• TABLE OF CONTENTS
HIDE
 Front Cover
 Title Page
 Division of agriculture committee...
 Preface
 Table of Contents
 Introduction
 Legal framework for scientific...
 Guidelines for the development...
 Effects of developments in biotechnology...
 Legal challenge to the deliberate...
 National biological impact assessment...
 The cooperative extension service...
 Support obtained by scientists...
 Additional committee activitie...
 Summary
 Appendix A: Policy statement governing...
 Appendix B: Regulations and protocol...






Group Title: Progress report III
Title: Emerging biotechnologies in agriculture, issues and policies
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Permanent Link: http://ufdc.ufl.edu/UF00056210/00001
 Material Information
Title: Emerging biotechnologies in agriculture, issues and policies
Abbreviated Title: Emerg. biotechnol. agric.
Physical Description: v. : ; 28 cm.
Language: English
Creator: National Association of State Universities and Land-Grant Colleges -- Committee on Biotechnology
Publisher: Division of Agriculture, Committee on Biotechnology, National Association of State Universities and Land-Grant Colleges
Place of Publication: Washington D.C.
Publication Date: 1982-
Frequency: annual
regular
 Subjects
Subject: Agricultural biotechnology -- Law and legislation -- Periodicals -- United States   ( lcsh )
Agricultural biotechnology -- Biotechnology -- United States   ( lcsh )
Agricultural biotechnology -- Periodicals   ( nal )
 Notes
Dates or Sequential Designation: <1> (Nov. 1982)-15 (1996).
Numbering Peculiarities: Vols. for Nov. 1982-<Nov. 1986> called also Progress report.
Funding: Electronic resources created as part of a prototype UF Institutional Repository and Faculty Papers project by the University of Florida.
 Record Information
Bibliographic ID: UF00056210
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: aleph - 000883030
oclc - 14918369
notis - AEJ1015
lccn - 88652017
issn - 0896-0305
 Related Items
Succeeded by: Report of the committee on biotechnology emerging issues and policies

Table of Contents
    Front Cover
        Front Cover
    Title Page
        Title Page
    Division of agriculture committee on biotechnology
        Page i
        Page ii
    Preface
        Page iii
        Page iv
    Table of Contents
        Page v
        Page vi
        Page vii
    Introduction
        Page 1
        Page 2
        Page 3
        Page 4
    Legal framework for scientific inquiry at public universities
        Page 5
        Introduction
            Page 5
        Public purpose doctrine
            Page 6
            Page 7
        Academic freedom
            Page 8
            Page 9
        Conflict of interest
            Page 10
        Protection of intellectural property
            Page 11
            Patents and certificates of plant variety protection
                Page 12
                Page 13
                Page 14
                Page 15
                Page 16
                Page 17
            Trade secrets
                Page 18
                Page 19
            Copyrights
                Page 20
                Page 21
                Page 22
                Page 23
                Page 24
                Page 25
                Page 26
            Record-keeping
                Page 27
                Page 28
            Corroborate notebook entries
                Page 29
            Keep a separate notebook for each project
                Page 29
            Keep all research notebooks in a secure location
                Page 29
        Financing
            Page 29
            Introduction
                Page 29
            Tax considerations
                Page 30
                Page 31
                Page 32
            Research and development limited partnerships
                Page 33
                Page 34
        Liability
            Page 35
            Page 36
        Summary and conclusion
            Page 37
            Page 38
            Page 39
            Page 40
            Page 41
            Page 42
            Page 43
            Page 44
            Page 45
            Page 46
            Page 47
            Page 48
            Page 49
    Guidelines for the development of a university/industry research contract
        Page 50
        Page 51
        Page 52
        Page 53
        Page 54
        Page 55
        Page 56
        Page 57
        Page 58
        Page 59
        Page 60
        Page 61
        Page 62
        Page 63
        Page 64
        Page 65
    Effects of developments in biotechnology on society
        Page 66
        Page 67
        Page 68
        Page 69
    Legal challenge to the deliberate release of genetically engineered organisms, foundation on economic trends, et al. v. Margaret Heckler, et al.
        Page 70
        Page 71
        Page 72
        Page 73
        Page 74
        Page 75
    National biological impact assessment program
        Page 76
        Page 77
        Page 78
        Page 79
        Page 80
        Page 81
        Page 82
        Page 83
        Page 84
        Page 85
        Page 86
        Page 87
        Page 88
        Page 89
    The cooperative extension service and biotechnology for food and agriculture
        Page 90
        Page 91
        Page 92
    Support obtained by scientists of the State Agricultureal Experiment Stations from the National Science Foundation and National Institutes of Health during 1982
        Page 93
        Page 94
        Page 95
        Page 96
    Additional committee activities
        Page 97
        Page 98
        Page 99
    Summary
        Page 100
        Page 101
        Page 102
    Appendix A: Policy statement governing release and introduction of plant material
        Page 103
        Page 104
        Page 105
        Page 106
        Page 107
        Page 108
    Appendix B: Regulations and protocol for introduction and release of parasites, predators, weed feeders and other beneficial species for biological control
        Page 109
        Page 110
Full Text







EMERGING BIOTECHNOLOGIES IN AGRICULTURE: ISSUES AND POLICIES


Progress Report III












November 1984














Division of Agriculture
Committee on Biotechnology
National Association of State Universities
and Land-Grant Colleges









DIVISION OF AGRICULTURE
COMMITTEE ON BIOTECHNOLOGY


Dr. Frank B. Armstrong
Department of Biocheim-istry
North Carolina State University
Raleigh, NC 27650

919/737-2581


Dr. Durward F. Bateman
Associate Dean and Director of the
North Carolina Agricultural
Experiment Station
North Carolina State University
Raleigh, NC 27650

919/737-2718


Dr. Bill R. Baumgardt
Associate Dean and Director of the
Indiana Agricultural Experiment
Station
Purdue University
West Lafayette, IN 47907

317/494-8360


Dr. Charles B. Browning
Dean and Director of the Oklahoma
Agricultural Experiment Station
139 Agriculture Hall
Oklahoma State University
Stillwater, OK 74074


Dr. Neville P. Clarke
Director of the Texas Agricultural
Experiment Station
Texas A & M University
College Station, TX 77843

409/845-8484

Dr. Neil E. Harl
Charles F. Curtiss Distinguished
Professor in Agriculture
Professor of Economics
Department of Economics
Iowa State University
Ames, IA 50011

515/294-2210

Dr. Charles E. Hess
Dean of the College of Agriculture
and Environmental Sciences and
Associate Director of California
Agricultural Experiment Station
228 Mrak Hall
University of California
Davis, CA 95616

916/752-1605

Dr. Theodore L. Hullar
Executive Vice Chancellor
University of California Riverside
Riverside, CA 92521

714/787-5034


405/624-5398


Dr. Lee A. Bulla, Jr.
Dean
College of Agriculture
University of Wyoming
Laramie, WY 82071

307/766-4133


Dr. Richard J. Sauer
Deputy Vice President and Director
of the Minnesota Agricultural
Experiment Station
220 Coffey Hall
University of Minnesota
St. Paul, MN 55108

612/373-0734









DIVISION OF AGRICULTURE
COMMITTEE ON BIOTECHNOLOGY


Dr. Samuel H. Smith
Dean of the College of Agriculture,
Director of the Agricultural
Experiment Station and Director
of Cooperative Extension Serivce
The Pennsylvania State University
University Park, PA 10302

814/865-2541

Dr. Leo M. Walsh
Dean of the College of Agriculture
and Life Sciences
University of Wisconsin
Madison, WI 53706

608/262-4930


Dr. James S. Wershow
Professor of Agricultural Law
Food and Resource Economics
1130 McCarty Hall
University of Florida
Gainesville, FL 32611

904/392-5131


Dr. F. Aloysius Wood, Chairman
Dean for Research and Associate
Director of the Florida
Agricultural Experiment Station
University of Florida
Gainesville, FL 32611


904/392-1784


SUBCOMMITTEES


Land-Grant Institutions
Charles F. Hess Chairman
Durward F. Bateman
Samuel H. Smith

Education amd Manpower
Charles B. Browning Chairman
Frank B. Armstrong
Richard J. Sauer
Leo M. Walsh

National Biological Impact
Assessment Program
Samuel H. Smith Chairman
Lee A. Bulla, Jr.
Charles B. Browning
Richard J. Sauer
James S. Wershow


Funding & University/Industry
Relationships
Neville P. Clarke Chairman
Neil E. Harl
Theodore L. Hullar
James S. Wershow

National Program Leadership and
Development
Theodore L. Hullar Chairman
Bill R. Baumgardt
Lee A. Bulla, Jr.

Social/Ethical Issues
Lee A. Bulla, Jr. Chairman
Frank B. Armstrong
James S. Wershow


This Committee gratefully acknowledges the assistance of Dr. John F. Fulkerson,
Principal Scientist, Cooperative State Research Service, Washington, D.C. 20250.









PREFACE



The Division of Agriculture Committee on Biotechnology was appointed by
the chairman of the Division of Agriculture of the National Association of
State Universities and Land-Grant Colleges in April 1982. The Committee was
charged to advise the Division on the following:

1. Policy matters including legislation that would impact on the ability
of Division members to develop strong programs in biotechnological research
and related education activities.

2. Any special problems that might emanate from industry providing
support for biotechnological research in agriculture in land-grant institu-
tions.
3. Budgeting matters that should be addressed by the Division's Policy
and Budget Committees.

4. Other related matters that should be brought to the attention of
Division members.

Committee membership includes individuals with varying degrees of admin-
istrative responsibility for agricultural research and education programs in
land-grant institutions and attorneys versed in agricultural laws and relevant
tax and patent laws and codes.

The overall activities of the Committee have been divided into six areas:

1. Land-grant institution structure and agricultural and biotechnologi-
cal research program capability.

2. Education and manpower needs in biotechnological research and educa-
tion.
3. University/Industry relationships.

4. National biotechnological research program development, coordination
and evaluation in the state agricultural experiment station system.
5. Social and ethical issues related to application of the new biologi-
cal research techniques to agriculture.

6. Environmental impact of the release of genetically engineered organ-
isms into natural and agro-ecosystems.
Subcommittees have been established in each of the above areas and the
division will be provided with a report annually and with interim reports as
significant committee efforts are completed. This report represents a state-
ment of progress since november of 1983. The data in this report are provided
as background information for the development of policies and the settling of
issues related to the development of biotechnological research and education
programs. The Committee has not attempted to develop a series of policy









statements or a specific set of guidelines in the various problem areas simply
because of the infrastructural differences between and among institutions. It
is our hope and intent that a discussion of the basic issues involved in a
given problem will provide institutions with background information necessary
to the formulation of sound policies at the institutional level.
Finally, this report represents the third annual progress report of the
Committee and we would appreciate receiving your overall reaction to the
report with emphasis on suggestions of additional issues that we might
address.








TABLE OF CONTENTS


Page


1. Introduction


2. Legal Framework for Scientific Inquiry at Public Universities

I. Introduction
II. Public Purpose Doctrine
III. Academic Freedom
IV. Conflict of Interest
V. Protection of Intellectual Property
A. Patents and Certificates of Plant Variety Protection
1. Introduction
2. Utility Patents
3. Design Patents
4. Plant Patents
5. Certificates of Plant Variety Protection
6. Persons Entitled to Receive Patents
7. Loss of Patent Rights
8. Mechanics and Procedures
9. Examination and Prosecution
B. Trade Secrets
C. Copyrights
1. Introduction
2. Subject Matter
3. Ownership
4. Exclusive Rights and Copyrights
5. Notice, Deposit and Registration
6. Infringement
7. Limitations on Exclusive Rights
8. Duration and Renewal
D. Record-Keeping
VI. Financing

A. Introduction
B. Tax Considerations
1. Tax Treatment of Transfers and Patents
2. Tax Deduction for Research and Experiment
Expenditures
3. Tax Credit for Increase in Research and
Experimental Expenses
4. Tax Deduction for Contributions of Scientific
Equipment
C. Research and Development Limited Partnerships
VII. Liability
A. Introduction
B. Tort Law
C. Negligence
D. Strict Liability
E. Government Immunity
VIII. Summary and Conclusion










3. Guidelines for the Development of a University/Industry
Research Contract

I. Introduction
II. Memorandum of Agreement
III. General University Purpose
IV. General Purpose of the Sponsor
V. Scope of the Research Project
VI. Duties of the University
VII. Duties of the Sponsor
VIII. Publications, Copyrights, and Trade Secrets
IX. Press Releases
X. Patent Rights
XI. Project Assets
XII. Mutual Cooperation and Modification of the Agreemen
XIII. Termination Rights
XIV. Arbitration
XV. Exclusivity of Funding
XVI. Assignment
XVII. Insurance and Liability


XVIII.
XIX.
XX.
XXI.
XXII.
XXIII.


t


Notices
Integration, Severability, Headings, and Contract Terms
Governing Laws
Definitions
Research Agreement
Funding Arrangements


4. Effects of Developments in Biotechnology on Society

I. Introduction
II. Effects within the Price or Market System
III. Environmental Effects
IV. Social Effects

5. Legal Challenge to the Deliberate Release of Genetically
Engineered Organisms, Foundation on Economic Trends,
et al. v. Margaret Heckler, et al.

6. National Biological Impact Assessment Program


I. Introduction
II. Concepts in
III. Assessment o1
IV. Proposal for
Program


Biological Change
f Biological Change
a National Biological Impact


Assessment


Level 1 Laboratory Research
Level 2 Experimental Field Releases
Level 3 Commercial Release of a Biotechnological
Research Project
The National Biological Impact Assessment Board
Responsibilities of the Principal Investigator
Legal Overview


Page


V.
VI.
VII.








Page

VIII. Questions and Issues Yet to be Resolved or Addressed 89

7. The Cooperative Extension Service and Biotechnology for
Food and Agriculture 90

8. Support Obtained by Scientists of the State Agricultural
Experiment Stations from the National Science Foundation and
National Institutes of Health During 1982 93

I. Introduction 93
II. Procedure 93
III. Results and Discussion 93
IV. Summary 94
9. Additional Committee Activities 97

I. A National Program for Basic Research in
Biotechnology for Agriculture and Food Current
Status 97
II. Proposed Analysis of Instrumentation Needs in
Biotechnology for the State Agricultural Experiment
Stations System 97
III. Industry Survey of Biotechnology Research Activities
and Potential Manpower Needs 98
IV. Re-survey of SAES 99
V. AAAS Symposium 99
VI. Governor's Conference on Agricultural Innovation 99

10. Summary 100

11. Appendices 103

A. Policy Statement Governing Release and Introduction
of Plant Material 103
B. Regulations and Protocol for Introduction and Release of
Parasites, Predators, Weed Feeders and Other Beneficial
Species for Biological Control 109








CHAPTER 1


INTRODUCTION

Biotechnology, the use of living organisms or their components in indus-
trial processes,1 is not new to agriculture. Biotechnologies in the form of
improved plants and animals have been the center piece of agriculture produc-
tion for at least 80 years and in a rudimentary way for the past several
thousand years. Plant and animal improvement was significantly enhanced by
Mendel's discovery in the mid-1800's that characteristics of plants were
transmitted from one generation to the next in an orderly fashion and that
entities within the individual controlled the expression of a given trait.
These entities have become known as genes. The amazing success of American
agriculture is largely a result of the application of the science of genetics
to plant and animal improvement.

The new techniques include plant cell and protoplast culture, plant
regeneration, somatic hybridization, embryo transfer, recombinant DNA ap-
proaches, including gene identification, characterization, splicing, replica-
tion, regulation and transfer. Thus, "biotechnology" refers to the improved
or modified organism, microbe, plant or animal, and "new research techniques"
or "technology" refers to contemporary "tools" available to scientists for the
purpose of biotechnology development. For purposes of this report, "biotech-
nological research" describes research utilizing these new research
techniques.

These new research capabilities have been available for a number of years
and significant progress has been made. For example, in excess of forty
species of plants have been regenerated from protoplasts, that is, a single
protoplast taken from the tissues of the parent plant has been manipulated in
culture to the extent that it eventually differentiates into a plant similar
to the parent from which the protoplast was taken. Somatic hybrids have been
developed between approximately thirty species and at least twelve genera.
For example tomato and potato have been crossed using protoplast fusion or the
somatic hybridization process. Somatic hybridization makes it possible to
cross plants that are reproductively isolated (incompatible). This provides
tremendous opportunities for bringing new combinations of genes together.
Embryo rescue has been used in species where embryos tend to abort before they
become mature or before the seed germinates. In such instances it is possible
to remove the embryo from the developing seed and culture it in the laboratory
to the extent that it eventually develops into a mature plant. It is one
method for example that has been utilized in citrus to obtain hybrids which
otherwise abort and are not available from genetic crosses.

In the area of molecular genetics three significant discoveries have
resulted from the application of genetic engineering techniques to agricul-
ture. The gene or set of genes which controls ice nucleation in the ice
nucleating bacteria has been removed to the extent that when the genetically
engineered bacteria are present on the surface of a plant leaf they do not
change the temperature at which the leaf freezes. This discovery has applica-
tion across a wide variety of crops in terms of minimizing the impact of frost
and cold injury.

One of the most significant discoveries to date in the area of genetic







engineering of plants has to do with transfer of the bacterial gene which
controls degradation of the antibiotic kanamycin into petunia protoplasts
which were subsequently used to regenerate petunia plants. When tested, the
petunia plants regenerated from such protoplasts contained the gene for kana-
-mycin degradation. This represents the first transfer of a microbial gene to
a higher plant with expression of that gene in the higher plant. Using simi-
lar techniques, the higher plant gene which controls phaseolin production
(phaseolin is a seed protein in bean) has been transferred from bean to sun-
flower and has been expressed in sunflower plant tissues. This represents the
first instance of the transfer of a higher plant gene to another higher plant
with expression of that gene in the new host plant.

Recent biotechnology breakthroughs have immediate and widespread applica-
tions in the animal industry. Applications which are in some stage of devel-
opment include: animal feed supplements, vaccines, hormones, growth regula-
tors, embryo manipulation, pregnancy diagnosis, pest control, and improved
ruminal fermentation. In the area of reproductive physiology, scientists are
working to improve reproductive, growth, and lactational efficiency by identi-
fying key limiting proteins. Once identified, these molecules may be produced
in quantity via recombinant techniques to supply to animals exogenously or to
use in assays to identify important physiological events such as the onset of
pregnancy. Examples of proteins being studied include bovine growth hormones,
bovine placental lactogens, and bovine and ovine trophoblastins. The poten-
tial benefits of using such molecules is illustrated by recent trials using
exogenous bovine growth hormone in lactating cattle. Milk production was
increased an average of 20%.

Monoclonal antibodies and related research systems are being used to
develop vaccines; the foot and mouth disease vaccine represents an example of
success in this area. In addition, monoclonal antibody systems are being used
to develop early disease detection techniques; scientists have been especially
successful in the development of such methods for the diagnosis of diseases of
poultry.

Embryo transfer, embryo splitting and related techniques are being used
successfully in the overall improvement of beef cattle and dairy animal pro-
duction systems.

These examples highlight accomplishments in the application of the new
biotechnological research capabilities to agriculture. These new research
capabilities have significantly increased our capability to improve plants and
animals and if we continue to apply then diligently, they will make it
possible for us to maintain our technological edge relative to the
agricultural productivity of other countries in the world. However, the
application of these new research technologies to agriculture and, in
particular the release of recombinant DNA into the environment have raised
questions, questions which we in the agricultural community must be sensitive
to and questions which we should attempt to address.

Application of the new research technologies to agriculture will require
the efforts of scientists trained in microbiology, physiology and biochemistry
who understand gene structure, function, regulation, and transfer. It will
require that these scientists collaborate with plant and animal geneticists,
plant pathologists, entomologists, agronomists, horticulturists, foresters and







breeders in the identification of agriculturally important genes and in
developing an understanding of the function and expression of such genes.
Finally, potential new varieties will have to be tested in the field just as
in traditional breeding programs.

Maximum success in the application of the new research technologies to
the enhancement of agricultural productivity will require an integration of
the basic sciences (molecular biology, biochemistry, microbiology, biophysics)
with the disciplines of traditional agriculture science (entomology,
nematology, plant pathology, weed science, soil science, forestry, agronomy,
horticulture, animal science, and aquaculture). Integration of the basic
sciences with these disciplines in the application of new research
technologies to agriculture will require different kinds and degrees of
program coordination depending upon the hierarchical structure of the academic
institution. By their very nature and structure, the land-grant universities
provide an ideal setting for the application of advances in biotechnological
research to agriculture.

This report builds on past committee activities which have been
summarized in reports submitted to the Division of Agriculture in November of
1982 and November of 1983. Highlights of this report include:

A. A chapter on the Legal Framework for Scientific Inquiry at Public
Universities. The goal of this chapter is to provide in some detail a
description of the legalistic environment within which scientists find
themselves in today's high technology and related research efforts. In
general, we have attempted to sensitize scientists and administrators to
various components of this legalistic environment and provide them with a
basis for interacting more effectively with elements of the private sector.

B. A chapter is devoted to a set of Guidelines for the Development of a
Research Contract between a university and a private industry. This contract
was published in Progress Report II, 1983, in a preliminary form. It has
since been reviewed and revised as a result of the reviews provided by a
number of institutions across the country. It is important to realize that
this information is provided as a set of guidelines and that the application
of these guidelines at a given institution will depend largely on the
infrastructure and nature of that institution.

C. A chapter is devoted to a statement of Social and Ethical Issues that
we in agricultural research and education should be sensitive to and that,
within limits, we should assume responsibility for determining in advance
potential social and ethical impacts of research and education programs in
biotechnology.

D. A chapter is devoted to a chronology of the Lawsuit-Civil Action
83-2714, which was initiated in September of 1983. This action grew out of a
request on the part of the University of California, Berkeley to test ice
nucleating bacteria in a field location. The request for approval to conduct
this research in the field was submitted to the National Institutes of Health
Recombinant DNA Advisory Committee and was subsequently challenged by
individuals in the private sector. The chronology includes what we consider
to be the highlights of that action.







E. A chapter has been devoted to a proposal for the development of a
National Biological Impact Assessment Program. This proposal was stimulated,
at least in part, by the notion that we should accept the responsibility for
assessing the environmental impact of the release of recombinant DNA molecules
into the environment. Further, the traditional agriculture community should
take the initiative in establishing protocols that would provide for the
assessment of such impacts. The proposed National Biological Impact
Assessment Program recognizes that agriculture has been assessing the impact
of the release of genetically altered organisms into the environment for the
last 75 years or so. As planned, the Program would make maximum use of
existing structures at both the local and national level.

The balance of the report contains a brief statement on the role of
extension in a biotechnological research and education program now and in the
future; describes a survey procedure that has been developed to determine the
instrumentation needs of research and education programs in the area of
biotechnology; describes a survey process whereby the committee plans to
determine the nature of industry programs in this area and in particular their
current and future manpower needs; lists the results of a survey of the SAES
to determine the level of support provided by grants obtained from the
National Science Foundation and the National Institutes of Health; and a
statement on the current status of the National Program for Basic Research in
Biotechnology for Food and Agriculture which was proposed and described in
some detail in our 1983 report.

Objectives:

1. To assess the nature and magnitude of the biotechnological research
program in the SAES and ARS.

2. To assess manpower needs in this area of science in the land-grant
colleges and state universities, and U. S. Department of Agriculture
(USDA) and the private sector.

3. To determine the need for additional educational programs in this and
related areas of science.

4. To examine university/industry relationships with emphasis on consulting,
contractual, partnership and patent, and licensing arrangements.

5. To develop legislative proposals that will provide additional incentives
for industrial investment in biotechnological research in public
institutions and in particular, as applied to agriculture.

6. To examine university/federal government agency relationships including
an evaluation of regional and federal research program coordination by
Cooperative State Research Service (CSRS) and the potential for
coordination and development of a regional and national land-grant
institution based biotechnological research program in agriculture.

7. To determine the need for research and education programs arising from
biological and socioeconomic externalities emerging from new research
technology applications and development.
1Genetic Technology, A New Frontier (Office of Technology Assessment,)
WestView Press, Boulder, Colorado, 19821, 331 pages.








CHAPTER 2


LEGAL FRAMEWORK FOR SCIENTIFIC INQUIRY AT PUBLIC UNIVERSITIES


I. Introduction

This document is designed to familiarize university faculty and
administration with the issues and problems involved in conducting and funding
scientific inquiry at public institutions. While relationships with industry
are becoming an increasingly popular method of funding university research,
topics discussed herein are also applicable to traditionally funded research.
Universities should maintain patent and copyright policies, even in regard to
research funded solely from government sources. Legal issues may arise in
many different contexts. Academic freedom influences research regardless of
the source of funding. The public purpose doctrine must enter into all
decisions regarding the direction or subject matter of public university
research. Although legal issues may be more likely to arise in complex
university/industry relationships, traditional university research is not
immune from possible legal action.

Where close university/industry ties have been established, the
relationships have resulted from the desire of industrial concerns for
university innovation, on the one hand, and the need of the universities for
funding on the other. For industry the time necessary for transforming
university research into commercially useful products must be short enough to
warrant investment in basic research. This marriage of public and private
interests has made it imperative for university faculty to become aware of the
countervailing policies and interests between the university community and
industry in order to avoid potential problems and tensions.

When a private company makes an investment, it expects to realize a
benefit in proportion to that investment. An expenditure of funds is a
business risk, and the greater the investment, the more substantial is the
expectation of return. In contrast the university community does not operate
strictly on a cost/benefit basis. Many ethical and moral concerns, as well as
long term academic considerations, are considered in the conduct of the public
university system. These concerns often override the opportunity for
privately sponsored research arrangements. Ethics and policy will also vary
from one institution to another. Although public universities must serve
primarily the general interests of society, individual state laws and
regulations must be studied prior to negotiating industry ties. Many forces
influence the development of university/industry cooperation, and each
situation involves careful consideration of the value standards of the parties
involved.

The direction and conduct of inquiry at a public university is guided by
the policy objectives of the particular university. Generally, public
universities are established to serve the populace through free discovery and
open dissemination of information. Although specific details of this broad
policy differ from system to system, the public purpose doctrine, concepts of
academic freedom, and conflict of interest rules shape the policies which
influence directions of research. State universities, as institutions
supported by public funds, must carry out their objectives in line with the








CHAPTER 2


LEGAL FRAMEWORK FOR SCIENTIFIC INQUIRY AT PUBLIC UNIVERSITIES


I. Introduction

This document is designed to familiarize university faculty and
administration with the issues and problems involved in conducting and funding
scientific inquiry at public institutions. While relationships with industry
are becoming an increasingly popular method of funding university research,
topics discussed herein are also applicable to traditionally funded research.
Universities should maintain patent and copyright policies, even in regard to
research funded solely from government sources. Legal issues may arise in
many different contexts. Academic freedom influences research regardless of
the source of funding. The public purpose doctrine must enter into all
decisions regarding the direction or subject matter of public university
research. Although legal issues may be more likely to arise in complex
university/industry relationships, traditional university research is not
immune from possible legal action.

Where close university/industry ties have been established, the
relationships have resulted from the desire of industrial concerns for
university innovation, on the one hand, and the need of the universities for
funding on the other. For industry the time necessary for transforming
university research into commercially useful products must be short enough to
warrant investment in basic research. This marriage of public and private
interests has made it imperative for university faculty to become aware of the
countervailing policies and interests between the university community and
industry in order to avoid potential problems and tensions.

When a private company makes an investment, it expects to realize a
benefit in proportion to that investment. An expenditure of funds is a
business risk, and the greater the investment, the more substantial is the
expectation of return. In contrast the university community does not operate
strictly on a cost/benefit basis. Many ethical and moral concerns, as well as
long term academic considerations, are considered in the conduct of the public
university system. These concerns often override the opportunity for
privately sponsored research arrangements. Ethics and policy will also vary
from one institution to another. Although public universities must serve
primarily the general interests of society, individual state laws and
regulations must be studied prior to negotiating industry ties. Many forces
influence the development of university/industry cooperation, and each
situation involves careful consideration of the value standards of the parties
involved.

The direction and conduct of inquiry at a public university is guided by
the policy objectives of the particular university. Generally, public
universities are established to serve the populace through free discovery and
open dissemination of information. Although specific details of this broad
policy differ from system to system, the public purpose doctrine, concepts of
academic freedom, and conflict of interest rules shape the policies which
influence directions of research. State universities, as institutions
supported by public funds, must carry out their objectives in line with the








public purpose doctrine, i.e., in the interest of the public welfare.
Academic freedom helps shape the policy of the university by promoting
openness of discovery and freedom to communicate. Rules against conflicts of
interest guide public university policy by discouraging unwarranted or unfair
private influence on university research objectives and fostering trust and
confidence in university professors as public servants. Private contributions
to university research must be managed in accordance with the ideals of open
and free inquiry.

The ongoing debates over the ownership of intellectual property--e. g.,
patents, copyrights, and trade secrets--provides strong incentive to learn the
basic legal issues involved. Do patents belong exclusively to the inventor or
to the entity that provided the money for the inventor's work? Are patent
rights to be shared among various parties? To what extent may each of the
parties exploit those rights, and what control may the other parties retain?
The answers to these questions generally can be resolved through contract
agreements. Without specific, signed agreements complex legal disputes can
arise. There is a multitude of views concerning the exploitation of
intellectual property, who should retain ownership of discoveries, and whether
and how long information should remain confidential.

Attention to the legal aspects of research arrangements is becoming
increasingly important to the university community. Professors at public
institutions must account for their official actions to an informed and
curious citizenry. The work of university researchers has been brought into
the public eye by tremendous advances in technology. These advances have been
prominent in many areas, but hold unusual potential in biotechnology and in
the genetic sciences, because of their application in alleviating immediate
human needs and problems. The prospects of new technologies have also led to
innovative schemes to fund research, and close ties with private industry have
resulted from the need for monetary support in the face limited federal
government aid. The potential for significant advances in science and
technology, coupled with new relationships between the private sector and
public universities, have focused concern on legal issues which previously
remained in the background.

II. The Public Purpose Doctrine

A major guide for the conduct of government and the expenditure of public
funds is the public purpose doctrine. The influence of the public purpose
doctrine upon public university research may appear to be attenuated because
of the general freedom of university professors in conducting research.
However, the public purpose doctrine is applicable to the use of research
moneys. The public purpose doctrine must be considered a significant factor
in any research proposal at a public research institution.

The public purpose doctrine exists as a basic limitation on the use of
governmental funds. The essence of the doctrine is that the actions of
governing bodies should be carried out for the benefit of the general public.
At the heart of the public purpose doctrine is the states' duty to act on
behalf of the general welfare of the people.1 Because the public purpose
doctrine is based on the concept of the general welfare, there is no single
definition that applies to all cases. The notion of general welfare changes
continually with the particular needs and pressures of the times.2 The
parameters of the public purpose doctrine are not defined clearly, and every







decision of public purpose should be examined in light of the facts of each
situation.4

Public purpose encompasses the goal for which governmental action is
performed; the legislature then chooses the method by which that goal is
accomplished.5 The discretion of the legislature in choosing that method is
extremely broad, and an act of the legislature will be invalidated by a court
only with a clear demonstration that the public interest is not being served.6
Challenges based on the public purpose doctrine usually revolve around state
constitutional provisions that restrict the giving or lending of a state's
credit7and that prohibit the taking of private land except for a public
purpose and with full compensation.8 The aim of the constitutional and
statutory provisions that restrict the use of public funds is to prevent
taxpayers from becoming responsible for debts and obligations of private
commercial enterprises.P

The public purpose doctrine originated from a common practice by
municipalities in the nineteenth century of appropriating funds to aid private
companies in the development of American railroads. Challenges to these
expenditures generally failed, because the courts ruled that there was
sufficient benefit to the public from the development of railroads to justify
public monetary support. Abuses of public credit by municipal governments led
to changes in attitudes of courts and the public. This change caused the
promulgation of state constitutional amendments to limit these activities.

Application of the public purpose doctrine to public universities differs
from state to state, because of the universities' differing origins. Many
state universities have been created directly by state constitutions,10whereas
others were formed by statutory enactment of legislatures." A constitution-
ally created university is a semi-autonomous part of state government, while a
statutorily established university is subject to direct control by the
legislature through a statutory scheme and allocations of money. It is
important to examine the state constitutions and statutes when scrutinizing
the acts of a particular university. Still, the public purpose doctrine is
similar in each case, and all state university research projects must be
devoted to subjects which further the public welfare.

Traditionally, research at state universities has been funded either from
various federal government sources or from appropriations of state legis-
latures. Individual researchers have possessed a large degree of freedom to
choose and direct research projects, as long as the general purposes of
appropriations legislation have been met. The only immediate accountability
of researchers in the state university setting has been directed to
administrative superiors and peer groups within the particular research areas.
With the advent of shorter periods of time required to bring new research
technologies out of the laboratory and into the commercial world, private
industry has become increasingly interested in the developments of the
university laboratory. A significant amount of private money supports
research in public universities. These developments have led to questions
over who now controls the direction and disposition of research in public
universities. Increased involvement of private entities has exposed many
research projects to scrutiny under the public purpose doctrine.








The concept of public purpose is quite easy to state: public funds are to
-be utilized only for the benefit of the general public. However, when this
idea is applied to particular situations, the dividing line between public
benefit and private benefit becomes very hazy. Private individuals or
associations always benefit from a public expenditure or improvement, and this
reality does not necessarily detract from the public nature of the government
action, where there is substantial benefit to the public.12 The proscription
inherent in the public purpose doctrine is against rising public money or
credit for the primary benefit of private parties. Again, the words
describing the doctrine are easy to state, but the meaning and application of
those words are difficult to define and describe.

Heightened involvement of the industrial sector in university research
programs has led to a variety of funding relationships, some simple and others
extremely intricate. They range from elementary consulting agreements between
university professors and private companies to detailed and lengthy
cooperative research arrangements which sometimes involve multiple
institutions and firms. Questions of public purpose arise concerning not only
the relationships of professors with private companies, but also the
disposition of rights to intellectual property, the utilization of university
facilities, and the maintenance of secrecy for certain information. It is far
easier to conjure up potential conflicts relating to the public purpose
doctrine than it is to formulate solutions. The answers also depend upon
specific provisions of state constitutions and statutes, as well as upon
judicial interpretation. The ideal of public purpose is not hard to define,
but opinions of the application and definition of relevent terms--e.g.,
"significant public benefit," "incidental private benefit," "public
character," "primarily public nature," etc.--are subject to myriad
interpretations.

III. Academic Freedom and Scientific Inquiry

Public university professors enjoy academic freedom, which is the freedom
to choose research topics and publish research results. However, there are
certain legal and ethical limitations and responsibilities which accompany the
exercise of academic freedom. There are not only many views of the exact
scope and definition of academic freedom, but the concept of academic freedom
changes with perceptions of ethics and morality throughout time. The
components of academic freedom are embodied in the free speech ideals of the
First Amendment to the United States Constitution. The First Amendment
freedoms of open inquiry and publication foster academic progress and the
goals of a democratic nation.2 Inherent in academic freedom is unrestricted
dissent and expression of conflicting points of view, which also promote
progress. Academic freedom helps maintain the character and strength of the
Nation by facilitating the quest for new knowledge and truth.3 In its pure
form, academic freedom knows no bounds, but it is necessarily limited by
public policy and changing mores.

Colleges and universities represent a major vehicle for the acquisition
of new knowledge and its communication to society.4 Without the freedom to
explore the unknown, to exchange ideas, and to criticize differing thoughts,
the academic community cannot perform its essential function as a conduit of
knowledge for society. Research at public institutions is tied closely to the
general welfare and goals of the governing bodies. While academic freedom in








any setting must give way to the power of the state to protect the general
health, safety, and welfare of the people, academic freedom in a public
university is also shaped by notions of the public purpose doctrine and the
power of the purse. Public institutions must carry out their research and
teaching for the benefit of the public. The government may direct research or
teaching efforts through the allocation and control of finances. Academic
freedom is always delimited directly or indirectly by principles of ethics and
policy.

The policies that limit academic freedom apply to the actions of faculty
members within the scope of their employment. For example, the state
legislature may set policy by appropriating funds only for particular areas of
research. Private funding agencies also may restrict areas of inquiry by
agreement with the institution. Likewise, the general mission of a research
institution may prescribe boundaries for the scope of inquiry of the research
staff. Conditions of employment of a faculty member often describe the area
of research associated with the specific position. Appointments in a State
Agricultural Experiment Station may carry specific research responsibilities.
Within the general mission of the research component of the university--as
limited by the conditions of employment of the faculty member and by the
explicit expectations of funding agencies--faculty members are insured freedom
of inquiry in selecting areas of research, in conducting project activities,
in publishing results, and in communicating by other means.

The United States Supreme Court has recognized academic freedom as an
important value in First Amendment jurisprudence.5 However, the breadth of
academic freedom is not certain. Academic freedom has been involved in the
protection of the right of political expression,6 but there is no clear legal
mandate for a constitutionally guaranteed freedom of scientific inquiry.
Ideas of serious social importance and controversial expressions are generally
protected and encouraged in our society.7 Along with the expression of ideas,
the concomitant right to gather information is clearly protected by the First
Amendment. 8 It would follow that the research necessary for the publication
and expression of scientific thought would be protected as well. Even though
free expression and information-gathering are guaranteed by the First
Amendment, these rights must yield to important state interests.

State or federal governments may legitimately limit scientific inquiry
and experimentation, even if it is clearly protected by the First Amendment.
The police power--the power to protect the health, safety, and welfare of the
populace--often overrides First Amendment rights. The clearest examples of
police power intrusion on scientific inquiry would be the protection of human
or animal subjects in experiments and of laboratory workers. Adequate
precautions and safety measures can be required before any experimentation is
performed. The police power can also be invoked to protect the morals of the
public. This could be a most serious constraint upon research, because of the
subjectivity of the decision to be made by the governing body. When the
perception of danger to the health, safety, or welfare of the public outweighs
the right of discovery or expression, academic freedom can be restricted, and
certain lines of inquiry could be halted.

The state interests which justify the curbing of scientific inquiry must
be directed at legitimate public concerns, not specifically at the inquiry
itself. In other words, the stifling of scientific inquiry is not a







legitimate state interest, but the safety of laboratory subjects, the working
conditions of laboratories, and the health of citizens are legitimate state
concerns that may justify constraining scientific research. The interest in
favor of full freedom for research is strongest: (1) to the extent the
research is essential to the formulation of new ideas or theories; (2) to the
extent the inquiry is essential in teaching, learning, and communication; and
(3) to the extent the study is fundamental or basic, providing the state with
the opportunity to protect against dangers that are perceived at a later time.9
Government interests in limiting or controlling research are most convincing
where there are established public safety or health concerns with the
consequences of certain research work.

Academic freedom in its broadest sense encompasses unrestricted
discretion in the choice and performance of research and scientific
expression. To the extent legitimate state concerns are not infringed, the
communicating of ideas is protected by the First Amendment. Logically, any
gathering of information or research necessary for communicating ideas is also
part of First Amendment rights and privileges. Academic freedom can be
limited by public policy, the public purpose doctrine, the power of the purse,
and the police power. The limitations of free expression are not only legal
but are also moral and ethical in their concerns. Academic freedom knows no
permanent boundaries, as its parameters change within an organic society.

IV. Conflict of Interest

The law regarding conflict of interest is rooted in the age old notion
that one should not serve two masters at one time. Conflicts of interest
evolve in a variety of contexts, e.g., securities dealing, attorney/client
relationships, and ordinary employment situations, and the basic idea is the
same. A conflict of interest exists where the regard for one duty leads to
the disregard for other responsibilities.1 Implicit in an employment contract
is faithfulness to the interests of the employer. Conflict of interest in the
public setting refers to a clash between the public welfare and the private
interests of the individual involved.2 Laws and policies forbidding conflicts
of interest and promoting disclosure of potential conflicts in public
employment are aimed at: (1) upholding the public's right to know the
relevant investment, management, and contract interests of government
officials; (2) deterring corruption in government; (3) creating public
confidence in government; and (4) detecting and prosecuting violations.

Conflict of interest in the public employment situation, as pursued by
federal conflict of interest statutes,3 is aimed at preventing potential,
rather than actual, wrongdoing or loss.4 When applied to a university,
potentials for conflicts of interest arise where professors act as corporate
consultants or officers, where professors own stock or other equity in
corporations, and where corporate funds finance research projects. At public
universities, research properly may be undertaken only for a public purpose.
The purpose of a public university is generally recognized as the pursuit of
basic knowledge and its free and open dissemination. When corporate interests
influence research or limit publication of laboratory findings, potential
conflict of interest arises. The interests of the public and the university
must be paramount when scientists choose research topics and proceed with
research projects.







State universities exist to protect and promote free inquiry, advancement
of knowledge, and open exchange of ideas. The maintenance of such an
environment depends upon public trust, as does the proper conduct of public
institutions in general. University faculties should recognize their public
duty and maintain their commitment to the general mission of the university.5

While both university-based research and industry-based research
ultimately may serve the general welfare of society, their methods and short-
term goals differ.6 Much university research is guided by an interest in
fundamental knowledge which has many potential applications. Industry
research is directed toward applications of knowledge to the marketplace and
the production of profits. A reasonable expectation for return on investment
or other material reward must accompany a research project in order for
private industry to pursue it. Industry's drive for the production of
monetary returns often imposes secrecy with reference to ideas or inventions.
It is here that the conflict with university ideals is most intense. Secrecy
is discordant with public university aims. Immediate profit is not viewed by
public universities as a dominant criterion in pursuing research.

Where there is adequate disclosure of interests, potential conflict of
interest situations that develop are more likely to be compatible with the
public university setting. Disclosure allows for a proper review of the
potential for conflict and promotes confidence that is necessary for all
public servants. Where consulting or other industry relationships influence
university research to a greater extent than permitted by traditional
university goals and ideals, these methods of cooperation should be closely
examined and reevaluated. The public must be assured that, in the conduct of
research, university interests are protected and responsibilities are met.
Professors might be required to choose between finding alternate sources of
funds for their projects and severing or limiting certain ties with
corporations. A professor might take a leave of absence when faced with an
unacceptable conflict.7 The university researcher may be forced to choose
between a tenured faculty position and a private industry post if the conflict
is especially pronounced.8 When industry ties discourage open inquiry and
free communication of knowledge, a conflict of interest may occur. If the
conflict is so great that university policies and goals no longer dominate
decisions concerning research projects, those university/industry
relationships must be altered.

V. Protection of Intellectual Property

Intellectual property, the tangible embodiment of ideas or innovation, is
the stock-in-trade of a university scientist. A university/industry
cooperative effort can compromise scientists' efforts, because industry looks
upon intellectual property as an avenue for profits. A strong influence in
the advancement of a university professor's career is the ability to publish
meaningful research results. On the other hand, the ability to keep
innovation secret provides a private firm with the opportunity to maintain a
competitive advantage and produce additional profit. These countervailing
interests--publication and secrecy--can be reconciled by the utilization of
the patent system, since research results are published and freely available,
with limited exclusive rights to the use of the innovation provided to the
patent owner. The knowledge is disseminated by the publication, and the
company can still gain a competitive advantage through ownership of the








exclusive rights. The patent system, therefore, can be utilized as an
instrumentality to foster mutually beneficial relationships between industry
and academia. While the patent system does offer a balancing of the
publication and secrecy issues, conflicts over the appropriate degree of
control may still arise.

A. Patents and Certificates of Plant Variety Protection

1. Introduction

The United States Constitution grants Congress the power to make laws "To
promote the progress of science and the useful arts, by securing for limited
times to authors and inventors the exclusive right to their respective
writings and discoveries." 1 Congress responded to this Constitutional
authorization with the enactment of the patent laws.2 Before the promulgation
of patent laws, the only method for inventors to protect ideas and discoveries
from commercial exploitation by others was through secrecy. The patent laws
grant qualified inventors the exclusive right to make, use, and sell their
inventions3in return for the public disclosure of the formulae that led to the
inventions. This scheme permits inventors to receive appropriate remuneration
for inventions while allowing others to learn from and build upon the
knowledge that has been revealed. The United States patent system provides
the Nation with a storehouse of knowledge upon which progress in the arts and
sciences can be advanced.

The utilization of the patent system is extremely important because of
the tremendous advances in technology, the increasing numbers of patentable
discoveries, and the commercial value of patents. Major new technological
advances have been accomplished in the field of recombinant DNA. The decision
of the United States Supreme Court in Diamond v. Chakrabarty,4 which
authorized the use of patents for manmade living organisms, has spurred much
activity in patent applications. Industry is keenly aware of the importance
of obtaining patents in order to reap profit, and industrial firms have
established strict procedures for preserving their patents and any pertinent
information that may lead to a patent. Patents serve a different purpose in
the state university environment, and procedures to safeguard patent rights
have not been scrupulously followed by the academic community. The importance
of preserving patentable discoveries and obtaining patents is becoming more
critical to land-grant colleges and state universities as more financial
support is obtained from private sponsors.

In order to preserve inventions or discoveries for patent protection it
is helpful to be aware of the requirements for a patent application and the
circumstances under which patent protection might be denied. A good
record-keeping procedure helps insure patentability of discoveries which
emanate from research projects. Researchers who are aware of the requirements
of a patent application and the process of filing for a patent are more likely
to produce a sound record for patent applications. This awareness should lead
to a greater understanding for the necessity of an adequate and complete
record-keeping system. This information is presented as pertinent background
material and should be utilized in the context of existing institutional
rules, regulations, and protocols.







Patentable subject matter is described in the Patent Code as "any new and
useful process, machine, manufacture or composition of matter, or any new and
useful improvement thereof."5 All "utility" patents must fall into one of
these categories of patentable subject matter. Separate provisions of the
Patent Code cover patents for designs8 and patents for plants.7 Design
patents are granted for new, original, or ornamental designs of articles of
manufacture. Plant patents are issued for new varieties of asexually
reproduced plants. New varieites of sexually reproduced plants are afforded
protection similar to patents by the United States Department of Agriculture
through certificates of plant variety protection.8 The exact requirements for
the issuance of a patent (or certificate of plant variety protection) depend
upon the particular type of patent that is being sought.

2. Utility Patents

Patentable subject matter includes both processes (methods or means of
producing a certain result) and products (machines, manufactures, and
compositions of matter). The United States Supreme Court has stated that a
discovery is patentable as long as it is the result of human intervention,
i.e., as long as it is manmade.' This includes living organisms.

After it is determined that the invention constitutes patentable subject
matter, the invention must demonstrate utility, novelty, and nonobviousness.
The standard for the demonstration of utility (or usefulness) is nominal. An
invention is useful if it can be used beneficially for its intended purpose.
The invention must not be harmful or frivolous.

The requirement that an invention be novel, or new, is included in the
Patent Code to insure that articles already in use by the public will remain
in the public domain free from any exclusive rights to their use. An
invention is novel unless it was known or used by others before application
for a patent or was made public more than one year prior to the date of the
application.10 An invention is considered to have been known or used by others
when all elements of the invention are found in the prior art. In order to
defeat the novelty requirement in a patent application, a prior invention must
be a complete invention which has been reduced to practice. If a process or
product is in the public domain prior to the applicant's invention, the
invention is "anticipated" by the prior art and does not meet the novelty
test. To grant a patent on a discovery which is in the public domain--to give
someone a monopoly on its manufacture, use, and sale--would defeat the
purposes of the patent system.

Nonobviousness is a finer degree of novelty. A patent application must
demonstrate that the subject matter sought to be patented is so different from
the prior art that it would not have been obvious to a person having ordinary
skill in the art to which it pertains at the time the invention was made.1
Patent monopolies are granted only to those who in fact advance the state of
the art. To receive a patent, an invention must provide a new solution or
idea which is beyond the knowledge of the ordinary technician who maintains a
full understanding of the relevant prior art.







3. Design Patents


Design patents are granted to protect new, original, or ornamental
designs of articles of manufacture. The intent is to protect the appearance
of useful objects. The purpose for including design patents in the Patent
Code is to encourage ornamentation and beautification in the manufactured arts
in order to increase the saleability of articles and satisfy the aesthetic
sense of the public. If the characteristics of a design have a useful
function, a utility patent should be sought.

4. Plant Patents

The requirements for plant patents differ from those for utility patents.
Only new varieties of plants which are asexually reproduced, i.e., propagated
by grafting, budding, cutting, layering, cloning, etc., are subjects for
patenting.12 In place of utility, a plant must demonstrate distinctness13 in
order to receive patent protection. The application for a plant patent must
also evidence novelty and nonobviousness. A plant is distinct when,
considering the aggregate of its characteristics, it differs from all other
varieties of plants. The difference might refer to suitability to a
particular environment or special milling, grinding, or other qualities. A
person who breeds a plant variety which has been asexually reproduced, and
which is distinct, novel, and nonobvious may be granted a patent for such
variety.

5. Certificates of Plant Variety Protection

Protection for new varieties of sexually reproduced plants is provided by
the United States Department of Agriculture. The Department of Agriculture
issues certificates of plant variety protection for sexually reproduced plants
which are distinct, uniform, and stable."1 A certificate of plant variety
protection affords similar protection to a patent in that its owner may
exclude others from producing, using, and selling the certified plant. A
certificate of plant variety protection lasts for 18 years.

A sexually reproduced plant demonstrates distinctness when one of its
aggregate of characteristics displays an advantage or difference over all
existing varieties. A new variety is distinct when it clearly differs by one
or more identifiable, morphological, physiological, or other characteristics
from all other varieties of plants in the public domain.

Uniformity and stability are shown through the experimental results of
production of the new variety over three generations. To be uniform, the new
variety must show variations that are describable, predictable, and
commercially acceptable. A new variety satisfies the stability test when it
remains unchanged with regard to its essential and distinct characteristics
when sexually reproduced.

6. Persons Entitled to Receive Patents

Only the original inventor is entitled to receive a patent for an
invention.15 To qualify as an original inventor, one must conceive the new
idea which forms the basis of the invention. The status as original inventor
is not lost by adopting suggestions made by another during the course of








developing an invention. The threshold question is whether the invention or
discovery is the product of the inventor's own ingenuity and skill.
When an original idea is developed by more than one inventor
independently, only the one who developed the idea first is entitled to the
patent. The time of formulation of the idea (referred to as conception) is
controlling, as long as the inventor is reasonably diligent in reducing the
invention to practice.16 Conception of the invention is the mental formulation
of the invention in every detail, while reduction to practice refers to actual
physical construction and testing of the invention that fulfills the
contemplated utility. Therefore, an original inventor who is the first to
conceive a patentable idea is entitled to a patent on the resulting invention
even though another original inventor may reduce it to practice first. The
requirement is that the first to conceive the idea exercise reasonable
diligence in reducing the invention to practice'7 These rules differ for
patents originating outside the United States.
If individuals act jointly, there may be more than one first and original
inventor. In such a case, no single inventor may apply for a patent alone;
all joint inventors must apply together. Joint invention is the product of
collaboration of the inventive endeavors of two or more persons working toward
the same goal. It is not necessary that the entire inventive concept occur at
once or that the joint inventors physically work together; the process may
occur step-by-step. One is not considered a joint inventor who merely carries
out instructions of an inventor, who makes suggestions to an inventor, or who
contributes to minor features of an invention. "Joint inventorship" suggests
united efforts of more than one individual in the conception of the main idea
in the creation of an invention or discovery.

7. Loss of Patent Rights

Despite completion of the requirements for proper subject matter and
original inventorship, the right to receive a patent may be lost because of
certain statutory bars or procedural safeguards. After an invention becomes
public, the inventor must apply for a patent within one year, or the right of
a patent is lost. An invention can become public through a written article
which describes the invention.18 Any public use of an invention starts the one
year period running. However, public research and experimentation before the
invention functions satisfactorily does not start the one year period.
Experimental use is determined by the intent of the inventor and whether the
inventor parts with dominion and control of the embodiments of the invention.
An inventor makes an invention public through attempts to exploit the
invention commercially.19

Although United States law grants inventors one year following public
disclosure of an invention to file a patent application, this is generally not
the case in foreign countries. However, the filing of an application for a
United States patent usually allows the inventor one year to file for foreign
patents.
A first and original inventor may also lose the right to a patent by
abandoning, suppressing, or concealing the invention.20 Loss of the right to
receive a patent may be avoided by filing a patent application within a
reasonable time of completion of an invention. What is a reasonable time is
decided in light of the facts of each case.
15








The purpose of the statutory bars is to require inventors to employ due
diligence in asserting rights to patents. The goal of the patent system is
public disclosure, and delays in disclosure hinder the process. Thus, even
where one has developed a useful, new, and nonobvious process, machine,
manufacture, or composition of matter, the right to a patent monopoly may be
lost where proper procedures are not followed in applying for a patent.
8. Mechanics and Procedures

After an inventor has developed a patentable invention, patentability
must be proved to the Patent and Trademark Office. The application for a
patent consists of a petition, a specification of the invention with claims
for a patent, drawings where necessary, an oath, and the filing fee.T--Th-e
petition is merely a requirement of the Patent and Trademark Office that the
applicant formally request consideration of the application. The
specification is a detailed description of the invention.22 Drawings are
included, when helpful, depending upon the particular subject matter?3 The
oath that is required is simply a declaration that the applicant believes
himself or herself to be the original and first inventor.24 Filing of the
application becomes final upon receipt in the Patent and Trademark Office, and
the entire application is held in confidence until issuance of the patent.
The specification must fulfill the requirement for adequate disclosure.
Disclosure is the consideration the public receives in return for the patent
monopoly from the government. The specification must set forth and describe
(1) the invention, (2) the manner and process of making and using the
invention (the "enablement" requirement), and (3) the most efficient manner of
carrying out the invention that the inventor contemplates (the "best mode"
requirement). The Patent Code states that the invention shall be set forth
"in such full, clear, concise, and exact terms as to enable any person skilled
in the art to which it pertains...to make and use... said invention."25 The
conclusion of the specification must include one or more claims which
particularly and distinctly describe the subject matter which qualifies for a
patent.
The claim or claims define the invention for two purposes. 26 The first
is to demonstrate application of the conditions of patentability: proper
subject matter, utility, novelty, nonobviousness, freedom from statutory bars,
and adequate disclosure. The second purpose is for determining infringement.
The claims are included in order to show that the invention is a patentable
means of performing a function and not to recite the structure and how to
construct or use the invention. Those are described by the specification. The
claims are to be particular and distinct in order to facilitate the
determination of patentability and to provide appropriate warning to potential
infringers.

Drawings should be included with the application if they facilitate
either the specification or the claimss).7 The Patent and Trademark Office
has wide discretion over this requirement. Drawings might be required by the
patent examiner during the review of the application. Models or specimens may
also be required to exhibit more clearly the invention.28

The entire patent application is kept secret by the patent examiners
until the patent is issued. No information concerning the application is









revealed without the approval of the applicant.29 Once the patent is issued,
all papers relating to the case in the patent file are open to inspection by
the general public.

9. Examination and Prosecution

Once application is made to the Patent and Trademark Office, the
Application Division assigns the application to an examining group according
to subject matter. The actual examination is conducted by an individual
examiner within the particular group. The examiner studies the application to
determine compliance with the statutes and rules. The examiner searches the
prior art in the particular field in order to determine novelty and
nonobviousness. Following the study of the application and search of the
prior art, the examiner notifies the applicant of the findings and reasons for
those findings. The examiner may reject or object to any or all claims or
make further requirements to the applicant regarding the application.30
The applicant may then reply to the examiner's findings and request
reexamination. An applicant who responds within six months of the examiner's
action to each ground of objection and/or rejection is entitled to a
reexamination.31 The applicant may then amend, add, or drop claims; amend the
specification; present evidence to support the application; or abandon the
process. An interview with the examiner may be requested by the applicant to
discuss the disposition of the application.

The examiner reexamines the application after the reply is received. The
reexamination is made with reference to any additional information or material
that is provided by the applicant. Notification of acceptance or adverse
decision by the examiner is made to the applicant. The process of action and
response may continue until the examiner indicates rejection is final.
Rejection is final once a clear issue is developed between the examiner and
the applicant. Activity following final action of the Patent and Trademark
Office is limited to: (1) appeal or cancellation of rejected claims or
(2) compliance with all requirements and objections, or petition to the
Commissioner of Patents for further consideration.

Amendment of the application is permitted after filing, but the
introduction of new matter is prohibited. Departure from or addition to the
original disclosure may be made only by filing a "continuation-in-part." The
purpose of amendments is to clarify or complete information which was
disclosed or suggested in the original application.

Appeal of final rejections may be made to the Board of Appeals of the
Patent and Trademark Office.32 The Board of Appeals can affirm or reverse the
examiner's action. If the Board affirms a rejection, it is permitted to rely
on a different ground than the examiner. The jurisdiction of the Board of
Appeals of the Patent and Trademark Office is limited to adverse decisions in
rejecting claims; it has no jurisdiction to review allowed claims.
From an adverse decision of the Board of Appeals of the Patent and
Trademark Office, a dissatisfied applicant may either appeal the decision to
the United States Court of Appeals for the Federal Circuit33 or file a civil
action against the Commissioner f Patents in the Uni ted States District Court
for the District of Columbia. Appeals to the Courft-ofppeals for-tFe









Federal Circuit are limited to the evidence that has been produced before the
Patent and Trademark Office. 35 Civil action in the District Court, on the
other hand, is de novo, and evidence may be admitted which had not been
produced to the Patent and Trademark Office in the original examination of the
patent application.
After allowance of a patent application, the Patent and Trademark Office
mails the appropriate notice to the applicant. Upon payment of the issuing
fee, 36 the patent is granted, giving the owner the right to exclude all others
Trom making, using, or selling the invention throughout the United States for
17 years.

In addition, maintenance fees must be paid during the life of the patent
for United States and foreign patents in order to keep the patent in current
status. The case is withdrawn from the Patent and Trademark Office after
issuance of the patent except under limited circumstances.37

B. Trade Secrets

Trade secrets are extremely important in the commercial world. They
represent a source of competitive advantage, which in turn has the potential
for reaping profits. The concept of secrecy is contrary to the basic aims of
public universities to promote the open communication of thought and ideas.
There may be times, however, where university faculty members are required to
maintain trade secrets which have been revealed to them during the course of a
research project. Those situations are not necessarily repugnant to the
public university purpose, since further knowledge can be developed from
existing trade secrets. A basic understanding of the concepts behind trade
secret law helps foster smooth relations between universities and industry.

Every inventor enjoys the common law right to protect the value of an
invention by keeping it secret. That is, apart from the authority of any
statute or written law, a person can maintain legal protection of ideas or
innovations through secrecy. Trade secret law is enforced by the courts of
the various states, and many states have codified their common law of trade
secrets into statutes. In states with trade secret statutes, those laws
govern the use of trade secrets, while policies in states without such
statutes derive solely from court decisions.

In general, equitable principles of law protect the owners of ideas which
are embodied in trade secrets from the appropriation of those ideas by unfair
means. The determination of unfair means is made by reference to generally
accepted commercial standards. The policy behind trade secret law is twofold:
(1) to reward invention with a degree of control by the inventors and (2) to
promote the commercial morality of good faith business dealings. Trade secret
law grants a person the right to exploit ideas. Thus, there may be an
economic advantage obtained by not divulging trade secrets.

There is no universal formula to be used to determine what kind of
information can be protected by trade secret laws, although some states have
attempted to standardize the determination through the enactment of trade
secret laws. Unlike the strict criteria for obtaining patent protection, a
trade secret need only be unique and kept secret to qualify for protection.1
This includes almost any information which has the potential for gaining a









commercial advantage where reasonable efforts are made to maintain secrecy.2
The know-how or information that is the subject of a trade secret should:
(1) be used in a business, (2) provide economic value based on the fact that
others in similar businesses do not know or use the information, and (3) be
kept secret by means which are reasonable under the circumstances.3 Any
formula, pattern, design, device, or compilation of information used in a
business that allows the owner to derive potential or actual advantage over
competition may be maintained by trade secret policies.

A trade secret, as well as any royalties for its use, can exist in
perpetuity. There is no established term for trade secret protection similar
to that in patent law. On the other hand, a trade secret can be appropriated
legally without consent of the owner when it is discovered by fair means.4
Similarly, a trade secret ceases to exist when it enters the public domain.s
The independent discovery of trade secret information entitles another to
legitimate use of information which had been under the exclusive control of a
trade secret owner.6 One may legally obtain trade secret information through
the reverse engineering of a product which is manufactured by a secret
formula.7 Any publication which enables a person who is competent in the
relevant field of expertise to duplicate trade secret information destroys
trade secret protection.8 Trade secret law only limits competition by
permitting the secrecy of inventions and know-how; no rights are created in
the information itself (as in patent law) to restrict the discovery and use by
fair commercial means.

At the heart of the administration of trade secret law are commercial
morality and good faith business practices.9 Trade secret law permits members
of the business community to prohibit persons in confidential relationships
(be they employees, partners, joint ventures, or contracting parties) from
disclosing commercially valuable information. At the same time, one cannot
claim trade secret protection for information which is generally known in a
particular field. Furthermore, trade secret law does not guard against the
appropriation of information for which no reasonable efforts have been made to
keep the information secret.10 While the law provides redress for the
misappropriation of trade secrets, good business practices must be employed by
the trade secret owner in claiming protection only for proper information and
in taking adequate precautions to maintain secrecy.

Liability for the misappropriation of trade secrets is based on the
breach of a confidential relationship. After the trade secret owner shows the
existence and ownership of the trade secret, it must be proved that (1) trade
secret information was disclosed in confidence, (2) the trade secret
information was used or revealed in violation of that confidence, and
(3) injury was caused thereby. 1

A confidential relationship may arise in any number of situations,
e.g., employment, partnership, joint venture, or contract. The duty to
maintain trade secrets may be evidenced by an express or implied contract or
simply by the nature of the relationship between the parties. The nature
and degree of trust involved, as well as the extent of precautions taken to
keep the information secret, are important factors in demonstrating a duty to
maintain trade secret information, especially where there is no specific
agreement between the parties.







The injury resulting from trade secret misappropriation is shown through
lost profits. The amount can be measured by evidence of expected sales or by
the actual profits earned by the wrongdoer. Remedies for the misappropriation
of trade secrets consist of an award of damages, the imposition of
injunctions, or the rendering of an accounting. In other words, the trade
secret owner may be awarded simply an amount of money that is determined to
compensate the loss; the guilty party may be ordered to stop using the
information; or the wrongdoer may be required to account for all profits made
as a result of using the trade secret.14 Where conduct is especially
egregious, punitive damages may be available in addition to the other forms of
recovery.15 Any combination of remedies may also be granted in order to fully
redress the wrong and compensate the trade secret owner.

C. Copyrights

1. Introduction

Copyright law comes into play whenever a work is created in a tangible
form. The rights created through copyright belong to the author unless they
are assigned to another party. A copyright exists without any formal
application or registration, but certain rights are secured when the work is
registered with the Copyright Office. Unless otherwise agreed copyright
belongs to the author of a work whether or not the work arose as part of a
funded project. An author can contract away rights, and often faculty members
sign a copyright agreement with their university for this purpose. Generally,
private sponsors do not take copyrights as part of the consideration in
cooperative agreements. However, a basic understanding of copyright law is
quite useful in a profession whose mainstay is the publication of research
results.

Authors traditionally have been entitled to the exclusive use of their
writings and other creations by copyright law. United States copyright law
was most recently codified in the Copyright Act of 1976.1 The Copyright Act
is intended to promote the constitutionally expressed values of furthering
intellectual progress and free dissemination of knowledge. The goal of
copyright law is to strike a proper balance between authors' rights to control
the use of their creations and the public's right to the broadest possible
access to intellectual development.

Any rights protected by the Copyright Act of 1976 are governed
exclusively by federal law and enforced by federal courts.2 Any state laws
which provide rights equivalent to those in the federal act are preempted.3
State law may govern rights that are not contained in the federal act as well
as extraneous rights which may involve copyrights, e.g., contractual or
ownership rights.4 Those state controlled rights--such as those within breach
of contract, defamation, or deceptive trade concepts--are enforceable in the
courts of the various states. Likewise, works which are not "fixed in any
tangible medium of expression"--such as unfilmed choreography or untaped
speeches--are outside the scope of the federal act.

2. Subject Matter

The Copyright Act of 1976 applies to all original works of authorship
fixed in any tangible medium of expression. Works of authorship include








literary works (which include computer data bases and computer programs),
musical works, dramatic works, pantomime and choreographic works, pictorial,
graphic and sculptural works, motion pictures and other audio-visual works,
and sound recordings.5 Copyright law protects expression and not ideas,
processes, or discoveries.6 In other words, works of authorship are embodied
in copyright only as to the tangible form of the works, not to any utility or
innovation contained in the work.

Only original works of authorship are covered.7 Originality is evidence
of independent creation, the fruits of one's own skill, labor, and judgment.
An original work need not be novel; new ideas are not a prerequisite to
copyright protection, but the expression must be recognizable as the author's
own. 8

The Copyright Act requires that the work be fixed in a tangible medium of
expression from which it can be perceived, reproduced, or otherwise
communicated, either directly or with the aid of a machine or device.
Fixation suggests permanence and stability to permit perception, reproduction,
or communication. 10 As noted above, protection for works of authorship which
are not fixed in a tangible form may still be found in state copyright law.

The Copyright Act also protects works which consist of the collection of
preexisting works or data.11 The originality requirement of the resulting
compilation is satisfied where the selection, coordination, and arrangement
result from the author's own skill, labor, and judgement. The final product
as a whole represents an original work of authorship.12 This category of
copyrightable material is referred to as "compilations" and includes
collective works, such as periodicals, anthologies, and encyclopedia. 13
Derivative works represent another category of copyrightable works which
is based on preexisting materials. 14 Translations, musicals, arrangements,
dramatizations, fictionalizations, motion picture versions, sound recordings,
art reproductions, abridgements, and condensations are all examples of
derivative works. 15 Any recasting, transformation, or adaptation is a
derivative work. Like a compilation, a derivative work must constitute an
original work of authorship in order to be subject to copyright protection.
Unlike compilations, however, a derivative work must be based upon
copyrightable, preexisting material. (Where a work is based on preexisting,
copyrightable materials, authorization must be obtained for such use.)

3. Ownership

Copyright protection arises as soon as an original work of authorship is
created. 16 Creation occurs when the work is fixed in a tangible medium, e.g.,
when laboratory notes are written in a notebook or recorded on magnetic tape.
Generally, ownership of copyright attaches to the author.17 However, in the
case of a work prepared by an employee within the scope of his or her
employment, copyright ownership vests in the employer, unless there is an
exclusive, written agreement to the contrary.18 The author of a specially
ordered or commissioned work, i.e., an independent contractor rather than an
employee, is considered the copyright owner unless there is an express,
written agreement otherwise.19 Copyright initially vests spontaneously in the
author of a work upon creation, except where the work is made in the scope of
one's employment.







Individual contributions to newspapers, periodicals, anthologies, and the
like are each entitled to copyright protection distinct from the whole work.20
Absent an express transfer, the owner of a copyright in a collection is
presumed to have acquired only the right to use the individual contributions
as part of that collective work and any revisions.21 Copyright in a
collective work or compilation applies to the independent, original effort in
collecting, selecting, and organizing the work to produce an original work.

Works prepared by two or more people with the intent that their efforts
will merge into one inseparable and independent production become co-owners of
the copyright in that work.22 A joint work may result either from the
collaboration of two or more authors or from contributions of various authors,
as long as their separate labors are aimed at a common purpose.

Copyright protects a particular expression, not the material object in
which that expression is fixed.23 Thus, an author who sells a book, cannot
prevent the buyer from reselling the book.24 On the other hand, by selling
the book, the author does not sell the copyright. The author's authorization
is still necessary for anyone to copy the work. A specific, written
instrument is required to sell or otherwise transfer rights of copyright
ownership. 25

4. Exclusive Rights of Copyright

Ownership of copyright entitles one to control the reproduction,
adaptation, publication, performance, or display of the copyrighted materials.
While these rights have a broad scope, they are subject to complex and
detailed limitations and exceptions.

The exclusive right of reproduction includes the right to copy or record.
The owner of a copyright has the exclusive right to duplicate, transcribe,
imitate, or simulate the underlying work.26 Reproduction is the fixation of a
work in tangible form which is sufficiently stable to permit perception or
other further communication.

A copyright owner also has the exclusive right to prepare derivative
works.27 (See discussion of derivative works above.) This is the adaptation
right, which is the incorporation of a copyrighted work into another form.28
Adaptation does not require fixation, but may be accomplished without the
embodiment in a tangible form. Thus, the production of a copyrighted work as
a ballet, pantomime, or improvised performance may constitute an adaptation.

Publication, or the right to distribute, also is encompassed within a
copyright owner's exclusive rights.29 This right is limited to public
distribution, which includes selling, renting, leasing, or lending. A
copyright owner maintains no rights under the copyright act to particular
copies once ownership is transferred.

Copyright owners enjoy the exclusive right to perform30 or display31
their works publicly.32 This includes the performance or display at a place
open to the public or where a substantial number of persons other than one's
family or social guests are gathered. Public performance or display is
extended to the transmission or communication by any means, either in one
place or where people may view the work in separate places or at separate
times.33 The public display right extends to originals as well as copies of
originals.







5. Notice, Deposit, and Registration


Whenever a copyrighted work is published, it must bear notice of
copyright in order to receive protection under the Copyright Act.34 Notice
consists of: (1) the symbol c (the letter c in a circle), the word
"copyright", or the abbreviation "copr.;" (2) the year the work was first
published; and (3) the name of the copyright owner.35 The positioning of the
notice must be in such a manner and location to give reasonable notice of the
copyright claim.36 Where notice has been omitted and not corrected, a
published work enters the public domain and may be used by anyone.

Copyright in individual contributions to collective works is distinct
from that in the whole work.37 Rights in the separate contributions to a
periodical, anthology, encyclopedia, or like work rest in each individual
author, but as long as the whole work bears a proper copyright notice,
separate notice for each work is unnecessary.38 The better practice, however,
is to include separate notice of copyright on an individual contribution to a
collective work.

Omission of copyright notice does not invalidate protection under the
Copyright Act if: (1) the omission only occurred on a small number of copies;
(2) registration of copyright has been made within five years of publication,
and a reasonable effort has been made to add notice; or (3) notice was omitted
in violation of an express, written agreement that notice was a condition of
the copyright owner's authorization to publicly distribute the work.3
Innocent infringers who have been misled by the omission of copyright notice
incur no liability until they have received actual notice of copyright.40

The owner of a copyright in a work which is published in the United
States is required to deposit two complete copies of the best edition with the
Copyright Office for use by the Library of Congress."1 The deposit should be
accomplished within three months after publication.42 If the Register of
Copyrights makes a written demand for the required deposit, and the deposit is
not made within three months after the demand, the copyright owner must pay
certain fines. 43 These deposit requirements are not, however, conditions for
copyright protection.44

The registration of copyrighted materials is not mandatory under the
copyright act and is not a condition of copyright protection.45 However,
registration must be effected prior to suing for infringement, and
registration is a prerequisite to certain remedies under the act.46 Two
copies of a work published in the United States must accompany registration.47
Unpublished works and those first published abroad only need one copy.48 For
contributions to collective works, the deposit of the collective work for
registration is sufficient.49 A special provision in the Act allows a single
registration for a series of works by one author which are to be included in a
periodical within a twelve month period.50 Registration of any work is
accomplished by the deposit of the specified number of copies in the Copyright
Office together with the appropriate application and fee. 51

After the Register of Copyrights determines that the material deposited
constitutes copyrightable subject matter under the Copyright Act, the
copyright claim is registered, and a certificate is issued to the claimant.52
The registration and certificate provide a record of the copyright and the







information that was included in the application. The certificate of
registration constitutes a presumption in any judicial proceeding that the
copyright and facts stated in the certificate are true, as long as
registration is effected within five years of first publication of the work.53

No suit for copyright infringement may be instituted until registration
of the copyright has been made.s4 If registration has been refused after
proper application, an infringement action may nevertheless be pursued if
notice of suit is served on the Register of Copyrights, allowing the Register
of Copyrights to become a party to the action.55 Statutory damages and
attorneys' fees cannot be awarded: (1) for infringement of copyright in an
unpublished work before the effective date of registration;56 or (2) for
infringement of copyright after the first publication of the work and before
the effective date of registration unless registration is made within three
months after the first publication.

Registration of copyright, while not mandatory, is the prudent course of
action for all but the most trivial works of authorship. The procedure is not
complicated or overly burdensome, and registration could help to avoid
significant problems in the future. Also, registration of copyright provides
a lasting and reliable record of a publication or other work.

6. Infringement

Infringement of copyright is defined as the violation of any of the
exclusive rights of the copyright owner.58 However, the exclusive rights--the
right to reproduce, to adapt, to publish, to display, and to perform--are
subject to limitations, exceptions, and exclusions (illustrated below) that
may excuse an apparent act of infringement. The right to sue for copyright
infringement belongs to the owner of an exclusive right under a copyright.59
Any documents of transfer must be recorded in the Copyright Office,60 and the
copyright must be registered before an infringement suit may be heard in
court. 61 One must prove ownership of the copyright, copying or other
infringing act of the copyrighted work, and damages in order to prevail in a
legal action for copyright infringement.62

The importance of prompt copyright registration becomes apparent when
suing for infringement. As noted above, proper introduction into evidence of
the certificate of registration raises a presumption that the copyright is
valid, and all the information contained in it is true.63 Therefore, proof
must be brought forward by the accused infringer to rebut the inference that
the plaintiff is the copyright owner, that the work is original and
copyrightable, that the registration and deposit requirements have been
fulfilled, and that the copyright is valid. Prompt registration of copyright
is satisfied where the certificate of registration is issued before or within
five years after the first publication of the work.64 Thus, by registering a
copyright early, one element of proof in a subsequent infringement action is
already presumptively established.

Copying is proved by showing that the defendant had access to the
copyrighted material and that the alleged infringing material is substantially
similar to the copyrighted work.65 Access can be shown by proving actual
viewing, the reasonable opportunity to see or hear the copyrighted work, or
that the alleged infringing work is so similar as to preclude the conclusion
of independent creation. 66







The crucial issue in an infringement case is whether the alleged
infringing work is substantially similar. Where there has been a verbatim
copying, infringement is clear; where there is insubstantial similarity,
independent creation may be apparent. However, an infinite number of cases
falls between the two extremes. Substantial similarity is present where an
ordinary observer would recognize the copy as having been taken or
appropriated from the copyrighted work.67 In deciding substantial similarity,
the overall impression or appearance of the work is studied.68 Both the
quantity and quality of the copied material must be examined against the
totality of the copyrighted work. Where the amount of copying is substantial
in relation to the copyrighted work as a whole, a finding of infringement is
likely. Also, where the nature of the copy is material to the copyrighted
work, a conclusion of infringement is likely. Infringement exists where the
manner of expression of a copyrighted work is materially or substantially
copied.

An infringer of copyright is liable to the copyright owner for any actual
damages and for any additional profits of the infringer.69 The copyright
owner must prove damages as well as profits of the infringer that are not
taken into account by the computation of actual damages.70 The copyright owner
has the option of choosing statutory damages where the copyright was
registered before the infringement.71 In that case, the court has the
discretion to award between $250 and $10,000 to the copyright owner.72 Where
the infringement was committed willfully, the court may award up to $50,000.73
The court may reduce the award to $100 where the infringer was not aware and
had no reason to believe that his or her acts constituted copyright
infringement.74 The award of damages is designed to compensate the wronged
party and to prevent any unfair benefit to the infringer.

The court also has the discretion to award costs and attorneys' fees.75
However, as with statutory damages, costs and attorneys' fees are only
available to the copyright owner where the copyright was registered prior to
the infringement.76 The court's discretion also includes the power to grant
injunctions and authorizes the impounding and destruction77 of infringing
articles to prevent unauthorized uses of materials.78

7. Limitations on Exclusive Rights

There are many and detailed exceptions to the exclusive rights enjoyed by
copyright owners. That is, there are instances where the use of copyrighted
material is permitted without authorization from the copyright owner. The
broadest limitation on copyright is the fair use doctrine.79 Other exceptions
involve library and archival uses of copyjFghted works and certain educational
uses. 80

No prescribed formula exists to determine whether a reproduction of a
copyrighted work is a fair use. Congress contemplated that fair use would
include instances such as: quotes of experts in review or criticism for
illustration or comment; quotes of short passages in scholarly or technical
works for illustration or clarification of the author's observations; and
summaries of addresses or articles with brief quotes in news reports.B' Four
factors are to be considered to determine whether uses for purposes such as
criticism, comment, news reporting, teaching, scholarship, or research are
fair uses under the Copyright Act: (1) the purpose and character of the use,








(2) the nature of the copyrighted work, (3) the amount and substantiality of
the portion used, and (4) the effect of the use on the potential market or
value of the copyrighted work. 82There is no generally applicable definition,
and each case must be decided on its own facts.

Uses for noncommercial or nonprofit educational purposes weigh on the
side of fair use.83 This would include literary or cinematic reviews of
copyrighted works. The commercial or educational nature is t1ill but one
factor to be considered in making the fair use determination. Protected
commercial speech and other communications protected by the First Amendment to
the United States Constitution may weigh in favor of a determination of fair
use.

Certain copyrighted works tend to encourage permissible uses, and greater
latitude is given in copying such works. For example, the utility of form
books relies on their being copied; they are not generally read as literature.

The determination of the amount and substantiality of the portion used in
relation to the copyrighted work as a whole bears heavily on the fair use
decision. As the amount and/or substantiality of the portion used increases,
the likelihood of a positive fair use determination decreases. This is a
quantitative determination as well as a qualitative determination. A very
small portion of a work indeed may be substantial when compared to the subject
matter of the copyrighted work as a whole.

The effect of a use on the value of a work or its potential market
pertains directly to the damages of the copyright owner. Where the work
tends to decrease the demand for the copyrighted work or serve as a
substitute, the use looks more like infringement than fair use. 87 The effect
on the market may go a long way toward proving damages, which is the third
item necessary for an infringement claim.

The fair use doctrine is an equitable rule of reason that has been
developed by the courts. 88 The Copyright Act offers only the factors to be
considered in making the fair use determination. There is no statutory
formula that may be used to decide whether a particular use of copyrighted
work is permissible and not an infringement.

There are certain circumstances under which libraries, archives, and
their employees may make a reproduction of a copyrighted work.89 The copying
must be without any purpose of direct or indirect commercial advantage, 90 and
the copy must bear a proper copyright notice.91 Only libraries open to the
public or to persons performing research in a specialized field are eligible
for this exception.92 This exception applies only to single, isolated and
unrelated instances under certain circumstances: (1) solely for purposes of
preservation and security; 93 (2) solely for the purpose of replacement of
damaged, deteriorating, lost, or stolen works if reasonable efforts are made
to determine that an unused replacement cannot be obtained at a fair price;
and (3) on request, a copy of no more than one article or other contribution
to a collection or small part of another work may be made if the copy becomes
the property of the user, and the library has no notice that th copy would be
used other than for private study, scholarship, or research. Permissip
library or archive copying is only allowed in isolated, unrelated instances.







Instructors or pupils are exempt from the exclusive rights of display or
performance in limited instances.97 In the course of face-to-face teaching
activities in a non-profit educational institution, the display or performance
of copyrighted materials may be carried out in a classroom or similar place
devoted to instruction without infringing copyright.98 The exemption for
educational display or performance applies only to teaching situations, not to
performances or displays for the general public.99

8. Duration and Renewal

Copyright in a work created on or after January 1, 1978 (the effective
date of the Copyright Act of 1976) endures for the life of the author plus
fifty years. 100 The copyright term for a joint work lasts for the lifetime of
the last surviving author plus fifty years.101 In the case of an anonymous
work, a pseudonymous work, or a work made for hire, the copyright endures for
the shorter of seventy-five years from the date of publication or one hundred
years from creation of the work.102 The Copyright Act of 1976 also extends
copyright terms which were created under the old Copyright Act.

Under the Copyright Act of 1909, a copyright endured for twenty-eight
years, at which time the copyright owner could renew the copyright for one
more twenty-eight year period. Copyrights which are in their first term on
January 1, 1978 may still renew their copyright, but the renewal term is for
forty-seven years, making'the total term seventy-five years.103 The terms of
those copyrights which have been renewed before January 1, 1978 are
automatically extended to endure for a term of seventy-five years from the
date the copyright was originally secured. 104

D. Record-keeping

The record-keeping procedure outlined below is designed to provide an
accurate and detailed record that can be established properly in court. It
represents an ideal that, if followed, will minimize problems which may be
encountered if a controversy develops concerning patent ownership. Good
record-keeping practices are essential for securing and maintaining patent
rights. The creation and preservation of clear and accurate laboratory notes
allow a potential patent owner to avoid many problems which may arise in
obtaining and maintaining a patent. This holds true whether the patent owner
be an individual, a university, or a private corporation. The most crucial
aspects of record-keeping are showing that the notes and diagrams are those of
the inventor and that they were recorded at the time the research was
performed. The maintenance of a record-keeping system should be an integral
part of good laboratory procedures.

Whether a state university plans to pursue patent protection on its own
or to utilize the assistance of private financing, the process of securing
patent protection or other protection of rights to intellectual property is
facilitated by the maintenance of accurate and detailed research records.
Good records also prove useful for future research and publications. To the
individual researcher, the maintenance of legally sufficient notebooks may
seem unduly burdensome, but once an efficient record-keeping system is
established, the process is relatively simple to maintain. The following is
offered as a suggestion for the systematic recordation and preservation of
research information. It can be modified to fit the needs of the particular
institution.








1. Use bound notebooks.


Bound notebooks provide security for research notes, making them superior
to looseleaf or spiral bound notebooks. Each book should be titled and
numbered to aid in the security of research information. A formal system of
recording and maintaining research information provides greater assurance that
proof offered in support of a patent application will not be challenged.

2. Number each page consecutively.

In the interest of proving the elements of the research record with
certainty, pages should be numbered consecutively. If both sides of the page
are used, each side should be numbered, and this practice should continue
throughout the book.

3. Handwrite all entries in ink.

Making notebook entries in the usual script of the researcher allows the
notebook entries to be identified easily and provides a permanent record.
Hand-printed notes should only be utilized if that is the researcher's usual
method of writing. Typewritten notes may present problems of proof even
though they are complete and accurate.

4. Write on the entire page.

To avoid a challenge that the research record was developed or augmented
at a later time, the researcher should leave no room for extraneous or
additional entries for any particular day of notes. If there are any blank
spaces, line through them.

5. Date each entry on the line immediately below the last line of that entry.

This is to insure that there is no question as to which entry belongs to
which date. Do not skip any space for an idle day. Either start the next
entry immediately below the last one, or make an entry stating that no work
was done on that particular day.

6. Sign and date each page or entry.

Each investigator should sign notebook entries. It is often helpful for
support personnel to maintain separate notebooks from the researchers.

7. Affix all attachments permanently.

Attachments should be affixed permanently to notebook pages; staples and
paper clips are more vulnerable to challenge. Material that cannot be
incorporated into the notebook should be keyed or referenced clearly to an
entry. Unincorporated material might consist of computer printouts, oversized
diagrams, or models.

8. Cross out errors with a single line.

Mistaken entries should remain readable. Rather than obliterate entries
or erase, erroneous entries should be lined through and initialed. Pages
should not be torn out or defaced other than to line out errors. The goal of








maintaining a complete notebook record is to provide an accurate account of
what occurred in the laboratory.

9. Corroborate notebook entries.

It is helpful in proving a research record for a technically knowledgeable
person to read and corroborate notebook entries periodically. This person
should be one who understands the subject matter of the investigation and,
preferably, knows the investigators) in the laboratory. Below the last entry
the corroborative witness reads, it should be indicated that the material was
understood. The corroborator should then sign and date the page. The
corroborative witness should not be a co-investigator. Such witnessing should
be frequent. The witnessing is especially important immediately after a
researcher feels patentable subject matter or a patentable idea has been
conceived.

10. Keep a separate notebook for each project.

Keeping a separate set of records for each research project provides a
much clearer and more definite record, which is especially valuable when
patentable subject matter results.

11. Keep all research notebooks in a secure location.

The location of research notebooks is important for purposes of security.
Often, notebooks are kept in a central location and checked in and out by the
researchers. This procedure adds reliability to the record and minimizes the
chance of tampering or altering notebook entries after research is performed.
Keeping research notebooks in a secure location helps insure that notebooks
are used only for research purposes.

The maintenance of accurate research notebooks is important after the
research is completed for purposes of securing patent rights or other legal
protection of intellectual property. Good records become especially important
immediately after patentable inventions are recognized, and a specific
notebook entry should describe the invention in detail. It is helpful to have
such entries corroborated as soon as possible following the discovery.
Permanent and accurate research notebooks help to avoid unnecessary and costly
delays in obtaining and maintaining patent protection and in providing
reference for publication and related investigations. If the researcher sets
aside time for making notebook entries, a routine develops that provides an
appropriate record. Also, by making prior arrangements with colleagues to
serve as corroborators, the record is properly witnessed.

VI. Financing

A. Introduction

The financing of public university research takes many forms. State
appropriations are typically supplemented with funds from various sources,
both governmental and private, in order for public universities to fulfill
their missions. An array of grants and aid programs supports many phases of
university research. The National Science Foundation, the United States
Department of Agriculture, and the Environmental Protection Agency are major








maintaining a complete notebook record is to provide an accurate account of
what occurred in the laboratory.

9. Corroborate notebook entries.

It is helpful in proving a research record for a technically knowledgeable
person to read and corroborate notebook entries periodically. This person
should be one who understands the subject matter of the investigation and,
preferably, knows the investigators) in the laboratory. Below the last entry
the corroborative witness reads, it should be indicated that the material was
understood. The corroborator should then sign and date the page. The
corroborative witness should not be a co-investigator. Such witnessing should
be frequent. The witnessing is especially important immediately after a
researcher feels patentable subject matter or a patentable idea has been
conceived.

10. Keep a separate notebook for each project.

Keeping a separate set of records for each research project provides a
much clearer and more definite record, which is especially valuable when
patentable subject matter results.

11. Keep all research notebooks in a secure location.

The location of research notebooks is important for purposes of security.
Often, notebooks are kept in a central location and checked in and out by the
researchers. This procedure adds reliability to the record and minimizes the
chance of tampering or altering notebook entries after research is performed.
Keeping research notebooks in a secure location helps insure that notebooks
are used only for research purposes.

The maintenance of accurate research notebooks is important after the
research is completed for purposes of securing patent rights or other legal
protection of intellectual property. Good records become especially important
immediately after patentable inventions are recognized, and a specific
notebook entry should describe the invention in detail. It is helpful to have
such entries corroborated as soon as possible following the discovery.
Permanent and accurate research notebooks help to avoid unnecessary and costly
delays in obtaining and maintaining patent protection and in providing
reference for publication and related investigations. If the researcher sets
aside time for making notebook entries, a routine develops that provides an
appropriate record. Also, by making prior arrangements with colleagues to
serve as corroborators, the record is properly witnessed.

VI. Financing

A. Introduction

The financing of public university research takes many forms. State
appropriations are typically supplemented with funds from various sources,
both governmental and private, in order for public universities to fulfill
their missions. An array of grants and aid programs supports many phases of
university research. The National Science Foundation, the United States
Department of Agriculture, and the Environmental Protection Agency are major








maintaining a complete notebook record is to provide an accurate account of
what occurred in the laboratory.

9. Corroborate notebook entries.

It is helpful in proving a research record for a technically knowledgeable
person to read and corroborate notebook entries periodically. This person
should be one who understands the subject matter of the investigation and,
preferably, knows the investigators) in the laboratory. Below the last entry
the corroborative witness reads, it should be indicated that the material was
understood. The corroborator should then sign and date the page. The
corroborative witness should not be a co-investigator. Such witnessing should
be frequent. The witnessing is especially important immediately after a
researcher feels patentable subject matter or a patentable idea has been
conceived.

10. Keep a separate notebook for each project.

Keeping a separate set of records for each research project provides a
much clearer and more definite record, which is especially valuable when
patentable subject matter results.

11. Keep all research notebooks in a secure location.

The location of research notebooks is important for purposes of security.
Often, notebooks are kept in a central location and checked in and out by the
researchers. This procedure adds reliability to the record and minimizes the
chance of tampering or altering notebook entries after research is performed.
Keeping research notebooks in a secure location helps insure that notebooks
are used only for research purposes.

The maintenance of accurate research notebooks is important after the
research is completed for purposes of securing patent rights or other legal
protection of intellectual property. Good records become especially important
immediately after patentable inventions are recognized, and a specific
notebook entry should describe the invention in detail. It is helpful to have
such entries corroborated as soon as possible following the discovery.
Permanent and accurate research notebooks help to avoid unnecessary and costly
delays in obtaining and maintaining patent protection and in providing
reference for publication and related investigations. If the researcher sets
aside time for making notebook entries, a routine develops that provides an
appropriate record. Also, by making prior arrangements with colleagues to
serve as corroborators, the record is properly witnessed.

VI. Financing

A. Introduction

The financing of public university research takes many forms. State
appropriations are typically supplemented with funds from various sources,
both governmental and private, in order for public universities to fulfill
their missions. An array of grants and aid programs supports many phases of
university research. The National Science Foundation, the United States
Department of Agriculture, and the Environmental Protection Agency are major








maintaining a complete notebook record is to provide an accurate account of
what occurred in the laboratory.

9. Corroborate notebook entries.

It is helpful in proving a research record for a technically knowledgeable
person to read and corroborate notebook entries periodically. This person
should be one who understands the subject matter of the investigation and,
preferably, knows the investigators) in the laboratory. Below the last entry
the corroborative witness reads, it should be indicated that the material was
understood. The corroborator should then sign and date the page. The
corroborative witness should not be a co-investigator. Such witnessing should
be frequent. The witnessing is especially important immediately after a
researcher feels patentable subject matter or a patentable idea has been
conceived.

10. Keep a separate notebook for each project.

Keeping a separate set of records for each research project provides a
much clearer and more definite record, which is especially valuable when
patentable subject matter results.

11. Keep all research notebooks in a secure location.

The location of research notebooks is important for purposes of security.
Often, notebooks are kept in a central location and checked in and out by the
researchers. This procedure adds reliability to the record and minimizes the
chance of tampering or altering notebook entries after research is performed.
Keeping research notebooks in a secure location helps insure that notebooks
are used only for research purposes.

The maintenance of accurate research notebooks is important after the
research is completed for purposes of securing patent rights or other legal
protection of intellectual property. Good records become especially important
immediately after patentable inventions are recognized, and a specific
notebook entry should describe the invention in detail. It is helpful to have
such entries corroborated as soon as possible following the discovery.
Permanent and accurate research notebooks help to avoid unnecessary and costly
delays in obtaining and maintaining patent protection and in providing
reference for publication and related investigations. If the researcher sets
aside time for making notebook entries, a routine develops that provides an
appropriate record. Also, by making prior arrangements with colleagues to
serve as corroborators, the record is properly witnessed.

VI. Financing

A. Introduction

The financing of public university research takes many forms. State
appropriations are typically supplemented with funds from various sources,
both governmental and private, in order for public universities to fulfill
their missions. An array of grants and aid programs supports many phases of
university research. The National Science Foundation, the United States
Department of Agriculture, and the Environmental Protection Agency are major








maintaining a complete notebook record is to provide an accurate account of
what occurred in the laboratory.

9. Corroborate notebook entries.

It is helpful in proving a research record for a technically knowledgeable
person to read and corroborate notebook entries periodically. This person
should be one who understands the subject matter of the investigation and,
preferably, knows the investigators) in the laboratory. Below the last entry
the corroborative witness reads, it should be indicated that the material was
understood. The corroborator should then sign and date the page. The
corroborative witness should not be a co-investigator. Such witnessing should
be frequent. The witnessing is especially important immediately after a
researcher feels patentable subject matter or a patentable idea has been
conceived.

10. Keep a separate notebook for each project.

Keeping a separate set of records for each research project provides a
much clearer and more definite record, which is especially valuable when
patentable subject matter results.

11. Keep all research notebooks in a secure location.

The location of research notebooks is important for purposes of security.
Often, notebooks are kept in a central location and checked in and out by the
researchers. This procedure adds reliability to the record and minimizes the
chance of tampering or altering notebook entries after research is performed.
Keeping research notebooks in a secure location helps insure that notebooks
are used only for research purposes.

The maintenance of accurate research notebooks is important after the
research is completed for purposes of securing patent rights or other legal
protection of intellectual property. Good records become especially important
immediately after patentable inventions are recognized, and a specific
notebook entry should describe the invention in detail. It is helpful to have
such entries corroborated as soon as possible following the discovery.
Permanent and accurate research notebooks help to avoid unnecessary and costly
delays in obtaining and maintaining patent protection and in providing
reference for publication and related investigations. If the researcher sets
aside time for making notebook entries, a routine develops that provides an
appropriate record. Also, by making prior arrangements with colleagues to
serve as corroborators, the record is properly witnessed.

VI. Financing

A. Introduction

The financing of public university research takes many forms. State
appropriations are typically supplemented with funds from various sources,
both governmental and private, in order for public universities to fulfill
their missions. An array of grants and aid programs supports many phases of
university research. The National Science Foundation, the United States
Department of Agriculture, and the Environmental Protection Agency are major








agencies providing monetary support for scientific inquiry. In addition to
federal and state government support, many nonprofit foundations make funds
available for public university research. In the private sector, numerous
corporations aid university research both through grants and more involved
relationships. As a rule, the private benefactors expect consideration for
their investment either in the form of tax benefits or potential ownership of
rights to intellectual property or both. The difficulty in obtaining adequate
financial support for university research necessitates the use of novel legal
approaches for support.

Outside funding is provided for university research in a variety of forms.
The particular nature of the funding arrangement can be classified by the
degree of control the sponsor exerts over the conduct of the research. An
outright gift for research provides the greatest freedom for the recipient in
that there is no specific objective which must be obtained. A grant usually
contains stated objectives, and formal reports on the progress of the research
are generally required by the sponsor. A research contract is often employed
where the funding agency--either governmental or industrial--wishes to fund
and achieve specific, defined objectives. Outside funding also includes
fellowships and scholarships, where money is provided to support the education
of students or scholars in a particular field of research. The purpose of
this section is to highlight issues and considerations involved in some of the
more innovative forms of private financing.

Major incentives to private sponsors of university research are provided
by the Internal Revenue Code. The capital gains provisions offer the
opportunity for favorable disposition of rights to intellectual property at
considerable savings. Tax deductions and credits also provide advantages to
the industrial entity. Congress has recognized the importance of research and
experimentation in the physical and biological sciences and has provided tax
benefits to encourage private investments in scientific endeavors.

B. Tax Considerations

1. Tax Treatment of Transfers of Patents

Section 1235 of the Internal Revenue Code permits individual inventors and
certain individual investors to receive long-term capital gains tax treatment
upon the transfer of patents to others.' The general requirements for
long-term capital gains tax treatment are relaxed by section 1235 to provide
incentive to individuals to produce inventions.2 The use of section 1235 in
the university setting is limited by the usual practice of researchers
assigning their patent rights to the university. A researcher cannot receive
capital gains treatment on payments for a patent when it is transferred to the
employer. A corporate sponsor cannot utilize section 1235, because only
individuals are eligible for section 1235 treatment. Any sponsors of
university research which are partnerships (and therefore able to utilize
section 1235, since the members are taxed individually) would have difficulty
employing this favorable tax section, because an investor can only qualify by
receiving an interest in the patent directly from the creator. It is still
possible, however, to devise a scheme whereby the sponsor could acquire an
interest in patents directly from the researcher in order to utilize section
1235 of the Internal Revenue Code. This scenario would involve revision in
the patent policies of some state universities and land-grant colleges.








Those eligible to receive the benefits of section 1235 of the Internal
Revenue Code are called holders. A holder is either the individual who
created the patented article3 or an individual who has acquired an interest in
the patent before its reduction to practice. 4 The employer of the creator and
the members of the creator's family (other than a brother or sister) cannot
qualify as holders.5

As long as all substantial rights in a patent are transferred, the
transaction qualifies for long-term capital gains treatment under section 1235
of the Internal Revenue Code. "All substantial rights to a patent" means all
rights of value at the time of the transfer. 6 All substantial rights to a
patent are generally the rights to make, use, and sell the patented invention.
Other rights considered to be substantial include:

the right to make, use, and sell the patented invention in all
trades or industries;

the right to make, use, and sell the patented invention within the
entire country of issuance; and

the right to terminate the transfer agreement, 7

These rights are not exclusive, and the determination that a transfer of a
patent is of all substantial rights is made according to the circumstances of
each transfer. A transfer of an undivided interest of all substantial rights
also leads to capital gains tax treatment as long ag the same fractional share
of each and every substantial right is transferred.

Taxpayers who fail to qualify under section 1235 of the Internal Revenue
Code may be able to utilize sections 1221 and 1231 of the Code to receive
long-term capital gains tax treatment on patent transfers. As for section
1235, a taxpayer must transfer all sQbstantial rights to a patent in order to
qualify for capital gains treatment. In addition, it must be shown that the
taxpayer was not in the business of inventing or employed for the purpose of
inventing.10 For those in the business of inventing, the transfers are taxed
as ordinary income from business sales. Finally, the taxpayer must hold the
patent for more than one year before long-term capital gains tax treatment may
be claimed on the sale or exchange of the patent.

2. Tax Deduction For Research and Experiment Expenditures

Tax deductions and credits make university research attractive for private
investments. Deductions allow a taxpayer to subtract amounts from gross
income in computing taxable income; tax credits provide a reduction of a
taxpayer's actual tax bill as computed after taking deductions into account.
University/industry cooperative agreements should be negotiated with the
benefits of tax deductions and credits in mind.

Section 174 of the Internal Revenue Code allows taxpayers to deduct
expenditures for research and experimentation which are incurred in connection
with a trade or business. Deductible expenses include costs for experimental
and laboratory work, particularly costs "incident to the development of an
experimental or pilot model, a plant process, a product, a formula, an
invention, or similar property, and the improvement" of such property which








already exists.12 The costs of obtaining a patent, including attorneys' fees,
which are expended in perfecting a patent application, qualify for the section
174 deduction.13 Taxpayers may also deduct amounts paid for research and
experimentation performed by another on behalf of the taxpayer.14

Ordinary testing and inspection of materials and products of the
taxpayer's trade or business are excluded from section 174 of the Internal
Revenue Code.15 Section 174 may not be used to deduct the cost of acquiring or
improving land or depreciable property that is to be used in connection with
research and experimentation.1 The research and experimentation deduction is
likewise inapplicable to the costs of acquiring another's patent, model,
production, or process.17

The value of section 174 of the Internal Revenue Code is enhanced because
the deduction is subject to fewer limitations than ordinary business
deductions. As long as the research and experimentation for which deductions
are claimed are being performed in connection with the activity for which the
business operates, the taxpayer may deduct the expenses under section 174 of
the Internal Revenue Code.18 For university research projects a sponsor not
only may be able to deduct payments made for actual research but also payments
for research equipment or construction of research facilities as long as the
university acquires title to the property.19

3. Tax Credit for Increase in Research and Experimental Expenses

Congress included section 44F in the Internal Revenue Code in order to
induce industry to invest more in research and experimentation. Taxpayers are
allowed a 25 percent tax credit for increasing research expenses in any
taxable year. The credit is computed by taking 25 percent of the amount by
which research expenses in the taxable year exceed the average research
expenses over the past three years. Research expenses consist of wages and
payments for supplies for experimental and laboratory research.20 Research
expenses also consist of 65 percent of amounts paid by taxpayer to anyone
other than the taxpayer's employee for the performance of qualified research.21
Unlike section 174, the research credit only applies to expenses incurred "in
carrying on" the taxpayer's trade or business. This is a stricter requirement
than the "in connection with" test of section 174 of the Internal Revenue
Code.

Section 44F of the Internal Revenue Code also entitles corporations to
include in the computation of their credit 65 percent of payments made to
colleges, universities, scientific research organizations, and research
foundations for basic research.22 In order to qualify, the payments by the
corporation must be for basic research (original investigation without a
specific commercial objective) and made to a qualified organization. 23

4. Tax Deduction for Contributions of Scientific Equipment

The Economic Recovery Tax Act of 1981 created an incentive for
manufacturers of scientific equipment to contribute new equipment to
educational institutions.24 The amount allowed as a deduction is more than
that for other contributions of ordinary income property.2s To be eligible for
the deduction, the property must be donated to an institution of higher
learning6 and used by the institution for research purposes.27 This deduction










is designed to encourage manufacturers to donate state-of-the-art equipment to
the Nation's'universities.
There are several requirements for contributions of research equipment to
qualify for the deduction:

the property must be tangible personal property which would be included
in the donor's inventory or held for sale in the donor's ordinary course of
business;

the equipment must be constructed by the donor 29-- the donor must adhere
to certain qualifications of the Internal Revenue Code in order for the
equipment to be considered "constructed by the donor;"

the contribution must be made by the donor within two years after the
property is substantially completed;

substantially all of the recipient's use of the property must be for
research and experimentation; 32

the equipment must be used in the United States for research and
experimentation in the physical and biological sciences;

the college or university receiving the property must be the original
user of the property; 34

the donee must be an educational organization which normally maintains a
regular faculty and curriculum and has a regularly enrolled body of students
attendance; and35

the donor must obtain from the donee institution a written statement
representing -- (1) that substantially all of the use of the equipment will be
for research or experimentation or research training in the physical or
biological sciences and (2) that the property 3ill not be transferred in
exchange for money, other property, or services.

C. Research and Development Limited Partnerships

The research and development limited partnership has been used to finance
the development of patentable inventions and other discoveries. Such limited
partnerships typically are designed to provide capital for the research neces-
sary to develop a marketable product and to arrange manufacturing and market-
ing activities and outlets. Often, an inventor or promoter transfers rights
in an invention or discovery to a limited partnership in exchange for an
interest as a general partner. Investors contribute capital in exchange for
interests as limited partners, and the limited partnership is established to
develop, manufacture, and market the invention or discovery.

In a limited partnership, the general partners control all decision
making and management. The general partners are also completely liable for
all obligations and liabilities of the partnership. The liability of the
limited partners is limited to the amount of their individual contributions.
The role of limited partners is essentially passive; they do not participate
in the control or management of the limited partnership's business activities.









After the partnership is formed, arrangements are often made with other
organizations--e.g., private research organizations or universities--to
conduct further research, experimentation, and development to produce a
marketable product. Once the research is completed, the limited partnership
generally transfers the product or patent rights to another entity for
manufacture and marketing. Research and development limited partnerships
often carry out the research, manufacture, and marketing through contracts
with other firms.

Under the present tax structure, limited partnership is a preferred
organizational device for research and development activities. Although any
form of business organization can be utilized, investors and inventors select
the limited partnership for several reasons. The potential for tax advantages
is greater in the limited partnership than other business forms, e.g.,
corporation, trust, general partnership, sole proprietorship.

The limited partnership arrangement allows the partners, both limited and
general, to individually utilize various tax deductions and credits. A
corporation must deduct losses and appropriate expenses at the corporate
level; the shareholders may not take advantage of such benefits individually.
Corporations of less than 36 shareholders, designated Subchapter S
Corporations, may utilize tax benefits like a partnership, but the limited
number of investors restricts the amount of capital that can be raised. A
general partnership can utilize the Internal Revenue Code provisions like the
limited partnership, but the unlimited liability of each of the partners
discourages its use for research and development activities.

A significant advantage of the limited partnership (as well as general
partnerships and Subchapter S Corporations) over the corporate form of
business is that income is earned by each of the partners and taxed only to
them. In the corporation, income is taxed once as it is earned by the corpo-
ration and again as it is passed to the shareholders in the form of dividends.

Another advantage over the corporate form is that favorable capital gains
tax treatment benefits each of the partners. A corporation can utilize the
preferential capital gains tax, but distribution of corporate income as
dividends is taxed to the stockholders as ordinary income. Furthermore, since
the limited partnership is taxed not as an entity but as a group of
individuals, the partners can utilize Internal Revenue Code section 1235 to
receive capital gains treatment on patent transfers. Only individuals qualify
for section 1235 treatment.

Limited partnerships offer many practical advantages in managing research
and development. Research and development limited partnerships often deal in
high risk investments with no guarantee of success. A corporation could
establish a limited partnership in order to avoid including such a high risk
investment in its daily activities and distorting the corporate balance sheet.
Investments in a research and development limited partnership are not readily
traded, but the opportunity for tax deductions and credits as well as the
potential for a high rate of return offset this illiquidity. Large sums of
capital can be raised through the limited partnership device, while
traditional funding sources might not be available because of the higher risks
entailed. Management is efficient in the limited partnership, since it is
concentrated in an expert individual or small group acting as general partner.









Both financial and management advantages have made the limited partnership a
popular vehicle for research and development activities in recent years.
Limited partnership arrangements, unless used properly, may provoke
challenges by the Internal Revenue Service under the provisions of the Tax
Equity and Fiscal Responsibility Act of 1982, which provides penalties for
abusive tax shelters. These penalties can be either civil or criminal.

VII. Liability

A. Introduction
Liability is the broad legal term which describes the responsibility of
one party for loss or damage suffered by another person. Legal responsibility
for another's loss can arise in many different contexts. In the area of
criminal law, liability results from the breach of the standard of conduct
citizens owe to the public at large. In the realm of civil law--torts and
contracts as opposed to crimes--liability arises from the breach of a duty
owed to other individuals. Where tort law is involved, the civil duty is owed
to persons generally, either as groups or individuals. In breach of contract
actions, the duty is owed to particular individuals as parties to an
agreement. This discussion is concerned with the civil side of liability, the
standards of conduct which guide members of society in their relations and
actions with their fellow citizens.

B. Tort Law

Tort law is devoted to private wrongs related to persons or property,
except when involving a breach of contract. The main concern of this
discussion is with the unintentional or negligent torts. Intentional
torts--e.g., battery, assault, conversion, and trespass--do not belong within
this framework, as it is assumed that university research would not be aimed
at the intentional infliction of harm.

C. Negligence

Negligence is considered generally with reference to the following
elements: (1) a duty recognized by law requiring people to conform to a
standard of conduct for the protection of others against unreasonable risks,
(2) a breach of that duty, and (3) actual injury or loss that is proximately
caused by the breach. Everyone is expected to refrain from actions which
would place another person in a position of recognizable danger. The law of
negligence is aimed at preventing unreasonable risk, i.e., risk that is great
enough to lead a reasonable person to avoid it. In short, society has placed
the duty on people to act reasonably given the particular circumstances of the
situation. The "reasonableness standard" is judged on the basis of a
theoretical ordinary and prudent person. This concept is intended to provide
a uniform standard of objectivity in light of the facts of each case.
Superior knowledge, skill, and intelligence of the actor are taken into
account in examining reasonableness. In other words, an expert--e.g., a
chemist, doctor, lawyer, or engineer--is judged according to the minimum
standards of the particular profession or area of specialty involved. After
the duty is established, in order to prevail in a negligence action it must be
shown that a real injury was directly sustained by the breach of that duty.









D. Strict Liability


In many situations, a party may be held responsible for an injury or loss
to another regardless of the breach of a reasonable standard of care. This is
called strict liability, which has resulted from a social policy that
allocates risk in situations of abnormally dangerous conditions or activity.
A party generally is held strictly liable where unusual, but nevertheless
intentional, behavior leads to a danger of exposing the community to great
harm. Strict liability is applied to abnormally dangerous things or
activities--e.g., operations dealing with explosives, maintenance of hazardous
materials, or the storage of substances which, if allowed to escape, would
cause substantial harm--which cause undue danger to the community in which
they are maintained. The judgement with reference to strict liability is made
in light of the particular location and surroundings. That is, the keeping of
an elephant may be appropriate to a community in Burma, whereas it might be
unreasonably dangerous in New York City. Likewise, the operation of an
explosives plant in an uninhabited area would not be viewed with the same
scrutiny as an explosives plant located in a large metropolitan area. Social
policy has dictated that certain activities should demand a greater
responsibility for possible consequences, irrespective of the attendant care
or precautions taken.

E. Government Immunity

The law has conferred an immunity from tort liability upon governmental
entities, which is commonly known as sovereign immunity. This notion has been
derived from the divine right of kings and the theory that "the King can do no
wrong." This concept continues in varying degrees throughout American
jurisdictions. The federal government passed the Federal Tort Claims Act
which waived its inherent immunity from tort liability, and many states have
followed suit with statutes that mirror the federal law. There are broad
exemptions in which the government's consent to be sued does not apply. The
most important and broadly applicable exception provides that the government
is not liable for acts which are a discretionary function of a federal agency.
This exception is employed to maintain the separation of powers of the
governmental branches. In application the actual delineation of the exception
is not well-defined, but the policy is stated by distinguishing between
"planning or policy" level decisions and "operational" level decisions. For
the former, the government is immune from liability; for the latter, tort
immunity is waived. Thus, governmental decisions to construct or maintain
services such as fire protection, hospitals, or air traffic control are policy
decisions immune from suit, but the negligent operation of those facilities is
actionable in a court of law. The application of the distinction between
planning and operating is not definitive and, therefore, is decided according
to the facts of each case.

As a rule, a public university, as an agent of the state, can only be
sued for tort actions to the extent authorized by statute. The university is
responsible for the actions of its employees if they are carried out within
the scope of their employment unless they amount to willful or malicious
breach of the prevailing standard of care. The decisions made in choosing
research projects appear to be planning decisions, since they are made by the
university as an agent of the state legislature (or as an autonomous body of
government in the case of a university that has been created by the state










constitution). However, where the actual conduct of research causes injury,
the university would be subject to a tort action by an injured party claiming
the breach of a reasonable standard of care. Public university decisions are
judged by the same criteria as other government entities; these criteria
differ in detail according to the specific provisions of state constitutions
and statutes.

The waiver of tort immunity for government entities is in harmony with
the democratic form of government. The monarchistic doctrine that "the King
can do no wrong" does not fit a Nation which was built upon a belligerent
reaction to a strong monarchy. However, in order to preserve the
constitutional principle of separation of powers, exceptions to the waiver of
immunity are necessary. Discretionary government functions which are inherent
to the act of governing are immune from a tort suit. The distinction between
planning and operational activities may be blurred at times, but the policy
behind it is necessary for the preservation of an essential constitutional
principle, the separation of powers.

VIII. Summary and Conclusion

The advent of new technologies and innovative relationships between
private industries and public universities has attracted attention to basic
legal implications and their attendant complexities. Major advances in
biotechnology and genetic research have intensified the attention and
curiosity of the general public, as well as the industrial and academic
communities. New methods of manipulating genetic material are particularly
sensitive areas of interest to the greater public audience. These new
capacities to change inheritable characteristics also have magnified industry
involvement and interest in the biological sciences as the likelihood of
creating original proprietary information is enhanced. This heightened
interest in biotechnology has prompted industry to increase its capabilities
and to seek outside expertise in the biological sciences.

Researchers at public universities by definition are responsible to serve
the interests of the general populace. Legal concepts such as the public
purpose doctrine, academic freedom, and conflict of interest usually have been
interpreted to uphold the interests of the public. Funds emanating from
governmental sources must be spent primarily to benefit the public.
Therefore, public university research must be directed toward supporting
public ends. The public interest in free and open dissemination of
information is inherent in the notion of academic freedom. This freedom in a
particular university setting may be qualified by the general university
mission, goals of funding institutions or specific job descriptions. Conflict
of interest ethics have evolved in the public arena to prevent undue intrusion
of private interests in the activities of public employees. Awareness of
these concepts and the ultimate goal of upholding the public interest fosters
confidence in the public university community by the public and helps avoid
legal disputes and entanglements.

Since the United States Supreme Court upheld the patent on a living,
manmade bacterium in Diamond v. Chakrabarty, private industry of necessity has
strengthened its relationships with universities in order to tap a patent pool
of information. University/industry relations also have been fostered by tax
advantages for supporting research and experimentation and by original schemes









to exploit those inherent tax savings. The research and development limited
partnership and other tax shelters have been very popular strategies for the
utilization of tax benefits. Consequently, advantages, coupled with the
possibility of future profits, have spurred new industry relations with
university research. These new relationships offer promise of a better
quality of life for many people.

New technologies and innovative business relationships also pose
important questions of liability and accountability for possible adverse
effects. Who is responsible for possible harmful consequences of
experimentation where public university projects are funded privately? How is
accountability under public purpose shown where experimentation proceeds to
the creation of a viable commercial product? Does the doctrine of legal
liability operate differently where funding is limited to governmental
sources? What are the parameters and boundaries beyond which individual
researchers become liable? Even when the possibilities of harmful results are
perceived as being very remote, these chances must be recognized and explored
early in the research and development procedure.

Tremendous possibilities for the creation of beneficial products and
processes are being developed through biotechnological research. These
advances can be spurred on by an influx of private financing, especially when
government funding is limited. However, with innovation also come additional
responsibilities which must be addressed prior to any impending litigation.

The academic community must become aware of the possible legal and social
impacts of scientific innovation. Knowledge of potential areas of public
concern helps to lessen, if not avoid, serious controversy.












Footnotes


LEGAL FRAMEWORK FOR SCIENTIFIC INQUIRY AT PUBLIC UNIVERSITIES

I. Public Purpose Doctrine

1Carmichael v. Southern Coal & Coke Co., 301 U.S. 495, 514 (1937).
2Helvering v. Davis, 301 U.S. 619, 641 (1937).

3Burnett v. Greene, 122 So. 570, 577 (Fla. 1929).

4Fallbrook Irrigation District v. Bradley, 164 U.S. 112, 159-160 (1896).

5Carmichael, 301 U.S. at 514-515.
61d. at 515; Milheim v. Moffatt Tunnel Improvement District, 262 U.S. 710,
721 (1923); Green v. Frazier, 253 U.S. 233, 239 (1920); and Spencer v.
Merchant, 125 U.S. 345, 353 (1888).
7See, e.g., Fla. Const. art. VII, 10; Cal. Const. art, XV, 6.

8See, e.g., Fla. Const. art. X, 6; Cal. Const. art. I, 14.

9See State v. Miami Beach Development Agency, 392 So.2d 875, 885 (Fla.
1980); Bannon v. Port of Palm Beach district, 246 So.2d 737, 741 (Fla. 1971);
Bailey v. City of Tampa, 111So. 119, 120 (Fla. 1926).

10Horowitz, The Autonomy of the University of California Under the State
Constitution, 25 UCLA L. Rev. 23, 24, fn. 1 (1977-. California, Colorado,
Georgia, Idaho, Michigan, Minnesota, Montana, and Oklahoma are noted as states
with constitutionally created universities.

11See, e.g., Fla. Stat. ch. 240.

12See Miami Beach Redevelopment Agency, 392 So.2d at 886; State v. Board
of Control, 66 So.2d 209, 210-211 (Fla. 1953); City of Downey v. Board of
Administration, 47 Cal. App. 3d 621, 629 (2d Dist. Ct. App. 19/b);and Central
Basin Municipal Water District v. Fossette, 235 Cal. App. 2d 689, 702 (2d
Dist. Ct. App. 1965).
13See Miami Beach Redevelopment Agency, 392 So.2d at 886-887 and State v.
Town of North Miami, 59 So.2d 779, 785 (Fla. 1952).


II. Academic Freedom and Scientific Inquiry
1"Academic Freedom and Tenure, 1940 Statement of Principles and 1970
Interpretive Comments," AAUP Bulletin vol. 60, no. 2, Summer, 1974, pp.
269-272.












2See Sweezy v. New Hampshire, 354 U.S. 234, 250 (1957).
3See Keyishan v. Board of Regents, 385 U.S. 589, 603 (1967).
4"Academic Freedom and Tenure in the Quest for National Security," AAUP
Bulletin vol. 42, no. 1, Spring, 1956, pp. 54-61.
5Keyishan, 385 U.S. at 603.

6Sweezy, 354 U.S. 234. The court recognized freedom in the academic
community as essential and vital in a democracy. The case was decided on due
process grounds.

7The right of governmental restraint upon public expression is very
limited. Prior restraints are warranted only in the cases of the national
security, obscene language, and words which provoke violence. Near v.
Minnesota, 283 U.S. 697, 716-717 (1931).
8Branzburg v. Hayes, 408 U.S. 665, 681-682 (1972). See also, Lamont v.
Postmaster General, 381 U.S. 301, 308 (1965). The Bill of Rights also
protectEhose personal rights necessary to make the expression of the express
guarantees fully meaningful.
9Delgado and Millen, God, Galileo, and Government: Toward Constitutional
Protection for Scientific Inquiry, 53 Wash. L. Rev. 349, 403 (1978).


III. Conflict of Interest

1United States v. Miller, 463 F.2d 600, 602 (1st Cir. 1972).

2Gardner v. Nashville Housing Authority, 514 F.2d 38, 41 (6th Cir. 1975).

3See 18 U.S.C.208, 216, 281, 283, 284, 434.

4Glazer v. Commission on Ethics, 431 So. 2d 753, 756 (La. 1983).

5Giamatti, The University, Industry, and Cooperative Research, 218 Science
1278 (1982).
61d.

71d. at 1279

8See New York Times, Feb. 8, 1983.


IV. Patents and Certificates of Plant Variety Protection
1U.S. Const. art. I, 8, cl. 8.
235 U.S.C. 101 et seq.









335 U.S.C. 101.
4447 U.S. 303 (1980).

535 U.S.C. 101.
635 U.S.C. 171.

735 U.S.C. 161.

87 U.*.C. 2321 et seq.

9Diamond v. Chakrabarty, 447 U.S. 303, 313 (1980).
1035 U.S.C. 102.

1135 U.S.C 103.

12Plant reproduced by seed are not eligible for patent protection.
See below on certificates of plant variety protection.
1335 U.S.C. 161.

147 U.S.C. 2321 et seq.

1535 U.S.C. 102. Only individuals may be granted a patent. Individuals
may assign patents to corporate entities or others.
16See Marconi Wireless Tel. Co. v. United States, 320 U.S. 1, 34 (1942).

17See Application of Nelson, 420 F.2d 1079, 1081 (C.C.P.A. 1970); Gould v.
Schawlow, 363 F.2d 9U8, 911 (C.C.P.A. 1966).
1835 U.S.C. 102(b). The publication or article must describe the
invention clearly and completely to start the one year limit. It is not
enough merely to refer to the invention vaguely or generally.
19Sale of the invention or offers to sell make the invention public. See
Akron Brass Co. v. Elkhart Brass Mfg., 353 F.2d 704, 709 (7th Cir. 1965) Piet
v. Uited states, 283 F.2d 693 (th Cir. 1960).
2035 U.S.C. 102(c).

2135 U.S.C. 111.
2235 U.S.C. 112.

2335 U.S.C. 113.

2435 U.S.C. 115.

2535 U.S.C. 112.

261d.








2735 U.S.C. 113.

2835 U.S.C. 114.

2935 U.S.C. 122.

3035 U.S.C. 132.

311d.; 35 U.S.C. 133.
3235 U.S.C. 134.

3335 U.S.C. 141.

3435 U.S.C. 145.

3535 U.S.C. 144.
3635 U.S.C. 41.

37Reexamination may occur where examples of the prior art are discovered
subsequently either by the Commissioner of Patents or by others.


V. Trade Secrets

1Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 476 (1974).

2Smith v. Dravo Corp., 203 F.2d 369, 373 (7th Cir. 1953)

3First Restatement of Torts Comment(b) of 757
4
Smith, 203 F.2d at 375; Greenberg v. Croydon Plastics Co., Inc., 378 F.
Supp.780,7 812 (U.S.D.C.E.D. Penn. 19/4).

5Permagrim Products v. U.S. Mat & Rubber Co., 489 F. Supp. 108, 112
(U.S.D.C.E.D. Penn. 1980)
6Kewanee, 416 U.S. at 476.

7Smith, 203 F.2d at 375.
81d., at 374; A. 0. Smith Corporation v. Petroleum Iron Works Co., 73 F.2d
531, 538 (6th Cir. 1934).

Kewanee, 416 U.S. at 481.

10Greenberg v. Croydon Plastics Co. Inc., 378 F. Supp. 806, 812
(U.S.D.C.E.D. Penn. 1974).
11Smith, 203 F.2d at 373; Greenberg, 378 F. Supp. at 811.

12Greenberg, 378 F. Supp. at 814.

42










13Kewanee, 416 U.S. at 475.
14Smith, 203 F.2d at 377-378.
15W. R. Grace & Co. v. Hargadine, 392 F.2d 9, 16 (6th Cir. 1968).


VI. Copyrights
117 U.S.C. 101 et seq. (1976).

217 U.S.C. 301(a).

31d.

417 U.S.C. 301(b).

517 U.S.C. 102(a).
617 U.S.C. 102(b).

7Durham Industries, Inc. v. Tomy Corp., 630 F.2d 905, 908-909 (2d Cir.
1980).
8R. Dakin & Co. v. Charles Offset Co., Inc., 441 F. Supp. 434, 438
(S.D.N.Y. 1977).
917 U.S.C. 101.

10Id.

11Id.
1217 U.S.C. 103.

1317 U.S.C. 101.

141d"
Id.
151d.

16Letter Edged In Black v. Public Bldg. Commission, 320 F. Supp. 1303,
1308 (N.D. flTT. 1970).
1717 U.S.C. 201(a).
1817 U.S.C. 201(b).

1917 U.S.C. 101.

2017 U.S.C. 201(c).

21d.
Id.










22 17
2317

2417

2517

2617
2717

2817

2917

3017
311d
3Id.
3217'

3317

3417

3517
3617

3717

381d.

3917
4017

4117
421d

4317
4417

451d.
4617

4717
4817


U.S.C.

U.S.C.

U.S.C.

U.S.C.

U.S.C.

U.S.C.

U.S.C.

U.S.C.

U.S.C.


U.S.C. 106(5).

U.S.C.S101.

U.S.C. 401(a).

U.S.C. 401(b).

U.S.C. 401(c).

U.S.C. 404(a).


U.S.C.
U.S.C.

U.S.C.


U.S.C.

U.S.C.

; 17 U

U.S.C.

U.S.C.

U.S.C.


405(a).

405(b).

407(a).


407(d).

407(a).
.S.C. 408(a).

411.

408(b)(2).

408(b)(1)(3)


101.

202.'

109(a).

204(a).

106.

106(2).

101.

106 (3).

101.


*









4917 U.S.C. 408(b)(4).
5017 U.S.C. 408(b)(4).


5117 U.S.C. 408(a).
5217 U.S.C. 410(a).
5317 U.S.C. 410(c).

517 U.S.C. 411(a).
Id.
5617 U.S.C. 412(1).
5717 U.S.C. 412(2).
5817 U.S.C. 501(a).
5917 U.S.C. 501(b).
6017 U.S.C. 205(d).

6117 U.S.C. 441(a).

62Atari, Inc. v. North American, Etc., 672 F.2d 607, 614 (7th Cir. 1982);
Ferguson v. National Broadcasting Co., Inc., 584 F.2d 111, 113 (5th Cir.
1978); NoveltyTTextile Mills, Inc. v. Joan Fabrics Corp., 558 F.2d 1090, 1092
(2d Cir. 1977).
6317 U.S.C. 410(c).
641d

65Warren Bros v. American Broadcasting Companies, 654 F.2d 204, 209 (2d
Cir. 1981); Novelty, 558 F.2d at 1092.
66 Fergusen, 584 F.2d at 113; Testa v. Janssen, 492 F. Supp. 198, 202
(W. D. Penn 1980).
67Novelty 558 F.2d at 1093; Ideal Toy Corp. v. Fab-Lu Ltd., 360 F.2d 1021,
1023 (1966).
6Atari, 672 F.2d at 619.
6917 U.S.C. 504(a)(1).

7017 U.S.C. 504 (b).
7117 U.S.C. 504(a)(2), 412.
7217 U.S.C. 504(c)(1).









7317 U.S.C. 504(c)(2).

74Id.
7517 U.S.C. 505.
7617 U.S.C. 412.

7717 U.S.C. 502(a).
7817 U.S.C. 503.

7917 U.S.C. 107.
8017 U.S.C. 108.

8117 U.S.C. 107.

82,d
82Id.

83Marcus v. Rowley, 695 F.2d 1171, 1175 (9th Cir. 1983).
84id
8Id.

85Marvin Worth Productions v. Superior Films Corp., 319 F. Supp. 1269
(S.D.N.Y. 1970).
86Meeropol v. Nizer, 560 F.2d 1061, 1069-1070 (2d Cir. 1977).
87Id. at 1070.

88Time Incorporated v. Bernard Geis Associates, 293 F. Supp. 130 (S.D.N.Y.
1968).
8917 U.S.C. 108.

9017 U.S.C. 108(a)(1).

9117 U.S.C. 108(a)(3).

9217 U.S.C. 108(a)(2).

9317 U.S.C. 108(b).

9417 U.S.C. 108(c).
9517 U.S.C. 108(d)(e).
9617 U.S.C. 108(g).

9717 U.S.C. 110.
9817 U.S.C. 110(1).









9917 U.S.C. 110(2)(c).
10017 U.S.C. 302(a).

10117 U.S.C. 302(b).

10217 U.S.C. 302(c).
10317 U.S.C. 304(a).

10417 U.S.C. 304(b).



VII. Financing
1Long term capital gains tax treatment allows individuals a 60 percent
deduction from the amount of net capital gain. Long term capital gains are
taxed at a maximum of 28 percent for corporations.
2Taxpayers who qualify for section 1235 treatment under the Internal
Revenue Code are not required to hold the patent (the capital asset) for the
requisite time period; one may qualify who is in the business of inventing and
selling patents; and periodic payments do not defeat capital gains treatment.
3By "individual whose efforts created the patent," Congress meant the
"first and original" inventor as described in the Patent Code. S. Rep. No.
1622, 82d Cong. 2d Sess. (1954), reprinted in [1954] U.S. Code Cong. & Ad.
News 5082.

41.R.C. 1235 (b)(2)(A)(B). Bills have been introduced in Congress (H.R.
6167 and S. 2257) which would allow as holders of a patent those who have
acquired an interest in a patent from a qualified institutional employer. A
qualified institutional employer includes universities and similar
institutions (as defined in I.R.C. 44F(e)(2)), which by virtue of the
creator's employment or affiliation claim rights in the property. The bill
also defines "patent" to include Certificates of Plant Variety Protection.
51I.R.C. 267(b) provides that related persons include spouses, lineal
descendants, ancestors, 50 percent owned corporations, and various trust
relationships. Section 1235(d) changes 50 percent to 25 percent for purposes
of section 1235 of the Code.
6Treas. Reg. 1.1235-2.
7d.
8Id.

9See P.P.G. Industries, Inc., 55 T.C. 928, 1012 (1970); T.C. Pickren v.
United States, 378 F.2d 595, 599 (5th Cir. 1967).








10See Ward v.. United States, 456.F.2d 354, 356, (6th Cir., 1972); Spence v.
United States-, 156 F. Supp. 556, 559-560 (Ct. Cl. 1957); Beausoleil, 66 T.C.
244, 246 51976).
11I.R.C. 1222(3) I.R.C.


12Treas. Reg. 1.174-2(a)(1). To qualify under
the research and experimentation must be scientific
literary and historical projects are excluded.


section 174 of the Code,
in the laboratory sense;


131d.

14Treas. Reg. 1.174-2(a)(2); Rev. Rul. 73-20, 1973-1 C.B. 133.
15Treas. Reg. 1.174-2(a)(1).
16I.R.C. 174(c).

17Treas. Reg. 1.174-2(a)(1).
18See Snow v. Commissioner, 416 U.S. 500, 537 (1974).
19Treas. Reg. 1.174-2(a)(2)(3).


20.R.C. 44F(d) states
"research and experimental"


that "qualified research" has the same meaning as
in I.R.C. 174.


21I.R.C. 44F(b)(1)(b) and (b)(3).
221.R.C. 44F(e).

23Treas. Reg. 1.44F-5(b).
241.R.C. 170(e)(4).

25The deduction allowed is equal to the sum of the taxpayer's income tax
basis in the property and one half of the unrealized appreciation in the
property, but the deduction may not exceed twice the income tax basis. I.R.C.
170(e)(4)(a).
261.R.C. 170(e)(4)(B)(i).
27I.R.C. 170(e)(4)(B)(v). Research purposes under this section are the
same as defined under I.R.C. 174 for research and experimentation.


28I.R.C. 170(e)(4)(B).
1221(1).


Qualified property is described in I.R.C.


291.R.C. 170(e)(4)(B)(ii).
30I.R.C. 170(e)(4)(C).

31I.R.C. 170(e)(4)(B)(iii).









321.R.C. 170(e)(4)(B)(v). Research and experimentation is used as in
I.R.C. 174. The test of "substantial use" is satisfied if the property is
used at least 80 percent of the time for research and experimentation. Comm.
Rpt. P.L. 97-34.
33Id.
34I.R.C. 170(e)(4)(B)(iv).

35I.R.C. 170(b)(1)(A)(ii). The donee must also be an "institution of
higher education," which requires that--(1) those admitted as regular students
be high school graduates or the equivalent, (2) the institution has legal
authority under state law to offer a program of study leading to a bachelor's
or higher degree or a program which prepares students for gainful employment,
and (3) it is a public or other nonprofit institution.
361.R.C. 170(e)(4)(B)(vii).








CHAPTER 3


GUIDELINES FOR DEVELOPMENT OF UNIVERSITY/INDUSTRY RESEARCH CONTRACT


I. Introduction

This document was originally included in the 1983 Progress Report. The
amended "Guidelines" are made part of this report in order to reflect
responses and queries from thirty-five land-grant institutions. The resulting
changes do not alter the basic format or substance of the document. The
changes do extend the discussion in several areas. Of particular note are
additional comments on research projects funded by multiple sources and on the
law governing the interpretation of a research agreement involved in possible
litigation or arbitration.

This guide for the development of a contract is intended to provide the
basis for negotiating a cooperative project between a research university and
an industrial sponsor. A contract between a university and an industrial
sponsor presents many unique policy issues which must be addressed during the
initial stages of negotiations in order to arrive at a successful agreement.
A university/industry research contract--like any contract--involves the
exchange of consideration, i.e., the promise of the sponsor to provide funding
or facilities in exchange for the university's promise to use its best efforts
to fulfill a research plan. This guide presents sample contract sections with
appropriate comments following each section to highlight the most important
policy issues and problems and to suggest alternatives. The current tax
incentives of the Internal Revenue Code for contributions to research are
reflected in the commentary. All universities and all sponsors will not be
able to utilize every provision contained in this guide. A contract of this
nature is intended as a guide which must be form-fitted to attain individual
objectives and policies of the contracting parties.

The development of a knowledgeable citizenry and improved levels of
living is a goal for which both private and public entities generally strive.
The research that is performed by college and university scientists is a
valuable tool in attaining the important ends of human development. Although
the short-term objectives of private business firms and higher education may
differ, the long-term purposes of technological advance and betterment of
society are shared. In many cases, the technical skills and knowledge of
colleges and universities is brought closer to society as it is transferred to
industry and transformed into commercial products. Efforts to expedite
research within colleges and universities and thus reduce the time necessary
to transfer such knowledge to industry clearly should be viewed in the
national interest.

Research opportunities in colleges and universities are highly dependent
upon their monetary source. These times of declining government funding and
increased involvement of private industry in basic research have begun to
foster close working relationships between universities and industry. These
efforts have taken the forms of consulting arrangements, research consortia,
cooperative research efforts, and collaborative agreements, among others.
These relationships necessitate a balancing of sometimes competing interests.
The nonproprietary, basic research aims of the university differ from the
commercial, profit-making ideals of private industry. The ideals of open








communication and free dissemination of information in the university setting
conflict with concepts of trade secrets and competitive advantage in the
industrial world. Formulation of close relationships between universities and
industry demands careful attention to the integrity of universities as
institutions of higher education.

II. Memorandum of Agreement

This memorandum of agreement is entered into on
between (the University) and
("the Sponsor) for the
establishment of a research project entitled,
to be conducted from
to at a total estimated cost of______
COMMENTS--

THE MEMORANDUM OF AGREEMENT SHOULD SET FORTH CLEARLY THE
DATES DURING WHICH THE PROJECT SHALL TAKE PLACE. THE
PARTIES MAY WISH TO STIPULATE THAT THE DURATION OF THE
PROJECT SHALL BE NEGOTIATED AT A LATER DATE. CONDITIONS
UNDER WHICH THE PROJECT WILL TERMINATE MIGHT BE INCLUDED
ALSO. ONE SUCH CONDITION COULD BE DEATH OF THE PRINCIPAL
INVESTIGATOR AND THE INABILITY TO FIND A MUTUALLY
ACCEPTABLE REPLACEMENT.

III. General University Purpose

Whereas the University is a publicly supported institution, the parties to
this agreement must recognize the paramount importance for this project to
benefit the general public. The Sponsor should be rewarded from the results
of the research, but it should not be provided a financial advantage through
privileged use of information that is wholly or partly derived from the use of
public funds. It is essential that the University promote the free flow of
information at all stages of research. The University exists for the
advancement of science and technology and for the enrichment of education; the
research project under this agreement should not be permitted to compromise
the purpose of the University in an unreasonable manner.

IV. General Purpose of the Sponsor

The parties to the agreement must recognize that the primary objectives of
the Sponsor are commercial. The Sponsor's purpose as a commercial entity is
to develop products, processes, and services for the generation of profits.
On the other hand, it must be emphasized herein that the Sponsor (as well as
Industry in general) provides intellectual stimulation and interpretation of
research that is valuable to the University and to the public in general.
This agreement should not be allowed to hinder unreasonably the Sponsor's
interest in protecting and exploiting intellectual property rights which
either have originated with the Sponsor or which originate from the Research
Project itself.








COMMENTS--SECTIONS III AND IV


SECTIONS III AND IV ARE INCLUDED AT THE OUTSET OF THE
CONTRACT IN ORDER TO EMPHASIZE THAT THIS IS A UNIQUE
AGREEMENT. THERE ARE IMPORTANT POLICY CONSIDERATIONS
THAT SHOULD BE EVALUATED BY BOTH PARTIES BEFORE ENTERING
INTO THIS TYPE OF RESEARCH PROJECT. THESE CONSIDERATIONS
ARE NECESSARILY CONFLICTING AND MUST BE COMPROMISED TO
SOME EXTENT BY EACH SIDE. ALL THE TERMS OF THIS TYPE OF
AGREEMENT SHOULD BE SPECIFICALLY TAILORED TO THE
PARTICULAR NEEDS AND DESIRES OF THE PARTIES INVOLVED. A
SIGNIFICANT AMOUNT OF VARIATION WILL OCCUR DEPENDING UPON
THE VARIOUS POLICIES OF THE UNIVERSITY AND THE SPONSOR.
IF THE DIFFERENCES BETWEEN THE PARTIES ARE RECOGNIZED AND
ADDRESSED DURING NEGOTIATIONS, MORE EFFECTIVE
COLLABORATION CAN TAKE PLACE.

AN AGREEMENT OF THIS NATURE MIGHT BE UTILIZED TO FUND AN
ENTIRE RESEARCH PROGRAM, WHICH INCLUDES MANY DIFFERENT
PROJECTS.

V. Scope of the Research Project

The research project under this agreement is to consist of


COMMENTS--

THIS SECTION CAN BE EITHER VERY BROAD OR VERY DETAILED,
DEPENDING UPON THE PARTICULAR PROJECT AND THE DESIRES OF
THE PARTIES. THE UNIVERSITY MAY NOT WISH TO DIVULGE
GREAT DETAIL WITHOUT SUFFICIENT ASSURANCES THAT THE
SPONSOR WILL MAKE PAYMENTS. A CLAUSE FOR MINIMUM
PAYMENTS OR FOR PAYMENTS OVER A MINIMUM PERIOD OF TIME
MIGHT PROVIDE A WORKABLE SAFEGUARD. THE SPONSOR MAY WISH
TO BE INFORMED OF THE EXACT SCOPE AND PARAMETERS OF THE
PROJECT IN ORDER TO MEET ITS NEEDS AND TO ASSURE THAT ITS
FUNDS ARE NOT DIRECTED TOWARD NEEDLESS OR FRIVOLOUS
INVESTIGATIONS.

WHERE THE SPONSOR IS GRANTED BROAD OR DIRECT RIGHTS TO
INTELLECTUAL PROPERTY WHICH IS DERIVED FROM THE RESEARCH
PROJECT, OR WHERE EXCLUSIVE FUNDING CLAUSES ARE INVOLVED,
IT IS DESIRABLE TO DESCRIBE THE RESEARCH PROJECT IN AN
ATTACHMENT TO THE BASIC AGREEMENT. IN THIS CASE, A
SUGGESTED SCHEME WOULD BE TO DEFINE THE RESEARCH PROJECT
AS NARROWLY AS POSSIBLE AND PROVIDE A FRAMEWORK BY WHICH
TO REVISE THE DIRECTION OF THE RESEARCH BY MUTUAL CONSENT
OF THE PARTIES. THESE REVISIONS SHOULD BE DESIGNED TO
LEAVE THE TERMS OF THE BASIC AGREEMENT INTACT. IN THE
EVENT A PATENT OR OTHER PRODUCT OF RESEARCH RESULTS FROM
MORE THAN ONE SOURCE OF FUNDING--EITHER BECAUSE OF
SUCCESSIVE OR OVERLAPPING PROJECTS--A DETAILED AND









SPECIFIC DESCRIPTION OF THE RESEARCH TO BE CARRIED OUT
UNDER THE AGREEMENT WILL HELP TO AVOID ANY CONFLICTING
CLAIMS TO SUCH PROPERTY. PROGRESS OF THE RESEARCH SHOULD
BE REVIEWED PERIODICALLY, ALLOWING BOTH THE UNIVERSITY
AND THE SPONSOR TO RECOMMEND CHANGES IN THE SCOPE OF THE
PROJECT. JOINT DETERMINATION OF ANY CHANGES SHOULD BE
MADE IN AN APPROPRIATE MODIFICATION OF THE ATTACHMENT.

VI. Duties of the University

The primary obligation of the University is to exercise its best efforts
to achieve the desired results of the project within the estimated costs. The
University will appoint a Principal Investigator, subject to approval from the
Sponsor. The duties of the Principal Investigator will be to direct the
research project. The Principal Investigator will insure that periodic
reports on the progress of the project are transmitted to the Sponsor. These
reports shall include research results, projections of future research
objectives, prior notice of publications concerning the research, and an
accounting of disbursements of project moneys.

The University will provide the Sponsor with prompt notice of its
intention to pursue patent protection for research results. The University
will undertake application and prosecution of patents with the necessary
cooperation and aid from the Sponsor. In the event the University does not
wish to pursue patent protection, the Sponsor may do so at its expense' and
with University cooperation.

The University cannot insure either that any patentable items will result
from the project or that, if such discoveries do occur, they will yield
income.

COMMENTS--

THE DETAILS OF SECTION VI WILL DEPEND MAINLY UPON THE
SPECIFIC POLICIES OF THE UNIVERSITY. THAT THE UNIVERSITY
HAVE EXCLUSIVE CONTROL OVER THE MANAGEMENT OF THE
PROJECTS IS AN IMPORTANT CONSIDERATION TO AID THE
UNIVERSITY IN SAFEGUARDING THE PUBLIC GOOD. IT MAY BE
DESIRABLE TO HAVE SOME MANAGEMENT INPUT FROM THE SPONSOR,
ESPECIALLY IF THE SPONSOR HAS BEEN ENGAGED IN RELATED
RESEARCH OR IF IT OWNS PATENTS OR OTHER INTELLECTUAL
PROPERTY CONCERNING THE PARTICULAR FIELD OF RESEARCH. IT
MAY PROVE BENEFICIAL TO INCLUDE A STATEMENT THAT THE
UNIVERSITY IS ACTING AS AN INDEPENDENT CONTRACTOR, AND
NOT AS AN AGENT, JOINT VENTURER, OR PARTNER OF THE
SPONSOR. HOWEVER, IN CERTAIN SITUATIONS UNIVERSITY
POLICY MAY BE AMENABLE TO JOINT VENTURES OR PARTNERSHIPS
IN ORDER FOR THE SPONSOR TO TAKE ADVANTAGE OF CERTAIN
INCOME TAX PROVISIONS SUCH AS THE CAPITAL GAINS TAX.

THE UNIVERSITY MAY CHOOSE TO STATE THAT IT MAKES NO WAR-
RANTIES REGARDING THE OUTCOME OF THE RESEARCH.
RESPONSIBILITY FOR ANY PRODUCTS OF THE RESEARCH IS TO
REMAIN THE SPONSOR'S, PARTICULARLY REGARDING SAFETY,
MARKETABILITY, EFFECTIVENESS, ETC.









REASONABLE PRECAUTIONS TO PROTECT THE SPONSOR'S TRADE
SECRETS SHOULD BE DELINEATED, OR SAFEGUARDS MIGHT BE
LIMITED TO DISCLOSURE OF POSSIBLE CONFLICTS OF INTEREST,
THE SIGNING OF OATHS OF CONFIDENTIALITY, AND ADEQUATE
RECORD-KEEPING.

GENERALLY THE UNIVERSITY RETAINS OWNERSHIP OF PATENTS FOR
THE RESULTS OF ITS RESEARCH. IT WOULD BE QUITE BENEFICIAL
IN MANY CASES TO HAVE THE SPONSOR PAY FOR PATENT
APPLICATIONS. A LIMITED EXCLUSIVE LICENSE COULD BE GIVEN
TO THE SPONSOR IN EXCHANGE FOR FINANCING OF PATENT
APPLICATIONS. IN SUCH CASES THE UNIVERSITY WOULD RETAIN
THE RIGHT TO TAKE OVER THE LICENSE WHERE THE SPONSOR
FAILED PROPERLY TO EXPLOIT PATENTS. THE MAJOR UNIVERSITY
OBJECTIVE IN THE ADVANCEMENT OF KNOWLEDGE WOULD STILL BE
UPHELD, AND THE UNIVERSITY THEN WOULD BE ABLE TO SAVE THE
MONEY THAT WOULD NORMALLY BE SPENT ON THE RISING COSTS OF
PATENT APPLICATIONS. THIS OBJECTIVE HAS BEEN MET IN MANY
UNIVERSITY/INDUSTRY COOPERATIVE RESEARCH EFFORTS.

THE UNIVERSITY MAY WISH TO RETAIN THE RIGHT TO REPLACE
THE PRINCIPAL INVESTIGATOR. IN SUCH CASES SPONSOR
APPROVAL IS GENERALLY REQUIRED. A SEPARATE SECTION
OUTLINING THE SPECIFIC DUTIES OF THE PRINCIPAL
INVESTIGATOR IS OFTEN INCLUDED IN UNIVERSITY/INDUSTRY
CONTRACTS.

VII. Duties of the Sponsor

The Sponsor shall provide all funding for this research project in advance
of actual disbursement by the University for research. Funding will be
provided according to the attached schedule which has been developed by the
parties to this agreement. The Sponsor will provide to the Principal
Investigator and the University any knowledge or intellectual property rights
which relate to the subject of this research project which are in its
possession prior to the inception of this agreement and which it may acquire
thereafter. This will include adequate rights to patents in order to allow
the University to use the Sponsor's preexistent expertise in conducting the
research.

COMMENTS--

ESPECIALLY IMPORTANT IN SECTION VII IS THAT FUNDS WILL BE
PROVIDED TO THE UNIVERSITY IN ADVANCE. GENERALLY, A
UNIVERSITY IS UNABLE TO ADVANCE MONEY FOR SUCH A PROJECT.
IT WOULD ALSO BE USEFUL TO INCLUDE SPECIFICALLY FOR WHAT
'THE MONEYS WILL'BE SPENT, E.G., ONLY FOR WAGES, SUPPLIES,
AND EQUIPMENT, OR INCLUDING OVERHEAD SUCH AS MAINTENANCE
AND UTILITIES. ALSO, "PROMPT NOTICE" SHOULD BE SPECIFIC,
E.G., WITHIN TWO MONTHS.

SOME UNIVERSITY/INDUSTRY AGREEMENTS HAVE PROVIDED FOR
OWNERSHIP OF PATENTS TO BE HELD BY THE SPONSOR. IN SUCH
CASES, THE SPONSOR SHOULD BE REQUIRED TO PROVIDE THE








UNIVERSITY WITH PROMPT NOTICE OF ITS DESIRES TO PURSUE
PATENT PROTECTION FOR RESEARCH RESULTS. THE UNIVERSITY
SHOULD THEN PROVIDE COOPERATION AND AID AND BE ENTITLED
TO PURSUE PATENTS WHERE THE SPONSOR DOES NOT WISH TO DO
SO.

VIII. Publication, Copyrights, and Trade Secrets

Publication and dissemination of information are integral to the purpose
of the University. Therefore, the University shall be the sole judge of what
it will publish and shall have the exclusive right to publish any and all
results of this research project, subject only to such rights of the Sponsor
to protect trade secrets. There shall be no publicity or disclosure of
information about the project without prior notice to the Sponsor. If the
decision is made to publish the results of project research, patent rights
shall be preserved with respect to research discussed in publications. A copy
of any papers or presentations shall be submitted to the Sponsor for any
comments or suggestions before publication. The University shall have the
exclusive right to all copyrights which result from the research project.

All publications shall give proper credit to appropriate parties to this
agreement.

While free dissemination of information strongly underlies the purpose of
the University, certain information and documentation must remain confidential
for the protection of the Sponsor. Any trade secrets which the Sponsor has
disclosed for the purposes of this project shall be kept in strict confidence,
absent the express, written consent of the Sponsor. All confidential
information shall be conspicuously marked, and all who work on the project
shall agree to protect all confidential information. Information that is
developed during the scope of this project shall not be required to be kept
confidential beyond the time necessary to perfect patent rights, except to the
extent that it involves the sponsor's basic interest in trade secrets.

COMMENTS--

IT MAY ALSO BE DESIRABLE OR USEFUL TO INCLUDE LIMITATION
PERIODS IN SECTION VIII WHICH STATE HOW LONG CONFIDENTIAL
INFORMATION MUST REMAIN SECRET. PROVISIONS MIGHT ALSO BE
ADDED FOR CERTAIN INFORMATION THAT EMANATES FROM THE
PROJECT TO BE KEPT SECRET AT THE REQUEST OF THE SPONSOR.
PROVISIONS MIGHT BE INCLUDED TO REFLECT UNIVERSITY AND
SPONSOR POLICIES REGARDING THE USE OF THEIR NAMES IN
PUBLICATIONS. UNIVERSITIES GENERALLY PROHIBIT THE USE OF
THEIR NAMES IN COMMERCIAL ADVERTISING. IT IS IMPORTANT
TO EXAMINE CONSTITUTIONAL AND LEGISLATIVE PROVISIONS IN
CONNECTION WITH THE DOCTRINE OF PUBLIC PURPOSE IN
RELATION TO THIS CLAUSE.

IN CASES WHERE THE SPONSOR RETAINS OWNERSHIP RIGHTS IN
PATENTS, SPECIFIC TIME PERIODS SHOULD BE INCLUDED FOR THE
DELAY OF PUBLICATIONS TO ALLOW TIME TO SUBMIT PATENT
APPLICATIONS. A 60-DAY PERIOD WOULD BE REASONABLE FOR
BOTH PARTIES.








IX. Press Releases


Statements concerning the research project conducted under this agreement
shall not be made or released to any medium of public communication by the
Sponsor, except with the prior, written consent of the University, or by the
University, except with the prior, written consent of the Sponsor. Exception
is made hereunder to the regular reports of the University, which may include
the name of the Principal Investigator, the title of the project, the name of
the Sponsor, and the amount of funding provided.

COMMENTS--

THIS SECTION IS INCLUDED IN ORDER TO PROTECT THE SPONSOR
FROM PREMATURE DISCLOSURE OF VITAL INFORMATION AFFECTING
PATENT RIGHTS AND OTHER PROTECTION OF INTELLECTUAL
PROPERTY.

X. Patent Rights

The University shall maintain title to all patents which are derived from
this research project. The Sponsor shall receive a right of first refusal to
a license in such patents in return for a reasonable royalty based on the
gross receipts from products manufactured under such patents. The Sponsor is
obliged to exercise all reasonable diligence to create and promote a public
and commercial demand for products which are developed under license granted
by this agreement. In the event the Sponsor does not fulfill its obligation
to exploit patent rights, such patent rights shall revert to the University to
be used in accordance with its policies. In any event, the right to use the
patents for scientific pursuit and education shall remain in the University.
All rights of researchers to any patents shall be governed by the internal
policy of the University.

COMMENTS--

THE PATENT SECTION OF THE CONTRACT IS AN IMPORTANT
CONSIDERATION FOR THE SPONSOR, BECAUSE PATENTS PROVIDE
DIRECT ACCESS TO PROFITS.

THE SECTION OF THE CONTRACT CONCERNING PATENT RIGHTS WILL
VARY SIGNIFICANTLY DEPENDING ON THE POLICIES OF THE
UNIVERSITY AND THE SPONSOR. TRADITIONALLY LICENSE TERMS
WOULD BE NEGOTIATED ONLY AFTER BOTH PARTIES KNOW EXACTLY
WHAT IS BEING LICENSED. HOWEVER, SUCH TERMS MAY BE
INCLUDED IN THE ACTUAL CONTRACT AS AN INDUCEMENT FOR
PRIVATE SPONSORS TO ENGAGE IN COLLABORATIVE RESEARCH
EFFORTS WITH THE UNIVERSITY. GENERALLY, THE UNIVERSITY
WILL WISH TO RETAIN TITLE TO THE PATENT. SINCE IT IS
IMPORTANT TO THE UNIVERSITY'S FUNCTION TO MAINTAIN
MAXIMUM UTILIZATION AND AVAILABILITY OF THE PATENT TO THE
PUBLIC, A CLAUSE SHOULD BE INSERTED THAT REQUIRES THE
SPONSOR TO EXERCISE DUE DILIGENCE IN EXPLOITING AND
MARKETING THE PATENT. THE UNIVERSITY MAY WISH TO OBTAIN
SOME DEGREE OF CONTROL OVER LICENSING AND SUBLICENSING BY
THE SPONSOR IN ORDER TO PROTECT THE PUBLIC PURPOSE OF THE
UNIVERSITY.








MANY UNIVERSITY/INDUSTRY AGREEMENTS GRANT GENEROUS PATENT
RIGHTS TO THE SPONSOR IN ORDER TO RECEIVE SUBSTANTIAL
FUNDING. OFTEN THE SPONSOR IS GRANTED "ALL SUBSTANTIAL
RIGHTS" IN PROJECT PATENTS. THIS IS QUITE USEFUL IN THE
UTILIZATION OF CAPITAL GAINS TAX PROVISIONS.

THE UNIVERSITY MAY BE REQUIRED BY POLICY TO RETAIN ALL
SUBSTANTIAL RIGHTS IN THE PATENTS AND ISSUE EXCLUSIVE
AND/OR NON-EXCLUSIVE LICENSES TO THE SPONSOR. ALSO, THE
INCOME THAT THE UNIVERSITY RECEIVES FROM THE USE OF THE
LICENSE MAY TAKE ON VARIOUS FORMS, SUCH AS, A PERCENTAGE
OF THE SELLING PRICE, A FIXED COMMISSION, A PERCENTAGE OF
NET SALES, A SET ASSIGNMENT FEE, ETC.

THE CONTRACT MIGHT CALL FOR A DISTRIBUTION OF PATENT
RIGHTS BETWEEN THE SPONSOR AND THE UNIVERSITY. IN THAT
CASE, EACH PARTY WOULD RECEIVE AN UNDIVIDED INTEREST IN
ALL SUBSTANTIAL RIGHTS TO THE PATENT. THERE ARE
DIFFICULTIES IN UTILIZING UNDIVIDED INTERESTS, DUE TO
UNCERTAINTY IN REGARD TO TAX STATUS WITH INTERNAL REVENUE
RULES AND REGULATIONS. CAREFUL ATTENTION SHOULD BE
DIRECTED TO THE APPROPRIATE PROVISIONS OF SECTIONS 1221,
1231, and 1235 OF THE INTERNAL REVENUE CODE WHEN
EMPLOYING CONTRACT TERMS WHICH PLACE ALL SUBSTANTIAL
RIGHTS IN PATENTS INTO UNDIVIDED INTERESTS.

THE UNIVERSITY SHOULD BE CAREFUL NOT TO GRANT PATENT
RIGHTS TO INVENTIONS THAT HAVE BEEN DEVELOPED IN PART OR
IN WHOLE BY FUNDS OUTSIDE OF THE AGREEMENT. ONE
REASONABLE SAFEGUARD IS TO ALLOW THE GRANTING OF RIGHTS
ONLY TO PATENTS WHICH BOTH HAVE BEEN CONCEIVED AND
REDUCED TO PRACTICE UNDER THE SCOPE OF THE AGREEMENT.

XI. Project Assets

All assets which are acquired with funds distributed under this agreement
shall remain the property of the University.

COMMENTS--

THIS SECTION IS INCLUDED BOTH FOR THE BENEFIT OF THE UNI-
VERSITY IN OBTAINING CERTAIN PROPERTY AND FOR THE
PROTECTION OF THE SPONSOR'S RIGHT TO TAX DEDUCTIONS FOR
RESEARCH AND EXPERIMENTATION.

XII. Mutual Cooperation and Modification of the Agreement

Both parties agree to assist and cooperate with each other, especially
regarding their respective rights to publication and patent rights. The
parties shall meet at the end of each year to discuss the continued
feasibility of the project and any modifications in funding or scope that may
be necessary or desirable. Any and all modifications shall be in writing and
signed by both parties.








COMMENTS--


THIS SECTION IS INCLUDED TO EMPHASIZE THE DIVERGENT
INTERESTS OF THE PARTIES AND THE NECESSITY TO WORK
CLOSELY TOGETHER IN NEGOTIATIONS. ALSO, MANY PROJECTS
WILL CHANGE COMPLEXION OVER THE TERM OF THE CONTRACT, AND
ADJUSTMENTS MAY BE NECESSARY EITHER WITH RESPECT TO
FUNDING OR SCOPE OF THE RESEARCH.

XIII. Termination Rights

In the event the Sponsor is not satisfied with the progress of the
research project, the Sponsor may terminate the agreement upon reasonable
notice. The University may terminate the agreement upon proper notice if
conditions beyond its control preclude continuation of the project. If termi-
nation occurs, the Principal Investigator shall direct the conclusion of the
project, issue a final report, and return all unexpended funds. The dispo-
sition of equipment and research material involved with or generated by the
research project shall be decided by mutual assent to the extent not specified
herein.

COMMENTS--

THIS SECTION IS EXTREMELY USEFUL IN THE BARGAINING
PROCESS. DEPENDING UPON THE SIGNIFICANCE AND MAGNITUDE
OF RIGHTS OR BENEFITS GIVEN TO THE SPONSOR AND UPON THE
LIKELIHOOD OF SUCCESS OF THE PROJECT, THE SPONSOR OR THE
UNIVERSITY MAY WISH TO GRANT OR RECEIVE TERMINATION
RIGHTS. TERMINATION ON THE PART OF THE SPONSOR SHOULD
ALWAYS BE SUBJECT TO A MINIMUM PAYMENT PROVISION, SO THE
SPONSOR WILL NOT BE ENRICHED UNJUSTLY BY INFORMATION THAT
HAS BEEN PROVIDED AND TO PROTECT ANY SALARIES AND LONG
TERM COMMITMENTS THAT ARE BEING PAID WITH PROJECT FUNDS.
THE UNIVERSITY MAY DESIRE THE RIGHT TO TERMINATE IF IT
APPEARS THERE WILL BE LITTLE BENEFIT TO THE UNIVERSITY
PROGRAMS OR TO THE PUBLIC. THE RIGHTS TO TERMINATE MIGHT
BE VERY NARROW OR VERY BROAD, I.E., THERE MAY BE MANY
CONDITIONS PRECEDENT OR ONLY FEW, DEPENDING UPON THE
CIRCUMSTANCES OF THE AGREEMENT.

XIV. Arbitration

In the event of the inability to resolve a dispute between the Sponsor and
the University concerning the terms or conditions of the agreement, said
dispute shall be settled by arbitration before a single arbitrator in
accordance with the prevailing rules of the American Arbitration Society, and
judgement upon the award rendered by the arbitrator may be entered in any
court having jurisdiction. The arbitrator shall be appointed by mutual
consent.

COMMENTS--

AN ARBITRATION CLAUSE SHOULD BE INCLUDED IN ORDER TO
AVERT LENGTHY AND COSTLY DISPUTES. THE ARBITRATION








CLAUSE MAY BE MODIFIED IF THE PARTIES SO DESIRE. ONE
SUGGESTED CHANGE WOULD BE TO USE THREE ARBITRATORS
INSTEAD OF ONE. EACH ADVERSE PARTY WOULD APPOINT ONE
ARBITRATOR; THE ARBITRATORS SO APPOINTED WOULD THEN
APPOINT A THIRD IMPARTIAL ARBITRATOR BY MUTUAL CONSENT.

BINDING ARBITRATION MAY BE IMPOSSIBLE FOR MANY STATE
UNIVERSITIES DUE TO EITHER CONSTITUTIONAL OR STATUTORY
RESTRAINTS. IN THE EVENT OF DISPUTES, THE CONTRACT MAY
REQUIRE TERMINATION IF A REASONABLE SOLUTION CANNOT BE
FOUND.

THE SITE OF THE ARBITRATION PROCEEDINGS SHOULD BE
SPECIFIED AS THE STATE IN WHICH THE UNIVERSITY IS
LOCATED. THE UNIVERSITY SHOULD NOT BE REQUIRED TO INCUR
THE EXPENSES OF HIRING OUT-OF-STATE COUNSEL AND TRAVELING
TO AN OUT-OF-STATE LOCATION.

XV. Exclusivity of Funding

All funding for this project shall be provided by the Sponsor.

COMMENTS--

UNIVERSITY POLICY MAY PROHIBIT AN EXCLUSIVE FUNDING
PROVISION. FURTHERMORE, THE UNIVERSITY MAY NOT WISH TO
LIMIT ITSELF TO THE SPONSOR'S FINANCING. THE NEED AND/OR
OPPORTUNITY MAY ARISE FOR ADDITIONAL FUNDING OF WHICH THE
UNIVERSITY WOULD WISH TO AVAIL ITSELF. HOWEVER, THE
SPONSOR MAY BE HESITANT TO PROVIDE FUNDS WHICH WILL BE
COMBINED WITH OTHERS, SINCE THE SOURCE OF EXPENDED FUNDS
MAY NOT BE DETAILED SUFFICIENTLY FOR PURPOSES OF TAX
DEDUCTIONS AND RIGHTS TO RESULTING DISCOVERIES.

THE UNIVERSITY WILL OFTEN PAY THE SALARY OF THE PRINCIPAL
INVESTIGATOR AND/OR OTHER RESEARCHERS, IN WHICH CASE THIS
SECTION SHOULD BE ADAPTED ACCORDINGLY.

XVI. Assignment

Either party may assign its rights, remedies, obligations, or liabilities
arising under this agreement provided prior, express, and written consent is
obtained from the other party. The assignee must assume all responsibilities
under the agreement and agree to be bound thereby.

COMMENTS--

THE UNIVERSITY SHOULD RECEIVE PRIOR APPROVAL OF
ASSIGNMENT TO PROTECT ITS PUBLIC PURPOSE RESPONSIBILITY.
THE UNIVERSITY SHOULD BE ASSURED THAT THE ASSIGNEE WILL
CONTINUE TO PROVIDE SUPPORT AND ASPIRE TO THE GOALS OF
THE ORIGINAL SPONSOR. THE SPONSOR, ON THE OTHER HAND,
MUST BE SURE THAT THE WORK CAN BE CONTINUED ADEQUATELY BY
AN ASSIGNEE.








XVII. Insurance and Liability


The University shall be responsible for maintaining all facilities that
are used for performing work on the research project. The University shall
maintain adequate workers' compensation insurance for its employees working on
the research project. The Sponsor shall maintain adequate products liability
and third party liability insurance in respect to the project. The Sponsor
shall indemnify the University against the claims of third parties in regard
to the specific utilization of any marketed research results.
COMMENTS--

THIS SECTION IS IMPORTANT TO DEFINE MORE COMPLETELY THE
RESPONSIBILITIES OF THE PARTIES AND PROTECT THEIR
RESPECTIVE INTERESTS. BY MAINTAINING PROPER INSURANCE TO
COVER RESEARCH FACILITIES AND WORKERS, THE UNIVERSITY IS
DEMONSTRATING ITS EXCLUSIVE RESPONSIBILITY FOR MANAGEMENT
OF THE RESEARCH PROJECT. THE SPONSOR'S MAINTENANCE OF
ADEQUATE PRODUCTS LIABILITY AND THIRD PARTY LIABILITY
PROTECTION IS IMPORTANT IN UPHOLDING THE UNIVERSITY'S
PUBLIC PURPOSE RESPONSIBILITIES.

WHERE THE UNIVERSITY IS A SELF-INSURER AND WILL NOT
MAINTAIN OUTSIDE INSURANCE, IT SHOULD BE REQUIRED TO
INDEMNIFY THE SPONSOR AGAINST WORKERS' COMPENSATION
CLAIMS WITHIN THE SCOPE OF THE PROJECT. WHERE THERE IS
INSURANCE, INDEMNITY SHOULD BE LIMITED TO THE AMOUNT OF
INSURANCE COVERAGE.

IT IS RECOGNIZED THAT RESEARCH ACTIVITY, PRODUCT
DEVELOPMENT, AND PRODUCT USE MAY ALL GIVE RISE TO LOSSES
OR COSTS FROM UNEXPECTED OUTCOMES. SOME LOSSES MAY BE
IMMEDIATELY OBVIOUS, AND OTHERS MAY ONLY BECOME APPARENT
YEARS LATER. THE QUESTION OF WHETHER THE PARTIES TO A
RESEARCH AGREEMENT, THE USER OF THE PRODUCT, OR SOCIETY
GENERALLY SHOULD BEAR THE COSTS IS UNDER STUDY BY THE
COMMITTEE. THE RESEARCH CONTRACT CAN BE USED TO
ASCERTAIN THE INTENT OF THE PARTIES WITH REFERENCE TO THE
ALLOCATION OF FINANCIAL RESPONSIBILITY AND LIABILITY.

XVIII. Notices

All notices and communications pertaining to this agreement shall be in
writing. They shall be delivered personally or sent by first class mail to
the following:

a) to the Sponsor--



b) to the University--








COMMENTS--


BOTH THE PERSONS) AND PLACES) FOR NOTICE SHOULD BE
SPECIFIED. FOR THE SPONSOR IT MAY BE THE PRESIDENT OR
OTHER EXECUTIVE OF THE COMPANY AT ITS PRINCIPAL OFFICE.
THE UNIVERSITY MAY REQUIRE THAT NOTICE BE DELIVERED TO
THE PRINCIPAL INVESTIGATOR, THE PRESIDENT, OR PERHAPS THE
DEAN FOR RESEARCH. TIME PERIODS IN WHICH NOTICE MUST BE
RECEIVED SHOULD BE INCLUDED AS WELL AS WHEN SUCH PERIODS
SHOULD BEGIN AND END, E.G., UPON RECEIPT, UPON DELIVERY,
UPON MAILING, ETC.

XIX. Integration, Severability, Headings, and Contract Terms

This agreement and attached appendices and exhibits constitute the entire
agreement between (the University) and
Sth-tie --Sponsor -with respect to the
research project entitled,

All modificationsshall be i --n- -gn-n-ey'6"th--p-aFr ties.

All agreements and covenants contained herein are severable, except those
establishing the research project and those regarding protection of
confidential information, publication rights, and patent rights. If any
agreements or covenants, apart from the named exceptions, are held invalid by
a court of appropriate jurisdiction, this agreement shall be interpreted as if
such agreements or covenants were not included.

The headings in this agreement are intended only for convenience of
reference and shall be given no legal effect in construction or
interpretation.

The waiver by either party hereto of any right hereunder or failure to
perform or breach by the other party shall not be deemed as a waiver of any
other right hereunder or of any other breach or failure by said other party
whether of a similar nature or otherwise. The failure of either party to
enforce at any time the provisions of this agreement, or any rights in respect
thereto, or to exercise any election herein provided, shall in no way affect
the validity of this agreement. The exercise by either party of any of its
rights herein or any of its elections under the terms or covenants herein
shall not preclude or prejudice either party from exercising the same or any
other right it may have under this agreement, irrespective of any previous
action or proceeding taken by either party hereunder.

COMMENTS-

AN INTEGRATION CLAUSE IS INCLUDED TO INSURE THAT
EXTRANEOUS OR UNOFFICIAL DOCUMENTS OR AGREEMENTS ARE NOT
INTRODUCED TO IMPLY ADDED CONDITIONS TO THE AGREEMENT.
IT IS UNDERSTOOD THAT THE ENTIRE AGREEMENT IS EMBODIED IN
ONE DOCUMENT UNLESS ADDITIONS OR MODIFICATIONS OCCUR
LATER BY PRESCRIBED METHOD. IT IS ALSO DESIRABLE TO MEET
THE LEGAL REQUIREMENTS FOR SEVERABILITY. IN THE EVENT
THAT INDIVIDUAL SECTIONS OF THE AGREEMENT ARE FOUND








INVALID BY AN APPROPRIATE COURT, THOSE SECTIONS MAY BE
DELETED FROM THE AGREEMENT WITH THE REMAINING PARTS LEFT
INTACT.

XX. Governing Laws

This agreement shall be governed by and construed in accordance with the
laws of
COMMENTS--

THE GOVERNING LAWS SECTION IS INCLUDED MERELY TO PRECLUDE
ANY JURISDICTIONAL PROBLEMS OR CHALLENGES SHOULD THE
AGREEMENT BECOME SUBJECT TO CONTROVERSY OR LITIGATION.
LOCAL STATUTES AND LIMITING FACTORS IN RELATION TO
GOVERNING LAWS SHOULD BE CONSULTED.

GENERALLY THE LAWS OF THE STATE IN WHICH THE UNIVERSITY
IS LOCATED SHOULD CONTROL. IT IS NOT REASONABLE TO
EXPECT THE UNIVERSITY TO HIRE OUT-OF-STATE COUNSEL IN THE
EVENT OF A DISPUTE IN COURT.

XXI. Definitions

"All substantial rights" to a patent means all rights of value at the time
the patent is transferred, which are generally the rights to make, use, and
sell the patented subject matter. An undivided interest in all substantial
rights is an equal percentage of eac-an- every substantial right. All
substantial rights does not include patent rights that are restricted to
particular industries or territories unless the patent is useful only in those
industries or territories.

"Best efforts" means with diligence that reasonably is due an important
research project.
"Intellectual property rights" include all patents and applications for
patents or certificates of plant variety protection as well as trade secrets,
copyrights, and trademarks.

A "license" of a patent is the grant of anything less than all substantial
rights. It conveys a covenant by the patent owner not to sue for the manu-
facture, use, or sale of that which is covered by the patent.

"Memorandum of agreement" or "agreement" means this agreement between
(_ the University) and
o____e__ct e (the -Sponsor) dated f or the
project entitled, __________
and ail attached appendices and exhibits.
"Patent rights" shall include all patents issued under Title 35 of the
United States-Code, all foreign patents, as well as Certificates of Plant
Variety Protection issued under Title 7, Sections 2321 et seq. of the United
States Code.











"Principal Investigator" is the project leader and coordinator who is
designated by the University with the approval of the Sponsor. All management
of the project is directed by the Principal Investigator.

"Project assets" are all articles of tangible property which are purchased
with project Tund for use by the researchers in performance of the project.

"Project funds" are all moneys advanced to the University by the Sponsor
for use in the project.

"Researchers" are all University employees including the Principal
Investigator, who have been assigned to work on the project and who have
signed a research agreement.

"Research project" or "the Project" is the work entitled,
______________, and is the subject of this
agreement.

"Trade Secrets" are any formulae, patterns, devices, or compilations of
information which are used in the Sponsor's business, provide the Sponsor a
competitive advantage, and are marked "trade secret" and "confidential."

XXII. Research Agreement

In consideration of my selection to participate in the research project
entitled, and funded
by t___he Sponsor,- aho'f payme-nts due under the
agreement, I hereby agree:

1. to abide by all terms of the agreement;
2. to communicate all research results promptly and fully;
3. to keep accurate, witnessed, daily records of the research;
4. to assist the University and the Sponsor in any way to pursue patent
rights;
5. to maintain in strict confidence all trade secrets that are disclosed
by the Sponsor for use in this project;
6. to reveal any conflicts of interest or potential conflicts of interest,
which I may have, due to either private consulting arrangements or
other associations which may be related in subject matter to the attached
agreement;
7. to disclose all patents or certificates of plant variety protection
that have been issued in my name or that I have assigned to another
which relate to the project;
8. to seek no outside funds from either a public or private
Sponsor for the work to be performed pursuant to this agreement; and
9. that all rights to inventions and project assets in connection with
this research project belong to the University as described in the
agreement.

COMMENTS--

THE RESEARCH AGREEMENT MAY OR MAY NOT BE ATTACHED. IT
SHOULD BE SIGNED BY EACH RESEARCHER, OR SEPARATE
AGREEMENTS SHOULD BE SIGNED BY EACH RESEARCHER. THE











PURPOSE OF THE RESEARCH AGREEMENT IS TO APPRISE EACH
PARTICIPANT IN THE PROJECT OF THE FACTS SURROUNDING THE
ARRANGEMENT. EACH RESEARCHER SHOULD BE AWARE OF THE
UNIQUE ISSUES INVOLVED IN THIS UNIVERSITY/INDUSTRY
COOPERATIVE EFFORT. BY VIRTUE OF SIGNING A RESEARCH
AGREEMENT, THE RESEARCHERS WILL BE BOUND TO THE TERMS OF
THE AGREEMENT BETWEEN THE SPONSOR AND THE UNIVERSITY.
THIS IS ESPECIALLY IMPORTANT CONCERNING THE TREATMENT OF
INTELLECTUAL PROPERTY.

DUE REGARD SHOULD BE PAID TO THE RELATIONSHIPS AMONG
GRADUATE STUDENTS, PROFESSORS, THE UNIVERSITY, AND THE
SPONSOR IN THE FORMULATION OF CONTRACTUAL OBLIGATIONS.

THE RESEARCHERS MIGHT RECEIVE DIRECT PAYMENTS FROM THE
SPONSOR IF UNIVERSITY POLICY DOES NOT PROHIBIT IT.
OTHERWISE ALL PAYMENTS SHALL BE MADE THROUGH APPROPRIATE
UNIVERSITY CHANNELS.

IN CONNECTION WITH RECOMBINANT DNA RESEARCH, IT IS
INCUMBENT THAT THE RESEARCHERS STRICTLY ADHERE TO THE
GUIDELINES PROMULGATED BY THE NATIONAL INSTITUTES OF
HEALTH (VOL. 48 FEDERAL REGISTER, P. 24556, JUNE 1,
1983).

ADEQUATE PRECAUTIONS MIGHT BE ADDED TO THE RESEARCH
AGREEMENT TO PROTECT ALL FORMS OF INFORMATION WHICH ARE
DERIVED FROM THIS PROJECT. THE NEED FOR SUCH PROTECTION
MIGHT ARISE WHEN A RESEARCHER LEAVES THE EMPLOY OF THE
CONTRACTING INSTITUTION FOR A NEW POSITION. AN
APPROPRIATE SAFEGUARD WOULD BE TO PROHIBIT ANY USE
OUTSIDE THE PROJECT OF ANY INFORMATION DERIVED FROM THE
PROJECT DURING ITS TERM AND FOR A SPECIFIC TIME PERIOD
FOLLOWING ITS CONCLUSION.

XXIII. Funding Arrangements

$ shall be paid to the University on the date the project is to
begin. $ shall be paid on the first of each month thereafter,
beginning until the date the project is scheduled to be
completed.

COMMENTS--

THE FUNDING ARRANGEMENTS MAY TAKE MANY FORMS. MONTHLY
PAYMENTS MAY NOT BE PRACTICAL, SO PROVISION FOR QUARTERLY
OR SEMI-ANNUAL PAYMENTS MIGHT BE MADE. PAYMENTS MIGHT BE
MADE AS NEEDS ARISE OR AS DETERMINED WHILE THE RESEARCH
PROGRESSES. FUNDING SHOULD BE RECEIVED BY THE UNIVERSITY
IN ADVANCE IN ORDER TO INSURE THE PROPER CONTINUATION OF
THE RESEARCH. IN ALL CASES, THE FUNDING SCHEDULE SHOULD
BE DEFINITE AND SPECIFIC.








THE AGREEMENT MIGHT INCLUDE PROVISIONS FOR BONUS PAYMENTS
FOR INTERIM ACCOMPLISHMENTS OF THE RESEARCHERS. SUCH
ARRANGEMENTS SHOULD BE SET FORTH IN SPECIFIC AND DEFINITE
TERMS.








CHAPTER 4


EFFECTS OF DEVELOPMENTS IN BIOTECHNOLOGY ON SOCIETY


I. Introduction

A variety of effects will accompany the introduction of developments in
biotechnology--effects upon individuals, firms, communities, and the natural
environment. The precise effects will vary with the particular developments
that are introduced. Also, the external impact of biotechnological research
products will be similar to that of technologies derived through traditional
research activities. The influx of new technology into agriculture is
commonplace, but introductions of new biotechnology may be distinguished by
three features.

First, there is more time to study and plan responses to this new
technology before it is introduced on a broad scale. This time should be
spent anticipating all of the possible effects--economic, social,
environmental, and others.

Second, biotechnology holds the potential for major technological
change across a broad front, and agriculture promises to be the object of some
of the most significant developments.

Third, because the potential payoff for developments in biotechnology
may be very large, there is a significant demand on the pool of trained
scientists from universities.

A discussion of the effects of developments in biotechnology can be
divided into three categories: (1) effects expected to come within the normal
functioning of the price or market system, (2) environmental effects which are
anticipated to become manifest outside the price or market system, and (3)
social effects upon individuals, groups, and communities.

II. Effects Within the Price or Market System

A major question is, who ultimately benefits from new technology, such as
increased capacities for nitrogen fixation or frost tolerance--farmers,
consumers, input suppliers, output processors? New technologies are generally
cost decreasing, output increasing, or both. In many instances, consumers
tend to be the major beneficiaries in the long run with more output at a lower
price. In a market characterized by highly elastic demand or by a rapid
growth in demand, producers may retain a relatively large share of the gain
from technical change. However, in a market characterized by relatively
inelastic demand and by slow growth in demand, as is typically the case with
food in high income countries, most of the gains from technical change are
passed along to consumers in the form of lower product prices. Only early
adopters gain under competitive market conditions.

One likely result of research in the biotechnologies in agriculture is an
increase in production from a given amount of inputs. Thus, the level of
utilization of some inputs might decline, use might be made of lower quality
inputs, or the level of inputs could remain constant with production levels









increasing. The adjustment process promises to be particularly dramatic for
land as a production input. With increases in productivity from developments
in biotechnology, continuing pressure on land values appears highly probable.
Marginal lands for uses impacted by biotechnology would be expected to shift
to lower uses on the value scale. If the societal interest is in maintaining
a level of agricultural output, attention would be expected to focus on
reductions in levels of inputs used in production or use of lower quality
inputs in production. This could permit some easing of concern about soil
conservation, for example, if an increase in production per acre of land under
cultivation were to occur as a result of developments in the biotechnology
area. If the national interest is in maintaining a particular level of
production, the public interest would seem to be well served with investment
in research in biotechnology with the potential for reducing the utilization
level for inputs of greater present value than the present value of the
research investment. Research will be needed on the trade-offs between
expenditures of funds for research and development work in the new
biotechnologies and expenditures of funds to maintain the productivity of
inputs such as land. Throughout much of the cornbelt, for example, a great
deal of policy concern already exists over highly erosive soils. These soils
have moved increasingly into the production of intertilled crops and away from
livestock production as more attention to enterprise accounting has made it
increasingly clear that livestock production with high levels of forage
utilization is not an economically viable enterprise. With an expectation
that developments in biotechnology will increase productivity both in areas of
animal production and in areas of plant production, problems of land use at
the margin and problems of land values are likely to draw research and
extension attention over the next several years.

In some instances, long-range effects may be felt on the structure of
agriculture, depending upon the benefits from the new technology by size and
type of firm. Some developments may be structure-neutral. Others may come
with significant scale economies and benefit larger firms. The new
technologies may also affect risk and uncertainty with important implications
for investment decision-making and risk-sharing arrangements. For example,
the risks of loss of plants or plant production from freezing could be reduced
with development of more tolerant varieties as could the loss of animals or
animal production from disease.

New technology may affect price and quality competition for products
internationally. This is one compelling reason for pressing ahead
relentlessly with research in this area. Viewed from the standpoint of the
developing countries, the prospects for breakthroughs in the biotechnologies
hold both threats and promise. The matter of limited capability to carry on
research in this area, the limited capability of industry in developing
countries to exploit biotechnological developments, and the question of access
to biotechnological .breakthroughs in developed countries pose substantial
obstacles to the developing countries. Moreover, adjustment problems in the
developing countries could be substantial. Anticipating the effects of new
biotechnology is especially important in that developments are likely to have
a direct impact on more economic sectors than the Green Revolution. Yet
biotechnology offers hope for meeting nutritional needs in developing
countries where 90 percent of the population increase is likely to come.
While much recent technology such as the computer revolution has largely
bypassed developing countries, biotechnology relates directly to food and








fiber production, disease control, and other universal needs of the human
family. 'For all of these effects, domestic -as -well as international, ,market
forces will be activated as new technology is introduced and disseminated.

III. Environmental Effects
The second category of effects from the introduction of new
biotechnological developments involves the various dimensions of the
environment. Under this rubric are: (1) effects on human health, (2) effects
on animal health, (3) effects on the natural environment (air, soil, and
water), and (4) effects on property and other features of the environment
(apart from humans, animals, and the natural environment). Assurance is
necessary that the environment will not be damaged irreparably.

In dealing with the environmental effects outside of the price or market
system, efforts should be concentrated on preassessment, monitoring, and
compensation.

Effective preassessment of human health and environmental effects is
necessary before developments in biotechnology are released for field trials
and for general use. Monitoring of those effects should continue as
developments continue in general use. (A system is currently in place and
functioning to provide a review of proposed research in biotechnology.)

Assessment of the economic and social results should commence as soon as
possible after a development has a reasonable probability of introduction.

Compensation may be appropriate for those experiencing losses from
resource adjustment. Those costs may be lessensed by the development of new
technologies and other means to neutralize or to reduce the impact of negative
effects.

With respect to the preassessment function, a system is already in place
to provide a review of proposed research biotechnology. The centerpiece of
that system, the recombinant DNA Advisory Committee (RAC), of the National
Institutes of Health, focuses primarily on anticipated effects that reasonably
would be expected to have an adverse effect on health. This committee, has
developed a proposal for a national biological assessment system (see Chapter
6) which involves an ongoing process to meet perceivable needs in
biotechnological developments for agriculture. This monitoring effort would
assure continuing and effective surveillance of the effects of
biotechnological developments from field trials and commercial uses.

It is vital that the review functions be conducted in such a manner as to
maintain the highest level of confidence possible on the part of the public.
As part of that objective, the review effort should involve the most capable
and knowledgeable individuals from the disciplines and subdisciplines within
the review jurisdiction. Wide consultation should take place before
genetically engineered organisms are released into the environment.
Involvement of scientific-representation from the environmental disciplines is
vital to assure a thorough and complete review.











IV. Social Effects


Viewed globally, biotechnology offers additional hope for addressing
problems of world hunger. The potential exists for reducing the cost of food
and increasing food supplies in deficit-food areas. At the same time, the
potential is high for substantial and far reaching social adjustments from
developments in biotechnology. Some of the adjustments may relate directly to
biological features of the development; others will involve the social effects
of adjustments from change in economic relationships. The list of possible
impacts might include effects on individuals, families, firms, and groups of
firms, as well as communities including input suppliers and output processors.

The introduction of new developments in biotechnology will likely pose
many of the traditional questions relating to adoption of new technology and
diffusion throughout society or a sector or subsector. A substantial body of
literature has emerged in this area over the past three or four decades. For
this category of effects, the major contributions may be in anticipating the
social effects and assisting those affected in adjusting to changed
conditions.










CHAPTER 5


LEGAL CHALLENGE TO THE DELIBERATE RELEASE OF GENETICALLY ENGINEERED ORGANISMS,
FOUNDATION ON ECONOMIC TRENDS, ET AL. V. MARGARET HECKLER, ET AL.

The following is a chronology and brief outline of an important legal
action (Foundation on Economic Trends, et al. v. Margaret Heckler, et al.)
involving the deliberate release into the environment of genetically engi-
neered organisms. Several environmental and public interest groups have
challenged not only the first such release, but also the only existing review
procedures. The major challenges involve compliance with the National En-
vironmental Policy Act and the requirements for Environmental Impact State-
ments. This suit has caused significant delays in research which is viewed as
essential to worldwide agriculture.

7 September 1983

Civil Action No. 83-2714 was filed in the United States District Court
for the District of Columbia, entitled:
The Foundation on Economic Trends, Jeremy Rifkin, Michael W.
Fox, Environmental Action, Inc., and Environmental Task Force
vHeaT fTETT ITcHukimnSer v i c6 fs, ETiiFs T ynai r-a-E- Deire, tnT

HeTalt-h--TTTT RTc-cnh-i-ar ." f -Krause, Tn-hTs-o-Tfiia capaci ty
as RUE e to-Ia f-Nt-aT~fInIlT1iut 6fi --ATergy an-'TnTOe-tiuu-s-
Diseases.

The action is a complaint for a declaratory judgment and injunctive
relief. The plaintiffs are requesting the court to declare unlawful and
enjoin the actions of the defendants and those acting under their
authority approving, authorizing, or carrying out experiments which
involve the deliberate release of any organism containing recombinant DNA
into the environment pursuant to the National Institutes of Health Guide-
lines for Research Involving Recombinant DNA Molecules. The plaintiffs
further request that the court declare such Guidelines unlawful.
The plaintiffs claim that the National Institutes of Health violated the
National Environmental Policy Act (NEPA) by not preparing either an En-
vironmental Impact Statement (EIS) or an Environmental Assessment (EA)
when the Guidelines were revised in 1982 and 1983 to permit the deliber-
ate release of recombinant DNA organisms into the environment.

The plaintiffs further claim that the defendants' procedure for granting
approvals of experiments which involve the release of recombinant DNA
into the environment constitutes arbitrary agency action in violation of
the Administrative Procedures Act. The plaintiffs form this conclusion
because they claim the defendants failed to consider fully the
alternative of developing adequate scientific protocols for environmental
risk assessment before approving such experiments.








Finally, the plaintiffs claim that the actions of the defendants consti-
tute a federal common law nuisance in creating an unnecessary and sub-
stantial, albeit unquantified, risk to the environment.

16 September 1983

Plaintiffs moved for a Temporary Restraining Order and/or Preliminary
Injuction to enjoin the Recombinant DNA Advisory Committee (RAC) of the
National Institutes of Health (NIH) from hearing, reviewing, debating,
evaluating, and making a recommendation to defendant Wyngaarden on two
proposed experiments involving the deliberate release of recombinant DNA
organisms at a closed portion of the Committee's meeting scheduled for 19
September 1983.

The plaintiffs claimed the meeting either should have been open to the
public, or none of the matters should have been discussed.

19 September 1983

Judge Sirica of the United States District Court for the District of
Columbia denied plaintiffs' motion for a temporary restraining order.
Plaintiffs filed the first amended complaint which adds a fourth cause of
action based on the Federal Advisory Committee Act (FACA) concerning the
treatment of confidential information.

18 November 1983

Defendants filed an answer to the first amended complaint. Defendants
denied each cause of action.

6 February 1984

Plaintiffs filed a motion for a temporary restraining order asking the
United States District Court for the District of Columbia to enjoin
temporarily a portion of the 6 February 1984 meeting of the Recombinant
DNA Advisory Committee. The plaintiffs argued that defendants' intention
to close part of the meeting violated the Federal Advisory Committee Act
and that defendants violated the notice requirements required prior to
closing the meeting from the public. The matters to which the plaintiffs
objected concerned proposed experiments in the field concerning the de-
liberate releases of recombinant bacteria into the environment.

The motion was denied by the District Court, but on appeal to the United
States Court of Appeals for the District of Columbia, the decision was
reversed. The Court of Appeals granted the injunction on the ground that
the notice given by NIH in the Federal Register was inadequate.

13 April 1984

The plaintiffs amended the complaint in order to add David Brower (of
Berkeley, California and the Friends of the Earth) and William Turnage
(of Reston, Virginia and the Wilderness Society) as plaintiffs to the
action. Plaintiffs also added the Regents of the University of
California as defendants in the case.








14 April 1984

Plaintiffs requested a preliminary injunction: (1) ordering NIH to
vacate, rescind, and/or suspend any and all approvals for experiments
involving the deliberate release of recombinant DNA organisms into the
environment, (2) ordering the particular rescission or suspension of the
approval of the Lindow/Panopoulos experiment, and (3) prohibiting NIH
from any further review, approval, or authorization of any experiments
involving the deliberate release of recombinant DNA organisms into the
environment. Plaintiffs claim that before such activity can continue or
proceed, an Environmental Assessment or Environmental Impact Statement is
necessary for each deliberate release experiment, and an Environmental
Impact Statement is necessary because of certain changes in the NIH
Guidelines. These statements are required by the National Environmental
Policy Act according to the plaintiffs. Plaintiffs claim that before
such experiments can be undertaken scientific standards and protocols
must be promulgated in order to assess the environmental risks of
releases of recombinant organisms into the environment.

The National Institutes of Health requested the Court to dismiss the
third count of plaintiffs' complaint (federal common law nuisance) and to
grant summary judgment on the first and second counts [claims under NEPA
and the Administrative Procedures Act (APA)]. As to the third count, NIH
asserts that the Court does not possess the proper jurisdiction to hear
such claim. Concerning the motion for summary judgment, NIH claims that,
admitting the facts in a light most favorable to the plaintiffs, the only
reasonable conclusion is that NIH has upheld the policies of NEPA and
APA. The NIH maintains that its procedures for review and approval of
the proposed experiment constituted an adequate Environmental Assessment
of the risks involved. Furthermore, the Environmental Impact Statement
for the original guidelines in 1977 and the two Environmental Assessments
accompanying the 1978 amendments constituted adequate compliance with
NEPA mandates. In the same document the NIH opposed the plaintiff's
motion for preliminary injunction.

4 May 1984

The Regents of the University of California filed their opposition to the
plaintiffs' motion for preliminary injunction. The Regents' arguments
essentially mirror those of the NIH in their opposition and motions for
dismissal and partial summary judgment.

16 May 1984

The United States District Court for the District of Columbia granted
plaintiffs' motion for preliminary injunction. The Court concluded
(1) that the plaintiffs are likely to prevail when the merits of the case
are decided at trial, (2) that the plaintiffs would be irreparably harmed
if the injunction did not issue, (3) that the defendants would be harmed
relatively little, and (4) that the public interest favors granting a
preliminary injunction. The Court concluded that the decisions of the
NIH Director (1) not to issue an environmental impact statement for the
1978 revision of the NIH Guidelines, (2) not to issue a broad, program-
matic environmental impact statement addressing general environmental









issues presented by deliberate release experiments, and (3) not to issue
either an environmental assessment or an environmental impact statement
addressing specific environmental issues associated with the Lindow/
Panopoulos experiment constituted arbitrary actions in abuse of his
discretion. In sum, the NIH Directors' actions constituted the lack of
the required "hard look" inquiry for such federal agency action. The
decision of the District Court seems to hinge on the fact that specific
environmental documents were lacking to form the appropriate record for
the Court's review.

18 May 1984

The Regents of the University of California filed an emergency request to
the United States Court of Appeals for the District of Columbia to vacate
the preliminary injunction against the Regents. The Regents claimed that
the District Court failed to follow and apply the governing law in
granting the preliminary injunction against the experiment. Specifical-
ly, it was asserted (1) that the Court improperly allowed the plaintiffs
to raise for the first time in court objections that they had failed to
raise before NIH during its proceedings and (2) that the Court improperly
reached beyond NEPA to impose standards for the agency's decisional
criteria and process. The Regents claimed that the first point is
compelled by well-settled notions of fairness, orderly procedure, and
good administration. On the second point, the Regents felt the District
Court erred by failing to apply the "arbitrary and capricious" standard
and by ignoring the agency's standards for decision-making. The
"arbitrary and capricious" standard compels the overturning of a federal
agency's action only where it has exceeded good reason to the point of
being arbitrary or capricious. The Regents maintained that, if the
injunction is not vacated, the University, its research programs, and its
research faculty will be irreparably harmed in the areas of recruitment
and retention of faculty and researchers and of research funding.
Furthermore, the plaintiffs can allege only remote, speculative harm.
Finally, the Regents argued that the public interest will be
substantially and irreparably harmed by the loss of responsible and
valuable scientific research.

The plaintiffs countered the Regents' motion by claiming that the public
notices for the deliberation of the experiments at NIH were inadequate
and that little harm would result if the experiment is further delayed.
The Foundation points out that nowhere is it explained how or why the NIH
concluded that no EIS or EA was necessary. The Foundation's argument is
mainly that the District Court's action in granting the preliminary
injunction was the correct one.

23 May 1984

The American Council on Education filed an amicus curiae memorandum with
the Circuit Court in support of the Regents' emergency appeal. The
thrust of the Council's memorandum was unless the order of the District
Court was vacated, trust and confidence in the scientific community would
be harmed irreparably. The Council claimed that unless the experiment
proceeds, the entire area of recombinant DNA research will be affected
dramatically and adversely. Stressed in the memorandum is the fact that









the academic community has been acting in reliance on the NIH guidelines
while conducting recombinant DNA research. Researchers have been aware
that their experiments which pose significant risk to human health or the
environment may not be conducted. The scientific community has been very
cautious and responsible in their regulation of recombinant DNA experi-
mentation. Careful and reasoned attention has been directed to every
potential risk which has reasonable scientific basis. The Council now
fears that the conclusion to be made from this judicial result is that
all recombinant DNA experiments must be preceded by an Environmental
Impact Statement. That conclusion raises an inference that the particu-
lar experiment to be conducted will cause a significant risk to the en-
vironment, and that a finding of "no risk" is thereby precluded. Then it
would follow that no experiments could be approved under the Guidelines,
since the Guidelines prohibit experiments which pose significant risk to
human health or the environment. The public interest will only be served
by this injunction if environmental harm will result from the experiment
or if NIH failed to address the appropriate environmental factors.
Neither is true according to the American Council on Education. The
Council concludes that the District Court has diminished the trust and
confidence the scientific community has established with the public in
the area of recombinant DNA research over the past ten years.

25 May 1984

The Circuit Court denied the Regents' emergency appeal of the preliminary
injunction. In light of the significant amount of time involved and the
small likelihood of success, the Regents did not file a certiorari motion
to the United States Supreme Court in opposition to the Circuit Court's
decision.

1 June 1984

The NIH Recombinant DNA Advisory Committee recommended approval of an
experiment by Advanced Genetics Sciences, Inc. (AGS) to field test
genetically engineered Pseudomonas strains.

The plaintiffs filed a motion in the District Court for Summary Enforce-
ment of the Circuit Court Order of February 6, 1984 or, in the alterna-
tive, for a Preliminary Injunction against the AGS experiment. The
Circuit Court Order involved the prohibition of discussion or action on
the AGS experiment at the February 6 meeting of the NIH RAC.

20 August 1984

Both Regents of the University of California and the National Institutes
of Health filed briefs appealing the May 16 injunction issued by the
United States District Court for the District of Columbia. The American
Council on Education and the National Association of State Universities
and Land-Grant Colleges filed an amici curiae brief in support of
defendant-appellant Regents.

The Regents' brief raises three major objections to the District Court's
decision: (1) the court erred in issuing the injunction against the
University experiment, (2) the court erred in requiring a programmatic









approach by NIH in its review of deliberate release experiments, and
(3) the court erred by broadly tailoring the injunction to halt the
Lindow experiments. The experiments are necessary in order to develop
the generic standards desired by the court. In the Regents view, this
thwarts the very objectives that the court is trying to attain.

The NIH brief covers three major areas in its objection to the issuance
of the preliminary injunction: (1) the NIH determination that an EIS was
not required for the 1978 revisions to the NIH guidelines was reasonable
and adequately supported by the record; (2) NEPA does not require NIH to
prepare a programmatic EIS; and (3) the balance of equities between the
parties clearly weighs against the issuance of a preliminary injunction.

The amici curiae brief concentrates on the harm that would allegedly
resuflt-fomthe-'preliminary injunction. The amici curiae claim that
substantial harm will result to the progress of recombinant DNA research,
and that trust and confidence in the scientific community will be ir-
reparably harmed.

24 September 1984

Plaintiffs filed a brief in opposition to the defendants appeal of the
May 16 injunction. The plaintiffs maintain that the District Court
correctly found that an EIS was required for the 1978 revisions of the
guidelines, that a programmatic EIS is necessary for deliberate release
experiments in general, and that NIH failed to prepare an Environmental
Assessment for the Lindow experiment.

9 October 1984

Defendents filed reply to plaintiffs opposition appeal of the May 16
injunction. Oral argument is set for the November-December session of
the Circuit Court.









CHAPTER 6


PROPOSAL FOR A NATIONAL BIOLOGICAL IMPACT ASSESSMENT PROGRAM


I. Introduction

The agricultural community continuously assesses the impact of plant,
animal and microbial biota within a wide range of cropping and animal pro-
duction systems. These assessments are made to not only assure agricultural
stability but also to assure the protection and preservation of our environ-
ment. Particular care is taken with proposed introductions of new or geneti-
cally altered plants, animals and microbes. Any new material is carefully
assessed to determine if it is beneficial from an agricultural point of view
without imposing any threat to our environment. In the case of all major
crops, a wide range of processes are presently used in each state in which new
forms, varieties and species are assessed for their impact. It is proposed
that we build on our existing systems which have a long and successful history
to create a National Biological Impact Assessment Program (NBIAP).

Under the system envisioned in the National Biological Impact Assessment
Program, performance protocols will be developed on current model system
research projects to build into our existing protocols the capabilities of
successfully assessing the impact of materials produced using modern biotech-
nological research. This system would include those materials produced by
genetic engineering research including recombinant DNA (R-DNA) methodologies.
NBIAP would involve an orderly, step-wise assessment prior to release into the
environment and a monitoring process for assessing impact over time in
limited release systems.

NBIAP will be developed as a research based system built upon the exper-
ience gained from our existing assessment practices to benefit both production
agriculture and society as a whole while continuously protecting our
environment.

II. Concepts in Biological Change

Biological evolution is due primarily to a gradual flow of successive
changes resulting in organisms better adapted to the environment. However,
discontinuous and unpredictable events may also be important contributors to
the total evolutionary process. Few cases of natural speciation are under-
stood reasonably well; the origin of common wheat is an exception. It is
thought to have originated naturally about 2500 B.C. in the area now known as
Northeastern Turkey or perhaps an adjacent area of the Soviet Union. It
occurred as the result of a chance genetic combination of a 14-chromosome wild
grass with a 7-chromosome wild grass to form a 21-chromosome hexaploid that
subsequently became domesticated as bread wheat. Similar spontaneous genetic
changes are offered as explanations for the sudden formation of new types of
organisms and the rapid genetic dynamics that sometimes occur in natural
ecosystems.

In agricultural research systems the use of artificial selection for the
improvement of plant and animal types has caused dramatic increases in food
and fiber production. For instance, in the past 50 years, virtually all








varieties of crops have been replaced with improved selections. As a result
this Nation's yields of wheat, rice, sugarcane, soybeans, and potatoes have
been doubled. During the same period, United States yields have tripled for
corn,.grain sorghum, peanuts and processing tomatoes.

Most crop yield improvements are the direct result of genetic manipula-
tion of the crop species by conventional genetic research methods. For the
past half century, considerable research efforts have been devoted to un-
locking the natural barriers that define species. Penetrating these barriers
allows for the synthesis of new species. Some success has been accomplished
with man-made crops such as Triticale which was developed by fusion of the
wheat and rye genomes. Many other desirable recombinations between species
have not been possible because of strong genetically and immunologicallly
incompatible systems that block the interspecific exchange of genetic
material. These barriers have greatly limited conventional breeding programs,
forcing research programs to deal with gene pools of very limited size.

New biotechnological research capabilities may overcome many of these
barriers. These discoveries include the development of immunosuppressant
drugs that permit fertilization between distant species, the fusion of proto-
plasts of different species and the transfer of specific genes from one
species to another. Still to come will be methods to synthesize specific
genes for insertion into organisms. This new genetic technology combined with
the use of cell and tissue culture systems provides opportunities for the
exploration and development of new genetic combinations.

Changes and/or improvements in animals have been produced by traditional
breeding techniques for as long or longer than in plants. Fewer species have
been involved in the domestication of animals and efforts have been confined
primarily to cattle, swine, sheep, poultry, goats, and horses. Most activity
has been confined to intra-species crosses. Notable exceptions of inter-
species crosses occurred in such animals as the mule and beefalo. In recent
years, there has been a variety of "new breeds" of cattle developed such as
Brangus, Beefmaster, Simbrah, Brahmasin, Gelbray, and Santa Gertrudis that
depend on crossing closely related species of the same genus (Bos taurus x Bos
indicus). In addition, several synthetic strains of cattle, sw-ine, and sheep
invoTvTng the crossing of two or more existing breeds are currently being
developed at USDA research stations and State Agricultural Experiment
Stations. From an industry standpoint, the establishment of new breeds has
become more an administrative activity than a biological one.

Induced genetic changes in animals, i.e., transferring genes from one
species to another species in the egg, zygote, or embryo, has been accom-
plished only recently. The classic case involved transferring the genome for
growth hormone production from a rat to a mouse.

III. Assessment of Biological Change

For decades a reliable, distributed network of agricultural scientists
has successfully undertaken the task of monitoring and measuring the products
of conventional genetic improvement programs. This pluralistic and
geographically distributed research system has been a key factor in the ever
successful agricultural production of the United States. It is this network
of scientists which provides the information needed to make intelligent









decisions over the release of new cultivars, the introduction of new breeds of
animals, and the utilization of new microbial strains.

All discoveries of improved organisms are based on information collected
by a research protocol acceptable to the agricultural scientists and
protective of the environment. Current methods have been refined through
years of experimentation. "Rod-row" cultivar tests, "calf-performance"
testing and other procedures have been designed to measure the significant and
to judge the worthwhile. Statistical conventions, common experimental
designs, and standards for comparison have been generally accepted by the
entire agricultural scientific community. These protocols have and will
continue to serve American agricultural scientists and society well in the
assessment of the impact of products of conventional genetic improvement
programs. These protocols have been utilized over the last fifty years by
American agricultural scientists in the successful release of over 7,500 new
varieties, cultivars, and lines of germplasm. These releases have played a
major role in the development of our American agricultural system.

Thus, staggering quantities of DNA are deliberately released in agri-
cultural practices. These releases are carefully designed through results
from scientific research and tested under controlled systems for assessment
for their potential impact over time. Risk and benefit assessments are both
intensive and extensive prior to broad release into the environment. This not
only includes assessment of impact within components of the agricultural
system but also its potential impact on the environment broadly. Individual
states have specific protocols for the release of new crop varieties and
biological control agents. Appendices A and B are included as examples of
such state protocols.

A most important feature of this intricate national system for assessing
biological change is that of measuring change over time following extensive
and expansive release into the environment. Although this aspect of post
release impact assessment has been developed in an organized fashion for a
half century it has become a very sophisticated system in the last two decades
with the advent of new tools and techniques. Molecular ecologists have
designed indicators that measure the "symptoms" of genes; genetic gardens with
continuous monitoring, gene traps and genetic marker systems, and probes
designed to measure genetic flow and shifts in populations.

Not only is the post-release impact assessment essential to verify pre-
dicted performance but it is equally essential because of changing climactic
and edaphic factors, mass population effects over time, spontaneous genetic
events, gene "wearing" in a system, and other factors. Thus a continuing,
research based impact assessment system is essential to a total assessment of
biological change in this nation.

Although the food, feed and fiber base of the nation is derived in large
measure from only seven animal species and 38 plant species, the resulting
array of biologics released in the environment over time, exposing the
consequences of specifically designed DNA molecules, is of major concern in
the impact assessment process.
Although based on relatively few species American agriculture is of major
significance in the total physical and biological environment of the nation.









Of the 1,973,000,000 acres of land within the United States, approximately
1,438,000,000 acres are directly used in food, feed, and fiber production.
The relative distribution of areas planted among our major domestic crops is
constantly changing (Table 1) as is the case with our major domestic animal
populations (Table 2). Although we do not usually describe crops on the basis
of numbers of individuals it is of interest to note the numbers of genetically
altered corn and wheat varieties released into our agricultural environment
(Table 3).











TABLE NO. 1 Distribution of Area Among Major DoTestic Plant Production Crops
between 1932 & 1982


Crops 1932 1942 1952 1962 1972 1982
Acres (000)

Grain 227,558 197,039 200,708 147,460 130,739 175,634
Fruits 4,970 3,848 3,125 2,775 3,204 3,559
Vegetables 2,410 3,777 3,772 3,415 3,233 2,176
Cotton 35,891 22,602 25,921 15,569 12,984 9,729
Other Crops --- -- --- 1,287,000

Total 270,829 227,266 233,526 169,219 150,160 1,478,098


1USDA Agriculture Statistics Reports, 1978 and 1983.












TABLE NO. 2 Distribution of Major Domestic Animal Production Populations
between 1932 & 1982


1932


1942


1952


1962


1972


1982


Number of Animals (000,000)

Cattle 66 75 88 100 118 116
Swine 59 61 62 57 60 54
Sheep 54 57 32 31 19 12
Poultry 459 508 489 469 633 444


Total 638 701 671 657 830 626


TABLE NO. 3 Number of Plants Planted and Area Covered by Genetically Altered
Corn and Wheat Varieties Released in the Environment in 1982


Species


Acres


Plants


110,577,000
51,851,000


10
193 x 1010
3,940 x 10


Corn
Wheat


-- '~Y









In addition to the impact assessment of the billions of plants and ani-
mals illustrated in Tables 1-3, thousands of species of microbial life have
also been assessed. In plant culture alone some 25,000 species of fungi,
3,000 species of nematodes, 800 species of viruses, and 600 species of bac-
teria may be involved at any one time with the release and maintenance in the
environment of a primary plant production system. It should also be borne in
mind that the entire system is dynamic. Although species structuring in the
plant and animal systems is relatively stable, varieties, forms, breeds,
strains, and cultivars provide major changes in genetic conformation. In
response the microbial portion of the system is constantly shifting in genetic
conformation.
Thus, there is in place an extensive network and history of experience
for dealing with the introduction of new genetic combinations of plant, animal
and microbial life into the environment. However, the introduction of new
biotechnological research capabilities often referred to as "genetic
engineering," into agricultural research presents a unique set of questions
for agricultural scientists. We do not know if all existing research
protocols are adequate for assessing the impact of the products of these new
biotechnological research capabilities. Many existing methods may be
appropriate, others may be inadequate and additional assessment protocols are
needed.

Biological assessment through the NBIAP system would not seem appropriate
for the variations resulting from traditional animal breeding. These changes
are usually very subtle and during the course of having to produce several
replications and/or generations, the biological assessment has been well
determined. Imposition of NBIAP standards would be an overkill.

On the other hand, there are at least two scenarios in which biological
impact assessment is very appropriate. The first of these involves the use of
organic molecules derived from genetically engineered organisms to induce a
change from the normal biological pattern. A contemporary example is the use
of microbially produced growth hormone to alter the growth rate, lactation
performance, or metabolite partitioning in animals. To date, the assessment
of these compounds has been rigidly controlled, but establishment of addition-
al acceptable protocols would be appropriate.

A second case is where the genetic component of the embryo has been
altered by means just now being perfected. These techniques have the poten-
tial for producing combinations of traits not now existing in nature and even
new species. As a consequence, biological impact assessment standards and
requirements are essential.

The genetic changes resulting from the traditional methods used in selec-
tion and crossing between existing varieties of crop plants likewise do not
usually pose a risk to the environment; also this impact has been successfully
monitored with existing protocols. However, the second scenario above is also
one which would require biological impact assessment of the new plant germ-
plasm as well. In addition, plants provide a further complication in that
there may be potential for the new variant to become a pest.

The scientist and the scientific community have assumed the responsi-
bility for determining whether or not a given commodity and/or food derived








from a plant or animal improvement program is safe or is an improvement in
quality and quantity over preexisting commodities and food sources. In
certain instances these research scientists cooperate with scientists in the
Food and Drug Administration and other governmental agencies in assuring the
appropriate and proper quality of foods derived from various commodities.

This system of scientist monitoring and regulation integrated into the
overall plant and animal improvement research programs has been extra-
ordinarily successful and there are few examples of hazardous foods that have
emerged in the marketplace as a result of this system. There are a few
examples of hazardous compounds being detected and thus have not presented a
threat to consumers. One such instance occurred during the 1960's when a
potato variety with high alkaloid content was at the point of release when it
was realized that there was a potentially hazardous level of alkaloid in the
variety. The variety was withdrawn and subsequent releases of potato var-
ieties in this country have been checked for alkaloid content.

In addition to new plant and animal varieties as food sources, one must
also consider food additives, their sources and the reasons for using them.
Food additives come from an array of biological and synthetic processes and
they are generally added to food as a matter of maintaining flavor, to enhance
color, to prevent spoilage, to enhance shelf life, and to improve the nutri-
tional value.

There have been problems associated with various food additives; these
problems have been generally associated with the nature of the additive and
not necessarily how it was produced, either synthetically or biologically.
This is an important consideration when one realizes that genetic engineering
as related to food additives represents the development of new processes or
the modification of older processes whereby additives are developed. Thus,
genetically engineered food additives would be no more or less hazardous to
the consumer than additives derived by other processes.

IV. Proposal For a National Biological Impact Assessment Program

This document sets out a plan for a national program to utilize existing
scientists, research networks, and protocols to assess and monitor biological
changes in agricultural and related ecosystems. We recognize that not all
questions can be answered now. We stress the urgency of beginning now to
delineate appropriate and acceptable scientific methods for the assessment of
the products of biotechnological research.

It is proposed, both for economic reasons and to better capture the
benefits of existing experience, that NBIAP be established within the U. S.
Department of Agriculture and its state cooperating institutions. No other
agency or organization could offer a comparable existing structure, geographic
distribution of expertise, depth of experience, impartiality of assessment and
proven history of scientific integrity. Duplication of this existing network
would be both costly and unjustified.

The mission of the NBIAP would be to monitor fairly, accurately and con-
tinuously the impacts of the genetically altered organisms produced by bio-
technological research. This close and continuous scrutiny by a national









network of agricultural and allied scientists would enable the United States
to gain the maximum benefits from biotechnological research while assuring the
greatest possible protection of society and the environment.

In developing the following sequence of assessment and/or protocols that
would be used by the NBIAP, existing state and federal structures and proto-
cols were utilized wherever applicable and new or proposed structures and
protocols have been integrated into the existing network. This has the
obvious advantages of reducing the costs of implementation and placing a
significant amount of regulatory and monitoring responsibility at the local
level. The logic behind such a proposition is sound when one considers how
effective local biohazard, animal protection, and human subjects committees
have functioned in their respective roles. The following outline represents
an effort to develop an idealized structure; however, it draws heavily from
specific locations, institutions and agency protocols and hence requires
additional fine tuning before it is truly a workable national structure.

As currently envisioned, the structure would function at three different
levels of research and development, i.e., laboratory, initial field release-
experimentation, and long term monitoring of commercial releases. The fol-
lowing sequences are organized to accommodate these three levels of inquiry:

Level 1. Laboratory Research

The following outline or sequence to be followed with respect to obtain-
ing "approval" for laboratory research in the area of biotechnology, i.e.
genetic engineering, etc., is a generalized description of existing procedures
and protocols. These procedures and protocols have proven effective and have
been accepted. The outline is presented here simply because it provides a
platform for levels 2 and 3. It also underscores the fact that there is in
place an infrastructure for handling laboratory experimentation.

A sequence of events that would result in the approval of laboratory
experimentation in the area of the new biotechnologies might be as follows:

(A) Development of the proposal by the principal investigator and/or
cooperators.

(B) Submission of the proposal to the SAES director or other appropriate
office for review and submission to the central university division
of sponsored research or similar structure established to handle
sponsored research.

(C) Submission of the proposal to the university biohazard committee if
appropriate.

(D) Submission of the proposal to the university animal safety committee
if appropriate.

(E) Submission of the proposal to the university Biological Impact
Assessment Program Committee as information only at this point. The
Biological Impact Assessment -rogram Committee could be an expanded
university biohazard committee or an autonomous committee estab-
lished to regulate and monitor field experimentation and releases









involving recombinant DNA and related entities. We suggest expan-
sion of the role of the local biohazard committee.

(F) Submission of the proposal by the institution to the agency from
which funding is requested. Throughout this outline the USDA
Competitive Research Grants Program will be used as the example.
The procedure would be similar in general and only different in a
few details with respect to submissions to other agencies such as
NSF and NIH.

(G) Submission of the proposal by the USDA Competitive Research Grants
Program Office to the NIH RAC will depend upon the nature of the
proposal and the appropriateness of the need for NIH review.

(H) Return of the proposal to the USDA Competitive Research Grants
Program Office by the NIH RAC approving or requesting additional
information or denying the proposal.

(I) Evaluation of the proposal by the USDA Competitive Research Grants
Program Office and panels for adherence to program guidelines and
for quality.

(J) Return of the proposal to the principal investigator by the USDA
Competitive Research Grants Program Office with a statement of
action taken.

The above sequence is based on the assumption that as the proposal is
submitted to the various local and national organizations it is approved and
forwarded with approval. This would result ultimately in the funding of an
approved proposal, i.e., a proposal that had met all of the requirements of
the NBIAP. These requirements would have been met without adding any addi-
tional structure other than the expanded local biohazard committee which as
indicated above would receive a copy of the proposal only as information,
since the proposal, at this point, involved only laboratory experimentation.

Level 2. Field Release Experimentation

The following sequence is based on the assumption that an investigator or
group of investigators had developed a biotechnological research product
involving recombined genetic material to the point that field testing is
appropriate. Field testing involves a controlled release for purposes of
further experimentation in natural or agricultural ecosystems with the
ultimate goal of determining the performance of the released material and the
potential for adverse environmental impacts. A generalized procedure under
the NBIAP for field release experimentation could be as follows:

(A) Submission of the proposal to the SAES director or other appropriate
office.

(B) Submission of the proposal to the local expanded biohazard
committee. The expanded biohazard committee would evaluate the
proposal and determine if adequate procedures had been outlined for









protection of the environment, utilizing criteria that had been
developed at the national level, from a potentially destructive
release.

(C) Submission of the proposal to the university animal safety committee
if appropriate.

(D) Submission of the proposal to the university central division of
sponsored research for approval and eventual transmission to the
USDA Competitive Research Grants ProgramnOTf-fce.

(E) Following approval at the local level, submission of the proposal to
the USDA Competitive Research Grants Program Office.

(F) Submission of the proposal to the USDA National Biological Impact
Assessment Program Board by the USDA Competitive Research Grants
Program Office This national Board, appointed by the Secretary of
Agriculture and reporting to the Assistant Secretary for Science and
Education, would have developed previously a set of criteria whereby
each proposal for field release experimentation would be judged.
The national Board would set up a substructure consisting of program
commissions or committees to deal with each proposal on a program-
matic basis. (See section on the Board later in this Chapter).

(G) The proposal would be submitted to the NIH RAC for evaluation. The
NIH RAC would report back to the USDA Competitive Research Grants
Program Office the results of their deliberations and their
decision.

(H) The USDA Competitive Research Grants Program Office would provide
the USDA Biological Impact Assessment Board results of the NIH RAC
deliberations. That information along with the results of delibera-
tions of the USDA Board's program committees) would be used by the
board to make a final decision regarding the safety of the proposed
field release experiments.

(I) Results of the USDA Board would be communicated to the USDA Competi-
tive Research Grants Program Office.

(J) The proposal would be reviewed by the USDA Competitive Research
Grants Program Office for appropriateness in terms of guidelines and
overall quality, and a final decision regarding funding would be
made.

(K) The principal investigator would be informed by the USDA Competitive
Research Grants Program Office of the results of their evaluation
and whether the proposal had been approved for funding.

At any point in the above scenario, flow could be stopped and the proposal
returned to the Principal Investigator for additional information. The only
new national structure required would be a special NBIAP Board established by
the USDA. Criteria established by the National Board to judge the merits and
the potential environmental hazards of various proposals would satisfy the
goals of the National Environmental Policy Act.









Level 3. Commercial Release of Biotechnological Research Products

Given successful development in Levels 1 and 2, the product of the bio-
technological research effort might be considered for release on a commercial
scale. The following set of procedures would be utilized in obtaining ap-
proval for such a release. It is envisioned that this process would be a part
of NBIAP and the following is a general outline of the type of protocol that
might be utilized:

Also, this protocol has been developed for the release of a hypothetical
variety which contained recombinant DNA molecules and which had been developed
within the general framework of the protocols outlined in Levels 1 and 2
above.

(A) The institution, agency, or industry proposing the commercial re-
lease would prepare a release request document or proposal which
would include the following kinds of information:

1. A description of how the plant variety was developed.

2. A statement of the performance of the variety under laboratory,
greenhouse, and experimental field conditions with emphasis on
data which indicate the release represents little or no poten-
tial threat to the environment.

3. Documentation indicating that protocols established under Levels
1 and 2 were satisfied.

4. A description of the program of monitoring that would be util-
ized to follow development of the release on an appropriate
periodic basis. Different releases would dictate the use of
different monitoring systems, and it would be incumbent on the
organization proposing the release to provide a detailed de-
scription of monitoring protocols that would be used. Where
appropriate protocols are not available, the organization pro-
posing the release would outline research to develop such
protocols. This could involve research activities in the broad
area of risk assessment and in the development of specific
procedures to be used in the monitoring program.

(B) The request release document would be submitted to NBIAP for evalua-
tion and approval. In the case of a SAES the request for release
document would be submitted to the local biohazard committee, and,
with approval at that point, it would be forwarded to the USDA,
NBIAP Board. If the release was being proposed by an institution
other than the land-grant institution in the state in question then
the request for release document would be submitted to the SAES
director who would forward it to the local Expanded Biohazard
Committee of the land-grant university, which, with approval would
forward it to the NBIAP Board. If the request for release should be
submitted by a state agency, the state agency would submit the
request for release document to the SAES director and it would
follow a path similar to that described for non-land-grant
institutions above. If the request for release was being submitted
by an industry it would be submitted directly to the NBIAP Board.




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