January 30, 2023

Volume XIII, Number 30


January 27, 2023

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Reduced scope of march-in rights under Bayh Dole rules revisions

The Bayh Dole Act was enacted to provide incentives to promote commercialization of federally funded inventions and was designed to capitalize on the significant government investments in small business, university research, and other non-profit institutions. The Act imposes several terms on entities that benefit from federally funded research including non-exclusive licensing of patented inventions arising from the federally funded research to the federal government, requiring substantial manufacturing activities take place in the U.S. imposed on any exclusive licensee, compliance with various administrative rules, and latent march-in rights to the invention by the U.S. government under a variety of circumstances. It is the last of these that have become the subject of debate under proposed rule changes published just prior to the parting of the Trump administration in January 2021 and announced on June 11, 2021 as being in the Biden administration’s regulatory agenda.

March-in rights provide the government with a mechanism to step in where a patented invention is languishing in the hands of the funded institution or its licensee. Exercising march-in rights has been suggested as a means of imposing price control of pharmaceutical products. This idea has gained considerable political traction, despite the explicit denouncement of such use by the Bayh Dole Act authors. Seeking to quell the use of march-in rights solely for the purpose of price control, in January NIST (Department of Commerce’s National Institution of Science and Technology) proposed a specific rule (86 Fed. Reg. 35, 37 (Jan. 4, 2021)) regarding the use of march-in rights:

March-in rights shall not be exercised exclusively based on the business decisions of the contractor regarding the pricing of commercial goods and services arising from the practical application of the invention.

While the proposed rule does not foreclose the possibility of price control as one factor for imposing march-in rights, it cannot be the exclusive reason for doing so.

With the period for commenting on the proposed rule now expired, the Biden administration has adopted the proposed rule revision. Advocates of the rule suggest that it comports with the original intent of the author’s of Bayh Dole and will give assurances to investors and prospective licensees that the federal government needs more than just price control as a reason to exercise its march-in rights. They argue that the uncertainty that the government could step in at-will to regulate pricing will have a chilling effect on collaborative research efforts between academia and industry.

Those who sought to undo the rule suggested that not asserting price controls has led to unreasonable pricing regimes where U.S. consumers pay inordinately higher prices than those outside the U.S. For example, the prostate cancer drug Xtandi® is sold in the U.S. at a cost of $129,000, while the licensee Astellas provides the same drug to Sweden and Canada at a cost of $39,000 and $30,000, respectively.

The new rules will curtail the use of the march-in rights based on pricing alone. New strategies to address the issue of exorbitant drug pricing will require a fresh approach. Stay tuned for further relevant updates.

©1994-2023 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.National Law Review, Volume XI, Number 167

About this Author

Marc T. Morley Associate Mintz Patent Prosecution & Strategic Counseling Patent Prosecution Patent Portfolio Strategy Patent Opinions IP Due Diligence Licensing & Technology Transactions Trademark & Copyright

Marc works with clients to develop and implement effective intellectual property strategies and is recognized as one of San Diego’s top IP attorneys. In addition to obtaining and managing patent portfolios, he handles licensing and other IP-related transactions as well as the requisite due diligence. 

Marc provides strategic patent and trademark counseling, manages and prosecutes complex IP portfolios, and advises and counsels diverse clients ranging from early stage to established technology focused companies, research institutions, and venture...

Victor Behar, PhD Intellectual Property Attorney Mintz

Victor is an intellectual property attorney and registered patent attorney with a PhD in organic chemistry. He focuses his practice primarily on patent prosecution and patent portfolio management. He has extensive transactional experience assisting in the preparation of patent validity and freedom to operate opinions. He also has Hatch-Waxman litigation experience as well as experience in products liability litigation. Victor works with clients across a variety of industries, including biotechnology, diagnostics, pharmaceuticals, chemical nanotechnology, and oil &...