Federal Register / Vol. 85, No. 245 / Monday, December 21, 2020 / Rules and Regulations 82917 

coordinate protest activities so that your 

message can be received without 

jeopardizing the safety or security of 

people, places, or vessels. 

VI. Public Participation and Request for 

Comments 

We view public participation as 

essential to effective rulemaking, and 

will consider all comments and material 

received during the comment period. 

Your comment can help shape the 

outcome of this rulemaking. If you 

submit a comment, please include the 

docket number for this rulemaking, 

indicate the specific section of this 

document to which each comment 

applies, and provide a reason for each 

suggestion or recommendation. 

We encourage you to submit 

comments through the Federal 

eRulemaking Portal at http://

www.regulations.gov. If your material 

cannot be submitted using http://

www.regulations.gov, contact the person 

in the FOR FURTHER INFORMATION

CONTACT section of this document for 

alternate instructions. 

We accept anonymous comments. All 

comments received will be posted 

without change to http://

www.regulations.gov and will include 

any personal information you have 

provided. For more about privacy and 

the docket, visit http://

www.regulations.gov/privacyNotice. 

Documents mentioned in this TIR as 

being available in the docket, and all 

public comments, will be in our online 

docket at http://www.regulations.gov 

and can be viewed by following that 

website’s instructions. Additionally, if 

you go to the online docket and sign up 

for email alerts, you will be notified 

when comments are posted or a final 

rule is published. 

List of Subjects in 33 CFR Part 165 

Harbors, Marine safety, Navigation 

(water), Reporting and recordkeeping 

requirements, Security measures, 

Waterways. 

For the reasons discussed in the 

preamble, the Coast Guard amends 33 

CFR part 165 as follows: 

PART 165—REGULATED NAVIGATION 

AREAS AND LIMITED ACCESS AREAS 

■ 1. The authority citation for part 165 

continues to read as follows: 

Authority: 46 U.S.C. 70034, 70051; 33 CFR 

1.05–1, 6.04–1, 6.04–6, and 160.5; 

Department of Homeland Security Delegation 

No. 0170.1. 

■ 2. Add § 165.T01–0639 to read as 

follows: 

§ 165.T01–0639 Safety Zone; Narragansett 

Bay, Quonset, RI. 

(a) Location. The following area is a 

safety zone: All navigable waters from 

surface to bottom, within a 1,700 foot 

radius around the barge M. J. 

VERROCHI located in Narragansett Bay, 

Quonset, RI. 

(b) Enforcement Periods. This section 

is enforceable 24 hours a day from 

December 30, 2020 through January 31, 

2021, but will only be enforced when 

deemed necessary by the COTP 

Southeastern New England. 

(c) Regulations. (1) Under the general 

safety zone regulations in subpart C of 

this part, you may not enter the safety 

zone described in paragraph (a) of this 

section unless authorized by the COTP 

or the COTP’s designated representative. 

A designated representative is a 

commissioned, warrant, or petty officer 

of the U.S. Coast Guard assigned to 

units under the operational control of 

U.S. Coast Guard Sector Southeastern 

New England. 

(2) Vessels requiring entry into this 

safety zone must request permission 

from the COTP or a designated 

representative. To seek entry into the 

safety zone, contact the COTP or the 

COTP’s representative by telephone at 

508–457–3211 or on VHF–FM channel 

16. 

(3) Persons and vessels permitted to 

enter this safety zone must transit at 

their slowest safe speed and comply 

with all lawful directions issued by the 

COTP or the designated representative. 

(d) Information broadcasts. The COTP 

or a designated representative will 

inform the public through Broadcast 

Notice to Mariners of any changes in the 

planned schedule. 

Dated: December 15, 2020. 

C.J. Glander, 

Captain, U.S. Coast Guard, Captain of the 

Port Sector Southeastern New England. 

[FR Doc. 2020–28111 Filed 12–18–20; 8:45 am] 

BILLING CODE 9110–04–P 

DEPARTMENT OF COMMERCE 

Patent and Trademark Office 

37 CFR Part 1 

[Docket No. PTO–P–2019–0009] 

RIN 0651–AD33 

Small Entity Government Use License 

Exception 

AGENCY: United States Patent and 

Trademark Office, Department of 

Commerce. 

ACTION: Final rule. 

SUMMARY: The United States Patent and 

Trademark Office (USPTO or Office) is 

amending the rules of practice in patent 

cases to clarify and expand exceptions 

to the rule pertaining to government use 

licenses and their effect on small entity 

status for purposes of paying reduced 

patent fees. The rule change is designed 

to support independent inventors, small 

business concerns, and nonprofit 

organizations in filing patent 

applications and to encourage 

collaboration with the Federal 

Government by expanding the 

opportunities to qualify for the small 

entity patent fees discount for 

inventions made during the course of 

federally funded or federally supported 

research. 

DATES: Effective date: This final rule is 

effective on January 20, 2021. 

FOR FURTHER INFORMATION CONTACT: 

James Engel, Senior Legal Advisor, 

Office of Patent Legal Administration, 

by phone at 571–272–7725, or by email 

at James.Engel@uspto.gov; or Marina 

Lamm, Patent Attorney, Office of Policy 

and International Affairs, by phone at 

571–272–5905, or by email at 

Marina.Lamm@uspto.gov. 

SUPPLEMENTARY INFORMATION: The 

USPTO is amending the rules of 

practice in patent cases at 37 CFR 1.27 

to clarify and expand exceptions to the 

rule pertaining to government use 

licenses and their effect on small entity 

status for purposes of paying reduced 

patent fees, so as to support 

independent inventors, small business 

concerns, and nonprofit organizations in 

filing patent applications. The 

government use license exceptions in 

this rulemaking are the only exceptions 

to the general rule that every party 

holding rights to an invention must 

qualify as a small entity under 37 CFR 

1.27 in order for small entity status to 

be claimed in a patent application. 

The first exception—in section 

1.27(a)(4)(i)—covers a government use 

license that a Federal employeeinventor is obligated to grant if he/she 

is allowed to retain title to the 

workplace invention pursuant to a 

rights determination under Executive 

Order (E.O.) 10096. The Office is 

amending the regulations to specify that 

this exception applies to the use license 

reserved to the Federal Government 

when a Federal employee, including an 

employee of a Federal laboratory, is 

allowed, under 15 U.S.C. 3710d(a), to 

retain title to the workplace invention. 

The Office is also expanding the 

exception to cover a government use 

license to a Federal agency arising from 

an inventor’s retention of rights under 

35 U.S.C. 202(d), when the inventor is 

82918 Federal Register / Vol. 85, No. 245 / Monday, December 21, 2020 / Rules and Regulations 

the employee of a small business or 

nonprofit organization contractor 

performing research under a funding 

agreement with the Federal agency, and 

the government use license is equivalent 

to that specified in 35 U.S.C. 202(c)(4). 

Retention of rights by the inventor 

under 35 U.S.C. 202(d) becomes 

possible when the contractor performing 

research under a Federal funding 

agreement does not elect to retain title 

to the invention, and the Federal agency 

is not interested in pursuing the patent 

rights either. Provided the Federal 

agency receives no more than the 

government use license and there is no 

other interest in the invention held by 

a party not qualifying as a small entity, 

the inventor who otherwise qualifies for 

small entity status is not prohibited 

from claiming small entity status as a 

result of retaining rights under 35 U.S.C. 

202(d), to his or her invention. 

The second exception—in section 

1.27(a)(4)(ii)—provides that a small 

business concern or nonprofit 

organization, which otherwise qualifies 

as a small entity for purposes of paying 

reduced patent fees under 37 CFR 1.27, 

is not disqualified as a small entity 

because of a license to a Federal agency 

pursuant to 35 U.S.C. 202(c)(4). Section 

202(c)(4) reserves to the Federal agency 

a government use license in any 

invention made by a ‘‘contractor’’ (e.g., 

small business concern or nonprofit 

organization) pursuant to activities 

under a ‘‘funding agreement,’’ as those 

terms are defined in 35 U.S.C. 201(b) 

and (c), when the contractor elects to 

retain title to a subject invention. It was 

brought to the USPTO’s attention that 

much uncertainty existed as to whether 

the paragraph (a)(4)(ii) exception 

applies in cases in which there is a 

Federal employee co-inventor. In 

response, this rule amends 37 CFR 

1.27(a)(4)(ii) to refer to 35 U.S.C. 

202(e)(1), which permits the Federal 

agency, in the case of a Federal 

employee co-inventor, to ‘‘license or 

assign whatever rights it may acquire in 

the subject invention to the nonprofit 

organization, small business firm, or 

non-Federal inventor . . . ’’ Section 

1.27(a)(4)(ii) is being clarified to 

explicitly state that when the Federal 

agency takes action under 35 U.S.C. 

202(e)(1) to place all ownership rights 

with the contractor, leaving to the 

Federal agency only the government use 

license under 35 U.S.C. 202(c)(4), the 

exception under section 1.27(a)(4)(ii) 

still applies. This is appropriate, given 

that a small entity contractor joint 

owner of a patent has the right to 

‘‘make, use, offer to sell, or sell the 

patented invention within the United 

States, or import the patented invention 

into the United States, without the 

consent of and without accounting to 

the other owners’’ pursuant to 35 U.S.C. 

262. Furthermore, Federal agency action 

to assign rights under 35 U.S.C. 

202(e)(1) leaves to the Federal agency 

only the government use license, which 

is what the Federal agency would have 

acquired had there been no Federal 

employee co-inventor. 

Cooperative research and 

development agreements (CRADAs) are 

another important tool to promote 

collaboration between Federal agencies 

and non-Federal parties, including those 

qualified as small entities. In support of 

research consistent with the mission of 

the Federal ‘‘laboratory’’ as that term is 

defined in 15 U.S.C. 3710a(d)(2), under 

CRADAs, the Government, through its 

laboratories, provides personnel, 

facilities, equipment, intellectual 

property, or other resources, except for 

funds to non-Federal parties, and the 

non-Federal parties provide their own 

resources, which may include funds, for 

the collaborative activities. A CRADA 

may stipulate that the collaborating 

party assumes responsibility for the 

filing and prosecution of a patent 

application directed to a joint invention 

made under the CRADA and retains title 

to such invention, with the goal of 

achieving the practical application of 

technology advancements through 

commercialization. The Federal law 

providing for CRADAs (15 U.S.C. 3710a) 

reserves an obligatory government use 

license in exchange for ownership rights 

retained by the collaborating party 

much the same way as discussed above 

with respect to Federal funding 

agreements and Government employee 

inventions. It was reported that some 

small businesses and nonprofit 

organizations were hesitant to enter into 

CRADAs with the Federal Government 

because, prior to this rulemaking, they 

would have automatically lost their 

small entity status and would have to 

pay full patent fees (undiscounted 

patent fees) as a result of granting the 

government use license or the 

Government’s interest in a joint 

invention. In response to these 

concerns, and in order to encourage 

small business and nonprofit 

organization collaborating parties to 

take the initiative for filing and 

prosecuting patent applications for their 

inventions at no expense to the 

Government, this rule expands the 

exceptions in 37 CFR 1.27(a)(4) by 

adding a new section, 1.27(a)(4)(iii), that 

covers government use licenses that 

arise in certain situations when an 

otherwise qualifying small entity retains 

ownership rights to its invention made 

under a CRADA. This expansion of the 

government use license exception, as it 

pertains to federally supported research, 

is consistent with the President’s 

‘‘Return on Investment Initiative,’’ as it 

applies to transferring technology to the 

private sector that originated from 

federally funded research or non-funded 

research performed at a Federal agency 

laboratory. See NIST Special 

Publication 1234 titled ‘‘Return on 

Investment Initiative for Unleashing 

American Innovation’’ (April 2019). 

Background: The Patent and 

Trademark Law Amendments Act, 

Public Law 96–517, 94 Stat. 3015 (Dec. 

12, 1980)—commonly referred to as the 

Bayh-Dole Act—added chapter 18 

(sections 200 et seq.) to 35 U.S.C. to 

‘‘encourage maximum participation . . . 

in federally supported research and 

development efforts’’ (35 U.S.C. 200) by 

giving small businesses and nonprofit 

organizations the ability to elect to 

retain title to their inventions made 

under Federal funding agreements. For 

more than 35 years prior to this 

rulemaking, the USPTO has provided 

the exception—now at 37 CFR 

1.27(a)(4)(ii)—for Bayh-Dole Act 

government use licenses under 35 

U.S.C. 202(c)(4). Similar to the BayhDole Act, the Stevenson-Wydler 

Technology Innovation Act of 1980, 

Public Law 96–480, 94 Stat. 2311 (Oct. 

21, 1980), as amended by the Federal 

Technology Transfer Act of 1986, Public 

Law 99–502, 100 Stat. 1785 (Oct. 20, 

1986) (FTTA), seeks to promote 

development and utilization of 

technologies made with Federal 

support. Unlike the Bayh-Dole Act, 

whereby support is in the form of 

Federal funding, the FTTA, among other 

things, authorized CRADAs as the basis 

for research collaboration between 

Federal agencies and private sector 

businesses and organizations, including 

small business concerns and nonprofit 

organizations. Unlike 35 U.S.C. 

202(c)(4) government use licenses, the 

patent rules did not previously provide 

an exception for government use 

licenses reserved to the Government 

under CRADAs in exchange for the 

small business concern or nonprofit 

organization’s retention of ownership 

rights to its invention made during 

research at the partnering Federal 

laboratory. In response to feedback from 

Federal agencies concerning the 

importance of the small entity discount 

to promote collaboration with small 

businesses and nonprofit organizations 

and technology transfer efforts of 

Federal agencies and laboratories, the 

USPTO is revising the patent rules to 

Federal Register / Vol. 85, No. 245 / Monday, December 21, 2020 / Rules and Regulations 82919 

add a government use license exception 

that applies to small entities that make 

an invention under a CRADA with a 

Federal laboratory. 

The statutory provisions for CRADAs, 

similar to those for Federal funding 

agreements under the Bayh-Dole Act, 

reserve to the Federal Government use 

licenses for inventions made under a 

CRADA. 35 U.S.C. 202(c)(4), which 

provides the Bayh-Dole Act version of 

the government use license, and the 

CRADA government use license found 

in 15 U.S.C. 3710a(b)(2) and 

3710a(b)(3)(D), are practically identical 

in scope. As set forth in 35 U.S.C. 

202(c)(4): 

With respect to any invention in which the 

contractor elects rights, the Federal agency 

shall have a nonexclusive, nontransferable, 

irrevocable, paid-up license to practice or 

have practiced for or on behalf of the United 

States any subject invention throughout the 

world. 

Under the Bayh-Dole Act provisions, 

the awardee of Federal funding is called 

a ‘‘contractor.’’ Under the CRADA 

provisions of the FTTA, the term used 

for a participating non-Federal party is 

‘‘collaborating party.’’ In addition, the 

CRADA government use license refers to 

‘‘the laboratory’’ or ‘‘the Government’’ 

as the recipient, rather than ‘‘the Federal 

agency.’’ 

The patent rules continue to provide 

a government use license exception for 

licenses arising under 35 U.S.C. 

202(c)(4). Being added are exceptions 

for government use licenses that may 

arise under a CRADA pursuant to 15 

U.S.C. 3710a(b)(2) or 3710a(b)(3)(D). 

Section 3710a(b)(2) concerns the use 

license reserved to the Government for 

an invention made solely by employees 

of the collaborating party, and section 

3710a(b)(3)(D) concerns the use license 

reserved to the Government when the 

laboratory waives ownership rights to a 

subject invention made by the 

collaborating party or an employee of 

the collaborating party. This rulemaking 

adds to 37 CFR 1.27 a new paragraph 

(a)(4)(iii) providing an additional 

exception for government use licenses 

under 15 U.S.C. 3710a(b)(2) and 

3710a(b)(3)(D) for inventions made by 

small entities under a CRADA with a 

Federal laboratory. 

Further, with respect to the exception 

for the government use license under 35 

U.S.C. 202(c)(4) as it existed prior to this 

rulemaking, it was reported to the 

USPTO that small business firms and 

nonprofit organizations had become 

increasingly concerned that 

contributions of Federal employees in 

joint inventions could eliminate their 

entitlement to small entity status. In 

response, the section 1.27(a)(4)(ii) 

exception—the so-called ‘‘federal 

licensing safe harbor provision’’—is 

amended to clarify in a new paragraph 

(B) that the exception applies when 

there is a Federal employee co-inventor, 

and action is taken under 35 U.S.C. 

202(e)(1) by the Federal agency. Under 

section 202(e)(1), the funding Federal 

agency may license or assign whatever 

rights the Federal agency acquired in 

the subject invention, made by the 

contractor with a Federal employee coinventor, to the contractor, in 

accordance with the provisions of 35 

U.S.C. chapter 18, which include a 

government use license. The section 

1.27(a)(4)(ii) exception is amended to 

explicitly apply, under new paragraph 

(B), to such situations. When an 

employee of the small entity contractor 

and an employee of the Federal agency 

are co-inventors, the small entity 

contractor, by virtue of an assignment 

from the contractor employee or the 

employee’s current obligation to assign, 

would still have an undivided 

ownership interest in the joint 

invention. The undivided interest to the 

joint owner is provided at 35 U.S.C. 262. 

The requirement for an assignment or a 

currently existing obligation to assign is 

set forth in Board of Trustees of Leland 

Stanford Junior University v. Roche 

Molecular Systems, Inc., 563 U.S. 776 

(2011), where the Court held: ‘‘[o]nly 

when an invention belongs to the 

contractor does the Bayh-Dole Act come 

into play.’’ Id. at 790. In addition, ‘‘ . . . 

unless there is an agreement to the 

contrary, an employer does not have 

rights in an invention ‘which is the 

original conception of the employee 

alone.’ ’’ Id. at 786. Accordingly, when 

action is taken by the Federal agency 

under 35 U.S.C. 202(e)(1), the contractor 

could elect to retain full ownership 

rights. These ownership rights would be 

the same as those retained by a 

contractor under new paragraph (A) of 

section 1.27(a)(4)(ii), which applies 

when the subject invention was made 

solely by the small entity contractor 

employee(s). 35 U.S.C. 202(e) refers to 

this as ‘‘consolidating rights.’’ 

Consistent with the foregoing, this 

rule change clarifies that a use license 

under 35 U.S.C. 202(c)(4) resulting from 

a funding agreement with a Federal 

agency does not preclude claiming 

small entity status in the case of a 

Federal employee co-inventor when the 

Federal agency employing such coinventor took action pursuant to 35 

U.S.C. 202(e)(1), to exclusively license 

or assign whatever rights currently held 

or that it may acquire in the subject 

invention to the small business concern 

or nonprofit organization, subject to the 

license under 35 U.S.C. 202(c)(4). This 

is set forth in new paragraph (B) of 

section 1.27(a)(4)(ii). Of course, 

claiming small entity status in such a 

case would also require that no other 

interest in the invention is held by a 

party not qualifying as a small entity. 

Thus, new paragraph (B) clarifies, but 

does not change, the applicability of 

section 1.27(a)(4)(ii) in cases in which 

consolidation of rights to a small entity 

contractor has occurred under 35 U.S.C. 

202(e)(1). This clarification is important, 

given that prior to this rulemaking, there 

may have been uncertainty as to 

whether the section 1.27(a)(4)(ii) 

exception could ever apply in cases in 

which there is a Federal employee coinventor. Accordingly, notwithstanding 

the effective date of this rulemaking, for 

any small business concern or nonprofit 

organization contractor to which new 

paragraph (B) of section 1.27(a)(4)(ii) 

applies, the three-month time period 

under 37 CFR 1.28(a) for requesting a 

refund based on later establishment of 

small entity status is not affected by this 

rulemaking. This accounts for the 

possibility that a small business concern 

or nonprofit organization contractor, to 

which paragraph (B) of section 

1.27(a)(4)(ii) applies, might have paid 

full fees within three months prior to 

the effective date of this rulemaking 

based on a misunderstanding of the 

applicability of section 1.27(a)(4)(ii) as it 

existed prior to this rulemaking. In that 

event, the small business concern or 

nonprofit organization qualifying as a 

small entity, by virtue of paragraph (B) 

of section 1.27(a)(4)(ii), could take 

advantage of the provisions under 37 

CFR 1.28(a) to obtain a refund based on 

later establishment of small entity 

status. A refund request under section 

1.28(a) is really a request for a partial 

refund, since a section 1.28(a) refund is 

based on applying a discount 

subsequent to payment of the full fee. 

Section 1.28(a) requires that the 

request for a refund of the excess 

amount, and an accompanying assertion 

of small entity status, be ‘‘filed within 

three months of the date of timely 

payment of the full fee.’’ Except for the 

three-month window of opportunity 

provided by 37 CFR 1.28(a), the failure 

to establish status as a small entity in 

any application or patent prior to 

paying, or at the time of paying, any fee 

(1) precludes payment of the fee in the 

small entity amount, and (2) precludes 

a refund, pursuant to 37 CFR 1.26, of 

any portions of fees paid prior to 

establishing status as a small entity. 

Accordingly, any request for a refund 

under section 1.28(a) based on the 

clarifying effect of new paragraph (B) of 

82920 Federal Register / Vol. 85, No. 245 / Monday, December 21, 2020 / Rules and Regulations 

section 1.27(a)(4)(ii) would only be 

appropriate if filed within three months 

of payment of the full fee, 

notwithstanding the effective date of 

this final rule. Because section 

1.27(a)(4)(iii) sets forth a new 

government use license exception not 

available prior to the effective date of 

this rulemaking, a refund under section 

1.28(a) for later establishment of small 

entity status on the basis of the new 

section 1.27(a)(4)(iii) exception could be 

obtained only for full patent fees that 

were timely paid on or after the effective 

date of this rulemaking and requested 

within three months of payment of the 

full fee. 

Regarding new section 1.27(a)(4)(iii), 

which applies to government use 

licenses arising under a CRADA where 

the small entity retains all ownership 

rights, paragraph (B) covers situations in 

which the Federal laboratory took action 

under 15 U.S.C. 3710a(b)(3)(D), to waive 

in whole any right of ownership the 

Government may have to the subject 

invention made by the small business 

concern or nonprofit organization. 

Paragraph (A) of section 1.27(a)(4)(iii) 

applies to government use licenses 

arising in situations in which the 

invention to which title is retained, was 

made solely by the employee of the 

small business concern or nonprofit 

organization. Thus, consolidation of 

rights to a small entity collaborating 

party, under the CRADA provision of 15 

U.S.C. 3710a(b)(3)(D), is treated 

similarly to the way in which 

consolidation of rights to a contractor, 

under the Bayh-Dole Act provision of 35 

U.S.C. 202(e)(1), is treated under 37 CFR 

1.27(a)(4)(ii). All the exceptions under 

37 CFR 1.27(a)(4)(i) through (iii) require 

that the Government or the Federal 

agency receive no more than the 

applicable government use license and 

that there is no other interest in the 

invention held by a party not qualifying 

as a small entity. 

New section 1.27(a)(4)(iv) is added to 

specify that regardless of whether a 

government use license exception 

applies, no refund under 37 CFR 1.28(a) 

is available for any patent fee paid by 

the Government. 

When the exception at 37 CFR 

1.27(a)(4) was originally promulgated, 

the basis for the exception, as it related 

to the obligatory license to the Federal 

government under 35 U.S.C. 202(c)(4), 

was ‘‘to avoid frustrating the intent of 

Public Law 97–247 and Pub. L. 96–517 

when taken together.’’ See Revision of 

Patent Practice, 49 FR 548, Jan. 4, 1984. 

(Pub. L. 97–247 was a 1982 

appropriations act from which the small 

entity discount originated, and Public 

Law 96–517 is a reference to the BayhDole Act of 1980.) No such basis exists 

for extending the government use 

license exceptions to the micro entity 

provisions. In addition, although the 

USPTO can provide for government use 

license exceptions for small entity status 

qualification, these exceptions cannot 

apply for purposes of qualifying as a 

micro entity on the gross income basis. 

The reason for this is that the statute 

authorizing micro entity patent fee 

discounts—35 U.S.C. 123(a)(4)— 

disqualifies an entity from micro entity 

status if it has assigned, granted, or 

conveyed a license or other ownership 

interest in the invention to an entity that 

exceeded the gross income limit 

(currently $206,109) in its previous 

calendar year’s gross income. Because a 

‘‘gross national income’’ is attributed to 

the United States each year, any 

government use license runs afoul of the 

35 U.S.C. 123(a)(4) qualification 

requirement. Accordingly, a government 

use license may not disqualify an 

applicant from a small entity status, but 

does disqualify the applicant from 

micro entity status. This applies to 

micro entity status on the ‘‘institution of 

higher education basis’’ under section 

1.29(d) as well as micro entity status on 

the ‘‘gross income basis’’ under section 

1.29(a). A clarifying amendment to 37 

CFR 1.29 is made in order to explicitly 

reflect this. 

Discussion of Regulatory Changes: 

These rule changes amend 37 CFR 

1.27(a)(4) to clarify and expand the 

exceptions to the general rule that every 

party holding rights to an invention 

must qualify as a small entity under 37 

CFR 1.27 in order for small entity status 

to be properly claimed. 

A new introductory clause is added to 

37 CFR 1.27(a)(4) to limit eligibility for 

each government use license exception 

to patent applications filed and 

prosecuted at no expense to the 

Government, with the exception of any 

expense taken to deliver the application 

and fees to the USPTO on behalf of the 

applicant. A new paragraph (a)(4)(iv) is 

added to 37 CFR 1.27 to specify that 

regardless of whether a government use 

license exception applies, no refund 

under 37 CFR 1.28(a) is available for any 

patent fee paid by the Government. To 

overcome any reluctance of research 

partners to take responsibility for 

seeking patent protection of federally 

supported inventions, the new section 

1.27(a)(4) introductory clause, combined 

with new paragraph (a)(4)(iv), should 

encourage small business concern and 

nonprofit organization contractors and 

collaborators to take the lead in seeking 

patent protection. 

The regulations at 37 CFR 1.27(a)(4)(i) 

have long provided an exception for a 

government use license resulting from a 

rights determination under E.O. 10096, 

wherein title to the invention is retained 

by a Federal employee-inventor (‘‘a 

person’’ as defined in 37 CFR 

1.27(a)(1)). That exception is being 

amended to acknowledge the 

regulations contained in 37 CFR part 

501, which implement E.O. 10096. This 

is done by making reference in the rule 

to 37 CFR 501.6, which substantially 

incorporates the E.O. 10096 criteria for 

the determination of rights in and to any 

invention made by a Government 

employee. This exception, as amended 

by this rulemaking, remains in section 

1.27(a)(4)(i) under a new paragraph (A). 

A new paragraph (B) is added to section 

1.27(a)(4)(i), referring to 15 U.S.C. 

3710d(a), which provides for disposal of 

title to an invention from the Federal 

agency to the Federal employeeinventor, as well as the conditions 

under which the employee obtains or 

retains title to the invention, subject to 

a government use license. Accordingly, 

paragraphs 1.27(a)(4)(i)(A) and (B) both 

relate to the government use license 

exception in the context of Federal 

employee-inventors who retain title to 

their work inventions, subject to a 

government use license. Also added to 

section 1.27(a)(4)(i) is a new paragraph 

(C) for government use licenses to a 

Federal agency resulting from retention 

of rights by the inventor under 35 U.S.C. 

202(d), when a small business concern 

or nonprofit organization contractor 

does not elect to retain title to an 

invention made by its employee under 

a Federal funding agreement. Provided 

the Federal agency receives no more 

than the government use license, and 

there is no other interest in the 

invention held by a party not qualifying 

as a small entity, the inventor who 

otherwise qualifies for small entity 

status is not prohibited from claiming 

small entity status as a result of 

retaining rights under 35 U.S.C. 202(d), 

to his or her invention. This exception 

is contingent upon the inventor meeting 

the conditions applicable under 37 CFR 

401.9, to an employee/inventor of the 

small business firm or nonprofit 

organization contractor not electing to 

retain title. (37 CFR part 401 

implements the provisions of the BayhDole Act codified in 35 U.S.C. 200–212.) 

Compared to what was proposed in the 

February 5, 2020, notice of proposed 

rulemaking (NPRM) at 85 FR 6476, the 

language of new paragraph 

1.27(a)(4)(i)(C) is changed for clarity. 

For example, a specific reference to the 

35 U.S.C. 202(c)(4) government use 

license was added, as well as the term 

‘‘employee/inventor,’’ which is the term 

Federal Register / Vol. 85, No. 245 / Monday, December 21, 2020 / Rules and Regulations 82921 

37 CFR 401.9 uses to refer to the 

contractor’s employee. No new 

requirement is added to paragraph 

1.27(a)(4)(i)(C) compared to the 

proposed requirements. Thus, section 

1.27(a)(4)(i) continues to apply to small 

entity ‘‘persons,’’ as defined in 37 CFR 

1.27(a)(1), and as amended by this 

rulemaking, sets forth three types of 

government use licenses that would not 

disqualify a patent applicant from 

claiming small entity status for purposes 

of paying reduced patent fees. 

With respect to ‘‘small business 

concerns’’ and ‘‘nonprofit 

organizations,’’ as defined in 37 CFR 

1.27(a)(2) and (3), there are generally 

two types of agreements into which they 

enter with the Federal Government that 

are pertinent to this rulemaking: (1) 

Federal funding agreements under the 

Bayh-Dole Act (as defined in 35 U.S.C. 

201(b)), and (2) CRADAs, as provided 

for in 15 U.S.C. 3710a. Both of these 

agreements require a government use 

license to be granted to the Federal 

Government by the entity or person 

retaining title to an invention made 

under such agreement. The regulations 

at section 1.27(a)(4)(ii) continue to 

provide an exception for Bayh-Dole Act 

government use licenses under 35 

U.S.C. 202(c)(4). To clarify that 

exception, new paragraphs (A) and (B) 

are added to section 1.27(a)(4)(ii). 

Paragraph 1.27(a)(4)(ii)(A) applies to the 

situation in which the invention under 

a Federal funding agreement was made 

solely by employees of the small 

business concern or nonprofit 

organization. Paragraph 1.27(a)(4)(ii)(B) 

addresses situations in which there is a 

Federal employee co-inventor. 

Prior to this rulemaking, the patent 

rules did not provide any exception for 

use licenses reserved to the Government 

under a CRADA. The rule change 

provides an additional exception, in a 

new section 1.27(a)(4)(iii), for 

government use licenses for inventions 

made by small entities under a CRADA 

in situations under 15 U.S.C. 

3710a(b)(2) and 3710a(b)(3)(D), wherein 

the small entity retains title to the 

invention. 

Section 1.29 is amended to clarify that 

the government use license exceptions 

under 37 CFR 1.27(a)(4) do not apply for 

purposes of micro entity status 

qualification. The baseline small entity 

requirement under sections 1.29(a)(1) 

and (d)(1) cannot be met if qualification 

as a small entity under 37 CFR 1.27 

depends on one of the government use 

license exceptions specified in 37 CFR 

1.27(a)(4). 

Response to Comments 

The USPTO published a notice 

proposing changes to the rules of 

practice in patent cases to clarify and 

expand exceptions to the rule pertaining 

to government use licenses and their 

effect on small entity status for purposes 

of paying reduced patent fees, so as to 

support independent inventors, small 

business concerns, and nonprofit 

organizations in filing patent 

applications. See Small Entity 

Government Use License Exception, 85 

FR 6476 (February 5, 2020). In response, 

the Office received two comments, one 

from a nonprofit association and one 

from an attorney, both of which fully 

endorsed the purpose and the content of 

the proposed changes. The Office thanks 

these commenters for their feedback. 

Rulemaking Considerations 

A. Administrative Procedure Act: The 

changes in this rulemaking involve rules 

of agency practice and procedure, and/ 

or interpretive rules. See Perez v. Mortg. 

Bankers Ass’n, 135 S. Ct. 1199, 1204 

(2015) (Interpretive rules ‘‘advise the 

public of the agency’s construction of 

the statutes and rules which it 

administers.’’ (citation and internal 

quotation marks omitted)); Nat’l Org. of 

Veterans’ Advocates v. Sec’y of Veterans 

Affairs, 260 F.3d 1365, 1375 (Fed. Cir. 

2001) (Rule that clarifies interpretation 

of a statute is interpretive.); Bachow 

Commc’ns Inc. v. FCC, 237 F.3d 683, 

690 (D.C. Cir. 2001) (Rules governing an 

application process are procedural 

under the Administrative Procedure 

Act.); Inova Alexandria Hosp. v. 

Shalala, 244 F.3d 342, 350 (4th Cir. 

2001) (Rules for handling appeals were 

procedural where they did not change 

the substantive standard for reviewing 

claims.). 

Accordingly, prior notice and 

opportunity for public comment for the 

changes in this rulemaking are not 

required pursuant to 5 U.S.C. 553(b) or 

(c), or any other law. See Perez, 135 S. 

Ct. at 1206 (Notice and comment 

procedures are required neither when 

an agency ‘‘issue[s] an initial 

interpretive rule’’ nor ‘‘when it amends 

or repeals that interpretive rule.’’); 

Cooper Techs. Co. v. Dudas, 536 F.3d 

1330, 1336–37 (Fed. Cir. 2008) (stating 

that 5 U.S.C. 553, and thus 35 U.S.C. 

2(b)(2)(B), do not require notice and 

comment rulemaking for ‘‘interpretative 

rules, general statements of policy, or 

rules of agency organization, procedure, 

or practice’’ (quoting 5 U.S.C. 

553(b)(A))). However, the Office chose 

to seek public comment before 

implementing the rule to benefit from 

the public’s input. 

B. Regulatory Flexibility Act: Under 

the Regulatory Flexibility Act (5 U.S.C. 

601 et seq.), whenever an agency is 

required by 5 U.S.C. 553 (or any other 

law) to publish an NPRM, the agency 

must prepare and make available for 

public comment an Initial Regulatory 

Flexibility Analysis, unless the agency 

certifies under 5 U.S.C. 605(b) that the 

proposed rule, if implemented, will not 

have a significant economic impact on 

a substantial number of small entities. 5 

U.S.C. 603, 605. The Senior Counsel for 

Regulatory and Legislative Affairs in the 

Office of General Law of the USPTO 

certified to the Chief Counsel for 

Advocacy of the Small Business 

Administration that the NPRM will not 

have a significant economic impact on 

a substantial number of small entities. 

See 5 U.S.C. 605(b). For the reasons set 

forth herein, the Senior Counsel for 

Regulatory and Legislative Affairs in the 

Office of General Law of the USPTO has 

certified to the Chief Counsel for 

Advocacy of the Small Business 

Administration that this final rule will 

not have a significant economic impact 

on a substantial number of small 

entities. 

The USPTO is amending the rules of 

practice in patent cases to clarify and 

expand exceptions to the rule pertaining 

to government use licenses and their 

effect on small entity status for purposes 

of paying reduced patent fees, so as to 

support independent inventors, small 

business concerns, and nonprofit 

organizations in filing patent 

applications. To be entitled to pay small 

entity patent fees, all parties holding 

rights in the invention must qualify for 

small entity status. Prior to this 

rulemaking, there were two exceptions 

to this rule, both of which continue to 

apply, as clarified and expanded by this 

rulemaking. Both these exceptions relate 

to government use licenses granted 

under the law by independent 

inventors, small business concerns, or 

nonprofit organizations otherwise 

qualifying as a small entity, where such 

entities retain title to their inventions. 

The first exception applies when an 

inventor employed by the Federal 

Government has an obligation to grant 

the government use license in the 

workplace invention in which the 

inventor obtains title pursuant to a 

rights determination under E.O. 10096. 

This exception continues to apply and 

is amended to clarify that it applies to 

employees of Federal laboratories under 

15 U.S.C. 3710d(a). The second 

exception applies when the government 

use license in the Government-funded 

invention is an obligation (pursuant to 

35 U.S.C. 202(c)(4)) under a funding 

82922 Federal Register / Vol. 85, No. 245 / Monday, December 21, 2020 / Rules and Regulations 

agreement with a Federal agency. This 

exception is expanded to cover the 

situations in which a small business 

concern or nonprofit organization 

qualifying as a small entity does not 

elect to retain title to an invention made 

by its employee under a Federal funding 

agreement, and the Federal agency 

allows the inventor to retain title to the 

federally funded invention. In that case, 

a government use license (equivalent to 

that specified in 35 U.S.C. 202(c)(4)) is 

an obligation arising from the 

employee’s retention of rights under 35 

U.S.C. 202(d). The second exception is 

also expanded to address situations in 

which there is a Federal employee coinventor. Further, this rulemaking adds 

a third exception to cover a government 

use license arising from an obligation 

under a CRADA with a Federal agency 

pursuant to 15 U.S.C. 3710a(b). 

Regardless of whether any of the 

aforementioned exceptions apply, no 

refund is available for any patent fee 

paid by the Government. In addition, 

patent applications filed and prosecuted 

at Government expense will not be 

entitled to the small entity discount. 

Finally, the qualifications for the micro 

entity patent fee discount are clarified. 

The rule changes are designed to 

encourage persons, small businesses, 

and nonprofit organizations to 

collaborate with the Federal 

Government by providing an 

opportunity to qualify for the small 

entity patent fees discount for 

inventions made during the course of 

federally funded or federally supported 

research. Thus, this rule allows more 

entities to qualify for the small entity fee 

discount; these entities may qualify for 

a 50% reduction in fees, resulting in a 

substantial cost savings to them. 

Although the cost savings may be 

substantial, this rule is not expected to 

impact a large number of small entities. 

We estimate the number of small 

entities impacted by this rule to be in 

the range of 750 to 1,000, based on the 

number of active CRADAs reported for 

FY 2015 and its projected growth. 

These changes are procedural and are 

not expected to have a direct economic 

impact on small entities. For the reasons 

described above, this rule is not 

expected to have a significant economic 

impact on a substantial number of small 

entities. 

C. Executive Order 12866 (Regulatory 

Planning and Review): This rulemaking 

has been determined to be not 

significant for purposes of Executive 

Order 12866 (Sept. 30, 1993). 

D. Executive Order 13563 (Improving 

Regulation and Regulatory Review): The 

Office has complied with Executive 

Order 13563 (Jan. 18, 2011). 

Specifically, the Office has, to the extent 

feasible and applicable: (1) Made a 

reasoned determination that the benefits 

justify the costs of the rule; (2) tailored 

the rule to impose the least burden on 

society consistent with obtaining the 

regulatory objectives; (3) selected a 

regulatory approach that maximizes net 

benefits; (4) specified performance 

objectives; (5) identified and assessed 

available alternatives; (6) involved the 

public in an open exchange of 

information and perspectives among 

experts in relevant disciplines, affected 

stakeholders in the private sector, and 

the public as a whole, and provided 

online access to the rulemaking docket; 

(7) attempted to promote coordination, 

simplification, and harmonization 

across Government agencies and 

identified goals designed to promote 

innovation; (8) considered approaches 

that reduce burdens and maintain 

flexibility and freedom of choice for the 

public; and (9) ensured the objectivity of 

scientific and technological information 

and processes. 

E. Executive Order 13771 (Reducing 

Regulation and Controlling Regulatory 

Costs): This rule is not an Executive 

Order 13771 regulatory action because 

this rule is not significant under 

Executive Order 12866 (Jan. 30, 2017). 

F. Executive Order 13132 

(Federalism): This rulemaking does not 

contain policies with federalism 

implications sufficient to warrant 

preparation of a Federalism Assessment 

under Executive Order 13132 (Aug. 4, 

1999). 

G. Executive Order 13175 (Tribal 

Consultation): This rulemaking will not: 

(1) Have substantial direct effects on one 

or more Indian tribes; (2) impose 

substantial direct compliance costs on 

Indian tribal governments; or (3) 

preempt tribal law. Therefore, a tribal 

summary impact statement is not 

required under Executive Order 13175 

(Nov. 6, 2000). 

H. Executive Order 13211 (Energy 

Effects): This rulemaking is not a 

significant energy action under 

Executive Order 13211 because this 

rulemaking is not likely to have a 

significant adverse effect on the supply, 

distribution, or use of energy. Therefore, 

a Statement of Energy Effects is not 

required under Executive Order 13211 

(May 18, 2001). 

I. Executive Order 12988 (Civil Justice 

Reform): This rulemaking meets 

applicable standards to minimize 

litigation, eliminate ambiguity, and 

reduce burden as set forth in sections 

3(a) and 3(b)(2) of Executive Order 

12988 (Feb. 5, 1996). 

J. Executive Order 13045 (Protection 

of Children): This rulemaking does not 

concern an environmental risk to health 

or safety that may disproportionately 

affect children under Executive Order 

13045 (Apr. 21, 1997). 

K. Executive Order 12630 (Taking of 

Private Property): This rulemaking will 

not affect a taking of private property or 

otherwise have taking implications 

under Executive Order 12630 (Mar. 15, 

1988). 

L. Congressional Review Act: Under 

the Congressional Review Act 

provisions of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (5 U.S.C. 801 et seq.), prior to 

issuing any final rule, the USPTO will 

submit a report containing the rule and 

other required information to the United 

States Senate, the United States House 

of Representatives, and the Comptroller 

General of the Government 

Accountability Office. The changes in 

this rulemaking are not expected to 

result in an annual effect on the 

economy of $100 million or more, a 

major increase in costs or prices, or 

significant adverse effects on 

competition, employment, investment, 

productivity, innovation, or the ability 

of United States-based enterprises to 

compete with foreign-based enterprises 

in domestic and export markets. 

Therefore, this rulemaking is not a 

‘‘major rule’’ as defined in 5 U.S.C. 

804(2). 

M. Unfunded Mandates Reform Act of 

1995: The changes set forth in this 

rulemaking do not involve a Federal 

intergovernmental mandate that will 

result in the expenditure by State, local, 

and tribal governments, in the aggregate, 

of $100 million (as adjusted) or more in 

any one year, or a Federal private sector 

mandate that will result in the 

expenditure by the private sector of 

$100 million (as adjusted) or more in 

any one year, and will not significantly 

or uniquely affect small governments. 

Therefore, no actions are necessary 

under the provisions of the Unfunded 

Mandates Reform Act of 1995. See 2 

U.S.C. 1501 et seq. 

N. National Environmental Policy Act 

of 1969: This rulemaking will not have 

any effect on the quality of the 

environment and is thus categorically 

excluded from review under the 

National Environmental Policy Act of 

1969. See 42 U.S.C. 4321 et seq. 

O. National Technology Transfer and 

Advancement Act of 1995: The 

requirements of section 12(d) of the 

National Technology Transfer and 

Advancement Act of 1995 (15 U.S.C. 

272 note) are not applicable because this 

rulemaking does not contain provisions 

that involve the use of technical 

standards. 

Federal Register / Vol. 85, No. 245 / Monday, December 21, 2020 / Rules and Regulations 82923 

P. Paperwork Reduction Act of 1995: 

The Paperwork Reduction Act of 1995 

(44 U.S.C. 3501) requires that the Office 

consider the impact of paperwork and 

other information collection burdens 

imposed on the public. This rulemaking 

does not involve any new information 

collection requirements that are subject 

to review by the Office of Management 

and Budget (OMB) under the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501 

et seq.). 

Notwithstanding any other provision 

of law, no person is required to respond 

to, nor shall any person be subject to a 

penalty for failure to comply with, a 

collection of information subject to the 

requirements of the Paperwork 

Reduction Act unless that collection of 

information has a valid OMB control 

number. 

List of Subjects in 37 CFR Part 1 

Administrative practice and 

procedure, Biologics, Courts, Freedom 

of information, Inventions and patents, 

Reporting and recordkeeping 

requirements, Small businesses. 

For the reasons stated in the 

preamble, 37 CFR part 1 is amended as 

follows: 

PART 1—RULES OF PRACTICE IN 

PATENT CASES 

■ 1. The authority citation for 37 CFR 

part 1 continues to read as follows: 

Authority: 35 U.S.C. 2(b)(2), unless 

otherwise noted. 

■ 2. Section 1.27 is amended by revising 

paragraph (a)(4) to read as follows: 

§ 1.27 Definition of small entities and 

establishing status as a small entity to 

permit payment of small entity fees; when 

a determination of entitlement to small 

entity status and notification of loss of 

entitlement to small entity status are 

required; fraud on the Office. 

(a) * * * 

(4) Federal Government Use License 

Exceptions. In a patent application filed, 

prosecuted, and if patented, maintained 

at no expense to the Government, with 

the exception of any expense taken to 

deliver the application and fees to the 

Office on behalf of the applicant: 

(i) For persons under paragraph (a)(1) 

of this section, claiming small entity 

status is not prohibited by: 

(A) A use license to the Government 

resulting from a rights determination 

under Executive Order 10096 made in 

accordance with § 501.6 of this title; 

(B) A use license to the Government 

resulting from Federal agency action 

pursuant to 15 U.S.C. 3710d(a) allowing 

the Federal employee-inventor to obtain 

or retain title to the invention; or 

(C) A use license to a Federal agency 

resulting from retention of rights under 

35 U.S.C. 202(d) by an inventor 

employed by a small business concern 

or nonprofit organization contractor, 

provided the license is equivalent to the 

license under 35 U.S.C. 202(c)(4) the 

Federal agency would have received 

had the contractor elected to retain title, 

and all the conditions applicable under 

§ 401.9 of this title to an employee/ 

inventor are met. 

(ii) For small business concerns and 

nonprofit organizations under 

paragraphs (a)(2) and (3) of this section, 

a use license to a Federal agency 

resulting from a funding agreement with 

that agency pursuant to 35 U.S.C. 

202(c)(4) does not preclude claiming 

small entity status, provided that: 

(A) The subject invention was made 

solely by employees of the small 

business concern or nonprofit 

organization; or 

(B) In the case of a Federal employee 

co-inventor, the Federal agency 

employing such co-inventor took action 

pursuant to 35 U.S.C. 202(e)(1) to 

exclusively license or assign whatever 

rights currently held or that it may 

acquire in the subject invention to the 

small business concern or nonprofit 

organization, subject to the license 

under 35 U.S.C. 202(c)(4). 

(iii) For small business concerns and 

nonprofit organizations under 

paragraphs (a)(2) and (3) of this section 

that have collaborated with a Federal 

agency laboratory pursuant to a 

cooperative research and development 

agreement (CRADA) under 15 U.S.C. 

3710a(a)(1), claiming small entity status 

is not prohibited by a use license to the 

Government pursuant to: 

(A) 15 U.S.C. 3710a(b)(2) that results 

from retaining title to an invention 

made solely by the employee of the 

small business concern or nonprofit 

organization; or 

(B) 15 U.S.C. 3710a(b)(3)(D), provided 

the laboratory has waived in whole any 

right of ownership the Government may 

have to the subject invention made by 

the small business concern or nonprofit 

organization, or has exclusively licensed 

whatever ownership rights the 

Government may acquire in the subject 

invention to the small business concern 

or nonprofit organization. 

(iv) Regardless of whether an 

exception under this paragraph (a)(4) 

applies, no refund under § 1.28(a) is 

available for any patent fee paid by the 

Government. 

* * * * * 

■ 3. Section 1.29 is amended by revising 

paragraphs (a)(1) and (d)(1) to read as 

follows: 

§ 1.29 Micro entity status. 

(a) * * * 

(1) The applicant qualifies as a small 

entity as defined in § 1.27 without 

relying on a government use license 

exception under § 1.27(a)(4); 

* * * * * 

(d) * * * 

(1) The applicant qualifies as a small 

entity as defined in § 1.27 without 

relying on a government use license 

exception under § 1.27(a)(4); and 

* * * * * 

Andrei Iancu, 

Under Secretary of Commerce for Intellectual 

Property and Director of the United States 

Patent and Trademark Office. 

[FR Doc. 2020–27049 Filed 12–18–20; 8:45 am] 

BILLING CODE 3510–16–P 

DEPARTMENT OF COMMERCE 

Patent and Trademark Office 

37 CFR Part 42 

[Docket No. PTO–P–2019–0011] 

RIN 0651–AD34 

Rules of Practice To Allocate the 

Burden of Persuasion on Motions To 

Amend in Trial Proceedings Before the 

Patent Trial and Appeal Board 

AGENCY: United States Patent and 

Trademark Office, Department of 

Commerce. 

ACTION: Final rule. 

SUMMARY: The United States Patent and 

Trademark Office (USPTO or Office) 

revises the rules of practice in inter 

partes review (IPR), post-grant review 

(PGR), and the transitional program for 

covered business method patents (CBM) 

(collectively post-grant trial) 

proceedings before the Patent Trial and 

Appeal Board (PTAB or Board) to 

allocate the burdens of persuasion in 

relation to motions to amend and the 

patentability of substitute claims 

proposed therein. In light of Federal 

Circuit case law, and to better ensure 

the predictability and certainty of postgrant trial proceedings before the Board, 

the Office revises the rules of practice 

governing motions to amend, to 

expressly assign to the petitioner the 

burden of showing the unpatentability 

of substitute claims proposed in a 

motion to amend. In addition, the Office 

revises the rules to expressly assign to 

the patent owner the burden of showing 

that a motion to amend complies with 

certain statutory and regulatory 

requirements for such a motion. 

Notwithstanding the adversarial nature