Department of Health and Human Services 

OFFICE OF


INSPECTOR GENERAL


NIH OVERSIGHT 

RESEARCH 

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OF EXTRAMURAL 

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JUNE GIBBS BROWN 

Inspector General 

MAY 1994 

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 OIG’S 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 OIG’S 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


NIH OVERSIGHT OF EXTRAMURAL


RESEARCH INVENTIONS


J& - @$w 

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I 
EXECUTIVE SUMMARY


PURPOSE 

To review the National Institutes of Health’s (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 Health’s (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 NIH’s 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 kI-IOWII as the Bayh-Dole Act (P.L. 96-517). 

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 

inventl”oninformation. 

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 database’s 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 NIH’s 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 selfmonitoring 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 public’s 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 Health’s(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 Health’s (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 NIH’s 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 nonexclusive, 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 NIHsupported 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 96-51’7, 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 federallyfunded 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 President’s 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 be’low 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 NIH’s determination.


Exceptional circumstances occur when NIH determines that restriction or elimination


of the grantee’s 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 NIH’s determination. If NIH’s


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 NIH’s oversight has centered main]y on three of the Bayh-Dole Act’s 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 NIH’s 

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 grantee’s 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


,1 Invention Disclosures ~Written Disclosure I
 ~ Election of Title Written Election 

I I 

I Utilization Reports I Annual report I II

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 

1 I

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 government’s 

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,


DEIR’s 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 Contractor’s 

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 database’s 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 DEIR’s 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. 

Grantee:


Name 1:


Grant 1:


Patent Title:


Disclosed:


Retained Rights:


IIUS License: 

Sample Database Record 

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 DEIR’s 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 selfmonitoring 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 NIH’s current 

monitoring, universities did not always adequately support these objectives. In a 

recent draft report, the Office of Audit Services detailed one research institution’s 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 NIH’s 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 federallysupported inventions and protecting the public’s 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 NIH’s 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 NIH’s 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 IV—ASSISTANT SECRETARY FOR 

TECHNOLOGY POLICY, DEPARTMENT OF 

COMMERCE 

Part Page 

401 Rights to inventions made by nonprofit organizations and small business firms uncier Government granti, contracts, and cooperative agreements � ..............� ............................................� ..............� 460 

404 Licensing of Government owned inventions ............ 476 

A-2

4401.1 

PART 401-41GHTS TO INVENTIONS 

MADE BY NONPROFIT ORGANIZATIONS AND SMALL BUSINESS 

FIRMS UNDER GOVERNMENT 

GRANTS, CONTRACTS, AND COOPERATIVE AGREEMENTS 

sec. 

401.1 Scope. 

401.2 Definitions. 

401.3 Use of the standard clauses at 

$401.14. 

401.4 Contractor appeals of exceptions. 

401.5 Modification and tailoring of clauses. 

401.6 Exercise of march-in rights. 

401.7 Small business preference. 

401.8 Reporting on utilizauon of subject 

inventions. 

401.9 Retention of rights by contractor employee inventor. 

401.10 Government sswgnrnent to contractor of rights in invention of government 

employee.

401.11 APpeais. 

401.12 Licensing of background patent 

rights to third parties. 

401.13 Administration of patent rights 

clauses. 

401.14 Standard patent rights clauses. 

401.15 Deferred determinations. 

401.16 Submissions and inquiries. 

AUTHORITY35 U.S.C. 206 and the delegation of authority by the Secretary of Commerce to the Assistant Secretary of Commerce for Technology Policy at sec. 3(g) of 

DOO 10-18. 

SOURCE52 FR 8554, Mar. 18.1987.unless 

otherwisenoted. 

5401.1 scope. 

(a) TrmWionall y there have been no 

conditions imposed by the government 

on research performers while using 

private facilities which would preclude 

them from accepting research funding 

from other sources to expand. to aid in 

completing or to conduct separate investigations closely related to research 

activities sponsored by the government. Notwithstanding the right of research organizations to accept supplemental funding from other sources for 

the purpose of expediting or more 

comprehensively accomplishing the research objectives of the government 

sponsored project, it is clear that the 

ownership provisions of these regulations would remain applicable in any 

invention ‘“conceived or first actually 

reduced to practice in performance” of 

the rxoject. Separate accounting for 

37 CFR Ch. IV (7-l-92 Edition) 

the two funds used to support the 

project in this case is not a determining factor. 

(1) To the extent that a non-government sponsor established a Project which. although closely related, ”falls 

outside the Planned and committed activities of a government-funded 

project and does not diminish or distract from the performance of such activities. inventions made in performance of the non-government sponsored

project would not be subject to the 

conditions of these regulations. - example of such related but separate

projects would be a government sponsored project having research ob@ctives to expand scientific understanding in a field and a closely related industry sponsored project having as iobjectives the application of such new 

knowkdge to develop usable new technology. The time relationship in conducting the two projects and the use 

of new fundamental knowledge from 

one in the performance of the other 

are not important determinants since 

most inventions rest on a knowledge 

base built up by numerous independent research efforts extending over 

many years. Should such an invention 

be claimed by the performing organization to be the product of non-government sponsored research and be 

challenged by the sponsoring agencY 

as being reportable to the government 

as a ‘“subject invention”, the challenge

is appealable as described in 

$401.ll(d). 

(2) An invention which is made outside of the research activities of a gov­ ernment-funded project is not viewed 

asa “subject invention” since it 

cannot be shown to have been “conceived or first actually reduced to 

practice” in performance of the 

Project. An obvious example of this is 

a situation where an instrument pur­ chased with government funds is later 

used. without interference with or cost 

to the government-funded project, in 

making an invention all expenses of 

which involve only non-government 

funds. 

(b) This part inplement.s 35 U.S.C. 

202 through 204 and is applicable to 

all Federal agencies. It applies to ail 

funding agreements with smail business firms and nonprofit organizations 

A-3

Dopartmont of Commwc* 

executed after the effective date of 

this part, except for a funding agreement made primarily for educational 

purposes. Certain sections also provide 

guidance for the administration of 

funding agreements which predate the 

effective date of this part. In accordance with 35 U.S.C. 212. no scholarship, fellowship, training grant, or 

other funding agreement made by a 

Federal agency primarily to an awardee for educational purposes will contain any provision giving the Federal 

agency any rights to inventions made 

by the awardee. 

(c) The march-in and appeals proce­ dures in $3401.6 and 401.11 shall 

apply to any march-in or appeal proceeding under a funding agreement 

subject to Chapter 18 of Title 35, 

U.S.C., initiated after the effective 

date of this part even if the funding 

agreement was executed prior to that 

date. 

(d) At the request of the contractor, 

a funding agreement for the operation 

of a government-owned facility which 

is in effect on the effective date of this 

part shall be promptly amended to include the provisions required by 

$$401.3(a) unless the agency determines that one of the exceptions at 35 

U.s.c. 202(a)(i) through (iv)

$ 401.3(a)(8) through (iv) of this part) 

is applicable and will be applied. If the 

exception at S401.3(a)(iv) is determined to be applicable. the funding 

agreement will be promptly amended 

to include the provisions required by 

$401.3(C). 

(e) This regulation supersedes OMB 

Circular A-124 and shall take precedence over any regulations dealing 

with ownership of inventions made by 

small businesses and nonprofit organizations which are inconsistent with it. 

This regulation will be followed by all 

agencies pending amendment of 

agency regulations to conform to this 

part and amended Chapter 18 of Title 

35. Only deviations requested by a contractor and not inconsistent with 

Chapter 18 of Title 35, United States 

Code, may be made without approval 

of the Secretary. Modifications or tailoring of clauses as authorized by 

! 401.5 or $401.3. when alternative provisions are used under $ 401.3(a)(1) 

through (4), are not considered deviations requiring the Secretary’s aPProval. Three comes of proposed and 

final agency regulations sumdementing this part shall be submitted to the 

Secretary at the office set out in 

$401.16 for approval for consistency 

with this part before they are submitted to the Office of Management and 

Budget (OMB) for review under Executive Order 12291 or, if no submission 

is rec,uired to be made to OMB, before 

their submission to the FEDmtALREGISTERfm publication. 

(f) In the event an agency has outstanding prime funding a-ee~:ents 

that do not contain patent flow-down 

provisions consistent with this Part or 

earlier Off ice of Federal Procurement 

Policy regulations (OMB Circular A124 cr OMB Bulletin 81-22), the 

agency shall take auProPfi* =tion 

to ensure that small business firms or 

nonprofit organizations that are subcontractors under any such agreements and that received their subcontracts after July L 1981. receive rights 

in their subject inventions that are 

consistent with Chapter 18 and this 

part. 

(g) This part is not intended to 

apply to arrangements under which 

nonprofit organizations. small business firms, or others are allowed to use 

government-owned research facilities 

and normal technical assistance pro­ vided to users of those facilities. 

whether on a reimbursable or nonreimbursable basis. This part is also 

not intended to apply to arrangemen~ 

under which sponsors reimburse the 

government or facility contractor for 

the contractor employee’s time in per- forming work for the spo~or. Such 

arrangements are not considered 

‘“funding agreements” as defined at 35 

U.S.C. 201(b) and $ 401.2(a) of this 

part. 

9401.2 Definitions. 

As used in this part— 

(a) The term funding agreement 

means any contract, grant. or cooperate agreement entered into between 

any Federal agency, other than the 

Tennessee Valley AuthoritY, and anY 

contractor for the performance of experunental. developmental. or research work funded in whole or in Part 

A-4

by the Federal government. This term 

also includes anY assignment, substitution of parties, or subcontract of any 

type entered into for the performance 

of experimental. development@ or research work under a funding agre 

ment as defined in the first sentence 

of this paragraph. 

(b) The term contractor means anY 

person. small business firm or nonprofit onranization which ~ a P-Y to 

a funding agreement. 

(c) The term invention means anY 

invention or discovery which is or may be patentable or otherwise protectable 

under Title 35 of the United States 

Code, or any novel variety of plant which is or may be protectable under 

the Plant Variety Protection Act (7 

U.S.C. 2321 et sea.). 

(d) The term sub~t inuention 

means any invention of a contractor 

conceived or first actually reduced to 

practice in the perforrnance of work 

under a funding agreemerm provided that in the case of a variety of plant. 

the date of determination (as defined 

in section 41(d) of the Plant Variety 

Protection Act, 7 U.S.C. 2401(d)) must 

also occur during the period of contrad performance. 

(e) The term Practical uP@4cation 

means to manufacture in the case of a 

composition of product, to practice in 

the case of a process or meth@ or to 

operate in the case of a machine or 

s ysterm an& in each case, under such 

conditions as to establkh that the invention is being utilized and that its 

benefits are. to the extent permitted 

by law or government regulations, available to the public on reasonable 

terms. 

(f) The term nuzti when used in relation to any invention means the conception or first actual reduction to 

practice of such invention. 

(g) The term smalZ tntsiness /irnz 

means a small business concern as defined at section 2 of Pub. L. 85-536 (15 

U.S.C. 632) and implementing regulations of the Administrator of the 

Small Business Administration. For 

the purpose of this part, the size 

standards for small business concerns 

invoived in government procurement 

and subcontracting at 13 CFR 121.5 

will be used. 

37 cm Ck Iv (7-W2 Edition) 

(h) The term normmfit om?anization 

means universities and other institutions of higher edUC@On or an organi. 

zation of the type descr’i~ k section 

501(c)(3) of the Internal Revenue 

Code of 1954 (26 U.S.C. Sol(c) and 

exempt from taxation mder section 

501(a) of the Internal Revenue Code 

(26 U.S.C. 501(a)) or anY nonlx’ofit scientific or educational onranhzation 

qualified under a state nonprofit organisation statute. 

(i) The term Chapter 18 mean8 

Chapter 18 of Title 35 of the United 

States Code. 

(j) The term Secn?tam means the 

Secretary of Commerce or Ma or her 

designee. 

ff401.3 Use of the standard Ciallses* 

6401.14. 

(a) Each fundine agreement awarded 

to a snail business firm or nonprofit 

organization (except th~ ~bject to 

35 U.S.C. 212) shall contain the clause 

found in $ 401.14(a) with such modifications and tailoring as authorized or 

required elsewhere in tMs part However, a funding agreement maY contain alternative provisions­

(1) When the con~r is not loca& 

ed in the United States or does not 

have a place of busine located in the 

United States or is subject to the control of a foreign government or 

(2) In exceptional circWM@lwhen it is determined by the SgencY 

that restriction or eifrnination of the 

right to retain title to any sub@ct @ 

vention will better promote the poficy 

and objectives of ChaRter la of ~~e 

35 of the United States Code%or 

(3) When it is determined by a ffovernment authority which is autho~ 

by statute or executive order to conduct foreign intelligence or coun**­

telligence activities that the restri~ 

tion or elimination of the right to 

retain title to any subject mven~on b 

necessary to protect the sectitY to 

such activities. or 

(4) When the fUnding agreement’­ ‘eludes the operation of the govemrnent-owned. contractor+pemted f*flitY of the Department of Energy P~­

mMilY dedicated to that Department’s naval nuclear propulsion or wea~~ 

related programs and ~ f~” 

A-5

agreement Mnitations under this subparagraph on the contractor’s right to 

elect title to a subject invention are 

limited to inventions occurring under 

the above two Programs. 

(b) When an agency exercises the 

exceptions at * 401.3(a)(21 or (3), it 

shall use the standard clause at 

$ 401.14(a) with oniy such modifications as are n~ to address the 

exceptional circumstances or concerns 

which led to the use of the exception. 

For example, if the justification relates to a Particular field of use or 

market, the clause might be modified 

along lines similar to those described 

in $ 401.14(b). In anY event, the clause 

should provide the contractor with an 

opportunity to receive greater rights

in accordance with the procedures at 

$401.15. When an agency justifiesand 

exercises the exception at # 401.3(a)(2) 

and uses an alternative provision in 

the funding agreement on the basis of 

nationai security. the provision shall 

provide the contractor with the right 

to elect ownership to any invention 

made under such funding agreement 

as provided by the Standard Patent 

Rights Clause found at $ 401.14(a) if 

the invention is not classified by the 

agency within six months of the date 

it is reported to the agency, or within 

the same time period the Department 

of Energy does not, as authorized by 

regulation, law or Executive order or 

implementing regulations thereto, prohibit unauthorized dissemination of 

the invention. Contracts in support of 

DOE’s naval nuclear propulsion program are exempted from this para­ maph.

(c) When the Department of Energy

exercises the exception $401.3(a)(4), it shall use the ciawa~ 

Prescribed at Q401.14(b) or substitute 

thereto with such modification and 

tailoring as authorised or required 

eIsewhere in this Part. 

(d) When a funding agreement involves a series of separate task orders, 

an agency may apply the exceptions at 

$401.3(a)(2) or (3) to individual task 

orders. and it may structure the contract so that modified patent rights 

provisions will ap~ly to the task order 

even though the clauses at either 

$401.14(a) or (b) are applicable to the 

rema~der of the work. Agenciesare 

authorized to negotiate such modified 

provisions with respect to task orders 

added to a funding a$meement after its 

initial award. 

(e) Before utilizing anY of the excew 

tio~ in # 401.3(a) of this s~tion, the 

agency shail PrePare a written determination, including a statement of 

facts supporting the determination, 

that the conditions identified in the 

exception exist. A separate statement 

of facta shall be prepared for each exceptional circumstances determination, except that in appropriate -es 

a single determina tion may apply to 

both a funding agreement and anY 

subcontracts issued under it or to anY 

funding agreement to which such an 

exception is applicable. In C=S when 

s 401.3(a)(2) is uae& the detemtion 

shall aiao include an analysis justifying the determination. Th~ *Ys* 

should address with specificity how 

the alternate provisions will better 

achieve the objectives set forth in 35 

U.S.C. 200. A copy of each determination, statement of facts, and. if appli­ cable, anaiyais shall be PrOmPtiY Providedto the contractor or prospective 

contractor along with a notification to 

the contractor or prospective contractor of its rights to appeal the determination of the exception under 35 

U.S.C. 202(b)(4) and 5401.4 of this 

part. (f) Except for determinations under 

5 401.3(a)(3). the agency shall also pro- vide copies of each determination, 

statement of fact. and analysis to the 

Secretary. These shall be sent within 

30 days after the award of the funding 

agreement m which they Per@~. 

Copies shall also be sent to the Chief 

Counsei for Advocacy of the Small 

Business Adrnidatration if the funding agreement is with a small business 

firm. If the Secretary of Commerce 

beiieves that anY individual determination or pattern of determinations is 

contrary to the policies and objectives of this chapter or otherwise not in 

conformance with this chapter, the 

Secretary shall so advise the head of 

the agency concerned and the Administrator of the Office of Federal Procurement Pol.icY and recommend corrective actions. 

(g) To assist the Comptroller General of the United States to accomplish 

A-6

$401.4 

his or her responsibilities under 35 

U.S.C. 202, each Fecierai agency that 

enters into any funding agreements with nonprofit organizations or smail 

business firms shall accumulate and, 

at the request of the Comptroller General, provide the Comptroller General 

or his or her duly authorized reRresencative the total number 01 prime 

agreements entered into with small 

business firms or nonprofit organizations that contain the paLent rignts 

ciause in this part or under OMB Circular A-124 for each fiscal year beginning with October 1, 1982. 

(h) To qualify for the standard 

ciause, a prospective contractor may 

be required by an agency to certify 

that it is either a smail business firm 

or a nonprofit organization. If the 

agency has reason to question the 

status of the prospective contractor as 

a small business firm, it may file a protest in accordance with 13 CFR 121.9. 

If it questions nonprofit status, it may 

require the prospective contractor to 

furnish evidence to establish its status 

= a nonprofit organization. 

5401.4 Contractorappeals of exceptions. 

(al In accordance with 35 U.S.C. 

202(b)(4) a contractor has the right to 

an administrative review of a determination to use one of the exceptions at 

$ 401.3(a) (1) through (4) if the contractor believes that a determination 

is either contrary to the policies and 

objectives of this chapter or constitutes an abuse of discretion by the 

agent y. Paragraph (b) of this section 

specifies the procedures to be followed 

by contractors and agencies in such 

cases. The ~ertion of such a claim by 

the contractor shall not be used as a 

basis for withholding or delaying the 

award of a funding agreement or for 

suspending performance under an 

award. Pending final resolution of the 

claim the contract may be issued with 

the patent rights provision proposed 

by the agency; however. should the 

final decision be in favor of the contractor. the funding agreement will be 

amended accordingly and the amendment. made retroactive to the effective 

date of the funding agreement. 

(b)(1) A contractor may armeal a determination by provi~ing- written 

notice to the agency within 30 working 

37 CFR Ch. IV (7-1-92 Edition) 

days from the time it receives a copy 

of the agencY’s determination, or 

within such longer time as an agency 

may specifY in its regulations. The 

contractor’s notice should specifically 

identify the basis for the appeal. (2) The appeal shall be decided by 

the head of the agencY or by his/her 

designee who is at a levei above the 

person who made the determination. 

If the notice raises a genuine dispute 

over the materiai facts. the head of 

the agency or the designee shall undertake, or refer the matter for, factfinding. 

(3) Fact-finding shall be conducted 

in accordance with procedures established by the agency. Such procedures 

shall be as informal u practicable and 

be consistent with principles of fundamental fairness. The procedures 

should afford the contractor the opportunity to appear with counseL 

submit documentary evidence, present 

witnesses and confront such persons ., as the agency may rely upon. A transcribed record shall be made and shall 

be available at cost to the contractor 

upon request. The requirement for a 

transcribed record may be waived by 

mutual agreement of the contractor 

and the agency. 

(4) The off icial conducting the factfinding shall prepare or adopt written 

findings of fact and transmit them tO 

the head of the agency or dm~ee 

promptly after the conclusion of the 

fact-finding proceeding aiong ~~ a 

recommended decision. A COPYof the 

findings of fact and recommended decision shall be sent to the contractor 

by registered or certified mail. 

(5) Fact-finding should be comPle~ 

within 45 working days from the ** 

the agency receives the contra@@s 

written notice. 

(6) When fact-finding h= been @nducted, the head of the agencY or d* 

ignee shall base his or her decision on 

the facts found. together with ~Y ~“ 

gUment submitted by the contrScWro 

agency officials or any other ~0--

tion in the administrative record. In 

c=es referred for fact-f~tigt the 

agency head or the designee -y 

reject only those facts that have been 

found to be cieariY erron~wo but 

mUStexplicitly state the rejection ~ 

indicaLe the bxk for the conA-7

Department of Commerce 

finding.
The agency head or the designee may hear oral arguments after 

fact-finding provided that the contractor or contractor’s attorney or representative is present and given an opportunisty to make arguments and rebuttal. The decision of the agency 

head or the designee shall be in writing and, if it is unfavorable to the contractor shall include an explanation of 

the basis of the decision. The decision 

of the agency or designee shall be 

made within 30 working days after 

fact-finding or, if there was no factfinding, within 45 working days from 

the date the agency received the contramor’s written notice. A contractor 

adversely affected by a determination 

under this section may, at any time 

within sixty days after the determination is issued. file a petition in the 

United States Claims Court, which 

shall have jurisdiction to determine 

the appeal on the record and to 

affirm, reverse, remand, or modify as 

appropriate, the determination of the 

Federal agency. 

5401.5 Modification and tailoring of 

ciauses. 

(a) Agencies should complete the 

blank in paragraph (g)(2) of the 

clauses at $401.14 in accordance with 

their own or applicable government- wide regulations such as the Federal 

Acquisition Regulation. In grants and 

cooperative agreements (and in contracts. if not inconsistent with the 

Federal Acquisition Regulation) agenc~es wishing to apply the same daUSe 

to all subcontractors as is applied to 

the contractor may delete paragraph 

~g)(2) of the clause and delete the 

words “to be performed by a small 

business firm or domestic nonprofit 

organization” from paragraph (g)(1). -Also, if the funding agreement is a 

grant or cooperative agreement, para­

.~aph (g)(3) may be deleted. When 

either paragraph (g)(2) or paragraphs {g) ( 2) and (3) me deleted, the remain­

!ng paragraph or paragraphs should 

De renumbered appropriately. 

~b ) Agencies should complete paragraph (l). “’Communications”. at the 

end of the clauses at $ 401.14 by designating a central point of contact for 

communications on matters relating to 

!he clause. Additional instructions on 

$401.5 

communications may also be included 

in paragraph f1). 

(c) Agencies may replace the italicized words and phrases in the clauses 

at s 401.14 with those aPprop*te to 

the particular funding a-cement. For 

example, “contracts” could be re­

@ced by “grant.” “contwtor” W 

“grantee.” and “contracting officer” 

by “grants officer.” Depending on its 

use, “Federal agency” can be replaced 

either by the identification of the 

agency or by the specification of the 

particular office or official within the 

agency. 

(d) When the agency head or duly 

authorized designee determines at the 

time of contracting with a small business firm or nonprofit organization 

that it would be in the national interest to acquire the right to sublicense 

foreign governments or international 

organizations pursuant to any existing 

treaty or international agreement. a 

sentence may be added at the end of 

paragraph (b) of the clause at 5401.14 

as follows 

This licensewill include the right of the 

government to sublicense foreign govemmenta. their nationtds. and timmatio~ organizations. pursuant to the following treaties or international agreements: 

The blank above should be completed with the names of applicable existing 

treaties or international agreements. 

agreements of cooperation, memoranda of understanding, or simil~ ~­ rangements, including militarY afmeements relating to weapons development and production. The above language is not intended to apply to treaties or other agreements that are in 

effect on the date of the award but 

which are not listed. Alternatively, 

agencies may use substantially similar 

language relating the government’s 

rights to specific treaties or other 

agreements identified elsewhere in the 

funding agreement. The language maY 

also be modified to make clear that 

the rights granted to the foreign government. and its nationals or an international organization may be for additional rights beyond a license or sublicense if so required by the app~i~ble 

treaty or international agreement. For 

example. in some exclusive licenses or 

A-8

37 CfR Ch. IV (7-l-92 Edition) 

even the assignment of title in the foreign country involved might be required. Agencies may also modify the 

language above to provide for the 

direct licensing by the contractor of 

the foreign government or international organization. 

(e) If the funding agreement involves performance over an extended 

Period of time, such as the typical 

funding agreement for the operation 

of a government-owned facility, the 

following language maY also be added: 

The tzg~ reserves the right to urdlaterally amend thjs findtng agnwment to identify specific treatiesor international agreements entered Into or to be entered inta by 

the gove~ent after the effective date of 

this junding a~ t and effectuate those 

license or other rights which are necemmry 

for the gove~ent to meet its obligations 

to foreign governmen~ their nationala and 

international o~ons under such treaties or international agreementswith respect to subject inventions made after the 

date of the amendment. 

(f) Agencies may add additional subparagraphs to paragraph (f) of the 

clauses at ~401.14 to require the contractor to do one or more of the following 

(1) Provide a report prior to the 

close-out of a funding agreement l~t. 

irm all subject inventions or stating that there were none. 

(2) Provide, upon request. the filing date, serial number and title; a copy of 

the Patent application; and patent number and issue date for any subject 

invention in any country in which the 

contractor has applied for patenti. 

(3) Provide periodic (but no more 

frequently than annual) listings of all 

subject inventions which were disciosed to the agency during the period 

covered by the report. 

(g) If the contract is with a nonprofit organization and is for the operation 

of a government-owned, contractor-op­ erated facility, the following will be 

substituted for paragraph (k)(3) of the 

clause at $ 401.14(a): 

(3) After payment of patenting costs, licensing costs, paymen~ to inventors. and 

other expenses incidental to the administration of subject inventions, the balance of 

any royalties or income earned and retained 

by the contractor during any fiscai year on 

subject inventions under this or any successor contract containing the same requirement. up to any amount equal to five percent of the budget of the fac~tY for that 

fiscal year, shall be used by the contractor 

for scientific research. development and 

education comustent mth the research and 

development nusaion and objectives of the 

facility, including activities t~t incmaae 

the licenstng potential of other inventions 

of the facility. If the balance exceeds five 

percent. 75 percent of the excets above five 

percent shall be paid by the contractor to 

the Wasury of the United States and the 

remaining 25 percent shall be used by the 

contnzcfar only for the same purposes sa de= 

scribed above. To the extent it providesthe 

most effective technology transfer. the licensing of subject inventions shall be administered by contractoremplo$weson location at the facility. 

(h) If the contract is for the operation of a government-owned facility, 

agencies maY add the follo~ at the 

end of paragraPkt (f) of the c~use at 

3401.14(a): 

(5) The contractor shall establiah and 

matntatn active and effective procedures to 

ensure that subject inventions are promptly 

identified and timely disclosed and shall 

submit a description of the Proceduresta 

the contnzctinao.tficerso that the contrac& 

ing officer may evaluate and determine 

their effectiveness. 

5401.6 Exercise of march-in rights. 

(a) The following procedures shall 

govern the exercise of the march-in 

rights of the agencies set forth in 35 

U.S.C. 203 and paragraph (j) of the 

clause at 3401.14. 

(b) Whenever an agency receives ilIformation that it believes might warrant the exercise of march-in righ@ 

before initiating anY march-ti P* 

ceeding, it shall notify the cont~r 

in writing of the information and request informal written or oral comments from the contractor as We~ * 

information relevant to the matter. M 

the absence of any comments from the 

contractor within 30 days, the ag~cy 

maY, at its discretion. proceed with the 

procedures below. If a comment E re 

ceived within 30 days, or later if the 

agency has not initiated the Pdures below, then the agencY s~ 

within 60 days after it receives the 

comment. either initiate the Pdures below or notify the cont~mr’ 

in writing, that it will not Pursue 

A-9

Dapartmont of Commwca 

march-in rights on the basis of the 

available information. 

(c) A march-in proceeding shall be 

initiated by the issuance of a written 

notice by the agency to the contractor 

and its assignee or exclusive licensee, 

as applicable and if known to the 

agency, stating that the agency is considering the exercise of march-in 

rights. The notice shall state the reasons for the proposed march-in in 

terms sufficient to Put the contractor 

on notice of the facts upon which the 

action would be based and shall speci­ fy the field or fields of use in which 

the agency is considering requiring licensing. The notice shall advise the 

contractor (assignee or exclusive licensee) of its right& as set forth in 

this section and in anY supplemental 

agency regulations. The determination 

to exercise march-in rights shall be 

made by the head of the agency or his 

or her designee. 

(d) Within 30 days after the receipt 

of the written notice of march-in, the 

contractor (assignee or exclusive licensee) may submit in person, in writing,or through a representative, information or argument in opposition to 

the proposed march-in, including any 

additional specific information which 

raises a genuine dispute over the material facts upon which the march-in is 

based. If the information presented 

raises a genuine dispute over the material facts, the head of the agency or 

designee shall undertake or refer the 

matter to another official for factfinding. 

(e) Fact-f iriding shall be conducted 

in accordance with the procedures established by the agency. Such procedures shall be as informal as practicable and be consistent with principles 

of fundamental fairness. The proce­ dures should afford the contractor the 

opportunity to appear with counsel, 

submit documentary evidence, present 

Witnesses and confront such persons 

Ss the agency may present. A transcribed record shall be made and shall 

be available at cost to the contractor 

upon request. The requirement for a 

transcribed record may be waived by 

mututi agreement of the contractor 

md the agency. hy portion of the 

-h-in proceeding, including a factfind~g he-g that involves test~o. 

~ 401.6 

ny or evidence relating to the utilization or efforts at obtaining utilization 

that are being made by the contractor, 

its assignee, or licensees shall be closed 

to the public. including potential licensees. In accordance with 35 U.S.C. 

202(c)(5), agencies shall not disclose 

anY such information obtained during 

a march-in proceeding to persons outside the government except when such 

release is authorized by the contractor 

(assignee or licensee). 

(f) The official conducting the factfinding shall prepare or adopt mtt%n 

findings of fact and transmit them to 

the head of the agency or designee 

promptly after the conclusion of the 

fact-finding proceeding along with a 

recommended determination. A COPY 

of the findings of fact shall be sent to 

the contractor (assignee or exclusive 

licensee) by registered or certified 

mail. The contractor (assignee or exclusive licensee) and agency representatives will be given 30 days to submit 

written arguments to the head of the 

agency or designee: and, upon request 

by the contractor oral arguments will 

be held before the agency head or designee that will make the final determination. 

(g) In cases in which fact-finding has 

been conducted, the head of the 

agency or designee shall base his or 

her determination on the facts found. 

together with any other information 

and written or oral arguments submitted by the contractor (assignee or exclusive licensee) and agent y representatives, and any other information in 

the administrative record. The consistency of the exercise of march-in rights 

with the policy and objectives of 35 

U.S.C. 200 shall also be considered. In 

csses referred for fact-finding, the 

head of the agency or designee maY 

reject only those facts that have been 

found to be cleariy erroneous, but 

must explicitly state the rejection and 

indicate the basis for the contrarY 

finding. Written notice of the determination whether march-in rights will be 

exercised shall be made by the head of 

the agency or designee and sent to the 

contractor (u4signee of exclusive licensee ) by certified or registered mail 

within 90 days after the completion of 

fact-finding or 90 days after oral arguments, whichever is later, or the proA-10

ceedings will be deemed to have been 

ternunated and thereafter no marchin based on the facts and rew$onsupon which the proceeding was initiated 

may be exercised. 

(h) An agency may, at anY time, terminate a march-in proceeding if it is 

satisfied that it does not wish to exercise march-in rights. (i) The procedures of this part shall 

also apply to the exercise of march-in 

rights against inventors receiving title 

to subject inventions under 35 U.S.C. 

202(d) and. for that purpose, the term 

4”contractor” ss used in this section 

shall be deemed to include the inventor. 

(j ) An agency determination unfat’orable to the contractor (sssignee or 

exclusive licensee) shall be held in 

abeyance pending the exhaustion of 

appeaAs or petitions filed under 35 

U.S.C. 203(2).

(k) For purposes of this section the 

term exclusive licemee includes a par­ tially exclusive licensee. 

(1) Agencies are authorized to issue 

supplemental procedures not inconsistent with this part for the conduct 

of march-in proceedings. 

9 JO1.7 Small business preference. 

(a) Paragraph (k)(4) of the clauses 

at $401.14 Implements the small business preference requirement of 35 

U.S.C. 202(c)(7)(D). Contractors are 

expected to use efforts that are reasonable under the circumstances to attract small business licensees. They 

are also expected to give small business firms that meet the standard outlined in the clause a preference over 

other applicants for licenses. What 

constitutes reasonable efforts to atmact small business licensees will vary with the circumstances and the 

nature, duration, and expense of efforts needed to bring the invention to 

the market. Paragraph (k)(4) is not intended, for example, to prevent nonprofit organizations from providing 

larger firms with a right of first refusal or other options in inventions that 

relate to research being supported under long-term or other arrangements with larger companies. Under 

such circumstances it would not be resonable to seek and to give a preference to small business licensees. 

37 CFR Ch. IV (7-l-92 Edition) 

(b) Small business firms that believe 

a nonprofit orgamzation is not meeting its obligations under the clause 

may report their concerns to the Secretary. To the extent deemed appropriate, the Secretary will undertake 

informal investigation of the concern, 

and, if appropriate, enter into discussions or negotiations with the nonprofit organization to the end of improving its efforts in meeting its obligations under the clause. However, in 

no event will the Secretary intervene 

in ongoing negotiations or contractor 

decisions concerning the licensing of a 

spec~ic subject invention. AU the 

above investigations, discussions, and 

negotiations of the Secretary will be in 

coordination with other interested 

agencies. including the Small Business 

Administration, and in the case of a 

contract for the operation of a government-owned, contractor operated research or production facility, the Secretary wiil coordinate with the agency 

responsible for the facilitY Prior to 

any discussions or negotiations with 

the contractor. 

401.8 Reporting on utilization of subject 

inventions. 

(a) Paragraph (h) of the clauses at 

$401.14 and its counterpart in the 

clause at Attachment A to OMB CfrCUlar A-124 provides that agencies have 

the right to receive periodic reports 

from the contractor on utilization of 

inventiona. Agencies exercising tw 

right should accept such in.formatiom 

to the extent feasible. in the format 

that the contractor normally PrePares 

it for its own intemai purposes. The 

prescription of forms should be avoided. However. any forms or stanquestionnaires that are adopted by ~ 

agency for this purpose must coMP@ 

with the reciuirements of the PaPerwork Reduction Act. Copies sha * 

sent to the Secretary. 

(b) In accordance with 35 U.S.C. 

202(c) (5) and the terms of the clauses 

at S 401.14, agencies shall not ~~~ such information to personS Ou@de 

the government. Contractors - cOntinue to provide confidential ~~ 

to help prevent inadvertent rel~ 

outside the agency. 

A-II

Dopartmont of Commorco 

~ 401.9 Retention of rigMs by contractor 

employee inventor. 

Agencies which allow an empioYee/ 

inventor of the contractor to retain 

rights to a subject invention made 

under a funding agreement with a 

small business firm or nonprofit organization contractor, as authorized by 

35 U.S.C. 202(d), will impose upon the 

inventor at least those conditions that 

would apply to a small business firm 

contractor under paragraphs (d)(1) 

and (3): (f)(4); (h): (i): and (j) of the 

clause at $ 401.14(a). 

5401.10 Government assignment to contractor of righti in invention of government Employee. 

In any case when a Federal employee is a co-inventor of any invention 

made under a funding agreement with 

a small business firm or nonprofit organization and the Federal agency employing such co-inventor transfers or 

reassigns the right it has acquired in 

the subject invention from its employee to the contractor as authorized by 

35 U.S.C. 202(e), the assignment will 

be made subject to the same conditions as apply to the contractor under 

the patent rights clause of its funding 

agreement. Agencies may add additional conditions as long as they are 

consistent with 35 U.S.C. 201-206. 

5401.11 Appeals. 

(a) As used in this section. the term 

standani clause means the clause at 

$401.14 of this part and the clauses 

previously prescribed by either OMB 

Circular A-124 or OMB Bulletin 81-22. 

(b) The agency off icial initially authorized to take any of the following 

actions shall provide the contractor 

with a written statement of the basis 

for his or her action at. the time the 

action is taken. including any relevant 

facts thaL were relied upon in Laking 

:he action. 

( 1) A refusal to grant an extension 

under paragraph (c)( 4 ) of the standard 

clauses. 

(2) A request for a conveyance of 

title under paragraph (d) of the standard clauses. 

(3) A refusal to grant a waiver under 

paragraph (i) of the standard clauses. 

g 401.12 

(4) A refusal to approve an assignment under paragraph (k)(1) of the 

standard clauses. 

(5) A refusal to grant an extension 

of the exclusive license period under” 

paragraph (k)(2) of the clauses prescribed by either OMB Circular A-124 

or OMB Bulletin 81-22. 

(c) Each agency shall establish and 

publish procedures under which artY 

of the agency actions listed in paragraph (b) of this section may be appealed to the head of the agency or 

designee. Review at this level shall 

consider both the factual and legai 

basis for the actions and its consistency with the policy and objectives of 35 

U.S.C. 200-206. 

(d) Appeals procedures established 

under paragraph (c) of this SeCtiOn 

shall include administrative due Process procedures and standards for factfinding at least comparable to those 

set forth in $401.6 (e) through (g) 

whenever there is a dispute as to the 

factual basis for an agency request for 

a conveyance of title under paragraph 

(d) of the standard clause, including 

anY dispute u to whether or not an invention is a subject invention. 

(e) To the extent that any of the actions described in paragraph (b) of 

this section are subject to appeal 

under the Contract Dispute Act. the 

procedures under the Act will satisfy 

the requirements of paragraphs (c) 

and (d) of this section. 

S 401.12 Licensing of background patent 

rights to third parties. 

(a) A funding agreement with a 

small business firm or a domestic nonprofit organization will not contain a 

provision allowing a Federal agency to 

require the licensing to third parties 

of inventions owned by the contractor 

that are not subject inventions unless 

such provision has been approved by 

the agency head and a written justification has been signed by the agency 

head. Any such provision will clearlY 

state whether the licensing may be required in connection with the practice 

of a subject invention. a specificaUY 

identified work object, or both. The 

agency head may not delegate the authority to approve such provisions or 

A-12

$401.13 

tO sign the justification required for 

such provisions. 

(b ) A Federal agency will not require 

the licensing of third parties under 

any such provision unless the agency 

head determines that the use of the 

invention by others is necessary for 

the practice of a subject invention or 

for the use of a work object of the 

funding agreement and that such 

action 1s necessary to achieve practical 

application of the subject invention or 

work object. Any such determination 

will be on the record after an opportunity for an agency hearing. The contractor shall be given prompt notification of the determination by certified 

or registered mail. Any action commenced for judicial review of such determination shall be brought within 

sixty days after notification of such 

determination. 

5401.13 Administration of patent righta 

clauses. 

(a) In the event a subject invention 

is made under funding agreements of 

more than one agency, at the request 

of the contractor or on their own initiative the agencies shall designate one 

agency as responsible for administration of the rights of the government in 

the invention. 

(b) Agencies shall promptly grant, 

uiiiess there is a significant reason not 

to. a request by a nonprofit organization under paragraph (k)(2) of the 

clauses prescribed by either OMB Circular A-124 or OMB Bulletin 81-22 inasmuch as 35 U.S.C. 202(c)(7) has 

since been amended to eliminate the 

limitation on the duration of exclusive 

licenses. Similarly, unless there is a 

significant reason not to, agencies 

shall promptly approve an assignment 

by a nonprofit organization to an organization which has as one of its primary functions the management of inventions when a request for approval 

has been necessitated under paragraph (k)(1) of the clauses prescribed 

by either OMB Circular A-124 or 

OMB Bulletin 81-22 because the 

patent management organization is 

engaged in or holds a substantial interest in other organizations engaged

in the mam.famureor sale of products 

or the use of processes that might utilize the invention or be in competition 

37 CFR Ch. IV (7-1-92 Edition) 

with embodiments of the invention. As 

amended. 35 U.S.C. 202(c J(?) no longer 

contains this limitation. The Policy of 

this subsection should also be followed 

in connection with similar approvals 

that may be required under Institutional Patent Agreements, other 

patent rights clauses. or waivers that 

predate Chapter 18 of Title 35, United 

States Code. 

(c) The President’s Patent Policy. 

Memorandum of February 18, 1983, 

states that agencies should Protect the 

confidentiality of invention disclosure, 

patent applications. and utilization reports required in performance or in 

consequence of awards to the extent 

permitted by 35 U.S.C. 205 or other 

applicable laws. The following requirements should be followed for funding 

agreements covered by and predating 

this part 401. 

(1) To the extent authorized by 35 

U.S.C. 205, agencies shall not disclose 

to third parties pursuant to requests 

under the Freedom of Information Act 

(FOIA) anY information disclosing a 

subject invention for a reasonable 

time in order for a patent application 

to be filed. With respect to subject inventions of contractors that are smalI 

business firms or nonprofit organizations, a reasonable time shall be the 

time during which an initial patent ap 

plication may be filed under P* 

graph (c) of the standard clause found 

at $ 401.14(a) or such other ClaUSe maY 

be used in the funding agreem~~ 

However, an agency may disclose SU* 

subject inventions under the ~- at 

it-s discretion, after a contractor ti 

elected not to retain title or after the 

time in which the contractor is required to make an election if the @ntractor has not made an el~~on 

within that time. SimilarlY, an agen~ 

maY honor a FOIA request at MS* 

cretion if it finds that the same ~or. 

mation has previously been pub~~ 

by the inventor, contractor, or otherwise. If the agency plans to ffle ‘x 

when the contractor has not elmti 

title. it may, of course. cont~ue m 

avail itself of the authoritY of 35 

U.S.C. 205. 

(2) In accordance with 35 U.S.C. ~“ 

agencies shall nOL disclose or relz 

fOr a period of 18 mont~ from ‘e 

filing date of the appi.ication @ m 

A-13

D~partmont of Commorce 

parties pursuant to requests under the 

Freedom of Information Act or otherwise copies of any document which the 

agency obtained under this clause 

which is part of an application for 

patent with the U.S. Patent and 

Trademark Office or any foreign 

patent office filed by the contractor 

(or its assignees. licensees. or empioy ­

ees ) on a subject invention to which 

the contractor has elected to retain 

title. This prohibition does not extend 

to disclosure to other government 

agencies or contractors of government 

agencies under an obligation to maintain such information in confidence. 

(3) A number of agencies have policies to encourage public dissemination 

of the results of work supported by 

theagency through publication in government or other publications of technical reports of contractors or others. 

In recognition of the fact that such 

publication. if it included descriptions 

of a subject invention could create 

bars to obtaining patent protection. it 

is the po!icy ef the executive branch 

that agencies will not include in such 

publication programs copies of disclosures of inventions submitted by small 

business firms or nonprofit organizations,
pursuant to paragraph (c) of the 

standard clause found at $ 401.14(a), 

except that under the same circumstances under which agencies are authorized to release such information 

pursuant to FOIA requests under 

paragraph (c)( 1) of this section. agencies may publish such disclosures. 

(4) Nothing in this parawaph is intended to Rrechlde agencies from including in the publication activities described in the first sentence of paragraph (c)( 3). the publication of materials describing a subject invention to 

the extent such materials were provided as part of a technical report or 

other submission of the contractor 

which were submitted independently 

of the requirements of the patent 

rights provisions of the contract. However, if a small business firm or nonProfit organization notifies the agency 

that a particular report or OtherSub. 

mission contains a disclosure of a subIect invention to which it has elected 

title or may elect. title, the agency 

sh~l use reasonable efforts to restrict 

lt,.spublication of the material for six 

$401.14 

months from date of its receipt of the 

report or submission or. if earlier. 

until the contractor has filed an initiai 

patent application. Agencies, of 

course, retain the discretion to delay 

publication for additional periods of 

time. 

(5) Nothing in this para=aph is intended to limit the authority of agencies provided in 35 U.S.C. 205 in circumstances not specifically described 

in this paragraph. 

5401.14 Standard patent rights clausea. 

(a) The following is the standard 

patent rights clause to be used as specified in $ 401.3(a). 

Patent Rights (Small Business Finns and 

Nonprofit Organtsationa) 

(a) Def Initiona 

(I) fnvention means anY invention or d~­

covery which is or may be patentable or 

otherwise protectable under Title 35 of the 

United States Code. or anY novei VSrietY of 

plant which is or may be protected under 

the Plant Variety Protection Act (7 U.S.C. 

2321 et seq.). 

(2) Subject invention means any invention 

of the contractor conceived or first sctuaUY 

reduced to practice in the performance of 

work under this contrac~ provided that in 

the caseof a varietyof plant.the dateof determination(ss defined in section 41(d) of 

the Plant Variety Protection Act. 7 U.S.C. 

2401(d)) must also occur during the period 

of contract performance. 

(3) Practical Application means to mariufacture in the c- of a composition or product, to practice in the case of a process or 

method. or to operate in the c=e of a machine or system. and. in each c=e. under 

such conditions as to establish that the invention is being utilized and that its benefits are. to the extent permitted by law or 

government regulations. available to the 

public on reasonable terms. 

(4) Made when used in relation to any Invention means the conception or first actual 

reduction to practice of such invention. 

(5) Small Business Finn means a small 

business concern as defined at section 2 of 

Pub. L. 85-536 (15 U.S.C. 632) and implementing regulations of the Administrator of 

the Small Busu’iess Admmistratlon. For the 

purpose of this ciause. the size standards for 

small business concerns revolved in governmentprocurement and subcontracting at 13 

CFR 121.3-8 and 13 CFR 121.3-12, respecuvely, wdl be used. 

(6) Nonprolit Organzsatlon mew a University or other mstitutlon of higher education or an orgamzmon of the type deA-14

~ 401.14 

scribed in section 501(c)(3) of the Internal 

Revenue Code of 1954 (26 U.S.C. 501(c) and 

exempt from taxation under seCtlOn 501(a) 

of the Internal Revenue Code (25 U.S.C. 

501(a) ) or any nonprofit scientific or educational organisation qualified under a state 

nonprofit organisation statute. 

(b) Allocation of Principal Rights 

The Contractor may retain the entire 

right. title, and interest throughout the 

world to each subject invention subject to 

the provisions of this clause and 35 U.S.C. 

203. With respect to any subject invention 

in which the Contractor retaina title, the 

Federal government shall have a nonexclusive. nontransferable, irrevocable. paid-up license to practice or have practiced for or on 

behalf of the United States the subject invention throughout the world. 

(c)	 Invention Disclosure, Election of Title 

and Filing of Patent Application by Contractor 

(1) The contufor will disclose each subject invention to the Federai Amncv within 

two monthsafter the inventordiscloses it in 

vmiting to contnzctor persomel responsible 

forpatent matters.The disclosureto the 

agency shall be in the form of a written 

report and shall identify the contract under 

which the invention was made and the 

inventor@). It shall be sufficiently complete 

in technical detail to convey a clear understanding to the extent known at the time of 

the disclosure. of the nature, purpose, operation. and the physical, chemical. biological 

or electrical characteristics of the invention. 

The disdosure shall also identify anY publication, on sale or public use of the invention 

and whether a manuscript describing the invention has been submitted for publkation 

and. M so. whether it has been accepted for 

publication at the time of disclosure. In addition. after disclosure to the agency, the 

Contractor will promptly notify the agenq 

of the acceptance of any manuscript describing the invention for publication or of 

any on sale or public use planned by the 

contractor. 

(2) The Contractor will elect in writing 

whether or not to retain title to any such invention by notifying the Federal agency 

within two years of discluure to the Federal 

agenm. However. in any csge where publication. on sale or public use has initiated the 

one year statutory period wherein valid 

patent protection can still be obtained in 

the United States. the period for election of 

title may be shortened by the agencv to a 

date that is no more than 60 days prior to 

the end of the statutory period. 

(3) The contractor will file its initial 

patent application on a subject invention to 

which it elects to retain titIe within one 

year after election of title or. if earlier. prior 

37 CFR Ch. IV (7-l-92 Edition) 

tothe end of anY statutorY Petiod wherein 

valid patent Protection can be obtained in 

the United States after a Publication on 

sale, or public use. The contmctor uWI file 

patent applications in additional countries 

or international patent offices within either 

ten months of the corresponding initial 

patent application or six months from the 

date penmssion is granted W the Commissioner of Patents and Tradernari=to file 

foreign patent applications where such 

filing has been prohibited by a Secrecy 

Order. 

(4) Requests for extension of the time for 

disclosure. election. and filing under subparagraphs (1), (2). and (3) maY. at the discretion of the agencv, be granted. 

(d) Conditions When the Government MaY 

Obtain Title 

The contractor will convey to the Federaf 

agencw upon written reuuest. title to any subjectinvention— 

(1) If the contractor fails to discloseor 

elect title to the subject inventionwithin 

the times specified in (c). above, or elects 

not to retaintitle$providedthat the amncw 

maYonly request title within 60 days after 

learningof the failure of the contractorto 

dischse or elect within the specified thnea. 

(2) In those countries in which the contractor fails to file patent applications 

within the times specified in (c) abmm Provided. however. that if the contractor haa 

filed a patent applicationin a country~~r 

the times specified in (c) above. but prior to 

its receipt of the written request of the Federal amncv, the contractor shall ~nt~ue ~ 

retain title in that country. 

(3) In anY country m which the cont?ucfor 

decides not to continue the prosecution of 

anY application for. to pay the maintenance 

fees on. or defend in reexamination or oP* 

sition proceeding on. a patent on a sublect 

invention. 

(e) Minimum Rights to ContnuXor and 

Protection of the Contractor Right to Pile 

(1) The contractor will retain a nonexclusive royalty-free license throughout the 

world in each subject invention to which 

the Government obtains title. excePt K the 

contractor fails to disclose the invention 

within the times specified in (c), above. The 

contractor’s license extends to its domti 

subsidiary and affiliates, if anY. tith~ the 

COrpO17W3structure Of which the COntti@ 

is a partY and includes the right to et 

sublicenses of the same scope to the ex~t 

the con&actor w= legally obligated W do SO 

at the tune the contract was awarded. The 

license E transferable only wnh the aPPmv” 

al of the Fe&rat agencv except when ~ ferred to the sucesor of that P-Y of ‘e 

A-15

DopaWmomtof Commuco 

contractor’s business to which the invention 

pertains.

(2) The contractor’s domestic license maY 

berevokedor modified by the junding Federai agenq to the extent n~ to 

achieve expeditious practical application of 

the subject invention pursuant to an appli­ cation for an exclusivelicensesubmitted in 

accordance with applicable provisions at 37 

CFR Part 404 and agency licensing re@ations(ifany).‘l%islicense will not be revoked in that field of use or the geotrraphi” 

cal areas in which the contractor has 

achieved practical application and continues 

tomake the benefits of the invention reasonably accessible to the public. The license 

in anY foreign country may be revoked or 

modified at the discretion of the hmdin9 

Federal amncv to the extent the contmctor, 

itslicensees. or the domestic subsidiaries or 

aff iliatea have failed to achieve practical application in that foreign country.

(3) Before revocation or modification of 

thelicense, the funding Federai agency will 

furrush the contnsdcw a written notice of 

itsintention W revoke or modify the llcense, 

and the contractor will be allowed thirtY 

days (or such other tkne as may be authorized by the funding Fe&ral agency for good 

cause shown by the contractor) after the 

notice w show cause why the license should 

not be revoked or modified. The contractor 

hasthe right to appeal, in accordance with 

applicable regulationa in 37 CFR Part 404 

and agency regulations (if any ) concerning 

the licensing of Government-owned inventions.any decision concerning the revocatIon or modification of the license. 

(f) Contractor Action to Protect the 

Government’s Interest 

( 1) The contractor agrees to execute or to 

have executed and promptly deliver co the 

Federal agencv all instruments necessary to 

(i) es~blish or COnfirm the rights the Government has throughout the world in those 

subject inventions to which the contractor 

eiects to retain title. and (ii) convey title to 

the Federal agency when requested under 

paragraph (d) above and to enable the government to obtain patent protection

throughout the world in that subject inven­ uon. 

(2) The contractor agrees to require, by 

umtten agreement. its employees. other 

:hanclerical and nontechnical employees, 

:0 disclose promptly in writing to peraomel 

:dentified as responsible for the administra­

:lon of patent matters and in a format suggested by the contractor each subject invention made under contract in order that the 

contractor can comply with the disclosure 

Provmons of paragraph (c), above, and to 

execute all papers necessary to file patent 

applications on SUbJeCt [nVentlOIYS ancf to establish the government’s rights m the sub­

:ect mvenuons. This disclosure format 

g 401.14 

should require, as a minimum. the informationrequired by (c)(1), above. The con&ractor shall instruct such emPloYees through 

employee agreements or other suitable educational Prcwrama on the ~PO~ce of reporting inventions m sufficient the to 

permit the filing of Pawnt aPPM=tions 

prior to U.S. or foreimt statutory bars. 

(3) The contractor will notify the Federat 

agencyof any decisions not to continue the 

prosecution of a patent application pay 

maintermnce fees, or defend in a reexamination or opposition Proce*g on a pa=~ ~ any country, not 1= th~ t~y *Ys 

before the expiration of the response period required by the relevant PaWnt office. 

(4) The contractor agrees to include. 

within the specification of anY United 

States patent applications and anY patent 

issuing thereon coverine a sublect ~ven~om 

the following statement. “~ ~ven~on 

was made with government SUPPOrt under 

(identify the contract) awarded by @e!MifY 

the Federal agency). The government hsa ce~ rights in the invention.” 

(g) Subcon­

(1) The contractor will include this clause. 

suitably modified to identifY the P_ies. in 

aIl subcontracts. regardless of tier, for experimental. developmental or research work 

to be performed by a small business firm or 

domestic nonprofit organization. The subcontractor will retain ail rights provided for 

the contractor in this clause. md the contractor will not. = Part of the conside~tion 

for awarding the subcontract. obmin righw 

in the subcontractor’s subject inventions. 

(2) The contractor wiU include in all other 

subcontracts. regardless of tier. for experimental developmental or research work the 

patent rights clause required bY (cite section 01 agencv impiem4rntin9 regrdatwns or 

FAR). 

(3) In the c~e of subcontracts. at anY tier. 

when the prime award with the Federal 

agencY w= a contract (but not a grant or 

cooperative agreement ). the aa?ncv. subcontractor, and the contractor agree that the 

mutual obligations of the parties created by 

this clause constitute a contract between 

the subcontractor and the Federal agencY 

with respect to the matters covered by the 

clause: provided, however, that nothing in 

this paragraph is intended to confer anY Jurisdiction under the Contract Disputes Act 

inconnection with proceedings under paragraph (j) of this clause. 

(h) Reporting on Utilization of Subject

Inventions 

The Contractor agrees to submit on rewest periodic reports no more frettuently 

thanannually on the utilization of a subject 

invention or on efforts aL ob~g such 

A-16

$401.14 

utilization that are being made by the contractor or its licensees or ~ignees. Such reports shall fnclude information regarding 

the status of developmenL date of first commerical sale or use. gross royalties received 

by the contractor. and such other data and 

information as the agency may reasonably 

specify. The contmctor also agrees m provide additional reports M maY be requested 

by the ag~ in connection with anY 

march-in proceeding undertaken by the 

agenm in accordance with P arasraph (j) of 

this clause. As required by 35 U.S.C. 

202(c)(5). the agency agrees it will not disclose such information to persons outside 

the government without permission of the 

contractor. 

(i)Preference for United States Xndustry 

Notwithstanding anY other provision of 

this clause. the contractor agreesthat neither it nor anY -ee will grant to anY 

person the exclusive right to use or sell any 

subject inventiona in the United States 

unless such person agrees that anY Products 

embodying the subject invention or produced through the use of the subject invention will be manufactured subatantiaIly in 

the United States. However. in indhriduai 

cases. the requirement for such an agreement may be waived by the Federal agency 

upon a showing by the contractor or lW assignee that reasonable but unsuccessful efforts have been made tQ grant licenses on 

similar terms to potential licensees that 

would be likely to manufacture substantiailY in the UnKed States or that under the 

circumstances domestic manufacture is not 

commericaily feasible. 

(j) March-in Rights 

The contnzctor agrees that with respect to 

any subject invention in which it has acquired title. the FederaJ agency has the 

right in accordance with the procedures in 

37 CFR 401.6 and any supplemental regulations of the agen~ to require the cont~ctor, an assignee or exclusive licensee of a 

subject invention to grant a nonexclusive, 

partially exclusive, or exclusive license in 

any field of use to a responsible applicant or 

applicants. upon terms that are reasonable 

under the circumstances, and if the contractor, arsignee, or exclusive licensee refuses 

such a request the FederaJ agency has the 

right to grant such a license itself if the 

Fedeml agency determines that: 

( 1) Such action is necessary because the 

contractor or assignee haa not taken. or ia 

not expected to take within a reasonable 

time, effective steps to achieve practical application of the subject invermon in such 

field of use. 

(2) Such action is n~ to allevtate 

heaith or safety needs which are not reason37 CFR ChOIv (7-l-92 q) 

ably satisfied by the contractor,~ ~ their licensees 

(3) Such action IS ne@saary @!neet*

quirements for public use specified by ~ 

eral regulations and such requirem~~ ~ not reasonably sawfied by the cone, 

esmgnee or li~ or 

(4) Such setion IS necesmry because ~. agreement recnured by Paragmp h (i) of u 

clause has not been obtatnedor waived~ because a licensee of the exclusive right @ 

use or sell anY subject invention in ~ 

United States IS m breach of such ~ ment. 

(k) Special Provisions fOr Contnzcf# w~ 

Nonprofit Organizations 

If the constructoris a nonprofit o~ 

tion. it agrees thau 

(1) Rights to a subject invention In the 

United States may not be =fwEned ‘ Wuhout 

the approval of the Federai agencu, except 

where such mutignment iamadetaan~ 

ntition which has es one of its Prlmavy 

functions the manumnent of inventions. 

provided that such assignee will be subject 

to the same provisions es the contnzeton 

(2) The contmctor willshare royaltiesml. 

lected on a subject invention with the intor, including Federal employee xm-lnven= 

tore (when the agencydeemsit appmp-) whenthe subject invention is assigned in * 

cordance with 35 U.S.C. 202(e) and 37 (X’R

401.10: 

(3) The baianeeof anYroyaltiesor income 

earned by the contractor with respect to 

subject inventiona. after payment of expenses (including payments to inventom) In. 

cidentiai to the administration of subject blventions. will be utilized for the support of 

scientific research or educatioxx and 

(4) It will make efforts that are reasonable 

under the circumstances to attract liceneesS 

of subject invention that are small buab.leU 

firma and that it will give a prefere~ ~ a 

small business firm when licensing a suM@ 

invention if the contntctor determin= W 

the smaU business firm has a plan or P* 

Posai fOr marketing the iIWentiOn whkh. if 

executed. is equtiy u likely to brim the~= vention to practicai application SS 81WPor Prowaals from applican~ that are IIOt 

small business firms provided. that the ~-

tractor is also satisfied that the smti b~­ nesa firm has the capability and reao~ 

tocarryout its Pian or pro-. The d~. 

sion whether to give a preference in UU 

SPeClfiCme will be at the discretion Of the 

contractor. However, the contnzcbr agrees 

that the Secretary may review the -~ tor’s licensing progmm and dec~iona ~ ing small business applicants. and the ‘. 

tractor will negotiate changes @ i~ ~=m 

inig pollcies. procedures. or P~~= ‘~ 

the Secretary when the Secre-’s ‘m 

discloses that the contmetor could tie ~“ 

A-17

Dopartmont of Cammorce 

sonable steps to implement more effectively 

thereqlremencs of this paragraph (k)(4). 

(I) Commurucation 

[Compiete According to Instructions at 

401.5(b)) 

(b) When the Department of Energy 

( DOE) determines to use alternative 

provisions under $ 401.3(a)(4), the 

standard clause at $ 401.14(a), of this 

section. shall be used with the following modifications unless a substitute 

clause is drafted by DOE: 

( 1 ) The title of the clause shall be 

changed to read as follows: Patent 

Rights to Nonprofit DOE Facditu OPerators 

(2) Add an “(A)” after “(l)” in paragraph (c )(1) and add subparagraphs 

1B) and (C) to paragraph (c)(1) as follows: 

(B) If the subject invention occurred 

.mder activities funded by the naval nuclear 

sronulsion or weapons related programs of 

LIOE, then the provisiona of this subparagraph (c)( 1)(B) will apply in lleU of Paragraphs (c)(2) and (3). In such cases the contractor agrees to assign the government the 

+ntme right, title. and interest thereto 

hroughout the world in and to the subject 

nvention except to the extent that rights 

.re retained by the contractor through a 

:reater rights determination or under para­

:raph (e), below. The contractor. or an em­

]loyee-inventor, with authorization of the 

ontractor. may submit a request for greater 

‘!ghts at the time the invention 1s disclosed 

:? within a reasonable time thereafter. DOE 

J:I1l processsuch a request in accordance 

.vlth procedures at 37 (JF’R 401.15. Each de­

:ermmation of greater rights will be subject 

‘ a Daraf3’raPhs (h)-(k)
of thisciauseand 

such additional conditions. ifany, deemed 

[o be appropriate by the Department of 

Energy. 

(C ) At the time an invention is disclosed in 

ccordance with (c)(1)(A) above. or within 

!3 days thereafter. the contractor will 

Jbmit a written statement M to whether or 

‘-jot the mventlon occurred under a naval 

:’.uclear propulsion or weapons-related pro­

<ram of the Department of Energy. If this 

statement IS not filed w]thin this time. subparagraph (c)( 1)(B) will apply ln lieu of 

paragraphs (c)(2) and (3 ). The contractor 

.tatement will be deemed conclusive uniess. 

‘;lthln 60 days thereafter. the Contracting 

‘3ff1cer disagrees m umtmg, m whichcsse ‘ne determmaclon of the Concractlng Off!-

“W WL1l be deemed conclusive unless the 

!Ontraccor files a cialm under the ContracL 

~]sputes Act wlthln 6(J days after the Con­

:ractmg Officer’s determulataon. Pending 

$ 401.1s 

resolution of the matter. the invention w~ll 

be subject to subparagraPh (c)(1)(B). 

( 3 ) Paragraph (k)(3) of the clause 

will be modified = prescribed at 

$ 4ol.5(g). 

5401.15 Deferred determinations. 

(a) This section applies to requests 

for greater rights in subject inventions 

made by contractors when deferred 

determination provisions were inc~uded in the funding agreement because 

one of the exceptions at $ 401.3(a) was 

applied. except that the Department 

of Energy is authorized to process deferred determinations either in accordance with its waiver regulations or this 

section. A contractor requesting greater rights should include with its request information on its plans and intentions to bring the invention to 

practical application. Within 90 days 

after receiving a request and supporting information, or sooner if a statutory bar to patenting is imminent, the 

agency should seek to make a determination. In any event, if a bar to patenting is imminent, unless the agency 

plans to file on its own+ it shall authorize the contractor to file a patent application pending a determination by 

the agency. Such a filing sh~l normally be at the contractor’s own risk and 

expense. However. if the agency subsequently refuses to allow the contractor 

to retain title and elects to proceed with the patent application under government ownership, itshall reimburse 

the contractor for the cost of PrePar” 

ing and filing the patent application. 

(b) If the circumstances of concerns 

which originally led the agency to 

invoke an exception under $ 401.3(a) 

are not applicable to the actual subject invention or are no longer valid 

because of subsequent events. the 

agency should allow the contractor to 

retain title to the invention on the 

same conditions as would have applied 

if the standard clause at $ 401.14(a) 

had been used originally,unlessithas


been licensed. 

(c) If paragraph ( b ) is not applicable 

the agency shall make its determination based on an assessmentwhether 

ic~own plans regarding the invention 

will better promote the policies and 

objectives of 35 U.S.C. 200 than ~111 

A-18

~ 401.16 37 CFR Ch. IV (7-1-92 Edition) 

contractor
ownershipofthe invention.


Moreover.ifthe agency ISconcerned


only about specificuses or applica­


tionsof the invention,
 itshallconsider


leavingtitle inthecontractor
withad­


ditionalconditionsimposed upon the


contractor’s
use of the inventionfor


such applications
or with expanded


government licenserightsm such ap­


plications.


(d)A determinationnot toallowthe 

contractorto retaintitleto a subject 

inventionor torestrictorconditionits


titlewith conditionsdifferingfrom


those in the clause at $401.14(a).


unless made by the head of the


agency,shallbe appealableby thecon­


tractorto an agency official
 at a level


above the personwho made the deter­


mmation. This appealshallbe subject


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, telephone 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. 

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


II 
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 

II were involved or listing the inventions. NIH reviews the form 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 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 
1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

10. 

12. 

13. 

14. 

15. 

16. 

17. 

18. 

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 

Federal Agency National Institutes of Health 

Grant/contract No.(s) 

Date Disclosed to NIH 

Date of Election to Retain Rights 

Invention Title 

Case/file No. of Reporting Entity 

Inventor(s) 

FILXNG STATUS 

U.S. Pat. Appln. No. 9. Filing Date 

U.S. Patent No. 11. Issue Date 

Countries where foreign patent applications are pending or where 

patents have issued 

STATUS OF DEVELOPMENT 

Date of first commercial sale or use, if any 

Gross royalties received during report period $ 

Number of licenses or related agreements in effect 

If not licensed or under development, describe a) action taken to 

obtain utilization or b) comment on likelihood of licensing or 

practical application 

Reporting entity (Grantee institution or assignee) 

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:

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 Service/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 
--

AA ;*,!B No 0925.0001 

CEPARTMENTOF HEALT& AND HUMAN SERVICES LEA= ~FouC!=E ONLY. .* 

3UBLIC HEALTH SERVICE Type 1- Numbar ,, 

GRANT APPLICATION 

Follow InstructIons caretully. Type In the unshaded sreas oniy. 

FwiewGmup 

j counCwBOSd (Month, Year) 

Formerly 

Date Received 

. . . . . . . . 

., 

Type denstty must be 10 c.p.i. 

~:-. Ammveo Thm.qn 630:’34 

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: 

2b. TYPE OF GRANT PROGRAM 

3a. NAME (Last, first, middk) 

3d. POSITION TITLE 

3f. DEPARTMENT, SERVICE. LABORATORY, OR EQUIVALENT 

3g. MAJOR SUBDIVISION 

3h.	 TELEPHONE AND FAX (Area cnda, number and exierrsnm) 

TEL: 

FAX: 

4 HUMAN SUBJECTS ,, ~= .	 IRB 

a~oval 4b. Aaaumrm et 

4a r--- exempism no.	 0s 

— date ~ m.

NO YES 

6.	 DATES OF ENTIRE PROPOSED PRCkJECT 7, COSTS REQUESTED 

PERIOD BUCGET PERIOD 

From (MMDOYY) Through (MMDDYY) 7a. DirectCasts($) 

9. PERFORMANCE SITES (Orgamzations andaddresses) 

12. WPE OF ORGANIZATION 

— PUMIC S@@ c 

C PrivateNonpfofit 

~ Foq)rofit@anera/) 

15. NAME OF ADMINISTFLATIVE 

TELEPH@IE 

TM-E 

Y 

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.-.’ “is%.

wt-NETrlNTERNEr AboREss.@ 

/=d9r’a/ G state -u ,L& ; 

~ For@it @mW_. =. =-

OFFICIAL TO BE NOTIFIED IF AWARlk 

ISMAD6 . 

.- 3GINCIPAL INVESTIGATOR PRCICRAM DIRECTOR ASSURANCE I agree 10 ace, 

: 3 w for the see. !,llc conduct of tPe mo!ect ancitoorov!de the requt red progress reool 

s awaraea as a ,es.,1 ot th, s aODllcai 0. W,llful orov, slon of false fntormauon IS acr, ml 

Sndma? 

3.	 PRINCIPAL INVESTIGATOWPROGRAM DIRECTOR 

3b. DEGREE(S) 3c. SOCIAL SECURITY NO. 

3e. MAILING ADDRESS (Street, civ, state, zip cede) 

BITNET/lNTERNET ADDRESS 

5.	 VERTEBRATE ANIMALS If “Yes.- Sb. AnhmSl ~ 

IACUCaMSW/SIdate ~sm. 

—	 5a. ~ INOI \ YES 

FOR INITIAL 8. COSTS REQUESTED FOR ENTIRE 

PROPOSED PROJECT PERIOD 

7b. TotalCosts($) 8a. DirectCosta($) Sb,Total03ets ($) 

10. INVENTIONS AND PATENTS (Cor71FMbWcontrrruakma@cdorI dy) 

Previously Not ~ 

ND repamad r11.NAME OF APPLICANT ORGANIZATION 

ADDRESS 

13. ENTITV IDENTIFICATION NUMBER Congressmmsi-

‘ ‘- “.=. 

14. BIOMEDICAL RESEARCH SUPPORT GRANT CREDIT ,.-:’& +‘ . 

code lianMc@m 

l& NAMEOFOFFKXALSIGNINGFORAPPUCM ORW 

,esoon. SIGNATURE OF PERSON NAMED IN 3a SATE 

a aram I (In m Per” s:gnature not acceprame I 

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 CO.oll,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 

I 
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. Sign inthe block 

opposite the applicable type of fjramor award. 

TYPEOF GRANTOR AWARD WHO MUST SIGN (title) I SIGNATURE 

I 

Research Grant Principal Investigator 

or Project Director 

Health Sewices Grant Director I 

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 
CONTRACTOR’S 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 reporequired 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 

CONTRACTOR’S GUIDE FOR CONTROL OF pROpERTY GOVERNMENT PROPERTY, 1990. 

CONTRACTOR BUSINESS 

OFFICIAL’S 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 government’s 

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 

t 

‘-$ < 

. MN?24

Date


From Assistant 

Subjeaoffice of 

of Extramural 

To Inspector


OF HEALTH &. HUMAN SERVICES	 Public Health Service 

Memorandum 

1994 

Secretary for Health 

Inspector General (OIG) Draft Report “NIH Oversight 

Research Inventi_onsr” OEI-03-91-00930 

General, OS 

Attached are the Public Health Service comments on the subject

draft report. we concur with the report’s 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 panel’s 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 panel’s findings and recommendations, as 

well as the Task Force’s ongoing work i.n this area, will be 

considered in NIH’s 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