Reputation and Licensing Performance

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5.2.5 Reputation and Licensing Performance 5.2.5.1 Reputation

Table 9 NIH Technology Transfer Reputation in FY 2011-2013 (in USD$) ^{104, 114}

A summary of NIH reputation on technology transfer could be seen in Table 9.

On average NIH Intramural Program developed more than one hundred new patents every year, however if the Continued-in-part application (CIP), a successor to an earlier patent is being considered in the statistics, NIH Intramural Program produced more than 300 patents annually. On average, more than half of the disclosed inventions were licensed out from NIH Intramural Program annually¹⁰⁵. Although total executed licenses declined generally but royalties collected increase over the year, this signifies NIH patent quality has improved in general because it brings more revenue (per patent)

104 OTT Statistics (n.d.), NIH Office of Intramural Research and Office of Technology Transfer, Retrieved from http://www.ott.nih.gov/ott-statistics

105 Refer to Table 9, (Invention Disclosures) ÷ (Executed License).

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to NIH Intramural Program. On average, an executed license brings USD$ 640,000 (in FY 2013), USD$ 560,000 (in FY 2012) and USD$ 480,000 (in FY 2011) to NIH¹⁰⁶.

As an effort to fully utilize NIH intramural program’s invention, NIH is among one of the first national research institute that give clear instruction to potential foreign licensee or local licensee that are interested to practice an invention outside the United States. As mentioned earlier on “US Legislation: Bayh-Dole Act”, 35 USC § 204 was enacted to promote the prosperity of U.S. economy and to safeguard U.S. taxpayers’

benefits and rights. Invention made under the support of U.S. taxpayer’ money should be utilized in the U.S. to increase the prosperity of U.S. economy.

5.2.5.2 Licensing Reputation

With stable funding, quality scientist and synergetic collaboration between ICs, IRP has created an environment that enables innovative high-risk, high-reward research, of which traditional academic settings would take many years to achieve or would not be undertaken at all. In this regards, IRP excels in the type of basic research that is nascent but important and lack of scientific literature, especially finding cure for epidemic diseases with low successful rate like HIV and cancer. Following highlights some achievement made by NIH, including the discovery of fluoride to prevent tooth decay, the use of lithium to manage bipolar disorder, and the creation of vaccines against hepatitis, Haemophilus influenza type b (Hib), and human papillomavirus (HPV)¹⁰⁷. The IRP has also produced or trained 18 Nobel Prize winners, who either did the bulk of their award-winning research at NIH or trained in one of the NIH labs¹⁰⁸.

The NIH has few competition peers when viewed in terms of numbers of biomedical patents, licenses, commercialized products or the amount of royalties collected¹⁰⁹. NIH technology transfer is carried out by Technology Development Coordinators (TDCs) in each ICs and in the central NIH Office of Technology Transfer

106 Refer to Table 9, (Royalties) ÷ (Executed License)

107 What is the NIH Intramural Research Program? (n.d.), National Institutes of Health, Retrieved from http://aids2012.oar.nih.gov/faqsnih.html#accomplishments

108 NIH Intramural Research at the Threshold of a New Era (September 2009), p21.

109 NIH Intramural Research at the Threshold of a New Era (September 2009), p36.

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(OTT) located in the Office of Intramural Research in the OD. TDCs are responsible for facilitating the transfer of NIH technologies to the commercial sector for further stage research or develop into commercial products that could improve public health.

Though the technology transfer process is beneficial to public health, the royalties derived is an important by-product. Royalties collected from licensing out NIH and FDA intramural research program inventions are distributed to the inventors, ICs that developed the inventions and third parties according to statutory regulations¹¹⁰. According to NIH’s definition, there are various payments collected as royalties under licenses, including upfront license fees, annual minimum payments to maintain a license, payments associated with the achievement of commercial development milestones and “running royalties” as a percentage of the sales of products.

Inventors under a given license will receive annually the first USD$2,000 received by the NIH; 15% of royalties above USD$2,000 and up to USD$50,000; and 25% of royalties in excess of the first USD$50,000. However, the accumulated royalty payments received in a calendar year cannot exceed USD$150,000. Any remaining royalties are distributed to NIH’s ICs to cover technology transfer expenses. Inventors continue to receive royalty income after they leave NIH¹¹¹.

110 The Technology Transfer Program is guided by several statutory authorities, including: 15 USC 3710 (Stevenson-Wydler Technology Innovation Act of 1980 [Public Law 96-480]), Federal Technology Transfer Act of 1986 (FTTA) (Public Law 99-502), Cooperative Research and Development Agreements (CRADAs), National Technology Transfer and Advancement Act of 1995 (NTTAA) (Public Law 104-113), and Technology Transfer Commercialization Act of 2000 (TTCA) (Public Law 106-404). Source: NIH Intramural Research at the Threshold of a New Era (September 2009), p36.

111 NIH Intramural Research at the Threshold of a New Era (September 2009), p37.

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Table 10 NIH Royalty Income since 2008 (in Million USD$)¹¹²

Fiscal Year NIH

Table 10 shows royalty derived from NIH’s licensing activity since 2008.

Despite difficult economy situation and budget cut in recent years, royalty NIH collected remained stable over the years. Royalties collected fluctuate from year to year due to a variety of factors, including sales reputation, FDA regulatory changes, competitions, changes in patient care standard, license termination, patent expired and etc. Of USD$111M administered by NIH in 2012, 77% of the total royalty received goes to NIH, 0.4% goes to FDA, 7.5% goes to NIH inventor and 15.5% distributed to IIAs. These incomes were received under 803 license agreements from 505 companies or their subsidiaries. In FY12, 1,129 inventors received royalty payments amounting to USD$9.1M¹¹⁵. Of these, 86 were first-time recipients, and 29 received the statutory cap, both of these numbers increasing over the previous year. Royalty levels continued an upward trend with almost a 13% increase over FY11 and setting a record high for the program (See Figure 9). Royalty collected in FY 2013 continued in a rising trend at USD$ 116M (data not published)¹¹⁴.

112 Summarized from NIH Office of Technology Transfer Annual Report, from FY 2008 till FY 2012. Annual reports from FY 2009-2012 could be retrieved from this website: http://www.ott.nih.gov/annual-reports; Annual reports earlier than FY 2009 could be retrieved from this website: http://www.ott.nih.gov/annual-report-archive

113 IIA- Inter-Institutional Agreements, an agreement signed between NIH or FDA with NIH Extramural partners (“Institution”), of which the partners are one of the co-owners of the licensed inventions. The royalty distribution between NIH or FDA and Institution varies as it relies on the discussion between two parties. For more information on the IIA, please visit http://www.ott.nih.gov/sites/default/files/documents/pdfs/nih-iia-nih-lead-model-102005.pdf to view the IIA template.

114 NIH fiscal year starts from October 1 and ends September 30. Example: FY 2013- Started October 1, 2012 and ends September 30, 2013. NIH TTO annual report has not yet released to date (November 27, 2013) but certain data could be retrieved from TTO office website. For more information please visit

http://www.ott.nih.gov/ott-statistics

115 Probably including extramural inventors under IIAs

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Figure 9 Increase Trend of NIH Royalty Income from FY1996 to FY2012 (Source: NIH.gov)¹¹⁶

Royalties are collected under various payments, including upfront payments, annual minimum payments to maintain a license, payments according to the achievement of commercial development milestones and running royalties (a percentage of an ongoing sales of products). By far, the largest amount of royalty funds received is on sales of products. Besides that, OTT has continued on effort to identify patent prosecution costs that are due under licenses and resulted in a recovery of USD$3.9M.

The following figure (Figure 10) shows the composition of licenses based on agreement types. For the past three years, commercial-use biological materials license¹¹⁷ has the largest increase in scale, with a slight increase between FY10 and FY11 of 17% and a sharper increase of 46% in FY12. While the most significant decline for the past three years in the number of internal use licenses (both biological materials and patent), of which Internal Use licenses grant companies the right to use

116 Annual Report FY 2012 (2012), NIH Office of Technology Transfer, Retrieved from http://www.ott.nih.gov/sites/default/files/documents/pdfs/AR2012.pdf

117 Biological Material Commercial Licenses permit the use of unique biological materials from NIH, such as antibodies or cell lines, in commercial process or for sale and distribution as research tools.

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patented inventions in their internal research programs but do not permit their use in the sale of products or services.

Figure 10 NIH Licenses by Type of Agreement (FY2011-2013) ¹¹⁸

5.2.6 NIH OTT Effort to Increase Licensing Activity to Serve Global