Overview
This section establishes the federal policy regarding inventions made under government contracts, primarily governed by the Bayh-Dole Act. Its core objective is to promote the commercialization of federally funded research by allowing contractors to retain title to their inventions while ensuring the Government maintains sufficient rights to protect the public interest and meet agency needs.
Key Rules
- Contractor Right to Elect Title: Generally, contractors may choose to retain ownership (title) of any "subject invention" created during the contract, provided they disclose the invention to the Government.
- Government Purpose License: Regardless of who owns the title, the Government retains a nonexclusive, nontransferable, irrevocable, paid-up license to practice the invention (or have it practiced) worldwide on behalf of the United States.
- Exceptions to Contractor Ownership: The Government may require the contractor to assign title to the Government under specific conditions, such as when the contractor is foreign-controlled, for national security/intelligence purposes, or in "exceptional circumstances" determined by the agency.
- Failure to Follow Procedures: The Government has the right to take title if the contractor fails to disclose the invention, fails to elect to retain rights, or fails to file patent applications within the required timeframes.
- March-in Rights: The Government may "march in" and require the contractor to grant licenses to third parties if the contractor fails to achieve practical application of the invention or if necessary to alleviate health or safety needs.
- U.S. Manufacturing Preference: Any person or firm receiving an exclusive license to use or sell the subject invention in the United States must agree to manufacture the products "substantially in the United States," unless a waiver is granted.
- Utilization Reporting: The Government may require periodic reports on how the invention is being used or commercialized; these reports are protected from public disclosure.
Practical Implications
- Strict Compliance with Timelines: Contractors must implement robust internal tracking systems for intellectual property, as missing a disclosure or election deadline can result in the involuntary forfeiture of patent rights to the Government.
- Commercialization Strategy: While contractors retain ownership, the "substantial U.S. manufacture" requirement and the Government’s retained license must be factored into any sublicensing or international manufacturing strategy.
- Due Diligence: Because the Government can exercise "march-in rights" or take title due to procedural failures, commercial partners or investors performing due diligence on a contractor's IP portfolio must verify that all FAR-mandated disclosures and elections were correctly filed.