On February 9, in University of South Florida Board of Trustees v. United States, the Federal Circuit upheld royalty-free license rights of the U.S. government over a University of South Florida (USF) patent directed to Alzheimer’s disease research under the Bayh-Dole Act. The Federal Circuit’s decision confirms that 35 U.S.C. §202(c)(4) confers to the U.S. government a broad scope of licensing rights under the Bayh-Dole Act, including in some instances inventions that predate the funding agreement with the government.

In 2015, USF sued the U.S. government for infringement of its U.S. Patent No. 5,898,094 (the ’094 patent), directed to transgenic mice expressing mutated genes linked to Alzheimer’s disease, asserting a government contractor, The Jackson Laboratory, used the patented mice without authorization. Notably, the transgenic mice covered by the ’094 patent were developed at USF and Mayo Clinic (Mayo) with partial funding from a National Institutes of Health (NIH) grant.

The Bayh-Dole Act, under 35 U.S.C. §202(c)(4), gives federal funding agencies “a nonexclusive, nontransferrable, irrevocable, paid-up license.” As a defense, the government argued the work that resulted in the invention covered by the ’094 patent occurred “under” a grant funding agreement between the government and Mayo. After summary judgment proceedings and a trial, the Court of Federal Claims agreed with the government and entered a final judgment of noninfringement. USF appealed this decision to the Federal Circuit.

The Federal Circuit pointed out that USF’s argument for reversal rested on two necessary premises: (1) 35 U.S.C. §202(c)(4) applies only if the funding agreement predates the inventive work that resulted in the granted patent; and (2) there was no legally adequate implied agreement at the time the inventive work that resulted in the granted patent was performed. In particular, USF’s argument was that the subcontract between Mayo and USF was not executed until months after the experiments that resulted in the invention covered by the ’094 patent. However, the Federal Circuit determined that the language of 35 U.S.C. §202(c)(4) is broad enough to support inclusion within the provision of a subcontract that provides for, among other things, payment for work already performed before the subcontract is executed or before the subcontract’s effective date.

The Federal Circuit held that work already performed may be covered by a later-signed agreement if the scope of the funding grant specifies payment for the earlier-performed work. As a result, the Federal Circuit ruled that 35 U.S.C. §202(c)(4) does not impose strict timing requirements for federal funding agreements to establish the government’s license rights, and that 35 U.S.C. §202(c)(4) applies to give the government a license to use the patented transgenic mice because USF accepted federal grant funds for the inventive experiments under its subcontract with Mayo. More specifically, the Federal Circuit stated that “[w]e reject this [USF]-suggested temporal limitation on the scope of the relevant Bayh-Dole Act language.”

In this case, several of the government’s witnesses testified, without contradiction, that it was common for there to be a delay in subcontracting after an award of a government grant to a research institution. The Federal Circuit pointed out that its conclusion is “strongly bolstered by the record in this case, which suggests that what occurred here is not an uncommon fact pattern in government funding of research conducted in part by non-grantee members of a consortium called for in a government grant.” More specifically, the Federal Circuit stated that “the record makes clear that subcontracts are commonly not executed until sometime after the grant is awarded, yet the grant-covered work proceeds without waiting for the inking of a subcontract.”

The Federal Circuit’s decision in University of South Florida Board of Trustees v. United States supports the broad rights of the U.S. government under the Bayh-Dole Act to license a patented invention of an entity that accepted research funding from the federal government, even in some instances where the contract with respect to the federal funding for the work is executed between the parties after the work that results in the invention occurred.