BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 170
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          SENATE THIRD READING
          SB 170 (Pavley)
          As Amended  July 12, 2011
          Majority vote 

           SENATE VOTE  :  25-14

           LOCAL GOVERNMENT    6-3         NATURAL RESOURCES   5-2         
           
           ----------------------------------------------------------------- 
          |Ayes:|Skinner, Bradford,        |Ayes:|Chesbro, Brownley,        |
          |     |Campos, Davis, Gordon,    |     |Dickinson, Huffman,       |
          |     |Hueso                     |     |Monning                   |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Smyth, Knight, Norby      |Nays:|Knight, Grove             |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 

           APPROPRIATIONS      12-5                                        
           
           ----------------------------------------------------------------- 
          |Ayes:|Fuentes, Blumenfield,     |     |                          |
          |     |Bradford, Charles         |     |                          |
          |     |Calderon, Campos, Davis,  |     |                          |
          |     |Gatto, Hall, Hill, Lara,  |     |                          |
          |     |Mitchell, Solorio         |     |                          |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Harkey, Donnelly,         |     |                          |
          |     |Nielsen, Norby, Wagner    |     |                          |
           ----------------------------------------------------------------- 

           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 a local and regional air pollution control district and 
            air quality management district (district) to sponsor, 
            coordinate, and promote projects that will lead to the 
            prevention, mitigation, or cure of the adverse effects of air 








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            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,

             b)   To fund projects to reduce or mitigate air pollution 
               through the development or implementation of pollution 
               controls, low or zero polluting fuels or technologies, or 
               pollution prevention measures.

          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 process, machine, or article of 
            manufacture 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 








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            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)Declares that the requirements under the bill do not apply to 
            specified contracts between the state and the University of 
            California or the California State University. 

          10)Provides that provisions of this bill related to intellectual 
            property and benefits shall become inoperative on January 1, 
            2017.

          11)Provides that an agreement made prior to January 1, 2017, 
            pursuant to the bill's provisions, shall remain in effect for 
            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.








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          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 
            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  :  According to the Assembly Appropriations 
          Committee, there are no state costs.

           COMMENTS  :  According to the author, "air districts throughout 
          the state cosponsor and fund research, development, 
          demonstration and commercialization of clean technologies to 








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          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."

          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."

          According to the author and the bill's sponsor, the South Coast 
          Air Quality Management District (South Coast AQMD), this bill 
          "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 fund projects that 
          reduce or mitigate air pollution through the development or 
          implementation of pollution controls, low or zero polluting 
          fuels or technologies, or pollution prevention measures."

          A similar bill, SB 778 (Pavley) was sponsored by the 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, 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 (Pavley) were never heard in policy committee and the 
          bill did not move.

          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."









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          Opposition arguments:  The Legislature 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. 


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


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