BILL ANALYSIS Ó AB 744 Page 1 Date of Hearing: April 12, 2011 ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER PROTECTION Mary Hayashi, Chair AB 744 (John A. Pérez) - As Introduced: February 17, 2011 SUBJECT : Office of Intellectual Property. SUMMARY : Creates the Office of Intellectual Property (OIP) for purposes of identifying and providing policy guidance for state agency management of intellectual property (IP) developed by state employees or with state funds. Specifically, this bill : 1)Establishes the OIP in the Business, Transportation and Housing (BTH) Agency. 2)Requires OIP to IP generated by state employees and state-funded research. 3)Requires OIP to develop the following: a) A database to track IP using specified categories; b) A sample maintenance plan of an IP inventory; c) Factors that state agencies should consider when deciding whether to sell IP or license it to others; d) An outreach campaign informing state agencies of their rights and abilities concerning IP created by their employees; e) Sample invention assignment agreements that state agencies can consider to secure rights to patentable items created by their employees; and, f) Sample language for licenses or terms-of-use agreements that state agencies can use. 4)Authorizes state agencies and departments, upon request, to share records and information related to IP generated by state employees and state-funded research. 5)Prohibits current and former OIP employees from divulging IP AB 744 Page 2 information not expressly allowed or public. 6)Exempts University of California (UC) IP, except when contracted and funded by a state agency. 7)Exempts IP governed by the California Stem Cell Research and Cures Bond Act. 8)Creates the following definitions: a) "Agency" to mean BTH; b) "Intellectual property" to mean tangible assets subject to statutory protection under applicable patent, copyright, and trademark law. IP includes, but is not limited to, inventions, industrial designs, identifying marks and symbols, electronic publications, trade secrets, and literary, musical, artistic, photographic, and film works; and, c) "Office" to mean OIP. 9)Makes legislative findings and declarations. EXISTING LAW permits various state agencies to enter into contracts and agreements, create liabilities, and develop, own, and control the use of IP developed by the state. FISCAL EFFECT : Unknown COMMENTS : Purpose of this bill . According to the author's office, "To date there is no clear accounting of what IP the state owns or the types of agreements state agencies have entered into. Three reports on the issue have expressed the need to establish a centralized IP tracking system. This disjointed system ultimately costs the state more money. As technology continues to advance, state agencies without sufficient knowledge of how to protect IP will become increasingly vulnerable to unauthorized use and inability to capitalize on reduced contracts costs or increasing revenue to the state. AB 744 sets up the framework to determine what IP the state owns and informs state agencies of their rights and abilities to protect the state's IP." AB 744 Page 3 Background . IP typically consists of copyrights, trademarks, patents, and trade secrets. In November 2000, the Bureau of State Audits (BSA) published the report, "State-Owned IP," which found that many state agencies have insufficient knowledge about IP they own and incomplete written policies on managing IP. This could result in state agencies failing to act against individuals and entities that inappropriately use the state's IP by profiting from products developed at state expense, unauthorized use of trademarks, and state patents. BSA recommendations include developing an outreach campaign informing state agencies of their rights and abilities concerning IP and establishing guidelines for state agencies to administer their IP. The BSA report identified more than 113,000 items of state-owned IP across 125 state agencies, but estimated that there were more. State owned IP and IP developed with state funds have been the subject of numerous bills, legislative hearings, ballot initiatives, studies, audits, and reports that discuss IP policy from a broad, nonspecific perspective down to very specific IP, such as IP that may be produced by the stem cell research projects the state will pay for under the recently enacted Proposition 71. Further, this bill can be characterized as advancing the public policy goal of the state simply knowing what IP it has developed and begin to make a coordinated effort to manage it effectively for the public benefit. Under this bill, OIP would be required to identify state IP, and establish and periodically update guidelines for state agencies to appropriately administer their IP. These guidelines would include policies about when products should be considered IP, when products should be placed in the public domain, and when agencies should sell or license their IP. OIP would also be required to develop an outreach campaign to help state agencies understand their rights with respect to their IP and to develop sample agreements to effectuate the state's rights to IP developed by state employees. Previous Legislation . AB 819 (Calderon), Chapter 351, Statutes of 2010, doubled the fines in existing law for violations related to piracy or counterfeiting of specified marks registered with the Secretary of State or registered on the Principal Register of the United States Patent and Trademark Office. AB 744 Page 4 AB 479 (DeVore) of 2007, would have required the Little Hoover Commission to study whether third-party review is necessary to ensure proper assignment of IP rights in connection with state-funded research conducted by universities, private companies and other entities. This bill was held in the Assembly Judiciary Committee. AB 1456 (Mullin) of 2007, would have created the OIP for purposes of identifying and providing policy guidance for state agency management of IP developed by state employees or with state funds. This bill was amended to address an unrelated issue. AB 2721 (Mullin) of 2006, would have created the OIP to track state-funded inventions and establish policies for state-funded IP. This bill was held in the Senate Governmental Organization Committee. ACR 252 (Mullin), Chapter 190, Resolutions of 2004, asked the California Council on Science and Technology (CCST) to create a special study group to develop recommendations on how the state should treat IP made under state contracts, grants and agreements. The scope of the study was expanded in 2005, under ACR 24 (Mullin), Chapter 111, Resolutions of 2005, to include contracts, grants and agreements developed under the stem cell initiative (Proposition 71) to ask CCST to report on how the commercialization of technology developed with the investment of taxpayer dollars could generate some public benefit, and to request that CCST establish a review group to review and comment on the study. AB 1616 (Montanez) of 2003, would have created the California Intellectual Property Rights Act to encourage innovation in the sciences, creativity in the arts, and free and open government by providing that no state agency shall have the right to protect, assert, or exploit state-owned trade secrets, patentable inventions or patented inventions. This bill also would have provided that all copyrights in works made for hire by state employees or contractors were to be dedicated to the public domain. This bill was held in the Senate Judiciary Committee. SB 875 (Escutia) of 1999, which originally would have established OIP in the Trade and Commerce Agency to inventory, market and protect the state's IP, was amended to instead AB 744 Page 5 require the Director of General Services to create a special advisory committee to develop recommendations concerning how the state should organize and manage the cataloging, marketing, licensing, and legal protection of all IP owned or controlled by the state. This bill was held in the Assembly Appropriations Committee. REGISTERED SUPPORT / OPPOSITION : Support None on file. Opposition None on file. Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916) 319-3301