Department  of  Health  and  Human  Services 
OFFICE  OF

INSPECTOR  GENERAL

NIH  OVERSIGHT  OF  EXTRAMURAL 
RESEARCH  INVENTIONS 
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OEI-03-91-O0930  OFFICE  OF INSPECTOR  GENERAL 
The  mission of the  Office of Inspector  General  (OIG),  as mandated  by Public  Law 95-452, as 
amended,  is to protect  the  integrity  of the  Department  of Health  and Human  Sefices  (HHS) 
programs  as well as the  health  and welfare  of beneficiaries  served  by those  programs.  This 
statutory  mission  is carried  out  through  a nationwide  network  of audits,  investigations,  and 
inspections  conducted  by three  OIG  operating  components:  the  Office of Audit  Services, the 
Office of Investigations,  and the  Office of Evaluation  and Inspections.  The  OIG  also informs 
the  Secretary  of HHS  of program  and management  problems  and recommends  courses  to 
correct  them. 
OFFICE  OF AUDIT  SERVICES 
The OIGS Office of Audit  Services  (OAS)  provides  all auditing  services for HHS,  either  by 
conducting  audits with its own audit  resources  or by overseeing  audit work  done  by others. 
Audits  examine  the  performance  of HHS  programs  and/or  its grantees  and contractors  in 
carrying out  their  respective  responsibilities  and are intended  to provide  independent 
assessments  of HHS  programs  and operations  in order  to reduce  waste,  abuse,  and 
mismanagement  and to promote  economy  and efficiency throughout  the Department. 
OFFICE  OF INVESTIGATIONS 
The OIGS  Office of Investigations  (01)  conducts  criminal,  civil, and administrative 
investigations  of allegations  of wrongdoing  in HHS  programs  or to HHS  beneficiaries  and of 
unjust  enrichment  by providers.  The  investigative  efforts  of 01  lead to criminal  convictions, 
administrative  sanctions,  or civil money  penalties.  The  01  also oversees  State  Medicaid  fraud 
control  units which investigate  and prosecute  fraud  and patient  abuse  in the  Medicaid  program. 
OFFICE  OF EVALUATION  AND  INSPECTIONS 
The OIGS Office of Evaluation  and Inspections  (OEI)  conducts  short-term  management  and 
program  evaluations  (called  inspections)  that  focus on issues of concern  to the  Department, 
the  Congress,  and the  public.  The  findings  and recommendations  contained  in these  inspection 
reports  generate  rapid,  accurate,  and up-to-date  information  on the  efficiency, vulnerability, 
and effectiveness  of departmental  programs.  This report  was prepared  in the  Philadelphia 
Regional  Office  under  the  direction  of Joy Quill, Regional  Inspector  General  and Robert  A. 
Vito,  Deputy  Regional  Inspector  General.  Project  staff included:

REGION  HEADQUARTERS

Linda  M. Ragone,  Project  Leader  Mary Beth  Clarke

For additionalcopies of this repo~  please contact the PhiladelphiaRegional (M&  at 
1-800-531-9562.  Department  of  Health  and  Human  Services 
OFFICE  OF

INSPECTOR  GENERAL

I 
NIH  OVERSIGHT  OF  EXTRAMURAL

RESEARCH  INVENTIONS

J&  -@$w 
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JUNE GIBBS BROWN
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>+d ~~  (3EI-03-91-00930 EXECUTIVE  SUMMARY

PURPOSE 
To  review  the  National  Institutes  of Healths  (NIH)  oversight  of grantees  compliance 
with the  requirements  of the  Patent  and  Trademark  Amendments  of  1980 (commonly 
known  as the  Bayh-Dole  Act). 
BACKGROUND 
The  National  Institutes  of Healths  (NIH)  mission  is the  pursuit  of science  to improve 
human  health.  One  way  NIH  accomplishes  its  mission  is by  supporting  extramural 
research  in  universities,  medical  schools,  hospitals,  and  research  institutions.  over  70 
percent  of the  NIHs  1993$10  billion budget  supports  extramural  research. 
Prior  to  1980, there  was no uniform  Federal  policy for  dealing  with  inventions 
developed  through  extramural  research.  In  1980, Congress  passed  the  Patent  and 
Trademark  Amendments  Act,  commonly  Bayh-Dole  Act  (P.L.  96-517). 
kI-IOWII  as  the 
The  purpose  of the  Act was to allow small businesses  and  nonprofit  organizations  to 
acquire  title  to inventions  produced  with Federal  research  funding. 
In  1984, the  Bayh-Dole  Act was amended  by the  Trademark  Clarification  Act  (P.L.

98-620), which  provided  even  greater  flexibility to  certain  grantees  in licensing

inventions.  With  the  passage  of the  Trademark  Clarification  Act,  the  Department  of

Commerce  was assigned  responsibility  for developing  regulations.

The  Commerce  regulations  are  applicable  to all Federal  agencies.  The  Department  of

Health  and  Human  Services  has chosen  not  to promulgate  its own regulations.

Instead,  the  Commerce  regulations  are  used  to implement  the  Bayh-Dole

requirements  at  NIH.  The  Division  of Extramural  Invention  Reports  within  NIH  is

responsible  for  oversight  of these  regulations.

We  reviewed  pertinent  legislation  and  regulations  regarding  federally-supported 
inventions.  We  interviewed  officials  at  the  Department  of  Commerce  and  NIH  and 
reviewed  their  extramural  invention  policies  and  procedures. 
FINDINGS 
i%  NIH has the primaq  role in ensuring that i~ granteer comply with f&ml  regulations 
for  inventions. 
While  the  NIH  and  the  Department  of commerce  are  both  granted  certain  areas  of 
review  by the  Commerce  regulations,  both  agree  that  NIH  has  the  primary 
responsibility  for tracking  grantee  compliance  with  the  regulations. 
i  l%e NIH has limited i~ oversight of grantees by not requiring dkmwntation  for some 
federal requirement 
The  NIH  requires  documentation  for  only certain  Bayh-Dole  requirements.  Some  of 
this documentation  is required  by regulation,  some  is allowed  but  not  required,  and 
some  is not  mentioned  in the  regulation  at all. 
2%  NIH lhckx a systematic process for ensuring that grantees submit ail required 
inventloninformation. 
The  NIH  does  not  follow  up systematically  with grantees  to ensure  that  required 
documents  are  submitted.  In addition,  it has no system  for  determining  whether 
documents  are  submitted  timely. 
The NIH does not ji.dly utilize its bwention database to monitor grantee compliance. 
The  NIH  is not  fully utilizing  its databases  potential  for  monitoring  or reporting  out 
information.  Information  from  the  database  could  be  used  periodically  to inform 
grantees  that  certain  requirements  have  not yet been  met.  More  complete 
information  on commercialization  could  be recorded  in the  database  and  then 
reported  to NIH  management  and  the  public.  This  outcome  information  would 
illustrate  one  benefit  of public  research  funding. 
RECOMMENDATIONS 
This  report  describes  how  NIH  carries  out  its oversight  role  in ensuring  grantee 
compliance  with  the  Federal  regulations  implementing  the  Bayh-Dole  Act.  We  realize 
that  in designing  its role,  NIH  has had  to balance  several  priorities.  These  priorities 
include  encouraging  the  commercialization  of NIH-supported  inventions,  minimizing 
the  administrative  burden  of grantee  monitoring,  and  ensuring  that  the  rights  of the 
government  and  public  are  upheld.  We  also recognize  the  dedication  of the  Division 
of Extramural  Invention  Reports  staff for handling  a large  volume  of work with limited 
resources. 
The  following  recommendations  address  fundamental  problems  with  NIHs  existing 
oversight  role.  These  recommendations  are  consistent  with  the  findings  of a review 
done  by the  Office  of Audit  Services  (OAS)  within  the  Office  of Inspector  General. 
The  OAS found  that  one  NIH  grantee  had  not  fully complied  with  Bayh-Dole 
reporting  requirements  and  that  NIH  did not  have  effective  procedures  to detect  this 
non-compliance. 
Accordingly,  we recommend  the  following. 
o	 The  NIX-Ishould  reexamine  its current oversight role to determine  if 
improvements  couId be made  in the monitoring  of grantee  compliance  with 
Bayh-Dole  requirements.  While  we believe  the  NIH  monitoring  role  should  not 
ii  be  so constricting  as to hinder  the  overriding  purpose  of commercialization  that 
is central  to the  intent  of the  Bayh-Dole  Act, we also believe  that  NIH  needs  to 
have  an effective  monitoring  role  to preserve  the  additional  Bayh-Dole  Act 
objectives  of protecting  the  public  investment  in research  and  promoting  small 
businesses  and  U.S. manufacturing.  We  do not  believe  that  grantee  self-
monitoring  would  ensure  that  all of these  objectives  are  met. 
We  believe  the  NIH  needs  to increase  its monitoring  of grantee  compliance 
especially  in the  areas  of royalties,  and  small business  and  U.S.  manufacturing 
preferences.  However,  we recognize  the  need  to consider  the  views of the  full 
spectrum  of affected  parties,  including  the  research  community,  when 
implementing  an  improved  monitoring  process. 
To  create  more  effective  monitoring  procedures,  the  NIH  may  determine  the 
need  to recommend  that  the  Department  of Health  and  Human  Sewices  issue 
its own regulations  for implementing  Bayh-Dole  requirements.  This  may  clari~ 
NIH  and  grantee  responsibilities  under  the  Bayh-Dole  Act. 
o	 The  NIH should (1)  add more  detailed licensing and utilization information  to 
its invention database  and (2)  use the database  to track grantees  for timely 
compliance.  The  data  could  be  aggregated  periodically  and  used  to gauge 
progress  in commercializing  NIH-supported  inventions. 
AGENCY  COMMENTS 
The  NIH  commented  on the  draft  report  and  the  full text  of their  comments  appears 
in Appendix  E.  The  NIH  concurred  with our  recommendations.  The  NIH  indicated  it 
had  made  a major  step  in evaluating  its current  oversight  role  of Bayh-Dole  through 
the  sponsoring  of a two-day  public  forum  by the  Task  Force  on the  Commercialization 
of Intellectual  Property  Rights  from  Extramural  Research.  However,  while  we agree 
with  the  finding  of the  forum  that  NIH  monitoring  should  not  overburden  research 
institutions  to the  point  of hindering  the  goal  of technology  transfer  and 
commercialization,  we are  not  convinced  that  self-monitoring  by grantee  institutions 
will ensure  that  the  objectives  of J3ayh-Dole  will  be  met.  We  continue  to  believe  that 
NIH  must  exercise  a strong  monitoring  role  in  order  to  ensure  that  an  equitable 
balance  is struck  between  commercializing  federally-supported  inventions  and 
protecting  the  publics  investment  in research. 
...
111  TABLE  OF  CONTENTS

PAGE 
EXECUTIVE  SUMMARY  . . . . . . . . . . . . . . . . . . ........................i

INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .....  ..........1

FINDINGS

  NIHRole  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..6

Grantee  Oversight  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........9

Ensuring  Compliance  . . . . . . . . . . . . . . . . . . . . . . . . . ....  . . . . . . . . . . . . .  12

.Useof  Invention  Database.  . . . . . . . . . . . . . . . . . . . . . . . ..............  14

RECOMMENDATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16

APPENDICES

A  Regulations  Implementing  the  Bayh-Dole  Act  . . . . . . . . . . . . . . . . . . . . . . . .  A-1

B:  Flow of Invention  Reporting  Process  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  B-1

C: NIHSample  Forms  for Licensing  and  Invention  Reporting  . . . . . . . . . . . . . .  c-1

D:  Sample  Database  Record..  . . . . . . . . . . . . . . . . . . . . . . . . . ..........  D-1

E  Agency  Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............  E-1
 INTRODUCTION

PURPOSE 
Toreview  the  National  Institutes  of Healths(NIH)  oversight  ofgrantees  compliance 
with the  requirements  of the  Patent  and  Trademark  Amendments  of 1980 (commonly 
known  as the  Bayh-Dole  Act). 
BACKGROUND 
tiamural  Reseamh 
The  National  Institutes  of Healths  (NIH)  mission  is the  pursuit  of science  to improve 
human  health.  One  way NIH  accomplishes  its mission  is by supporting  extramural 
research  in universities,  medical  schools,  hospitals,  and  research  institutions.  @er  70 
percent  of the  NIHs  1993$10  billion  budget  supports  extramural  research. 
Funds  are  awarded  to extramural  organizations  mainly  through  research  grants  and 
research  and  development  contracts. 1  In FY  1991, almost  93 percent  of awards  were 
to domestic  nonprofit  institutions,  with universities  receiving  the  majority  of these 
funds.2 
Patent L.4@dation 
Prior  to  1980, there  was no uniform  Federal  policy for  dealing  with grantees 
inventions.  Each  agency  developed  its own guidelines  for  allocating  patent  rights  to 
grantee  inventions.  Concerns  that  conflicting  patent  policies  for federally-supported 
research  were  impeding  commercialization  led  to the  passage  of new patent 
legislation. 
In 1980, Congress  passed  the  Patent  and  Trademark  Amendments  Act,  commonly 
known  as the  Bayh-Dole  Act  (P.L.  96-517).  The  law allowed  small  businesses  and 
nonprofit  organizations  to acquire  title  to their  subject  inventions  in any country  in 
lNIH  Data  Book  1992, Table  18, p. 25, September  1, 1992. 
2NIH Data  Book  1992, Table  21, p. 31, September  1, 1992. 
3The term  subject  invention  means  any invention  that  the  grantee  conceived  or 
first actually  reduced  to practice  in the  performance  of work  under  a funding 
agreement.  A funding  agreement  includes  grants,  contracts,  or cooperative 
agreements.  For  the  purpose  of this report,  we will use grantee  to mean  any 
institution  which  has  a funding  agreement  with NIH  that  would  fall under  these 
regulations  (35 USC  201). 
1  which  they  file a patent  application  within  a reasonable  time.  However,  under  certain 
exceptional  circumstances,  the  Federal  Government  may retain  title  to  subject 
inventions. 
The  goal  of the  Bayh-Dole  Act is comprised  of seven  objectives.  These  objectives 
are  to: 
o	 use  the  patent  system  to promote  the  utilization  of inventions  arising 
from  federally  supported  research  or development; 
o	 encourage  maximum  participation  of small  business  firms  in federally 
supported  research  and  development  efforts; 
o	 promote  collaboration  between  commercial  concerns  and  nonprofit 
organizations,  including  universities; 
o	 ensure  that  inventions  made  by nonprofit  organizations  and  small 
business  firms  are  used  in a manner  to promote  free  competition  and 
enterprise; 
o	 promote  the  commercialization  and  public  availability  of inventions 
made  in the  United  States  by United  States  industry  and  labor; 
o	 ensure  that  the  Government  obtains  sufficient  rights  in federally 
supported  inventions  to meet  the  needs  of the  Government  and  protect 
the  public  against  nonuse  or unreasonable  use  of inventions;  and 
o  minimize  the  costs of administering  policies  in this  area. 
In  1984, the  Bayh-Dole  Act was amended  by  the  Trademark  Clarification  Act  (P.L. 
98-620),  which  provided  even  greater  flexibility to certain  grantees  in licensing 
inventions. 
Incorporation of the Bayh-Dole  and Trademark Ckijication  Acfi  into US.  Codes 
Although  under  most  circumstances  patent  rights  are  allocated  to  grantees,  the 
government  is allowed  certain  minimum  rights  in any  federally-funded  invention  (35 
U.S.C.  202).  Grantees  must  disclose  inventions,  elect  to retain  title,  and  file patent 
applications  for  each  subject  invention  within  a reasonable  time  frame.  If the  grantee 
does  not  perform  these  functions  in a reasonable  time  frame,  the  government  may 
receive  title  to the  invention. 
When  the  grantee  retains  rights  to the  invention,  Federal  agencies  retain  a non-
exclusive,  non-transferable,  irrevocable,  paid-up  license  to  practice  the  subject 
invention.  Federal  agencies  also  have  the  right  to  require  periodic  reporting  on  the 
2
 utilization  or efforts  at obtaining  utilization  of the  invention.  In addition,  the  grantee 
is required  to include  a statement  in the  patent  specifying  that  the  invention  was made 
with  Government  support  and  that  the  Government  has  certain  rights  in the  invention. 
If a grantee  chooses  to license  a subject  invention,  certain  requirements  app]y.  Al] 
grantees  must  make  an effort  to license  to firms  that  will manufacture  the  invention 
substantially  in the  United  States.  Nonprofit  organizations  must  make  a reasonable 
effort  to give preference  to small  businesses  when  licensing.  Finally,  royalties  accrued 
to nonprofit  organizations  must  be  shared  with  the  inventor  and  the  remainder  must 
be  used  to support  scientific  research  or education. 
If certain  requirements  are  not  met,  granting  agencies  may  employ  march-in  rights. 
March-in  rights  allow the  granting  agency  to require  grantees  or licensees  to grant  a 
nonexclusive,  partially  exclusive,  or exclusive  license  to responsible  applicants  if the 
agency  determines  that  the  grantee  or licensee  is not  fulfilling  certain  requirements. 
The  agency  may employ  this  march-in  right  if (1) the  grantee  has  not  taken  effective 
steps  to commercialize  the  invention,  (2) action  is necessa~  to alleviate  health  or 
safety  needs,  (3) action  is necessary  to meet  requirements  for public  use,  or (4) action 
is necessary  because  the  requirement  for manufacturing  the  invention  in the  United 
States  is not  being  fulfilled. 
Federal Regulations 
The  Office  of Federal  Procurement  Policy was initially  charged  with  issuing  regulations

for implementing  the  Bayh-Dole  Act.  With  the  passage  of the  Trademark

Clarification  Act,  the  Department  of Commerce  was assigned  responsibility  for

developing  regulations.

The  Commerce  regulations  (37 CFR  401) include  a standard  patent  clause  that  is to

be  incorporated  in all funding  agreements.  The  clause  outlines  the  rights  and

responsibilities  of Federal  agencies  and  grantees  regarding  subject  inventions.  The

Commerce  regulations  are  applicable  to  all Federal  agencies.  The  Department  of

Health  and  Human  Services  has  chosen  not  to promulgate  its own regulations.

Instead,  the  Commerce  regulations  are  used  to implement  the  Bayh-Dole

requirements  at  NIH.  See  Appendix  A for the  Commerce  regulations.

%  NIH Administration of the Bayh-Dole Act 
The  Division  of Extramural  Invention  Reports  (DEIR)  is responsible  for  overseeing 
grantee  compliance  with  Federal  regulations  concerning  invention  reporting.  Since 
1991, DEIR  has  been  under  the  direction  of the  Office  of Policy for Extramural 
Research  Administration  (OPERA). 
The  DEIR  is composed  of two staff members.  The  Director  and  one  additional 
support  person  handle  the  invention  information  that  comes  from  the  thousands  of 
funding  agreements  awarded  each  year. 
3  Concerns About  Commercialization  of Federally-Supported Inventions 
Recent  congressional  hearings  have  questioned  the  appropriateness  of collaborative 
agreements  between  research  institutions  receiving  Federal  support  and  private  firms. 
The  research  environment  has changed  since  the  passage  of Bayh-Dole  more  than  a 
decade  ago.  Research  institutions  areincreasingly  turning  toprivate  funding  as 
Federal  research  dollars  grow scarce.  Along with  the  growing  number  of 
collaborative  agreements  comes  a growing  concern  that  the  public  investment  in 
research  is not  being  adequately  protected. 
The  Bayh-Dole  Act  has  been  successful  in encouraging  the  commercialization  of 
federally-supported  inventions  and  collaboration  between  commercial  concerns  and 
universities.  Between  1980 and  1990, the  number  of patent  applications  for  NIH-
supported  inventions  increased  nearly  300 percent.  The  commercialization 
agreements  and  licenses  to produce  these  inventions  have  provided  universities  and 
other  research  institutions  with millions  of dollars  in royalties.4 
Although  NIH,  universities,  and  private  firms  point  to the  success  of Bayh-Dole,  others 
believe  the  increased  collaboration  between  researchers  and  industry  can  lead  to 
conflicts  of interest  and  a lack of accountability  to the  public. 5  In response  to these 
concerns,  NIH  recently  surveyed  approximately  100 universities  to review  their 
invention  information  and  research-support  agreements.G  The  NIH  has  also  asked  its 
internal  Task  Force  on the  Commercialization  of Intellectual  Property  Rights  from 
NIH-Supported  Extramural  Research  to evaluate  the  issues  surrounding 
commercialization. 
4Bernadine  Healy,  M.D., Director  of the  National  Institutes  of Health,  Statement 
before  the  House  Committee  on Small  Business,  Subcommittee  on Regulation, 
Business  Opportunities,  and  Energy,  June  17, 1993. 
5Ralph  Nader,  Statement  before  the  House  Committee  on Small  Business, 
Subcommittee  on Regulation,  Business  Opportunities,  and  Energy,  March  11, 1993 
Representative  Ron  Wyden,  Opening  statement  before  the  House  Committee  on 
Small  Business,  Subcommittee  on Regulation,  Business  Opportunities,  and  Energy, 
March  11, 1993. 
Sheldon  Krimsky,  Ph.D.,  Statement  before  the  House  Committee  on Small 
Business,  Subcommittee  on Regulation,  Business  Opportunities,  and  Energy,  June  17, 
1993. 
Research-support  agreements  are  agreements  between  outside  firms  and  research 
institutions,  where  in exchange  for research  dollars,  the  institution  provides  the  outside 
firm  the  first  right  to license  or commercialize  inventions  that  arise  during  the 
supported  research. 
4  METHODOLOGY

We  reviewed  pertinent  patent  legislation  (pL  96-517, PL  98-620),  including  legislative 
histories,  to determine  the  purposes  and  objectives  of the  laws.  We  examined  current 
regulations  covering  the  assignment  and  management  of patent  rights  for federally-
funded  inventions  promulgated  by the  Departments  of Commerce  and  Health  and 
Human  Services. 
We interviewed  both  NIH  and  Commerce  officials  and  asked  them  to define  their 
oversight  responsibilities.  We also interviewed  officials  at  the  National  Science 
Foundation  to see  how an agency with grantees  similar  to  those  funded  by NIH 
viewed  their  oversight  responsibilities. 
We  reviewed  all pertinent  procedures  and  policy statements  that  NIH  has  developed 
to oversee  grantees  compliance  with Bayh-Dole  requirements.  We  also reviewed 
information  provided  to grantees  to inform  them  of their  rights  and  responsibilities 
under  Bayh-Dole.  To  learn  what  information  is collected  and  stored  by the  Inventions 
Office,  we examined  the  computer  database  of grantee  invention  information. 
We  limited  our  review  to what  procedures  were  in place  at NIH  to ensure  grantee 
compliance.  We  did not  evaluate  whether  grantees  were  complying  with  regulations. 
We  conducted  our  inspection  in accordance  with the  Quali~  Standards  for  Inspections 
issued  by the  Presidents  Council  on Integrity  and  Efficiency. 
5
 FINDINGS

THE  NIH  HAS  THE  PRIMARY  ROLE  IN  ENSURING  THAT  ITS  GRANTEES 
COMPLY  WITH  FEDERAL  REGULATIONS  FOR  INVENTIONS.

While  the  National  Institutes  of Health  (NIH)  and  the  Department  of Commerce  are 
both  granted  certain  areas  of review  by the  regulations  promulgated  by Commerce, 
both  agree  that  NIH  has  the  primary  responsibility  for  tracking  its grantees 
compliance  with  the  regulations.  The  table  below illustrates  which  agency  has  a 
responsibility  for  overseeing  the  principal  requirements  of the  Federal  regulations. 
Agencies  Oversight  Responsibilities 
Exceptional  Circumstances  x  x

Invention  Disclosures  x

Election  of Title  lx  II

Utilization  Reports  x

Preference  for  US  Industry  x

Sharing  Royalties  with  1  x

Inventors 
I

Using  Royalties  for  x

Research  and  Education

Preference  Given  to Small  x  x

Business  When  Licensing

Although  NIH  has  primary  oversight  responsibility,  they  apply  regulations  designed  by 
Commerce.  Therefore,  NIH  has  on occasion  requested  clarification  from  Commerce 
when  determining  what  would  constitute  Compliance with certain  parts  of the 
regulations. 
6
 While the  Depa~ent  of Commeme  shares some rmponsibi@  with N~,  it dbes not have 
a moniton-ng role. 
The  Department  of Commerce  views itself as an ombudsman  for  complaints

concerning  compliance  with  the  regulations.  If a complaint  were  received,  it would  be

sent  to the  appropriate  agency  for review with a request  that  the  agency  share  the

results  with  Commerce.

According  to Commerce,  their  regulations  allow for decentralized  agency  decisions  on

how to implement  policies.  Commerce  relies  on individual  agencies  to implement

their  policies  within  the  broad  legal  parameter  of the  regulations.  Commerce

recognizes  that  agencies  differ  in their  level of oversight  and  has  no  official  opinion  on

what  the  appropriate  level should  be.

There  are  two areas  where  NIH  and  Commerce  share  responsibility  for  oversight:

exceptional  circumstances  and  ensuring  that  nonprofit  grantees  give preference  to

small  businesses  when  making  licensing  decisions.

Exceptional  Circumstances

In cases  of exceptional  circumstances,  NIH  is responsible  for making  the

determination  and  the  Secretary  of Commerce  for reviewing  NIHs  determination.

Exceptional  circumstances  occur  when  NIH  determines  that  restriction  or elimination

of the  grantees  right  to retain  title  would  better  achieve  the  Bayh-Dole  objectives.

When  NIH  determines  that  exceptional  circumstances  exist, it is required  to prepare  a

written  analysis justifying  its decision.  It shares  this analysis with  the  grantee  and  the

Secretary  of Commerce.  The  Secretary  reviews  NIHs  determination.  If NIHs

determination  is found  not  to conform  with  the  policies  and  objectives  of the

regulations,  the  Secretary  may recommend  corrective  action.

Small  Business  Preference

While  both  agencies  agree  that  Commerce  would  handle  complaints,  neither  actively

monitors  grantee  compliance  with the  small business  preference  requirement.  Under

this  regulation,  nonprofit  grantees  are  required  to make  reasonable  efforts  to attract

small  business  licensees.  Grantees  must  also give preference  to small  businesses  when

their  marketing  plans  are  as likely to bring  about  commercialization  as the  plans  of

larger  businesses.

While  NIH  indicated  that  problems  would  be forwarded  to Commerce  for  review,

there  is no formal  mechanism  either  for identifying  problems  or for  sharing

information  with  Commerce.

7
 l%e NIH has defined its role based on three Bayh-Dole  objectives. 
The  NIHs  oversight  has  centered  main]y on three  of the  Bayh-Dole  Acts objectives. 
The  primary  objective  is encouraging  grantees  to use  the  patent  system  to promote  the 
utilization  of inventions  arising  from  federally-supported  research.  According  to the 
former  NIH  Director,  NIH must  continue  to seek  the  rapid  development  of 
discoveries  into  useful  products  in order  to fulfill our  mission  to save  and  improve  the 
lives of the  American  people. 
Through  the  activities  of DEIR,  NIH  has  also  focused  on two more  objectives.  The 
first  is ensuring  the  government  retains  its rights  to federally-supported  inventions. 
The  NIH  protects  these  rights  by securing  a non-exclusive  license  from  the  grantee 
and  verifying  that  the  patent  contains  a clause  stating  that  the  invention  was made 
with  NIH  support. 
The  second  objective  is to minimize  the  cost  of administrative  policies.  In determining 
its oversight  role,  NIH  has focused  not  on strict  monitoring  of grantees  but  rather  has 
relied  on the  grantees  self-interest  to ensure  compliance.  The  NIH  believes  that 
compliance  with  the  regulations  occurs  because  it is in the  best  interest  of the  grantee 
to  have  clear  title  to an invention. 
l%  Nm  h responsible for making grantees aware of requkments. 
Both  NIH  and  Commerce  agree  that  the  granting  agency  is responsible  for making 
grantees  aware  of their  rights  and  obligations  under  Bayh-Dole.  The  NIH  fulfills this 
responsibility  by providing  several  documents  to grantees. 
All  Public  Health  Service  (PHS)  grantees  receive  the  PHS  Grants  Policv Statement,  a 
resource  manual.  Unlike  the  National  Science  Foundation  which  places  the  standard 
patent  rights  clause  in its manual,  the  PHS  manual  provides  only the  citation  for the 
pertinent  Commerce  regulations  under  the  Patent  and  Invention  section.  It also 
explains  the  different  invention  reporting  requirements. 
New  grantees  receive  a welcome  wagon  letter  advising  them  of their  responsibilities. 
The  Institutional  Patent  Policy Section  of this  letter  cites  the  Commerce  regulations 
and  advises  grantees  to refer  questions  to  the  appropriate  NIH  extramural  inventions 
office.  The  letter  also states,  It is expected  that  institutions  will rely primarily  on their 
own legal  counsel  for advice  and  interpretation  of relevant  laws and  regulations. 
Several  notices  explaining  invention  reporting  requirements  have  been  published  in the 
NIH  Guide  for Grants  and  Contracts,  a weekly  publication  sent  to all grantees  and 
7Bernadine  Healy,  M.D., Statement  before  the  House  Committee  on Small 
Business,  Subcommittee  on Regulation,  Business  Opportunities,  and  Energy,  March 
11, 1993. 
8  interested  parties.  To  make  grantees  aware  of their  obligations,  invention  and  patent 
requirement  information  has been  published  in the  Guide  five times  since  February 
1990. 
Information  about  patent  requirements  also appear  in the  Application  for Public 
Health  Service  grants  and  in the  application  for contracts  and  Small  Business 
Innovation  Research  (SBIR). 
THE  NIH HAS  LIMITED  ITS OVERSIGHT  OF  GRANTE=  BY NOT 
REQUIRING  DOCUMENTATION  FOR  SOME  FEDERAL  REQUIREMENTS. 
The  NIH  requires  documentation  for only certain  requirements  thereby  limiting  its 
oversight  role.  Some  of this documentation  is required  by regulation,  some  is allowed 
but  not  required,  and  some  is not  mentioned  in the  regulation  at  all. 
The  regulations  require  grantees  to submit  written  documentation  to granting  agencies 
for invention  disclosure  and  election  of title.  In the  case  of utilization  reports,  the 
regulations  allow but  do not  require  agencies  to collect  them.  For  the  remaining 
requirements,  the  regulations  do not  outline  what  information  should  be  required  to 
document  compliance. 
The  NIH  requires  documentation  for some  of these  requirements.  However,  for four 
requirements,  NIH  does  not  require  grantees  to send  any documentation  or 
certification  of compliance.  The  table  on the  following  page  identifies  NIHs 
documentation  requirements. 
As required in the regulations, NIH requests nvitten dkclosua-e of ihventibns and ekdon 
of title. 
If an invention  occurs  during  the  life of a funding  agreement,  NIH  requires  the 
grantee  to send  an  invention  disclosure  and  election  of title.  In accordance  with  the 
regulations,  NIH  directs  grantees  to send  a written  disclosure  within  2 months  after 
the  inventor  discloses  it in writing  to the  personnel  responsible  for handling  patent 
matters  at the  grantee  institution.  Within  2 years  after  disclosure,  NIH  requires 
grantees  to elect  to  retain  or release  title  to the  invention. 
As allowed by regulatio~  NEl  reques~ utilization repn3  from grantees. 
As of October  23, 1992, NIH  began  requesting  that  grantees  send  annual  utilization 
reports.  Since  1990, NIH  had  been  requiring  them  every  2 years.  Before  1990, NH 
did not  specifically  require  that  utilization  reports  be  sent  to them. 
Under  Federal  regulations,  agencies  may request  reports  on the  grantees  effort  to 
utilize  the  invention.  These  utilization  reports  include  information  on the  development 
status  of the  invention,  date  of first commercial  use,  and  gross  royalties  collected  by 
grantee. 
9  Documentation  Required  by  NIH to  Ensure  Grantee  compliance 
I 
~]Federal  Requirements  Documentation  Required  by NIH 
I For  All Grantees: 
!1
 I

Invention  Disclosures  ~Written  Disclosure 
,1 
I 
~ Election  of Title  Written  Election 
I 
I Utilization  Reports  I Annual  report  II
I 
I Filing  Patents  I Patent  Application  and  Patent  I 
Ensuring  Government  Rights  Patent  Application  and  Patent,  U.S.  license 
I I 
~ Sharing  Royalties  with  Inventors  None  I
1 
Using  Royalties  for Research  None 
and  Education 
Preference  Given  to Small  None 
Business  When  Licensing 
7he NIH chooses  to require documentation  verijjikg that patent  applications are @xi  and 
ensuring government righ~. 
The  NIH  requires  grantees  to submit  copies  of the  patent  application,  issued  patent, 
and  the  non-exclusive  government  license  even  though  not  specifically  required  by the 
regulation.  The  NIH  has  determined  that  copies  of these  documents  are  needed  to 
ensure  grantee  compliance. 
The  regulation  requires  grantees  to file a patent  application  within  one  year  after 
election  of title  and  acknowledge  government  support  in the  patent  application  and 
issued  patent.  It further  states  that  when  the  grantee  elects  to retain  title  to an 
invention,  the  Federal  government  shall have  a nonexclusive,  nontransferable, 
irrevocable,  paid-up  license  to practice  the  subject  invention  throughout  the  world. 
l%e NIH does not monitor grantem to ensure compliance  with US.  ikthstry and smd 
bkness  preferences  and royalty r+ements. 
The  NIH  does  not  require  grantees  to submit  licensing  agreements,  certification  of 
meeting  royalty  requirements,  or certification  of efforts  to give licensing  preference  to 
U.S. industry  and  small  businesses.  While  the  regulations  outline  these  requirements, 
they  are  silent  on how the  requirements  should  be  documented.  Since  NIH  does  not 
10	 require  documentation  Of these requirements,  it is unable to determine  the  extent  of

grantee  compliance.

U.S.  Industrv  and  Small  Business  Preference

Since  NIH  neither  reviews  the  licensing  process  nor  obtains  a copy  of the  invention

license,  it is unable  to determine  whether  grantees  are  complying  with  the  U.S.

industry  and  small  business  preference  requirements.  When  a grantee  licenses  an

invention,  it allows  a firm  to use the  invention  to  commercialize  the  product  in

exchange  for a licensing  or royalty  fee.  Regulations  require  that  all grantees  license  to

companies  that  will manufacture  the  invention  substantially  in the  U.S.  and  that

nonprofit  grantees  give preference  to small  business.

In the  case  of the  U.S. manufacturing  requirement,  grantees  may apply  for  a waiver  if

reasonable  efforts  to meet  it are  unsuccessful.  With  no formal  documentation

required,  the  only way NIH  learns  this requirement  is not  being  met  is when  a grantee

requests  a waiver  or if a complaint  is received.  The  recent  university  survey  found

that  only 20 percent  of the  research-support  agreements  (from  some  100 universities

surveyed)  had  clearly  established  U.S. manufacturing  clauses.8

The  NIH  has no formal  mechanism  to determine  whether  nonprofit  grantees  have

given  preference  to small  business.  According  to their  recent  survey,  approximately  44

percent  of research-support  agreements  collected  were  with  small businesses?

Rovaltv  Requirements

The  NIH  does  not  require  any certification,  financial  reports,  or other  information

from  nonprofit  grantees  to verify  compliance  with  the  royalty  requirements  in the

Federal  regulations.  The  NIH  considers  this proprietary  information.  They  also

consider  the  royalty  requirements  to be  self-enforcing,  believing  that  inventors  would

advise  NIH  if grantees  failed  to comply,

According  to Federal  regulations,  any royalties  received  from  the  licensing  of

inventions  must  be shared  with  inventors.  In addition,  the  balance  of royalties  after

expenses  must  be  used  to support  scientific  research  and  education.  The  Federal

regulations  do not  specify what  information  granting  agencies  need  to  collect  to verify

that  royalty  requirements  are  being  met.

*Bernadine  Healy,  M.D., Statement  before  the  House  Committee  on Small 
Business,  Subcommittee  on Regulation,  Business  Opportunities,  and  Energy,  June  17, 
1993. 
Bernadine  Healy,  M.D., Statement  before  the  House  Committee  on Small 
Business,  Subcommittee  on Regulations,  Business  Opportunities,  and  Energy,  June  17,
.- .	
1993. 
11
 THE  NIH  LACKS  A SYSTEMATIC  PROCESS  FOR  ENSURING  THAT 
GRANTEES  SUBMIT  ALL  REQUIRED  INVENTION  INFORMATION. 
The  NIH  does  not  follow up systematically  with grantees  to ensure  that  required 
information  is submitted.  Although  NIH  does  require  grantees  at the  end  of a grant 
to certify  if any invention  occurred  during  the  granting  period,  NIH  has  no way of 
knowing  if grantees  are  providing  accurate  information.  Without  this information, 
NIH  may  not  be  aware  of inventions  funded  with  their  research  dollars  and  can  not  be 
certain  that  grantees  are  complying  with Federal  requirements.  AS outlined  in the 
previous  finding,  NIH  requires  grantees  to send  them  documentation  for invention 
disclosures,  elections  of title,  utilization  reports,  patent  applications,  issued  patents, 
and  the  U.S. non-exclusive  licenses.  The  DEIR  has  created  a database  to  store  the 
information  collected  from  grantees. 
Although  NIH  requires  grantees  to submit  this documentation  within  specific  time 
frames,  it has  not  created  a system  for determining  whether  documents  are  submitted 
timely.  Due  to  a lack  of staff time  and  resources,  the  DEIR  has not  made  reviewing 
grantees  for  timeliness  a priority.  The  Division  has stated  that  it instead  focuses  on 
ensuring  that  government  rights  are  recognized  through  the  acknowledgement  of 
government  support  in the  patent  and  through  the  granting  of the  governments 
non-exclusive  license. 
According  to NIH,  they  do not  perform  strict  monitoring  of grantees  believing  that 
grantees  are  responsible  for ensuring  that  the  terms  of their  funding  agreements  are 
met.  The  NIH  explained  that  it is in the  best  interest  of the  grantees  to  comply 
because  the  title  to inventions  is at stake. 
The  DEIR  has  chosen  not  to penalize  grantees  who  do not  send  information  when 
required.  While  the  regulations  allow granting  agencies  to take  title  to grantees 
inventions  if they  do not  meet  certain  requirements,  NIH  believes  this  punitive 
approach  is contrary  to the  primary  Bayh-Dole  objective  of allowing  grantees  to retain 
the  rights  to their  inventions.  Instead,  when  problems  arise,  DEIR  informs  grantees  of 
their  requirements  and  asks that  the  necessary  information  be  sent. 
A detailed  explanation  of the  invention  reporting  process  is provided  in Appendix  B. 
The NIH does not review invention disclosures and elections of tide for timeliness and has 
no way of knowing if grantees are in compliance. 
Invention  disclosures  are  not  entered  into  the  computer  database  to ensure  that 
elections  of title  are  received  within  2 years  after  disclosure.  When  DEIR  receives  a 
disclosure  it files the  paper  copy by grantee  name,  but  does  not  enter  the  information 
into  the  database  as it is considered  preliminary  in nature.  A computer  file is opened 
and  the  information  is input  only after  DEIR  receives  the  election  of title. 
12
 Disclosures  are  accepted  at any time  because  without  reviewing  grantee  and  inventor 
files DEIR  can  not  ascertain  if they were  sent within  the  2 month  time  limit.  The 
DEIR  considers  late  disclosures  and  elections  to be  de  facto  requests  for time  limit 
extensions.  By regulation,  grantees  can request  extensions  of time  and  agencies  can 
grant  them  at their  discretion.  The  DEIR  always grants  extensions  to grantees  when 
requested. 
The  DEIR  has  no method  for ensuring  that  grantees  are  making  all the  necessary 
disclosures  and  elections  of title.  Once  again,  without  reviewing  grantee  files, NIH  is 
unable  to ascertain  whether  it is receiving  disclosures  to  all inventions  that  occurred 
during  the  funding  period. 
l%e NIH does not examine annual utilization rep~  to monitor grmatem 
commemialization  ejjXorts. 
Even  though  NIH  has  required  grantees  to submit  utilization  reports  since  1990, it has 
not  established  procedures  to ensure  that  the  reports  are  submitted  when  due,  and 
does  not  review  forms  to monitor  grantees  commercialization  efforts. 
Earlier  this year,  NIH  specified  that  utilization  reports  are  required  only for licensed 
inventions  that  have  generated  income.  Since grantees  who  have  yet  to license  their 
products  no longer  need  to report,  NIH  no longer  has  a means  of monitoring  grantees 
commercialization  efforts.  This is significant  since  NIH  can  exercise  its march-in  rights 
if it determines  a grantee  has not  taken  effective  steps  to  commercialize  an invention. 
Prior  to  1990, NIH  grantees  may have  sent  these  utilization  reports  to Commerce. 
Commerce  developed  a standardized  Invention  Utilization  Report  that  grantees  were 
encouraged  to use.  Once  received,  Commerce  shared  copies  of the  form  with  the 
appropriate  granting  agencies.  Although  Commerce  no  longer  shares  the  reports,  they 
noted  that  they  continue  to receive  these  forms  occasionally  from  grantees. 
In order  to clear  up  confusion  and  assure  receipt  of utilization  reports,  DEIR 
developed  a Subject  Invention  Utilization  Form  for  its grantees  earlier  this year. 
Among  other  items,  the  form  requests  proprietary  information  on licensing  and 
royalties.  The  DEIR  indicates  on the  new form  that  reports  should  now be  sent 
directly  to their  office.  See Appendix  C for a sample  form. 
fie  NZH has no system to ensure the~  filing of pauwt  applications. 
The  NIH  does  not  monitor  grantees  to ensure  that  patent  applications  are  filed within

one  year  of election  of title.  However,  when  applications  or issued  patents  are  sent,

DEIRs  policy  is to review  them  for the  statement  acknowledging  government  suppofi.

If the  statement  is missing,  DEIR  requests  the  grantee  to  include  the

acknowledgement.

13
 When  grantees  send  the  patent application,  NIH  also requires  them to send  a copy of 
the  government  license.  If the  license  is not  sent  at  this  time,  DEIR  will inform  them 
of the  requirement.  The  DEIR  provides  a sample  licensing  form  to universities  upon 
request.  An  example  of this form  appears  in Appendix  C. 
After  the  patent  application,  issued  patent,  and  license  are  received,  DEIR  records 
this information  in the  database  file.  Some  grantees submit  patent  applications  for 
inventions  that  were  never  disclosed  or where  rights were  never  elected.  In these 
cases,  DEIR  opens  a new computer  file and  no penalties  are  applied. 
As a check  to the process, NIH doer provide additwnal oppommities for grantees to repoti 
inventions and patents. 
Grantees  are  required  to certifi  whether  inventions  or patents  have  occurred  when 
applying  for a continuing  grant  and  also when  a grant  is completed.  The  DEIR 
receives  copies  of all these  certifications  and  compares  them  with  their  records.  If 
there  are  inconsistencies,  information  is requested  from  grantees. 
On  the  grant  application  filed  for  a continuation  grant,  the  grantee  must  check  if any 
inventions  or patents  occurred  and  if they were  reported.  When  a grant  is completed, 
the  grantee  must  certify  on the  Final  Invention  Statement  and  Certification  whether 
inventions  occurred  and  when  they were  reported.  Institutions  who hold  NIH 
contracts  are  also  required  to certify  if inventions  were  made  on a Contractors 
Certification.  Examples  of these  forms  can  be found  in Appendix  C. 
THE  NIHDOES  NOT  FULLY  UTILIZE  ITS INVENTION  DATABASE  TO 
MONITOR  GRANTEE  COMPLIANCE. 
The  NIH  is not  fully utilizing  the  DEIR  databases  potential  for monitoring  or 
reporting  out  information.  The  DEIR  developed  the  easy-to-use  REFLEX  database 
for storing  invention  information.  Prior  to the  creation  of the  database,  invention 
information  was stored  on  the  Patent  Management  Information  System  (PMIS).  The 
PMIS  contains  about  5000 files and  the  new  database  about  3800.  ArI example  of an 
invention  record  is shown  on the  next  page.  A sample  computer  file record  and  a 
description  of what  is stored  in the  record  fields  appears  in Appendix  D. 
By using  the  fields  already  containing  dates  (Djsc]osed,  Application  Date)  and  adding 
a date  field  for retaining  rights,  the  DEIR  could  use  the  database  to determine  when 
information  is due  from  grantees  and  thereby  have  a mechanism  for measuring 
grantee  timeliness.  Information  from  the  database  could  be  used  periodically  to 
inform  grantees  that  certain  requirements  have  not  yet  been  met. 
The  information  now in the  system  is not  utilized  for  any  purpose  or reported  out  to 
any NIH  office.  More  complete  information  on commercialization  from  the  utilization 
14
 reports  could  be  recorded  in the  database  and  then  reported  to NIH  management  and 
the  public.  This  outcome  information  would  illustrate  one  benefit  of public  funding  of 
research. 
Sample  Database  Record 
Grantee:

Name 1:

Grant  1:

Patent Title:

Disclosed:

Retained Rights:

US License:

Support Acknowledged:

Serial Number:

Patent Serial:

Special Note:

Licensed:

While  DEIR  is aware  of its database  capabilities,  large  workloads  and  little  staff  time 
have  not  allowed  them  to fully use the  database.  A limited  DEIR  review  of the 
invention  and  licensing  information  sent  by approximately  30 universities  recently 
sumeyed  found  that  in more  than  half of the  cases  the  information  sent  by the 
universities  did not  match  the  information  in DEIRs  files.  Improving  the  monitoring 
capabilities  of the  database  could  improve  grantee  compliance  with  requirements. 
15
 reports  could  be  recorded  in the  database  and  then  reported  to NIH  management  and 
the  public.  This  outcome  information  would  illustrate  one  benefit  of public  funding  of 
research. 
Sample  Database  Record 
Grantee:

Name 1:

Grant  1:

Patent Title:

Disclosed:

Retained Rights:

IIUS License: 
Support Acknowledged: 
Serial Number: 
Patent Serial: 
,, 
Special Note: 
Licensed: 
While  DEIR  is aware  of its database  capabilities,  large  workloads  and  little  staff  time 
have  not  allowed  them  to fully use  the  database.  A limited  DEIR  review  of the 
invention  and  licensing  information  sent  by approximately  30 universities  recently 
surveyed  found  that  in more  than  half of the  cases  the  information  sent  by the 
universities  did not  match  the  information  in DEIRs  files.  Improving  the  monitoring 
capabilities  of the  database  could  improve  grantee  compliance  with  requirements. 
15
 RECOMMENDATIONS

This  report  describes  how NIH  carries  out  its oversight  role  in ensuring  grantee 
compliance  with  the  Federal  regulations  implementing  the  Bayh-Dole  Act.  We  realize 
that  in designing  its role,  NIH  has had  to balance  several  priorities.  These  priorities 
include  encouraging  the  commercialization  of NIH-supported  inventions,  minimizing 
the  administrative  burden  of grantee  monitoring,  and  ensuring  that  the  rights  of the 
government  and  public  are  upheld.  We  also  recognize  the  dedication  of the  Division 
of Extramural  Invention  Reports  staff for handling  a large  volume  of work  with  limited 
resources. 
The  following  recommendations  address  fundamental  problems  with NIHs  existing 
oversight  role.  These  recommendations  are  consistent  with  the  findings  of a review 
done  by the  Office  of Audit  Services  (OAS)  within  the  Office  of Inspector  General. 
The  OAS  found  that  one  NIH  grantee  had  not  fully complied  with Bayh-Dole 
reporting  requirements  and  that  NIH  did not  have  effective  procedures  to detect  this 
non-compliance. 
Accordingly,  we recommend  the  following. 
o	 The  NIH  should reexamine its current oversight role  to determine  if 
improvements  could  be made in the monitoring  of grantee compliance  with 
Bayh-Dole  requirements.  While we believe  the NIH  monitoring  role  should not 
be  so constricting as  to  hinder  the  overriding  purpose  of commercialization  that 
is central  to the  intent  of the  Bayh-Dole  Act,  we also  believe  that  NIH  needs  to 
have  an  effective  monitoring  role  to preseme  the  additional  Bayh-Dole  Act 
objectives  of protecting  the  public  investment  in research  and  promoting  small 
businesses  and  U.S. manufacturing.  We  do not  believe  that  grantee  self-
monitoring  would  ensure  that  all of these  objectives  are  met. 
We  believe  the  NIH  needs  to increase  its monitoring  of grantee  compliance 
especially  in the  areas  of royalties,  and  small  business  and  U.S. manufacturing 
preferences.  However,  we recognize  the  need  to consider  the  views of the  full 
spectrum  of affected  parties,  including  the  research  community,  when 
implementing  an improved  monitoring  process. 
To  create  more  effective  monitoring  procedures,  the  NIH  may  determine  the 
need  to recommend  that  the  Department  of Health  and  Human  Services  issue 
its own regulations  for implementing  Bayh-Dole  requirements.  This  may clarify 
NIH  and  grantee  responsibilities  under  the  Bayh-Dole  Act. 
o	 The  NIH  should (1)  add more  detailed  licensing and utilization information  to 
its invention database  and (2)  use the database  to track grantees for timely 
compliance.  The  data  could  be  aggregated  periodically  and  used  to gauge 
progress  in commercializing  NIH-supported  inventions. 
16  AGENCY  COMMENTS 
The  NIH  commented  on the  draft  report  and  the  full text  of their  comments  is in

Appendix  E.

The  NIH  concurred  with  our  first recommendation  that  NIH  reexamine  its oversight

role  to determine  if improvements  could  be made  in the  monitoring  of grantee

compliance  with  Bayh-Dole  requirements.  The  NIH  indicated  it had  made  a major

step  in evaluating  its current  oversight  role  of Bayh-Dole  through  the  sponsoring  of a

two day public  forum  by the  Task  Force  on the  Commercialization  of Intellectual

Property  Rights  from  Extramural  Research.

The  forum,  entitled  Forum  on Sponsored  Research  Agreement:  Perspectives,

Outlook  and  Policy  Development,  was held  to solicit  the  views of an  external  panel  of

experts  and  the  public  on issues  related  to research  support  agreements  between

grantees  and  industry  in which  NIH  funding  was involved.

The  preliminary  recommendations  of the  panel  suggest  that:

(1)  the  grantee  institutions  rather  than  the  Federal  Government  should  be  the 
primary  monitors  of compliance  with the  Bayh-Dole  Act  provisions  concerning 
the  utilization  and  preference  for small business,  and 
(2)  NIH  should  focus  on providing  educational,  and/or  policy Widance  to the 
institutions  on this matter. 
The  panel  also  stated  that  stringent  guidelines  and  reporting  requirements  could  have 
a detrimental  effect  on technology  transfer  and  the  ultimate  commercialization  of 
Federally  funded  research. 
We  commend  NIH  for  convening  both  the  task  force  and  the  public  forum  to address 
issues surrounding  the  commercialization  of federally-funded  extramural  research. 
We  also commend  NIH  for  eliciting  the  views of universities  and  parties  who will in 
the  end  be  affected  by any NIH  policy decisions. 
We  agree  with  the  panel  that  NIH  monitoring  should  not  overburden  research 
institutions  to  the  point  of hindering  the  goal  of technology  transfer  and 
commercialization.  However,  the  Bayh-Dole  Act  also  outlines  the  following  objectives: 
o	 ensure  that  inventions  made  by nonprofit  organizations  and  small 
business  firms  are  used  in a manner  to promote  free  competition  and 
enterprise; 
o	 promote  the  commercialization  and  public  availability  of inventions 
made  in the  United  States  by United  States  industxy and  labor;  and 
17  c1	 ensure  the  Government  obtains  sufficient  rights  in federally  supported 
inventions  to meet  the  needs  of the  Government  and  protect  the  public 
against  nonuse  or unreasonable  use of inventions. 
We  are not convinced  that self-monitoring  by grantee institutions will ensure that the 
above  objectives  will be  met.  Under  the minimum requirements  of NIHs  current 
monitoring,  universities  did not  always adequately  support  these  objectives.  In a 
recent  draft  report,  the  Office  of Audit  Services  detailed  one  research  institutions  lack 
of compliance  with the  Bayh-Dole  requirement  that  grantees  acknowledge  federal 
support  when  filing a patent  for a new invention.  The  NIH  also  found  during  its 
recent  100 university  survey  that  only 20 percent  of research-support  agreements 
between  universities  and  outside  companies  had  clearly  established  U.S.  manufacturing 
clauses.  In addition,  only 44 percent  of these  agreements  were  with  small  businesses. 
We  believe  that  NIHs  current  lack of grantee  monitoring  in the  areas  of preference 
for U.S.  industry  in manufacturing  and  preferences  to small  businesses  when  licensing 
may  have  led  to the  universities  inadequate  promotion  of these  objectives. 
We  continue  to believe  that  NIH  must  exercise  a strong  monitoring  role  in order  to 
ensure  that  an  equitable  balance  is struck  between  commercializing  federally-
supported  inventions  and  protecting  the  publics investment  in research. 
The  NIH  concurred  with  our  second  recommendation  that  more  detailed  licensing  and 
utilization  information  should  be  added  to their  invention  database  and  that  the 
database  should  be  used  to track  grantees  for timely  compliance.  Although  NIH 
stated  that  it is not  certain  that  requiring  grantees  to submit  more  detailed  reports  is 
the  most  effective  means  of ensuring  compliance  with the  Act,  they  did agree  to 
evaluate  the  usefulness  of information  currently  collected  and  consider  requesting 
different  or additional  information  for use in monitoring  compliance  and  illustrating 
public  benefits  from  federally-funded  research. 
We  support  NIHs  evaluation  of the usefulness of reporting  information  received  from 
grantees.  We  believe  that  the  issue may not  be  one  of increasing  the  volume  of 
information  requested  but  improving  the  content  and  method  of grantee  reporting. 
Therefore,  we regard  NIHs  intention  to establish  electronic  transfer  of reporting 
information  as an important  step  toward  improving  the  grantee  reporting  process. 
18
 APPENDIX 
A 
Regulations  Implementing  the  Bayh-Dole  Act 
37  CFR  401 
A-1  CHAPTER  IVASSISTANT  SECRETARY  FOR 
TECHNOLOGY  POLICY,  DEPARTMENT  OF 
COMMERCE 
Part 
Page 
401  Rights  to  inventions  made  by  nonprofit  organizat-
ions  and  small  business  firms  uncier  Gover-
nment  granti,  contracts,  and  cooperative  agree-
ments .............. ............................................ ..............
460 
       
404  Licensing  of  Government  owned inventions ............  476 
A-2
 4401.1  37 CFR Ch. IV  (7-l-92  Edition) 
PART  401-41GHTS  TO  INVENTIONS  the  two  funds  used  to  support  the 
project  in this  case  is not  a determin
MADE BY NONPROFIT ORGANIZA
ing factor. 
TIONS  AND  SMALL  BUSINESS 
(1) To  the extent  that  a non-gover
FIRMS  UNDER  GOVERNMENT 
nment  sponsor  established  a  Project
GRANTS,  CONTRACTS,  AND  CO- which.  although  closely  related,  falls 
OPERATIVE AGREEMENTS  outside  the  Planned  and committed  ac
tivities  of  a  government-funded 
sec.  project  and  does  not  diminish  or dis
401.1  Scope. 
tract from  the performance  of such ac
401.2  Definitions. 
tivities.  inventions  made  in  perform
401.3  Use  of  the  standard  clauses  at 
$401.14.  ance of the non-government  sponsored
401.4  Contractor  appeals of exceptions.  project  would  not  be  subject  to  the 
401.5  Modification  and tailoring  of clauses.  conditions  of these  regulations.  - ex-
401.6  Exercise of march-in rights.  ample  of  such  related  but  separate
401.7  Small  business preference.  projects  would  be a government  spon
401.8  Reporting  on  utilizauon  of  subject 
sored  project  having  research  ob@c
inventions. 
tives to  expand  scientific  understand
401.9  Retention  of rights by contractor  em
ployee  inventor.  ing in a field  and  a closely  related in
401.10  Government  sswgnrnent  to contrac dustry sponsored  project  having as i-
tor of rights  in invention  of government  objectives  the  application  of such new 
employee. knowkdge  to develop  usable new tech
401.11  APpeais.  nology.  The  time  relationship  in  con
401.12  Licensing  of  background  patent 
ducting  the  two  projects  and  the  use 
rights  to third parties. 
of  new  fundamental  knowledge  from 
401.13  Administration  of  patent  rights 
clauses.  one  in  the  performance  of  the  other 
401.14  Standard  patent  rights clauses.  are  not  important  determinants  since 
401.15  Deferred  determinations.  most  inventions  rest  on  a  knowledge 
401.16  Submissions  and inquiries.  base  built  up  by  numerous  independ
AUTHORITY35 U.S.C. 206 and the  delega ent  research  efforts  extending  over 
tion  of  authority  by the  Secretary  of Com many years. Should  such  an invention 
merce  to  the  Assistant  Secretary  of  Com be claimed  by  the  performing  organi
merce  for Technology  Policy  at sec. 3(g) of  zation  to  be  the  product  of  non-gov
DOO  10-18.  ernment  sponsored  research  and  be 
SOURCE52 FR 8554, Mar.18.1987.unless  challenged  by  the  sponsoring  agencY 
otherwisenoted.  as being reportable  to the government 
as a subject  invention,  the challenge
5401.1  scope. 
is  appealable  as  described  in 
(a) TrmWionall y there have been no  $401.ll(d). 
conditions  imposed by the government  (2) An invention  which  is made out-
on  research  performers  while  using  side of the research  activities of a gov
private  facilities  which  would preclude  ernment-funded  project  is not  viewed 
them  from  accepting  research  funding  asa  subject  invention  since  it 
from  other  sources  to  expand. to aid in  cannot  be  shown  to  have  been  con
completing  or to conduct  separate  in ceived  or  first  actually  reduced  to 
vestigations closely related to research  practice  in  performance  of  the 
activities  sponsored  by  the  govern Project.  An obvious  example  of  this is 
ment. Notwithstanding  the right of re- a situation  where  an  instrument  pur
search  organizations  to accept supple- chased  with  government  funds is later 
mental  funding from other sources for  used. without  interference  with or cost 
the  purpose  of  expediting  or  more  to  the  government-funded  project,  in 
comprehensively  accomplishing  the  re- making  an  invention  all  expenses  of 
search  objectives  of  the  government  which  involve  only  non-government 
sponsored  project,  it  is clear  that  the  funds. 
ownership  provisions  of  these  regula (b)  This  part  inplement.s  35  U.S.C. 
tions  would  remain applicable  in  any  202 through  204 and  is applicable  to 
invention  conceived  or  first  actually  all  Federal  agencies.  It  applies  to  ail 
reduced to practice in performance  of  funding  agreements  with  smail  busi
the  rxoject.  Separate  accounting  for  ness  firms and nonprofit  organizations 
A-3
 Dopartmont of Commwc* 
executed  after  the  effective  date  of  ations  requiring  the  Secretarys  aP-
this part, except  for a funding  agree Proval.  Three  comes  of  proposed  and 
ment  made  primarily  for  educational  final  agency  regulations  sumdement
purposes. Certain sections also provide  ing this part shall be submitted  to the 
guidance  for  the  administration  of  Secretary  at  the  office  set  out  in 
funding agreements which predate  the  $401.16  for  approval  for  consistency 
effective  date of  this part.  In accord with this part before  they  are submit
ance  with  35 U.S.C. 212. no  scholar- ted to the  Office  of  Management  and 
ship,  fellowship,  training  grant,  or  Budget (OMB)  for  review under Exec
other  funding  agreement  made  by  a  utive Order  12291 or, if no submission 
Federal agency primarily to an award is rec,uired to be made to OMB, before 
ee  for  educational  purposes  will  con their submission to the FEDmtALREGIS-
tain any provision giving the  Federal  TERfm publication. 
agency  any rights to inventions  made  (f)  In the  event  an agency  has out-
by the awardee.  standing  prime  funding  a-ee~:ents 
(c) The  march-in  and appeals  proce that  do not  contain  patent  flow-down 
dures  in  $3401.6  and  401.11  shall 
provisions consistent  with this Part  or 
apply  to  any march-in or  appeal  pro
earlier Off ice of  Federal  Procurement 
ceeding  under  a  funding  agreement 
Policy  regulations  (OMB  Circular  A-
subject  to  Chapter  18  of  Title  35, 
124  cr  OMB  Bulletin  81-22),  the 
U.S.C.,  initiated  after  the  effective 
agency  shall  take  auProPfi*  =tion 
date  of  this part even if  the  funding 
to ensure that  small business firms or 
agreement was executed  prior  to  that 
nonprofit  organizations  that  are sub-
date. 
contractors  under  any  such  agree
(d) At the request of the contractor, 
ments and that  received  their subcon
a funding agreement for the operation 
tracts after July  L 1981. receive rights 
of  a government-owned  facility  which 
in  their  subject  inventions  that  are 
is in effect on the effective  date of this 
consistent  with  Chapter  18 and  this 
part shall be promptly amended  to in
part. 
clude  the  provisions  required  by 
(g)  This  part  is  not  intended  to 
$$401.3(a)  unless  the  agency  deter-
apply  to  arrangements  under  which 
mines that one of the exceptions  at 35 
nonprofit  organizations.  small  busi
U.s.c.  202(a)(i)  through  (iv)
ness firms, or others  are allowed to use 
$ 401.3(a)(8) through  (iv) of  this  part) 
government-owned  research  facilities 
is applicable and will be applied.  If the 
and  normal  technical  assistance  pro
exception  at  S401.3(a)(iv)  is  deter-
vided  to  users  of  those  facilities. 
mined  to  be  applicable.  the  funding 
whether  on  a  reimbursable  or  non-
agreement  will be promptly  amended 
reimbursable  basis.  This  part  is  also 
to  include  the  provisions  required  by 
not intended to apply  to arrangemen~ 
$401.3(C). 
under  which  sponsors  reimburse  the 
(e) This  regulation supersedes  OMB 
Circular  A-124  and  shall  take  prece government  or  facility  contractor  for 
dence  over  any  regulations  dealing  the contractor  employees  time in per-
forming  work  for  the  spo~or.  Such 
with ownership of inventions made  by 
arrangements  are  not  considered 
small businesses and nonprofit  organi
funding agreements  as defined at 35 
zations which are inconsistent  with  it. 
This regulation will be followed  by all  U.S.C.  201(b)  and  $ 401.2(a)  of  this 
agencies  pending  amendment  of  part. 
agency regulations to conform  to  this 
9401.2  Definitions. 
part and amended Chapter  18 of  Title 
35. Only deviations requested by a con- As used  in this  part 
tractor  and  not  inconsistent  with  (a)  The  term  funding  agreement 
Chapter  18 of Title  35, United  States  means  any  contract,  grant. or coopera
Code, may  be made  without  approval  te  agreement  entered  into  between 
of the  Secretary.  Modifications  or  tai any  Federal  agency,  other  than  the 
loring  of  clauses  as  authorized  by  Tennessee  Valley  AuthoritY,  and  anY 
! 401.5 or  $401.3. when alternative  pro- contractor  for  the  performance  of  ex
visions  are  used  under  $ 401.3(a)(1)  perunental.  developmental.  or  re-
through  (4),  are not  considered  devi search  work funded  in whole or in Part 
A-4
 37 cm  Ck  Iv  (7-W2  Edition) 
by the Federal government. This term  (h) The term normmfit  om?anization 
also includes anY assignment, substitu means  universities  and  other  institu
tion  of  parties,  or subcontract  of  any  tions of higher edUC@On or an organi. 
type  entered into for the performance  zation of the type descri~  k  section 
of  experimental.  development@  or re- 501(c)(3)  of  the  Internal  Revenue 
search  work  under  a  funding  agre  Code  of  1954  (26  U.S.C.  Sol(c)  and 
ment  as defined  in the  first sentence  exempt  from  taxation  mder  section 
of this paragraph.  501(a) of  the  Internal  Revenue  Code 
(b)  The  term contractor  means  anY  (26 U.S.C. 501(a)) or anY nonlxofit  sci
person.  small  business  firm  or  non- entific  or  educational  onranhzation 
profit  onranization which ~ a P-Y  to  qualified under a state  nonprofit  orga
a funding agreement.  nisation statute. 
(c)  The  term  invention  means  anY  (i)  The  term  Chapter  18  mean8 
invention or discovery which is or may Chapter  18 of  Title  35 of  the  United 
be patentable  or otherwise protectable  States  Code. 
under  Title  35  of  the  United  States  (j)  The  term  Secn?tam  means  the 
Code,  or  any  novel  variety  of  plant Secretary  of  Commerce  or  Ma or her 
which  is or may be protectable  under  designee. 
the  Plant  Variety  Protection  Act  (7 
U.S.C. 2321 et sea.).  ff401.3 Use of  the  standard  Ciallses* 
(d)  The  term  sub~t  inuention  6401.14. 
means  any  invention  of  a contractor  (a) Each fundine  agreement  awarded 
conceived  or first actually  reduced  to  to  a snail  business  firm  or  nonprofit 
practice  in  the  perforrnance of  work  organization  (except  th~  ~bject  to 
under  a funding  agreemerm  provided 35 U.S.C. 212) shall  contain  the clause 
that  in the case of a variety of  plant.  found  in $ 401.14(a)  with  such  modifi
the  date  of  determination  (as defined  cations and tailoring  as authorized  or 
in section  41(d)  of  the  Plant  Variety  required elsewhere  in  tMs  part  How-
Protection  Act, 7 U.S.C. 2401(d)) must  ever,  a  funding  agreement  maY con
also  occur  during  the  period  of  con tain alternative provisions
trad  performance.  (1) When the con~r  is not loca& 
(e)  The  term  Practical  uP@4cation  ed  in  the  United  States  or  does  not 
means to manufacture in the case of a  have a place of busine  located  in the 
composition  of  product,  to practice  in  United States or is subject  to the con
the case of a process or meth@  or to  trol of a foreign government  or 
operate  in  the  case  of  a machine  or  (2)  In  exceptional  circWM@l
s ysterm  an&  in  each case, under such  when  it is determined  by  the  SgencY 
conditions  as to establkh  that  the  in that  restriction  or  eifrnination  of  the 
vention  is being utilized  and  that  its  right to retain title  to  any  sub@ct  @ 
benefits  are. to  the  extent  permitted  vention will better promote  the poficy 
by  law  or  government  regulations, and objectives  of  ChaRter  la  of  ~~e 
available  to  the  public  on  reasonable  35 of the United States  Code%or 
terms.  (3) When  it is determined  by a ffov
(f)  The  term nuzti when used in re ernment authority  which  is autho~ 
lation to any invention means the con by statute  or  executive  order  to con-
ception  or  first  actual  reduction  to  duct foreign  intelligence  or coun**
practice of such invention.  telligence  activities  that  the  restri~ 
(g)  The  term  smalZ tntsiness  /irnz  tion  or  elimination  of  the  right  to 
means  a small business concern  as de- retain title to any subject  mven~on  b 
fined at section 2 of Pub. L. 85-536 (15  necessary  to  protect  the  sectitY  to 
U.S.C.  632) and implementing  regula such activities. or 
tions  of  the  Administrator  of  the  (4) When  the fUnding agreement
Small  Business  Administration.  For  eludes the  operation  of  the  govem
the  purpose  of  this  part,  the  size  rnent-owned. contractor+pemted  f*fl
standards  for  small business concerns  itY of  the  Department  of  Energy P~
invoived  in  government  procurement  mMilY dedicated  to that  Departments
and  subcontracting  at  13 CFR  121.5  naval  nuclear  propulsion  or  wea~~ 
will be used.  related  programs  and  ~  f~ 
A-5
 agreement  Mnitations  under this sub- authorized  to  negotiate  such modified 
paragraph on the contractors  right to  provisions  with  respect  to  task orders 
elect  title  to  a  subject  invention  are  added to a funding  a$meement after its 
limited  to  inventions  occurring  under  initial award. 
the  above two Programs.  (e) Before  utilizing anY  of the excew 
(b)  When  an  agency  exercises  the  tio~  in # 401.3(a)  of  this  s~tion,  the 
exceptions  at  * 401.3(a)(21 or  (3),  it  agency  shail  PrePare  a written  deter
shall  use  the  standard  clause  at  mination,  including  a  statement  of 
$ 401.14(a)  with  oniy  such  modifica facts  supporting  the  determination, 
tions as are  n~  to  address the  that  the  conditions  identified  in  the 
exceptional  circumstances  or concerns  exception  exist.  A separate  statement 
which led to the use of the exception.  of facta shall  be prepared  for each ex
For  example,  if  the  justification  re ceptional  circumstances  determina
lates  to  a  Particular  field  of  use  or  tion,  except  that  in appropriate  -es 
market, the  clause  might  be modified  a single  determina tion  may  apply  to 
along  lines similar  to those  described  both  a  funding  agreement  and  anY 
in  $ 401.14(b). In anY  event, the clause  subcontracts  issued under it or to anY 
should provide  the contractor  with an  funding  agreement  to  which  such  an 
opportunity  to  receive  greater  rights exception  is applicable.  In C=S  when 
in accordance  with  the  procedures  at  s 401.3(a)(2)  is uae& the detemtion 
$401.15. When  an  agency  justifiesand  shall  aiao include  an  analysis  justify
exercises the exception  at # 401.3(a)(2)  ing  the  determination.  Th~  *Ys* 
and  uses  an  alternative  provision  in  should  address  with  specificity  how 
the  funding  agreement  on the basis of  the  alternate  provisions  will  better 
nationai  security.  the  provision  shall  achieve  the  objectives  set  forth  in 35 
provide the  contractor  with the right  U.S.C. 200. A copy  of  each determina
to  elect  ownership  to  any  invention  tion,  statement  of  facts,  and. if appli
made  under  such  funding  agreement  cable,  anaiyais shall  be  PrOmPtiY Pr
as provided  by  the  Standard  Patent  ovidedto the  contractor  or prospective 
Rights  Clause  found  at  $ 401.14(a)  if  contractor  along with a notification  to 
the invention  is not  classified  by  the  the  contractor  or prospective  contrac
agency within  six months  of  the date  tor of its rights  to appeal  the determi
it is  reported  to the agency, or within  nation  of  the  exception  under  35 
the same time period  the Department  U.S.C.  202(b)(4)  and  5401.4  of  this 
of Energy  does  not,  as authorized  by  part.
regulation,  law  or  Executive  order  or  (f)  Except  for  determinations  under 
implementing regulations thereto, pro 5 401.3(a)(3).  the agency shall also pro-
hibit  unauthorized  dissemination  of  vide  copies  of  each  determination, 
the  invention.  Contracts  in support  of  statement  of  fact.  and analysis to the 
DOEs  naval  nuclear  propulsion  pro- Secretary.  These  shall  be sent  within 
gram  are  exempted  from  this  para 30 days after  the award of the funding 
maph. agreement  m  which  they  Per@~. 
(c) When  the Department  of Energy Copies  shall  also  be sent  to the  Chief 
exercises  the  exception Counsei  for  Advocacy  of  the  Small 
$401.3(a)(4),  it  shall  use  the  ciawa~  Business  Adrnidatration  if  the  fund
Prescribed at  Q401.14(b)  or substitute  ing agreement  is with a small business 
thereto  with  such  modification  and  firm.  If  the  Secretary  of  Commerce 
tailoring  as  authorised  or  required  beiieves  that  anY  individual  determi
eIsewhere in this Part.  nation  or pattern  of  determinations  is 
(d)  When  a  funding  agreement  in contrary  to the  policies  and objectives
volves a series of separate task orders,  of  this  chapter  or  otherwise  not  in 
an agency may apply the exceptions at  conformance  with  this  chapter,  the 
$401.3(a)(2)  or  (3)  to  individual  task  Secretary  shall  so  advise  the  head  of 
orders. and  it may  structure  the con- the  agency  concerned  and the Admin
tract so  that  modified  patent  rights  istrator  of  the  Office  of  Federal  Pro
provisions will ap~ly to the task order  curement  Pol.icY and  recommend  cor
even  though  the  clauses  at  either  rective actions. 
$401.14(a) or (b)  are applicable  to the  (g) To assist the Comptroller  Gener
rema~der  of  the  work.  Agenciesare 
al of  the  United  States  to accomplish 
A-6
 $401.4  37 CFR Ch. IV  (7-1-92  Edition) 
his or  her  responsibilities  under  35  days from  the  time  it  receives a copy 
U.S.C.  202, each  Fecierai agency  that  of  the  agencYs  determination,  or 
enters  into  any  funding  agreements within such  longer  time  as an agency 
with nonprofit  organizations  or smail  may  specifY  in  its  regulations.  The 
business  firms  shall  accumulate  and,  contractors  notice  should  specifically 
at the request of the Comptroller Gen identify the basis for the appeal.
eral, provide  the Comptroller  General  (2)  The  appeal  shall  be  decided  by 
or  his  or  her  duly  authorized  reRre the head  of  the  agencY or by his/her 
sencative  the  total  number  01  prime  designee  who  is at  a  levei  above  the 
agreements  entered  into  with  small  person  who  made  the  determination. 
business  firms  or  nonprofit  organiza If  the  notice  raises a genuine  dispute 
tions  that  contain  the  paLent rignts  over  the  materiai  facts.  the  head  of 
ciause in this part or under OMB Cir the  agency  or  the  designee  shall  un
cular A-124  for  each fiscal year begin dertake,  or refer  the  matter  for,  fact-
ning with October  1, 1982.  finding. 
(h)  To  qualify  for  the  standard  (3)  Fact-finding  shall  be  conducted 
ciause,  a  prospective  contractor  may  in accordance  with  procedures  estab
be  required  by  an  agency  to  certify  lished by the agency. Such  procedures 
that  it is either  a smail business firm  shall be as informal  u  practicable and 
or  a  nonprofit  organization.  If  the  be consistent  with principles of funda
agency  has  reason  to  question  the  mental  fairness.  The  procedures 
status of the prospective  contractor  as  should  afford  the  contractor  the  op
a small business firm, it may file a pro- portunity  to  appear  with  counseL 
test in accordance  with 13 CFR  121.9.  submit  documentary  evidence, present 
If  it  questions  nonprofit  status, it may  witnesses  and  confront  such  persons 
.,
require  the  prospective  contractor  to  as the  agency  may  rely upon.  A tran
furnish  evidence  to establish its status  scribed record shall be made and shall 
=  a nonprofit  organization.  be available  at cost  to  the  contractor 
upon  request.  The  requirement  for  a 
5401.4  Contractorappeals  of  exceptions.  transcribed  record  may  be  waived by 
(al  In  accordance  with  35  U.S.C.  mutual  agreement  of  the  contractor 
202(b)(4)  a contractor  has the right to  and the agency. 
an administrative  review of a determi (4) The  off icial conducting  the fact-
nation  to use one of the exceptions  at  finding  shall  prepare  or adopt written 
$ 401.3(a)  (1)  through  (4)  if  the  con- findings  of  fact  and transmit  them tO 
tractor  believes  that  a determination  the  head  of  the  agency  or  dm~ee 
is either  contrary  to  the  policies  and  promptly  after  the  conclusion  of  the 
objectives  of  this  chapter  or  consti fact-finding  proceeding  aiong  ~~  a 
tutes  an  abuse  of  discretion  by  the  recommended  decision.  A COPYof the 
agent  y.  Paragraph  (b)  of  this  section  findings  of  fact  and recommended  de
specifies  the  procedures  to be followed  cision  shall  be  sent  to  the  contractor 
by  contractors  and  agencies  in  such  by registered or certified mail. 
cases. The  ~ertion  of such a claim by  (5) Fact-finding  should  be comPle~ 
the  contractor  shall  not  be used as a  within  45 working  days from  the ** 
basis for  withholding  or delaying  the  the  agency  receives  the  contra@@s 
award  of  a funding  agreement  or  for  written notice. 
suspending  performance  under  an  (6) When  fact-finding  h=  been @n
award. Pending  final resolution of the  ducted,  the head of the agencY or d* 
claim the contract  may be issued with  ignee shall base his or her decision on 
the  patent  rights  provision  proposed  the facts  found.  together  with ~Y  ~ 
by  the  agency;  however.  should  the  gUment submitted  by  the  contrScWro 
final  decision  be  in favor  of  the  con- agency  officials  or any other  ~0--
tractor.  the funding  agreement will be  tion  in  the  administrative  record. In 
amended  accordingly  and the  amend c=es  referred  for  fact-f~tigt  the 
ment.  made  retroactive  to  the  effective  agency  head  or  the  designee  -y 
date  of  the  funding  agreement.  reject  only  those  facts that have been 
(b)(1)  A contractor  may  armeal  a de- found  to  be  cieariY  erron~wo  but 
termination  by  provi~ing- written  mUStexplicitly  state the rejection ~ 
notice to the agency within 30 working  indicaLe  the  bxk  for  the  con-
A-7
 Department  of Commerce  $401.5 
finding.T
he  agency head or the  desig communications  may  also  be  included 
nee  may  hear  oral  arguments  after  in paragraph  f1). 
fact-finding  provided that the contrac (c)  Agencies  may  replace  the  itali
tor  or  contractors  attorney  or repre cized words and  phrases  in the  clauses 
sentative  is present  and given an op at  s 401.14 with  those  aPprop*te  to 
portunisty to  make arguments and re the  particular  funding  a-cement.  For 
buttal.  The  decision  of  the  agency  example,  contracts  could  be  re
head  or the  designee shall be in writ @ced  by  grant.  contwtor  W 
ing  and,  if  it  is unfavorable  to  the  con- grantee.  and  contracting  officer 
tractor  shall  include  an  explanation  of  by  grants  officer.  Depending  on  its 
the basis of  the decision. The  decision  use, Federal  agency  can  be replaced 
of  the  agency  or  designee  shall  be  either  by  the  identification  of  the 
made  within  30  working  days  after  agency  or by  the  specification  of  the 
fact-finding  or,  if  there  was no  fact- particular office  or official  within  the 
finding,  within  45 working days from  agency. 
the  date  the  agency received the con (d)  When  the  agency  head  or  duly 
tramors  written  notice.  A contractor  authorized  designee determines  at the 
adversely  affected  by a determination  time of contracting  with  a  small  busi
under  this  section  may,  at  any  time  ness  firm  or  nonprofit  organization 
within  sixty  days after the determina that it would be in the national  inter
tion  is  issued.  file  a  petition  in  the  est to  acquire  the  right  to  sublicense 
United  States  Claims  Court,  which  foreign  governments  or  international 
shall  have  jurisdiction  to  determine  organizations pursuant to any existing 
the  appeal  on  the  record  and  to  treaty  or  international  agreement.  a 
affirm,  reverse,  remand, or modify  as  sentence  may be added  at  the  end  of 
appropriate,  the  determination  of  the  paragraph (b) of the clause  at 5401.14 
Federal agency.  as follows 
5401.5  Modification  and  tailoring  of  This licensewill  include  the  right  of  the 
ciauses.  government  to  sublicense  foreign  govem
menta. their nationtds.  and timmatio~  or
(a)  Agencies  should  complete  the 
ganizations.  pursuant  to the  following  trea
blank  in  paragraph  (g)(2)  of  the  ties or international  agreements: 
clauses  at  $401.14  in accordance  with 
their own  or  applicable  government-
wide  regulations  such  as the  Federal  The  blank above should  be completed
Acquisition  Regulation.  In grants and  with the names of  applicable  existing 
cooperative  agreements  (and  in  con- treaties  or  international  agreements. 
tracts. if  not  inconsistent  with  the  agreements  of  cooperation,  memorand
Federal  Acquisition  Regulation)  agen a  of  understanding,  or  simil~  ~
c~es  wishing  to  apply  the same daUSe  rangements,  including  militarY  afmee
to  all  subcontractors  as is applied  to  ments  relating  to  weapons  develop
the  contractor  may  delete  paragraph  ment  and production.  The  above  lan
~g)(2)  of  the  clause  and  delete  the  guage is not intended to apply  to trea
words  to  be  performed  by  a  small  ties  or  other  agreements  that  are  in 
business  firm  or  domestic  nonprofit  effect  on  the  date  of  the  award  but 
organization  from  paragraph  (g)(1). which  are  not  listed.  Alternatively, 
-Also, if  the  funding  agreement  is  a  agencies may use substantially  similar 
grant  or  cooperative  agreement,  para language  relating  the  governments 
.~aph  (g)(3)  may  be  deleted.  When  rights  to  specific  treaties  or  other 
either  paragraph  (g)(2)  or  paragraphs agreements identified elsewhere  in the 
{g)  ( 2)  and  (3)  me  deleted,  the  remain funding agreement. The  language  maY 
!ng  paragraph  or  paragraphs  should  also  be  modified  to  make  clear  that 
De renumbered  appropriately.  the rights granted to  the  foreign  gov
~b )  Agencies  should  complete  para- ernment. and its nationals  or an inter-
graph  (l).  Communications.  at  the  national organization  may  be for  addi
end  of  the  clauses  at  $ 401.14  by  desig tional rights beyond a license  or subli
nating  a  central  point  of  contact  for  cense if so required by  the  app~i~ble 
communications  on  matters  relating  to  treaty or international  agreement.  For 
!he  clause.  Additional  instructions  on  example.  in some exclusive  licenses  or 
A-8
 37 CfR Ch. IV  (7-l-92  Edition) 
even the assignment  of title  in the  for ment.  up  to  any  amount  equal  to  five  per-
eign  country  involved  might  be  re cent  of  the  budget  of  the  fac~tY  for  that 
quired.  Agencies  may  also  modify  the  fiscal  year,  shall  be used  by the  contractor 
language  above  to  provide  for  the  for  scientific  research.  development  and 
direct  licensing  by  the  contractor  of  education  comustent  mth  the  research  and 
development  nusaion  and  objectives  of  the 
the  foreign  government  or  intern
facility,  including  activities  t~t  incmaae 
ational organization. 
the  licenstng  potential  of  other  inventions 
(e)  If  the  funding  agreement  in
of  the  facility.  If  the  balance  exceeds  five 
volves  performance  over  an  extended 
percent.  75 percent  of the  excets  above  five 
Period  of  time,  such  as  the  typical 
percent  shall  be  paid  by  the  contractor  to 
funding  agreement  for  the  operation  the  Wasury  of  the  United  States  and  the 
of  a  government-owned  facility,  the  remaining  25 percent  shall  be  used  by  the 
following language maY  also  be  added:  contnzcfar  only for the same  purposes  sa de= 
scribed  above.  To the extent it providesthe 
The  tzg~  reserves the  right to urdlater
most  effective  technology  transfer.  the  li
ally  amend  thjs findtng  agnwment  to  iden
censing  of  subject  inventions  shall  be  ad-
tify specific treatiesor international  agree
ministered  by contractoremplo$weson loca
ments  entered  Into or to be entered  inta  by 
tion at the facility. 
the  gove~ent  after  the  effective  date  of 
this junding  a~  t and effectuate  those  (h)  If  the  contract  is  for  the  oper
license  or  other  rights  which  are necemmry 
ation  of  a  government-owned  facility, 
for the  gove~ent  to  meet  its  obligations 
to foreign  governmen~  their  nationala  and  agencies  maY  add  the  follo~  at  the 
international  o~ons  under such trea end of  paragraPkt (f)  of  the  c~use  at 
ties  or  international  agreementswith re 3401.14(a): 
spect  to  subject  inventions  made  after  the 
date of the amendment.  (5)  The  contractor  shall  establiah  and 
matntatn  active  and effective  procedures  to 
(f)  Agencies may  add  additional  sub- ensure  that subject  inventions  are promptly 
paragraphs  to  paragraph  (f)  of  the  identified  and  timely  disclosed  and  shall 
clauses at ~401.14 to require the con- submit  a  description  of  the  Proceduresta 
tractor  to  do  one  or  more  of  the  fol the contnzctinao.tficerso that the contrac& 
lowing  ing  officer  may  evaluate  and  determine 
(1)  Provide  a  report  prior  to  the  their effectiveness. 
close-out  of  a funding  agreement  l~t. 
irm  all  subject  inventions  or  stating 5401.6  Exercise  of  march-in  rights. 
that  there  were none.  (a)  The  following  procedures  shall 
(2) Provide,  upon  request.  the  filing govern  the  exercise  of  the  march-in 
date, serial  number  and title;  a copy of  rights  of  the  agencies  set  forth  in 35 
the  Patent  application;  and  patent U.S.C.  203 and  paragraph  (j)  of  the 
number  and  issue date  for any  subject  clause at 3401.14. 
invention  in any  country  in which  the 
(b)  Whenever  an agency  receives ilI
contractor  has applied  for patenti.  formation  that  it  believes  might  war-
(3)  Provide  periodic  (but  no  more  rant  the  exercise  of  march-in  righ@ 
frequently  than annual) listings of  all 
before  initiating  anY  march-ti  P* 
subject  inventions  which  were  dis
ceeding,  it shall  notify  the  cont~r 
ciosed to the agency during the period 
in writing of  the  information  and re-
covered by the report. 
quest  informal  written  or  oral  com
(g) If the contract  is with a nonprof
ments  from  the  contractor  as We~  * 
it organization and is for the operation 
information  relevant to the matter. M 
of a government-owned,  contractor-op
the absence of any comments  from the 
erated  facility,  the  following  will  be 
contractor  within  30 days,  the  ag~cy 
substituted for paragraph (k)(3)  of the 
maY, at its discretion. proceed  with the 
clause at $ 401.14(a): 
procedures  below.  If  a comment  E re 
(3) After  payment  of  patenting  costs,  li ceived  within  30 days,  or  later  if the 
censing  costs,  paymen~  to  inventors.  and  agency  has  not  initiated  the  P
other expenses  incidental  to the administra
dures  below,  then  the  agencY  s~ 
tion  of  subject  inventions,  the  balance  of 
within  60  days  after  it  receives  the 
any royalties  or income earned and retained 
by the contractor  during  any fiscai  year on  comment.  either  initiate  the  P
subject  inventions  under this or any succes dures  below  or  notify  the  cont~mr 
sor  contract  containing  the  same  require in  writing,  that  it  will  not  Pursue 
A-9
 Dapartmont of Commwca  ~ 401.6 
march-in  rights  on  the  basis  of  the  ny  or  evidence  relating to  the  utiliza
available  information.  tion  or efforts  at obtaining  utilization 
(c)  A  march-in  proceeding  shall  be  that are being made by the contractor, 
initiated  by  the  issuance  of  a written  its assignee, or licensees shall be closed 
notice  by  the  agency  to  the  contractor  to  the  public.  including  potential  li
and its assignee  or  exclusive  licensee,  censees.  In accordance  with  35 U.S.C. 
as  applicable  and  if  known  to  the  202(c)(5),  agencies  shall  not  disclose 
agency, stating that  the agency is con anY such  information  obtained  during 
sidering  the  exercise  of  march-in  a march-in  proceeding  to persons  out-
rights. The  notice  shall  state the rea side the government  except when such 
sons  for  the  proposed  march-in  in  release is authorized  by the contractor 
terms sufficient  to  Put the contractor  (assignee or licensee). 
on notice  of  the  facts  upon which the  (f)  The  official  conducting  the  fact-
action would  be based and shall speci finding  shall  prepare  or adopt  mtt%n 
fy the  field  or  fields  of  use in which  findings  of  fact  and transmit  them  to 
the agency  is considering  requiring li the  head  of  the  agency  or  designee 
censing.  The  notice  shall  advise  the  promptly  after  the  conclusion  of  the 
contractor  (assignee  or  exclusive  li fact-finding  proceeding  along  with  a 
censee)  of  its  right&  as set  forth  in  recommended  determination.  A  COPY 
this section  and  in  anY supplemental  of the  findings  of fact shall be sent to 
agency regulations.  The determination  the  contractor  (assignee  or  exclusive 
to  exercise  march-in  rights  shall  be  licensee)  by  registered  or  certified 
made by the head of the agency or his  mail.  The  contractor  (assignee  or  ex
or her designee.  clusive licensee)  and agency represent
(d) Within  30 days after  the receipt  atives will  be given 30 days to submit 
of the written  notice  of  march-in, the  written  arguments  to the head  of  the 
contractor  (assignee  or  exclusive  li agency  or designee: and, upon  request 
censee) may submit  in person, in wri by the  contractor  oral arguments  will 
ting,or through  a representative, infor be held before  the agency head or des
mation  or  argument  in  opposition  to  ignee that  will make the final determi
the  proposed  march-in,  including any  nation. 
additional  specific  information  which  (g) In cases in which fact-finding  has 
raises a genuine dispute over the mate- been  conducted,  the  head  of  the 
rial facts  upon  which  the  march-in is  agency  or  designee  shall  base  his  or 
based.  If  the  information  presented  her determination  on the facts  found. 
raises  a genuine  dispute  over  the  mate- together  with  any  other  information 
rial  facts,  the  head  of  the  agency  or  and written  or oral arguments submit
designee  shall  undertake  or  refer  the  ted by  the  contractor  (assignee  or  ex
matter  to  another  official  for  fact- clusive licensee)  and agent y represent
finding.  atives,  and  any  other  information  in 
(e)  Fact-f  iriding  shall  be  conducted  the administrative  record. The consist
in accordance  with  the  procedures  es ency of the exercise of march-in rights 
tablished  by  the  agency.  Such  proce with  the  policy  and  objectives  of  35 
dures  shall  be  as  informal  as  practica U.S.C. 200 shall  also be considered.  In 
ble and  be  consistent  with  principles  csses  referred  for  fact-finding,  the 
of  fundamental  fairness.  The  proce head  of  the  agency  or  designee  maY 
dures should  afford  the contractor the  reject  only  those  facts that  have been 
opportunity  to  appear  with  counsel,  found  to  be  cleariy  erroneous,  but 
submit documentary  evidence, present  must explicitly  state the rejection  and 
Witnesses and  confront  such  persons  indicate  the  basis  for  the  contrarY 
Ss the  agency  may  present.  A  tran finding.  Written  notice of the determi
scribed  record  shall  be  made  and  shall  nation whether  march-in rights will be 
be available  at  cost  to  the  contractor  exercised  shall be made by the head of 
upon  request.  The  requirement  for  a  the agency  or designee and sent to the 
transcribed record  may  be  waived  by  contractor  (u4signee  of  exclusive  li
mututi  agreement  of  the  contractor  censee ) by certified  or registered  mail 
md  the  agency.  hy  portion  of  the  within 90 days after the completion  of 
-h-in  proceeding,  including a fact- fact-finding  or 90 days after oral argu
find~g  he-g  that  involves  test~o.  ments,  whichever  is later,  or the  pro-
A-10
 37  CFR  Ch. IV (7-l-92  Edition) 
ceedings  will be deemed  to  have been  (b) Small business firms that believe 
ternunated  and  thereafter  no  march- a nonprofit  orgamzation  is not  meet
in  based  on the facts and rew$onsupon ing  its  obligations  under  the  clause 
which  the  proceeding  was  initiated  may report  their  concerns  to the Sec
may be exercised.  retary.  To  the  extent  deemed  appro
(h) An  agency may, at anY  time,  ter priate,  the  Secretary  will  undertake 
minate  a  march-in  proceeding  if  it  is  informal  investigation  of  the concern, 
satisfied  that it does not wish to exer and, if appropriate,  enter  into  discus
cise march-in rights.
sions  or  negotiations  with  the  non-
(i) The  procedures  of this part shall 
profit  organization  to  the  end  of  im
also apply  to the exercise  of march-in 
proving  its efforts  in meeting  its obli
rights against inventors  receiving title 
gations under  the  clause. However,  in 
to  subject  inventions  under  35  U.S.C. 
no  event  will  the  Secretary  intervene 
202(d) and.  for that purpose,  the term 
in ongoing  negotiations  or  contractor 
4contractor  ss  used  in  this  section 
decisions concerning  the licensing of a 
shall  be deemed  to  include  the inven
spec~ic  subject  invention.  AU  the 
tor. 
(j )  An  agency  determination  unfa above  investigations,  discussions,  and 
torable  to the  contractor  (sssignee or  negotiations  of  the  Secretary  will  be  in 
exclusive  licensee)  shall  be  held  in  coordination  with  other  interested 
abeyance  pending  the  exhaustion  of  agencies.  including  the  Small  Business 
appeaAs  or  petitions  filed  under  35  Administration,  and  in  the  case  of  a 
U.S.C. 203(2). contract  for  the  operation  of  a gover
(k)  For  purposes  of  this section  the  nment-owned, contractor  operated  re-
term exclusive licemee  includes a par search  or production  facility,  the Sec
tially exclusive licensee.  retary wiil coordinate  with the agency 
(1) Agencies  are  authorized  to  issue  responsible  for  the  facilitY  Prior  to 
supplemental  procedures  not  incon any  discussions  or  negotiations  with 
sistent  with  this  part  for  the  conduct  the contractor. 
of march-in  proceedings. 
401.8  Reporting  on  utilization of  subject 
9JO1.7  Small  business  preference.  inventions. 
(a)  Paragraph  (k)(4)  of  the  clauses  (a)  Paragraph  (h)  of  the  clauses at 
at  $401.14  Implements  the  small  busi
$401.14  and  its  counterpart  in  the 
ness  preference  requirement  of  35 
clause at Attachment  A to OMB CfrCU
U.S.C.  202(c)(7)(D).  Contractors  are 
lar A-124  provides  that  agencies have 
expected  to  use  efforts  that  are  rea
the  right  to  receive  periodic  reports 
sonable  under  the  circumstances  to  at-
from  the  contractor  on  utilization  of 
tract  small  business  licensees.  They 
inventiona.  Agencies  exercising  tw 
are  also  expected  to  give  small  busi
right should  accept  such  in.formatiom 
ness  firms  that meet the standard out-
lined  in  the  clause  a preference  over  to  the  extent  feasible.  in the  format 
that the contractor  normally  PrePares 
other  applicants  for  licenses.  What 
constitutes  reasonable  efforts  to  at it for  its  own  intemai  purposes.  The 
mact small business licensees will vary prescription  of  forms  should  be avoid
with  the  circumstances  and  the  ed.  However.  any  forms  or  stan
nature,  duration,  and  expense  of  ef questionnaires  that  are adopted by ~ 
forts needed  to bring the invention to  agency  for  this  purpose  must coMP@ 
the market. Paragraph  (k)(4) is not in- with  the  reciuirements  of  the  PaPer
tended,  for  example,  to  prevent  non- work  Reduction  Act.  Copies  sha  * 
profit  organizations  from  providing  sent to the Secretary. 
larger firms with a right of first refus (b)  In  accordance  with  35  U.S.C. 
al or other  options  in inventions that  202(c) (5) and the terms of the clauses 
relate  to  research  being  supported at  S 401.14, agencies  shall not ~~~ 
under  long-term  or  other  arrange such  information  to  personS  Ou@de 
ments  with  larger  companies.  Under  the  government.  Contractors  - cOn
such circumstances  it would not be re tinue  to  provide  confidential  ~~ 
sonable  to  seek  and  to  give a prefer
to  help  prevent  inadvertent  rel~ 
ence to small business licensees.  outside  the  agency. 
A-II
 Dopartmont of Commorco  g401.12 
~ 401.9  Retention  of  rigMs by contractor  (4)  A  refusal  to  approve  an  assign
employee  inventor.  ment  under  paragraph  (k)(1)  of  the 
Agencies which  allow an empioYee/  standard  clauses. 
inventor  of  the  contractor  to  retain  (5)  A  refusal  to  grant  an extension 
rights  to  a  subject  invention  made  of  the  exclusive  license  period  under 
under  a  funding  agreement  with  a  paragraph  (k)(2)  of  the  clauses  pre-
small business firm or nonprofit  orga scribed by either  OMB  Circular A-124 
nization  contractor,  as authorized  by  or OMB Bulletin  81-22. 
35 U.S.C. 202(d), will impose upon  the  (c)  Each  agency  shall  establish  and 
inventor at least those conditions  that  publish  procedures  under  which  artY 
would  apply  to  a small business  firm  of  the  agency  actions  listed  in  para-
contractor  under  paragraphs  (d)(1)  graph  (b)  of  this  section  may  be  ap
and  (3):  (f)(4);  (h):  (i):  and  (j)  of  the  pealed  to  the  head  of  the  agency  or 
clause at $ 401.14(a).  designee.  Review  at  this  level  shall 
consider  both  the  factual  and  legai 
5401.10  Government  assignment  to  con- basis for the  actions  and its consisten
tractor  of  righti  in  invention  of  gov cy with the policy  and objectives  of 35 
ernment  Employee.  U.S.C. 200-206. 
In any case when a Federal  employ (d)  Appeals  procedures  established 
ee  is  a co-inventor  of  any  invention  under  paragraph  (c)  of  this  SeCtiOn 
made under a funding agreement  with  shall include  administrative  due Proc
a small business firm or nonprofit  or ess procedures  and standards  for fact-
ganization and the Federal agency em finding  at  least  comparable  to  those 
ploying  such  co-inventor  transfers  or  set  forth  in  $401.6  (e)  through  (g) 
reassigns the right it has acquired  in  whenever  there  is a dispute  as to  the 
the  subject invention from  its employ factual basis for  an agency request for 
ee to  the contractor  as authorized  by  a conveyance  of  title under paragraph 
35 U.S.C. 202(e),  the  assignment  will  (d)  of  the  standard  clause,  including 
be  made  subject  to  the  same  condi anY dispute u  to whether  or not an in
tions  as  apply to the contractor  under  vention is a subject  invention. 
the patent rights clause of its funding  (e) To  the extent  that any of the ac
agreement.  Agencies  may  add  addi tions  described  in  paragraph  (b)  of 
tional  conditions  as long  as  they  are  this  section  are  subject  to  appeal 
consistent with 35 U.S.C. 201-206.  under  the  Contract  Dispute  Act.  the 
procedures  under  the  Act  will satisfy 
5401.11  Appeals.  the  requirements  of  paragraphs  (c) 
(a)  As used in this section.  the term  and (d) of this section. 
standani  clause  means  the  clause  at 
$401.14  of  this  part  and  the  clauses  S 401.12  Licensing  of  background  patent 
previously  prescribed  by  either  OMB  rights  to  third  parties. 
Circular A-124 or OMB Bulletin 81-22.  (a)  A  funding  agreement  with  a 
(b)  The  agency  off icial  initially  au small business  firm or a domestic  non-
thorized  to take any of  the  following  profit  organization  will not  contain  a 
actions  shall  provide  the  contractor  provision allowing  a Federal agency to 
with a written statement  of  the  basis  require  the  licensing  to  third  parties 
for  his  or  her  action  at. the  time  the  of inventions  owned  by the contractor 
action  is taken.  including  any  relevant  that  are  not  subject  inventions  unless 
facts  thaL  were  relied  upon  in  Laking  such  provision  has  been  approved  by 
:he  action.  the agency  head  and a written justifi
(1) A  refusal  to  grant  an  extension  cation  has  been  signed  by  the  agency 
under  paragraph  (c)( 4 ) of  the  standard  head.  Any  such  provision  will clearlY 
clauses.  state whether  the licensing may be re
(2)  A  request  for  a  conveyance  of  quired in connection  with the practice 
title under paragraph (d) of the stand of  a  subject  invention.  a specificaUY 
ard clauses.  identified  work  object,  or  both.  The 
(3) A refusal to grant a waiver under  agency  head  may not delegate  the au
paragraph (i) of the standard  clauses.  thority  to  approve  such  provisions  or 
A-12
 $401.13  37  CFR Ch. IV  (7-1-92  Edition) 
tO  sign  the  justification  required  for  with  embodiments  of  the  invention.  As 
such  provisions.  amended.  35 U.S.C. 202(c J(?) no longer 
(b ) A Federal  agency  will  not  require  contains  this  limitation.  The  Policy of 
the  licensing  of  third  parties  under  this subsection  should  also  be followed 
any  such  provision  unless  the  agency  in  connection  with  similar  approvals 
head  determines  that  the  use  of  the  that  may  be  required  under  Institu
invention  by  others  is  necessary  for  tional  Patent  Agreements,  other 
the  practice  of  a  subject  invention  or  patent  rights  clauses.  or  waivers  that 
for  the  use  of  a  work  object  of  the  predate Chapter  18 of Title  35, United 
funding  agreement  and  that such  States Code. 
action  1s necessary  to  achieve  practical  (c)  The  Presidents  Patent  Policy. 
application  of  the  subject  invention  or  Memorandum  of  February  18,  1983, 
work  object.  Any  such  determination  states that agencies should  Protect the 
will  be  on  the  record  after  an  opportu confidentiality  of  invention  disclosure, 
nity  for  an  agency  hearing.  The  con- patent applications.  and utilization  re-
tractor  shall  be  given  prompt  notifica ports  required  in  performance  or  in 
tion  of  the  determination  by  certified  consequence  of  awards  to  the  extent 
or  registered  mail.  Any  action  com permitted  by  35  U.S.C.  205  or  other 
menced  for  judicial  review  of  such  de- applicable laws. The  following  require
termination  shall  be  brought  within  ments should  be followed  for  funding 
sixty  days  after  notification  of  such  agreements  covered  by  and  predating 
determination.  this part 401. 
(1) To  the  extent  authorized  by  35 
5401.13  Administration  of  patent  righta  U.S.C. 205, agencies  shall  not  disclose 
clauses.  to  third  parties  pursuant  to  requests 
(a)  In  the  event  a subject  invention  under the Freedom  of Information  Act 
is  made  under  funding  agreements  of  (FOIA)  anY  information  disclosing  a 
more  than  one  agency,  at  the  request  subject  invention  for  a  reasonable 
of  the  contractor  or on  their  own  initi time in order  for  a patent  application 
ative  the  agencies  shall  designate  one  to be filed. With  respect  to subject  in
agency  as  responsible  for  administra ventions of  contractors  that  are smalI 
tion  of  the  rights  of  the  government  in  business  firms  or  nonprofit  organiza
the  invention.  tions,  a reasonable  time  shall  be  the 
(b)  Agencies  shall  promptly  grant,  time during which  an initial patent ap 
uiiiess  there  is a significant  reason  not  plication  may  be  filed  under  P* 
to.  a  request  by  a  nonprofit  organiza graph (c) of the standard  clause found 
tion  under  paragraph  (k)(2)  of  the  at  $ 401.14(a) or such  other  ClaUSe maY 
clauses  prescribed  by  either  OMB  Cir be  used  in  the  funding  agreem~~ 
cular  A-124  or  OMB  Bulletin  81-22  in However,  an  agency  may  disclose  SU* 
asmuch  as  35  U.S.C.  202(c)(7)  has  subject  inventions  under  the  ~- at 
since  been  amended  to  eliminate  the  it-s discretion,  after  a  contractor  ti 
limitation  on  the  duration  of  exclusive  elected  not  to  retain  title  or  after  the 
licenses.  Similarly,  unless  there  is  a  time  in  which  the  contractor  is  re
significant  reason  not  to,  agencies  quired  to  make  an  election  if  the @n-
shall  promptly  approve  an  assignment  tractor  has  not  made  an  el~~on 
by  a nonprofit  organization  to  an  orga within  that  time.  SimilarlY,  an  agen~ 
nization  which  has  as  one  of  its  pri maY  honor  a  FOIA  request  at MS* 
mary  functions  the  management  of  in cretion if it finds  that  the same ~or. 
ventions  when  a  request  for  approval  mation  has previously  been  pub~~ 
has  been  necessitated  under  para- by the  inventor,  contractor,  or other-
graph  (k)(1)  of  the  clauses  prescribed  wise. If the  agency  plans  to ffle x 
by  either  OMB  Circular  A-124  or  when  the  contractor  has  not  elmti 
OMB  Bulletin  81-22  because  the  title.  it  may,  of  course.  cont~ue  m 
patent  management  organization  is  avail  itself  of  the  authoritY  of  35 
engaged  in or  holds  a substantial  in U.S.C.  205. 
terest  in other  organizations  engaged (2)  In accordance  with  35 U.S.C. ~ 
in the mam.famureor sale of  products  agencies  shall  nOL disclose  or  relz 
or the use of processes that might uti fOr  a  period  of  18  mont~  from  e 
lize the invention or be in competition  filing  date  of  the  appi.ication  @ m 
A-13
 D~partmont  of Commorce  $401.14 
parties pursuant to requests under the  months  from  date  of  its  receipt  of the 
Freedom  of  Information  Act  or  other- report  or  submission  or.  if earlier. 
wise  copies  of any  document  which  the  until  the  contractor  has  filed  an  initiai 
agency  obtained  under  this  clause  patent  application.  Agencies,  of 
which  is  part  of  an  application  for  course,  retain  the  discretion  to  delay 
patent  with  the  U.S.  Patent  and  publication  for  additional  periods  of 
Trademark  Office  or  any  foreign  time. 
patent  office  filed  by  the  contractor  (5)  Nothing  in  this  para=aph  is  in-
(or  its  assignees.  licensees.  or  empioy   tended  to  limit  the  authority  of  agen
ees )  on  a  subject  invention  to  which  cies  provided  in  35  U.S.C.  205  in  cir
the  contractor  has  elected  to  retain  cumstances  not  specifically  described 
title.  This  prohibition  does  not  extend  in this  paragraph. 
to disclosure  to  other  government 
agencies  or  contractors  of  government  5401.14  Standard  patent  rights  clausea. 
agencies  under  an  obligation  to main (a)  The  following  is  the  standard 
tain  such  information  in confidence.  patent  rights  clause  to  be used  as spec
(3)  A number  of  agencies  have  poli ified  in  $ 401.3(a). 
cies  to  encourage  public dissemination 
of  the  results  of  work  supported  by  Patent  Rights  (Small  Business  Finns  and 
theagency  through  publication  in gov Nonprofit  Organtsationa) 
ernment  or other  publications  of  tech (a) Def Initiona 
nical  reports  of  contractors  or  others. 
(I)  fnvention  means  anY invention  or d~
In  recognition  of  the  fact  that  such 
covery  which  is  or  may  be  patentable  or 
publication.  if  it  included  descriptions 
otherwise  protectable  under  Title  35 of the 
of  a  subject  invention  could  create  United  States  Code.  or anY novei  VSrietY of 
bars  to  obtaining  patent  protection.  it  plant  which  is  or  may  be  protected  under 
is  the  po!icy  ef  the  executive  branch  the  Plant  Variety  Protection  Act  (7 U.S.C. 
that  agencies  will  not  include  in  such  2321 et seq.). 
publication  programs  copies  of  disclo (2) Subject  invention  means  any  invention 
sures  of  inventions  submitted  by  small  of the  contractor  conceived  or first sctuaUY 
reduced  to  practice  in  the  performance  of 
business  firms  or  nonprofit  organiza
work under  this  contrac~  provided  that in 
tions,pu
 rsuant  to  paragraph  (c)  of  the 
thecaseof avarietyof plant.thedateof de
standard  clause  found  at  $ 401.14(a),  termination(ss defined in section 41(d)  of 
except  that  under  the  same  circum the  Plant  Variety Protection Act. 7 U.S.C. 
stances  under which  agencies  are au 2401(d))  must  also  occur  during  the  period 
thorized  to  release  such  information  of contract  performance. 
pursuant  to  FOIA  requests  under  (3)  Practical  Application  means  to mariu
paragraph (c)( 1) of  this section.  agen facture  in the  c- of a composition  or prod
cies may publish such  disclosures.  uct,  to  practice  in  the  case  of  a process  or 
method.  or to  operate  in the  c=e  of a ma-
(4)  Nothing  in  this  parawaph  is  in-
chine  or  system.  and.  in  each  c=e.  under 
tended  to  Rrechlde  agencies  from  in
such  conditions  as to  establish  that  the  in
cluding  in the  publication  activities  de- vention  is  being  utilized  and  that  its  bene
scribed  in  the  first  sentence  of  para- fits  are.  to  the  extent  permitted  by law or 
graph  (c)( 3).  the  publication  of  materi government  regulations.  available  to  the 
als  describing  a  subject  invention  to  public on reasonable  terms. 
the  extent  such  materials  were  provid (4) Made  when  used  in relation  to any In
vention  means  the  conception  or first actual 
ed  as  part  of  a  technical  report  or 
reduction  to practice  of such invention. 
other  submission  of  the  contractor 
(5)  Small  Business  Finn  means  a  small 
which  were  submitted  independently 
business  concern  as defined  at section  2 of 
of  the  requirements  of  the  patent  Pub.  L.  85-536  (15  U.S.C.  632)  and  imple
rights  provisions  of  the  contract.  How- menting  regulations  of the Administrator  of 
ever,  if  a  small  business  firm  or  non- the  Small  Busuiess  Admmistratlon.  For the 
Profit  organization  notifies  the  agency  purpose of this  ciause.  the size standards  for 
that a particular report or OtherSub.  small  business  concerns  revolved  in gover
nmentprocurement  and subcontracting  at 13 
mission  contains  a disclosure  of  a sub-
CFR  121.3-8  and  13 CFR  121.3-12,  respec
Iect  invention  to  which  it  has  elected 
uvely,  wdl be used. 
title  or  may  elect.  title,  the  agency 
(6)  Nonprolit  Organzsatlon  mew  a Uni
sh~l  use  reasonable  efforts  to  restrict 
versity  or other  mstitutlon  of higher  educa
lt,.spublication  of  the  material  for  six  tion  or  an  orgamzmon  of  the  type  de-
A-14
 ~ 401.14  37 CFR Ch. IV (7-l-92  Edition) 
scribed  in section  501(c)(3)  of  the  Internal  tothe  end  of anY statutorY  Petiod  wherein 
Revenue  Code of 1954 (26 U.S.C. 501(c) and  valid  patent  Protection  can  be obtained  in 
exempt  from  taxation  under  seCtlOn 501(a)  the  United  States  after  a  Publication  on 
of  the  Internal  Revenue  Code  (25  U.S.C.  sale, or public  use.  The  contmctor  uWI file 
501(a) ) or any nonprofit  scientific  or educa patent  applications  in  additional  countries 
tional  organisation  qualified  under  a state  or international  patent  offices  within  either 
nonprofit  organisation  statute.  ten  months  of  the  corresponding  initial 
patent  application  or six months from the 
(b) Allocation  of Principal  Rights 
date penmssion is granted W the Commis
The  Contractor  may  retain  the  entire  sioner of  Patents and Tradernari=to file 
right.  title,  and  interest  throughout  the  foreign  patent  applications where  such 
world  to  each  subject  invention  subject  to  filing  has  been  prohibited  by  a  Secrecy 
the  provisions  of  this  clause  and  35 U.S.C.  Order. 
203. With  respect  to any  subject  invention  (4) Requests  for extension  of the  time for 
in  which  the  Contractor  retaina  title,  the  disclosure.  election.  and  filing  under  sub-
Federal  government  shall  have  a nonexclu paragraphs  (1),  (2). and (3) maY. at the  dis
sive. nontransferable,  irrevocable.  paid-up li
cretion of the  agencv,  be granted. 
cense to practice or have practiced  for or on 
behalf  of the  United  States  the  subject  in (d) Conditions  When  the Government  MaY 
vention  throughout  the world.  Obtain  Title 
(c)	 Invention  Disclosure,  Election  of  Title  The  contractor  will convey  to the  Federaf 
and Filing of Patent  Application  by Con- agencw  upon  written  reuuest. title to any
tractor  subjectinvention 
(1) If the contractor fails to discloseor 
(1)  The  contufor  will  disclose  each  sub
ject  invention  to the  Federai Amncv  within  elect title to the subject inventionwithin 
two monthsaftertheinventordiscloses  it in  the times specified in (c). above, or elects 
vmiting to contnzctor  persomel  responsible  not to retaintitle$providedthat the amncw 
forpatent  matters.The disclosureto the  maYonly request title within 60 days after 
agency shall be  in  the  form  of  a  written  learningof the failure of the contractorto 
report and shall  identify  the  contract  under  dischse  or elect within  the specified thnea. 
which  the  invention  was  made  and  the  (2)  In  those  countries  in  which  the  con-
inventor@).  It shall  be sufficiently  complete  tractor  fails  to  file  patent  applications 
in technical  detail  to convey  a clear  under- within  the  times  specified  in (c) abmm  Pro
standing  to the extent  known at the  time of  vided.  however.  that  if  the  contractor  haa 
the  disclosure.  of the  nature,  purpose,  oper filed a patent  applicationin a country~~r 
ation.  and the  physical,  chemical.  biological  the times  specified  in (c) above.  but prior to 
or electrical  characteristics  of the  invention.  its receipt  of the  written  request  of the Fed
The  disdosure  shall  also identify  anY  publi eral amncv,  the  contractor  shall  ~nt~ue  ~ 
cation,  on sale or public use of the invention  retain  title  in that  country. 
and whether  a manuscript  describing  the in (3) In anY  country  m which  the cont?ucfor 
vention  has  been  submitted  for  publkation 
decides  not  to  continue  the  prosecution  of 
and.  M so.  whether  it has been accepted  for  anY  application  for. to pay  the  maintenance 
publication  at the  time of disclosure.  In ad
fees on. or defend  in reexamination  or oP* 
dition.  after  disclosure  to  the  agency,  the 
sition  proceeding  on.  a patent  on  a sublect 
Contractor  will promptly  notify  the  agenq 
invention. 
of  the  acceptance  of  any  manuscript  de-
scribing  the  invention  for publication  or of  (e) Minimum  Rights  to ContnuXor  and 
any  on  sale  or public  use  planned  by  the 
Protection  of the  Contractor  Right  to Pile 
contractor. 
(2)  The  Contractor  will  elect  in  writing  (1) The  contractor  will  retain  a nonexclu
whether  or not to retain title  to any such in sive  royalty-free  license  throughout  the 
vention  by  notifying  the  Federal  agency  world  in  eachsubject  invention  to  which 
within  two years of discluure  to the  Federal  the  Government  obtains  title.  excePt  K the 
agenm.  However. in any csge where publica contractor  fails  to  disclose  the  invention 
tion.  on sale or public  use has  initiated  the  within  the  times  specified  in (c), above.  The 
one  year  statutory  period  wherein  valid  contractors  license  extends  to  its domti 
patent  protection  can  still  be  obtained  in  subsidiary  and  affiliates,  if anY. tith~  the 
the  United States.  the period for election  of  COrpO17Wst3ructure  Of which  the  COntti@ 
title  may  be shortened  by  the  agencv  to a  is a partY and  includes  the  right  to  et 
date  that  is no more than  60 days  prior to  sublicenses  of  the  same  scope  to the  ex~t 
the end of the statutory  period.  the con&actor  w=  legally  obligated  W do SO 
(3)  The  contractor  will  file  its  initial  at the  tune  the  contract  was  awarded.  The 
patent  application  on  a subject  invention  to  license  E transferable  only  wnh  the aPPmv 
which  it elects  to  retain  titIe  within  one  al of the  Fe&rat  agencv  except  when ~ 
year after election  of title  or. if earlier.  prior  ferred  to  the  sucesor  of  that  P-Y  of e 
A-15
 DopaWmomtof  Commuco  g401.14 
contractors  business to which  the  invention  should  require, as a minimum.  the  informa
pertains. tionrequired  by (c)(1),  above.  The  con&rac
(2) The  contractors  domestic  license  maY  tor  shall  instruct  such  emPloYees  through 
berevokedor  modified  by the junding  Fed employee  agreements  or other  suitable  edu
erai  agenq  to  the  extent  n~  to  cational  Prcwrama  on  the  ~PO~ce  of  re-
achieve  expeditious  practical  application  of  porting  inventions m  sufficient the  to 
the  subject  invention  pursuant  to  an appli permit the  filing of  Pawnt  aPPM=tions 
cation for an exclusivelicensesubmitted  in  prior to U.S. or foreimt statutory bars. 
accordance  with  applicable  provisions  at  37  (3) The  contractor  will  notify  the  Federat 
CFR  Part  404  and  agency  licensing  re@a agencyof any decisions  not  to continue  the 
tions(ifany).l%islicense  will  not  be  re
prosecution  of  a  patent  application  pay 
voked  in that  field  of use or the  geotrraphi  maintermnce  fees, or defend  in a reexamina
cal  areas  in  which  the  contractor  has  tion or opposition Proce*g  on a pa=~  ~ 
achieved  practical  application  and continues  any  country,  not  1=  th~  t~y  *Ys 
tomake the  benefits  of  the  invention  rea before the expiration  of the response period
sonably  accessible  to the public. The  license  required by the relevant  PaWnt  office. 
mino dainfYie d foraeti gnth ec oduinsctrrye tiomna y ofb et hree vhokmeddi n9o r  (4)  The  contractor  agrees  to  include. 
Federal  amncv  to the extent  the  contmctor,  within  the  specification  of  anY  United 
itslicensees.  or  the domestic  subsidiaries  or  States patent  applications  and  anY  patent 
issuing thereon  coverine  a sublect  ~ven~om 
aff iliatea have failed to achieve  practical  ap
plication  in that  foreign country. the  following  statement.  ~  ~ven~on 
(3)  Before  revocation  or  modification  of  was  made  with  government  SUPPOrt under 
thelicense,  the funding  Federai  agency  will  (identify  the  contract)  awarded  by  @e!MifY 
the  Federal  agency).  The  government  hsa 
furrush  the  contnsdcw  a written  notice  of 
itsintention  W revoke or modify  the  llcense,  ce~  rights in the  invention. 
and  the  contractor  will  be  allowed  thirtY 
(g) Subcon
days  (or such  other  tkne as may  be author
ized by the funding  Fe&ral  agency  for good  (1) The contractor  will include  this  clause. 
cause  shown  by  the  contractor)  after  the  suitably  modified  to identifY  the  P_ies.  in 
notice  w show cause why the  license  should  aIl subcontracts.  regardless  of  tier,  for  ex
not  be revoked  or modified.  The  contractor  perimental.  developmental  or research  work 
hasthe  right  to appeal,  in accordance  with  to be performed  by a small  business  firm or 
applicable  regulationa  in  37 CFR  Part  404  domestic  nonprofit  organization.  The  sub-
and  agency  regulations  (if  any ) concerning  contractor  will retain  ail rights  provided  for 
thelicensing  of  Government-owned  inven the  contractor  in  this  clause.  md  the  con-
tions.any decision  concerning  the  revoca tractor  will not. =  Part  of the  conside~tion 
tIon or modification  of the license.  for awarding  the  subcontract.  obmin  righw 
in the subcontractors  subject  inventions. 
(f)  Contractor  Action to Protect  the 
(2) The contractor  wiU include  in all other 
Governments  Interest 
subcontracts.  regardless  of  tier.  for  experi
( 1) The  contractor  agrees to execute  or to  mental  developmental  or research  work the 
have  executed  and promptly  deliver  co the  patent  rights  clause  required  bY (cite  sec
Federal  agencv  all instruments  necessary  to  tion  01 agencv  impiem4rntin9  regrdatwns  or 
(i) es~blish  or  the  rights  the  Gov
COnfirm  FAR). 
ernment  has throughout  the  world in those 
(3) In the c~e  of subcontracts.  at anY tier. 
subject  inventions  to which  the  contractor  when  the  prime  award  with  the  Federal 
eiects  to retain  title.  and (ii) convey  title  to 
agencY w=  a contract  (but  not  a grant  or 
the  Federal  agency  when  requested  under  cooperative  agreement  ). the  aa?ncv. subcon
paragraph (d) above and to enable  the  gov tractor,  and  the  contractor  agree  that  the 
ernment  to obtain  patent  protection
mutual  obligations  of the  parties  created  by 
throughout  the  world in that  subject  inven
this  clause  constitute  a  contract  between 
uon.  the  subcontractor  and  the  Federal  agencY 
(2)  The  contractor  agrees  to  require,  by  with  respect  to  the  matters  covered  by the 
umtten  agreement.  its  employees.  other 
clause:  provided,  however,  that  nothing  in 
:hanclerical  and  nontechnical  employees, 
:0 disclose  promptly  in writing  to peraomel  this paragraph  is intended  to confer  anY Ju
:dentified  as responsible  for the  administra risdiction  under  the  Contract  Disputes  Act 
inconnection  with  proceedings  under  para-
:lon of patent  matters  and in a format  sug
graph (j) of this clause. 
gested by the contractor  each  subject  inven
tion made under  contract  in order  that  the 
(h) Reporting  on Utilization  of Subject
contractor  can  comply  with  the  disclosure  Inventions 
Provmons  ofparagraph  (c),  above,  and  to 
execute  all  papers  necessary  to  file  patent  The  Contractor  agrees  to  submit  on  re-
applications  on  SUbJeCt  [nVentlOIYS  ancf  to  es west  periodic  reports  no  more  frettuently 
tablish  the  governments  rights  m  the  sub thanannually  on the  utilization  of a subject 
:ect mvenuons.  This  disclosure  format  invention  or  on  efforts  aL ob~g  such 
A-16
 $401.14  37 CFR ChOIv  (7-l-92  q) 
utilization  that  are being made  by the  con- ably  satisfied  by  the  contractor,~  ~ 
tractor or its licensees or ~ignees.  Such  re- their licensees 
ports  shall  fnclude  information  regarding  (3)  Such  action  IS ne@saary  @!neet*
the status of developmenL  date of first com quirements  for public  use  specified  by ~ 
merical  sale or use. gross royalties  received  eral  regulations  and  such  requirem~~  ~ 
by the  contractor.  and such  other  data  and  not  reasonably  sawfied  by  the  cone, 
information  as the  agency  may  reasonably  esmgnee  or li~  or 
specify.  The  contmctor  also  agrees  m  pro- (4)  Such  setion  IS necesmry  because ~. 
vide additional  reports M maY be requested  agreement  recnured by Paragmp h (i) of u 
by  the  ag~  in  connection  with  anY  clause has not been obtatnedor waived~ 
march-in  proceeding  undertaken  by  the  because  a licensee  of  the  exclusive  right @ 
agenm  in accordance  with  P arasraph  (j)  of  use  or  sell  anY  subject  invention  in  ~ 
this  clause.  As  required  by  35  U.S.C.  United  States  IS m  breach  of  such ~ 
202(c)(5).  the  agency  agrees  it will  not  dis ment. 
close  such  information  to  persons  outside 
the  government  without  permission  of  the  (k) Special  Provisions  fOr Contnzcf#  w~ 
Nonprofit  Organizations 
contractor. 
If the  constructoris a nonprofit  o~ 
(i)Preference  for United States  Xndustry  tion. it agrees  thau 
(1)  Rights  to  a  subject  invention  In the 
Notwithstanding  anY  other  provision  of 
this  clause.  the  contractor  agreesthat  nei United  States  may  not  be =fwEned Wuhout 
ther  it  nor anY -ee  will  grant  to  anY  the  approval  of  the  Federai  agencu, except 
where  such  mutignment  iamadetaan~ 
person the exclusive  right to use or sell any 
subject  inventiona  in  the  United  States  ntition  which  has  es  one  of  its Prlmavy 
unless such person agrees that  anY Products  functions  the  manumnent  of  inventions. 
embodying  the  subject  invention  or  pro provided that such  assignee will be subject 
duced  through  the use of the  subject  inven to the same provisions  es the contnzeton 
(2) The  contmctor willshareroyaltiesml. 
tion  will  be manufactured  subatantiaIly  in 
the  United  States.  However.  in  indhriduai  lected  on a subject  invention  with the in-
cases.  the  requirement  for  such  an  agree tor,  including  Federal  employee  xm-lnven= 
tore (when  the  agencydeemsitappmp-)
ment  may be waived by the  Federal  agency 
upon  a showing  by the  contractor  or  lW as whenthe subject  invention  is assigned in * 
cordance  with  35 U.S.C.  202(e)  and 37 (XR
signee  that  reasonable  but  unsuccessful  ef
401.10: 
forts  have  been  made  tQ grant  licenses  on 
(3) The baianeeof anYroyaltiesor income 
similar  terms  to  potential  licensees  that 
would be likely  to manufacture  substantiai earned by the contractor  with  respect  to 
lY  in  the  UnKed States  or that  under  the  subject  inventiona.  after  payment  of  ex
circumstances  domestic  manufacture  is not  penses  (including  payments  to inventom) In. 
commericaily  feasible.  cidentiai  to the  administration  of subject bl
ventions.  will  be utilized  for the  support of 
(j) March-in Rights  scientific  research  or educatioxx and 
(4) It will make efforts  that  are reasonable 
The contnzctor  agrees  that  with respect  to  under the  circumstances  to attract  liceneesS 
any  subject  invention  in  which  it  has  ac
of subject  invention  that  are small buab.leU 
quired  title.  the  FederaJ  agency  has  the  firma and  that  it will  give a prefere~  ~  a 
right  in accordance  with  the  procedures  in  small  business  firm  when licensing a suM@ 
37 CFR 401.6 and any supplemental  regula
invention  if the  contntctor  determin=  W 
tions  of the  agen~  to require  the  cont~c
the  smaU  business  firm  has  a plan or P* 
tor,  an  assignee  or  exclusive  licensee  of  a 
Posai  fOr marketing  the  iIWentiOn  whkh.  if 
subject  invention  to  grant  a  nonexclusive,  executed.  is equtiy  u  likely  to brim the~= 
partially  exclusive,  or  exclusive  license  in  vention  to practicai  application  SS 81WP-
any field of use to a responsible  applicant  or 
or  Prowaals  from  applican~  that  are IIOt 
applicants.  upon  terms  that  are  reasonable  small  business  firms  provided.  that the ~-
under the circumstances,  and if the  contrac tractor  is  also  satisfied  that  the  smti  b~
tor,  arsignee,  or  exclusive  licensee  refuses  nesa  firm  has  the  capability  and reao~ 
such  a request  the  FederaJ  agency  has  the  tocarryout  its  Pian  or pro-.  The d~. 
right  to  grant  such  a  license  itself  if  the 
sion  whether  to  give  a  preference  in UU 
Fedeml  agency  determines  that:  SPeClfiCme  will  be at the  discretion  Of the 
( 1) Such  action  is necessary  because  the  contractor.  However,  the  contnzcbr  agrees 
contractor  or assignee  haa not  taken.  or ia  that  the  Secretary  may  review  the -~ 
not  expected  to  take  within  a  reasonable  tors  licensing  progmm  and dec~iona ~ 
time, effective  steps  to achieve  practical  ap ing  small  business  applicants.  and the . 
plication  of  the  subject  invermon  in  such  tractor  will  negotiate  changes  @  i~  ~=m 
field of use. 
inig  pollcies.  procedures.  or  P~~=  ~ 
(2)  Such  action  is n~  to  allevtate  the  Secretary  when  the  Secre-s  m 
heaith  or safety  needs which are not reason- discloses  that  the  contmetor  could  tie  ~ 
A-17
 Dopartmont of Cammorce  $ 401.1s 
sonable  steps  to  implement  more  effectively  resolution  of  the  matter.  the  invention  w~ll 
the
reqlremencs  of  this  paragraph  (k)(4).  be subject  to  subparagraPh  (c)(1)(B). 
(I) Commurucation  ( 3 )  Paragraph  (k)(3)  of  the  clause 
will  be  modified  =  prescribed  at 
[Compiete  According  to  Instructions  at 
$ 4ol.5(g). 
401.5(b)) 
(b)  When  the  Department  of  Energy  5401.15  Deferred  determinations. 
( DOE)  determines  to  use  alternative 
(a)  This  section  applies  to  requests 
provisions  under  $ 401.3(a)(4),  the 
for  greater  rights  in  subject  inventions 
standard  clause  at  $ 401.14(a),  of  this 
made  by  contractors  when  deferred 
section.  shall  be  used  with  the  follow
determination  provisions  were  inc~ud
ing  modifications  unless  a  substitute 
ed  in  the  funding  agreement  because 
clause  is drafted  by DOE: 
one  of  the  exceptions  at  $ 401.3(a)  was 
( 1 )  The  title  of  the  clause  shall  be 
applied.  except  that  the  Department 
changed  to  read  as  follows:  Patent 
of  Energy  is  authorized  to  process  de
Rights  to  Nonprofit  DOE  Facditu  OP
ferred  determinations  either  in accord
erators 
(2)  Add an (A)  after (l)  in para- ance  with  its  waiver  regulations  or this 
graph  (c)(1)  and  add  subparagraphs  section.  A contractor  requesting  great
1B) and (C) to paragraph (c)(1)  as fol er  rights  should  include  with  its  re-
lows:  quest  information  on  its  plans  and  in
tentions  to  bring  the  invention  to 
(B)  If the subject  invention  occurred 
practical  application.  Within  90  days 
.mder activities  funded  by the naval nuclear 
after  receiving  a  request  and  support
sronulsion  or weapons  related  programs  of 
ing  information,  or sooner  if  a statuto
LIOE, then  the  provisiona  of  this  subpara
ry  bar  to  patenting  is  imminent,  the 
graph  (c)(  1)(B)  will  apply  in  lleU  of  Para-
graphs  (c)(2)  and  (3).  In  such  cases  the  con- agency  should  seek  to  make  a determi
tractor  agrees  to  assign  the  government  the  nation.  In  any  event,  if  a  bar  to  pat
+ntme  right,  title.  and  interest  thereto  enting  is  imminent,  unless  the  agency 
hroughout  the  world  in and  to  the  subject  plans  to  file  on  its  own+ it shall  author
nvention  except  to  the  extent  that  rights  ize  the  contractor  to  file  a  patent  ap
.re  retained  by  the  contractor  through  a  plication  pending  a  determination  by 
:reater  rights  determination  or  under  para
the  agency.  Such  a filing  sh~l  normal
:raph  (e),  below.  The  contractor.  or  an  em
ly  be  at  the  contractors  own  risk  and 
]loyee-inventor,  with  authorization  of  the 
expense.  However.  if the agency subse
ontractor.  may  submit  a request  for  greater 
!ghts  at  the  time  the  invention  1s disclosed  quently  refuses  to  allow  the  contractor 
:? within  a reasonable  time  thereafter.  DOE  to  retain  title  and  elects  to  proceed
J:I1plr ocesssuch  a  request  inaccordance  with the patent application  under gov
.vlth  procedures  at  37 (JFR  401.15.  Each  de ernment ownership,  itshall  reimburse 
:ermmation  of  greater  rights  will  be subject  the contractor  for  the  cost  of  PrePar 
Daraf3raP(hhs) -(ko)f
 thisciauseand 
sau ch  additional  conditions.  ifany,  deemed  ing  and  filing  the  patent  application. 
[o  be  appropriate  by  the  Department  of  (b)  If  the  circumstances  of  concerns 
Energy.  which  originally  led  the  agency  to 
(C ) At  the  time  an  invention  is disclosed  in  invoke  an  exception  under  $ 401.3(a) 
ccordance  with  (c)(1)(A)  above.  or  within  are  not  applicable  to  the  actual  sub
!3  days  thereafter.  the  contractor  will  ject  invention  or  are  no  longer  valid 
Jbmit  a written  statement  M  to  whether  or  because  of  subsequent  events.  the 
-jot  the  mventlon  occurred  under  a  naval 
agency  should  allow  the  contractor  to 
:.uclear  propulsion  or  weapons-related  pro
retain  title  to  the  invention  on  the 
<ram  of  the  Department  of  Energy.  If  this 
same  conditions  as  would  have  applied 
statement  IS not  filed  w]thin  this  time.  sub-
paragraph  (c)(  1)(B)  will  apply  ln  lieu  of  ifthe standard clause  at  $ 401.14(a) 
paragraphs  (c)(2)  and  (3 ).  The  contractor  had  been  used  originallyu,nlessithas

.tatement  will  be  deemed  conclusive  uniess.  been  licensed. 
;lthln  60  days  thereafter.  the  Contracting  (c)  If  paragraph  ( b ) is not  applicable 
3ff1cer  disagrees  m  umtmg,  m whichcsse 
nedetermmaclon  of  the  Concractlng  Off!- the  agency  shall  make  its  determina
tion  based  on an assessmentwhether 
W  WL1l  be  deemed  conclusive  unless  the  ic~own plans  regarding  the invention 
!Ontraccor  files  a cialm  under  the  ContracL 
~]sputes  Act  wlthln  6(J days  after  the  Con will  better  promote  the  policies  and 
:ractmg  Officers  determulataon.  Pending  objectives  of  35  U.S.C.  200  than  ~111 
A-18
 ~ 401.16  37  CFR Ch. IV  (7-1-92  Edition) 
contractoro
wnershipoftheinvention.

Moreover.ifthe agency ISconcerned

only about specificuses or applica

tionsoftheinventioni,t
shallconsider

leavingtitlei nthecontractorw
ithad

ditionalconditionsimposed upon the

contractoruss
 e of the inventionfor

such applicationso
r with expanded

government licenserightsm such ap

plications.

(d)A determinationnottoallowthe 
contractortoretaintitletoa subject 
inventionortorestricotrconditionits

titlewith conditionsdifferingfrom

those in the clauseat $401.14(a).

unless made  by  the head of the

agency,shallbeappealableby thecon

tractortoan agencyofficiaalt
 a level

abovethepersonwho made thedeter

mmation. Thisappealshallbesubject

to the proceduresapplicableto aP-

pealsunder$401.11ofthispart.

?+401.16  Submissions  and  inquiries. 
All  submissions  or  inqumes  should 
be  directed  to  Federal  Technology 
Management  Policy  Division,  tele
phone  number  202-377  -0659.,  Room 
H4837,  U.S.  Department  of  Commerce, 
Washington,  DC  20230. 
A-19
 APPENDIX  B

Flow  of  Invention  Reporting  Process 
Grant  is awarded.  It is at  this stage  that  NIH  would  have  to make  the  decision  if 
an exceptional  circumstance  exists that  warrants  an alternate  provision  to automatic 
retention  of rights  by grantee. 
I 
If NIH  asserts  exceptional  circumstance,  than  NIH  must  inform  the  grant  and write

an analysis  of why the  alternate  provision  will better  achieve  the  objective  set  forth

by Bayh-Dole.  A copy of this must  be sent  to the  Secretary  of Commerce  within  30

days after  the  award  of the  funding  agreement.  The  Chief  Counsel  of Small

Business  Administration  would  also  be  sent  a copy  if the  award  is to  a small

business.

If the  Secretary  believes  that  the  determination  is contrary  to the  policies  and

objectives  of the  regulation  governing  invention  rights  for grantees,  the  Secretary

would  advise  NIH  and  recommend  corrective  actions.

I 
NIH  sends  welcome  wagon  letter  to new grantee  advising  them  of their 
responsibilities  citing  37 CFR  401.  NIH  also provides  grantee  with  PHS  Grants 
Policy Statement  and  weekly  copies  of the  NIH  Guide  for  Grants  and  Contracts 
that  periodically  discusses  g~ant~es  invention  reporting  responsibilities. 
II 
I 
If an invention  occurs  during  grant,  the  grantee  would  disclose  it in writing  to DEIR 
within  2 months  after  inventor  discloses  to grantee  personnel  responsible  for patent 
matters. 
I 
~ When  NIH  receives  the  written  disclosure,  the  paper  COpy is filed  by grantee  name. 
I

B-1
 Grantee  elects  in writing  to retain  or release  rights  to invention  within  two years  of 
disclosure. 
If grantee  declines  rights  but  requests  that  rights  be waived  to inventor,  the  case  is 
sent  to  the  Licensing  Branch  in the  Office  of Technology  Transfer.  The  file is sent 
to the  Office  of Technology  transfer  who in consultation  with the  appropriate 
Institute  determines  whether  the  government  wishes  to retain  rights  or waive  rights 
to the  inventor.  If rights  are  assigned  to the  inventor,  they  must  follow  the 
condition  set  forth  in the  regulations. 
If the  grantee  declines  rights  and  does  not  indicate  whether  the  inventor  request 
rights.  The  disclosure  is put  in a pending  file for one  year  to see  if inventor 
petitions  for  rights.  If the  inventor  fails to file within  year,  case  is discarded. 
If after  two years,  no additional  information  is sent  concerning  election,  the 
disclosure  is abandoned  and  no entry  is made  in data  base. 
I 
! DEIR  would  open  computer  record  when  election  is received  and  input  information 
received. 
I

1, 
Within  one  year  of electing  title,  grantee  must  file patent  application.  Grantee  send 
the  patent  application  and  the  standard  U. S.government  non-exclusive  license  to 
DEIR. 
If the  grantee  files a patent  application  and  then  abandons  it but  requests  that 
rights  be waived  to the  inventor,  the  case  is sent  to the  Licensing  Branch  in the 
Office  of Technology  Transfer.  The  file is sent  to the  Office  of Technology  transfer 
who  in consultation  with the  appropriate  Institute  determines  whether  the 
government  will retain  rights  or waive  rights  to the  inventor. 
If the  grantee  files a patent  application  and  then  abandons  and  does  not  indicate 
the  inventor  is interested,  the  case  is put  in a pending  file for  one  year  to  see  if 
inventor  petitions  for rights.  If the  inventor  fails to file within  year,  case  is 
discarded. 
I 
B-2
 iDEIR  adds  patent  application  and  license  to paper  file and  inputs  information  in 
I computer  file.  DEIR  checks  to see  if the  government  support  clause  is in the 
patent  application.  If the  information  sent  be  grantee  is incomplete,  notice  will be 
sent  to university  asking  for additional  information. 
I

I 
Grantee  begins  to  send  annual  utilization  reports  to  NIH  identifying  their 
commercialize  efforts. 
I 
; DEIR  would  file  these  in paper  copy  and  update  previous  fields  if information  was 
 missing  or incorrect. 
I 
Grantee  sends  patent  when  its issues.  NIH  checks  for  government  funding  clause. 
I 
I 
During  this process,  if grantee  indicates  in a progress  report  or on the  application 
for  continuing  grants  that  inventions  have  been  made,  DEIR  will check  to see  if a 
case  file has been  set up  and  if information  in the  file is complete  and  matches  the 
information  from  the  report  or application.  If the  information  is no complete,  a 
letter  is sent  to grantee  requesting  information. 
I

Following  the  expiration  or termination  of grant,  a Final  Invention  Statement  and 
Certification  (Form  HHS  568) must  be  sent  to NIH  certifying  that  no inventions 
were  involved  or listing the  inventions.  NIH  reviews  the  form  to see  if a case  file 
II 
has been  set  up  and  if information  in the  file is complete  and  matches  the 
information  from  the  report  or application.  If the  information  is not  complete,  a 
letter  is sent  to grantee  requesting  information. 
I

After  17 years,  when  the  patent  expires  the  files will be  purged  unless  legal  actions 
were  involved. 
B-3
 APPENDIX  C 
NIH Sample  Forms  for  Licensing  and  Invention  Reporting 
c-1  SUBJECT  INVENTION  UTILIZATION  REPORT 
per  authority  of  35  U.S.C.  S202(C)  (5) 
Period  Ending  (Month,  Year) 
(PRIVILEGED  AND  CONFIDENTIAL  per  5  U.S.C.  S552) 
IDENTIFICATION 
1.  Federal  Agency  National  Institutes  of  Health 
2.  Grant/contract  No.(s) 
3.  Date  Disclosed  to  NIH 
4.  Date  of  Election  to Retain  Rights 
5.  Invention  Title 
6.  Case/file  No.  of  Reporting  Entity 
7.  Inventor(s) 
FILXNG  STATUS 
8.  U.S.  Pat.  Appln.  No.  9.  Filing  Date 
10.  U.S.  Patent  No.  11.  Issue  Date 
12.  Countries  where  foreign  patent  applications  are  pending  or  where 
patents  have  issued 
STATUS  OF  DEVELOPMENT 
13.  Date  of  first  commercial  sale  or  use,  if  any 
14.  Gross  royalties  received  during  report  period  $ 
15.  Number  of  licenses  or  related  agreements  in  effect 
16.  If  not  licensed  or  under  development,  describe  a)  action  taken  to 
obtain  utilization  or  b)  comment  on  likelihood  of  licensing  or 
practical  application 
17.  Reporting  entity  (Grantee  institution  or  assignee) 
18.  Signed  Date 
Title 
c-2  LICENSE  TO  THE  UNITED  STATES  GOVERNMENT 
Invention  Title:

Inventors  ) :

Patent  or  Application  serial  Ilo.

U.S.  ~iling/Issue  Date:

Grant/Contract  Identification  Number:(cid:1)
Grantee/Contractor  File  #:

Foreign  Applications  filed/intended  in  (countries):

The  invention  identified  above  is  a  Subject  Invention  under 
35  U.S.C.  200,  et  seq.,  and  the  Standard  Patent  Rights  clause  at 
37  CFR 401.14 or  FAR  52.227-11, which are included among the terms Of 
the  above-identified  grant/contract  award  from  the  Public  Health  Ser
vice/National  Institutes  of  Health.  This  document  is  confirmatory 
of: 
1.	 The  nonexclusive,  nontransferable,  irrevocable,  paid-up 
license  granted  to  the  Federal  Government  in  the 
invention  described  in  the  patent  application  and  in  any 
and  all  divisions,  continuations,  and  continuations  in 
part,  and  in  any  and  all  patents  and  re-issues  granted 
thereon;  and 
2. All  other  rights  acquired  by  the  Government  by  reason 
of  the  above  identified  grant/contract  award  and  the 
laws  and  regulations  which  are  applicable  to  the  award. 
The  Government  is  hereby  granted  an  irrevocable  power  to  inspect  and 
make  copies  of  the  above-identified  patent  application. 
Signed  thb  day  of  ,19. 
By 
(Grantee/Contractor  Official  and  Title) 
For 
(Organization) 
At 
(Business  Address) 
c-3  ~:-. Ammveo Thm.qn 630:34 
AA  ;*,!B No 0925.0001 
CEPARTMENTOF  HEALT&  AND  HUMAN  SERVICES  LEA=  ~FouC!=E  ONLY.  .* 
3UBLIC  HEALTH  SERVICE  Type  1- Numbar  ,, 
FwiewGmup  Formerly  . . . ..  ..  . 
Follow InstructIonsG RcAarNetTul ly.A PTPypLeI CInA tThIeO uNn shaded  sreas oniy.  j counCwB(MOoSndYtehar),  Date Received  ., 
Type denstty must be 10 c.p.i. 
..,,+.. 
i  TITLE OF PROJECT  (Do not exceed 56 typawrrter spaces.)	
-.. 
2a.  RESPONSE  TO SPECIFIC  REQUEST  FOR APPLICATIONS  OR PROGRAM ANNOUNCEMENT  ~  NO  c  YES (If YES, StafIS SIWI&-L 
Numbac  Title:  Sndma? 
2b. TYPE OF GRANT PROGRAM  3.	 PRINCIPAL INVESTIGATOWPROGRAM  DIRECTOR 
3a. NAME (Last, first, middk)  3b. DEGREE(S)  3c. SOCIAL SECURITY  NO. 
3d. POSITION  TITLE  3e. MAILING ADDRESS  (Street, civ, state, zip cede) 
3f.  DEPARTMENT,  SERVICE.  LABORATORY,  OR EQUIVALENT 
3g. MAJOR SUBDIVISION 
3h.	 TELEPHONE  AND FAX (Area cnda, number and exierrsnm) 
TEL: 
FAX:  BITNET/lNTERNET  ADDRESS 
4  HUMAN  SUBJECTS  ,, ~=  .	 aIR~Bo val  4b. Aaaumrm  et  5.	 VERTEBRATE  ANIMALS  IIfA YCeUs.C-aMSW/SIdate  Sb. A~nshmm.S l ~ 
4a  r--- exempism  no.	 0s   date  ~  m. 	 5a. ~ 
NO  YES  INOI  \ YES 
6.	DATES OF ENTIRE  PROPOSED  PRCkJECT  7, COSTS REQUESTED  FOR INITIAL  8. COSTS REQUESTED  FOR ENTIRE 
PERIOD  BUCGET PERIOD  PROPOSED  PROJECT  PERIOD 
From (MMDOYY)  Through  (MMDDYY)  7a. DirectCasts($)  7b. TotalCosts($)  8a. DirectCosta($)  Sb,Total03ets ($) 
9. PERFORMANCE  SITES (Orgamzations andaddresses)  10. INVENTIONS  AND PATENTS (Cor71FMbcWontrrruakma@cdorI  dy) 
Previously  Not ~ 
ND  repamad  r-
11.NAME OF APPLICANT  ORGANIZATION 
ADDRESS 
I 
12. WPE  OF ORGANIZATION  13. ENTITV IDENTIFICATION  NUMBER  Congressmms-i
 PUMIC S@@  c  /=d9ra/  G  state  -u ,L& ;   -.=. 
C  PrivateNonpfofit  14. BIOMEDICAL  RESEARCH  SUPPORT  GRANT CREDIT  ,.-:& +  . 
~  Foq)rofit@anera/)  ~  For@it  @mW_.  =. =- code  lianMc@m 
15. NAME OF ADMINISTFLATIVE  OFFICIAL TO BE NOTIFIED  IF AWARlk  l&  NAMEOFOFFKXALSIGNINGFORAPPUCM  ORW 
IS. MAD6
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.- 3GINCIPAL  INVESTIGATOR  PRCICRAM  DIRECTOR  ASSURANCE  I agree 10 ace,  ,esoon.  SIGNATURE  OF PERSON  NAMED  IN 3-a-  SATE 
: 3 w  for the see. !,llc  conduct of tPe mo!ect ancitoorov!de  the requt red progress  reool  a aram  I  (In m  Per s:gnature  not acceprame  I 
s awaraea  as a ,es.,1 ot th, s aODllcai 0.  W,llful orov, slon of false fntormauon  IS acr, ml  ottense  ( 
S Coae  T : e .8  Sec!lon  1001,  am aware mat anv false. mcmrtous or !rauaulent  Sratemenl  I 
3v  m acnml!on.3 C:-er remeales  avaf,aDle rD !he(.%vernmem  suD!ecl me lo CIVIIpenalttes unoer 
-+  ?rooram  F.3.5  c w Rerned(es  AZ: of 1986 (45 CFR 791 
:  Z 5? TIFICA TIC*;  AND ACCEPTANCE  I cen,fy lna, ,he s,a~emen,s  ere, n are ,,ue ano COmDIeIe  SIGNATIJRE  OF PERSC)N NAMED  IN :6  DATE 
2 .-e Dest 0! v  .-awleoge,  ano accem me Obllgatlon 10comDlv Wtlh Publlc Health Serv!ce Terms I  cm mk  Per  s!gnarure  nor acceD1aole I 
-z COo.ll,ors  , 2 ;,an!  IS awaraea  ?.s :ce result of thts a!ml,caf,on  A w,dfullv false Cenltlca!,on  s 
:. nal  ol.ens?  J S Caae,  T  e .3  Secl)On ~001,  I am aware  mat any false. fIc:)tIOus  c, 
:.a L,en! s!aw-e  . av  m aaolho- .3 >!ner remea{es  av.waole  to me Governmem  suqecl  Te  I 
: : .:, oena, t,es .-cc,  !ne P,orgram =,aua  CIVII Remea (es Act or 1986 ,45 CFR 79) 
c-4  Approved  for USOttYOU@6/~_ 
OMB  No.  oS2S-WG1 
DHHS  GRANT  OR AWARD  NO. 
Department  OF HEALTH AND  HUMAN  SERVICES 
FINAL  INVENTION  STATEMENT  AND  CERTIFICATION 
i 
(FOR  GRANT  OR AWARD) 
A.	 We  hereby  certify  that.  to the  best  of our knowledge  and belief,  al] inventions  are  listed  below  which  were  conceived 
and/or  first  actually  reduced  to practice  during  the course  of work  under  the  above-referenced  DHHS grantor  award 
for  the  period 
through  . 
ongmal  effectore date  date of Iermmatlon 
B.  INVENTIONS  (Note:  If no  mventlons  have  been  made  under  the  grant  or award,  inse~  the  word  NONE  under 
Title  below.) 
NAME  OF INVENTOR  TITLE OF INVENTION  DATE REPORTED  TO DHHS 
[Use  contmuatmn sheet  If necessary}  I  I 
C.	 FIRST  SIGNATURE   The  person  responsible  for the  grantor  award  IS required  to sign(inW.  Signintheblock 
opposite  the  applicable  type  of  fjramor award. 
TYPEOF GRANTOR  AWARD  WHO MUST SIGN (title)  I  SIGNATURE 
I 
Principal  Investigator 
Research  Grant 
or  Project  Director 
I 
Health  Sewices  Grant  Director 
Research  Career  Program  Award  Awardee 
[ 
1 
All  other  types  ~specify) 
Responsible  Official 
I  I 
D.  SECOND  SIGNATURE   This block must  be signed  by an official  authorized  to sign  on  behalf  of the  institution. 
TITLE  NAME ANO  MAILING  ADDRESS  OF INSTITUTION 
/
lYPED  NAME 
SIGNATURE  DATE 
1  1 
HFfS 66S  (Rev. 9191) 
c-5  CONTRACTORS  CERTIFICATION 
(FAR General  Provisions) 
CONTACT  NUMBER 
CONTRACTOR 
PRINCIPAL INVESTIGATOR  I 
in accordance  with  the terms and conditions  of the  above  contract,  I hereby  certify  that  the 
followin  information  istrue  to the  best of my knowiedge  as it pertains  to the  repo
required  II y the  General  Provisions of the  contract. 
1.  PATENT/COPYRIGHT  INFRINGEMENT  and  PATENT RIGHTS: 
a.  Patent/Cocwiqht  Infringement  Report  (FAR 52.227-21. 
There  was (),  was  not  () a notice  of claim of patentor  copyright  infringement 
based on the  performance  of the  contract. 
[f answered  in the  affirmative,  please submit  one  (1) copy of each disclosure 
statement  to this office;  and  one  (1) copy to:  Extramural  Invention  Reports Office 
(EIRO), Office  of Extramural Programs, NIH, Building  31, Room  5B41, 9000  Rockville 
Pike, Bethesda,  Maryland  20892.  EIR() telephone  number  is (301)  402-0850 
b.  Patent  Riqhts/invention  Disclosure  (FAR 52.227-11}. 
There  was (),  was not ( ) an invention  or discovery  made  by the  Contractor  or 
its employees  as a result of performance  under  the  contract. 
If answered  in the  affirmative,  please submit  one  (1) copy of each disclosure 
statement  to this office;  and  one  (1) copy to:  Extramural  Invention  Reports Office 
(EIRO), Office of Extramural Programs, NIH,  Building  31, Room  5B41, 9000  Rockville 
Pike, Bethesda,  Maryland  20892.  EIRO telephone  number  is (301)  402-0850. 
2.  FINAL INVENTORY  OF GOVERNMENT  PROPERTY: 
Government  Property  was (),  was not  ( ) purchased  or furnished  under  this contract. 
If answered  in the  affirmative,  using form  HHS.S6S,  please submit  3 copies of a final 
inventory repoti  indicating  Government  Property  in possession of the  Contractor or 
subcontractor in accordance  with  instructions  in the  DHHS Manual,  entitled 
CONTRACTORS  GUIDE  FOR CONTROL  OF pROpERTY GOVERNMENT  PROPERTY,  1990. 
CONTRACTOR  BUSINESS 
OFFICIALS SIGNATURE 
OFFICIAL TITLE  I 
C-6 
NINDS(01=92)  Sample  Database  Record 
Grantee 
Name 1: 
Grant  1: 
Grantee:  Institution  name 
Code:  Institution  Code 
Name  1,23:  Name  ofprincipal  investigators 
Grant  1,23:  Grant  numbers  - sometimes  several  grants  have  supported  an  invention 
Patent Title:  Title given to invention by grantee 
Disclosed:  Disclosure  Date 
CIP CON  DIV  Applns:  Coded  with Yes,  No, Blank - indicates if patent  application 
has  been  continued  in part,  continued,  or  divided. 
Retained  Rights:  Coded  with Yes,  No,  or Blank - has grantee elected  rights 
Lead  Agency	 If there  are  grants  involved  from  other  agencies,  which  agency  is taking 
the  lead  for collecting  information 
D-1
 Serial Number: 
Patent Serial: 
~Special Note: 
Licensed: 
US License:  Coded  with  Yes, No, or Blank  - has  grantee  provided  the  governments 
non-exclusive  license 
Old  G code:  If the grant is older than 1985 a different  coding  system used, this is 
filled with  the  old grant  code 
Support  Acknowledged:  Coded  with Yes,  No, Blank - k the clause about  agency 
support  in the  patent  application 
Case Abandoned:	 Coded  with Yes  or Blank - has Patent Office  rejected  or grantee 
decided  not to pursue patent 
Serial Numbec  Patent application  serial number 
Application  Date:  Date  of filing application with Patent  and Trademark  Office 
Patent  Serial:  Serial  Number  of  patent 
Patent  Issue  Date:  Issue  date  of  patent  if successful

Special Note:  Additional  information

Licensed:  Code  with Yes,  No, Blank - if known,  has the invention been  licensed

D-2  APPENDIX  E 
Agency  Comments 
E-1  ,,
.- .,,4  ,,  . 
.  DEPARTMENT  OF HEALTH &. HUMAN  SERVICES	 Public  Health  Service 
t 
-$  < 
Memorandum 
.  MN?24 1994 
Date

From  Assistant  Secretary  for  Health 
Subjeaoffice  of  Inspector  General  (OIG)  Draft  Report  NIH  Oversight 
of  Extramural  Research  Inventi_onsr  OEI-03-91-00930 
To  Inspector
 General,  OS 
Attached  are  the  Public  Health  Service  comments  on  the  subject
draft  report.  we  concur  with  the  reports  recommendations. 
Our  comments  delineate  the  actions  that  the  National 
Institutes  of  Health  pqlans  to  take  to  implement  them. 
Attachment

m 
SAIG 
PDIG 
DIG-M 
DIG-III 
DX34X 
AIG-MP 
OGmG 
DATE SENT 
k 
i.:

v

I 
-. 
< 
,- ,.,-
,.-., 
.,4  :.,,,  PUBLIC  HEALTH  SERVICE  (PHS 1 COMMENTS  ON THE  OFFICE  OF 
INSPECTOR  GENERAL  (OIG\  DRAFT  REPORT  NIH  OVERSIGHT  OF 
EXTRAMURAL  RESEARCH  INVENTIONS,    0EI-03-91-O0930 
The  PHS  is  in  agreement  with  the  recommendations  of  the  OIG

report.  The  i.mplementation  of  the  recommendations,  however, 
must  take  into  account  the  prerogatives  established  for 
grantee  institutions  in  the  BaYh-Dole  Act  (Act),  the  rights  of 
the  public  and  the  government,  and  the  competing  demands  for 
staff  and  administrative  resources. 
OIG Recommendation

1.	 The  National  Institutes  for  Health  (NIH)  should  reexamine 
its  current  oversight  role  to  determine  if  improvements 
could  be  made  in  the  monitoring  of  grantee  compliance 
with  Bayh-Dole  requirements. 
PHS  Comment

We  concur.  Under  the  direction  of  its  internal  Task  Force on

the  Commercialization  of  Intellectual  Property  Rights  from

Extramural  Research,  the  NIH  has  just  taken  a major  step  in

evaluating  its  current  oversight  role  of grantee  compliance

under  the  Bayh-Dole  Act  by  holding  a public  forum  entitled 
Forum  on  Sponsored  Research  Agreements:  Perspectives~  Outlook 
and  Policy  Development.    The  forum  was  held  on  January  25  and 
26,  1994. 
The  purpose  of  the  forum  was  to  solicit  the  views  of  an 
external  panel  of  experts  and  the  public  on  issues  related  to 
research  support  agreements  between  grantees  and  industry  in 
which  NIH  funding  was  involved.  The  meeting  focused  on 
certain  provisions  of  the  Act,  including  the  utilization  Of 
inventions  arising  from  extramural  research,  preference  for 
small  business,  and  U.S.  manufacturing  requirement. 
The  outside  panel  questioned  the  usefulness  and  necessity  of:

requiring  additional  data  from  grantees,  or  of  additional

oversight  by  NIH,  regarding  the  commercialization  or

utilization  of  inventions;  the  preference  for  small  business;

and  the  U.S.  manufacturing  requirement.  The  panel  stated  that

stringent  guidelines  and  reporting  requirements  could  have  a

detrimental  effect  on  technology  transfer  and  the  ultimate

commercialization  of  Federally-funded  research.  In  fact,  the

preliminary  recommendations  of  the  panel  suggest  that:

(1) the  grantee  institutions  rather  than  the  Federal 
Government  should  be  the  primary  monitors  of  compliance  with 
the  Bayh-Dole  Act  provisions  concerning  the  utilization  and 
preference  for  small  business,  and  (2)  NIH  should  focus  on 
providing  educational  and/or  policy  guidance  to  the 
institutions  on  these  matters. 
E-3  2 
A.draft  report  on  the  panels  activities  is  currently  being

reviewed  by panel members.  It is expected  that  this  report

will  be  finalized  in  the  next  several  weeks.  It will  then  be

submitted  to  the Advisory  Committee to the Director, NTH, at

the next Advisory  Committee meeting  scheduled for

June  1,  1994.  The  panels  findings  and  recommendations,  as 
well  as  the  Task  Forces  ongoing  work  i.nthis  area,  will  be 
considered  in  NIHs  implementation  of  recommendations  i.n the

report.

OIG Recommendation

2.  The NIH should  (1) add more detailed  licensing and

utilization	 information  to its invention data base and 
(2)  use the database  to track grantees  for timely 
compliance . 
PHS Comment

We  concur.  As noted  in the OIG report, NIH currently  collects 
utilization  reports  from its grantees even though the Act does 
not specifically  require such reports.  However, as recognized 
at the iorum held  in January, the usefulness  of these reports 
for actually  tracking  compliance with the utilization 
requirement  of the Act may be questionable  because the 
practical  difficulty  of actually assessing  or utilizing 
information  such as performance benc~arks  could require 
extensive  staff  effort an~ expertise  with  little guarantee  of 
improved  program  results. 
Therefore,  at this time it is not certain that requiring

grantees  to submit  more detailed reports is the most effective

means ci ensuring  compliance with the Act.  Nonetheless,  NIH 
will  evaluate  the  usefulness  of  the  information  that  i.s 
currently  collected  from grantee institutions,  and consider 
requesting  different  or additional  information,  for use in

monitoring  compliance  under the Act and for other purposes

such as illustrating  the public benefits  derived  from Federal

funding of research.  NIH  expects  to  complete  this  evaluation 
in  FY  1994. 
According to a recent licensing  survey conducted  by the 
Association  of University  Technology Managers,  98  U.S. 
universities  reported  a total of 5,645  invention disclosures; 
executed  1,387  licenses  and  options; and had 1,112 of their 
patents  issued  in fiscal year 1992.  In addition,  the su~ey 
indicated  that these  98  universities,  which represent  only a 
small fraction  of the universities  that receive  Federal  funding,

have  over 5,500 active  licenses  and  options.

E-4  3

Regardless  of  the  approach  taken  concerning  the  utilization

reports,  NIH  intends  to establish  an  electronic  means  to

transfer  the  information  between  an  institution  and  NIH.  It

is expected  that this  electronic transfer mechanism  will be

operational  in Fiscal Year 1995.

E-5