Comments on the CCST IP Study Group process and conclusions

1. Comments on the CCST IP Study Group process and conclusions Dr. Stephen Rockwood Exec. VP, SAIC and CCST Study Co-Chair

2. Intellectual Property Study Group • Alan Bennett, Associate Vice-Chancellor for Research, UC Davis (Co-Chair) • Stephen Rockwood, Executive VP, Science Applications International Corp. (Co-Chair) • Susan Bryant, Dean of Biological Sciences, UC Irvine • Ronald Cochran, Executive Officer, Lawrence Livermore Nat. Lab. • Lawrence Coleman, Vice Provost for Research, UC • Cynthia Curry, Senior Staff Counsel, Dept. General Services • Michael Goldberg, Mohr, Davidow Ventures • Ginger Graham, President and CEO, Amylin Pharmaceuticals • Wayne Johnson, VP University Relations, Hewlett-Packard • Katharine Ku, Director, Office of Technology Licensing, Stanford • Meyya Meyyappan, Director, Center for Nanotech., NASA Ames • Roger Noll, Morris M. Doyle Professor of Public Policy, Stanford • James Pooley, Partner, Milbank, Tweed, Hadley & McCloy LLP • Pamela Samuelson, Professor of Information Management, UC Berkeley • Robert Spinrad, Consultant • Richmond Wolf, Director, Office of Tech. Transfer, Caltech (until 12/05) • Julie Meyer Wright, President and CEO, San Diego Economic Development Corp. • CCST affiliated

3. Range of expertise and input • Additional support from working group of 11 IP policy and technology transfer experts • Input from nearly 50 high-tech leaders (CCST Board and Council and outside reviewers) • Many interests involved; report is a starting point for further research and discussion

4. ACR 24 and the Review Process • In keeping with CCST’s practices, more than 50 people reviewed the report. Their comments were taken into consideration. • Some legislators wanted input from a broader range of reviewers. ACR 24 requested that study group expand scope of project & seek input from bond counsel firms, the Legislative Analyst, the State Treasurer, consumer and public interest groups; and foundations engaged in funding biomedical research. ACR 24 requested that comments from these groups be included in the final report. • In response to ACR 24, Appendix E includes responses from: • Legislative Analysts Office • Alzheimer’s Association • Orrick, Herrington & Sutcliffe, LLP (bond counsel) • Office of the Treasurer • Study Group concluded that other non-IP issues (such as taxable or non-taxable bonds, criteria for maximizing benefits from research) need to be explored by experts in those fields.

5. The Recommended IP Policies were guided by several basic facts and conclusions • In general, CIRM will be funding early stage research projects. • Research support is dominated by Federal funding; the ownership of IP developed by federal funding is governed by well-tested policies under the Bayh-Dole Act. • The greatest return to taxpayers will be from the earliest possible availability of new drugs and treatments. • Historically, royalty returns are generally small (with the exception of a few blockbuster inventions) and cannot realistically be expected to have a major financial return in the near-term.

6. Logical consideration of the previous factors guided the study group’s recommendations • Early stage research – • The primary results of this work will likely be in the form of new processes, tools and databases. To gain maximum benefit this information should be as open and broadly disseminated as possible. • Practical applications will require large investments by other sponsors, particularly the private sector. Hence, the IP management by the state should incentivize a close and simple working relationship between the research institutions and the private sector.

7. Further considerations (cont.) • Federal funding still dominates – • Bayh-Dole policies grant ownership of IP to the inventors and their institutions. This implicitly recognizes that incentives and motivation for early commercialization of discoveries are strongest at the “front lines”. • The state should encourage efficient leveraging of all research funds available. • Thus, state policies should be as compatible with Bayh-Dole as possible.

8. Further considerations (cont.) • Return on investment – • The benefits of R&D are long term, broadly distributed and generally of limited financial benefit to the originators. • Royalty revenues, historically, are small but there have been a few “blockbuster” inventions that policies should anticipate. • The greatest return to the state taxpayers will be from the early availability of new drugs and treatments for chronic diseases.

9. Further considerations (cont.) 4. Returns – To provide maximum return to its tax payers the state’s IP policies should • Provide for open dissemination and use of databases and tools. • Foster close working relationships with the private sector and other future investors. • Require diligent development of the IP for public availability of products. • Be compatible with Bayh-Dole to gain maximum leverage of limited research funds.

10. We recommend to the state four general principles for its IP policy: • The policy is consistent with the federal Bayh-Dole act. • The policy creates incentives for commerce in California. • The policy encourages timely publication of results to diffuse knowledge widely, with guidance on kinds of data that are desired to be placed in public domain, open source, or other broad-use licenses. • Requires diligent commercialization of IP-protected technology into products that benefit the public.

11. The policies should accomplish: • Permit grantees to own IP rights • Require grantees’ proposal offer a plan describing how IP will be managed to benefit the state • Grant basic research funds without requiring that grantees commit to providing a specific revenue stream to the state. If, however, a significant revenue stream develops, require that revenues be reinvested in research and education. • Make state-developed research tools widely available to other researchers. • Require diligent efforts to develop state funded IP

12. Policies (cont.) • Retain Bayh-Dole like “march-in” rights. • Leave license particulars to the owners. • Reserve the right to use IP by or on behalf of the state for further research or non-commercial purposes. • Establish and maintain state-administered functions to track all IP generated through state funding.

13. Distractions and Concerns • The state, and the nation, have a “schizophrenic” attitude toward the drug industry. This is problematic, for virtually all of the drugs available to the public are dependent on significant investments by the private sector. • There is considerable naiveté regarding the financial value of research and the state’s value-added role. We noted this role to be: to provide a priority based focus on issues of interest to the state and to encourage rapid commercial adoption of results. • The state’s funding of stem cell research, while significant, is small compared to the overall national investment in health sciences research. • Early stage research is a very small percentage of the total cost of producing a new, publicly available drug. One must keep this in perspective when forming policies that will encourage further and timely investment by others.

14. Outcomes to date • August 23, 2005 – release of interim report • January 17, 2006 – release of final report • January 18, 2006 – CIRM release of its draft IP policy for non-profit organizations

15. Key Elements of Draft CIRM IP Policy • Questions to guide IP discussions: • Who should own any inventions that may arise from CIRM funding? • How shall CIRM require the sharing of data, tools, technology, and intellectual property? • Should CIRM create a research exemption for the use of intellectual property for basic research purposes? • What licensing requirements should be adopted by CIRM grantees? • Should CIRM retain “march-in” rights?

16. CIRM IP Policy Principles Ownership • CIRM non-profit grantee organizations own all rights to intellectual property created during the period supported by a CIRM grant. Data/Biomedical Materials Sharing • CIRM strongly supports a broad sharing policy.  CIRM willexpect grantees to share data and biomedical materials widely, and beyond current practices.  Research Exemption • CIRM will create a research exemption to allow the use of patented CIRM-funded discoveries for research purposes by CIRM grantees.

17. CIRM IP Policy Principles (cont.) Licensing • CIRM will encourage the commercialization of CIRM-funded discoveries.  In licensing activities, CIRM will require that all other things being equal, preference be given to companies with plans for access to resultant therapies for underserved patient populations.  In addition, CIRM strongly encourages the practice of non-exclusive licensing when possible. • CIRM may require that a portion of the grantee organization’s share of licensing fees and royalties benefit the State of California.  March-in rights • CIRM will retain march-in rights in the event of: • Failure to develop CIRM-funded discoveries • Public health and safety reasons