The Government’s License Has Limited Applicability

Federal agencies and their authorized funding recipients have the right  to benefit from the use of a federally funded invention without risk of  infringing the patents. Federal contractors,  grantees, and cooperative agreement funding recipients may use the  government’s license if they are authorized to do so. For example,  federal agencies can contract with a third party to manufacture products  containing such inventions. However, the government’s license to use a  federally funded invention does not automatically entitle the government  to price discounts when purchasing products that happen to incorporate  the invention. The government’s license also does not necessarily extend  to later inventions related to or based on the federally funded invention. There are two primary ways in which the government can use its right  to practice an invention in which it has retained a license. The Government’s License Is Available to Federal Agencies and Authorized Funding Recipients

The government’s right to practice an invention is limited to federal  agencies and their funding recipients specifically authorized to use the  invention for federal government purposes. In this regard, the government is not  entitled to any different protection than other entities that fund research. For  pharmaceuticals, one of the largest sectors of the biomedical market, we  found that the government had an interest—either because of its license  under the Bayh-Dole Act or as the owner or “assignee” of the patent—in  only 6 brand name drugs associated with the top 100 products, by dollar  value, that VA procured in fiscal year 2001 and 4 brand name drugs  associated with the top 100 products, by dollar value, that DOD dispensed  from July 2001 to June 2002. We could not determine the extent to which the government holds  rights to other types of biomedical products because (1) no databases  exist showing the underlying patents for most of these products and  (2) products such as hospital beds and wheelchairs may incorporate  numerous components that might not be covered by identifiable patents. The Government Has Used Its Biomedical Licenses Primarily for Research

Officials from VA, DOD, and NIH said that their agencies use the  government’s licenses to biomedical inventions primarily in performing  research. VA and DOD officials said they do not consider the government’s licenses  for procurements because they (1) would not be able to determine  readily which products incorporate patented technologies or whether the  government helped fund the technology’s development, (2) believe they  already receive favorable pricing through the Federal Supply Schedule and  national contracts, and (3) are not required by law to do so. According to these officials, the  government’s licenses are valuable because they allow researchers to use  the inventions without concern about possible challenges alleging that the  use was unauthorized. While we agree with NIH that federal agencies and their  funding recipients have unrestricted rights to use a federally funded  invention for federal government purposes, it is important to recognize  that they can use these rights only to meet needs that are reasonably  related to the requirements of federal programs. Our objectives were to assess (1) who is eligible to use and  benefit from the government’s licenses to biomedical inventions  created under federally sponsored research, (2) the extent to which the  government has licenses to those biomedical inventions it procures or  uses most commonly, and (3) the extent to which those eligible have  actually used or benefited from these licenses.
Why GAO Did This Study

The Bayh-Dole Act gives federal contractors, grantees, and cooperative agreement funding recipients the option to retain ownership rights to inventions they create as part of a federally sponsored research project and profit from commercializing them. The act also protects the government's interests, in part by requiring that federal agencies and their authorized funding recipients retain a license to practice the invention for government purposes. GAO examined (1) who is eligible to use and benefit from the government's license to federally funded biomedical inventions, (2) the extent to which the federal government has licenses to those biomedical inventions it procures or uses most commonly, and (3) the extent to which federal agencies and authorized federal funding recipients have actually used or benefited from these licenses. GAO focused its work on the Department of Veterans Affairs (VA), the Department of Defense (DOD), and the National Institutes of Health (NIH). NIH commented that the report implies that the government's right to use its license is more limited than it actually is. GAO recognizes that the right of federal agencies and their funding recipients to use a federally funded invention is unrestricted. However, GAO believes that these license rights can be used only to meet needs that are reasonably related to the requirements of federal programs.

What GAO Found

Federal agencies and their authorized funding recipients are eligible to use the government's licenses to federally funded inventions for the benefit of the government. Government researchers can use the technology without paying a royalty, and federal agencies can authorize their funding recipients to use the government's licenses for specific contracts, grant awards, or cooperative agreements meeting a federal government need. The government is not entitled to automatic price discounts simply because it purchases products that incorporate inventions in which it happens to hold a license. Furthermore, the government's rights attach only to the inventions created by federally funded research and do not necessarily extend to later inventions based on them. Thus, the government may have no rights in a next-generation invention that builds on federally funded technology if the new invention were not itself created by federally sponsored research. Few of the biomedical products that federal agencies most commonly buy appear to incorporate federally funded inventions. In 2001 the government had licensing rights in only 6 brand name drugs associated with the top 100 pharmaceuticals that VA procured and in 4 brand name drugs associated with the top 100 pharmaceuticals that DOD dispensed. GAO was unable to determine the extent to which the government had rights to other types of biomedical products because there are no databases showing the underlying patents for most of these products and such products may incorporate numerous components that might not be covered by identifiable patents. The federal government uses its licenses to biomedical inventions primarily for research; however, researchers generally do not document such usage. These licenses are valuable because researchers can use the inventions without concerns about possible challenges for unauthorized use. Neither VA nor DOD has used the government's licenses to procure biomedical products because they cannot readily determine whether products use federally funded technologies and they believe they already receive favorable pricing through the Federal Supply Schedule and national contracts. Furthermore, neither VA nor DOD has used the government's license to manufacture a biomedical product for its use.