BILL ANALYSIS Ó SB 170 Page 1 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 SB 170 Page 2 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 SB 170 Page 3 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. SB 170 Page 4 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 SB 170 Page 5 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." SB 170 Page 6 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 FN: 0001960