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Bayh-Dole Act: How patent march-in rights really work
Back in 1980, the Bayh-Dole Act established a federal patent policy that allows recipients of federal funding to retain ownership of patent rights in inventions created with such funding. Certain restrictions apply, though, including “march-in rights.”
The law and this particular restriction have been the subject of much misinformation lately, leading to a fear of heightened federal scrutiny over inventions subject to it. Let’s set the record straight.
Bayh-Dole Act basics
The Bayh-Dole Act applies only to patents on inventions conceived or first “reduced to practice” under a federal funding agreement. The ownership of patent rights by the funding recipient is the bedrock of the law that facilitated the law’s success.
The law was enacted to attempt to realize the full value of federally funded inventions, which likely would not be realized without appropriate private-sector involvement and incentives. In essence, the law permits a funding recipient to retain ownership of the patent rights to use itself or license to industry partners. As a result of the federal funding/private sector partnership, investment money has flowed into companies owning or licensing such patent rights, thereby permitting commercialization of patented products for the benefit of society.
In some circumstances, however, the law authorizes the government to “march in” and require the grant of a license to a third party that will commercialize the invention or take another action not fulfilled by the funding recipient. Specifically, if the agency determines that any of the following four criteria apply, it can begin the procedure to exercise march-in rights:
- The funding recipient or licensee hasn’t taken, or isn’t expected to take, within a reasonable time, effective steps to achieve practical application of the invention,
- Action is necessary to alleviate health or safety needs that aren’t reasonably satisfied by the funding recipient or its licensees,
- Action is required to meet public use requirements in federal regulations, or
- The domestic manufacturing preference hasn’t been satisfied.
The domestic manufacturing preference mandates that certain inventions must be “manufactured substantially in the United States.” It applies only to exclusive licensees (not to funding recipients or nonexclusive licensees) and to products sold in the United States. In certain circumstances, the funding agency may grant a waiver. In the absence of a waiver, though, any products “embodying the subject invention or produced through the use of the subject invention” must satisfy the requirement.
In the 45 years since the Bayh-Dole Act became law, no funding agency has ever exercised march-in rights. The current administration’s emphasis on increased domestic manufacturing has prompted speculation that it might begin enforcing those rights. However, disturbing the status quo in this way likely would send ripples through a variety of industries, including the life sciences as well as the investment community.
March-in rights vs. taking ownership
Stakeholders understandably are anxious at the prospect of the government exercising march-in rights. But the regulations implementing the Bayh-Dole Act make clear the criteria and circumstances under which such an action may be taken. Moreover, it’s important to understand that the government’s exercise of march-in rights doesn’t put patent ownership in jeopardy.
A governmental taking of ownership isn’t tied to march-in rights. Rather, a federal agency can request or take title to a subject invention and its associated patent rights only if a funding recipient doesn’t timely disclose the invention to the agency and elect title to the patent rights. If the recipient does elect title, a patent application must be timely filed after election. Only the failure to comply with these deadlines can result in the loss of patent ownership.
Stay on top of your obligations
Federal funding recipients need to understand the basic aspects of the Bayh-Dole Act if they wish to avoid running afoul of its requirements and retain ownership of the patent rights. Whether enforced through march-in rights or taking ownership, noncompliance can prove costly.
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