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Recent Changes to Bayh Dole Act Regulations Remove a Strategy for Keeping Ownership of Your Governme

Failure to comply with certain obligations under your government funding agreement gives the funding agency the right to claim title to inventions and corresponding patents made with the funding. Uncertainty in a company’s IP ownership when seeking private sector funding or when ultimately selling the company can cost the company thousands, if not millions, of dollars. Changes to the Bayh Dole Act Regulations that went into effect last week remove one of the strategies for fixing the non-compliance and removing the IP ownership uncertainty.

The Patent Rights Clause under the Bayh Dole Act requires grant recipients who create inventions in whole or in part with government funding to: 1) disclose those inventions to the funding agency within 2 months after initial internal company disclosure; 2) elect title to such inventions in writing within 2 years of disclosure to the funding agency; and 3) file initial patents covering such inventions within 1 year after electing title.[i] These deadlines can be shorter under certain conditions such as the imminent publication of inventions or in the case of foreign filings. If these deadlines are missed, the Bayh Dole Act regulations require the grant recipient to assign title to the invention to the funding agency upon request.[ii] Under the old regulations, the funding agency had to request title in writing within 60 days after learning of the grant recipient’s failure to meet the deadlines.[iii] Accordingly, one strategy for removing ownership uncertainty when deadlines were missed was to simply self-disclose the non-compliance in writing to the funding agency and wait for the 60 days to pass. Proper documentation of this action typically satisfies future investors and/or company buyers that the government agency has no claim of ownership to the inventions in question.

As of May 14, 2018, however, the 60-day limit on the period of time within which the government may request ownership has been eliminated for future grants.[iv] This means that for future grants, if the grant recipient misses the deadlines mentioned above, the government’s regulatory right to claim title to the recipient’s government-funded inventions, and the cloud of uncertainty hanging over those inventions, could last for years. Years of IP ownership uncertainty is sure to adversely affect the value of the recipient company. It becomes imperative to have the right compliance policies and procedures in place for your next funding award. As for the recipient’s existing government grants, the time for self-disclosure of non-compliance of the patent rights clause of your government grant is now.

[i] 37 CFR 401.14 (c)(1)-(3)

[ii] 37 CFR 401.14 (d)(1)

[iii] Id.

[iv] https://www.federalregister.gov/documents/2018/04/13/2018-07532/rights-to-federally-funded-inventions-and-licensing-of-government-owned-inventions

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