November 18, 2016

Proposed Amendments to Bayh-Dole Act Regulations Tweak Rights to Inventions Made Using Federal Assistance


The Patent and Trademark Law Amendments Act of 1980,1 commonly known as the "Bayh-Dole Act," governs the disposition of patent rights developed pursuant to three types of government funding arrangements: procurement contracts, grants, and cooperative agreements. The Secretary of Commerce has delegated to the National Institute of Standards and Technology (NIST) the authority to promulgate implementing regulations.2

On November 7, 2016, NIST issued proposed changes to the implementing regulations of Bayh-Dole Act for public comment. We have set forth below a brief summary of the proposed changes. NIST will hold a public meeting and simultaneous webinar regarding the proposed changes on November 21, 2016. Comments on the proposed rule are due on December 9, 2016.

The Bayh-Dole Act

The Bayh-Dole Act permits a recipient of federal funding to retain ownership of inventions "conceived or first actually reduced to practice" by its personnel in the performance of a government-funded project (subject inventions). By its terms, the Bayh-Dole Act applies to a "person, small business firm, or nonprofit organization that is a party to a funding agreement."3 However, it has been extended by Executive Order to apply to large, as well as small businesses.4

As a condition of retaining ownership, the contractor is obliged to comply with certain statutory and regulatory requirements. Among other things, the contractor must:

(i) disclose subject inventions to the Government within two months after the inventor discloses it to the contractor's personnel responsible for patent matters;5

(ii) elect to retain title within two years following disclosure of the invention;6 and

(iii) automatically grant to the Government a nonexclusive, irrevocable, paid-up license to use the invention.7

In certain "exceptional" circumstances, the Government may restrict or eliminate the contractor's right to retain ownership of the invention—such that the Government obtains title to the invention.8

NIST's Proposed Modifications

NIST's proposed amendments to Bayh-Dole's implementing regulations make several changes to this well-known regulatory scheme.9 A summary of these proposed amendments follows:

Conform the regulations to Executive Orders 1259 and 12618. NIST has proposed to modify the regulations to clarify that the presumption of the right to retain title, when invoked, applies to large business contractors as well as small businesses and nonprofit organizations.10 The revisions also would clarify that the term "contractor" as used in the regulations includes any business firm regardless of size,11 and would remove other language in the regulations that does not conform to the Executive Orders.12 As noted previously, Bayh-Dole has been extended to large entities by Executive Orders, but these modifications will conform the regulations to the Executive Orders.

Increase the agencies' authority to shorten the two-year period in which a contractor may elect to retain title. Under the present regulations, the funding agency has authority to shorten the two-year period in which a contractor may elect to retain title to a subject invention in one, specifically identified situation.

To explain the agency's authority to shorten the two-year election time period, we first digress briefly into patent law fundamentals. 35 U.S.C. § 102 establishes certain conditions for patentability. Among those conditions, Section 102 provides that, under ordinary circumstances, a patent will not be granted if the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.13

However, there is an exception to this bar on patentability if the disclosure is made by the inventor one year or less before filing.14 This exception is typically referred to as the "one-year statutory bar period"—once a year has passed from the inventor's date of disclosure, the inventor is "statutorily barred" from obtaining patent protection for the invention.

Under the current Bayh-Dole regulations, a contracting agency may only shorten the two-year period for election of title to protect itself from losing patent protection under these circumstances. The regulations authorize the agency to shorten the two-year election period to a date that is no more than 60 days prior to the end of the one-year statutory period.15 This allows the agency a 60-day period to take title to the invention and prepare a patent application prior to the expiration of the Section 102 statutory time bar.

The proposed revisions would expand the agency's authority to shorten the two-year election period. The agency's current authority to shorten the election time period would remain, but the agency also would be authorized to shorten the election time period "where the agency determines that a shorter period is necessary in order to protect the government's interest."16

Modify certain time limitations. As described above, a contractor must (i) disclose a subject invention to the Government within two months after the inventor discloses it to the contractor's personnel responsible for patent matters, and (ii) elect to retain title within two years after disclosure of the invention to the Government. If the contractor fails to comply with either of these obligations, the regulations presently require agencies to request title within 60 days after learning of the contractor's action, or to forgo the election. The amendments remove this time limitation.17

Additionally, the regulations presently require contractors to notify the agency of any decision not to prosecute an application at least 30 days before the end of any applicable USPTO deadline (e.g., 30 days before the contractor's response is due to an Office Action issued by the USPTO). The proposed amendments would extend that period to 120 days.18

Clarify what happens when a federal employee is a co-inventor of the subject invention. The regulations governing the assignment of patent rights when a federal employee is a co-inventor of the subject invention are presently quite sparse.19 The amendments clarify that the agency employing the co-inventor may file the initial patent application, provided that the contractor retains the ability to elect rights.20 If the contractor elects title in this situation, the agency employing the co-inventor retains all ownership rights to which they would otherwise be entitled.21 Additional rules apply when the funding agency is different from the agency employing the co-inventor.22

Make various definitional clarifications. For example, the amendments clarify that "Initial patent application" means the "first provisional or nonprovisional U.S. national application for a patent" under 37 C.F.R. § 1.9(a)(2) and (3) or the first international application for a patent under 37 C.F.R. § 1.9(b).23


Many of the proposed amendments are simply clarifications of existing law. However, contractors should take special notice of the changes in timelines set out in the proposed amendments. First, the agency may —in its discretion—elect to shorten the two-year election time period. While the proposed regulations are not clear, presumably this could be accomplished on a per-agreement basis. Thus, contractors should be cognizant of this point during contract negotiation, and be prepared to make early decisions as to whether they want to take ownership of IP generated under a funding agreement.

Second, as in the existing regulations, NIST has not clarified whether there is a cure period for failure to timely disclose or elect title. As noted above, the regulations presently require agencies to request title within 60 days after learning of the contractor's failure to timely disclose or elect title to a subject invention. By removing this 60-day deadline, it is unclear whether the Government can, at any time following such a failure, take title from the contractor. To avoid inadvertent transfers of title, contractors should strictly adhere to these timelines.

Third, if a contractor does elect title to a subject invention, it must be prepared to make quick decisions regarding patent prosecution. As noted, the proposed regulations require the contractor to give 120 days' notice in the event the contractor has decided to discontinue prosecution of a subject invention. By way of example, if the contractor receives a non-final Office Action, with the usual initial three-month response deadline and three additional months of available extensions, the contractor will need to determine within the first sixty days whether it intends to respond to the Office Action—or alert the Government. For contractors who typically make these decisions close to the end of the initial response period—or at the end of the extension period—a change in prosecution practice will be required.

Finally, independent of timing issues, contractors should also pay increased attention when Government employees are working with contractor personnel and there is a co-invention scenario. This tends to be unusual in the types of situations governed by Bayh-Dole instruments, i.e. procurements, grants and cooperative agreements—typically an alternative funding instrument, a Cooperative Research and Development Agreement, which is governed by the Stevenson-Wydler Act24 rather than the Bayh-Dole Act, would be more appropriate in a collaborative development scenario. But, in the event there is joint invention between a government employee and a contractor employee under a procurement contract, grant, or cooperative agreement subject to Bayh-Dole, it is likely in the contractor's best interests to control patent prosecution, not the Government. The Government is generally less experienced than private contractors at seeking and securing patent protection—which is increasingly a lengthy, complex legal fight with the USPTO.

Unfortunately, the proposed regulations do not clearly give the contractor a right to seek to control prosecution; they simply state that the Federal agency "may submit an initial patent application, provided that the contractor retains the ability to elect rights."25 This implies that the contractor may control prosecution after the election of title, but that the initial application may have been filed by the Government. However, the drafting of the initial patent application can contribute materially to the application's ultimate issuance or rejection—for example, a poorly written specification may fail to give necessary support to claims the contractor would like to issue. Thus, contractors likely will want to avoid this scenario. To do so, contractors will need to closely monitor how and when their employees work with Government employees, and work with legal counsel, to try and eliminate co-invention scenarios. When there is a co-invention, contractors should coordinate closely with government counsel on whether the contractor or the agency will file the initial patent application.

  1. Pub. L. No. 96-517, Dec. 12, 1980, as codified at 35 U.S.C. §§ 200-212.

  2. 27 C.F.R. Part 401 et seq.

  3. 35 U.S.C. § 201(c).

  4. Executive Order 12591; see also Executive Order 12618.

  5. 37 C.F.R. Part 401.14(c)(1); see also 35 U.S.C. § 201(c)(1).

  6. 37 C.F.R. Part 401.14(c)(2); see also 35 U.S.C. § 201(c)(2).

  7. 37 C.F.R. Part 401.14(b); see also 35 U.S.C. § 201(c)(4).

  8. 35 U.S.C. § 202(a) and (b).

  9. Note that these amendments do not change the statutory scheme, which would require amendment by an act of Congress.

  10. 81 Fed. Reg. 78090, 78093 (Nov. 7, 2016), proposing to amend 37 C.F.R. § 401.1(b).

  11. Id., proposing to amend 37 C.F.R. § 401.2(b).

  12. Id. at 78093-94, proposing to amend 37 C.F.R. § 401.3(h).

  13. 35 U.S.C. § 102(a)(1).

  14. Id. at § 102(b)(1).

  15. 37 C.F.R. § 401.14(a)(c)(2).

  16. 81 Fed. Reg. at 78092, proposing to amend 37 C.F.R. § 401.14(a)(c)(2).

  17. Id. at 78096, proposing to amend 37 C.F.R. § 401.14(d)(1).

  18. Id., proposing to amend 37 C.F.R. § 401.14(f)(3).

  19. 37 C.F.R. § 401.10.

  20. 81 Fed. Reg. at 78095, proposing to amend 37 C.F.R. § 401.10(a)(2).

  21. Id. at 78096, proposing to amend 37 C.F.R. §401.10(a)(5).

  22. Id. at 78095-96, proposing to amend 37 C.F.R. §401.10(a)(3).

  23. 37 C.F.R. § 401.2.

  24. 15 U.S.C. § 3710a.

  25. 81 Fed. Reg. at 78095, proposing to amend 37 C.F.R. § 401.10(a)(2).


Ronald D. Lee
Ronald D. Lee
Washington, DC
Amanda Johnson
Amanda J. Sherwood
Senior Associate
Washington, DC
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