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IV. Collaboration and Inventions: The "CRADA"

B. CRADA Basics

Foremost, the keystone of a CRADA is collaboration. Each party must contribute some intellectual effort towards a specific research project. That collaboration drives the process of developing the agreement, and, in turn, that process is designed to authorize the negotiation of terms in the agreement suitable to enable the project.

Under a CRADA, the Government laboratory may:

• contribute physical resources to a collaborator;
• dedicate staff time to a project;
• permit a collaborator’s staff to work in Government facilities without requiring that staff member to assign all inventions to the Government (as is usually required ⁴¹X

  See, e.g., NIH Policy Manual No. 2300-320-03 (the NIH Visiting Program).

  ); and
• promise the collaborator an exclusive option to elect an exclusive or nonexclusive license (collaborator’s choice) in any Government rights in any invention that will be conceived or first reduced to practice in the conduct of research under the CRADA.

The CRADA is not a grant, procurement contract, or other "funding mechanism;" ⁴²X

Some confusion occasionally arises between a "Cooperative Agreement" (15 U.S.C. § 3706), which is a mechanism analogous to a grant by which federal funds can be legally transferred to a private party, and a "Cooperative Research And Development Agreement," which is not a funding mechanism.

Under a CRADA, the collaborator may:

• contribute resources to the Government laboratory;
• dedicate staff time to a project;
• permit Government researchers to perform their CRADA-related research in the collaborator’s facilities; and
• transfer funds to the Government for the laboratory’s use in carrying out the CRADA.

In addition, essentially all the issues pertinent to CDAs, MTAs, and CTAs can arise in the negotiation of a CRADA. Finally, the CRADA has some additional, administrative twists unique to the nature of the agreement, which will be discussed in more detail below.

As is obvious, the CRADA involves resolution of a wide variety of important issues. Consequently, an understanding of what a CRADA comprises can smooth the process greatly. The fastest NIH can establish a CRADA is about a month, though complicated cases have required a year of negotiations, and even more. A rough estimate for the time needed to establish a new CRADA is between four and eight months, depending in large measure on how fast and flexible the collaborator’s review process is. For the NIH, the major stages include selecting a collaborator, negotiating the agreement, institutional review of the agreement, and finally, execution by the parties -- each of which will be discussed in turn.

1. Selecting the Collaborator

In the vast majority of cases, the selection of a CRADA collaborator is one of the simplest of the four main phases. Occasionally, however, this process presents a serious hurdle. These hurdles can be grouped as either fair-access or conflict-of-interest.

By law, a Federal laboratory must provide every possible collaborator "fair access" to any opportunity to enter a CRADA. ⁴³X

15 U.S.C. § 3710a(c)(4).

As a general rule, if research under a CRADA genuinely depends on access by the Government to a prospective collaborator’s proprietary technology, unique expertise, or unique facilities, "fair access" is deemed satisfied without any effort having been made to find someone else (because no one else would suffice). This is not as beneficial for collaborators as it might appear at first blush, however, because the CRADA research would be circumscribed by that uniqueness. The laboratory would be free to initiate CRADAs on similar themes utilizing other technologies -- provided, of course, that the laboratory can satisfy all the requirements of each CRADA, and that the research plan of each CRADA does not overlap any other. For instance, a laboratory having a new cDNA library may initiate one CRADA with a gene-array maker using their propriety chip technology, and another CRADA with a company with unique protein- analysis technology to create an expression profile for this cDNA library. Indeed, in principle, if the research plans were written specifically enough and the research carefully segregated, the laboratory could engage in more than one CRADA to analyze different proteonomic aspects of the library, limiting each CRADA to research utilizing that collaborator’s unique technology.

For those cases where access to a particular technology is not a necessary prerequisite, the laboratory may announce to the world that a CRADA opportunity exists, and permit anyone interested to submit a research proposal. Again, unlike the Federal Acquisition Regulations, the law governing CRADAs provides no formal guidance or specific mechanism for making such announcements. At a minimum, publication in the Federal Register should suffice, but there is no limit to the venues that may be used for announcing. Thereafter, if one collaborator is selected on the basis of a proposal submitted under that announcement, others would have little grounds for complaining on the basis of "fair access."

A question often arises in the selection of collaborators, namely, whether a Federal laboratory can enter a CRADA with either a non-profit entity or a company based outside the United States. The answer to this question is yes for both kinds of collaborators, with certain caveats. For example, in a collaboration with a non-profit entity, particularly universities, the parties must consider how the products that might be developed under the CRADA will be commercialized. Also, unlike private parties, the Federal laboratory has limited authority to control the flow of money, which makes sharing royalties a tricky endeavor. These are issues the non-profit entity should consider before embarking on the negotiation for a CRADA, as the terms will have to be carefully crafted. For a foreign company, the law governing CRADAs and (2) for any U.S. rights in inventions licensed to any collaborator, the collaborator must manufacture in the U.S. any products it sells in the U.S. requires only two things: (1) if two parties apply for the same opportunity, and if one is a U.S. company and the other is a foreign company, the Federal laboratory must give preference to the U.S. company; ^{44, 45}X

44. Id. § 3710a(c)(4)(B).
45. Id; see also 35 U.S.C. § 204.

Assuming the collaborator is appropriately selected under "fair access" principles, the other hurdle to cross before negotiations can begin is to confirm that the NIH’s Principal Investigator (PI) will not have a conflict of interest. For example, if the PI owns stock in the prospective collaborator, or is in the process of negotiating employment with the prospective collaborator, the PI’s independence could be questioned, even if not actually compromised. ⁴⁶X

Though rarely exercised, in instances where there is an appearance (but not actual) conflict of interest, the NIH Institute has the power to elect to waive that conflict if the research is of overriding importance to the Institute and no other PI could carry out the research.

2. Negotiating the Agreement

Once the collaborator has been appropriately selected, the negotiations may begin. A complete CRADA should have at least three parts: (A) the Research Plan, which includes specific commitments of particular actions by each party; (B) the commitment of specific resources by each party; and (C) the terms provisions that make the agreement operational under the law. Other items can be included, if the parties see fit. At NIH, in order to make the review process more efficient, these three parts are written as separate documents that are attached to the back of a copy of the unmodified PHS Model CRADA (called the "boilerplate") as appendices, rather than integrating them into a single document.

(i) Appendix A: The Research Plan. The Research Plan ("RP") should serve three functions. First and foremost, it should lay out exactly what each party will do. The more specific these allocations of work are, the less likely confusion over responsibilities will be. Second, it should circumscribe the activities, so that activities "outside" and "inside" the scope of the RP can be readily distinguished -- which, in turn, defines which inventions are governed by the agreement and which are not. For example, if the RP contemplates incorporating an antigen into a vaccine, the inadvertent discovery that the purified antigen makes a wonderful shoe-polish would not be a subject invention. Third, if the NIH invents something and the collaborator elects the option to a license, the collaborator is entitled under the law ⁴⁷X

15 U.S.C. § 3710a(b)(1).

Although not absolutely required, a Research Plan may also incorporate additional information to serve other functions. For example, the RP presents a useful opportunity to explain the background of the technology, to highlight the experience and interests of the NIH PI, and to explain in detail why the selected collaborator is particularly suited to the project. Also, the RP can contain an agreed abstract for public release, which each party understands up front may be freely disclosed to the public at any time by the other. Having such an abstract is especially important for NIH, which must often answer regular FOIA requests for routine data relating to CRADAs. Companies also appreciate the reduced risk offered by such an abstract, as they no longer have to worry about reviewing every proposed disclosure for these routine FOIA requests. Finally, the RP can include such other useful information as the parties deem appropriate, like a list of the most relevant publications, background patents owned by each party, and any prior agreements between the parties.

(ii) Appendix B: Financial And Material Contributions. In NIH CRADAs, "Appendix B" contains the commitment of physical and financial resources. Specifically, this part of the CRADA spells out exactly what materials, facilities, equipment, and staff will be committed by each party, and the funds (if any) that the collaborator will provide to the NIH. Each Appendix B is unique; there is no requirement that every CRADA involve the commitment by either party of any particular one of these items. Ultimately, the resources to be committed by each party will depend on the research that each party wants to perform. If, for example, the collaborator wants the NIH to perform an experiment using a particular piece of equipment neither party owns, the collaborator may choose to buy the equipment and loan it to NIH, to hire a contractor to run the experiment, or to give the NIH lab money to buy one -- or, the NIH lab will have to decide whether to purchase the equipment directly. If neither the collaborator nor the NIH laboratory can afford it, or if each could pay but is unwilling to bear the expense for other reasons, the research plan would have to be modified or scaled back.

The funding aspect of CRADAs offers a particularly useful source of opportunities to Government laboratories. First, funds transferred by the collaborator to the Government may be used to hire personnel -- who will not be subject to the hiring ceilings otherwise imposed by law. Second, unlike appropriated money, funds transferred to the Government under a CRADA may be kept by the laboratory for the duration of the CRADA, and it will never revert to the U.S. Treasury. Third, subject to routine ethics-review, the funds can be used for the travel-related expenses of Government researchers in carrying out the CRADA. Further, receipt of CRADA funds and materials allows the PI to explore additional, perhaps costly experiments that would not otherwise be supported by the lab’s budget. Of course, the laboratory must regularly account to the collaborator how the funds are spent, the funds must be used to pay for CRADA-related materials or activities, and any unobligated funds at the end of the CRADA must be returned to the collaborator.

The funding aspect of the CRADA also benefits companies. For example, it presents a way for a company to support particular Government research that is of interest to the company, without running afoul of the ethical concerns implicated in the gift process. Also, companies that do not have large budgets may be able to fund CRADA research with money received under a Federal grant, such as the Small Business Innovative Research program. As long as the research project of the CRADA is distinct from the research project under the grant, such grant money can be used in this manner. In exchange, the company receives a wealth of expertise not available from any other source in the world -- not just in a particular scientific field, but also in regulatory filings.

With respect to this funding aspect of the CRADA in particular, one point should be clearly re-emphasized: The foundation of every CRADA is intellectual collaboration. Although the CRADA mechanism offers NIH labs the opportunity to supplement the resources they receive through routine channels, this aspect should not dominate the CRADA. If the only reason a lab has for entering a CRADA is the material support, the use of the CRADA mechanism is inappropriate. Reciprocally, if the CRADA collaborator is only interested in acquiring a "pair of hands" for the collaborator’s benefit, and has no interest in the intellectual contributions of the NIH scientists, there is no collaboration and the CRADA is not appropriate, even if the laboratory is willing to assist the collaborator.

(iii) Appendix C: Modifications To The CRADA Language. Appendix C contains changes to the CRADA boilerplate language. Some of the language in the boilerplate is little more than a restatement of existing law. For example, the mandatory Government licenses to collaborator’s subject inventions derives from a specific Congressional command; ⁴⁸X

15 U.S.C. § 3710a(b)(1, 2).

Appendix C also contains terms relating to clinical trials, if applicable. As with the CTA, a Clinical-CRADA would reflect, at a minimum, special consideration relating to protocol drafting, regulatory filings, interactions with regulatory agencies, use of data, and how the agreement might be terminated in the middle of the clinical trial without endangering the patients enrolled in the trial. Unlike the CTA, however, the collaborator will always participate in a Clinical-CRADA, contributing intellectual effort to portions of the research, if not to all of it.

3. NIH Review of the Agreement

Once the conflict of interest and fair access questions have been resolved, the scope of the research clearly identified in the RP, resources have been promised, and legal language hashed out, the complete agreement must be reviewed by NIH. Overall, this process requires nine separate approvals: four within the Institute, four at the level of the National Institutes of Health, and after all these have been secured, final execution by the Director of the Institute.

First and foremost, the NIH Principal Investigator ("PI") must review the agreement as a whole, as that individual will be ultimately responsible for doing what the CRADA promises. In addition, the PI’s Laboratory Chief must approve, not only because the CRADA represents a commitment of lab resources, but also as a first substantive review of the science behind the research plan. Next, the Technology Development Coordinator for the Institute must review the agreement, to determine whether it complies with the Institute’s policies. Then, the Scientific Director must review the agreement, to determine the merits of the project both on its own and in relation to the mission of the Institute as a whole.

Once the Institute has approved the package, it moves up to NIH-wide review. Formally, the specific Institute is the Governmental party to the agreement, not the National Institutes of Health as a whole (let alone the Public Health Service ⁴⁹X

Although the Public Health Service no longer functions as a discrete sub-unit of the Department of Health & Human Services, the name still serves to identify the National Institutes of Health, the Centers for Disease Control, and the Food & Drug Administration as a group.

The first level of review is the NIH Office of Technology Transfer ("OTT"). OTT has been delegated the exclusive authority to prosecute patent applications and negotiate patent licenses for all the Institutes of the National Institutes of Health. OTT reviews the CRADA for issues relating to the handling of intellectual property, such as modifications to the procedure by which any inventions under the CRADA will be licensed, or the pre-negotiated field of use for those inventions. Next, the NIH Office of the General Counsel ("OGC") reviews the CRADA for legal sufficiency. Any modifications to the boilerplate, and any legally binding terms appearing anywhere else, will be scrutinized for whether they conform to, and are authorized by, the laws. Thereafter, the "PHS CRADA Subcommittee" looks at it for policy issues spanning the PHS, and in particular, it reviews the CRADA for compliance with NIH policies and for conflicts with other CRADAs by other Institutes. ⁵¹X

Because OTT and OGC have representatives on the Subcommittee, issues that OTT and OGC have about a CRADA are typically raised as an integral part of the Subcommittee’s review, which increases the efficiency of resolving those issues by airing them all in a single forum.

4. Execution by the Parties and the Effective Date

By its terms, the CRADA becomes effective on the day when the last signature is inked. Could the parties agree that the agreement will be effective on a date after final signature? Certainly. How about making the agreement retroactively effective -- in other words, setting the effective date to a point before the final signature? By itself, this is apparently not authorized by the law; NIH cannot promise intellectual property rights without anything having been signed by the collaborator and the Institute. Unfortunately, this inability to make CRADAs retroactive put prospective collaborators and the NIH in a quandary: As CRADA negotiations take months, and as the NIH-approval process itself takes weeks (sometimes more than a month), either the scientists must remain idle, or the collaborator must risk losing rights to any NIH inventions that are invented just before the CRADA is signed. Several CRADA opportunities were lost because of this problem.

To solve it, the NIH developed the "Letter of Intent," or "LOI." The LOI is a simple promise that, if a CRADA is signed, its effective date will be retroactive to the effective date of the LOI. Unfortunately, the mechanism has certain limitations. First, because the LOI is not a promise that a CRADA will ever be signed, some collaborators are unwilling to begin a project under an LOI. Also, some projects depend on the transfer of funds to begin; however, no funds may pass to NIH under an LOI because it is not a promise that the full CRADA will be signed. Further, because the LOI was originally intended solely to allow research to begin while the paperwork is completed, it is limited to a short, six-month life, which may be extended for cause. Nonetheless, many collaborators are satisfied with this mechanism, and the Letter of Intent has proven to be a valuable mechanism for facilitating collaborations.

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