Complexities of Complexities of Designing a Research Designing a Research ExemptionExemption

Arti K. RaiArti K. Rai

Professor, Duke Law Professor, Duke Law SchoolSchool

Research exemption: Research exemption: Stage 1 (e.g., Stage 1 (e.g., Eisenberg 1989)Eisenberg 1989) Non-commercial research use by Non-commercial research use by

those who are not “ordinary those who are not “ordinary users” is exempt users” is exempt

When research becomes When research becomes commercial, no longer exemptcommercial, no longer exempt

At point that research becomes At point that research becomes commercial, have to seek license commercial, have to seek license (discretionary or compulsory)(discretionary or compulsory)

Problems Problems

Have to draw line between what is Have to draw line between what is commercial, what is non-commercialcommercial, what is non-commercial

Hard to determine who is “ordinary Hard to determine who is “ordinary user”user”

Could undermine private incentives Could undermine private incentives for developing research tools (e.g. for developing research tools (e.g. Dupont Oncomouse)Dupont Oncomouse)

Dreyfuss Response to Dreyfuss Response to Line-DrawingLine-Drawing Anyone can invoke research Anyone can invoke research

exemption so long as they relinquish exemption so long as they relinquish all proprietary rights in results of all proprietary rights in results of researchresearch

Ex: Entity that used receptor research Ex: Entity that used receptor research tool would have no right to patent drug tool would have no right to patent drug

Would presumably publish results Would presumably publish results insteadinstead

University Publishes University Publishes Results Re: Promising Results Re: Promising DrugDrug Research tool owner gets no Research tool owner gets no

compensationcompensation Worse, publication may eliminate Worse, publication may eliminate

ability to patent drugability to patent drug If drug can not be patented, who will If drug can not be patented, who will

take it through FDA-mandated take it through FDA-mandated approval process?approval process?

Dreyfuss suggests “buying back” Dreyfuss suggests “buying back” patent right (complex)patent right (complex)

Research Exemption: Research Exemption: Stage 2 (Mueller)Stage 2 (Mueller) Compulsory license for some Compulsory license for some

research toolsresearch tools If tool readily available at If tool readily available at

“standard” price, then not subject “standard” price, then not subject to compulsory licenseto compulsory license

But what if “standard” price is But what if “standard” price is very high?very high?

Madey v. Duke Madey v. Duke

Makes clear that there is no Makes clear that there is no exemption for non-profit universities exemption for non-profit universities

Suggests that even “experimenting Suggests that even “experimenting on” patented invention might be on” patented invention might be infringement infringement

Latter assertion hard to square with Latter assertion hard to square with idea that patents require disclosureidea that patents require disclosure

““Minimalist” Proposals Minimalist” Proposals Post-MadeyPost-Madey

“ “Experimenting on” must be Experimenting on” must be exempted (AIPLA)exempted (AIPLA)

Government assumes liability for Government assumes liability for suits brought against federally suits brought against federally funded researchers (National funded researchers (National Academies)Academies)

Norms and low damages are likely Norms and low damages are likely to limit suits??to limit suits??

Other proposals post-Other proposals post-Madey (Strandburg, Madey (Strandburg, 2004)2004) ““Experimenting on” is exemptExperimenting on” is exempt For “experimenting with,” For “experimenting with,”

compulsory licensing after limited compulsory licensing after limited period of “property rule” regimeperiod of “property rule” regime

Difficulties with Difficulties with Compulsory LicensingCompulsory Licensing Can government actors make Can government actors make

valuation decisions?valuation decisions? But perhaps parties can bargain But perhaps parties can bargain

in the shadow of possible in the shadow of possible government action?government action?

Royalty-free research Royalty-free research exemption for exemption for federally funded federally funded researchresearch For such research, incentives to For such research, incentives to

invent are not a concerninvent are not a concern Proposal has some congruence Proposal has some congruence

with existing norms: universities with existing norms: universities reserve the right to make reserve the right to make research uses for themselves research uses for themselves (sometimes others) when they (sometimes others) when they give commercial licensesgive commercial licenses

Counter-argumentsCounter-arguments

B-D sees secure patents, exclusive B-D sees secure patents, exclusive licensing as crucial for development by licensing as crucial for development by private sectorprivate sector

Research exemption may undermine Research exemption may undermine development motivation of exclusive development motivation of exclusive licenseeslicensees

But B-D rationale does not apply to all But B-D rationale does not apply to all research tools, e.g. widely enabling tools research tools, e.g. widely enabling tools that can be the basis for downstream that can be the basis for downstream IPRs IPRs

Possible Structure of Possible Structure of ExemptionExemption NIH has power to determine that NIH has power to determine that

particular publicly funded research particular publicly funded research will be subject to royalty-free will be subject to royalty-free research exemption for “non-research exemption for “non-commercial” researchcommercial” research

Still hard to draw boundary between Still hard to draw boundary between commercial, non-commercial but commercial, non-commercial but need for accuracy is not as greatneed for accuracy is not as great

DifficultiesDifficulties

Limited in scopeLimited in scope Will NIH be able to determine Will NIH be able to determine ex anteex ante

which projects should be subject to which projects should be subject to research exemption provision?research exemption provision?

Will NIH become subject to political Will NIH become subject to political pressure, lobbying if it is given pressure, lobbying if it is given additional discretion? additional discretion?

Will Will anyany statutory change be subject to statutory change be subject to rent-seeking?rent-seeking?

ConclusionConclusion

Difficult to design statutory research Difficult to design statutory research exemptionexemption

One of reasons it was better to have One of reasons it was better to have case-by-case approach/ambiguity of case-by-case approach/ambiguity of common lawcommon law

Post Post MadeyMadey, common law not an option, common law not an option Limiting research exemption to publicly Limiting research exemption to publicly

funded research may be usefulfunded research may be useful