Prior to the Bayh-Dole Act, the government generally retained ownership of federally funded inventions regardless of whether the research was performed in federal laboratories, at universities, or by individual companies, and only 5 percent of the patents on these inventions were ever used in the private sector, according to a Congressional Research Service report. The Bayh-Dole Act allows nonprofits, small businesses, and universities to retain ownership of federally funded inventions to promote the utilization of inventions created through federal research and development programs, and to provide an incentive for contractors to commercialize federally funded inventions for sale in the marketplace. The Bayh-Dole Act applies to universities, nonprofit organizations, and small businesses that receive federal research funding. Federal agencies that enter into financial assistance awards with these types of entities must adhere to the requirements of the Bayh-Dole Act and its implementing regulation developed by the Department of Commerce.particular, the Bayh-Dole Act requires agencies, including DOE, to incorporate specific provisions into research and development financial assistance awards that contractors must comply with to help protect the government’s interests in any resulting inventions. Federal Nonnuclear Energy Research and Development Act of 1974 § 9, 42 U.S.C. § 5908. 3. apply for a patent on an invention, typically within 1 year of electing to retain ownership. DOE generally requires similar actions from large businesses in order to retain ownership of agency funded inventions, but the time frames can vary depending on the specific provisions of an individual financial assistance agreement. Compliance with these provisions informs agencies, such as DOE, of an invention’s existence, and helps ensure that a contractor takes timely steps to patent the intellectual property embodied in the invention, should the contractor wish to retain ownership of it. If a contractor does not comply with these requirements, agencies have the authority to demand ownership of a federally funded invention to provide the government the opportunity to take steps to protect its interests in it. Once contractors own a patented invention, they are generally free to use or transfer their patent rights at their discretion, in compliance with applicable laws, such as those regarding export control. The Bayh-Dole Act also identifies certain interests the government has in federally funded inventions, including their utilization and domestic manufacture. DOE’s Patent Waiver Regulation does not explicitly identify these interests with regard to inventions developed by large business contractors, but the waivers themselves generally will outline specific requirements related to invention utilization and domestic manufacture as shown below. Utilization. DOE can use the authority, known as march-in authority, to require a contractor or licensee to grant a license to any responsible entity or entities when an agency determines that certain conditions identified in the act have been met. Additionally, the government has a nonexclusive royalty-free license to practice, and have practiced on its behalf, any invention created with federal funding. Domestic manufacture. Under the Bayh-Dole Act and DOE regulations and policy, DOE has established certain requirements in financial assistance awards for contractors to manufacture federally funded inventions in the United States. These requirements vary depending on the type of contractor involved in a financial assistance award. Domestic manufacture requirements for federally funded inventions include: U.S. Preference. U.S. Preference provisions generally require small business and nonprofit contractors’ exclusive licensees to substantially manufacture federally funded inventions domestically in order to use or sell the inventions in the United States. These requirements apply only to a contractor’s exclusive licensee; the contractor that developed the invention faces no limitations on manufacturing location. Federal agencies may use their march-in authority in instances where contractors’ licensees do not comply with U.S. Preference requirements. U.S. Competitiveness. U.S. Competitiveness provisions generally require that the manufacture of inventions developed by large businesses must occur substantially in the United States unless otherwise approved by DOE. DOE may require forfeiture of invention ownership or refund of its investment when contractors do not comply with these requirements if such penalties are included in the patent rights clause of the financial assistance award. U.S. Manufacturing Plan. U.S. Manufacturing Plan provisions generally require that contractors submit plans as part of a funding application specifying how they intend to domestically manufacture any potential inventions developed in the course of the financial assistance award. Where this provision is part of a financial assistance award, DOE may take ownership of the invention, require refund of its investment,reporting requirements in instances of noncompliance. In addition, DOE may include provisions within a financial assistance award that require reports from contractors to provide information on how Specifically, DOE programs can federally funded inventions are utilized. request that contractors provide periodic reports with information regarding patent status (e.g., filing date, application number and title, and patent number and issue date), and invention utilization (e.g., the status of development, date of first commercial sale or use, and gross royalties received). DOE may request these reports at its discretion but not more than annually. During fiscal years 2009 through 2013, DOE initiated nearly 6,000 financial assistance awards. DOE relies primarily on contractor self- reporting and financial assistance award closeout procedures to ensure that contractors disclose agency funded inventions. During fiscal years 2009 through 2013, DOE initiated a total of nearly 6,000 financial assistance awards worth at least $11 billion with contractors, according to data provided by DOE. During this period, according to DOE patent counsel, contractors reported approximately 5,800 inventions, elected to take ownership of about 2,800 inventions, and were issued more than 700 patents. 37 C.F.R. § 401.8. DOE’s large business patent waivers may contain similar reporting requirements. amount and number of financial assistance awards DOE established with different types of contractors for fiscal years 2009 through 2013. In fiscal year 2013, the most recent year data were available, DOE provided a majority of funds to universities and nonprofits (nearly $1 billion across 580 agreements), followed by large businesses (approximately $304 million across 79 agreements) and small businesses (approximately $290 million across 370 agreements). Contractors disclose agency funded inventions to DOE through a variety of reporting mechanisms including e-mail, regular mail, and Interagency Edison (iEdison)—which is an electronic reporting system that allows federal grantees and contractors to report federally funded inventions, patents, and utilization data.contractor discloses an invention developed with DOE funds, patent staff create a file for that invention. According to DOE procedures, patent counsel then monitor compliance with time frames related to the contractor’s determination of whether to retain ownership and pursue According to DOE procedures, when a patent protection. From this point forward, according to DOE procedures, whenever a contractor submits additional information about an invention, DOE patent counsel review the invention’s file to ensure compliance with all invention disclosure provisions. If DOE patent counsel determine that a contractor has not met the specified time frames for disclosing and electing ownership of an invention, they send the contractor a letter— known as a demand letter—demanding that the contractor give DOE ownership of the invention. DOE patent counsel told us that they recently upgraded one of the agency’s data management systems—IP Master—to a new system called IP Manager, which became operational in November 2014. noncompliance with invention disclosure requirements during closeout.They added that nondisclosure, particularly from contractors with more limited resources, is generally inadvertent. They told us that nondisclosure is more often due to limited contractor familiarity with the legal requirements or experience in working with the federal government than an intentional attempt to avoid disclosing an agency funded invention. DOE patent counsel said if a contractor failed to disclose an agency funded invention but did so inadvertently, they would generally work with the contractor to meet disclosure requirements rather than demand ownership for noncompliance with disclosure requirements. They said that approach better meets their view of the intent of the Bayh-Dole Act to commercialize federally funded inventions, while ensuring the government protects its interests in them. The closeout of a financial assistance award is also the point when DOE monitors whether contractors have patented agency funded inventions. For example, according to DOE procedures, a contractor must send DOE patent counsel a patent certification form—a document that discloses all inventions that resulted from the financial assistance award. In turn, according to DOE procedures, patent counsel use this information to ensure contractor compliance with the terms of the financial assistance award before issuing a patent clearance letter—a document in which DOE acknowledges the contractor’s ownership of the patented invention. In addition to the required certification form, upon request from DOE, contractors must provide information about patents for any invention they elected to own. When a contractor submits such information, DOE patent counsel verify that the reported patents include a statement of government interest—standard language in a patent that acknowledges the government’s role in funding its development—and that the invention’s file is complete and up-to-date in the relevant data system. DOE faces challenges in ensuring that contractors disclose inventions they develop with agency funding and is taking actions to address them. Specifically, one challenge DOE faces is not having a documented process for ensuring that contractors disclose agency funded inventions after financial assistance awards end, and the agency has initiated two pilot projects to identify the extent of potentially undisclosed inventions. Additionally, DOE faces a challenge in managing invention disclosure information because its data systems for doing so have limited capabilities. While the agency has begun to upgrade those systems, DOE has not developed an implementation plan with specific milestones for certain key steps to guide these efforts. One challenge that DOE faces is not having a documented process for ensuring that contractors disclose agency funded inventions after financial assistance awards end. DOE’s closeout procedures are designed to, among other things, ensure that contractors disclose all inventions developed during a DOE financial assistance award and that DOE’s interests in them are documented.