Basics of the Bayh-Dole Act: FAQs

Wilson Sonsini Goodrich & Rosati

In this Client Advisory, we answer some frequently asked questions (FAQs) about the Bayh-Dole Act or Patent and Trademark Law Amendments Act (Bayh-Dole).

What is Bayh-Dole?

Bayh-Dole refers to a law (spearheaded by Senators Birch Bayh of Indiana and Bob Dole of Kansas) passed in 1980 that allowed small businesses and non-profit institutions to elect to take title to federally funded inventions under certain terms and conditions. It was enacted to provide incentives to promote commercialization of federally funded inventions.

If my company takes SBIR/STTR Funding, does Bayh-Dole apply?

Yes. An entity that receives federal funding (research grants, SBIR/STTR grants, etc.) is considered a "contractor" thus your Company is a contractor and Bayh-Dole applies. Your company will need to set up a system to receive inventions disclosures, disclose these inventions to the U.S. government, file patent applications, and give the U.S. government a (non-exclusive) license to use the patented technology for governmental purposes.

What inventions are covered by Bayh-Dole provisions?

Any invention of the contractor conceived or first actually reduced to practice in the performance of work under the grant or contract is considered a "Subject Invention" under the Bayh-Dole law.

NOTE: Even if a contractor has conceived and filed a patent application on an invention prior to receiving funding, if that contractor later "first actually reduces" the invention to practice under the funding, that invention is still considered a "Subject Invention" and the government will have rights in it. So, if you use government funds to run confirmatory experiments on your invention, your invention becomes subject to Bayh-Dole.

What are the terms and conditions if the company takes title to a Subject Invention?

A company must:

  1. Grant the government a nonexclusive, irrevocable, paid-up license to use the Subject Invention throughout the world.
  2. Require substantial manufacture in the U.S. for any exclusive licensee.
  3. Allow the U.S. government to exercise March-In Rights, i.e., the government can require the contractor to license the patent to others on reasonable terms.
  4. Comply with the administrative components of the law.

What are the administrative compliance requirements for a company?

  1. Obtain written assignments from your employees assigning all rights to the company.
  2. Educate employees about the importance of reporting inventions to permit filing of patent applications.
  3. Require your employees to disclose each Subject Invention to your patent administrator.
  4. Report each Subject Invention to the sponsoring agency.
    NOTE: Most companies will not publish these inventions; however, if you/the company intends to publish, the company needs to notify the government of the acceptance of any manuscript describing the Subject Invention.
  5. Elect in writing within two years of reporting to the government whether or not the company wishes to retain title to the Subject Invention.
    NOTE: The company must elect to take title before the filing of an initial patent application.
    NOTE: If a printed publication, public use, sale, or other availability to the public has initiated the one-year Statutory Bar, the company must elect 60 days prior to the end of the Statutory period. (Statutory Bar is the date after which one cannot file a patent application.)
  6. File the Initial Patent Application within one year after election of title (or earlier if there is a Statutory Bar).
    NOTE: If the company is not filing a patent application right away, ask for an extension.
    NOTE: Each patent application filed must include the exact statement: "This invention was made with government support under [identify the contract] awarded by [identify the federal agency]. The government has certain rights in the invention."
    NOTE: In the above statement you identify the federal agency (e.g., the National Institutes of Health (NIH)) and not the Institute or Center (e.g., the National Institute of Allergy and Infectious Diseases).
    NOTE: The Company must provide a confirmatory license to the government.
    NOTE: The Company must inform the sponsoring agency of the filing date of the Initial Patent Application, number, and title AND all subsequently filed patent applications.
  7. File a non-provisional application within 10 months of the filing of the provisional application.
    NOTE: Extensions are available—Ask for an extension of time if the company cannot file within 10 months.
  8. Notify the government of the date a patent is issued, the patent number, and the expiration date of the issued patent.
  9. File an annual Utilization Report describing the use of the Subject Invention, its stage of development, date of first commercial sale/use, royalties received (if any).
  10. File an Annual Invention Statement Disclosing all Subject Inventions developed during the previous budget period.
  11. File a Final Invention Statement and Certification summarizing all Subject Inventions during the entire term of the grant/contract.
  12. If the company is no longer interested in pursuing the patent, notify the government at least 60 days before any pending patent office deadline.

How does the company comply with these requirements?

The U.S. government has an electronic system called iEdison to report Subject Inventions and help contractors to comply with the Bayh-Dole law, https://era.nih.gov/iedison/iedison.htm.

What are the consequences if the company does not comply with these requirements?

  1. The government may restrict or eliminate the company's right to retain ownership of the Subject Invention such that the government obtains title to the Subject Invention.
    NOTE: This has never actually happened but it is not worth the risk.
  2. It is unclear whether the company can cure a failure to disclose. As such, it is important to comply with the requirements.
  3. Failing to comply with disclosure and other Bayh-Dole requirements can lead to a cloud on the title of the ultimate patent.
  4. Non-compliance will be a material fact that may need to be disclosed in transactions and to investors.
  5. Sophisticated investors and potential partners will do due diligence for this issue.

Where can I get help?

The responsibility for maintaining iEdison has been with the NIH but is being moved to NIST (National Institute for Standards and Technology). Go to https://era.nih.gov/eraHelp/iEdison_User/Content/Introduction/Introduction.htm?tocpath=Introduction%7C_____0.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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