Bayh-Dole Act and Tech Transfer Issues

1. Bayh-Dole Act and Tech Transfer Issues FLC Mid-Atlantic Regional Meeting October 23, 2007 John Raubitschek US Army Patent Attorney

2. Bayh-Dole Act • Allows non-profits and small businesses to own their inventions made with federal funds – 35 USC 202(a)-(c) • Authorizes agencies to patent and license their inventions – 35 USC 207 & 209 • Allows disposition of rights in joint inventions involving federal employees – 35 USC 202(e). Prior to 2000, agencies could only “transfer or assign” their rights to the contractor. Now, joint inventions can be assigned or licensed to or by an agency even in the absence of funding agreement.

3. Bayh-Dole Act (cont’d) • 35 USC 202(e) may conflict with USG’s residual rights in non-elected inventions under 35 USC 202(c)(2) • Another conflict may arise if non-profit or small business contractors working for USG on CRADAs make an invention because collaborator would not have rights to those inventions • DoC addressed this issue on April 2, 2004 (69 FR 17299) with an alternate provision to standard patent clause in 37 CFR 401.14 requiring contractors to grant collaborator an option for a license. This was a shift from the DoD proposal to take title to the contractors’ inventions and royalty share with their inventors. DOC objected to the DoD proposal as being inconsistent with making the minimum changes in the clause as described in 37 CFR 401.3(b). • 37 CFR 401.3(a)(5), in a sense, authorizes agencies to do a DEC. • The alternate provision is included in FAR “plain language” revision expected to be published soon as a final rule.

4. DECs • All agencies, except for DoE, DoD and NASA, are required to use the Bayh-Dole clause FAR 52.227-11 for all contractors • However, agencies may modify clause in “exceptional circumstances” after making a determination or DEC • Legislative history – S. Rep. 96-480 (1979), p 32. DECs should be used sparingly, for example when use by the public of a product is required by a UDG regulation or when agency plans to fully fund and promote invention to market. But agency should define its specific fields of use and carefully structure deferred determinations so that it does not destroy incentives to commercialize in fields not of interest to agency.

5. DECs - Procedures • What action requires a DEC? Any “restriction or elimination of the right to retain title to any subject invention” 37 CFR 401.3(a)(2) • The requirement that a contractor license a third party, such as a prime, would need a DEC • Modification or tailoring of the patent rights clause as described in 37 CFR 401.5 does not need a DEC • What is the necessary justification for a DEC – Modification will better promote the policy and objectives of the Bayh-Dole Act • The revised clause should start with the basic patent clause and make only such modifications as are necessary to address the exceptional circumstances or concerns which led to the use of the exception (37 CFR 401.3(b)). In other words, it would not be appropriate to start with the title clause in 52.227-13.

6. DECs (cont’d) • 401.3(a) requires written determination with statement of facts supporting the conditions identified in the exception exist and address with specificity how alternate provisions will better achieve B-D objectives • Must provide contractor with option for greater rights under 401.15 or 52.227-13(b)(2) • Copy of DEC must be sent to contractor (prospective) with appeal rights under 401.4 (30 working days) or under 35 USC 202(b) and 203 (60 days to COFC); appeal decided by head of agency or designee • Copy must be sent w/i 30 days of contract award to DoC (Assistant Sec. for Tech Policy, now abolished) and SBA (Chief Counsel for Advocacy), if small business • If DoC thinks there is a pattern inconsistent with B-D, notifies head of agency and OFPP which may recommend corrective action • GAO may request agencies to provide info on DECs

7. DECs - FAR • Agency head makes a DEC – FAR 27.303(d)(ii); 37 CFR Part 401 does not specify authority level except for appeals • Covers all contractors • Appeals decided by head of agency or designee at level above person making DEC w/i 45 working days or 30 working days if there is fact finding • If appeal raises genuine dispute over material facts, agency must conduct fact-finding in accordance with agency procedures to be completed w/i 45 working days • Contractors may appear with counsel, submit evidence, present witnesses and confront agency witnesses • Must have a transcribed record unless parties waive

8. DEC Activity • Most DECs come from Energy and NIH • NIH has done “6 or fewer” DECs – GAO Report 98-126 • DoC received notices from NIH (3) and DOE (3); only objected to DEC by Energy in U.S. Advanced Battery Consortium – a $200M cost share battery program for electric cars with the big 3, which took title to all inventions for automobile applications. B-D subs would receive reasonable royalties for use of their inventions by other than USABC and EPRI.

9. GAO Analysis of DECs • GAO Report 84-26 analyzed 7 DECs (Energy – 6 and NASA - 1) • GAO reviewed DECs until statute was changed in 1984 to assign responsibility to DoC • Under its statute, NASA took title to Cal Tech’s inventions under a contract awarded prior to B-D but renewed afterwards. Cal Tech requested DEC for uniform treatment of inventions. GAO did not object to DEC. • Similarly, GAO agreed with 4 Energy DECs where the subs’ inventions were owned by the prime contractor in an award made prior to B-D. • GAO disagreed with Energy DEC relating to a contract for nuclear waste disposal and storage because the agency has no present intent to transfer the technology in view of existing government policy relating to storage of nuclear waste • GAO also disagreed with two Energy DECs because it didn’t accept basis for withholding patent rights, i.e. that participants needed a royalty-free license in inventions by universities and small businesses.