Bayh-Dole Act

The Bayh-Dole Act or University and Small Business Patent Procedures Act is a piece of United States legislation from 1980. Bayh-Dole is codified in 35 U.S.C. § 200-212^[1], and is implemented by 37 C.F.R. 401^[2]. Among other things, it gave US universities, small businesses and non-profits intellectual property control of their inventions that resulted from federal government-funded research. The act, sponsored by two senators, Birch Bayh of Indiana and Bob Dole of Kansas, was enacted by the United States Congress on December 12, 1980.

The Bayh-Dole Act is a significant 20th century piece of legislation in the field of intellectual property in the US. Perhaps the most important contribution of Bayh-Dole is that it reversed the presumption of title. Bayh-Dole permits a university, small business, or non-profit institution to elect to pursue ownership of an invention before the government.

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Rights and obligations

Recipient requirements

Small businesses and non-profit organizations can retain the title in a federally funded "subject invention." In exchange, the organization is required to

• Report each disclosed invention to the funding agency
• Elect to retain title in writing within a statutorily prescribed timeframe
• File for patent protection
• Grant the federal government a non-exclusive, non-transferable, irrevocable, paid-up license to practice or have practiced on its behalf throughout the world
• Actively promote and attempt to commercialize the invention
• Not assign the rights to the technology, with a few exceptions
• Share royalties with the inventor
• Use any remaining income for education and research
• Give preference to US industry and small business

Subject inventions

A subject invention "means any invention" that is "conceived or first actually reduced to practice in the performance of work under a funding agreement." This definition covers a wide range of research activities that are either partially or completely federally funded. The CFR notes two questionable scenarios that do not give rise to subject inventions.

The first happens where an invention is created in closely related research outside the scope of the federally funded research. In this case, it must be shown that the non-government research did not "diminish or distract from" the federal research.

The second scenario occurs when research is wholly outside the scope of federally funded research, but may utilize some government funds (like equipment purchased for another research project). In this case, it must be shown that the research was done "without interference with or cost to the government-funded project."

Nevertheless, this definition is so broad, and it is very difficult to prove that research did not diminish, distract from, interfere with, or cost the government funded program. As such, many institutions assume that where federal funds have been used anywhere in a lab, a subject invention exists.

History

Prior to the enactment of Bayh-Dole, the U.S. government had accumulated 30,000 patents. Only approximately 5% of those patents were commercially licensed.

After World War II, the government began spending a great deal of money to support public research in military, defense and medical technologies (through the newly funded National Science Foundation). However, the government did not have a unified patent policy. At one point, those interested in government intellectual property were faced with dealing with 26 different agency policies.

The government's steps towards unification began in 1963 with Jerome Weisner, President John F. Kennedy's science advisor, and culminated in 1971 under President Richard Nixon. Nevertheless, all these policies directed title to the agencies and not to the public.

Not content, many non-profit organizations, led by the University of Wisconsin-Madison, sought even more favorable policies. In 1968 and 1973, the University successfully lobbied for agencies to enter into Institutional Patent Agreements, which, among other things, allowed universities and non-profits with approved of patent policies to retain title to their inventions. Although agreed to by only two agencies, the Health and Human Services (HHS) and National Science Foundation, the IPA laid the groundwork for enacting Bayh-Dole less than 10 years later.

Legal proceedings and case law

There is not a considerable amount of case law covering Bayh-Dole.

Disclosure of subject inventions

Only one case has discussed the implications of disclosing subject inventions. In Campbell Plastics Engineering & Mfg., Inc. v. Les Brownlee, 389 F.3d 1243 (Fed. Cir. 2004), the court held that since the appellant failed to comply with the invention disclosure provisions of a contract, the court upheld the transfer of title to an invention to the U.S. Army. Specifically, the contract required, per Bayh-Dole, that an invention be disclosed to the U.S. Army through a specific form, DD Form 882s. Campbell Plastics never disclosed its subject invention through this form. Campbell Plastics argued instead that it disclosed all parts of its invention over the course of the contract, but simply never used the form. The court did not specifically address the legitimacy of the particular form, but assumed that it was sufficient. Nevertheless, the court found that the "piecemeal submissions [did] not adequately disclose the subject invention under the contract." The result was a forfeiture of the subject invention.

Extent of the government's license

In a footnote in the famous experimental use case, Madey v. Duke University, 307 F.3d 1351 (Fed. Cir. 2002), the court mentions Bayh-Dole. There is ultimately very little treatment of the topic. Instead the court quoted the district court as holding that where a subject invention exists and the defendant is a recipient of government funding, "in light of the Bayh-Dole Act... use of the patents that has been authorized by the government does not constitute patent infringement."

Bayh-Dole and patentability

In University of Rochester v. G.D. Searle & Co., 358 F.3d 916 (Fed. Cir. 2004), the court rejected a claim that Bayh-Dole altered the grounds for patentability. The court, quoting an Amicus curiæ, stated

no connection exists between the Bayh-Dole Act and the legal standards that courts employ to assess patentability. Furthermore, none of the eight policy objectives of the Bayh-Dole Act encourages or condones less stringent application of the patent laws to universities than to other entities.

Petitions for march-in rights

The government's march-in right is one of the most contentious provisions in Bayh-Dole. It allows the funding agency, on its own initiative or at the request of a third party, to effectively ignore the exclusivity of a patent awarded under the act and grant additional licenses to other "reasonable applicants." This right is strictly limited and can only be exercised if the agency determines, following an investigation, that one of four criteria is met^[3]. The most important of these are a failure by the contractor to take "effective steps to achieve practical application of the subject invention" or a failure to satisfy "health and safety needs" of consumers.

Though this right is, in theory, quite powerful, it has not proven so in terms of its practical application — to date, no federal agency has exercised its march-in rights. Three march-in petitions have been made to the National Institutes of Health, however, and pharmaceutical companies occasionally instruct their legal departments to evaluate the risk of march-in prior to negotiating contracts for drugs licensed under Bayh-Dole.

In In Re Petition of CellPro, Inc.^[4], CellPro first argued that The Johns Hopkins University and Baxter Healthcare failed to take reasonable steps to commercialize certain patented stem cell technologies and that Johns Hopkins should be forced to license Cellpro the patent necessary to keep its machine on the market^[5]. The NIH denied this claim citing:

• Johns Hopkins's licensing of the subject invention
• Baxter's use, manufacturing, and practice of the subject invention
• Baxter's application to the Food and Drug Administration

The NIH also denied Cellpro's claim that it needed Johns Hopkins's patents to keep its device on the market for health and safety reasons. The NIH also mentioned the adverse effects that a march-in decision would have on federal efforts to encourage firms to commercialize federally funded research.

In In the Case of NORVIR^[6], the NIH received a request^[7] from Essential Inventions, supported by the public and members of the United States Congress, to exercise march-in rights for patents owned by Abbott Labs covering the drug ritonavir, sold under the trade name Norvir, a prescription drug used in the treatment of AIDS. Abbott had recently raised the price of NORVIR 400% for U.S. customers (but not for consumers in any other country), and had refused to license ritonavir to another company for purposes for providing protease inhibitors coformulated with ritonavir. The NIH denied the petition finding no grounds to exercise its march-in rights. The NIH cited:

• The availability of NORVIR to patients with AIDS
• That there was no evidence that health and safety needs were not adequately met by Abbott, and
• That the NIH should not address the issue of drug pricing; only Congress.

In In the Case of Xalatan^[8] Pfizer's glaucoma drug was sold in the United States at two to five times the prices in other high income countries. Essential Inventions asked the NIH to adopt a policy of granting march-in licenses to patents when the patent owner charged significantly higher prices in the United States than they did in other high income countries^[9]. The NIH held that “the extraordinary remedy of march-in was not an appropriate means for controlling prices.”

Notes

1. ^  Cornell University Law School, Legal information Institute, US Code Collection, "Chapter 18 — Patent rights in inventions made with federal assistance"
2. ^  US Government Printing Office. Title 37 — Patents, Trademarks, and Copyrights, "Chapter IV — Assistant Secretary for technology policy, Departement of Commerce. Part 401 — Rights to inventions made by nonprofit organizations and small business firms under government grants, contracts, and cooperative agreements"
3. ^  35 U.S.C. § 203
4. ^  In the Case of Petition of CellPro, Inc.
5. ^ Original petition from CellPro
6. ^  In the Case of NORVIR
7. ^  Petition to use authority under Bayh-Dole Act to promote access to Ritonavir
8. ^  In the Case of Xalatan
9. ^  Petition to use authority under Bayh-Dole Act to promote access to Latanoprost

See also

• Technology transfer
• Government-funded research

Statutes and regulations

• 37 C.F.R. 401 — Rights to inventions made by nonprofit organizations and small business firms under government grants, contracts, and cooperative agreements.
• 35 U.S.C. 200-212 Chapter 18 — Patent Rights in Inventions Made with Federal Assistance