[Bayh-dole-regulations] Kathryn Ardizzone Comment to NIH Regarding Proposal to Deny Members of the Public Standing to Appeal Government Licenses

James Love james.love at keionline.org
Fri Mar 26 11:24:23 PDT 2021

Kathryn Ardizzone Comment to NIH Regarding Proposal to Deny Members of the
Public Standing to Appeal Government Licenses
Posted on March 26, 2021 <https://www.keionline.org/35729>

PDF version here: KA-KEI-NIST-Standing-26March2021
More on the NIST proposed changes to the Bayh-Dole Regulations.

Kathryn Ardizzone
Counsel, Knowledge Ecology International

National Institute of Standards and Technologies
Rights to Federally Funded Inventions and Licensing of Government Owned
Docket No.: 201207-0327
Docket ID: NIST-2021-0001-0001
FR Doc # 2020-27581, 86 Fed. Reg. 35

March 26, 2021

*Re: The Proposal to Deny Members of the Public Standing to Appeal
Government Licenses*

I am writing to express my strong opposition to NIST’s proposal to modify
37 C.F.R. § 404.11 to artificially narrow the class of people that have
standing to appeal federal agencies’ decisions to grant exclusive licenses
in federally-owned inventions. The Bayh-Dole Act gives the public a voice
in such decisions, as it requires federal agencies to consider all
timely-submitted public comments before executing an exclusive license. The
NIST proposal is an attempt to silence that voice. It would limit standing
to appeal licensing decisions to those who can show that they are able to
commercialize the licensed invention.

I oppose the proposal because it conflicts with the public’s statutory
right to comment on licenses in federally-owned inventions and would have
harmful implications. If the NIST proposal is implemented and members of
the public could not seek review on unlawful licensing decisions, agencies
would become even less willing to give their comments meaningful
consideration. If agencies continue to be dismissive of public comment,
without a possibility of review, the legal framework in which the public
has a voice in exclusive patent licenses would be upended.

I am counsel for Knowledge Ecology International (KEI) and have submitted
comments and appeals on agency licensing decisions. KEI’s experience
submitting more than 70 comments on licenses in the past four years and
several appeals teaches that if NIST should be doing anything on this, it
should be strengthening the public’s right to comment and appeal, not
weakening it.

*The Current Regulation Governing Standing to Appeal*

This proposal concerns the rules governing standing to appeal exclusive
licenses in federally-owned inventions under the Bayh-Dole Act.

Under the current regulation, a person who timely filed comments opposing
an exclusive license has standing to appeal as long as they “may be damaged
by” the license. 37 C.F.R. § 404.11.

Concerning public comment, the Bayh-Dole Act states that agencies may not
grant exclusive licenses unless they provide notice of their intent to
grant the license, allow at least 15 days for the public to comment, and
consider all timely-submitted comments. 35 U.S.C. § 209(e). In the original
version of the Act, the comment period was 60 days.

*The NIST Proposal*

NIST is proposing modifying 37 C.F.R. § 404.11 so that a person who may be
damaged by a license must also demonstrate that they were damaged by the
license specifically by losing the “opportunity to promote the
commercialization” of the licensed invention. The new language would state
in full:

(3) A person who timely filed a written objection in response to the notice
required by § 404.7 and who can demonstrate to the satisfaction of the
Federal agency that such person may be damaged by the agency action due to
being denied the opportunity to promote the commercialization of the

*Why it Matters*

The NIST proposal on standing is inconsistent with the intent of the
Bayh-Dole Act, as expressed through the licensing procedures at 35 U.S.C. §
209(e). By giving the public a right to comment on exclusive licenses and
requiring agencies to consider their comments, Congress signaled its desire
to give members of the public a powerful voice in these decisions. The
right to comment cannot be meaningful if the public cannot appeal licenses.
The proposal is also inconsistent with a stated policy and objective of the
Act: to “protect the public against nonuse or unreasonable use of
inventions.” 35 U.S.C. § 200.

The proposal would likely contribute to agencies’ dismissiveness of public
comment as it stands today. Over the past several years, the National
Institutes of Health (NIH) has become increasingly unresponsive and non
transparent about its licensing decisions, undermining the public’s voice.
As an example of this lack of responsiveness and possible hostility to the
public’s right to appeal, KEI’s previous counsel asked the NIH to provide
him copy of the NIH’s appeals procedures for an appeal that KEI wanted to
submit, but the NIH initially refused to forward him the policy, asserting
that KEI did not have standing. It was impossible for the NIH to know that
KEI did not have standing before KEI even had an opportunity to be heard on
why it did. And despite KEI notifying the NIH on multiple occasions over
the years, the link to the Department of Health and Human Services appeals
procedures remains broken on the NIH Office of Technology Transfer website.

The failure of agencies to consider public comments and appeals would have
a harmful impact. If this proposal is implemented and NIH licensing
officers prefer to enter into licenses that violate the restrictions set
forth at 35 U.S.C. § 209, the Public Health Service obligation to promote
access in developing countries, and the requirement under 40 U.S.C. § 559
to seek the advice of the Attorney General, the officers would be even more
willing to dismiss the comments on both process and substance, knowing that
the public would not be able to seek review of their actions. These
restrictions, however, are all important because they are all intended to
protect the public interest concerning the licensing of inventions paid for
and owned by the public. As such, they deserve serious assessment and
consideration when making licensing decisions. It is also unreasonable to
expect potential developers of federally-owned technologies to advocate for
public interest safeguards, since they share the same interests as other
companies seeking to commercialize federal inventions, such as by charging
high prices and engaging in anticompetitive practices or under-serving
persons living in developing countries. The public is uniquely situated to
provide an important and necessary check on agencies’ licensing decisions.

I also oppose this proposal because it is inconsistent with more accepted
and more equitable standards on standing.

Under constitutional law on standing, there is no special requirement to
demonstrate a particular form of an injury. It is unclear why NIST is
trying to erect this unnecessary hurdle, to require appellants to show not
just that they submitted comments but that they were damaged in the way
NIST thinks they should be damaged. I am astonished that NIST wants to
limit the right to appeal to drug companies and other commercial entities,
as if they are the only stakeholders in the granting of exclusive licenses.
If anything, the public should have greater ability to establish standing
than provided under the concept of Article III standing.

Exclusive licenses in government-owned patents have broad implications,
including on the price at which the technology would be available in the
market. They give companies monopolies in inventions paid for and owned by
the American public, and these monopolies have consequences. During the
period of exclusivity, companies face no competition regarding the licensed
inventions, and thus are able to set higher prices for the resultant
products. High prices and other potential consequences of exclusive
licenses can harm patients, payers and the public in general, all of whom
should have the opportunity to comment on and appeal decisions that may
damage them. They are no less damaged by the licenses simply because they
themselves do not have the opportunity to commercialize an invention. There
can be no doubt that when the public pays for and owns an invention, it has
a stake in how it is licensed.

If the public role in the licensing process were taken seriously and
supported rather than undermined, this would likely have a beneficial
impact on ensuring that licenses to federally-owned inventions comport with
the Bayh-Dole Act and serve the public interest. In my experience asking
questions on pending licenses and submitting comments and appeals, the NIH
does not give proper consideration to the criteria governing exclusive
patent licenses and is unreasonably secretive about them. Although the
Bayh-Dole Act sets forth strict limits on agencies’ authority to grant
exclusive licenses and on the permissible scope of the agreements, the NIH
routinely flouts these requirements. For example, as noted above, the
Bayh-Dole Act stipulates that the scope of exclusivity must not be broader
than the incentive necessary to induce a company to invest in
commercializing an invention, while in our experience the NIH model
exclusive license agreement is to make the period of exclusivity as long as
possible—the duration of the last-filed patent in the licensed patent
estate. Based on our conversations with the NIH, this is also what takes
place in practice. The practice of routinely granting licenses with the
maximum possible period of exclusivity is contrary to past practice, in
which the NIH used shorter terms of exclusivity when appropriate, for
example, as it did in the license to Bristol Myers Squibb for the
commercialization of the HIV drug ddI.

I strongly believe that to preserve the public’s role in the licensing
process and best ensure agencies comply with their statutory requirements
regarding exclusive patent licenses, NIST must rescind this proposal. But
rescission, in my opinion, would not go far enough, because it is
disturbing and highly concerning that NIST would issue this proposal in the
first place. Upon reading this proposal together with the rest of NIST’s
regulatory package, a theme emerges: NIST is doing everything it can to
maximize the privatization aspect of the Bayh-Dole Act and erode its public
interest safeguards. When I joined KEI as their lawyer, I never expected,
but increasingly learned the extent to which federal agencies like NIST and
the NIH sidestep or distort Congressional intent on the Bayh-Dole Act, in
order to diminish the public interest in the affordability of
taxpayer-funded inventions in service of private interests.

Congress should conduct oversight on the NIST proposals in general, and ask
NIST specifically why it thought that undermining the public’s right to
participate in the licensing process was beneficial and consistent with the
text and intent of the Bayh-Dole Act.

For additional information on this or other issues with the proposed
regulations, I can be contacted via email at Kathryn.Ardizzone at keionline.org
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