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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: July 25, 2002

SUBJECT: Department of Energy Acquisition Regulation (DEAR); Patent Regulations for Management and Operating Contracts

SOURCE: Federal Register, July 25, 2002, Vol. 67, No. 143, page 48568

AGENCIES: Department of Energy (DOE)

ACTION: Final Rule

SYNOPSIS: DOE is adopting as final, with changes, the November 15, 2000, interim final rule that revised the patent coverage in the DEAR relating to DOE's management and operating (M&O) contracts.

EDITOR'S NOTE: The DEAR is Part 9 of Title 48 of the Code of Federal Regulations (CFR). It is available on the Internet at http://professionals.pr.doe.gov/ma5/MA-5Web.nsf/Procurement/Acquisition+Regulation?OpenDocument.

For more on the interim final rule, see the November 15, 2000, FEDERAL CONTRACTS DISPATCH "Department of Energy Acquisition Regulation (DEAR); Patent Regulations Relating to Management and Operating Contracts."

EFFECTIVE DATE: August 26,2002.

FOR FURTHER INFORMATION CONTACT: Robert M. Webb, 202-586-8264.

SUPPLEMENTAL INFORMATION: On November 15, 2000, DOE published an interim final rule that revised its patent regulations for M&O contracts for the first time since 1995. The interim final rule revised the M&O patent regulations to reflect the realities of performance under DOE M&O contracts more effectively, to reflect additional statutory requirements and the special treatment of exceptional circumstances in defense-related activities, and to rewrite the M&O patent clauses in "plain language." Only one comment was received, and that comment said that the rule had achieved its intended purposes of clarity and organization. However, DOE has decided that several minor changes must be made to the interim final rule:

• Since the interim final rule was published, the regulations and clauses included in the interim final rule were republished as part of a final rule that rewrote DEAR Part 970, DOE Management and Operating Contracts (see the December 22, 2000, FEDERAL CONTRACTS DISPATCH "Department of Energy Acquisition Regulation (DEAR); Rewrite of Part 970, DOE Management and Operating Contracts"). While the regulations and clauses were not changed by the DEAR Part 970 rewrite, changes in numbering did occur. The numbering of the DEAR Part 970 provisions and clauses of this final rule is different than those used in the interim final rule but are consistent with the DEAR Part 970 rewrite.
  
  
• Since the publication of the interim final rule, Congress enacted two statutes that affect DEAR 970.5227-3, Technology Transfer Mission. Section 3196 of Public Law 106-398, the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001, reduced from ninety days to thirty days the time an agency could review and respond to proposed joint work statements and proposed cooperative research and development agreements (CRADAs) at government-owned, contractor-operated (GOCO) laboratories. Also, Section 11 of Public Law 106-404, the Technology Transfer Commercialization Act of 2000, directed the secretary of energy to make sure that certain of DOE's laboratory and facilities contractors designate a Technology Partnership Ombudsman to perform specified duties. This final rule amends DEAR 970.5227-3 to implement these statutes (paragraph (n)(1)(iv) and paragraph (p), respectively).
  
  
• The threshold for flowdown of DEAR 970.5227-4, Authorization and Consent, to subcontractors is raised from $25,000 to $100,000 to reduce the contractor's burden of including it in subcontracts, and paragraph (c) has been reorganized to improve its clarity.
  
  
• The threshold for flowdown of DEAR 970.5227-5, Notice and Assistance Regarding Patent and Copyright Infringement, to subcontractors is raised from $25,000 to $100,000 to reduce the contractor's burden of including the clause in subcontracts.
  
  
• DEAR 970.5227-8, Refund of Royalties, is altered as a result of experience gained since the publication of the interim final rule. Changes have been made to limit the scope of the clause to royalties payable for a licensing of an invention. The version in the interim final rule covered all royalties, including royalties for copyright. DOE states in the introduction to the final rule, "In this day of the purchase of large quantities of commercial software, that inclusion would be burdensome and not provide a return worth the investment of resources by both the contractor and DOE. Additionally, the version of the clause included in the interim final rule was written in a way that assumed there was a solicitation and that the royalties could be identified in the contract price for the term of the contract. While there are more solicitations leading to management and operating contracts than ever before, there remain many instances in which contracts are extended. In neither event would it be possible for the offeror or the contractor to identify all royalties associated with contract performance at the inception of the contract because of the broad research and development nature of these contracts; therefore, the Department has made changes to focus the clause to require that the contractor gain DOE approval before paying patent royalties of more than $250 during contract performance."
  
  
• The phrase "as DOE deems appropriate" has been deleted from the last sentence in paragraph (b)(6) of DEAR 970.5227-10, Patent Rights -- Management and Operating Contracts, Nonprofit Organizations or Small Business Firm Contractor, and paragraph (b)(9) of DEAR 970.5227-12, Patent Rights -- Management and Operating Contracts, For-Profit Contractor, Advance Class Waiver ("The contractor shall share royalties collected for the manufacture, use or sale of the subject invention with the government employee, as DOE deems appropriate.") The sentence without that phrase accomplishes its intended purpose of requiring the contractor to share royalties with a federal co-inventor. The deleted phrase could have been construed as making the sharing scheme subject to DOE dictation or approval, neither of which was intended.
  
  Also, a specific reference to the National Nuclear Security Administration has been added as a federal activity that funds inventions covered by the definition of "weapons related subject inventions" in Alternates I to DEAR 970.5227-10 and DEAR 970.5227-12.

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

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