On May 14, 2018, rule changes from the National Institute of Standards and Technology (NIST) modifying the agency's regulations implementing the Bayh-Dole Act,i went into effect. The rule changes are intended to reduce regulatory burdens on contractors performing federally funded research projects by, among other things, clarifying electronic reporting requirements, aligning certain sections with patent laws, streamlining the license application process, clarifying the role of funding agencies and addressing instances where a federal employee is a co-inventor. However, as explained below, these rule changes also are likely to generate some uncertainty regarding contractor ownership of patents.

The Bayh-Dole Act requires contractors performing federally funded research, including universities, small businesses and nonprofits, to disclose to the government "subject inventions," i.e., inventions conceived or first reduced to practice in the performance of federally funded work, within a reasonable time after discovery of the invention.ii The Bayh-Dole Act provides contractors the ability to retain title to a subject invention, so long as the contractor timely makes such an election and files a patent application.iii When a contractor elects to retain title to a subject invention, the government is granted a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced the subject invention throughout the world.iv 

The rule changes aim to reduce regulatory burdens on contractors and government agencies by: (i) updating provisions regarding time frames, royalty funds, and definitions to align with the Leahy-Smith America Invents Act; (ii) outlining a simplified electronic reporting process; (iii) providing for an automatic extension of one year to file non-provisional patent applications; (iv) eliminating the previous requirement that organizations submit separate license applications for federal inventions being used under cooperative research and development agreements; and (v) streamlining the licensing application process for federal laboratory collaborators. 

The rule changes also aim to provide clarity to contractors and government agencies by: (i) codifying the applicability of the Bayh-Dole Act to clarify the application of its requirements; (ii) explaining when a Determination of Exception Circumstances is appropriate; (iii) addressing situations where a federal employee is a co-inventor of a subject invention; and (iv) making technical corrections to the provisions.

While many of the rule changes outlined above are unlikely to significantly impact contractors performing federally funded research projects, the most notable change is the removal of the 60-day time limit for the government to decide whether to assert ownership of a subject invention. Previously, the government had 60 days to make a written request to a contractor to convey title after learning that the contractor failed to timely disclose an invention or elect title. Under this rule change, the government can claim title to the patents at any time after a contractor fails to timely disclose or elect title or there is a disagreement over the adequacy of a disclosure. This is significant because it likely will create uncertainty regarding ownership of patents in the event a contractor misses a deadline or a disagreement arises. Time will tell how this change will impact the federally funded research projects and to what extent, if any, the government will rely on this change to assert ownership of subject inventions well after-the-fact.

Finally, while the rule changes do not apply retroactively, but only to funding agreements executed on or after their effective date of May 14, 2018, funding agencies have discretion to amend existing funding agreements to make the rule changes applicable. 

Footnotes

i. 35 USC section 200, et seq.↩

ii. 35 USC section 202(c)(1). ↩

iii. 35 USC section 202(c).↩

iv. 35 USC section 202(b).  ↩

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