proposed Section 401.6 reads, “March-in rights shall not be exercised exclusively based on the business decisions of the contractor regarding the pricing of commercial goods and services arising from practical application of the invention.”

In its comments, Eagle Forum Education and Legal Defense Fund calls the proposed injection of price into march-in decisions “the bad apple on an otherwise fruitful tree.”

These comments point out that if product price isn’t provided in the statute as a reason allowing march-in, then a regulation for that statute cannot create a new ground for the power to be exercised.

“However, the statute (35 U.S.C. § 203) omits price of goods and services as an element for consideration of whether to exercise march-in. The law provides four narrow grounds for the exercise of march-in rights. Not one of them includes price as a consideration. Therefore, no statutory basis for injecting product price into march-in exists.”

Similarly, Conservatives for Property Rights (CPR) says, “It should be noted that the law (35 U.S.C. § 203) specifies four narrow grounds for the government’s exercising march-in rights. None of them mentions price. Thus, there is no statutory basis for injecting product price into march-in — much less for considering it ‘exclusively’ or otherwise.”

Both sets of comments cite the law’s authors and namesakes, Senator Birch Bayh (D-IN) and Senator Robert Dole (R-KS), who averred once the revisionist history project of the march-in activists began that they intentionally left out product price as grounds for march-in.

Both organizations recount how officials in both Democratic and Republican administrations have consistently declined to exercise march-in over pricing, as petitioners demanded.

Both commenters cite the disastrous “reasonable pricing” episode the NIH experimented with in the late 1980s and 1990s, adding language to a contracting vehicle for licensing NIH technologies. The pricing clause quashed interest in doing business with a government price control provision of that sort. They observe how NIST’s proposal plays with the same fire.

Disruptive and Damaging

CPR points to the proposal’s inconsistency with the statute and the practice for 40 years. “With the absence of statutory language that would provide a basis for price consideration for march-in, to inject ‘pricing’ into these decisions via regulation is unjustifiable and unfounded. The proposed regulatory rewrite would render the regulation inconsistent with the statute. To do so would risk the secure property rights on which entrepreneurs, institutions, investors, and others rely in deciding whether to attempt commercialization of a given invention.”

Eagle Forum ELDF “urge[s] NIST to remove the references for considering ‘pricing’ from the proposed regulatory provision. As discussed above, as proposed, the provision would be inconsistent with the statute. The effect could be highly disruptive and damaging to technology transfer and commercialization of the inventions and discoveries arising from federal research funding.”

The comment period ends April 5.

Image Source: Deposit Photos
Author: sharpshutter
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The Author

James Edwards

James Edwards consults on intellectual property, health care innovation, and regulatory and policy issues. Edwards advises companies, trade associations, and conservative organizations on patent policy and is Co-Director of the Inventor's Project. He participates in the Medical Device Manufacturers Association's Patent Working Group. Edwards mentors start-ups and early-stage companies, largely in the med tech space, and is involved in several IP-centric projects.

Edwards served as Legislative Director to Rep. Ed Bryant, R-Tenn., then a member of the U.S. House Judiciary Committee, and handled IP legislative matters. Edwards also worked on the staffs of Rep. John Duncan, R-Tenn., the U.S. Senate Judiciary Committee, and Sen. Strom Thurmond, R-S.C. In addition, he was an association executive at the Healthcare Leadership Council. Edwards earned a Ph.D. at the University of Tennessee, and bachelor's and master's degrees at the University of Georgia.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 2 Comments comments.

  1. Kelly L. Morron April 1, 2021 2:11 pm

    I agree with Mr. Edwards that this amendment does appear to muddy the waters for the exercise of march-inn rights. I also believe that the amendment is unnecessary to ensure that exercising march-in rights is not based on pricing, but unlike Mr. Edwards, not because the bases for exercising the rights, Section 203(a)(1)-(4), do not refer to pricing – they do. While true that those provisions do not refer to “price” or “cost,” Section 203(a)(1) permits march-in rights where the contractor “has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application …” where the term “practical application” is defined at 35 U.S.C. § 201(f) to include manufacturing “under such conditions … available to the public on reasonable terms.” So actually, under a reading taking only into account the definition of “practical application,” Section 203(a)(1) would require pricing to be taken into account, meaning that proposed Section 401.6(e) actually conflicts with the statute. However, in concluding to the contrary, I also take into consideration the fact that there is ambiguity between Section 203(a)(1), which refers to “subject inventions” and Section 201(f), which refers to “inventions” (where the terms are defined differently), as well as numerous other provisions in the Act that illustrate that it is the development and dissemination that are important, with no other reference to cost, e.g., Sections 202 and 209. Of course, as the organizations point out, historical petitions based on price have been rejected.
    However, regardless of your position on whether or not the proposed Section 401.6(e) conflicts or comports with Section 203, as I explain in the Comments I submitted to NIST (www.regulations.gov /comment/NIST-2021-001-0026 (comment kmn-k3em-11hq, Mar. 25, 2021)) it pales in comparison with the extent of ambiguity of the proposed language. The proposal is such a morass of confused thoughts that it would be criminal to implement it. The phrases “exclusively based,” “business decisions,” “decisions of the contractor,” “commercial goods and services,” are all hopelessly ambiguous, and no definitions are proposed. For instance, what is “exclusively based” in the context of the prior petitions’ requests, what are or should not be considered “business decisions,” and what are “commercial goods and services” vis-à-vis the “subject invention” of Section 203? And what does it mean by using “invention” rather than “subject invention” of Section 203? None of these are apparent, explained, or defined. In my opinion, it should be pulled until someone figures out how to convey whatever it is they are trying to achieve.
    I also think that proposed amendments to Section 401.6(a)(1) are extremely dangerous, but those also appear in my submitted Comments.

  2. James Love April 6, 2021 2:04 pm

    Why is the Eagle Forum Education and Legal Defense Fund engaged in the issue of excessive prices on federally funded medical inventions?