Revisions to Bayh-Dole Act Regulations Governing Rights to Federally Funded Inventions

Kathryn E. Noll

By Kathryn Noll. A member of our Patent Practice Group

August 2018 IP Update

Rules affecting recipients of federal research and development funding have recently been revised, adding new deadlines and obligations. Changes to the regulations implementing the Bayh-Dole Act went into effect on May 14, 2018. The Bayh-Dole Act governs the rights to inventions made under government grants, contracts, and co-operative agreements, even if the federal government is not the sole source of the funding. The Act applies to funding provided to nonprofit organizations, large and small businesses, and universities.

The final rule that changes the regulations applies to funding agreements that are executed after May 14, 2018.  Existing funding agreements that are subsequently amended may be made subject to the revised regulations at the discretion of the funding agency.

The Bayh-Dole Act and its implementing regulations require the recipients of federal funding, or “contractors”, to take certain actions to properly manage inventions conceived during projects that receive federal funding. The following is a summary of some of the key requirements in the revised regulations and the changes made to them:

 

RequirementChange
The contractor must disclose, in writing to the federal agency providing the funding, each invention within two months after the contractor’s inventor discloses it in writing to the contractor.No change
The contractor must elect in writing whether to retain title to an invention within two years of disclosure to the federal agency.  If publication, on sale, or public use has occurred which initiates the one year “statutory period,” the agency may shorten the period for election to a date that is up to 60 days prior to the end of the statutory period.

 

The term “statutory period” was not previously defined in the old regulations.  The new regulations define “statutory period” to mean “the one-year period before the effective filing date of a claimed invention during which exceptions to prior art exist per 35 U.S.C. 102(b) as amended by the Leahy-Smith America Invents Act”. This means that the one-year period begins on the first public disclosure of the invention by the inventor or others learning of it from the inventor.  See 35 U.S.C. 102(a) (novelty requirement) and 102(b)(1) (providing a one-year period for filing after the inventor first discloses the invention publicly).
If the contractor wishes to retain title to the invention, it must file an “initial patent application” within one year after election or, if earlier, prior to the end of any statutory periodThe old regulations defined “initial patent application” to mean only a non-provisional US application.  The new regulations clarify that this initial patent application may be a U.S. provisional or non-provisional application or a PCT application.
If the contractor files its “initial patent application” as a provisional patent application, it must file a non-provisional application within 10 months after the filing date of the provisional applicationThis is a new requirement.   The old regulations did not recognize a provisional application as an “initial patent application”.
The contractor must file any foreign patent applications in additional countries or international patent offices within either (a) 10 months of the first filed patent application or (b) 6 months from the date permission is granted by the Commissioner of Patents to file foreign patent applications that have been prohibited by a Secrecy Order.No change
The contractor must require its employees (1) to sign a written agreement requiring them to disclose promptly in writing each invention made under a federally funded contract, (2) to assign to the contractor the rights in each such invention, and (3) to execute all papers necessary to file patent applications on the subject inventions in order to establish the government’s rights.The requirement under items (2) and (3) are new
The contractor must notify the federal agency, no less than 60 days prior to the expiration of a statutory deadline, of any decision not to continue the prosecution of a non-provisional patent application or not to pay a maintenance, annuity or renewal fee.The new regulations changed the 30 day notice period to 60 days and clarified that the requirement related to non-provisional patent applications.

Contractors may request an extension of time for the disclosure, election, and filing requirements mentioned above, which may be granted at the discretion of the federal agency. The new regulations provide for an automatic one-year extension, when requested, for filing a non-provisional application after filing a provisional application unless the agency notifies the contractor within 60 days of receiving the request.

As before, contractors are obligated to include standard flowdown clauses in any subcontracts, thereby making any subcontractor subject to them; to submit periodic reports as requested on the utilization efforts pertaining to a subject invention that are being made by the contractor or its licensees or assignees; and to agree that neither the contractor nor any assignee will grant the exclusive right to use or sell any subject inventions in the United States unless the person agrees that any products produced will be manufactured substantially in the United States.

The changes to the regulations also address situations in which a federal employee is a co-inventor with the contractor of a subject invention made under a federal funding agreement.  In this case, the federal agency employing the co-inventor may elect to file an initial patent application, after consulting with the contractor, provided that the contractor retains the ability to elect title. The final rule makes clear that the revised regulations will not supersede any existing inter-institutional agreements between the contractor and federal agency for the management of jointly- owned subject inventions.

If a contractor fails to disclose an invention or elect title within the specified times, the regulations require the federal agency to make a written request to the contractor to convey title.  The old regulations required the agency to make this request within 60 days of learning that the contractor had failed to make proper disclosure.  The new regulations no longer have any time limit for this written request. The reason provided for this change is that the contractor’s failure to timely disclose or elect title might deny the federal government rights in the funded invention through no fault of the funding agency.

In light of these regulations, recipients of federal funding should review their employee agreements, internal reporting structures and docketing systems to make sure that they are properly managing subject inventions and complying with the disclosure, election and filing requirements.  In addition, recipients should make sure that employees working on projects using federal funding are informed of the regulations and new timeframes so that title is not inadvertently waived on any subject invention.