BILL NUMBER: SB 771	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senators Kuehl and Runner
   (Principal coauthor: Assembly Member Jones)

                        FEBRUARY 23, 2007

   An act to amend Section 125290.30 of the Health and Safety Code,
relating to stem cell research.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 771, as introduced, Kuehl. Stem cell research standards:
licensing revenues.
   Existing law, the California Stem Cell Research and Cures Act
establishes the Independent Citizen's Oversight Committee (ICOC) and
the California Institute for Regenerative Medicine, the purpose of
which is, among other things, to make grants and loans for stem cell
research, for research facilities, and for other vital research
opportunities to realize therapies, protocols, and medical procedures
that will result in the cure for, or substantial mitigation of,
diseases and injuries. Existing law authorizes the issuance of bonds,
not to exceed $3,000,000,000, for the purpose of funding this
research.
   Existing law requires the ICOC to establish standards that require
all awards be subject to intellectual property agreements.
   This bill would require that the intellectual property standards
include certain requirements, including, but not limited to, the
requirement that every award recipient provide the state with 25% of
the associated net licensing revenues.
   The California Stem Cell Research and Cures Act, an initiative
measure, provides that the Legislature may amend the non-bond
statutory provisions of that act, to enhance the ability of the
California Institute for Regenerative Medicine to further the
purposes of the grant and loan programs created by that act, with a
70% vote of each house and compliance with specified procedural
requirements.
   This bill, which would declare that it enhances the ability of the
institute to further the purposes of the grant and loan programs
created by that act, would therefore require for passage a 70% vote.

   Vote: 70%. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 125290.30 of the Health and Safety Code is
amended to read:
   125290.30.  Public and Financial Accountability Standards
   (a) Annual Public Report
   The institute shall issue an annual report to the public which
sets forth its activities, grants awarded, grants in progress,
research accomplishments, and future program directions. Each annual
report shall include, but not be limited to, the following: the
number and dollar amounts of research and facilities grants; the
grantees for the prior year; the institute's administrative expenses;
an assessment of the availability of funding for stem cell research
from sources other than the institute; a summary of research
findings, including promising new research areas; an assessment of
the relationship between the institute's grants and the overall
strategy of its research program; and a report of the institute's
strategic research and financial plans.
   (b) Independent Financial Audit for Review by State Controller
   The institute shall annually commission an independent financial
audit of its activities from a certified public accounting firm,
which shall be provided to the State Controller, who shall review the
audit and annually issue a public report of that review.
   (c) Citizen's Financial Accountability Oversight Committee
   There shall be a Citizen's Financial Accountability Oversight
Committee chaired by the State Controller. This committee shall
review the annual financial audit, the State Controller's report and
evaluation of that audit, and the financial practices of the
institute. The State Controller, the State Treasurer, the President
pro Tempore of the Senate, the Speaker of the Assembly, and the
Chairperson of the ICOC shall each appoint a public member of the
committee. Committee members shall have medical backgrounds and
knowledge of relevant financial matters. The committee shall provide
recommendations on the institute's financial practices and
performance. The State Controller shall provide staff support. The
committee shall hold a public meeting, with appropriate notice, and
with a formal public comment period. The committee shall evaluate
public comments and include appropriate summaries in its annual
report. The ICOC shall provide funds for the per diem expenses of the
committee members and for publication of the annual report.
   (d) Public Meeting Laws
   (1) The ICOC shall hold at least two public meetings per year, one
of which will be designated as the institute's annual meeting. The
ICOC may hold additional meetings as it determines are necessary or
appropriate.
   (2) The Bagley-Keene Open Meeting Act, Article 9 (commencing with
Section 11120) of Chapter 1 of Part 1 of Division 3 of Title 2 of the
Government Code, shall apply to all meetings of the ICOC, except as
otherwise provided in this section. The ICOC shall award all grants,
loans, and contracts in public meetings and shall adopt all
governance, scientific, medical, and regulatory standards in public
meetings.
   (3) The ICOC may conduct closed sessions as permitted by the
Bagley-Keene Open Meeting Act, under Section 11126 of the Government
Code. In addition, the ICOC may conduct closed sessions when it meets
to consider or discuss:
   (A) Matters involving information relating to patients or medical
subjects, the disclosure of which would constitute an unwarranted
invasion of personal privacy.
   (B) Matters involving confidential intellectual property or work
product, whether patentable or not, including, but not limited to,
any formula, plan, pattern, process, tool, mechanism, compound,
procedure, production data, or compilation of information, which is
not patented, which is known only to certain individuals who are
using it to fabricate, produce, or compound an article of trade or a
service having commercial value and which gives its user an
opportunity to obtain a business advantage over competitors who do
not know it or use it.
   (C) Matters involving prepublication, confidential scientific
research or data.
   (D) Matters concerning the appointment, employment, performance,
compensation, or dismissal of institute officers and employees.
Action on compensation of the institute's officers and employees
shall only be taken in open session.
   (4) The meeting required by paragraph (2) of subdivision (b) of
Section 125290.20 shall be deemed to be a special meeting for the
purposes of Section 11125.4 of the Government Code.
   (e) Public Records
   (1) The California Public Records Act, Article 1 (commencing with
Section 6250) of Chapter 3.5 of Division 7 of Title 1 of the
Government Code, shall apply to all records of the institute, except
as otherwise provided in this section.
   (2) Nothing in this section shall be construed to require
disclosure of any records that are any of the following:
   (A) Personnel, medical, or similar files, the disclosure of which
would constitute an unwarranted invasion of personal privacy.
   (B) Records containing or reflecting confidential intellectual
property or work product, whether patentable or not, including, but
not limited to, any formula, plan, pattern, process, tool, mechanism,
compound, procedure, production data, or compilation of information,
which is not patented, which is known only to certain individuals
who are using it to fabricate, produce, or compound an article of
trade or a service having commercial value and which gives its user
an opportunity to obtain a business advantage over competitors who do
not know it or use it.
   (C) Prepublication scientific working papers or research data.
   (f) Competitive Bidding
   (1) The institute shall, except as otherwise provided in this
section, be governed by the competitive bidding requirements
applicable to the University of California, as set forth in Article 1
(commencing with Section 10500) of Chapter 2.1 of Part 2 of Division
2 of the Public Contract Code.
   (2) For all institute contracts, the ICOC shall follow the
procedures required of the Regents by Article 1 (commencing with
Section 10500) of Chapter 2.1 of Part 2 of Division 2 of the Public
Contract Code with respect to contracts let by the University of
California.
   (3) The requirements of this section shall not be applicable to
grants or loans approved by the ICOC.
   (4) Except as provided in this section, the Public Contract Code
shall not apply to contracts let by the institute.
   (g) Conflicts of Interest
   (1) The Political Reform Act, Title 9 (commencing with Section
81000) of the Government Code, shall apply to the institute and to
the ICOC, except as provided in this section and in subdivision (e)
of Section 125290.50.
   (A) No member of the ICOC shall make, participate in making, or in
any way attempt to use his or her official position to influence a
decision to approve or award a grant, loan, or contract to his or her
employer, but a member may participate in a decision to approve or
award a grant, loan, or contract to a nonprofit entity in the same
field as his or her employer.
   (B) A member of the ICOC may participate in a decision to approve
or award a grant, loan, or contract to an entity for the purpose of
research involving a disease from which a member or his or her
immediate family suffers or in which the member has an interest as a
representative of a disease advocacy organization.
   (C) The adoption of standards is not a decision subject to this
section.
   (2) Service as a member of the ICOC by a member of the faculty or
administration of any system of the University of California shall
not, by itself, be deemed to be inconsistent, incompatible, in
conflict with, or inimical to the duties of the ICOC member as a
member of the faculty or administration of any system of the
University of California and shall not result in the automatic
vacation of either such office. Service as a member of the ICOC by a
representative or employee of a disease advocacy organization, a
nonprofit academic and research institution, or a life science
commercial entity shall not be deemed to be inconsistent,
incompatible, in conflict with, or inimical to the duties of the ICOC
member as a representative or employee of that organization,
institution, or entity.
   (3) Section 1090 of the Government Code shall not apply to any
grant, loan, or contract made by the ICOC except where both of the
following conditions are met:
   (A) The grant, loan, or contract directly relates to services to
be provided by any member of the ICOC or the entity the member
represents or financially benefits the member or the entity he or she
represents.
   (B) The member fails to recuse himself or herself from making,
participating in making, or in any way attempting to use his or her
official position to influence a decision on the grant loan or
contract.
   (h) Patent Royalties and License Revenues Paid to the State of
California 
   The 
    (1)     The  ICOC shall establish
standards that require that all grants and loan awards be subject to
intellectual property agreements that balance the opportunity of the
State of California to benefit from the patents, royalties, and
licenses that result from basic research, therapy development, and
clinical trials with the need to assure that essential medical
research is not unreasonably hindered by the intellectual property
agreements. 
   (2) The standards that the ICOC develops shall do all the
following:  
   (A) Require every recipient of a grant or loan award for research
to provide to the state 25 percent of the net licensing revenues it
receives associated with any institute-funded patented invention
beyond a reasonable revenue threshold that the ICOC may establish.
Net licensing revenue shall include all forms of financial
consideration from licensing and shall be defined as gross licensing
revenues, less patent expenses and reasonable payments to inventors.
 
   (B) Require every recipient of a grant or loan award for research
to grant exclusive licenses involving institute-funded patented
inventions relevant to development of therapies, drugs, and
diagnostics only to organizations that have plans which the institute
determines will provide substantial access to the resultant
therapies, drugs, and diagnostics to uninsured Californians. In
addition, the licensees shall agree to provide to patients whose
therapies, drugs, and diagnostics will be purchased in California
with public funds, the therapies, drugs, and diagnostics at the
federal Medicaid price.  
   (C) Require any recipient of a grant or loan award for research
that commercializes any product that it develops using institute
funds to agree, as a condition of accepting the funds, to make
royalty payments to the state equal to 2 to 5 percent of the revenues
over the life of the product, depending on the level of funds
provided and contribution of institute-funded patented inventions to
the development of the product. 
   (i) Preference for California Suppliers
   The ICOC shall establish standards to ensure that grantees
purchase goods and services from California suppliers to the extent
reasonably possible, in a good faith effort to achieve a goal of more
than 50 percent of such purchases from California suppliers.
  SEC. 2.  The Legislature finds and declares that this act the
ability of the California Institute for Regenerative Medicine to
further the purposes of the grant and loan programs created by the
California Stem Cell Research and Cures Act within the meaning of
Section 8 of that act.