Tech Transfer University Reporter
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Answers to the Top NIH Manufacturing Waiver Questions


By David Schwartz
Published: December 16th, 2013

When federal funding is involved, the “preference to U.S. manufacturing” is a requirement (See 35 U.S.C. 204 of the Bayh-Dole Act below).

Since manufacturing activities in industries such as electronics, medical devices and consumer products are mostly conducted outside of the U.S., obtaining a manufacturing waiver is an attractive route for exclusive licensees and can only be obtained if U.S. manufacturing is not commercially feasible or if the university is unable to find a licensee that can — or will — engage in U.S. manufacturing.

Waivers are issued sparingly and if you don’t dot every “i” and cross every “t,” the approval process can drag on for many months. 

In today’s blog post, we’ll review the top concerns regarding manufacturing waiver requirements and how to address them in your exclusive licenses. We’re also including a few minutes worth of the Q&A that was held at the conclusion of our recent webinar: Best Practices for Fast-Tracking Your U.S. Manufacturing Waiver Application for Federally Funded IP. Attendees brought up a lot of great scenarios, and you’ll find lots of time-saving tips (without them, most applications can take up to 40 hours to complete). For full details on the program and to order, CLICK HERE.

35 U.S.C. 204

Notwithstanding any other provision of this chapter, no small business or firm or nonprofit organization which receives title to any subject invention and no assignee of any such small business firm or nonprofit organization shall grant to any person the exclusive right to use or sell any subject invention in the United States unless such person agrees that any products embodying the subject invention or produced through the use of such invention will be manufactured substantially in the United States. However, in individual cases, the requirement for such an agreement may be waived by the Federal agency under whose funding agreement the invention was made upon a showing by the small business firm, nonprofit organization, or assignee that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible. 

Who should apply for a manufacturing waiver?

The licensee, since they need it for their business purposes, right? Wrong. 35 USC section 204 of the Bayh- Dole Act is clear that the tech transfer office should be the one to submit the application since it relates to the licensing and historical efforts related to that. Applications won’t be rubber-stamped, and they are very fact-specific, so completing it will require digging into your own records, and then detailing those efforts with proof in hand to backup all of your assertions.  Also, you’ll need to provide extensive and detailed information regarding the licensee’s manufacturing plans and attempts to secure a US-based manufacturing contract.

When should one apply? 

Only apply for a waiver at the request of a licensee who wants an exclusive license to your intellectual property that was federally funded and who wants to manufacture substantially outside of the U.S.  Because Johns Hopkins has applied for and been awarded waivers in the past, they have redrafted their exclusive license template, and the new template actually includes Bayh-Dole language that puts licensees on notice of their obligations: 

JHU’s Exclusive License Template Language
Government Rights. This Agreement is subject to Title 35 Sections 200-204 of the United States Code as implemented in 37 CFR Part 401, as may be amended from time to time. Among other things, these provisions provide the United States Government with certain nonexclusive rights in a LICENSED PATENT if federal funds were used to develop the TECHNOLOGY. They also impose the obligation that LICENSED PRODUCTS sold or produced in the United States be “manufactured substantially in the United States”.  LICENSEE will ensure all required obligations of these provisions are met.

What happens if you’re not granted a waiver and the licensee goes forward with their plans?

The licensee will be in breach of your license if you have incorporated the government rights language noted above in your licenses. Plus, the Government has the ability to exercise march-in rights. March-in rights, the right of the government to grant additional licensees (exclusive and non-exclusive) to other reasonable applicants are limited, but are a real possibility and should be taken seriously.

What if the licensee hasn’t determined a manufacturing location yet, as there is significant development to be done?  When should we submit for a manufacturing waiver?

You can apply for a waiver once they think they’ve identified a location, but if that changes down the road, you’ll need to submit another application because you won’t be able to amend your prior application.  So, it’s really up to the licensee as to when they want to do this.   

Could you please touch upon how the TTO and licensee can understand what “substantial” means with respect to manufacture, and whether a waiver is needed to be applied for?

I don’t think the TTO should be construing what “substantial” means.  I think construing that statute is really a legal opinion, and it’s up to the licensee to get that legal advice from their counsel.  If they feel like their manufacturing is not substantial, then there’s a section in the application that talks about the percentage produced outside the U.S.  And maybe they can have you put in an application just to be on the safe side.  And if they decide for themselves that they don’t need to put in the application, then they bear the risk because if it’s deemed that they’re not compliant down the road, there’s this possibility of march-in rights.  It’s a tricky issue.  I think it’s one, really, for the licensee and their lawyer to figure out.

Assuming that the manufacturing does not occur until 10 years after the license is entered into, is there any special advice that you would have regarding the application in such case?  We are thinking about the life sciences context, where the parties are not really even thinking about manufacturing until a number of years after the license has been entered into.

I think that you could either fill out the application at the time that you’re doing the license with the best information that you have, or else you could enter into the license, but then agree that there will be some other agreement or consideration for going down this waiver route down the road. It’s a very time-consuming process; it’s going to cost the university money in terms of your administrative time to do this. And so, if they want you to do this, I think that it’s not unreasonable to ask for some fee and put some parameters around you doing this application for them. 

Where should I go to find an application? 

A waiver application must be submitted to the applicable funding agency or agencies, and generally can be submitted online through iEdison, the federal government’s online tool for reporting under the Act. (www.iedison.gov)

Application form can be found here.

For a complete list of agency contacts, click here.

The professional development webinar, Best Practices for Fast-Tracking Your U.S. Manufacturing Waiver Application for Federally Funded IP  is available on DVD, On-Demand Video and PDF Transcript.  For more detail or to order, CLICK HERE. Technology Transfer Tactics would like to thank our speaker for her valuable insight and advice on this topic:

  • Ami Gadhia, a portfolio director for physical sciences and engineering at the Johns Hopkins Technology Transfer Office.

Visit www.TechTransferCentral.com for more unique, practical, and advanced strategies, case studies, best practices, and expert guidance on a broad range of challenges and opportunities for technology transfer offices and professionals.

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Tips for recruiting your next great start-up CEO


By David Schwartz
Published: December 3rd, 2013

Too many start-ups have failed or stalled because they lack leadership talent. The problem is even more acute for university start-ups, since the CEO must mesh with the faculty inventor as well as the campus culture – an environment that some business pros find difficult and frustrating.  In short, it … continue reading »

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Writing Technology Summaries to Pique the Potential Partner’s Interest


By David Schwartz
Published: November 19th, 2013

If you’re a member of a technology transfer office licensing team and you have written an initial summary about a technology, in many cases the reader will be someone from the business development or the scouting team in industry.  It’s imperative that you gear your message to them. Consider that … continue reading »

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How Five TTOs Are Using Express Licenses… Successfully


By David Schwartz
Published: October 28th, 2013

Since they were first developed several years ago, “express” licenses have become a widely used tool and many organizations are using various versions of standardized license agreements to dramatically speed licensing and start-up formation. In this post, we’ll take a look at statistics compiled from interviews with five TTOs that … continue reading »

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‘Ecosystem’ is the magic word in economic development strategy


By David Schwartz
Published: October 28th, 2013

As an increasing number of TTOs add economic development to their mission statements, new models are being developed for most effectively injecting the university commercialization arm into this process. As a number of experts have recently indicated, one of the keys to success is the coalescing of the diverse audiences … continue reading »

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Experts identify the best tools available for marketing metrics


By David Schwartz
Published: October 28th, 2013

Tech transfer executives have a wide variety of tools available to measure the effectiveness of their social media and digital marketing efforts, but in many cases these tools are not being taken advantage of. Speaking at a recent webinar sponsored by Tech Transfer University, “Tech Transfer Marketing Metrics in the … continue reading »

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Case scenarios provide illustrations of proper COI management in faculty start-ups


By David Schwartz
Published: October 25th, 2013

While the term “conflict of interest” often has a negative connotation, two COI experts who recently presented at a Tech Transfer University webinar, “Best Practices for Managing Conflicts of Interest in Faculty Start-ups,” agreed that conflicts in and of themselves are not a problem – but managing those conflicts effectively … continue reading »

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