The Bayh–Dole Act or Patent and Trademark Law Amendments Act (Pub. L. 96-517, December 12, 1980) is U.S. legislation permitting ownership by contractors of inventions arising from federal government-funded research. Sponsored by Senators Birch Bayh of Indiana and Bob Dole of Kansas, the Act was adopted in 1980, is codified at 94 Stat. 3015, and in 35 U.S.C. §§ 200–212, and is implemented by 37 C.F.R. 401 for federal funding agreements with contractors and 37 C.F.R 404 for licensing of inventions owned by the federal government.
The Bayh-Dole Act made a key change in federal contracting procedures that allowed contractors the right to retain ownership of inventions made with federal funding. Before the Bayh–Dole Act, the Federal Procurement Regulation required the use of a patent rights clause that in some cases required federal contractors or their inventors to assign inventions made under contract to the federal government unless the funding agency determined that the public interest was better served by allowing the contractor or inventor to retain principal or exclusive rights. The National Institutes of Health, National Science Foundation, and the Department of Commerce had implemented programs that permitted non-profit organizations to retain rights to inventions upon notice without requesting an agency determination. By contrast, Bayh–Dole uniformly permits non-profit organizations and small business firm contractors to retain ownership of inventions made under contract and which they have acquired, provided that each invention is timely disclosed and the contractor elects to retain ownership in that invention.
A second key change with Bayh–Dole was to authorize federal agencies to grant exclusive licenses to inventions owned by the federal government.
History The Bayh–Dole Act grew out of the Congress's efforts to respond to the economic malaise of the 1970s.Ashley Stevens (2004) The Enactment of Bayh–Dole Journal of Technology Transfer 29:93–99 One of Congress's efforts was focused on how best to manage inventions that were created with the more than $75 billion a year invested in government-sponsored R&D. Three philosophies were debated: "a Hamiltonian belief that the solution lay with a strong central government, which should take charge and actively manage these resources"; "a Jeffersonian belief that the solution lay with the individual and that the best thing government could do to provide incentives for success was to get out of the way of these individuals"; and a belief that "held that government could only hurt and that it should make sure that everyone benefited financially from government's efforts".
Prior to the enactment of Bayh–Dole, the U.S. government had accumulated 28,000 patents, but fewer than 5% of those patents were commercially licensed.U.S. Government Accounting Office (GAO) Report to Congressional Committees. May 7, 1978. "Technology Transfer, Administration of the Bayh–Dole Act by Research Universities"
These patents had accumulated because after World War II, the government under President Harry S. Truman decided to continue and even ramp up its spending on research and development, on the basis of Vannevar Bush's famous report entitled, "Science The Endless Frontier", which stated: "Scientific progress is one essential key to our security as a nation, to our better health, to more jobs, to a higher standard of living, and to our cultural progress."Vannevar Bush. Science The Endless Frontier: A Report to the President by Vannevar Bush, Director of the Office of Scientific Research and Development United States Government Printing Office, Washington: 1945 However, the government did not have a unified patent policy governing all the agencies that funded research, and the general policy was that government would retain title to inventions and would license them only nonexclusively.Staff, BayhDole25, Inc. April 17, 2006 The Bayh–Dole Act at 25 A report by the Government Accountability Office found that "Those seeking to use government-owned technology found a maze of rules and regulations set out by the agencies in question because there was no uniform federal policy on patents for government-sponsored inventions or on the transfer of technology from the government to the private sector."United States General Accounting Office. May 1998
In 1968, the Department of Health, Education, and Welfare (HEW) introduced a uniform "Institutional Patent Agreement" (IPA) to allow grantee nonprofit institutions to obtain assignment of patentable inventions made with federal funding for which the institution had decided to seek patents. By 1978, over seventy universities and research organizations had negotiated an IPA with HEW or with the National Science Foundation. In the 1970s, faculty at Purdue University in Indiana had made important discoveries under grants from the Department of Energy, which did not issue Institutional Patent Agreements. Officials at the university complained to their senator, Birch Bayh, whose staff investigated. At the same time, Senator Robert Dole was made aware of similar issues, and the two senators agreed to collaborate on a bill, along the lines of the "Jeffersonian belief" described above.
Accordingly, as described below, the legislation decentralized control of federally funded inventions, vesting the responsibility and authority to commercialize inventions with the institution or company receiving a grant, with certain responsibilities to the government, the inventor, and the public, as described below.
Recipient requirements The Bayh–Dole Act authorizes the Department of Commerce to create standard patent rights clauses to be included in federal funding agreements with nonprofits, including universities, and small businesses.Vicki Loise, CAE, and Ashley J. Stevens, CLP The Bayh–Dole Act Turns 30 Les Nouvelles December 2010: 185–94 The standard patent rights clause is set forth at 37 CFR 401.14. The clause is incorporated into federal funding agreements through a number of contracting instruments, including grants made to universities and contracts made with for-profit companies. The Department of Commerce has delegated to the National Institute of Standards and Technology to promulgate implementing regulations for Bayh–Dole.
Under the standard patent rights clause, small businesses and non-profit organizations, if they obtain title by assignment to "subject inventions," can retain that title by complying with certain formalities. No small business or nonprofit organization, however, is required to obtain ownership of such inventions. All organizations agree to do the following:
Include the patent rights clause in any subcontracts; Report subject inventions to the sponsoring agency; Elect in writing whether or not to retain title; Conduct a program of education for employees regarding the importance of timely disclosure; and Require certain employees to make a written agreement to protect the government's interest in subject inventions.
The U.S. Supreme Court clarified in Stanford v Roche (2011), that the Bayh-Dole Act did not change the constitutional provision, that the original ownership of patents always vests with their inventor(s), and that the inventors' employers can own patents, only when inventors explicitly assign their patents to their employers.
If an organization does not elect to retain title to a subject invention that it has acquired, then the Federal agency may request title. The agency may waive its right to take title to the invention, and allow the inventors to retain title to their inventions.
If an organization elects to retain title to a subject invention for which it has obtained assignment, the organization is obligated to do the following: Grant to the government a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States the subject invention throughout the world; File its initial patent application within one year after its election to retain title; Notify the government if it will not continue prosecution of an application or will let a patent lapse;37 CFR 401.14(f)(3) https://www.law.cornell.edu/cfr/text/37/401.14 Convey to the Federal agency, upon written request, title to any subject invention if the organization fails to file, does not continue a prosecution, or will allow a patent to lapse; In each patent include a statement that identifies the contract under which the invention was made and notice of the government's rights in the invention; Report on the utilization of subject inventions; Require in exclusive licenses to use or sell in the United States that products will be manufactured substantially in the United States; and Agree to allow the government to "march in" and require licenses to be granted, or to grant licenses, in certain circumstances, such as if the organization has not taken effective steps to achieve practical application of the invention.
Certain additional requirements apply to nonprofit organizations only. Nonprofits must also: Assign rights to a subject invention only to an organization having as a primary function the management of inventions, unless approved by the Federal agency; Share royalties with the inventor; Use the balance of royalties after expenses for scientific research or education; Make efforts to attract, and give preference to, small business licensees.
Subject inventions A subject invention is defined as "any invention of the contractor that is conceived or first actually reduced to practice in the performance of work under a funding agreement." The U.S. Supreme Court in Stanford v Roche made clear that "of" in "of the contractor" means ownership. ("And 'invention owned by the contractor' or 'invention belonging to the contractor' are natural readings of the phrase “invention of the contractor.”). If an invention is not owned by a party to the federal funding agreement, then it cannot be a subject invention and does not come within the scope of Bayh–Dole.
The CFR addresses the relationship between federal funding and other funding that may supplement the federally supported research. If an invention is made outside the research activities of the federally funded research "without interference with or cost to the government-funded project," then the invention is not a subject invention. Similarly, an invention is not a subject invention if it arises in closely related research outside the "planned and committed activities" of the federally funded project, and the closely related research does not "diminish or distract from the performance" of the federally funded project.
Legal proceedings and case law
There is a growing body of case law on Bayh–Dole.
Ownership of inventions
Stanford v. Roche,563 U.S. 776 (2011) was a case decided by the Supreme Court that held that title in a patented invention vests first in the inventor, even if the inventor is a researcher at a federally funded lab subject to the Bayh–Dole Act.Board of Trustees of Leland Stanford Junior Univ. v. Roche Molecular Systems, Inc., 131 S.Ct. 2188 (2011) The judges affirmed the common understanding of US Constitutional law that inventors automatically own their inventions, and contractual obligations to assign those rights to third parties are secondary.Baer MF, et al Stanford v. Roche: Confirming The Basic Patent Law Principle That Inventors Ultimately Have Rights In Their Inventions les Nouvelles March 2012:19–23