Chapter 3: Introduction to Technology Licensing
3.7 Locally Manufacture Clause
國
立立 政 治 大
㈻㊫學
•‧
N a tio na
l C h engchi U ni ve rs it y
the passage of this act, every government-funded research will have the same right and same ground on the ownership and revenue sharing matters.
2. The allocation of right to funded agencies to manage the IP
The Fundamental Science and Technology Act required each government agencies to enact each agency’s rule and regulation on governmental-funded research based on the Fundamental Science and Technology Act.
Besides certain criteria like military invention and invention which is crucial for public health, all government-funded research result should be fully transferred or partly transferred from the government to the research institute for technology transfer management or licensing management.
3. The release of government-funded research result from being categorized as government property
The Fundamental Science and Technology Act exclude the IP rights derived from governmental funding to be categorized as government property under the “National Property Act”38.
3.7 Locally Manufacture Clause
The money from government funding comes from taxpayer’s pocket. In order to protect taxpayer’s right, government has to be responsible for the money they utilized, in this case, funding public research. Since the passage of Bayh-Dole Act in 1980, the ownership of a government funded invention had been shifted from the government to the research institute. However, there are clauses written in 35 USC § 204 to constrain the licensing scope in order to protect the local industry. 35 USC § 204, the Preference for United States Industry states that licensee shall not use or sell the subject invention outside the United States, and shall agrees that products embodying the subject invention, or produced through the use of the subject invention will be manufactured substantially in the United States. This literally limits the practice of a subject invention outside the United States, which means that invention made by government-sponsored
38王偉霖、劉江彬（2010），第十章，國際技術轉移制度理論與實務－兼論台灣立法與產學研因應之策
略，華泰文化。
•‧
國
立立 政 治 大
㈻㊫學
•‧
N a tio na
l C h engchi U ni ve rs it y
grant, shall not be licensed to parties that does not intend to use, make or sell in the United States.
As mentioned above, 35 USC § 204 was enacted to promote the prosperity of U.S. economy and to safeguard U.S. taxpayers’ benefits and rights. However, under 1reference for U.S. industry, the act made an exception to invention under certain circumstances, of which, to practice any invention in the United States is economically not feasible, or it is shown to the funding agency, substantial but unsuccessful effort has been made to license out the invention to U.S. corporates, waiver could be granted to the inventor by funding agency.
…However, in individual cases, the requirement for such an agreement may be waived by the Federal agency under whose funding agreement the invention was made upon a showing by the small business firm, nonprofit organization, or assignee that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible. (35 USC § 204)
Organization that intends to apply for the abovementioned exception needs to address the following issues to the funding agency in order to get a waiver under the U.S. manufacturing requirement. Different agencies have set different waiver standards for U.S. manufacturing requirement, licensee should refer to agencies’ announcement respectively. Since this study focuses on discussing the differences in licensing practice of NIH and NHRI, Table 5 summarized the standard of U.S. manufacture waiver requirement given by NIH. Licensee interested in applying for waiver will have to provide some detailed information proving the two situations: i) Reasonable but Unsuccessful Efforts to License, and ii) Not Commercially Feasible to License in the United States.
•‧
Table 5 Exception to U.S. Manufacture Requirement (35 USC § 204) 39
Reasonable but
Unsuccessful Efforts to License
Discuss the significance of the technology, including the availability of alternative products, the size of intended patient populations, whether requiring U.S. manufacture will delay entry of the product into the U.S. or foreign markets, and the effect such delay may have on the U.S. and foreign public health.
Identify the past marketing strategy and efforts for the technology, including the number of companies contacted, the methods used for marketing and contacting companies, the types of licenses and terms offered to potential licensees, comparison of terms offered to potential foreign licensee and those offered to U.S. companies, and the responses of companies to marketing efforts.
Not
Commercially Feasible
Discuss the factors that make domestic manufacture not commercially feasible, including the relative costs of U.S. and foreign manufacturing, the licensee's manufacturing capabilities within the U.S. and the efforts made by to locate, develop, or contract for such manufacturing capabilities, and any other circumstances that make foreign manufacture necessary.
Identify the part or percentage of products arising from the invention that would be manufactured outside the U.S.
Identify any value or benefit to the United States of licensing the technology even if it will not be manufactured in the United States, including i) the direct or indirect investment in U.S. plants or
39 NIH Procedures for Requests for Waivers of the U.S. Manufacturing Requirement in Licenses to Extramural Inventions, iEdition.gov, Retrieved from https://s-edison.info.nih.gov/iEdison/ManufacturingWaiver.jsp
•‧
considering product and service exports as well as foreign licensing royalties and receipts, or vi) cross-licensing, sublicensing, and reassignment provisions in the license which seek to maximize benefits to the U.S.
It is apparent that U.S. government understands the economic circumstances in the U.S. that it is no longer competitive compared to China, India and other South East Asia countries where labor-intense market dominates. Despite the awareness of competition issue, NIH is rather careful and conservative in approving waiver for U.S.
Manufacture clause. According to statistics, it wasn’t until late 2000s that application for manufacture waiver became more dominant according to Table 6.
Table 6 Waiver Application to NIH from FY 2006-2012112
Year Application for Waiver40 U.S. Manufacture Waiver
2006 66 Not listed
In general, U.S. agencies will require potential licensee to answer the following questions during application to license out invention to location outside the United States:
1. Do other companies involved in the relevant industry manufacture in the US?
2. Where are actual or potential competitive products manufactured?
3. What are the relative costs of manufacturing the product in the US as opposed to manufacturing the product outside of the US?
4. Will some manufacturing be done in the US (e.g., final assembly) even though it would not be considered to be “substantial”?
40 Waiver includes extramural inventor waivers, waivers of U.S. manufacturing requirements, and waivers of assignment.
•‧
國
立立 政 治 大
㈻㊫學
•‧
N a tio na
l C h engchi U ni ve rs it y
5. Does the grant and exploitation of the exclusive license provide other economic value to the US economy apart from manufacturing such as additional US jobs in other functional areas (e.g., R&D or sales) or taxes to be paid by the licensee on sales made in the US?
6. Does the license restrict the sale of foreign-manufactured products to foreign markets and provide that products sold in the US must still be manufactured in the US?
7. Are there any ancillary considerations that should be taken into account that demonstrate that the license is beneficial to the US public despite the lack of domestic manufacturing (e.g., lower cost for US consumers or the underlying technology is environmentally responsible)?41
Compared to the United States government, Taiwanese government is relatively strict on “Taiwan Manufacture” restriction in technology transfer context, not that the law restricts foreign licensing possibility, but not clearly indicates the possibility to not practice or manufacture a government-funded research invention outside Taiwan.
Although in late 2011, Taiwanese government has loosen the restriction on the ownership of government-funded intellectual property right, the government in general only allow government-funded intellectual property to be sold to Taiwanese corporates, or to be licensed to corporates promised to practice or provide service based on the technology. Article 6.3 of Fundamental Science and Technology Act states that:
…The ownership and utilization of the intellectual property rights and results … shall be determined based on the principles of fairness and effectiveness by assessing the proportion and contribution of capital and labor, the nature of the research and development result, potential uses, societal benefits, national security, and impacts on the market. Regulations pertaining to the objectives, prerequisites, effective period, scope, proportion (whole or part), registration, administration, allocation of profit, recusal and disclosure
41 Alan Gutterman (2007), Bayh-Dole Act—Us Manufacturing Requirements, Business Counselor Blog Retrieved from http://www.businesscounselorblog.com/2007/12/bayh-dole-actus.html
•‧
國
立立 政 治 大
㈻㊫學
•‧
N a tio na
l C h engchi U ni ve rs it y
of relevant information, intervention by the funding agency into the matter of a third party licensed to implement the research and development result, reclamation of the result by the funding agency as national property, and other relevant procedures shall be arranged and prescribed by the Executive Yuan.
Additionally, the competent authorities may prescribe related laws and regulations to enforce such matters42.
Recently, some government agencies, including the Ministry of Economic Affairs, Executive Yuan, Ministry of National Defense, Atomic Energy Council and Council of Agriculture had opened up certain degree of freedom to “Taiwan Manufacture” restriction. However, there weren’t any clear and direct instructions for agencies to apply the waiver clause.
42 科技基本法第六條：…智慧財產權及成果之歸屬及運用，應依公平及效益原則，參酌資本與勞務之比
例及貢獻，科學技術研究發展成果之性質、運用潛力、社會公益、國家安全及對市場之影響，就其目的、
要件、期限、範圍、全部或一部之比例、登記、管理、收益分配、迴避及其相關資訊之揭露、資助機關 介入授權第三人實施或收歸國有及相關程序等事項之辦法，由行政院統籌規劃訂定；各主管機關並得訂 定相關法規命令施行之。
•‧
國
立立 政 治 大
㈻㊫學