“The implementation of the Executive Order raises concerns about whether research institutions and domestic and international licensees and collaborators can effectively work together to manage the increased compliance burden.”
In recent months, two U.S. government executive initiatives have reshaped the landscape concerning intellectual property and the domestic production of products resulting from federally funded research. These initiatives are poised to bring substantial changes to the dynamics of academic-industry collaborations as inventions are brought to market.
- Executive Order on Federal Research and Development in Support of Domestic Manufacturing and United States Jobs: This Executive Order mandates that technologies and products stemming from U.S government-funded research must whenever possible, be manufactured within the United states. This directive, issued in July, will fundamentally alter the way research institutions and industry partners operate.
- NIST Compliance Reporting Changes: The National Institute of Standards and Technology (NIST), which oversees compliance through iEdison, has introduced significant utilization reporting changes. Effective from October 1, all government-funded research projects require annual updates on the manufacturing locations of resulting products. This adds an administrative layer to Bayh-Dole compliance, which has always favored U.S. manufacturing but now necessitates specific data from universities and research centers for all licensees.
The New World of Utilization Reporting
Under the more stringent U.S. manufacturing mandate, the licensing of federally funded technologies will necessitate a profound transformation in Bayh-Dole compliance practices. Under the new reporting requirements, research institutions must provide detailed information such as licensee names, names of manufacturers, the number of units sold, and gross annual revenue. In current compliance operations, this data is not typically kept on hand by academic institutions and will require a deep dive into how licensees are taking technologies to market. Is it realistic to expect that fiscally-challenged universities will be able to track down where and how products are manufactured by their licensees? In addition, this information must be updated on an annual basis and will likely to change year-to-year as new products are introduced. This shift will challenge technology transfer offices to allocate resources effectively to meet these demands, with greater focus on compliance.
Impact on Academia – Industry Relationships
The impact will be most pronounced on industry partners, given the emphasis on U.S. manufacturing. Ambiguities in the definition of “substantially manufactured in the U.S.” may create challenges for both the licensee as well as the institution engaged in the research and commercialization. As tech transfer offices struggle to answer the new utilization reporting requirements, key questions arise, such as whether large companies that acquire startups will share data for reporting purposes or if private companies will be reluctant to disclose revenue and sales figures.
International Collaboration Under the New Executive Order
The relationship between U.S research institutions and international collaborators may change. The requirement for U.S. manufacturing could strain relationships, potentially affecting foreign entities interested in licensing U.S. technologies. Tracking products in international markets may also become more complex. Moreover, international collaboration/sponsorship of research in U.S. universities, such as the collaboration between Yale University and Jubilant Biosys, among many others, may see reduced participation if offshore manufacturing is restricted.
Practical Concerns About the Domestic Manufacturing Mandate
Ensuring the commercialization of federally funded inventions by United States manufacturers -while maintaining intellectual property rights – may run into headwinds now that the government has put some teeth behind compliance. Many industries will face challenges in overhauling their production processes. Will an industry such as pharma, that is under pressure to bring treatments to market rapidly and currently has limited U.S. manufacturing involvement, be able to meet the challenge? As of August 2019, 72% of the manufacturing facilities making APIs (Active Pharmaceutical Ingredients) to supply the U.S. market were overseas, with that trend increasing year-to-year. Waivers to the U.S. manufacturing requirement are granted but is the implementation practical? Currently, it can take years for a waiver to be considered and the volume of requests can be expected to increase exponentially in this new compliance landscape.
A Looming Question
The implementation of the Executive Order raises concerns about whether research institutions and domestic and international licensees and collaborators can effectively work together to manage the increased compliance burden. There is a looming question of whether these changes will stimulate or stifle the innovation pipeline, with far-reaching implications for the future of research and development in the United States. It is clear that to navigate this evolving landscape will require careful consideration and adaptation by all stakeholders involved.