DATE: September 11, 2000

FROM: Barry McVay, CPCM

SUBJECT: Department of Commerce; Rights to Inventions Made by Nonprofit Organizations and Small Business Firms Under Grants, Contracts, and Cooperative Agreements

SOURCE: Federal Register, September 11, 2000, Vol. 65, No. 176, page 54268

AGENCIES: Department of Commerce (DOC)

ACTION: Proposed Rule

SYNOPSIS: DOC is proposing to authorize federal agencies to use an alternate patent rights clause in certain contracts with nonprofit organizations and small business firms which provide support services at a government-owned and -operated laboratory in connection with a cooperative research and development agreement (CRADA) between the laboratory and a collaborating party.

DATES: Comments must be received on or before October 11, 2000.

ADDRESSES: Send comments to Mr. Jon Paugh, Director, Technology Competitiveness, Office of Technology Policy, Room 4418, Herbert C. Hoover Building, U.S. Department of Commerce, Washington, DC 20230.

FOR MORE INFORMATION CONTACT: Mr. John Raubitschek, Patent Counsel, 202-482-8010.

SUPPLEMENTAL INFORMATION: The Federal Technology Transfer Act of 1986 (Public Law 99-502) authorized federal laboratories to enter into CRADAs, which are agreements between a federal laboratory and a nonfederal party ("collaborating party") to conduct specified research or development efforts that are consistent with the missions of the federal laboratory and to share the costs of the research. The primary purpose of the act is to encourage the transfer of commercially useful technologies from federal laboratories to the private sector and to make accessible unique technical capabilities and facilities. DOC administers the regulations pertaining to CRADAs.

A recent development has caused complications. Certain federally laboratories (such as those of the Department of Defense and the Environmental Protection Agency) are now using contractors to assist in their operation. Because the Bayh-Dole Act (Public Law 96-517) gives nonprofit and small business contractors and grantees the option to retain the rights to their inventions which result from federally funded research. This means a nonprofit or small business contractor supporting a laboratory under a CRADA may retain the rights to any invention it develops. If the support contractor decides to retain the rights to the invention, the collaborating party to the CRADA does not receive the rights to the CRADA invention, which is one of the primary reasons most collaborating parties enter into CRADAs.

DOC believes that this situation "might be a negative factor or disincentive to the participation by private parties in a CRADA because they would not be assured of receiving rights in all CRADA inventions as mandated by the [Federal Technology Transfer Act]." Therefore, DOC is proposing to revise the basic patent rights clause in Title 37 of the Code of Federal Regulations, Patents, Trademarks, and Copyrights; Chapter IV, Assistant Secretary for Technology Policy, Department of Commerce; Part 401, Rights to Inventions Made by Nonprofit Organizations and Small Business Firms under Government Grants, Contracts, and Cooperative Agreements; Section 401.14, Standard Patent Rights Clauses, by adding, as an alternate, a new subparagraph to paragraph (b), Allocation of Principle Rights, which encourages the contractor to negotiate the rights to any subject invention with the collaborating party. The subparagraph would further provide that, in the absence of an agreement, the collaborating party would have the same rights to the contractor's inventions as if the invention had been made by government employee under the CRADA.

The following is the text of the proposed alternate subparagraph (the current text in Section 401.14(b) would be redesignated as Section 401.14(b)(1)):

"(2) If the Contractor performs support services at a Government owned and operated laboratory directed by the Government to fulfill the Government's obligations under a Cooperative Research and Development Agreement (CRADA) authorized by 15 U.S.C. 3710a, the Government may require the Contractor to try to negotiate an agreement with the CRADA collaborating party or parties over the rights to any subject invention the Contractor makes, solely or jointly, in the course of its work under the CRADA. The agreement shall be negotiated prior to the Contractor undertaking the CRADA work or, with the permission of the Government, upon the identification of a subject invention. In the absence of such an agreement, the Contractor agrees to grant the collaborating party or parties an option for a license in its inventions of the same scope and terms set forth in the CRADA for inventions made by the Government."

In addition, a new subparagraph (a)(5) would be added to Section 401.3, Use of the Standard Clauses at Sec. 401.14, which would permit contracting officers to include the alternate paragraph (b)(2) in Section 401.14 "if any part of the contract may require the contractor to perform work on behalf of the Government at a Government laboratory under a Cooperative Research and Development Agreement (CRADA)..." However, because the alternate is considered an exception to the invention rights retention provisions of the Bayh-Dole Act, "the contracting officer shall ensure that the appeal procedures of Sec. 401.4 are satisfied whenever the alternate is used." Section 401.4, Contractor Appeals of Exceptions, permits the contractor to appeal an "exceptional circumstances determination" (the use of alternate paragraph (b)(2) would be considered an "exceptional circumstance").

FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.

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