Imagine That IP Law Blog

The Bayh-Dole Act, officially known as the Patent and Trademark Law Amendments Act, was enacted in 1980 as a United States federal law. Its purpose is to establish a framework for the ownership and commercialization of intellectual property that arises from research and development (R&D) activities funded by the federal government.

Prior to the enactment of the Bayh-Dole Act, the U.S. government retained ownership of inventions resulting from federally funded research. However, this approach often led to the underutilization of these inventions, as the government lacked the necessary resources and expertise to effectively market and develop them. Specifically, in 1980 when the Bayh-Dole Act was enacted, U.S. federal agencies held roughly 28,000 patents, but less than 5% had been licensed to anyone that might commercialize the inventions. See 1998 GAO Report.

As a result, many valuable discoveries remained confined to government agencies without being translated into commercial products and services, depriving the public of the fruits of the research their tax dollars had funded.

The Bayh-Dole Act aimed to solve this problem by stimulating innovation, promoting the commercialization of federally funded inventions, and encouraging collaboration between the private sector and academic institutions. Its key provisions include the following:

• Ownership Rights: The act grants universities, small businesses, and non-profit organizations the right to own intellectual property resulting from federally funded research, whereas previously, the government retained ownership.
• Technology Transfer: The act encourages collaboration between research institutions and industry partners to facilitate the commercialization of inventions. Institutions have the flexibility to negotiate licensing agreements, allowing them to transfer ownership or grant exclusive or non-exclusive licenses to private companies for further development and commercialization.
• Patenting: The act enables universities and other recipients of federal funds to file patents for inventions resulting from federally funded research. This allows them to protect their intellectual property rights and attract private investment for further development.
• Research Partnering: The act promotes research collaboration between academic institutions, industry, and government agencies. It facilitates the sharing of knowledge, expertise, and resources, leading to more effective technology transfer and commercialization.

With the ownership right, the incentive to commercialize followed. In September 2021, Joseph Allen, Executive Director of the Bayh-Dole Coalition reported that the Bayh-Dole Act “supports 6 million jobs, helped launch 15,000 start-up companies, and contributed $1.7 trillion to U.S economic output.” Further, the volume of innovations at stake is only growing. In 2022, the National Institutes of Health (N.I.H.) issued 58,368 awards summing to $33.34 billion. See FY 2022 By the Numbers: Extramural Grant Investments in Research. And the N.I.H. is just one of many granting agencies in the U.S. government. Much of the work product under these grants is academic — such as publications in peer-reviewed journals. But a growing and large amount of the work product also ends up in patents. Any organization receiving federal funds for research must understand the Bayh-Dole Act and comply with its provisions and implementing regulations.

Requirements Under the Bayh-Dole Act

The Bayh-Dole Act is codified at 35 U.S.C. §§200–212, and implemented through 37 C.F.R., Chapter IV, Part 401. There are three main obligations placed on universities, non-profit corporations, and businesses (collectively “Contractors”) under the Bayh-Dole Act: (1) Disclosure of an invention, (2) Election to retain title to the invention, and (3) Filing a patent application.

(1) Disclosure of an invention
35 U.S.C. §202(c)(1) and 37 C.F.R. §401.14(c)(1) establish the requirement that a Contractor must disclose inventions made under an award (“Contract”) by a Federal Agency to the Federal Agency. An invention is “made” under a Contract if it is conceived or reduced to practice in the performance of work under the Contract, and is called a “Subject Invention.” The disclosure must be made in writing within two months after the inventor discloses the Subject Invention to the Contractor personnel responsible for patent matters.

The disclosure must also provide sufficient technical information to convey a clear understanding of the Subject Invention, state whether it has been on sale or in public use, whether a manuscript describing it has been submitted, and if so, whether the manuscript has been accepted for publication. If a manuscript is accepted for publication after the Contractor’s disclosure, the Contractor must follow up with an additional notice to the Federal Agency.

(2) Election to retain title to the invention
35 U.S.C. §§202(a) and (c)(2) and 37 C.F.R. §401.14(c)(2) require the Contractor to elect to retain title to a Subject Invention within two years of the date of the Disclosure to the Federal Agency. However, a warning is required as the two year deadline can be significantly shortened: “in any case where a patent, a printed publication, public use, sale, or other availability to the public has initiated the one year statutory period wherein valid patent protection can still be obtained in the United States, the period for election of title may be shortened by the agency to a date that is no more than 60 days prior to the end of the statutory period.” 37 C.F.R. § 401.14(C)(2).

Four exceptions may prevent a contractor from retaining title: (i) the Contractor is not in the United States or is subject to control by a foreign government; (ii) denial is needed to “better promote the policy and objectives” of the Bayh-Dole Act; (iii) denial is necessary to protect foreign intelligence or counterintelligence activities; or (iv) the funding agreement relates to Contractor operation of a Department of Energy facility related to that department’s nuclear propulsion or weapons programs. 35 U.S.C. 202(a).

(3) Filing a patent application

35 U.S.C. §§202 (c)(3) and 37 C.F.R. §401.14(c)(3) require that the Contractor file its initial patent application for the Subject Invention within either (1) one year from its date of election, or (2) prior to the end of any statutory period wherein valid protection can be obtained in the United States. If the initial application is a U.S. provisional application, the Contractor must file a non-provisional application within ten months of the provisional application filing date. The Contractor must also file foreign applications or an international application within ten months of the first filed application. This ten-month Bayh-Dole deadline departs from and is shorter than the regular 12-month priority period under the Paris Convention and 35 U.S.C. § 119(e). Contractors and their counsel must separately track and meet the ten-month deadline.

All U.S. applications to pertaining to Subject Inventions must include the statement: “This invention was made with government support under [grant number, contract identification] awarded by [state the Federal agency]. The government has certain rights in the invention.” 37 C.F.R. §401.14(f)(4). Many foreign patent offices will require removal of this statement if it remains from a filing stemming from the U.S., but it should be present in all U.S. and P.C.T. filings.

Subsequent to filing applications, the Contractor must notify the Federal agency of a decision to cease pursuit of patent rights no less than sixty days prior to any action required to keep an application pending. 37 C.F.R. § 401.14(f)(3). Likewise, the Contractor must also notify the Federal agency of any decision not to pay a maintenance, annuity, or renewal fee; not to defend in a reexamination or opposition proceeding on a patent, in any country; or to request, be a part to, or take action in any action (e.g., a trial proceeding before the Patent Trial and Appeals Board) affecting patent rights. Id.

Compliance

To facilitate compliance with the Bayh-Dole Act, the Interagency Edison (iEdison) system was established. iEdison is an electronic platform that streamlines the reporting and management of inventions and patents resulting from federally funded research. It allows grantees to report inventions, submit patent applications, track invention status, monitor compliance, and facilitate collaboration and information exchange with funding agencies.

iEdison serves as a centralized platform for grantee institutions and federal agencies to report, track, and manage inventions and patents resulting from federally funded R&D. By leveraging electronic capabilities, iEdison streamlines processes, enhances compliance, and supports the efficient utilization of intellectual property in accordance with the Bayh-Dole Act.

Failure to comply with the Bayh-Dole Act

Procedural Requirements
Failure to comply with the procedural requirements of the Bayh-Dole Act can have serious consequences for inventions arising from federal funding for research.

• Loss of Intellectual Property Rights: The Bayh-Dole Act provides recipients of federal funding the opportunity to retain ownership of inventions resulting from the research. However, failure to comply with the act’s reporting and disclosure requirements can result in the loss of intellectual property rights. The government may assert its ownership and control over the invention, limiting the recipient’s ability to commercialize or license it.
• Funding Termination or Reduction: Non-compliance with the Bayh-Dole Act can lead to adverse consequences for the grantee institution or organization. Funding agencies have the authority to impose penalties, including termination or reduction of funding for ongoing or future research projects. This can significantly impact a grantee institution's financial stability and ability to conduct further research.
• Legal and Financial Liability: Failure to comply with the Bayh-Dole Act may result in legal and financial liabilities for the grantee institution or individuals involved. Federal agencies have the power to audit and investigate compliance, and violations can lead to legal proceedings, penalties, fines, or repayment of funding. Non-compliance can also negatively impact the reputation and credibility of the institution or researchers involved.
• Impact on Collaboration and Partnerships: Non-compliance with the Bayh-Dole Act can strain relationships with industry partners, collaborators, or funding agencies. Failure to fulfill reporting or disclosure obligations can erode trust and discourage future collaborations or partnerships. It may also affect the willingness of industry partners to invest in or license technologies developed through federally funded research.
• Missed Opportunities for Commercialization: One of the primary goals of the Bayh-Dole Act is to facilitate the commercialization and practical application of research outcomes. Failure to comply with the act’s provisions can result in missed opportunities to license or market valuable inventions. It can impede the translation of research discoveries into real-world applications and the associated economic and societal benefits.

It is crucial for grantee institutions and individuals to understand and adhere to the procedural requirements of the Bayh-Dole Act to maintain their rights, funding, and collaborations. Compliance involves timely reporting, accurate disclosure of inventions, proper management of intellectual property, and effective technology transfer practices. Institutions should establish appropriate policies and procedures to ensure compliance and mitigate the risks associated with non-compliance.

Commercialization
Failure to comply with the commercialization requirements under the Bayh-Dole Act can also have serious consequences for inventions arising from federal funding for research. There are four specific reasons why a Federal agency can, on its own determination, force a Contractor to “grant a nonexclusive, partially exclusive, or exclusive license in any field of use to a responsible applicant or applicants, upon terms that are reasonable under the circumstances." These so called "Mach in Right can be triggered when:

(1) action is necessary because the contractor or assignee has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention in such field of use;

(2) action is necessary to alleviate health or safety needs which are not reasonably satisfied by the contractor, assignee, or their licensees;

(3) action is necessary to meet requirements for public use specified by Federal regulations and such requirements are not reasonably satisfied by the contractor, assignee, or licensees; or

(4) action is necessary because the agreement required by section 204 has not been obtained or waived or because a licensee of the exclusive right to use or sell any subject invention in the United States is in breach of its agreement obtained pursuant to section 204. 35 U.S.C. § 203.

However, to date, the Federal government has never exercised the March-in rights provided for under the act.

Takeaways

(1) Contractors (i.e., universities, non-profit organizations, or any business receiving Federal grants,) must put into place written agreements with employees that assign all inventions each employee will make in the course of employment to the Contractor.

(2) Contractor employees must be made aware of Contractor procedures enacted in order to comply with the Bayh-Dole Act. For example, inventors must disclose inventions in writing to a manager in charge of patents prior to submitting a manuscript for publication or making any other public disclosure. All patenting activities will be handled by a designated patents manager or managing office (a Tech Transfer Office), and the manager must track and ensure compliance with the reporting, election, and filing requirements.

(3) Commercialization efforts should be “substantially in the United States.”

(4) Companies that acquire intellectual property rights should assess the impact of the Bayh-Dole Act on any acquired assets because the obligations under the act apply to the successors in title of the rights arising from federally funded research.