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A frequently repeated concern is that the bill’s language is ambiguous, requiring contractors to act within “a reasonable period of time” or “appropriate cases” that might allow the state to dedicate IP rights to the public domain.
“It could be an invitation to litigation,” said John Wetherell, a partner in Pillsbury Winthrop Shaw Pittman’s San Diego office.
Patent attorney James Pooley, a partner in Pooley & Oliver, praised Mullin for “getting one agency in charge of all this because if you leave things the way they are, you’re leaving everything on the table.”
Pooley was part of a legislatively created IP task force that in a January report recommended many of the proposals found in Mullin’s Assembly Bill 2721.
The bill, however, includes two significant differences: State agencies could grant exclusive licenses only to organizations that agree to provide any developed therapies to uninsured patients and also to the state at a reduced rate. Also, the state would be entitled to a proportional share of any money earned on a product developed with taxpayer-funded research.
Pooley and others worry the royalty requirements could have a chilling effect on companies.
“Unless the state is willing to finance the rest of the process that occurs on the way to getting to a product that sells � it’s hard to justify the insistence in every case of a direct payback,” he said. “We thought the state should focus on the indirect paybacks: taxes, jobs, the increased attraction of the state’s universities. These are all legitimate state benefits. You get that by seeding research and development.”
Mullin countered that the state would only be taking a share of royalties that in many cases are already paid to research universities. And, he added, the state may actually attract more businesses if it has a single, uniform IP policy.
“The UCs already have a royalty stream and what we’re saying is that royalty stream should include the state,” he said. “This is not a new thing.”
University leaders have yet to take an official position on the proposal, and the bill’s backers say the IP office would not try to take over any school’s existing tech-transfer operations.
But Pillsbury Winthrop’s Wetherell questioned whether the bill’s provisions might lead research universities to hike their royalty requirements to offset any state take.
“I could envision a situation where the royalty rates get too high and a company says no, I’m sorry, I can’t do that,” he said.
Mullin’s proposal is also vague on what happens when researchers spend both state and federal money. Federal IP law doesn’t require grant recipients or licensees to pay back the government. Also, federal regulators have never used their “march-in” rights to seize IP from an inactive contractor or to address a public health issue. Would a more liberal California be less hesitant?
“That is a last resort and my sense is that it [would be] rarely if ever used,” Mullin said.
The assemblyman said he’s still editing his bill to answer questions about co-mingling state and federal funds and other issues.
