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    Locke Lord QuickStudy: New Bayh-Dole Regs: Tighter Compliance Requirements

    Locke Lord Publications

    Background.
    First enacted in 1980, the Bayh-Dole Act (as amended, the “Act”) for the first time permitted research institutions and other recipients of federal research funding (e.g. from the NIH, DOD and NSF) to retain ownership of resulting inventions and be able to license them to companies and other entities in exchange for royalties. The profession called “Technology Transfer” emerged from the Act, with vastly more patents being filed and licensed out and a wave of financing of new enterprises and technological development that has continued, to the benefit of the US economy.

    New Regulations.
    On April 13, 2018 revised final new regulations were published in the Federal Register, with an effective date of May 14. While regulations implementing the Act have been in place for some time, they have not been updated for years, resulting, among other things, in out-of-date cross-references to other laws. While there are no changes to the basic Bayh-Dole regime, the National Institute of Standards and Technology (NIST) took the opportunity, with input from affected organizations, to make substantive changes to the required procedures to enable funding recipients to elect to retain title to government-funded inventions. There are many other revisions, some purely technical, but others of more importance. This QuickStudy will highlight one of the most significant revisions to existing regulations.

    Effect of Non-Compliance with Regulations.
    Under existing regulations, funding recipients are obligated, among other things (i) to disclose inventions to the Federal funding agency within 2 months after disclosure to it by the inventor, and (ii) to elect to retain title to funded inventions by notice to the funding agency within 2 years of disclosure under (i) above. If the recipient failed to do so, the Federal agency could require conveyance of the invention to it upon request made within 60 days after learning of either of these failures. It is believed that many funding recipients fail to make these required reports, but rely on the anticipated failure of the Federal agency to give the required notice to assert title within the 60-day limit.

    Under the revised regulations, the above time limits for the recipient remain in place, but the requirement that the Federal agency act within 60 days has been deleted. The result is that if a funding recipient fails to timely comply with the invention reporting or title claiming requirements, the Federal agency can at any time during the life of a reported invention, a resulting patent application, or resulting issued patent demand a transfer of title to it. This, in effect, creates a cloud on the invention/patent, which would apparently put any licensee at risk of losing its rights. The funding agency could, of course, elect to recognize the license, but at the least it would have a chance to re-negotiate it.

    Action Steps for Funding Recipients and Licensees.
    • Recipients of Federal Research Funding. These are, most typically, nonprofit universities, research institutions and, academic medical centers, but Federal research funding is also available to small businesses and certain other businesses. Many large institutions have well-established technology transfer offices, most of which can be expected to routinely comply with the Bayh-Dole regulations. But smaller institutions and small businesses may run the risk of inadvertently failing to comply, with the potential loss of inventions. All Federal funding recipients must now take the regulations seriously and establish procedures to ensure that deadlines are not missed.
    • Licensees of Federally-Funded Research Results. Parties negotiating for licenses to Federally-funded inventions or patents must now ensure that the licensing organization has fully complied with all requirement of the Act. Nonprofit institutions are notoriously reluctant to make any representations or warranties, but they must be prepared to warrant that they own, without qualification, the inventions and patents which they are licensing. Licensees can consider seeking copies of the necessary and timely filings required under the Act.

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