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Letter from CGS to the CIRM Independent Citizens Oversight Committee

by Jesse Reynolds and Marcy Darnovsky
September 8th, 2005

To the Independent Citizens' Oversight Committee of the California Institute for Regenerative Medicine:

We are writing to register our concerns about the intellectual property (IP) policy framework for state-funded stem cell research proposed by a special committee formed by the California Council on Science and Technology (CCST). The issue of intellectual property is one of the most critical issues facing the CIRM. At stake is who will own, profit from, and benefit from any discoveries made using taxpayer funds managed by CIRM.

A detailed IP policy must be in place not only before any grants are issued, but also before any bonds are put on the market. Some observers, including the state bond counsel, have interpreted federal tax law to mean that taxable, rather than tax-exempt bonds, will be necessary if the state receives a portion of royalties from any profitable discoveries - as promised by the Proposition 71 campaign and indicated in its text. Thus, issuing bonds with a pre-determined tax status before clarifying CIRM's IP policy would be premature, and likely to preempt a full discussion of possible policies. We hope that the CCST's recommendations will not encourage the ICOC to make a hasty decision on this question that would conflict with the promises made by the Proposition 71 campaign.

To fulfill the mandates and promises of Proposition 71, a variety of innovative approaches must be considered. Unfortunately, the CCST report reflects little, if any, original thought or creative suggestions about IP management under Proposition 71. CCST's recommendations draw heavily on the current IP scheme used by universities and other not-for-profit institutions to manage federally funded discoveries under the Bayh-Dole Act. However, these recommendations are insufficient to be in compliance with Proposition 71.

The report's recommendations would fail to fulfill the claims made in Proposition 71 about financial returns to the state from patent royalties and licensing revenues. Nor do they envision ensuring that any treatments developed with the use of CIRM's state funds are widely accessible. Of course, the people of California approved the Stem Cell Research and Cures Initiative based both on the language of the initiative and on promises of financial returns and health benefits made repeatedly during the course of the campaign by key backers of Proposition 71, some of whom now play central roles at CIRM. As you're well aware, it is the legal and moral responsibility of CIRM and the ICOC to ensure that the people's expectations and wishes are diligently carried out.

In evaluating the report of the CCST committee, it is important to recognize that its composition is fundamentally skewed. A large majority of its members, by virtue of their institutional affiliations, are unlikely to look beyond Bayh-Dole or to be inclined to ensure returns to the state and/or accessible pricing. The single committee member representing the state is a lawyer from the Department of General Services, whose role was likely limited to ensuring legal compliance. Furthermore, and importantly, the committee includes no representation at all of public interest groups.

We believe that CIRM needs to establish not only an IP policy, but an accompanying commercialization plan as well, in order to guarantee the financial benefits to the state and the health benefits to the people of California that voters understood they could expect if they passed Proposition 71. CIRM will have to think 'outside the box' to devise an appropriate strategy that is compatible with the intent and spirit of Proposition 71. We recognize that this will involve departures from the status quo arrangements with which universities and their technology transfer offices are comfortable, and that compliance with federal statutes and regulations must be assured. Nonetheless, CIRM and the ICOC must live up to the tasks stipulated in Proposition 71 and put in place policies and plans to reconcile the various factors at play.

We call upon CIRM and the ICOC to arrange for broader public input in developing its own policies for protecting and licensing intellectual property flowing from state-funded or state-sponsored stem cell research. With this input, CIRM must develop a fully transparent IP management and technology commercialization plan, explaining how it intends to comply with Proposition 71's mandates of returning financial and health benefits to the state and its people.

If the appropriate policies and checks-and-balances are not in place at the before research grants or bonds are issued, then at the end of the decade, Californians are likely to discover that a huge transfer of public resources has occurred with little or no public benefit.


Jesse Reynolds
Marcy Darnovsky
The Center for Genetics and Society


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