Several important changes to Bayh-Dole Act implementing regulations took effect on May 14, 2018, that will apply to funding agreements executed after that date and may apply to existing funding agreements modified after that date. In this article, we focus on the most significant patent-related changes.
The Bayh-Dole Act governs rights in inventions made with U.S. federal government funding. Broadly speaking, the Act imposes invention disclosure obligations on “contractors,” permits contractors to elect to retain title (subject to a worldwide, non-exclusive license to the U.S. government), and requires contractors to pursue patent protection and commercialization. The Act also permits the U.S. government to restrict or eliminate the contractor’s rights under defined ‘‘exceptional’’ circumstances. While the Act refers to non-profit organizations, universities, and small businesses, it was expanded to apply to businesses of all sizes by Executive Order 12591, as now expressly reflected in the revised implementing regulations.
The implementing regulations discussed here are set forth in 37 CFR § 401, and primarily relate to the “standard clauses” required to be in funding agreements awarded to contractors. As summarized in the Federal Register Notice, the “standard clauses” generally obligate contractors to:
As set forth in the Federal Register Notice, the revised rules clarify electronic reporting, update certain sections to conform with changes in the patent laws, streamline the licensing application process for some Federal laboratory collaborators, make technical corrections, clarify the role of provisional patent application filing, explain a unique situation that may be appropriate for a Determination of Exceptional Circumstances, clarify the role of funding agencies in the Bayh-Dole process, and address subject inventions as to which a Federal laboratory employee is a co-inventor.
Practitioners who manage or oversee inventions subject to the Bayh-Dole Act should study the revised rules in depth. Some key patent-related changes include:
Importantly, the revisions remove the time limit within which a Federal agency can take title due to a contractor’s failure to timely disclose or elect title to a subject invention. According to the Federal Register Notice, this change is being made because “[a] contractor’s failure to timely disclose or elect title to a subject invention, both as required by its funding agreement, can work to deny the Federal government any rights in the funded invention, through no fault of the funding agency.”
While the previous version of 37 CFR § 401.14(c)(3) required contractors to file PCT and/or foreign patent applications within 10 months of filing an initial U.S. application (instead of the 12 months provided by the Patent Cooperation Treaty and Paris Convention), the revised rule expressly extends this “early” filing requirement to non-provisional applications filed after an initial provisional application:
(3) The contractor will file its initial patent application on a subject invention to which it elects to retain title within one year after election of title or, if earlier, prior to the end of any statutory period wherein valid patent protection can be obtained in the United States after a publication, on sale, or public use. If the contractor files a provisional application as its initial patent application, it shall file a non-provisional application within 10 months of the filing of the provisional application. The contractor will file patent applications in additional countries or international patent offices within either ten months of the first filed patent application or six months from the date permission is granted by the Commissioner of Patents to file foreign patent applications where such filing has been prohibited by a Secrecy Order.
If these requirements are not met, the Federal agency may obtain title to the subject invention, but if the contractor has filed a patent application in a given country after the time period specified but prior to its receipt of a written request to convey title from the Federal agency, “the contractor shall continue to retain title in that country.”
As noted above, revisions to 37 CFR § 401.14(c)(5) provide for automatic one-year extensions for filing non-provisional applications, although a request for such an extension is required:
(5) Requests for extension of the time for disclosure, election, and filing under paragraphs (1), (2), and (3) of this clause may, at the discretion of the Federal agency, be granted. When a contractor has requested an extension for filing a non-provisional application after filing a provisional application, a one-year extension will be granted unless the Federal agency notifies the contractor within 60 days of receiving the request.
U.S. government funding is an important source of funding for many small businesses and research institutions. While such funding comes with many strings attached, the ability to hold title to an invention developed with federal government support usually outweighs the administrative burdens of complying with the applicable statutory requirements and regulations. Contractors should take care to comply with these requirements, particularly in view of recent public scrutiny of private rights in federally-funded research.
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