The Patent and Trademark Law Amendments Act, better known as the Bayh-Dole Act, and the federal regulations implementing the Act permit government contractors to retain ownership of inventions developed with federal funding. However, to retain ownership the contractor must take certain actions within certain deadlines. If the contractor misses these deadlines, the government agency can take title to the invention.

These deadlines are about to become even more important when a regulatory change takes effect on May 14, 2018.

Significant deadlines to keep in mind include:

Disclose the invention within two months – Elect title within two years

The first required action is disclosure of the invention to the contracting agency. The Bayh-Dole Act (at 35 U.S.C. Section 202(c)(1)) requires any contractor who receives government funding to “disclose each subject invention to the federal agency within a reasonable time after it becomes known to contractor personnel responsible for administration of patent matters.” Regulations implementing the Act state that the “reasonable time” is “two months after the inventor discloses it in writing to contractor personnel responsible for patent matters.” 37 C.F.R. Section 401.14(c)(1).

The second required action is that if the contractor wants to retain ownership of the invention, the contractor must elect to retain title within two years of the disclosure. 37 C.F.R. Section 401.14(c)(2). If the contractor fails to make the required disclosure to the federal agency within two months, or if the contractor fails to elect to retain title within two years, the federal agency may take ownership of the invention.

Currently, a time limit also applies to the federal agency's right to take title to the invention. However, that is about to change.

Until May 13, 2018, federal regulations stated that “the agency may only request title within 60 days after learning of the failure of the contractor to disclose or elect within the specified times.” 37 C.F.R. Section 401.14(d)(1). This means that when a contractor misses the deadlines, the contractor could resolve the issue and retain ownership by making the disclosure and waiting until the agency's 60-day option expired.

Starting May 14, 2018, the 60-day time limit on the agency's option is removed. This means that if a contractor misses the deadlines listed above, the agency may choose to acquire title to the invention from the contractor at any time.

While federal government agencies very rarely exercise this right, such exercising did happen in the past. For example, the U.S. Army successfully took title when a contractor’s piecemeal submissions of progress reports and drawings disclosing features of a gas mask developed pursuant to its contract did not satisfy related disclosure requirements. See Campbell Plastics Eng’g & Mfg., Inc. v. Brownlee, 389 F.3d 1243 (Fed. Cir. 2004). The elimination of the 60-day period could create a cloud over ownership of any invention that is not properly disclosed or elected within the required time periods.

With the change soon to take effect, government contractors who may have inadvertently missed the deadlines should make a corrective disclosure. In addition, government contractors should ensure that their patent administration personnel are aware of the two-month disclosure and two-year election periods, and that they diligently adhere to those periods for new inventions going forward.

Convert provisional applications within 10 months – not the usual 12

The rule changes add a requirement that if the contractor files a provisional application for the invention, the contractor must file a formal application within 10 months of filing the provisional. 37 C.F.R. Section 401.14(c)(3). Yet, under 37 C.F.R. Section 401.14(c)(5), contractors may request up to a one-year extension of this time period, which can be useful if the invention is not yet developed enough to support a nonprovisional patent application. However, the federal agency will have 60 days to decide whether to grant or deny the request. This means that a contractor must either convert a provisional within 10 months or request an extension within no more than 8 months from the provisional application's filing date. If the contractor does not meet this deadline, the Federal agency may elect title and complete the filing before the 12-month life of the provisional application expires.

Although not affected by the change, contractors also should keep in mind that if they elect title to an invention, they must file an initial patent application within one year of electing title.

File foreign applications within 10 months

A carryover from the previous rule is that if the contractor wants to file patent applications outside of the U.S., the contractor must do so within 10 months of the first filed patent application (unless international filing was prohibited by secrecy order). 37 C.F.R. Section 401.14(c)(3). The federal agency may file foreign applications in any country where the contractor does not do so within this time period.

Notify within 60 days of abandoning any patent or patent application

If the contractor decides to abandon any patent or patent application (such as by stopping prosecution or not paying a maintenance fee), the contractor must notify the federal agency before doing so. The new rule increases the notification period to 60 days before the due date for the response or fee.  37 C.F.R. Section 401.14(f)(3).

The changed, new rule shall apply to all new funding agreements that are executed after the May 14, 2018 effective date.  It shall not apply to a funding agreement in effect on or before the effective date. However, if an existing funding agreement is amended after May 14, 2018, the relevant funding agency may, in its discretion, make the amended funding agreement prospectively subject to the new rule.

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