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Department of Veterans Affairs
Office of the General Counsel
Washington, DC 20420
December 9, 1992
VA District Counsel (372/02)
941 North Capitol Street, NE
Washington, DC 20421
QUESTIONS PRESENTED: Whether individuals can transfer royalty
rights to VA research corporations.
DISCUSSION:
1. You have asked us to concur as to a particular portion of a
draft opinion letter you are sending to the Director of the
Washington VA Medical Center ("DCVAMC"). The Director has told you
that Dr. David J. Nashel, Chief of Rheumatology and Mr. John J.
Martin, Research Biologist, both of whom work for the DCVAMC, have
developed a new software program called Images in Rheumatology. You
state that the Institute for Clinical Research, the DCVAMC's title 38
nonprofit research corporation ("ICR"), provided part of the funding
for the development of this software package. Presuming that the
software is copyrightable (a question you have asked 024 to address),
and that Dr. Nashel and Mr. Martin can individually obtain royalty
payments in the form of a licensing fee from the sale of the software
product, you have asked whether they could transfer the proceeds
generated by this fee to ICR. We conclude that they can transfer the
royalty proceeds to ICR provided that the rights to the royalty
initially belong to Dr. Nashel and Mr. Martin and not to VA.
2. You state in your opinion that royalties and other income from
the licensing or assignment of inventions cannot be transferred to
and administered by a VA nonprofit research corporation. For support,
you relied upon an opinion rendered by the Office of General Counsel (Op.G.C. 27-90 (April 24, 1990)) which held that (1) a VA laboratory
may transfer funds received under a cooperative agreement for the
conduct of research to its nonprofit research corporation for
administration, and (2) royalties and other income from licensing or
assignment of inventions may not be transferred to and administered
by a VA nonprofit research corporation. We disagree with your
interpretation of Op.G.C. 27-90 as an absolute prohibition against
the transfer of royalties by any entity or preteen to any title 38
research corporation. That Opinion addressed the factual situation
where the royalty interest involved was "owned" by VA. The Opinion
prohibited VA from transferring its royalty interest to the research
corporation because of the limitation in the Federal Technology
Transfer Act to "accept, retain, and use" royalty funds. 15 U.S.C.
3710a(b)(1)(1992). Here, there would be no such prohibition because
the owners of the royalty, Dr. Nashel and Mr. Martin, are individuals
who are not subject to the Federal Technology Transfer Act.
Therefore, we conclude that any royalty interest that Dr. Nashel and
Mr. Martin own could be transferred to ICR.
HELD: Individuals owning royalty rights may transfer the royalty
rights to a VA nonprofit research corporation.
Audley Hendricks, Assistant General Counsel
Attachment
NONPROFIT RESEARCH CORPORATIONS
AND THE FEDERAL TECHNOLOGY TRANSFER ACT
VA has authority to establish nonprofit research corporations as
"flexible funding mechanisms" for conducting approved research at VA
medical centers. 38 U.S.C. 7361(a). VA also has authority to permit
the directors of Government-operated laboratories to enter into
cooperative research and development agreements (CRADAs) with other
Government agencies, private organizations, and persons. 15 U.S.C.
3710a(a)(1). The question presented is whether a nonprofit research
corporation has authority to enter into a CRADA on behalf of the
Government. As explained below, a nonprofit research corporation is
not a Government-operated laboratory and therefore does not fall
within the statutory language permitting such agreements.
The purpose of the statute authorizing nonprofit research
corporations is to allow private entities to contribute research
monies to Government projects without augmenting appropriations, and
without passing monies through universities. The relationship which
the statute creates between these corporations and the Federal
Government is that the corporations, although formed under and
subject to state corporate laws, are subject to oversight by the
inspector General and the Comptroller General. The statute does not
create a relationship in which a nonprofit research corporation is an
arm of the Government.
In the House Report on the Veterans' Omnibus Health Care
Amendments of 1987, Congress addressed the proposed amendment
authorizing nonprofit research corporations, stating that "these
corporations would not be considered for any purposes as corporations
owned or controlled by the United States, except for the limitations
made applicable to these corporations by this Act." H.R. Rep. No.
373, 100th Cong., 1st Sess., at 5 (1987).
Given this legislative history, attorneys at the Department of
Veterans Affairs and the Department of Justice have concluded that
the Federal Tort Claims Act does not cover employees of nonprofit
research corporations, that nonprofit research corporations cannot
use the GSA supply schedule, and that VA medical centers may not
transfer funds received pursuant to a CRADA to nonprofit research
corporations for administration.
Consistent with the conclusion that nonprofit research
corporations are not Government-operated laboratories, and consistent
with prior determinations finding that nonprofit research
corporations have no governmental authority, we find that they also
have no authority to enter into CRADAs on behalf of the Federal
Government.
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