University and Small Business Patent Procedures Act of 1980 (Bayh-Dole Act) Skip to main content
Compliance

University and Small Business Patent Procedures Act of 1980 (Bayh-Dole Act)

PURPOSE

The purpose of the University and Small Business Patent Procedures Act is to promote the use of patented inventions funded in full or in part by federal funds; additionally, the Act reduces the licensing encumbrances that nonprofit organizations and small businesses previously encountered when using federal funds to create inventions and make discoveries and also promotes collaboration between commercial concerns and universities.

HISTORY

Congress passed the University and Small Business Patent Procedures Act (hereinafter Bayh-Dole Act) in 1980 as an amendment to the Government Patent Policy Act. The Bayh-Dole Act reversed a longstanding rule that inventions (i.e., any invention or discovery that is or may be patentable or protected) arising from federally sponsored research should be owned by the government. The Bayh-Dole Act outlines the requirements nonprofit organizations and small businesses must meet to elect title to inventions that have been created through research sponsored by federal funds and/or grant commercial licenses to such inventions.

APPLICABILITY TO BYU–HAWAII

The Bayh-Dole Act applies to any nonprofit organization—including universities and other institutions of higher education—or small business firm (hereinafter contractors), that has entered into a funding agreement with the federal government in order to receive funds for research. A funding agreement is “any contract, grant, or cooperative agreement entered into between any Federal agency, other than the Tennessee Valley Authority, and any contractor for the performance of experimental, developmental, or research work funded in whole or in part by the Federal Government.” However, scholarships, fellowships, training grants, or other funding agreements rewarded to an individual primarily for educational purposes are not considered “federal funding” for purposes of the Bayh-Dole Act, and federal agencies do not have any rights to inventions created using these types of funds.

REQUIREMENTS

Under certain circumstances, contractors that create inventions through the use of federal funds have the ability to retain title and patent rights to such inventions. The funding agreements that contractors enter into with federal agencies are to outline the process the contractors must go through in order to retain these rights. Although specific details may vary between funding agreements, the general requirements with respect to retaining title to inventions are set forth below.

Disclosure, Retaining Title, and Patent Application Filing

A contractor is required to disclose each invention arising out of federally-funded research to the funding federal agency. Such disclosure must be made within a reasonable amount of time, which has been considered to be two months after the inventor discloses the invention in writing to the contractor personnel who are responsible for administration of patent matters. Should a contractor fail to timely disclose an invention, the government may elect to receive title to that invention.

Generally, within two years of disclosing the invention to a federal agency, the contractor must make a written election about whether or not the contractor would like to retain title to the invention. Failure to timely make the written election may, again, allow the government to receive title to the invention.

A contractor who elects to retain rights to an invention must timely file a patent application for the invention prior to the end of any applicable statutory bar. Additionally, if the contractor is interested in pursuing patent protection in foreign countries, it must file such patent applications, within a reasonable amount of time. Also, when a contractor files a United States patent application for an invention created with federal funds, a statement specifying that the invention was made with government support and that the government has certain rights to the invention must be included in the specification of the application.

Exemptions to Obtaining Title and Patent

Within the Bayh-Dole Act, there are situations when the federal government can prevent a contractor from retaining title and patent rights to an invention that was created through government funding. These situations include, but are not limited to the following:

  • When the contractor is a foreign contractor or non-U.S. based business
  • When necessary to promote the government’s policies and objectives
  • When the invention involves a matter of national security
  • When the funding agreement is with the Department of Energy relating to naval nuclear propulsion or weapons

If the contractor believes that a determination to relinquish its title and patent rights is against the policies and objectives outlined in the Bayh-Dole Act, it may file a petition with the United States Court of Federal Claims within sixty days of the determination.

Licensing Standards and March-In Rights

A federal agency that enters into a funding agreement with a contractor “shall have a nonexclusive, nontransferable, irrevocable, paid-up license” to practice on behalf of the United States any subject invention for which the contractor has elected to retain rights.

Additionally, the federal agency has the right to require the contractor to grant a “nonexclusive, partially exclusive, or exclusive license in any field of use to a responsible applicant or applicants.” Should a contractor refuse to grant a license to such applicant(s), the federal agency has the right to grant the license if:

  • the contractor has not taken effective steps to achieve practical application of the invention;
  • the contractor has not completed the actions necessary to alleviate health and safety needs;
  • the contractor has not completed the actions necessary to meet requirements for public use; or
  • the contractor has neither taken steps to manufacture the subject invention in the United States nor received the waiver to manufacture the subject invention outside of the United States.

Whenever a federal agency has reason to believe that march-in rights are warranted, it must notify the contractor in writing of the pertinent information and request informal written or oral comments from the contractor as well as information relevant to the matter. If the contractor does not provide any comments within thirty days, then the agency may proceed with the march-in right process. However, if a comment is received within thirty days, then the agency must provide a response to the contractor within sixty days that it will either initiate the march-in right procedures or will not pursue the matter further.

Contractors who grant others exclusive rights to use or sell an invention that is subject to the Bayh-Dole Act in the United States must require the licensee or assignee to agree that any products embodying the invention or produced through the use of the invention are manufactured substantially in the United States. However, it is possible for a waiver to be received if the contractor can prove that it made a reasonable effort to meet these standards or if it can prove that domestic manufacture is not commercially feasible.

Contractors may be required to submit periodic reports to the federal agency that awarded the research funding on their utilization or efforts of obtaining utilization.

Special Requirements for Nonprofit Organizations

In the case of nonprofit organizations, including universities, the Bayh-Dole Act sets forth additional requirements in connection with the commercialization of federally funded inventions. In particular, the organization must:

  • Obtain approval from the federal agency before assigning rights in the invention to a third party.
  • Share royalties with the inventor.
  • Use any income left after paying for the expenses of the invention for scientific research or education.
  • Give preference to small businesses when licensing the new invention.