March-in rights

11.113 Recommendations 11–1, 11–2 and 11–3 are an alternative to a more restrictive approach under which the government maintains residual rights in any publicly funded research, known as ‘march-in rights’.

11.114 Concerns about lack of commercially viable research emanating from the public sector led the United States Congress to enact a number of pieces of legislation in the 1980s that aimed at improving technology transfer from research organisations receiving public funding to the private sector. In particular, the Bayh–Dole Act 1980[126](US) (Bayh–Dole Act) allowed recipients of government funding for the performance of experimental, developmental or research work to retain title to any invention made in the course of that work, and accordingly to be able to patent that invention, subject to meeting patent requirements.

11.115 However, unlike in Australia, under the Bayh–Dole Act the federal agency that funds research retains certain residual rights to inventions developed from that research. These ‘march-in’ rights are aimed at allowing the government to step in and commercialise a patented invention where an organisation has failed to do so. The government can also use these rights to take title to an invention and assign it to another organisation that is likely to commercialise it more effectively.[127]

11.116 These ‘march-in’ rights have been used sparingly. An example of the use of march-in rights is the NIH negotiations in relation to the broad patents held by the Wisconsin Alumni Research Foundation (WARF) over primate embryonic stem cells developed through publicly funded research. In September 2001, the NIH reached an agreement with WARF to provide access for federally funded researchers to the patented human embryonic stem cells. A subsequent agreement was reached providing access to the patented stem cells.[128]

Submissions and consultations

11.117 IP 27 asked whether there was any need in Australia for the government to retain a variety of rights to intellectual property developed from publicly funded research.[129] These rights included ‘march-in’ rights, the right to a government use license and the right to limit exclusive licences. The introduction of the concept of residual rights found some favour in submissions, albeit with some reservations.

11.118 Submissions that favoured march-in rights suggested that such rights enable the government to:

  • address inappropriately wide use of gene patents;[130]
  • ensure continued access by the public to the results of publicly funded research;[131]
  • retain the right to use gene patents in the provision of public health services, either completely or at a reduced fee;[132]
  • address equity of access issues in the public health system;[133] and
  • address the lack of incentives for researchers to commercialise their research;[134]

11.119 Objections to march-in rights included:

  • overuse of march-in rights will erode the confidence of potential commercial users that patents have real value;[135]
  • overuse could also lead to greater reliance on reversion to proprietary protection rather than patents, and then such provisions would be powerless;[136]
  • governments should not be given the task of commercially exploiting intellectual property as they lack the capacity to do so effectively;[137]
  • march-in rights would be ineffective in addressing the barriers to the commercialisation of genetic research in Australia;[138]
  • march-in rights may create a disincentive to industry collaboration in commercialising research by restricting potential negotiations between research organisations and commercial partners;[139]
  • Crown use and compulsory and statutory licensing provisions in the Patents Act are more effective mechanisms for addressing inappropriate use and commercialisation of publicly funded research results;[140] and
  • march-in rights would also impose significant management and tracking obligations on funding bodies, which they are not currently in a position to exercise.[141]

ALRC’s views

11.120 For a variety of reasons, the ALRC does not consider it necessary to recommend the Australian Government retain residual rights in intellectual property from publicly funded research. First, the ALRC concurs with the view expressed in a number of submissions that the government is not well placed to develop gene patents commercially. This is in part because the Government is neither structured to do so; nor do government agencies generally have the commercial skills and experience to negotiate with industry to develop patented technology.

11.121 By contrast, research organisations have been developing their capacity to undertake commercialisation over the past decade, through skill-building and the creation of infrastructure. This includes the establishment of dedicated technology transfer offices employing staff with commercial experience, and the provision of a range of educational and networking programs.

11.122 In Australia, commercialisation of gene patents is promoted through a wide range of measures, including the National Principlesand other funding requirements, government funding focused on industry linkages and technology transfer, state government programs supporting biotechnology industry development and benefit sharing schemes within research organisations. Given the level of support already provided by these measures, it is unlikely that a lack of commercialisation activity in research organisations is generally attributable to reluctance to commercialise. Instead, as discussed in Chapter 17, commercialisation is better promoted through continuing financial and educational support programs to provide monetary support and raise commercialisation skills.

11.123 In addition, Recommendation 11–3 is intended to allow funding bodies the option of placing conditions on research grants where it is thought that public benefit will be maximised by not patenting the research results. The ALRC anticipates that this option would be utilised very sparingly but it does allow for one purpose of march-in rights to be achieved without the need for the government to retain residual rights.

11.124 There are already a number of mechanisms available for addressing some of the concerns at which march-in rights are directed, for example, restrictions on access to significant patented technology or a failure to exploit a patented invention appropriately. These include the Crown use and compulsory licensing provisions of the Patents Act.

11.125 However, the ALRC recognises that these mechanisms have rarely been used and may not provide a complete solution to the issues raised in this chapter. For example, the Crown use provisions enable the Government to exploit a patented invention itself, or authorise another person to do so. To some extent, this provision gives the Government powers similar to those provided under the Bayh–Dole Act. However, Crown use is more limited than march-in rights, as it extends only to use for the services of the Commonwealth or of a State.[142] These mechanisms, and recommendations for addressing some of these limitations, are discussed in Chapters 26 and 27.

[126] 35 USC ss 200–212.

[127] Patents Act 1952, 35 USC s 203.

[128]WiCell Research Institute Inc and Public Health Service of the United States Department of Health and Human Services, Memorandum of Understanding, 5 September 2001.

[129]Australian Law Reform Commission, Gene Patenting and Human Health, IP 27 (2003), Question 5–3.

[130]J Mattick, Submission P35, 13 October 2003; South Australian Government, Submission P51, 30 October 2003.

[131]South Australian Government, Submission P51, 30 October 2003; G Suthers, Submission P30, 2 October 2003.

[132]Human Genetics Society of Australasia, Submission P31, 3 October 2003; Royal College of Pathologists of Australasia, Submission P26, 1 October 2003.

[133]Genetic Support Council WA (Inc), Submission P59, 7 November 2003.

[134]Royal College of Pathologists of Australasia, Submission P26, 1 October 2003.

[135]Genetic Support Council WA (Inc), Submission P59, 7 November 2003.

[136]Walter and Eliza Hall Institute of Medical Research, Submission P39, 17 October 2003.

[137]Ibid; National Health and Medical Research Council, Submission P52, 31 October 2003; Wondu Business & Technology Services Pty Ltd, Submission P4, 20 August 2003; A McBratney and others, Submission P47, 22 October 2003; Department of Industry Tourism and Resources, Submission P36, 13 October 2003; Royal College of Pathologists of Australasia, Submission P26, 1 October 2003.

[138]Queensland Government, Submission P57, 5 January 2004; Department of Industry Tourism and Resources, Submission P36, 13 October 2003. DITR argued that failure to commercialise research in Australia is more often attributable to a lack of venture capital and the risk-averse nature of private sector investors in this country, rather than the lack of incentives the Bayh–Dole Act was designed to address.

[139]GlaxoSmithKline, Submission P33, 10 October 2003.

[140]Ibid; Queensland Government, Submission P57, 5 January 2004; AusBiotech Ltd, Submission P58, 7 November 2003; National Health and Medical Research Council, Submission P52, 31 October 2003.

[141]Western Australian Department of Industry and Resources, Submission P90, 16 April 2004.

[142] See also Ch 26. There are also practical concerns about the efficacy of compulsory licensing as a solution in this context. Few, if any, compulsory licences have been granted in Australia to date. This may stem from costs involved in applying to a court for an order, or the difficulty in satisfying the legislative test for such an order. Compulsory licences may also be difficult to acquire because of pressure on governments from major trading partners. However, several commentators have suggested that the threat of compulsory licensing can encourage patent holders to negotiate a voluntary licence.