BILL ANALYSIS Ó
Bill No: AB
744
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Staff Analysis
AB 744 Author: John A. Perez
As Amended: June 7, 2012
Hearing Date: June 12, 2012
Consultant: Art Terzakis
SUBJECT
Office of Intellectual Property
DESCRIPTION
AB 744 establishes the "Office of Intellectual Property" in
the Department of General Services for purposes of
identifying and providing policy guidance for state agency
management of intellectual property (IP) developed by state
employees or with state funding. Specifically, this
measure:
1.Requires the Office to: (a) commencing January 1, 2017,
and every five years thereafter, to track IP generated by
state employees or with state funding; (b) develop a
database to track specified information about IP
generated by state employees or with state funding; (c)
develop a sample maintenance plan of an inventory of IP;
(d) develop factors that state agencies should consider
when deciding whether to sell their IP or license it to
others; (e) develop an outreach campaign informing state
agencies of their rights and abilities concerning IP; (f)
develop sample invention assignment agreements that state
agencies may use to secure rights to potentially
patentable items created by their employees using state
resources; and, (g) develop sample language for licenses
or terms-of-use agreements to limit the use of their IP
by others to only appropriate purposes.
2.Makes it explicit that these provisions do not apply to
the use of "expressive works" created by non-state
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employees or without state funding.
3.Defines "expressive works" to mean a play, book,
magazine, newspaper, musical composition, audiovisual
work, radio or television program, work of art, work of
political or newsworthy value, or an advertisement or
commercial announcement for any of these works, if it is
fictional or nonfictional entertainment, or a dramatic,
literary, or musical work.
4.Defines "intellectual property" to mean intangible 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.
5.Defines "databases" to mean compilations of data,
typically generated from research, sometime from one
source, but often combined from many sources.
6.Authorizes state agencies and departments, upon request,
to share with the Office records and information related
to IP generated by state employees or with state funding.
7.Prohibits any employee and former employees of the Office
from divulging IP information not expressly allowed.
8.Exempts from oversight University of California IP and
that of the California State University, except when
contracted and funded by a state agency.
9.Exempts IP governed by the California Stem Cell Research
and Cures Bond Act.
10.Stipulates that "state funding" shall not include
funding from the California Film & Television Tax Credit
Program.
11.Finds and declares the Legislature recognizes that the
licensing of or limitations on the use of IP should
accommodate free expression and therefore, the Office
should not develop policies or procedures to license or
otherwise limit the use of the state's IP in expressive
works created by non-state employees or without state
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funding.
EXISTING LAW
Existing law permits various state agencies to enter into
contracts and agreements, create liabilities, and develop,
own, and control the use of intellectual property developed
by the state.
Existing state law, the California Uniform Trade Secrets
Act, generally provides for the protection of trade
secrets, and provides that a holder of a trade secret may
recover damages for loss due to misappropriation of a trade
secret.
Article I, Section 8 of the United State Constitution
provides that Congress shall have the power to "promote the
progress of science and useful arts by securing for limited
times to authors and inventors the exclusive right to their
respective writings and discoveries."
Existing federal law provides for the copyright, which is a
form of protection provided to the authors of "original
works of authorship," including literary, dramatic,
musical, artistic, and certain other intellectual works.
This protection is available to both published and
unpublished works. The length of a copyright depends on
the nature of authorship, with most copyrights lasting 70
years after the author's death, while copyrights on works
for hire last for 120 years from the date of the work's
creation.
The Bayh-Dole Act allows for the transfer of exclusive
control over many government funded inventions to
universities and businesses operating with federal
contracts for the purpose of further development and
commercialization. The contracting universities and
businesses are then permitted to exclusively license the
inventions to other parties. The federal government,
however, retains "March-in" rights to license the invention
to a third party, without the consent of the patent holder
or original licensee, where it determines the invention is
not being made available to the public on a reasonable
basis.
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Proposition 71, known as the "California Stem Cell Research
and Cures Initiative," was adopted by the electorate in
November 2004. The initiative provides $3 billion in state
financing for stem-cell research and requires the creation
of the California Institute for Regenerative Medicine to
regulate stem cell research and provide funding, through
grants and loans, for this research and research
facilities.
BACKGROUND
Purpose of AB 744: The author's office notes that to date
there is no clear accounting of what intellectual property
the state owns or the types of agreements state agencies
have entered into. According to the author's office, this
measure seeks to incorporate recommendations from the
following reports: the 2011 Bureau of State Audits (BSA)
report entitled, Intellectual Property; the January 2006
California Council on Science and Technology (CCST) report
entitled, Policy Framework for Intellectual Property
Derived from State-Funded Research; and, a November 2000
BSA Report entitled, State-Owned Intellectual Property:
Opportunities Exist for the State to Improve Administration
of its Copyrights, Trademarks, Patents, and Trade Secrets.
The 2000 BSA report found that many state agencies are not
sufficiently knowledgeable about the intellectual property
they own. The report added, "Lacking adequate knowledge of
their intellectual property ownership and rights, state
agencies could fail to act against those who use the
State's intellectual property inappropriately.
Inappropriate use includes unauthorized use of state
trademarks and improperly profiting on products developed
at state expense." The author's office emphasizes that
this disjointed system ultimately costs the state money.
Additionally, the author's office contends that as
technology continues to advance, state agencies without
sufficient knowledge of how to protect intellectual
property will become increasingly vulnerable to
unauthorized use and inability to capitalize on reduced
contract costs or increasing revenue to the state. This
measure is intended to set up the framework to determine
what intellectual property the state owns and inform state
agencies of their rights and abilities to protect the
state's intellectual property.
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What does intellectual property consist of? The term
"intellectual property" describes products of the mind,
such as ideas, inventions, and creations. Unlike real
property such as land, intellectual property is intangible.
As a type of personal property, however, intellectual
property is protected by law.
There are four primary types of intellectual property;
copyrights, trademarks, patents, and trade secrets. A
copyright grants an exclusive legal right to reproduce,
publish, perform, display, distribute, or sell the content
and form of an original work of authorship (e.g., literary
and artistic works, maps, computer programs, audiovisual
materials, publications). A trademark is any name, word,
symbol, device, slogan, package design, or any combination
of these features (e.g., Nike, "Just Do It," the swoosh)
that identifies and distinguishes the source of goods
produced by one entity from those goods produced by others.
A patent is a property right that the federal government
grants to an owner to exclude others from making, using,
selling, or importing the patented item into the U.S.A.
(e.g., inventions, discoveries, chemical compounds). A
trade secret is any information used in an owner's
operations from which value is derived because the
information is not generally known (e.g., formulas,
recipes, computer programs).
Taken as a whole, federal, state, and common law provide
intellectual property owners with an extensive tool bag to
protect the items they create. Although intellectual
property laws enable an owner to pursue legal remedies
against any person or entity that infringes on the owner's
rights, they do not always give the owner the right to
manufacture or produce a product. Infringement includes
making unauthorized versions of the intellectual property
or using it against the owner's wishes.
PRIOR/RELATED LEGISLATION
SB 170 (Pavley) Chapter 586, Statutes of 2011. Authorized
air districts to sponsor, coordinate, and promote projects
that will lead to the prevention, mitigation, or cure of
the adverse effects of air pollution, including the adverse
health effects of air pollution. Also, authorized, until
January 1, 2017, a district to negotiate what share, if
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any, of the intellectual property, or benefits resulting
from intellectual property, developed from the use of
district funds, including funds discharged as grants, will
accrue to that district.
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 1456 (Mullin) 2007-08 Session. Would have established
the Office of Intellectual Property within the Business,
Transportation and Housing Department and required the
Office to, among other things, track intellectual property
generated by state employees and state-funded research,
develop a database to track the intellectual property, as
specified, and establish guidelines for use by state
agencies in administering their intellectual property
guidelines, including policies regarding what is to be
treated as intellectual property and what should be placed
in the public domain. (Gutted in Senate late in the Session
to become a Medi-Cal third party liability bill - AB 1456
eventually died on Senate Appropriations suspense file.)
AB 2721 (Mullin) 2005-06 Session. Would have established
an Office of Intellectual Property in state government for
purposes of tracking intellectual property generated by
state employees and state-funded research and with
responsibility for developing guidelines and principles for
use by state agencies in administering their intellectual
property. (Held in this Committee at author's request due
to concerns raised by the biotech and pharmaceutical
industries about the bill's mandated intellectual property
policies.)
SB 401 (Ortiz) 2005-06 Session. Would have modified the
public hearing and conflict of interest procedures of
members of the Independent Citizen's Oversight Committee
(ICOC), the Citizen's Financial Accountability Oversight
Committee, and the advisory and working groups established
to assist these bodies, and would have set forth minimum
intellectual property licensing conditions applicable to
ICOC standards for research and facilities grants and
loans. (Died on Suspense file in Assembly Appropriations)
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SB 340 (Battin) 2005-06 Session. Would have required that
all revenues derived from patents, royalties, and licenses
paid to the state as a result of intellectual property
agreements entered into pursuant to the bill's provisions
be deposited into the General Fund. (Held in Senate Health
Committee at author's request)
ACR 252 (Mullin) Resolution Chapter 190, Statutes 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 intellectual
property made under state contracts, grants and agreements.
The scope of the study was expanded in 2005, under ACR 24
(Mullin), Resolution. Chapter 111, Statutes 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 2319 (Mullin) 2003-04 Session. Would have directed the
Attorney General and the Department of General Services to
initiate a project with the CCST to develop recommendations
to the Governor and the Legislature on how the state should
treat intellectual property made under state contracts,
grants and agreements. (Held in Senate Judiciary
Committee)
AB 1616 (Montanez) 2003-04 Session. Would have created the
California Intellectual Property Rights Act which sought 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. 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.
(Held in Senate Judiciary Committee)
SB 875 (Escutia) 1999-00 Session. Originally would have
established the Office of Intellectual Property in the
Trade and Commerce Agency to inventory, market and protect
the state's intellectual property. This bill was later
amended to require the Director of the Department of
General Services (DGS) to develop recommendations on how
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the state should organize and manage its intellectual
property. (Held in Assembly Appropriations suspense file)
SUPPORT/OPPOSE: None on file as of June 8, 2012.
DUAL REFERRAL: Senate Judiciary Committee
FISCAL COMMITTEE: Senate Appropriations Committee