Bayh-Dole Act Amendments Governing Ownership of Government-Funded Inventions Take Effect Next Week

Government Contracts Update

Date: May 10, 2018

Key Notes:

  • NIST has issued a final rule that amends the regulations implementing the Bayh-Dole Act, which allows contractors to take ownership in government-funded inventions
  • Among other changes, the revised regulations eliminate the 60-day limit on the time period within which the government may seek ownership of an invention where the contractor fails to provide appropriate disclosure or election
  • Contractors should understand how the revised regulations impact their ownership of government-funded inventions under the Bayh-Dole Act

The Department of Commerce’s National Institute of Standards and Technology (NIST) has issued a final rule amending the regulations that implement the Bayh-Dole Act, 35 U.S.C. § 200, which governs rights in inventions made with federal funding assistance. The final rule makes several changes that impact the contractor’s rights with respect to ownership of federally funded inventions and the government’s ability to seek title to an invention. The revisions go into effect on May 14, 2018, and apply only to new government contracts.

Primary among the changes implemented by the final rule is the elimination of the time limit within which the government may seek title to an invention after it learns that there was an issue with the contractor’s invention disclosure or election. The Act requires contractors to disclose a subject invention to the government within two months after the inventor discloses it in writing to the contractor’s personnel responsible for patent matters. The contractor then has two years to notify the government in writing whether or not it elects to retain title to this invention. The current regulations allow the government to seek title to that invention within 60 days of learning that the contractor failed to disclose or elect title to the invention within the specified times. The final rule eliminates the 60-day deadline, thereby providing the government with an unlimited time period within which to assert ownership to an invention following the discovery of the contractor’s non-compliance with the Act’s disclosure and election requirements.

The final rule also obligates the contractor to require its employees to assign rights in a subject invention to the contractor. The revision follows the U.S. Supreme Court’s decision in Stanford University v. Roche Molecular Systems, Inc., 563 U.S. 776 (2011), in which the Court held that the title to an invention belongs to the inventor, even where the inventor is employed by a contractor working under the Bayh-Dole Act. The revision should clarify the issue of ultimate ownership in a subject invention created with federal funding.

In addition, the final rule expands the regulatory requirements governing the management of inventions where a federal government employee is a co-inventor. Under the final rule, if the federal agency employing the co‑inventor transfers or assigns to the contractor the right it has acquired in the invention from its employee pursuant to the Act, the assignment will be made pursuant to the patent rights clause of the contractor’s funding agreement. The final rule also spells out title election steps where the federal employee is a co-inventor under a funding agreement supported by an agency other than the agency employing the co-inventor.

The final rule also addresses the greater use of provisional patent applications by contractors. In its comments on the final rule, NIST acknowledged the increased use of provisional applications, and that the contractor may decide as a matter of prosecution strategy not to convert a provisional application under certain circumstances without abandoning the invention itself or precluding the ability of the contractor to file one or more additional applications directed to that invention. The current regulation requires contractors that file a provisional patent application to file an actual application within 10 months, and provides the government with discretion regarding any extension. The revised regulation states that a one-year extension will be granted unless the government provides notice to the contractor within 60 days of filing of such a request.

The final rule clarifies one long-standing issue, amending the regulations to make clear that the Bayh-Dole Act applies equally to small and large businesses. The final rule also rejects comments requesting revisions to the Act’s regulations to permit automatic waivers from the Act’s requirement for substantial U.S. manufacture of any product embodying a subject invention. The final rule emphasized that the current regulations track the Act’s provision that waivers of the requirement may be granted “in individual cases.”

Although the final rule does not make substantial changes to the Bayh-Dole Act’s regulations, the revised regulations do create risks for contractors that seek ownership of government-funded inventions. The elimination of the 60‑day period within which the government may seek title to contractor-owned inventions means that contractors must be more diligent with respect to adherence to invention disclosure and election requirements. Although the government historically has not always been diligent in terms of enforcing its ownership rights where a contractor fails to follow the Act’s disclosure and election provisions, the elimination of the 60-day period will allow the government greater latitude to enforce its ownership rights. As a result, contractors will have less ability to argue that the government knew or should have known about any errors in the contractor’s observance of the Act’s disclosure and election requirements.

The final rule can be found at 83 Federal Register 15954 (April 13, 2018) or at the following link: https://www.gpo.gov/fdsys/pkg/FR-2018-04-13/pdf/2018-07532.pdf.

FOR MORE INFORMATION

For more information, please contact:

Francis E. Purcell, Jr.
202.263.4118
Chip.Purcell@ThompsonHine.com

Tom Mason
202.263.4168
Thomas.Mason@ThompsonHine.com

Joseph R. Berger
202.263.4193
Joseph.Berger@ThompsonHine.com

Ray McCann
202.263.4152
Ray.McCann@ThompsonHine.com

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