Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter.
Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.
OCR for page 69
9. Contracting to Preserve Open Science:
Lessons for a Microbial Research Commons
– Peter Lee26
University of California, Davis, School of Law
In this talk, I would like to address three topics. First, I would like to present some
ongoing research on the use of “private ordering” mechanisms to broaden access to the
fruits of publicly-sponsored science. I would then like to apply some lessons from this
practice to the challenge of designing a microbial research commons. Finally, I would
like to explore some additional principles and considerations for constructing such a
commons.
Let me begin by providing some context. Much of my recent research focuses on
the role of “public institutions” in creating a noncommercial research commons in
biomedicine. In particular, it focuses on efforts by government, academic, and nonprofit
entities to enhance access to patented biomedical research tools. Obviously, enhancing
access to intellectual property is very different from enhancing access to physical
resources, such as microbes, that are ordinarily subject to material transfer agreements
(MTAs). However, there are some striking similarities between these two scenarios and
some lessons to be learned. With that in mind, allow me to turn in greater detail to my
first topic, the use of public norms and private ordering to create a biomedical research
commons.
The problem that these efforts address is familiar to many, and it has to do with
proprietary claims on scientific inputs operating to inhibit valuable research. I focus on
patented biomedical research tools, which can encompass anything from extracted and
purified human embryonic stem cells to genetically modified organisms, including
genetically modified microbes. The relevant theory here—which, of course, must be
empirically verified—is that patents on research tools constrain access to these resources,
thus inhibiting basic scientific research and the development of valuable technologies and
industrial applications.
The present tendency of parties to patent research tools gives rise to the challenge
of how to provide appropriate access to such resources. In exploring this challenge, let us
start with some first principles. Wide access to research tools enables more parties to
conduct scientific research, thus generating significant positive externalities. In general,
society is better off when scientists have ready access to resources like human embryonic
stem cells and microbes that are critical to conducting basic research.
This state of affairs suggests a particular set of policy responses. Given the
desirability of maintaining wide access to research tools, perhaps we should simply
commit them to the public domain by prohibiting parties from patenting them. This,
however, would be problematic for several reasons. First, as commentators have noted,
many research tools are actually dual-status inventions: research tools, such as extracted
and purified human embryonic stem cells, are often precursors to commercial products in
addition to being valuable enablers of basic research. Policy considerations thus weigh in
26
Presentation slides available at
http://sites.nationalacademies.org/xpedio/idcplg?IdcService=GET_FILE&dDocName=PGA_053668&Rev
isionSelectionMethod=Latest.
69
OCR for page 70
favor of granting exclusive rights on these research tools, even publicly-funded research
tools, to encourage their further development and commercialization. Indeed, this was in
large part the intuition underlying the enactment of the Bayh-Dole Act, which allows
federal grant recipients to take title to patents arising from taxpayer-funded research.
Consequently, we do not want to categorically commit research tools to the public
domain. Rather, it would be preferable to create a mediated semicommons where such
resources are subject to context-specific access and exclusivity. Unfortunately, traditional
policy levers such as legislation, judge-made common law, and regulation have proven
inadequate in this regard. In large part, these instruments are too blunt and cumbersome
to facilitate mediated access to research resources on a case-by-case basis.
However, where the law fails to provide for optimal resource management, interested
parties often resort to private ordering. We see this in the real property context where
communal management of environmental resources, such as fisheries, has proven highly
efficient. We also see this in the intellectual property context. In the copyright sphere, for
example, collective-rights organizations such as ASCAP and BMI have created pools of
licenses that allow interested parties to access performance rights for proprietary musical
works.
In the technology sector, private ordering has taken the form of massive cross-
licensing and patent pools in patent-intensive industries, such as software and
telecommunications. In addition, we see similar attempts to use private law mechanisms
to enhance access to protected content in the emergence of open-source licensing, such as
the General Public License for software and Creative Commons licenses for a variety of
copyrighted works. In all of these contexts, norms and contracts are driving enhanced
access to proprietary material.
Furthermore, “private ordering” is not simply the domain of private institutions; public
institutions are also fruitfully engaged in private regulation. This is particularly apparent
in the life sciences sector, a field in which public institutions enjoy enormous leverage.
Take, for example, the National Institutes of Health (NIH), which provides about
$30 billion per year in funds for biomedical research. As noted, under the Bayh-Dole Act,
federal grantees can take title to patents arising from taxpayer-financed research. Some
have criticized this law as providing a “double subsidy” to grantees, who receive both
taxpayer funds as well as patent rights. That being said, these public funds come with
certain strings and expectations attached.
Along these lines, in 1999, NIH issued principles and guidelines for obtaining and
disseminating NIH-funded biological resources. There are two principles in particular
that I think are very relevant. First, the NIH guidelines advocated the wide availability of
NIH-funded, grantee-patented research tools for noncommercial uses. At the same time,
however, these guidelines allowed for targeted exclusivity of such resources for
commercial development. While the Bayh-Dole Act complicates and arguably prohibits
direct enforcement of these guidelines, NIH considers compliance with its principles and
guidelines in reviewing grant proposals and awarding research funds.
The model that arises is one where NIH provides some sort of consideration, in
this case money, to a downstream resource developer, and in return that downstream
developer is expected to provide qualified access to proprietary resources for research
purposes. That access applies not only to NIH scientists, but extends on behalf of NIH to
the wider research community as well.
Of course, NIH is not the only game in town. I teach in California, and there the
California Institute for Regenerative Medicine (CIRM) will provide about $3 billion over
70
OCR for page 71
ten years for human embryonic stem cell research. And here again, public funds are
embedded in a quid pro quo. As with the federal Bayh-Dole Act, recipients of CIRM
funds can patent the results of publicly-financed research. However, CIRM imposes
certain access requirements for state-funded research resources. Grant recipients must
agree to make their patented, CIRM-funded inventions readily accessible on reasonable
terms to other California organizations for use in noncommercial research. In addition,
grantees must make CIRM-funded materials described in scientific publications widely
available for research purposes. These access requirements are embedded in the terms of
funding agreements and are legally enforceable.
CIRM places strings on public money in another way as well. Unlike NIH, CIRM
collects royalties on inventions arising from public funding. These royalties are deposited
into the state’s general fund and can be used for a wide variety of public expenditures. If
multiple funding sources contributed to an invention, the state is entitled to a share that is
“proportionate to the support provided by CIRM for the discovery of the invention.”27
In addition to the federal government and state governments, universities are also
major contributors to biomedical research. Increasingly, universities are using
contracts—specifically, technology transfer licenses—to enhance access to patented
research tools. For example, here is some boilerplate language from an exclusive license
at Harvard University: “Harvard will retain the right, for itself and other not-for-profit
research organizations, to practice the subject matter of the patent rights for internal
research, teaching and other educational purposes.”28 So, when Harvard exclusively
licenses out some patented invention, it retains the right to use that invention for research
purposes and to allow other nonprofit institutions to engage in similar activities.
In addition to demonstrating how licenses can enhance access to proprietary
resources, university practice can inform the design of a microbial commons in other
ways as well. As a general matter, resource owners tend to systematically overvalue their
assets. We see this in the physical property realm, and we also see such overvaluation in
the intellectual property context. Based in part on the expectation of generating
significant revenues, universities have dramatically increased their patenting activities
over the past several decades. However, university intellectual property actually
generates relatively little income. Income from licensing is largely hit or miss, and it is
overwhelmingly miss. In fact, a large proportion of university technology transfer offices
lose money. It appears that universities systematically overvalue their patents, a
phenomenon that is likely to apply to other owners of research resources as well.
From the perspective of designing a microbial commons, universities are also
informative in that they demonstrate a high degree of normative plurality. Norms can
diverge widely among seemingly similar institutions, as illustrated in various
universities’ approaches to technology transfer. For example, Columbia University and
the University of California have been very aggressive in patenting and licensing, while
other leading research universities, such as Johns Hopkins, have been much less active in
this realm. In addition to differences between institutions, we also see important
normative plurality within institutions. In general, research faculties and individual
scientists tend to be quite committed to the norms of open science. However, this
27
CAL. CODE REGS. tit. 17, § 100308(c).
28
Harvard University Office of Technology Development, Licensing Harvard Patent Rights: A Guideline
to the Essentials of Harvard’s License Agreements, available at
http://www.techtransfer.harvard.edu/resources/guidelines/license.
71
OCR for page 72
normative orientation may diverge sharply from that of senior university executives and
technology transfer offices, which may place greater emphasis on asserting patent rights
and maximizing licensing income.
Returning to our survey of “public institutions,” nonprofit funding organizations
are also significant sources of scientific venture capital. One very important player is the
Howard Hughes Medical Institute (HHMI), which provides approximately $600 million
per year in research funding. Consistent with the theme of placing strings on research
funding, HHMI “expects all HHMI research tools to be made available to the scientific
research community on reasonable terms and in a manner that enhances their widespread
availability.”29 This policy is consistent with NIH’s principles and guidelines on sharing
biomedical research resources.
In these examples from government, academia, and the nonprofit sector, we see
attempts to formalize the informal norm of open science. Public institutions are using
quid pro quos and contracts to leverage their provision of “upstream” scientific capital to
ensure access to “downstream” proprietary research assets. In this manner, public
institutions are utilizing private ordering to create a biomedical research commons.
Drawing from these case studies, there are several lessons that can be applied to
designing a commons for microbial resources. First, it may be useful to consider an
integrated approach that provides access to both intellectual and physical property. The
first generation of the microbial research commons will likely focus on enhancing access
to physical resources, namely microbes themselves. However, in future iterations, it may
be useful to include patents related to these resources within the commons. After all,
scientists often have to clear patent rights in addition to obtaining physical materials in
order to conduct valuable research.
The next lesson for designing a microbial commons relates to how parties go
about formalizing informal norms. Here, issues of authority and process are critical. For
instance, who speaks for the scientific community, and how does a community arrive at
normative consensus? Here, the scientific community can learn valuable lessons from
NIH’s development of its principles and guidelines. These principles and guidelines arose
through a consultative process that included formal notice and comment, which may
serve as a helpful model for designing policies governing a microbial research commons.
Within this endeavor, institutional buy-in will obviously be important. In
achieving such buy-in, it is crucial to consider normative plurality, that is, the fact that
different institutions, such as various culture collections, may have different norms. And
there might be normative plurality even within particular institutions, as we see in various
universities.
So, how can we encourage participation in the microbial research commons? As
noted earlier, the experience of universities suggests that parties systematically overvalue
their assets, which may discourage them from contributing their resources to a commons.
One way to discipline this tendency is to leverage upstream, scientific capital to mandate
or encourage compliance with access objectives. Many public institutions enjoy
significant leverage in this field, such as government agencies, universities, private
foundations, and even scientific journals. One promising model would involve public
institutions providing some sort of material support (or, in the case of journals, publishing
29
Howard Hughes Medical Institute, Research Policies: Research Tools (SC-310) 1 (2007), available at
http://www.hhmi.org/about/research/sc_310.pdf.
72
OCR for page 73
opportunities) to downstream parties, who must in return provide access to proprietary
resources to the research community
Instructive in this regard, there is an existing track history of calibrating property
regimes to accommodate dual purpose assets—assets that are both directly used in
noncommercial research and have high potential for commercial application. Past
experience shows that a single framework can accommodate these different uses. The
potential for commercial exploitation does, however, give rise to difficulties regarding
apportioning upstream versus downstream contributions in calculating appropriate
compensation. Consider the following hypothetical: party A transfers some material to
party B, who finds a way to commercialize it. What is the obligation of B to compensate
A, and how is this complicated when parties C and D also contributed to commercializing
this product? As we have seen, CIRM has already addressed this problem when
determining royalties owed to the state of California where CIRM is only one of several
funding sources for some commercialized product. I suggest that the proportionality
principle used by CIRM can be a useful guide to allocating compensation when one party
commercializes assets contributed by another.
In designing a microbial commons, institutional considerations are of course
paramount. In any type of initiative encompassing a broad array of institutions and
practices, centralized coordination and standardization can play a valuable role in
lowering information and transaction costs. In the patenting and licensing sphere, NIH
has played a central role in standardizing the ways in which various entities promote
access to patented biomedical research tools. Is there an analogous body in the microbial
research commons area, and to what extent are these challenges exacerbated because of
the global dimensions of this initiative?
Finally, I want to explore some additional design principles and considerations for
constructing a microbial research commons. In doing so, I have loosely modeled my
observations on the objectives outlined in the draft monograph by Reichman,
Dedeurwaerdere, and Uhlir. First, how can we shore up incentives to share proprietary
resources? In terms of benefits, it is important to emphasize communal norms as well as
the language of self-interest. Generally speaking, nobody likes giving up his property for
free. In some cases, however, such behavior can actually advance one’s self-interest. In
this respect, patent pools in the software industry represent an influential model, as firms
are voluntarily donating their patents to a common pool because it enhances innovation
for everyone.
Second, it is useful for parties to assess realistically the value of their microbial
assets. As we have seen, parties systematically overvalue their assets. However, rational
expectations concerning the profitability of these resources may encourage greater
participation in the sharing system.
Within any attempt to build a microbial commons, distributing duplicates and
derivative resources will be very important. In many ways, this need to broaden access to
“downstream” iterations of microbes distinguishes this initiative from traditional MTA-
mediated exchanges. Here, open source and viral licenses that ensure access to derivative
works can provide a useful model.
Maintaining high-quality standards for microbial resources will require dealing
with a variety of governance issues, which I understand will be the subject of a later
panel. At this time, however, let me just say that there is a strong need for institutional
leadership and community consensus to define standards, assign monitoring
73
OCR for page 74
responsibilities, and delineate sanctions. There may be organizations that are already
well-suited to provide these functions.
Reputational benefits are critical to the normative economy and, in some sense,
provide a solution to the incentives question. Why should parties voluntarily contribute
proprietary assets to a commons? One answer is that participation makes it possible to
establish priority, increase citations, and obtain communal recognition.
Along these lines, it is interesting to consider reputation as both a carrot and a
stick. In many ways, the effort to build a microbial research commons reflects an attempt
to create a community of strangers. Creating such a community gives rise to the
challenge of cultivating trust and identifying bad actors. Here, the literature on peer
production can offer a useful guide. User-generated ratings and “distributed
accreditation” offer a new twist on peer review. Consider, for example, eBay, another
community of strangers. How do I know that I can trust another party on eBay? The
answer is that everybody on eBay is rated by everybody else.
Finally, I would like to address the challenge of securing equitable compensation
in a commons. If I contribute some asset to a commons that another party eventually
commercializes, how much compensation, if any, should I receive? I am a big advocate
of liability rules, and I have argued in favor of them in other contexts. Such regimes,
however, give rise to a number of challenges related to valuation and apportionment.
Who determines equitable compensation, and how exactly is a reasonable royalty
calculated? While considering these questions, it is also important to consider eliminating
or mitigating the threat of exit. Is it going to be possible for an entity to simply opt out of
the system once a product becomes highly profitable? Perhaps the party will think it can
do better than equitable compensation and choose to leave rather than commit that
resource to a commons.
Along these lines, it is useful to look forward, beyond merely sharing physical
materials, to consider commercialization and patenting. In this regard, it may be helpful
to have structured rules whereby parties who obtain resources from the commons must
inform those who provided them of plans to patent any related inventions. Among other
functions, such notice might initiate discussions regarding co-inventorship and co-
assignment of inventions.
To summarize, I believe the microbial research commons is eminently feasible,
and I have suggested that it can benefit from related experiences to create a biomedical
research commons in the intellectual property context. We already have relevant
experience dealing with multiple-purpose assets that are useful in both basic research and
commercial applications. In designing the microbial commons, it would be helpful to
integrate access to all relevant intellectual, physical, and informational resources. Within
this project, we can leverage public norms and private ordering to formalize an informal
ethos of scientific sharing. Finally, there are, of course, a host of institutional challenges
regarding standardization, coordination, and determination of equitable compensation. If
these institutional hurdles can be overcome, the creation of a microbial commons
promises to greatly streamline and enhance microbial research.
74
OCR for page 75
Question and Answer Session
PARTICIPANT: I would like a better understanding of your metaphor of the new public
license. We are all trying to deal with the difficulty of intellectual property.
PROF. LEE: The basic idea is a contractual understanding that “derivative works” based
on some asset will also be disseminated in an open-source manner. The analogy to
software is not perfect, but essentially the concept is to have an embedded obligation that
all future iterations of some asset obtained in the commons will also be widely available
to others, particularly for noncommercial research use. To the extent that we want to
encourage openness, I think that we can use viral mechanisms to facilitate that outcome.
PARTICIPANT: I also am curious about what CIRM’s experience has been with this
obligation to negotiate reasonable terms ex post for access to materials. I am wondering
with CIRM (a) if there is much history of how successful they have been with this
process, and (b) whether they can be held confidential by the party.
PROF. LEE: There are actually two components to CIRM’s royalty hierarchy. One
involves ex ante definitions. Here, there is an established regulatory framework for
determining what the royalties will be, and they define certain blockbuster categories. For
example, if a grant recipient has $500,000 or more in sales, that triggers a certain
percentage of royalties, and then there are graduated categories going up from there. So,
those royalties are based on an established, ex ante schedule. The difficult part is
apportioning royalties when a CIRM grant recipient combines state money with funding
from other sources. CIRM recognizes that there are often multiple inputs to a commercial
product, and CIRM’s claim relative to other upstream funders tends to be determined on
an ex post fashion based on proportionality analysis.
Regarding the other component of your question, there is not much track history
here in apportioning royalties. CIRM was established relatively recently. It is doing a lot
of grant work, but not a lot of commercial products have been produced yet to provide
test cases for these rules.
75
OCR for page 76
76
