BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair AB 744 (J Perez) - Office of Intellectual Property. Amended: June 18, 2012 Policy Vote: GO 9-2 Judiciary 3-1 Urgency: No Mandate: No Hearing Date: August 16, 2012 Consultant: Bob Franzoia SUSPENSE FILE. Bill Summary: AB 744 would establish the Office of Intellectual Property in the Department of General Services (department). This bill would authorize the office to carry out various powers and duties relating to assisting a state agency in the management and development of intellectual property developed by state employees or with state funding. Fiscal Impact: Up to $350,000 in 2012-13 and 2013-14 to develop legally supported policies for identifying, and procedures for protecting, intellectual property. Up to $700,000 annually for 1.5 staff counsels, three associate governmental program analysts, one staff services manager, one executive assistant and one office technician with potentially offsetting state agency workload savings. Cost split approximately 80 percent General Fund and 20 percent special funds. Unknown increase in General Fund and special fund revenue to the extent the processes formalized by this bill relating to intellectual property result in royalties to the state. Background: In its November 2011 report Intellectual Property: An Effective Policy Would Educate State Agencies and Take Into Account How Their Functions and Property Differ, the Bureau of State Audits noted the following: - The state has not enacted a statutory framework nor implemented the recommendations made in a 2000 audit report. - Fifty-three percent of the state agencies that responded to the bureau survey think the state should establish statewide guidance for managing and protecting intellectual property. - Four state control agencies do not think they are responsible AB 744 (J Perez) Page 1 for providing policies or guidance to other state agencies for managing and protecting intellectual property. - The four state agencies the bureau visited had only limited written policies, and the way in which they addressed their rights varied. - The Department of Health Care Services generally retains the rights to intellectual property created by a contractor. - Certain contracts the California Energy Commission has with its researchers gives the researchers the rights, but it can and has earned royalties. Between 2008-09 and 2010-11, it received $2.6 million in royalties. - The California Department of Transportation sold licenses to its employee-developed intellectual property and generated $51,500 in revenue. - To move forward, the state will need to clearly articulate the goals of any policy related to intellectual property. Proposed Law: This bill defines "intellectual property" to mean intangible assets subject to statutory protections under applicable patent, copyright, and trademark law. Intellectual property 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. Staff Comments: The report suggested the Legislature and Governor should consider whether establishing a mechanism to track the State's intellectual property would be beneficial. This bill requires the department develop a database for the tracking of intellectual property by category of protection, date of creation, owner of intellectual property, grantee, state agency or granting entity, sources of funding, and status of licensing, including invention utilization updates. This bill exempts from the definition of state funding, the California Film and Television Tax Credit Program, likely denying the state an opportunity to at least obtain a share of intellectual property from musical, artistic, photographic or film works, all of which are specified in the definition of intellectual property proposed by the bill. The provisions of the bill do not apply to intellectual property agreements governed by the California Stem Cell Research and AB 744 (J Perez) Page 2 Cures Bond Act. Proposed Author Amendments: Proposed author amendments would require the office to track intellectual property commencing 2015 and every three years thereafter and clarify the application of existing University of California and California State University contract provisions.