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Bayh-Dole Act

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Bayh-Dole Act

The Bayh–Dole Act or Patent and Trademark Law Amendments Act (Pub. L. 96-517, December 12, 1980) is United States legislation dealing with intellectual property arising from federal government-funded research. Sponsored by two senators, Birch Bayh of Indiana and Bob Dole of Kansas, the Act was adopted in 1980, is codified at 94 Stat. 3015, and in 35 U.S.C. § 200-212,[1] and is implemented by 37 C.F.R. 401.[2]

The key change made by Bayh-Dole was in ownership of inventions made with federal funding. Before the Bayh–Dole Act, federal research funding contracts and grants obligated inventors (where ever they worked) to assign inventions they made using federal funding to the federal government.[3] Bayh-Dole permits a university, small business, or non-profit institution to elect to pursue ownership of an invention in preference to the government.[4]


The Bayh–Dole Act grew out of the Congress's efforts to respond to the economic malaise of the 1970s.[3] One of Congress's efforts was focused on how best to manage inventions that were created with the more than $75 billion a year invested in government sponsored R&D. Three philosophies were debated: "a Hamiltonian belief that the solution lay with a strong central government, which should take charge and actively manage these resources"; "a Jeffersonian belief that the solution lay with the individual and that the best thing government could do to provide incentives for success was get out of the way of these individuals"; another that "held that government could only hurt and that it should make sure that everyone benefited financially from government’s efforts".[3]

Prior to the enactment of Bayh-Dole, the U.S. government had accumulated 28,000 patents but fewer than 5% of those patents were commercially licensed.[5]:3

These patents had accumulated because after World War II, the government under President Roosevelt decided to continue and even ramp up its spending on research and development, on the basis of Vannevar Bush's famous report entitled, "Science The Endless Frontier", which stated: "Scientific progress is one essential key to our security as a nation, to our better health, to more jobs, to a higher standard of living, and to our cultural progress."[6] However, the government did not have a unified patent policy governing all the agencies that funded research, and the general policy was that government would retain title to inventions and would license them only nonexclusively.[3][7]:10–14 "Those seeking to use government-owned technology found a maze of rules and regulations set out by the agencies in question because there was no uniform federal policy on patents for government-sponsored inventions or on the transfer of technology from the government to the private sector."[8]

By the 1970s, some federal agencies had started to use "Institutional Patent Agreements" to allow grantee companies or institutions to retain rights to inventions made with federal funding, but such agreements were not regularly used.[3] In the 1970s, faculty at Purdue University in Indiana had made important discoveries under grants from the Department of Energy, which did not issue Institutional Patent Agreements.[3] Officials at the university complained to their Senator, Birch Bayh, whose staff investigated. At the same time, Senator Robert Dole was made aware of similar issues, and the two senators agreed to collaborate on a bill, along the lines of the "Jeffersonian belief" described above.[3]

Accordingly, as described below, the legislation decentralized control of federally-funded inventions, vesting the responsibility and authority to commercialize inventions with the institution or company receiving a grant, with certain responsibilities to the government, the inventor, and the public, as described below.

Recipient requirements

The Bayh-Dole Act authorizes the Department of Commerce to create standard patent rights clauses to be included in federal funding agreements with nonprofits, including universities, and small businesses.[9] The standard patent rights clause is set forth at 37 CFR 401.14(a).[10] The clause is incorporated into federal funding agreements through a number of contracting instruments, including grants made to universities.[11] and contracts made with for-profit companies.[12]

Under the standard patent rights clause, small businesses and non-profit organizations, if they obtain title by assignment to "subject inventions," can retain that title by complying with certain formalities. No small business or nonprofit organization, however, is required to obtain ownership of such inventions. All organizations agree to do the following:[9]

  • Include the patent rights clause in any subcontracts;
  • Report subject inventions to the sponsoring agency;
  • Elect in writing whether or not to retain title;
  • Conduct a program of education for employees regarding the importance of timely disclosure; and
  • Require certain employees to make a written agreement to protect the government's interest in subject inventions.

If an organization does not elect to retain title, then control of the invention passes to the Federal agency. The agency may waive its right to take title to the invention, and allow the inventors to retain title to their inventions.[13][14]

If an organization elects to retain title to a subject invention for which it has obtained assignment, the organization is obligated to do the following:[9]

  • Grant to the government a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States the subject invention throughout the world;
  • File its initial patent application within one year after its election to retain title;
  • Notify the government if it will not continue prosecution of an application or will let a patent lapse;
  • Convey to the Federal agency, upon written request, title to any subject invention if the organization fails to file, does not continue a prosecution, or will allow a patent to lapse;
  • In each patent include a statement that identifies the contract under which the invention was made and notice of the government's rights in the invention;
  • Report on the utilization of subject inventions;
  • Require in exclusive licenses to use or sell in the United States that products will be manufactured substantially in the United States; and
  • Agree to allow the government to "march in" and require licenses to be granted, or to grant licenses, in certain circumstances, such as if the organization has not taken effective steps to achieve practical application of the invention.

Certain additional requirements apply to nonprofit organizations only. Nonprofits must also:[9]

  • Assign rights to a subject invention only to an organization having as a primary function the management of inventions, unless approved by the Federal agency
  • Share royalties with the inventor
  • Use the balance of royalties after expenses for scientific research or education
  • Make efforts to attract, and give preference to, small business licensees

Subject inventions

A subject invention is defined as "any invention of the contractor that is conceived or first actually reduced to practice in the performance of work under a funding agreement."[15]

The CFR addresses the relationship between federal funding and other funding that may supplement the federally supported research. If an invention is made outside the research activities of the federally funded research "without interference with or cost to the government-funded project," then the invention is not a subject invention. Similarly, an invention is not a subject invention if it arises in closely related research outside the "planned and committed activities" of the federally funded project, and the closely related research does not "diminish or distract from the performance" of the federally funded project.[16]

Legal proceedings and case law

There is a growing body of case law on Bayh-Dole.

Ownership of inventions

Main article: Stanford v. Roche

Stanford v. Roche, 563 U.S. ___ (2011), was a case decided by the Supreme Court of the United States that held that title in a patented invention vests first in the inventor, even if the inventor is a researcher at a federally funded lab subject to the Bayh–Dole Act.[17] The judges affirmed the common understanding of US Constitutional law that inventors automatically own their inventions, and contractual obligations to assign those rights to third parties are secondary.[18]

The case arose because a Stanford employee, who was under obligation to assign inventions to Stanford, spent time at a biotech company to learn a technique, and signed an agreement with that company agreeing to assign inventions to it. The company was later purchased by Roche. Stanford filed patents on work the employee did after returning to Stanford, and the company (and later Roche) introduced products based on the work the Stanford employee did at the company. When Stanford sued Roche for infringing its patents, Roche countered that it had an ownership interest in the patents due to the agreement that the Stanford employee had signed. Among the arguments Stanford made at the District, Federal Circuit, and Supreme Court levels, was one that stated that the Bayh–Dole Act gave grant recipients a "right of second refusal" subject to the Government's right of first refusal, based on the following language of the statue: "If a contractor does not elect to retain title to a subject invention in cases subject to this section, the Federal agency may consider and after consultation with the contractor grant requests for retention of rights by the inventor subject to the provisions of this Act and regulations promulgated hereunder."[19]

While the District court accepted that argument,[20] both the Federal Circuit and the Supreme Court denied it, leaving the basic law of inventorship unchanged.[18]

Disclosure of subject inventions

Only one case has discussed the implications of disclosing subject inventions. In Campbell Plastics Engineering & Mfg., Inc. v. Les Brownlee, 389 F.3d 1243 (Fed. Cir. 2004),[21] the court held that since the appellant failed to comply with the invention disclosure provisions of a contract, the court upheld the transfer of title to an invention to the U.S. Army. Specifically, the contract required, per Bayh-Dole, that an invention be disclosed to the U.S. Army through a specific form, DD Form 882s. Campbell Plastics never disclosed its subject invention through this form. Campbell Plastics argued instead that it disclosed all parts of its invention over the course of the contract, but simply never used the form. The court did not specifically address the legitimacy of the particular form, but assumed that it was sufficient. Nevertheless, the court found that the "piecemeal submissions [did] not adequately disclose the subject invention under the contract." The result was a forfeiture of the subject invention.

Extent of the government's license

In a footnote in the famous experimental use case, Madey v. Duke University, 307 F.3d 1351 (Fed. Cir. 2002), the court mentions Bayh-Dole. There is ultimately very little treatment of the topic. Instead the court quoted the district court as holding that where a subject invention exists and the defendant is a recipient of government funding, "in light of the Bayh-Dole Act... use of the patents that has been authorized by the government does not constitute patent infringement."

Bayh-Dole and patentability

In University of Rochester v. G.D. Searle & Co., 358 F.3d 916 (Fed. Cir. 2004), the court rejected a claim that Bayh-Dole altered the grounds for patentability. The court, quoting an Amicus curiæ, stated

no connection exists between the Bayh-Dole Act and the legal standards that courts employ to assess patentability. Furthermore, none of the eight policy objectives of the Bayh-Dole Act encourages or condones less stringent application of the patent laws to universities than to other entities.

Petitions for march-in rights

The government's march-in right is one of the most contentious provisions in Bayh-Dole. It allows the funding agency, on its own initiative or at the request of a third party, to effectively ignore the exclusivity of a patent awarded under the act and grant additional licenses to other "reasonable applicants." This right is strictly limited and can only be exercised if the agency determines, following an investigation, that one of four criteria is met.[22] The most important of these is a failure by the contractor to take "effective steps to achieve practical application of the subject invention" or a failure to satisfy "health and safety needs" of consumers.

Though this right is, in theory, quite powerful, it has not proven so in terms of its practical application —as of 2012, no federal agency has exercised its march-in rights. Four march-in petitions have been made to the National Institutes of Health.

In In Re Petition of CellPro, Inc.,[23] CellPro petitioned the NIH in March 1997 after five years of patent litigation with The Johns Hopkins University and Baxter Healthcare. CellPro had a patented, FDA-approved device for purifying stem cells for use in hematopoietic stem cell transplantation procedures; Johns Hopkins had patents on a different method to purify stem cells and had licensed them to Becton Dickinson, which had sublicensed them to Baxter, which was developing products but had none on the market. CellPro argued that the march-in provisions were created for this situation, especially because (in its view) availability of essential medical technology was at stake. The NIH denied this claim[24] citing:

  • Johns Hopkins's licensing of the subject invention
  • Baxter's use, manufacturing, and practice of the subject invention
  • Baxter's application to the Food and Drug Administration (FDA) to market the invention
  • The actual clinical benefit of purifying stem cells for use in hematopoietic stem cell transplantation was unknown
  • Government intervention into markets has adverse effects and there is insufficient cause to do so in this case.

In In the Case of NORVIR, the NIH received requests[25] from Essential Inventions in January 2004, and other members of the public and members of the United States Congress,[26] to exercise march-in rights for patents owned by Abbott Labs covering the drug ritonavir, sold under the trade name Norvir, a prescription drug used in the treatment of AIDS. Abbott had recently raised the price of Norvir 400% for U.S. customers (but not for consumers in any other country), and had refused to license ritonavir to another company for purposes for providing protease inhibitors coformulated with ritonavir. The NIH denied the petition finding no grounds to exercise its march-in rights.[26] The NIH cited:

  • The availability of Norvir to patients with AIDS
  • That there was no evidence that health and safety needs were not adequately met by Abbott, and
  • That the NIH should not address the issue of drug pricing, only Congress.

In In the Case of Xalatan the NIH received a request[27] from Essential Inventions in January 2004 to adopt a policy of granting march-in licenses to patents when the patent owner charged significantly higher prices in the United States than they did in other high income countries, on the basis of Pfizer's glaucoma drug being sold in the United States at two to five times the prices in other high income countries. The NIH held that “the extraordinary remedy of march-in was not an appropriate means for controlling prices.”[28]

In In the Case of Fabrazyme[29] patients with Fabry disease petitioned on August 2, 2010, for march-in rights in response to Genzyme's inability to manufacture enough Fabrazyme to treat all Fabry patients. In 2009, Genzyme rationed the drug to less than a third of the recommended dose as a result of manufacturing problems and FDA sanctions, but did not anticipate being able to meet the market needs until late 2011. The patients had a return of their symptoms and were put at greater risk of morbidity and mortality at the reduced dosage. The petitioners contended that where a licensee of a public invention has created a drug shortage, the public health requirements of the Bayh–Dole Act are not met and other manufacturers should be allowed to enter the market.

On November 3, 2010, the NIH denied the petition for march-in, stating that under the then-current FDA drug approval process, it would take years of clinical testing to bring a biosimilar of Fabrazyme to market and therefore march-in would not address the problem.[30] The NIH also stated that it would continue to monitor the situation and if Genzyme could not meet its production deadlines, or if a third party licensee requested a license, the march-in request would be revisited. The NIH additionally required regular updates from Mount Sinai School of Medicine, the patent holder, which agreed to not seek injunctions for potentially infringing products being sold during the shortage. On February 13, 2013, NIH's Office of Technology Transfer issued a "close out" letter stating that: "The December 2012 report from Genzyme stated that: (1) U.S. Fabry patients remain on full dose regimens, (2) Genzyme continues to accommodate new patients with full dosing and without placing them on a waiting list; and (3) Genzyme is able to provide full doses of Fabrazyme® to patients transitioning to Fabrazyme.® [31]

See also


External links

  • University Technology Transfer Evolution and Revolution, Howard W. Bremer, 50th Anniversary of the Council on Government Relations.
  • IEdison is the federal government's electronic filing system.
Statutes and regulations
  • 37 C.F.R. 401 — Rights to inventions made by nonprofit organizations and small business firms under government grants, contracts, and cooperative agreements.
  • 35 U.S.C. 200-212 Chapter 18 — Patent Rights in Inventions Made with Federal Assistance
  • "Patent Ownership and Federal Research and Development (R&D): A Discussion on the Bayh-Dole Act and the Stevenson-Wydler Act", United States Congressional Research Service, December 11, 2000
  • The Economist (2002)
  • Bayhing for blood or Doling out cash?, The Economist, Dec. 24, 2005
  • Fortune Magazine
  • USA Today May 2008 Q&A with Texas Instruments CEO about Bayh-Dole
  • Are Bayh-Dole's Best Days Over? Law360 article by Robert Gerstein (March 2011)
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