Intellectual Property Policy in New York State Roundtable
January 17, 2007, Albany, NY

The Assembly Task Force on University-Industry Cooperation, chaired by Assemblymember William B. Magnarelli, the Assembly Subcommittee on Manufacturing, chaired by Assemblymember Joseph D. Morelle, and the Assembly Standing Committee on Small Business, chaired by Mark Weprin sponsored a roundtable discussion on Intellectual Property (IP) Policy in New York State on January 17, 2007, in Albany. This roundtable was a follow-up to a similar event held in September of last year. The participant list varied from the first discussion to include more state agencies and other university participants who did not attend the first session. The discussion echoed themes in the first roundtable, although more of an effort was made to make suggestions about how the State should develop policy options for consideration.

Assemblymember Magnarelli began the discussion, noting that it wasn't "just money" that the legislators were interested in as a return on the State's investment, but something to show the taxpayers of this State how their dollars are being used. What benefit is the taxpayer reaping from the awards? As it is now, the public often pays twice: once for the research and development (R&D) at the institution and again when a product resulting from that R&D is commercialized (at times at a non-affordable price, especially when the product is a drug or a new medical test or procedure). Essentially, the issue for the legislators is: what is the return to the taxpayers of New York?

Participants from New York State agencies and research institutions joined the Assemblymembers for a thoughtful and candid exchange of ideas and perspectives. Building upon the earlier discussion, the participants agreed that the challenge is how to develop a policy that continues to encourage investment, but at the same time provides what might be an appropriate return to the State. Discussion focused on defining this policy question, as well as how the State might better manage its IP assets.

Managing and Tracking IP

• Participants overwhelmingly agreed that, given the information collected under Bayh-Dole, there is no need to reinvent the wheel. It was suggested that as agencies report to federal agencies, they can duplicate the information for the State. The federal patent reporting system, iEdison, was mentioned as a possible model for what could be done at the state level. Albany Law School felt that this inventory and tracking endeavor might, in fact, be an opportunity for New York to develop a leadership role.

• Participants (agency, public authority and university) including the Assemblymembers were adverse to an active management role by the State of IP, but acknowledged the need for a statewide inventory and better cooperation among state-funded entities. A central repository would enhance research collaboration among researchers, universities, agencies and businesses, and could lead to more coordinated and efficient economic development initiatives.

• While not the consensus, it was suggested that the State could create a designated office to manage and prosecute patents, as well as negotiate royalties. It was also suggested that there be a designated office to keep track of IP generated with State funding while the actual management of the funds be carried out by the grantees.

Coordination with Federal IP Policies

• Participants maintained the same position as those at the September roundtable discussion. Where federal funds are included in the research, Bayh-Dole takes precedence as far as IP policy is concerned since it would be all but impossible to separate out state dollars. Bayh-Dole requires that licensing income be pumped back into the grantee institution, enabling further research and development.

• Participants also agreed that the State should have a system in place for reporting and tracking and that they could easily replicate, for the State, what they are required to report when awarded federal funds.

State Ownership of IP

• Participants and legislators agreed that while it is reasonable and beneficial for the State to track and maintain an inventory of intellectual property, it would serve no purpose for the State to actually 'own' the IP. This would be in contradiction with Bayh-Dole and almost impossible to put into practice since federal and state funds often overlap.

• The suggestion was made that a single policy be put in place for state-funded R&D to eliminate contract-by-contract negotiations, which often ends with the institution losing the contract. It was noted that the federal policy is not negotiated from contract to contract and that it doesn't benefit any of the parties to have such a procedure for industry-sponsored R&D.

• Participants urged that no changes be made in the practice of keeping IP ownership close to the inventors and their laboratories. Generally, participants argued against the State taking any ownership rights for the following reasons: it would create a barrier to businesses doing research in the State, and the State should not lose sight of the importance of the non-monetary benefits accruing from IP for the overall public good, such as advancements in medical technologies. The State should mirror the position of Bayh-Dole which is that the goal should be to maximize public benefit.

• The general consensus was to permit grantees to own, manage and license IP as they do under Bayh-Dole.

Require Commercialization of IP To Be Done by New York State Companies

• One obvious means of measuring return on investment is to have some revenue return to the State as result of successful commercialization of IP, or to prevent the loss of the investment when IP developed in New York is commercialized elsewhere. Several participants argued that if an effort to secure any return on investment did occur, it should focus on returns from commercialization grants.

  • NYSERDA referenced its standard contract procedures that penalize the commercialization of state-supported research outside of New York.

  • Representatives from the Department of Health laboratory were more cautious, noting that collaboration was always important and it was often necessary to look outside New York. Their priority was the development of the product or the procedure, and they worried that any effort to limit that development to New York would be discouraging.

• Overall, it was maintained by participants that the decision of where to commercialize should be made based on who can best carry that out, and participants urged the legislators not to require manufacturing be done in NYS. It was agreed, however, that this preference should at least be considered when commercializing state-funded IP.

• The point was made that anything the Members want to do as a policy in terms of establishing accountability (such as having a repository) is "great," but anything that limits the ability of an agency/institution to have unfettered access to outside entities for either research or commercialization would be counterproductive to what those entities are trying to achieve.

• Assemblymembers stressed that they did not want to do anything that would have a "chilling effect" on commercialization of IP and voiced awareness that requiring manufacturing to be done by NYS companies is impractical. Overall, participants reacted favorably to Assemblymember Morelle's notion that where there is a profit, the State should get a royalty which would be waived as long as the company stays in New York and employs New Yorkers. Concern was expressed, however, about how this might affect the State's entrepreneurial environment.

The two Roundtables held on Intellectual Property in New York State have provided keen insight regarding this issue. The sponsoring Assemblymembers heard from different entities that would be affected by policy decisions and their understanding of the issue has been enhanced as a result. The opinions, supported by years of experience in and expertise with research and development, tech transfer, commercialization and licensing practices, will be carefully considered as a State policy is discussed and developed.

There are many conclusions to be drawn from discussions, but perhaps four of the most important points for all parties to keep in mind are the following:

• The Assembly is committed to supporting R&D and the development of intellectual property, both for the pursuit of knowledge that will ultimately enhance the health and well-being of the public and for the economic benefits that will accrue to the State as companies thrive.

• The Assembly is also committed to honoring its fiduciary responsibility to the taxpayers of this State by making sure that they understand where their investments are being made and how they are being used.

• Too often concerns about setting out a reasonable return to the university and general confusion about the State's IP policy priorities can add considerable costs and delay to tech transfer agreements. As a policy is developed, care should be taken to avoid making the process more cumbersome.

• Avoiding the creation of a "chilling effect" on entrepreneurship is important when devising an IP policy, and adhering to Bayh-Dole principles is a good way to avoid this. However, while many participants observed that federal IP policy affects much of their work and their reporting, it does not cover all IP developments. Some see flaws in the current federal policies. If nothing else, a clarification of State IP policy and the extent to which Bayh-Dole explicitly applies in New York would help reduce uncertainty and costs in the tech transfer process.