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Patent reform law offers boost for biotech

By David Schwartz
Published: September 21st, 2011

Biotechs got two little boosts in the America Invents Act. One measure makes it easier for small companies to license government discoveries, and another sets up a program to develop a lab on a chip for early-stage drug-safety testing.

The first initiative speeds the process for small companies seeking to license patents belonging to the National Institutes of Health and the Food and Drug Administration. Companies less than five years old, with fewer than 50 employees, and which have received investment of less than $5 million are eligible to use the new, short-term exclusive Start-Up Evaluation License Agreement and the new Start-Up Commercial License Agreement. “By making it easier for start-up companies to obtain license agreements for these new technologies, we can facilitate the transfer of research advances from bench to bedside. This is where the interventions can ultimately benefit patients,” according Francis Collins, NIH director. The license agreements were developed by the Office of Technology Transfer at NIH.

Starting on October 1, biomedical entrepreneurs will be able to apply for any of the available patents and patent applications relating to drugs, vaccines, or therapeutics in the NIH/FDA portfolio by submitting a business plan for how they propose to use them. A start-up evaluation license can be obtained for $2,000 and converted into an exclusive Start-up Commercial License Agreement within one year. In the Start-up Commercial License Agreement, typical royalty payments are deferred for three years or until the company experiences a liquidity event. Prior patent expenses for the licensed technology and one-half of new patent expenses are similarly deferred. Performance milestones are required in these agreements but do not trigger royalty obligations. Royalty payments on product sales are limited to 1.5% of sales.

In the second development, the NIH will collaborate with the Defense Advanced Research Projects Agency and the FDA to develop a chip to screen potential drugs for toxicity. “Drug toxicity is one of the most common reasons why promising compounds fail,” Collins explains. “We need to know which ones are safe and effective much earlier on in the process.” NIH and DARPA each will commit up to $70 million over five years to the plan.

Sources: and NIH News

Posted under: Tech Transfer e-News

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