BILL ANALYSIS                                                                                                                                                                                                    ”



                                                                  SB 170
                                                                  Page  1

          Date of Hearing:  June 22, 2011

                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
                                Cameron Smyth, Chair
                     SB 170 (Pavley) - As Amended:  May 10, 2011

           SENATE VOTE  :  25-14
           
          SUBJECT  :  Air districts: adverse effects of air pollution: 
          intellectual property.
                                                             
           SUMMARY  :  Authorizes local and regional air pollution control 
          districts and air quality management districts to sponsor air 
          pollution prevention and mitigation projects, and allows 
          districts to share in revenues generated from the 
          commercialization of intellectual property, as specified.  
          Specifically,  this bill  :   

          1)Allows an air pollution control district (district) 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.

          2)Allows a district to negotiate what share, if 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.

          3)Allows a district to negotiate revenue sharing agreements with 
            recipients of district funds, including the collection of 
            royalties.

          4)Specifies that proceeds obtained by a district from these 
            revenue sharing agreements shall accrue to the district and be 
            deposited into a special account that may only be used, 
            subject to the district's ability to recover its expenses and 
            its administrative costs, for either of the following 
            purposes:

             a)   To fund 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; or,









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             b)   To develop low-polluting fuels or technologies.

          5)Provides that a district shall not receive a benefit pursuant 
            to the bill's provisions in excess of the amount of the 
            district's investment in the development of a process, 
            machine, or article of manufacture, if the district adopts a 
            rule or regulation that mandates the use of that process, 
            machine or article of manufacture and that regulation of rule 
            was adopted after the development of the process, machine, or 
            article of manufacture.

          6)Provides that if the state or a subdivision of the state 
            purchases or licenses a good, service, or process for which a 
            district accrues a benefit resulting from an intellectual 
            property interest negotiated pursuant to 1) or 2) above, upon 
            the request of the Department of General Services (DGS), the 
            district shall prepare reimbursement to the General Fund for 
            the amount of the benefit accrued.

          7)Requires a district that attempts to negotiate for benefits to 
            report annually to the Legislature, and include the following 
            in the report:

             a)   The number of district-funded projects and the number of 
               district-funded projects for which a benefit was 
               negotiated, regardless of the outcome of the negotiation;

             b)   The outcome of all negotiations regarding intellectual 
               property, including agreed upon terms for revenue sharing; 
               and,

             c)   A list of all district-funded projects from previous 
               years that have resulted in a benefit, if any, and the 
               total amount of that benefit to date.

          8)Provides that a district may include the report specified in 
            7) above as part of another report submitted to the 
            Legislature by the district.

          9)Provides that provisions of this bill related to intellectual 
            property and benefits shall become inoperative on January 1, 
            2018.

          10)Provides that an agreement made prior to January 1, 2018, 
            pursuant to the bill's provisions, shall remain in effect for 








                                                                  SB 170
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            the duration of the agreement.

           EXISTING LAW  :

          1)Provides the California Air Resources Board (CARB) with 
            primary responsibility for control of mobile source air 
            pollution, including adoption of rules for reducing vehicle 
            emissions and the specification of vehicular fuel composition. 
             

          2)Requires CARB to coordinate efforts to attain and maintain 
            ambient air quality standards.

          3)Provides that districts have primary responsibility for 
            controlling air pollution from all sources, other than 
            emissions from mobile sources.

          4)Requires the Independent Citizen's Oversight Committee, as 
            part of the California Institute for Regenerative Medicine 
            (CIRM), to 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 ensure that essential medical research is not 
            unreasonably hindered by the intellectual property agreements. 


          5)Requires all revenues received through the intellectual 
            property agreements as specified in 
          4) above to be deposited into the General Fund.

          6)Allows CIRM to accept additional revenue and real and personal 
            property, including, but not limited to, gifts, royalties, 
            interest, and appropriations that may be used to supplement 
            annual research grant funding and the operations of CIRM.

          7)Provides, as part of the Public Interest Energy Research 
            (PIER) Program administered by the California Energy 
            Commission (CEC), to the extent that intellectual property is 
            developed under the PIER program, that an equitable share of 
            rights in the intellectual property or in the benefits derived 
            therefrom shall accrue to the State of California.

          8)Allows CEC, for the PIER Program, to determine what share, if 








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            any, of the intellectual property, or the benefits derived 
            therefrom, shall accrue to the state and allows CEC to 
            negotiate sharing mechanisms for intellectual property or 
            benefits with award recipients.

           FISCAL EFFECT  :  None

           COMMENTS  :   

          1)According to the author, "air districts throughout the state 
            cosponsor and fund research, development, demonstration and 
            commercialization of clean technologies to reduce or eliminate 
            emissions.  The deficiency in the present law is that there is 
            no clear authority for air districts to share in revenue 
            streams of ventures resulting, in part, from their funding.  
            Such additional revenues would enable air districts to sponsor 
            additional research, achieve further reductions in diesel and 
            toxic emissions, and provide greater health protection in 
            impacted communities."

          2)The author notes that "the California Institute for 
            Regenerative Medicine (CIRM) and the California Energy 
            Commission's Public Interest Energy Research, Demonstration, 
            and Development (PIER) Program are prime examples of what air 
            districts hope to achieve - clear authorization which allows 
            them to negotiate revenue sharing agreements with grant 
            recipients."

          3)According to the author and the bill's sponsor, the South 
            Coast Air Quality Management District, SB 170 "seeks to, on a 
            voluntary basis, allow state air districts the option to share 
            in revenues generated from the commercialization of 
            intellectual property developed with air district research 
            grant funding, just as private sector investors can.  Revenues 
            generated would be deposited in a special account created by 
            the air district and spent on the prevention, mitigation, or 
            cure of the adverse effects of air pollution or to develop 
            low-polluting fuels or technologies."

          4)A similar bill, SB 778 (Pavley) was sponsored by the South 
            Coast Air Quality Management District (South Coast AQMD) in 
            2010 and would have specifically allowed South Coast AQMD to 
            sponsor, coordinate, and promote air pollution prevention or 
            mitigation projects and would have authorized South Coast AQMD 
            to determine what share, if any, of the intellectual property, 








                                                                  SB 170
                                                                  Page  5

            or benefits resulting from intellectual property, developed 
            from the use of district funds, including funds discharged as 
            grants, would have accrued.  The provisions of SB 778 were 
            never heard in policy committee and the bill did not move.

          5)Support arguments:  The American Lung Association, in support, 
            writes that this bill "provides local air pollution control 
            districts with an important new tool for cleaning up 
            California's air and protecting public health."

            Opposition arguments:  The Committee may wish to consider what 
            effect this will have on contract law as it pertains to the 
            use and benefit of intellectual property rights and the 
            royalties derived from such intellectual property rights. 

          6)This bill is doubled-referred to the Natural Resources 
            Committee.

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          South Coast Air Quality Management District ›SPONSOR]
          American Lung Association
           
            Opposition 
           
          None on file

           Analysis Prepared by  :    Debbie Michel / L. GOV. / (916) 
          319-3958