(Originally published in the June issue of Bruce R. Hopkins Nonprofit Counsel, available electronically to subscribers on publication.)
A medical research organization engages in genomic research to aid in the treatment of genetic-based diseases. It is a consortium, with participation by academics, tax-exempt hospitals and medical centers, governmental and quasi-governmental agencies, health-oriented charities, and representatives of the pharmaceutical, information technology, and genetic measurement industries. A formal membership structure is in place for each project, with these members, primarily pharmaceutical companies, providing funding. The organization has developed a publicly accessible and free database.
Residual tissue accumulated in the course of this project will be distributed to other persons, principally funding members, for follow-on studies. The IRS ruled that this distribution program is scientific inasmuch as it involves “compiling experimentation data gathered from the residual tissue and assembling it into a useful central resource of effective targets for therapeutic intervention and indicators of unfavorable outcomes” (Priv. Ltr. Rul. 201114035). Because this program will “consist of fundamental data gathering and analysis,” it was ruled to entail research.
In connection with this specimen distribution program, the recipients of the residual specimens (the funding members) will be able to retain the rights to any intellectual property produced. Nonetheless, the results of their research will be transmitted to the medical research organization and incorporated into the database within a reasonable time. As noted, this database will be available to the public via the Internet. Consequently, the IRS ruled that the results of experiments conducted using the residual specimens are considered as directed toward benefiting the public and, therefore, regarded as research carried on in the public interest. [9.1–9.3]
Note: As another example of how the IRS can be lenient when applying the private benefit doctrine when it cares to, it turns out in this case that industry representatives (primarily pharmaceutical companies) that fund the research are given an advantage in applying for the specimens. This was considered by the IRS to further exempt purposes by increasing the amount of public data on the disease and to constitute only incidental private benefit. [20.7]
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