[Federal Register Volume 81, Number 215 (Monday, November 7, 2016)]
[Proposed Rules]
[Pages 78090-78097]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-25325]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

National Institutes of Standards and Technology

37 CFR Parts 401 and 404

[Docket No.: 160311229-6229-01]
RIN 0693-AB63


Rights to Federally Funded Inventions and Licensing of Government 
Owned Inventions

AGENCY: National Institute of Standards and Technology (NIST), United 
States Department of Commerce.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The National Institute of Standards and Technology (NIST) 
requests comments on proposed revisions to regulations. The proposed 
revisions make technical corrections, update certain sections to 
conform with changes in the patent laws, clarify the role of 
provisional patent application filing, create a new Determination of 
Exceptional Circumstances, increase the role of Funding Agencies in the 
Bayh-Dole process, address subject inventions as to which a Federal 
laboratory employee is a co-inventor, and streamline the licensing 
application process for some Federal laboratory collaborators. NIST 
will hold a public meeting and simultaneous webinar regarding the 
proposed changes on November 21, 2016.

DATES: 
    For Comments: Comments must be received no later than December 9, 
2016.
    For Public Meeting/Webinar: A meeting and simultaneous webinar will 
be held on November 21, 2016, from 1 p.m. until 3 p.m. Eastern Time. 
Requests to participate in-person must be received via the meeting Web 
site no later than November 14, 2016.

ADDRESSES: Submit your comments, identified by docket identification 
(ID) number: 160311229-6229-01, through the Federal e-Rulemaking 
Portal: http://www.regulations.gov (search using the docket number). 
Follow the online instructions for submitting comments. Identify the 
document by docket ID number and other identifying information (subject 
heading, Federal Register date and page number).
    For Public Meeting/Webinar: A November 21, 2016 public meeting will 
be held in Lecture Room A on the NIST Campus in Gaithersburg, MD. 
Details about attending the meeting in-person or for accessing the 
webinar are available via the Technology Partnerships Office Web site 
at http://www.nist.gov/tpo/bayh-dole.

FOR FURTHER INFORMATION CONTACT: Courtney Silverthorn, via email: 
[email protected] or by telephone at 301-975-4189.

SUPPLEMENTARY INFORMATION: 
    A meeting and simultaneous webinar will be held on November 21, 
2016, from 1 p.m. until 3 p.m. Eastern Time in Building 101, Lecture 
Room A on the NIST Campus in Gaithersburg, MD. Details about attending 
the meeting in-person or for accessing the webinar are available via 
the Technology Partnerships Office Web site at http://www.nist.gov/tpo/bayh-dole. Requests to participate in-person must be received via the 
meeting Web site no later than November 14, 2016; forty seats are 
available on a first-come, first-served basis. For participants 
attending in person, please note that Federal agencies, including NIST, 
can only accept a state-issued driver's license or identification card 
for access to Federal facilities if such license or identification card 
is issued by a state that is compliant with the REAL ID Act of 2005 
(Pub. L. 109-13), or by a state that has an extension for REAL ID 
compliance. NIST currently accepts other forms of Federal-issued 
identification in lieu of a state-issued driver's license. To request 
accommodation of a disability, please contact the person listed under 
FOR FURTHER INFORMATON CONTACT, no later than November 10, 2016, to 
give NIST as much time as possible to process your request.

I. General Information

Does this action apply to me?

    This action may be of interest to you if you are an educational 
institution, company, or nonprofit organization, especially one that 
has or would like to receive Federal funding for scientific research 
and development.

II. Background

    These proposed rule revisions are promulgated under the University 
and Small Business Patent Procedures Act of 1980, Public Law 96-517 (as 
amended), codified at title 35 of the United States Code (U.S.C.) 200 
et seq., commonly known as the ``Bayh-Dole Act,'' which governs rights 
in inventions made with Federal assistance. The Bayh-Dole Act obligates 
nonprofit organizations and small business firms (``contractors''), and 
large businesses, as directed by Executive Order 12591, to disclose 
each ``subject invention'' (that is, each invention conceived or first 
actually reduced to practice in the performance of work under a funding 
agreement, 35 U.S.C. 201(e)) within a reasonable time after the 
invention becomes known to the contractor, 35 U.S.C. 202(c)(1), and 
permits contractors to elect, within a reasonable time after 
disclosure, to retain title to a subject invention 35 U.S.C. 202(a). 
Under certain defined ``exceptional'' circumstances, Bayh-Dole permits 
the Government to restrict or eliminate the contractor's right to elect 
to retain title, 35 U.S.C. 202(a), 202(b), and under such 
circumstances, rights vest in the Government.
    The Secretary of Commerce has delegated to the Director of NIST the 
authority to promulgate implementing regulations. Regulations 
implementing 35 U.S.C. 202 through 204 are codified at 37 CFR part 401, 
``Rights to Inventions Made by Nonprofit Organizations and Small 
Business Firms under Government Grants, Contracts, and Co-operative 
Agreements,'' and apply to all Federal agencies, 37 CFR 401.1(b). These 
regulations govern all subject inventions, 37 CFR 401.2(d), even if the 
Federal government is not the sole source of funding for either the 
conception or the reduction to practice, 37 CFR 401.1(a). Regulations 
implementing 35 U.S.C. 208, specifying the terms and conditions upon 
which federally owned inventions, other than inventions owned by the 
Tennessee Valley Authority, may be licensed on a nonexclusive, 
partially exclusive, or exclusive basis, are codified at 37 CFR

[[Page 78091]]

part 404, ``Licensing of Government Owned Inventions.''
    Bayh-Dole and its implementing regulations require Federal funding 
agencies to employ certain ``standard clauses'' in funding agreements 
awarded to contractors, except under certain specified conditions; 37 
CFR 401.3. Through these standard clauses, set forth at 37 CFR 
401.14(a), contractors are obligated to take certain actions to 
properly manage subject inventions. These actions include disclosing 
each subject invention to the Federal agency within two months after 
the contractor's inventor discloses it in writing to contractor 
personnel responsible for patent matters, 37 CFR 401.14(a)(c)(1); 
electing in writing whether or not to retain title to any subject 
invention by notifying the Federal agency within two years of 
disclosure, 37 CFR 401.14(a)(c)(2); filing an initial patent 
application on a subject invention as to which the contractor elects to 
retain title within one year after election, 37 CFR 401.14(a)(c)(3); 
executing and promptly delivering to the Federal agency all instruments 
necessary to establish or confirm the rights the Government has 
throughout the world in those subject inventions to which the 
contractor elects to retain title, 37 CFR 401.14(a)(f)(1); requiring, 
by written agreement, the contractor's employees to disclose promptly 
in writing each subject invention made under contract, 37 CFR 
401.14(a)(f)(2); notifying the Federal agency of any decision not to 
continue the prosecution of a patent application, 37 CFR 
401.14(a)(f)(3); and including in the specification of any U.S. patent 
applications and any patent issuing thereon covering a subject 
invention, a statement that the invention was made with Government 
support under the grant or contract awarded by the Federal agency, and 
that the Government has certain rights in the invention, 37 CFR 
401.14(a)(f)(4).
    In addition, a contractor is obligated to include the requirements 
of the standard clauses in any subcontracts under the contractor's 
award, 37 CFR 401.14(a)(g); to submit periodic reports as requested on 
the utilization of a subject invention or on efforts at obtaining such 
utilization that are being made by the contractor or its licensees or 
assignees, 37 CFR 401.14(a)(h); and to agree that neither the 
contractor nor any assignee will grant to any person the exclusive 
right to use or sell any subject inventions in the United States unless 
such person agrees that any products embodying the subject invention or 
produced through the use of the subject invention will be manufactured 
substantially in the United States, 37 CFR 401.14(a)(i), subject to 
waiver.
    Bayh-Dole and its implementing regulations also specify certain 
conditions applicable to licenses granted by Federal agencies in any 
federally owned invention. The implementing regulations include 37 CFR 
404.5, which sets forth restrictions and conditions applicable to all 
Federal agency licenses, 37 CFR 404.6, which addresses requirements 
pertaining to nonexclusive licenses, and 37 CFR 404.7, which addresses 
requirements pertaining to exclusive and partially exclusive licenses.
    Pursuant to authority delegated to it by the Secretary of Commerce, 
NIST is providing notice to the public of proposed rulemaking to revise 
parts 401 and 404 of title 37 of the Code of Federal Regulations (CFR) 
which address rights to inventions made under Government grants, 
contracts, and co-operative agreements, and licensing of government 
owned inventions. NIST is seeking public comments on the proposed 
amendments. Brief explanations of the proposed changes are included 
below; the full text of 37 CFR part 401 is available at https://www.gpo.gov/fdsys/pkg/CFR-2010-title37-vol1/pdf/CFR-2010-title37-vol1-part401.pdf and the full text of 37 CFR part 404 is available at 
https://www.gpo.gov/fdsys/granule/CFR-2004-title37-vol1/CFR-2004-title37-vol1-part404. This section is followed by a request for 
comments (Section III).
    The proposed revisions to 37 CFR part 401 will:
    1. Clarify in Sec.  401.1(b) that Federal agencies, under section 
1., subparagraph (b)(4) of Executive Order 12591, as amended, may apply 
the presumption of the right to retain title to contractors which are 
large business firms as well as to those which are small business firms 
and nonprofit organizations;
    2. Correct Sec.  401.1(e) to refer to Sec.  401.17, identifying the 
office to which copies of proposed and final agency regulations should 
be directed for approval by the Secretary of Commerce;
    3. Clarify in Sec.  401.2(b) that the term contractor includes any 
business firm regardless of size, under section 1., subparagraph (b)(4) 
of Executive Order 12591, as amended, which is a party to a funding 
agreement;
    4. Clarify that the term initial patent application means the first 
provisional or nonprovisional U.S. national application for a patent as 
defined in 37 CFR 1.9(a)(2) and (3), respectively, or the first 
international application as defined in 37 CFR 1.9(b) which designates 
the United States, in accordance with accepted practice;
    5. Clarify that the term statutory period refers to the one-year 
period in 35 U.S.C. 102(b).
    6. Clarify that the use of the standard clause at Sec.  401.14 is 
applicable to nonprofits and to all businesses regardless of size, 
consistent with section 1., subparagraph (b)(4) of Executive Order 
12591, as amended.
    7. Create additional conditions under Sec.  401.3(a) for the use of 
alternate provisions other than Sec.  401.14(a) through a formatting 
revision;
    8. Create additional conditions under Sec.  401.3(a) for the use of 
alternate provisions other than Sec.  401.14(a) when work is completed 
under a Cooperative Research and Development Agreement (CRADA) and 
removes outdated language related to Department of Energy naval nuclear 
propulsion and weapons related programs;
    9. Create additional conditions under Sec.  401.3(a) for the use of 
alternate provisions other than Sec.  401.14(a) when the contractor is 
not a non-profit organization and is not in the business of 
commercializing subject inventions that would arise under a funding 
agreement, consistent with the commercialization intent of 35 U.S.C. 
200;
    10. Remove language from Sec.  401.3(h) related to size protests 
that, per subparagraph (b)(4) of Executive Order 12591, as amended, no 
longer applies to a distinction between large and small businesses, and 
clarify language related to furnishing evidence of non-profit status;
    11. Update the provision for distribution of royalty payments in 
Sec.  401.5(g)(3) to be consistent with 35 U.S.C. 202(c)(7)(E)(i) as 
amended by the America Invents Act, Public Law 112-29;
    12. Revise Sec.  401.7(b) to include participation of the funding 
Agency in the review of an organization's nonprofit status;
    13. Revise Sec.  401.10 to clarify the management of subject 
inventions when there is a Federal employee who is a co-inventor of the 
subject invention, including clarifying that an agency may file an 
initial patent application provided that it does not negate a 
contractor's ability to elect rights, that a funding agency will 
provide administrative assistance to an agency who employs a Federal 
co-inventor in the management of co-invented subject inventions when a 
contractor has waived rights, that funding agencies and Federal 
agencies employing co-inventors shall consult on the management of co-
invented subject inventions that Federal agencies may enter into 
agreements with contractors

[[Page 78092]]

for the management of co-invented subject inventions, and that Federal 
agencies employing co-inventors retain their ownership rights when a 
contractor elects title to a co-invented subject invention;
    14. Redesignate Sec.  401.14(a)(c)(4) as 401.14(a)(c)(5);
    15. Revise Sec.  401.14(a)(c)(2) to clarify that a Federal agency 
may shorten the two year period of election of title by a contractor if 
necessary to protect the Government's interests;
    16. Clarify in Sec.  401.14(c) that a Federal agency may file an 
initial patent application at its own expense on a jointly-owned 
subject invention, if necessary to protect the Government's interest in 
the subject invention;
    17. Remove the 60-day agency time limitation after learning that a 
contractor has failed to disclose an invention or elect rights, in 
Sec.  401.14(a)(d)(1), in order to improve due diligence and enhance 
the ability of agencies to work with contractors;
    18. Clarify the requirement in Sec.  401.14(a)(f)(2) for a 
contractor to require its employees to assign rights in subject 
inventions to the contractor and in order for the contractor to file 
patent applications on subject inventions developed under the contract;
    19. Revise Sec.  401.14(a)(f)(3) to extend the required 
notification period for decisions not to continue patent prosecution 
from 30 days before the expiration of the response period to 120 days, 
in order to allow the Federal agency adequate time to determine whether 
to assume responsibility for patent prosecution of the subject 
invention;
    20. Revise Sec.  401.14(a)(k)(4) to provide for the funding 
agency's participation in the small business preference review process 
for the licensing of subject inventions by nonprofit contractors, and 
providing that the funding agency or the contractor may request review 
by the Secretary of Commerce as well;
    21. Revise Sec.  401.16 to make electronic filing the default 
format for reporting and elections unless otherwise directed by an 
agency; and
    22. Add contact information for Interagency Edison, which is used 
by many Federal agencies, to Sec.  401.17.
    The proposed revisions to 37 CFR part 404 will:
    23. Redesignate the existing text in Sec.  404.8 as paragraph (a) 
and create a new paragraph (b) to provide that a CRADA partner is not 
required to submit a separate license application to an agency in order 
to access, under the CRADA, background technology owned by the 
Government.
    This proposed rulemaking does not address contractor appeals of 
exceptions (Sec.  401.4), exercise of march-in rights (Sec.  401.6), 
small business preference (Sec.  401.7), subject invention utilization 
reporting (Sec.  401.8), contractor employee inventor rights retention 
(Sec.  401.9), appeals (Sec.  401.11), background patent rights 
licensing (Sec.  401.12), patent rights clauses administration (Sec.  
401.13), or deferred determinations (Sec.  401.15) of part 401, and 
addresses only the license application provision (Sec.  404.8) of part 
404.

III. Request for Comments

    NIST is requesting comments about parts 401 and 404 of the Bayh-
Dole regulations. We have included some questions that you might 
consider as you develop your comments:
    1. Are there any changes to these regulations, consistent with 
current law, that you or your organization think would accelerate the 
transfer of federally funded research and technology to entrepreneurs, 
or otherwise strengthen the Nation's innovation system?
    2. Are there provisions within 37 CFR part 401 or 404 that are 
inconsistent with, or otherwise affected by, changes in the patent laws 
under the Leahy-Smith America Invents Act, Public Law 112-29, or that 
Act's implementing regulations?
    3. Are there ways that the Federal Government can better share 
information on federally funded inventions in order to increase 
technology transfer and licensing opportunities?
    4. Are there ways to incentivize reporting compliance and 
compliance with the requirement to include a government support clause 
in patents?
    5. Do recipients of Federal funding, and their licensees, encounter 
issues in the reporting process? Are there changes that could 
streamline the requirements and reduce barriers to reporting?
    When submitting comments, remember to:
    i. Identify the document by docket ID number and other identifying 
information (subject heading, Federal Register date and page number).
    ii. Please organize your comments by referencing the specific 
question you are responding to or the relevant section number in the 
proposed regulatory text.
    iii. Explain why you agree or disagree; suggest alternatives and 
substitute language for your requested changes.
    iv. Describe any assumptions and provide any technical information 
and/or data that you used.
    v. Provide specific examples to illustrate your concerns and 
suggest alternatives.
    vi. Explain your views as clearly as possible.
    vii. Comments that contain profanity, vulgarity, threats, or other 
inappropriate language will not be considered.
    viii. Make sure to submit your comments by the comment period 
deadline identified.

IV. References

    1. Federal Laboratory Consortium for Technology Transfer. (n.d.) 
Technology Transfer Mechanisms. Retrieved from http://www.federallabs.org/education/t2-mechanisms/.
    2. National Institute of Standards and Technology, Federal 
Laboratory Technology Transfer, Fiscal Year 2010 Summary Report to the 
President and the Congress, August 2012, http://www.nist.gov/tpo/publications/index.cfm. See appendix table 4-40.
    3. Federal Laboratory Consortium for Technology Transfer. (2011). 
Technology Transfer Desk Reference. Retrieved from: http://globals.federallabs.org/pdf/T2_Desk_Reference.pdf.
    4. Kalil, T. and Wong, J. (2015). Lab to Market: Cross Agency 
Priority Goal Quarterly Progress Update, Fiscal Year 2015 Quarter 4. 
Retrieved from: https://www.performance.gov/node/3395/view?view=public#progress-update.

V. Statutory and Executive Order Reviews

Executive Order 12866

    This rulemaking is a significant regulatory action under sections 
3(f)(3) and 3(f)(4) of Executive Order 12866, as it raises novel policy 
issues. This rulemaking, however, is not an ``economically 
significant'' regulatory action under section 3(f)(1) of the Executive 
order, as it does not have an effect on the economy of $100 million or 
more in any one year, and it does not have a material adverse effect on 
the economy, a sector of the economy, productivity, competition, jobs, 
the environment, public health or safety, or State, local, or tribal 
governments or communities.

Executive Order 13132

    This proposed rule does not contain policies with Federalism 
implications as defined in Executive Order 13132.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires the preparation and 
availability for public comment of ``an initial regulatory flexibility 
analysis'' which will ``describe the impact of the

[[Page 78093]]

proposed rule on small entities.'' (5 U.S.C. 603(a)). Section 605 of 
the RFA allows an agency to certify a rule, in lieu of preparing an 
analysis, if the proposed rulemaking is not expected to have a 
significant economic impact on a substantial number of small entities.
    The Chief Counsel for Regulation of the Department of Commerce 
certified to the Chief Counsel for Advocacy of the Small Business 
Administration (SBA) that this rulemaking, if adopted, would not have a 
significant economic impact on a substantial number of small entities. 
The factual basis for this determination is as follows:
    A description of this proposed rule, why it is being considered, 
and the objectives of this proposed rule are contained in the preamble 
and in the SUMMARY section of the preamble. The statutory basis for 
this proposed rule is provided by 35 U.S.C. 200-212. The Bayh-Dole Act 
and its implementing regulations apply to all small business firms and 
nonprofit organizations that have entered into a Federal funding 
agreement, as defined in 35 U.S.C. 201, and express a policy to 
``encourage maximum participation of small business firms in federally 
supported research and development efforts; to promote collaboration 
between commercial concerns and nonprofit organizations, including 
universities; [and] to ensure that inventions made by nonprofit 
organizations and small business firms are used in a manner to promote 
free competition and enterprise without unduly encumbering future 
research and discovery.'' 35 U.S.C. 200. For small business firms and 
nonprofit organizations that deal with the Government in areas of 
technology development, the Bayh-Dole implementing regulations make it 
easier to participate in federally-supported programs by guaranteeing 
the protection of the intellectual property they create. This proposed 
rule, if implemented, would predominantly make technical changes and 
clarifications and is not anticipated to have any quantifiable economic 
impact with respect to small entities. Several proposed changes would 
bring the regulations into conformity with the America Invents Act, 
Public Law 112-29, and Executive Order 12591, which gave Federal 
agencies discretion to expand applicability of certain provisions to 
firms regardless of their size. Proposed changes to the definition of 
``initial patent application'' clarify that it would include a 
provisional application, making it less costly and burdensome for small 
entities to comply with the regulations' requirements. Proposed changes 
to 37 CFR 401.3 provide Federal agencies with some additional 
flexibility in choosing when to include the ``standard clauses'' 
described earlier in funding agreements awarded to contractors, which 
could benefit small businesses and nonprofits. The additional 
flexibility provided by these changes could provide some benefit to 
small entities. While proposed changes to 37 CFR 401.14 would allow 
Federal agencies to shorten certain time limitations applicable to 
election of title by a contractor (including small entities), these 
proposed changes are only intended to provide more efficient resolution 
of issues and not anticipated to have any negative substantive result.
    The information provided above supports a determination that this 
proposed rule would not have a significant economic impact on a 
substantial number of small entities. Because this rulemaking, if 
implemented, is not expected to have a significant economic impact on 
any small entities, an initial regulatory flexibility analysis is not 
required and none has been prepared.

Paperwork Reduction Act

    This proposed rule contains no new collection of information 
subject to the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.

National Environmental Policy Act

    This proposed rule will not significantly affect the quality of the 
human environment. Therefore, an environmental assessment or 
Environmental Impact Statement is not required to be prepared under the 
National Environmental Policy Act of 1969.

List of Subjects in 37 CFR Parts 401 and 404

    Inventions and patents, Laboratories, Research and development, 
Science and technology, Technology transfer.

    For the reasons stated in the preamble, the National Institute of 
Standards and Technology proposes to amend 37 CFR parts 401 and 404 as 
follows:

PART 401--RIGHTS TO INVENTIONS MADE BY NONPROFIT ORGANIZATIONS AND 
SMALL BUSINESS FIRMS UNDER GOVERNMENT GRANTS, CONTRACTS, AND 
COOPERATIVE AGREEMENTS

0
1. The authority citation for 37 CFR part 401 continues to read as 
follows:

    Authority:  35 U.S.C. 206; DOO 30-2A.

0
2. Section 401.1 is amended as follows:
0
a. Revise the second sentence of paragraph (b); and
0
b. In paragraph (e), remove ``401.16'' and add in its place ``401.17''.
    The revision reads as follows:


Sec.    401.1 Scope.

* * * * *
    (b) * * * It applies to all funding agreements with business firms 
regardless of size (consistent with section 1., subparagraph (b)(4) of 
Executive Order 12591, as amended by Executive Order 12618) and to 
nonprofit organizations, except for a funding agreement made primarily 
for educational purposes. * * *
* * * * *
0
3. Section 401.2 is amended as follows:
0
a. Revise paragraphs (b) and (n); and
0
b. Add paragraph (o).
    The revisions and additions read as follows:


Sec.  401.2   Definitions.

* * * * *
    (b) The term contractor means any person, small business firm or 
nonprofit organization, or, as set forth in Section 1., subparagraph 
(b)(4) of Executive Order 12591, as amended, any business firm 
regardless of size, which is a party to a funding agreement.
* * * * *
    (n) The term initial patent application means the first provisional 
or non-provisional U.S. national application for patent as defined in 
37 CFR 1.9(a)(2) and (3), respectively, or the first international 
application as defined in 37 CFR 1.9(b) which designates the United 
States.
    (o) The term statutory period means the one-year period before the 
effective filing date of a claimed invention during which exceptions to 
prior art exist per 35 U.S.C. 102(b).
0
4. Section 401.3 is amended as follows:
0
a. Revise the first sentence of paragraph (a);
0
b. In paragraph (a)(4), remove the period at the end of the paragraph 
and add in its place ``; or'';
0
c. Revise paragraph (a)(5);
0
d. Add paragraph (a)(6);
0
e. In paragraph (b), revise the first sentence, remove ``Sec.  
401.14(b)'' and add in its place ``paragraph (c) of this section'' and 
remove ``Sec.  401.14(a)'' and add in its place ``Sec.  401.14''
0
f. Revise the paragraph (c);
0
g. Revise paragraph (h); and
0
h. Add paragraph (i).
    The revisions and additions read as follows:

[[Page 78094]]

Sec.  401.3   Use of the standard clauses at Sec.  401.14.

    (a) Each funding agreement awarded to a contractor (except those 
subject to 35 U.S.C. 212) shall contain the clause found in Sec.  
401.14(a) with such modifications and tailoring as authorized or 
required elsewhere in this part. * * *
* * * * *
    (5) 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) pursuant 
to the statutory authority of 15 U.S.C. 3710a; or
    (6) If the contract provides for services and the contractor is not 
a nonprofit organization and does not promote the commercialization and 
public availability of subject inventions pursuant to 35 U.S.C. 200.
    (b) When an agency excercises the exceptions at Sec.  401.3(a)(2), 
(3), or (6), it shall use the standard clause at Sec.  401.14 with only 
such modifications as are necessary to address the exceptional 
circumstances or concerns which led to the use of the exception. * * *
    (c) When the Department of Energy (DOE) determines to use 
alternative provisions under Sec.  401.3(a)(4), the standard clause at 
Sec.  401.14 shall be used with the following modifications, or 
substitute thereto with such modification and tailoring as authorized 
or required elsewhere in this part:
    (1) The title of the clause shall be changed to read as follows: 
Patent Rights to Nonprofit DOE Facility Operators
    (2) Add an ``(A)'' after ``(1)'' in paragraph (c)(1) of the clause 
in Sec.  401.14 and add subparagraphs (B) and (C) to paragraph (c)(1) 
of the clause in Sec.  401.14 as follows:

    (B) If the subject invention occurred under activities funded by 
the naval nuclear propulsion or weapons related programs of DOE, 
then the provisions of this paragraph (c)(1)(B) will apply in lieu 
of paragraphs (c)(2) and (3) of this clause. In such cases the 
contractor agrees to assign the government the entire right, title, 
and interest thereto throughout the world in and to the subject 
invention except to the extent that rights are retained by the 
contractor through a greater rights determination or under paragraph 
(e) of this clause. The contractor, or an employee-inventor, with 
authorization of the contractor, may submit a request for greater 
rights at the time the invention is disclosed or within a reasonable 
time thereafter. DOE will process such a request in accordance with 
procedures at 37 CFR 401.15. Each determination of greater rights 
will be subject to paragraphs (h) through (k) of this clause and 
such additional conditions, if any, deemed to be appropriate by the 
Department of Energy.
    (C) At the time an invention is disclosed in accordance with 
(c)(1)(A) of this clause, or within 90 days thereafter, the 
contractor will submit a written statement as to whether or not the 
invention occurred under a naval nuclear propulsion or weapons-
related program of the Department of Energy. If this statement is 
not filed within this time, paragraph (c)(1)(B) of this clause will 
apply in lieu of paragraphs (c)(2) and (3). The contractor statement 
will be deemed conclusive unless, within 60 days thereafter, the 
Contracting Officer disagrees in writing, in which case the 
determination of the Contracting Officer will be deemed conclusive 
unless the contractor files a claim under the Contract Disputes Act 
within 60 days after the Contracting Officer's determination. 
Pending resolution of the matter, the invention will be subject to 
paragraph (c)(1)(B) of this clause.

    (3) Paragraph (k)(3) of the clause in Sec.  401.14 will be modified 
as prescribed at Sec.  401.5(g).
* * * * *
    (h) A prospective contractor may be required by an agency to 
certify that it is a nonprofit organization. If the agency has reason 
to question the nonprofit status of the prospective contractor, it may 
require the prospective contractor to furnish evidence to establish its 
status as a nonprofit organization.
    (i) When an agency excercises the exception at Sec.  401.3(a)(5), 
replace (b) of the basic clause in Sec.  401.14 with the following 
paragraphs (b)(1) and (2):

    (b) Allocation of principal rights. (1) The Contractor may 
retain the entire right, title, and interest throughout the world to 
each subject invention subject to the provisions of this clause, 
including paragraph (b)(2) of this clause, and 35 U.S.C. 203. With 
respect to any subject invention in which the Contractor retains 
title, the Federal Government shall have a nonexclusive, 
nontransferable, irrevocable, paid-up license to practice or have 
practiced for or on behalf of the United States the subject 
invention throughout the world.
    (2) If the Contractor performs services at a Government owned 
and operated laboratory or at a Government owned and contractor 
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 negotiate an agreement with 
the CRADA collaborating party or parties regarding the allocation of 
rights to any subject invention the Contractor makes, solely or 
jointly, 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.

0
5. Revise Sec.  401.5 to read as follows:


Sec.  401.5   Modification and tailoring of clauses.

    (a) Agencies should complete the blank in paragraph (g)(2) of the 
clauses at Sec.  401.14 in accordance with their own or applicable 
government-wide regulations such as the Federal Acquisition Regulation. 
In grants and cooperative agreements (and in contracts, if not 
inconsistent with the Federal Acquisition Regulation) agencies wishing 
to apply the same clause to all subcontractors as is applied to the 
contractor may delete paragraph (g)(2) of the clause in Sec.  401.14 
and delete the words ``to be performed by a small business firm or 
domestic nonprofit organization'' from paragraph (g)(1). Also, if the 
funding agreement is a grant or cooperative agreement, paragraph (g)(3) 
may be deleted. When either paragraph (g)(2) of the clause in Sec.  
401.14 or paragraphs (g)(2) and (3) of the clause in Sec.  401.14 are 
deleted, the remaining paragraph or paragraphs should be renumbered 
appropriately.
    (b) Agencies should complete paragraph (l), ``Communications'', at 
the end of the clauses at Sec.  401.14 by designating a central point 
of contact for communications on matters relating to the clause. 
Additional instructions on communications may also be included in 
paragraph (l) of the clause in Sec.  401.14.
    (c) Agencies may replace the italicized words and phrases in the 
clauses at Sec.  401.14 with those appropriate to the particular 
funding agreement. For example, ``contracts'' could be replaced by 
``grant,'' ``contractor'' by ``grantee,'' and ``contracting officer'' 
by ``grants officer.'' Depending on its use, ``Federal agency'' can be 
replaced either by the identification of the agency or by the 
specification of the particular office or official within the agency.
    (d)(1) When the agency head or duly authorized designee determines 
at the time of contracting with a small business firm or nonprofit 
organization that it would be in the national interest to acquire the 
right to sublicense foreign governments or international organizations 
pursuant to any existing treaty or international agreement, a sentence 
may be added at the end of paragraph (b) of the clause at Sec.  401.14 
as follows:

This license will include the right of the government to sublicense 
foreign governments, their nationals, and international 
organizations, pursuant to the

[[Page 78095]]

following treaties or international agreements: ____.

    (2) The blank in the added text in paragraph (d)(1) of this section 
should be completed with the names of applicable existing treaties or 
international agreements, agreements of cooperation, memoranda of 
understanding, or similar arrangements, including military agreements 
relating to weapons development and production. The added language is 
not intended to apply to treaties or other agreements that are in 
effect on the date of the award but which are not listed. 
Alternatively, agencies may use substantially similar language relating 
the government's rights to specific treaties or other agreements 
identified elsewhere in the funding agreement. The language may also be 
modified to make clear that the rights granted to the foreign 
government, and its nationals or an international organization may be 
for additional rights beyond a license or sublicense if so required by 
the applicable treaty or international agreement. For example, in some 
exclusive licenses or even the assignment of title in the foreign 
country involved might be required. Agencies may also modify the added 
language to provide for the direct licensing by the contractor of the 
foreign government or international organization.
    (e) If the funding agreement involves performance over an extended 
period of time, such as the typical funding agreement for the operation 
of a government-owned facility, the following language may also be 
added:

The agency reserves the right to unilaterally amend this funding 
agreement to identify specific treaties or international agreements 
entered into or to be entered into by the government after the 
effective date of this funding agreement and effectuate those 
license or other rights which are necessary for the government to 
meet its obligations to foreign governments, their nationals and 
international organizations under such treaties or international 
agreements with respect to subject inventions made after the date of 
the amendment.

    (f) Agencies may add additional subparagraphs to paragraph (f) of 
the clauses at Sec.  401.14 to require the contractor to do one or more 
of the following:
    (1) Provide a report prior to the close-out of a funding agreement 
listing all subject inventions or stating that there were none.
    (2) Provide, upon request, the filing date, patent application 
number and title; a copy of the patent application; and patent number 
and issue date for any subject invention in any country in which the 
contractor has applied for a patent.
    (3) Provide periodic (but no more frequently than annual) listings 
of all subject inventions which were disclosed to the agency during the 
period covered by the report.
    (g) If the contract is with a nonprofit organization and is for the 
operation of a government-owned, contractor-operated facility, the 
following will be substituted for the text of paragraph (k)(3) of the 
clause at Sec.  401.14:

After payment of patenting costs, licensing costs, payments to 
inventors, and other expenses incidental to the administration of 
subject inventions, the balance of any royalties or income earned 
and retained by the contractor during any fiscal year on subject 
inventions under this or any successor contract containing the same 
requirement, up to any amount equal to five percent of the budget of 
the facility for that fiscal year, shall be used by the contractor 
for scientific research, development, and education consistent with 
the research and development mission and objectives of the facility, 
including activities that increase the licensing potential of other 
inventions of the facility. If the balance exceeds five percent, 15 
percent of the excess above five percent shall be paid by the 
contractor to the Treasury of the United States and the remaining 85 
percent shall be used by the contractor only for the same purposes 
as described in the preceding sentence. To the extent it provides 
the most effective technology transfer, the licensing of subject 
inventions shall be administered by contractor employees on location 
at the facility.

    (h) If the contract is for the operation of a government-owned 
facility, agencies may add paragraph (f)(5) to the clause at Sec.  
401.14 with the following text;

The contractor shall establish and maintain active and effective 
procedures to ensure that subject inventions are promptly identified 
and timely disclosed and shall submit a description of the 
procedures to the contracting officer so that the contracting 
officer may evaluate and determine their effectiveness.

0
6. In Sec.  401.7, revise paragraph (b) to read as follows:


Sec.  401.7   Small business preference.

* * * * *
    (b) Small business firms that believe a nonprofit organization is 
not meeting its obligations under the clause may report their concerns 
to the funding Agency identified at Sec.  401.14(l), and following 
receipt of the funding Agency's initial response to their concerns or, 
if no initial funding Agency response is received within 90 days from 
the date their concerns were reported to the funding Agency, may 
thereafter report their concerns, together with any response from the 
funding Agency, to the Secretary. To the extent deemed appropriate, the 
Secretary, in consultation with the funding Agency, will undertake 
informal investigation of the concern, and, if appropriate, enter into 
discussions or negotiations with the nonprofit organization to the end 
of improving its efforts in meeting its obligations under the clause. 
However, in no event will the Secretary intervene in ongoing 
negotiations or contractor decisions concerning the licensing of a 
specific subject invention. All investigations, discussions, and 
negotiations of the Secretary described in this paragraph will be in 
coordination with other interested agencies, including the funding 
Agency and the Small Business Administration. In the case of a contract 
for the operation of a government-owned, contractor operated research 
or production facility, the Secretary will coordinate with the agency 
responsible for the facility prior to any discussions or negotiations 
with the contractor.
0
7. Revise Sec.  401.10 to read as follows:


Sec.  401.10   Government assignment to contractor of rights in 
invention of government employee.

    (a) In any case when a Federal employee is a co-inventor of any 
invention made under a funding agreement with a contractor:
    (1) If the Federal agency employing such co-inventor transfers or 
reassigns the right it has acquired in the subject invention from its 
employee to the contractor as authorized by 35 U.S.C. 202(e), the 
assignment will be made subject to the patent rights clause of the 
contractor's funding agreement.
    (2) The Federal agency employing such co-inventor may submit an 
initial patent application, provided that the contractor retains the 
ability to elect rights pursuant to 35 U.S.C. 202(a).
    (3) When a Federal employee is a co-inventor of a subject invention 
developed with contractor-employed co-inventors under a funding 
agreement from another agency:
    (i) The funding agency will notify the agency employing a Federal 
co-inventor of any report of invention and whether the contractor 
elects or waives rights.
    (ii) If the contractor waives rights to the subject invention, the 
funding agency must promptly provide notice to the agency employing a 
Federal co-inventor, and to the extent practicable, at least 60 days 
before any statutory bar date.
    (iii) Upon notification by the funding agency of a subject 
invention in which the contractor has waived rights, the agency 
employing a Federal co-inventor

[[Page 78096]]

must determine if there is a government interest in patenting the 
invention and will notify the funding agency of its determination.
    (iv) If the agency employing a Federal co-inventor determines there 
is a government interest in patenting the subject invention, the 
funding agency must provide administrative assistance (but is not 
required to provide financial assistance) to the agency employing a 
Federal co-inventor in acquiring rights from the contractor in order to 
file an initial patent invention.
    (v) The agency employing a Federal co-inventor has priority for 
patenting over funding agencies that do not have a Federal co-inventor 
when a contractor has waived rights.
    (vi) The funding agency and the agency employing a Federal co-
inventor shall consult in order to ensure that the intent of the 
programmatic objectives conducted under the funding agreement is 
represented in any patenting decisions. The agency employing a Federal 
co-inventor may transfer patent management responsibilities to the 
funding agency.
    (4) Federal agencies employing such co-inventors may enter into an 
agreement with a contractor when an agency determines it is a suitable 
and necessary step to protect and administer rights on behalf of the 
Federal Government, pursuant to 35 U.S.C. 202(e).
    (5) Federal agencies employing such co-inventors will retain all 
ownership rights to which they are otherwise entitled if the contractor 
elects title to the subject invention.
    (b) Agencies may add additional conditions as long as they are 
consistent with 35 U.S.C. 201-206.
0
8. Amend Sec.  401.14 as follows:
0
a. Remove the paragraph (a) designation from the first sentence of the 
section and republish the sentence;
0
b. Add paragraph (a)(7);
0
c. Revise paragraph (c)(2);
0
d. Redesignate the existing paragraph (c)(4) as paragraph (c)(5);
0
e. Add a new paragraph (c)(4); and
0
f. Revise paragraphs (d)(1), (f)(2) and (3), (g)(1), and (k)(4);
0
g. Revise the text after the paragraph heading of paragraph (l);
0
h. Remove the second paragraphs (b) and (c) from the end of the section 
which appear after paragraph (l).
    The additions and revisions read as follows:


Sec.  401.14   Standard patent rights clauses.

    The following is the standard patent rights clause to be used as 
specified in Sec.  401.3(a):
    Standard Patent Rights
    (a) * * *
    (7) The term statutory period means the one-year period before the 
effective filing date of a claimed invention during which exceptions to 
prior art exist per 35 U.S.C. 102(b).
* * * * *
    (c) * * *
    (2) The contractor will elect in writing whether or not to retain 
title to any such invention by notifying the Federal agency within two 
years of disclosure to the Federal agency. However, the period for 
election of title may be shortened by the Federal agency where the 
agency determines that a shorter period is necessary in order to 
protect the government's interest, and in any case where a patent, a 
printed publication, public use, sale, or other availability to the 
public has initiated the one year statutory period wherein valid patent 
protection can still be obtained in the United States, the period for 
election of title may be shortened by the agency to a date that is no 
more than 60 days prior to the end of the statutory period.
* * * * *
    (4) Where the Federal agency determines that it would be in the 
interest of the government, pursuant to 35 U.S.C. 207(a)(3), for the 
Federal agency to file an initial patent application on any subject 
invention with Federal agency and contractor inventors, the Federal 
agency, at its discretion and in consultation with the contractor, may 
file such application at its own expense.''
* * * * *
    (d) * * *
    (1) If the contractor fails to disclose or elect title to the 
subject invention within the times specified in (c), above, or elects 
not to retain title.
* * * * *
    (f) * * *
    (2) The contractor agrees to require, by written agreement, its 
employees, other than clerical and nontechnical employees, to disclose 
promptly in writing to personnel identified as responsible for the 
administration of patent matters and in a format suggested by the 
contractor each subject invention made under contract in order that the 
contractor can comply with the disclosure provisions of paragraph (c) 
of this clause, to assign to the contractor the entire right, title and 
interest in and to each subject invention made under contract, and to 
execute all papers necessary to file patent applications on subject 
inventions and to establish the government's rights in the subject 
inventions. This disclosure format should require, as a minimum, the 
information required by paragraph (c)(1) of this clause. The contractor 
shall instruct such employees through employee agreements or other 
suitable educational programs on the importance of reporting inventions 
in sufficient time to permit the filing of patent applications prior to 
U.S. or foreign statutory bars.
    (3) The contractor will, no less than 120 days prior to the 
expiration of any applicable response period or other filing deadline 
required by the relevant patent office, notify the Federal agency of 
any decision: Not to continue the prosecution of a patent application; 
not to pay a maintenance, annuity or renewal fee; not to defend in a 
reexamination or opposition proceeding on a patent, in any country; to 
request, be a party to, or take action in a trial proceeding before the 
Patent Trial and Appeals Board of the U.S. Patent and Trademark Office, 
including but not limited to post-grant review, review of a business 
method patent, inter partes review, and derivation proceeding; or to 
request, be a party to, or take action in a non-trial submission of art 
or information at the U.S. Patent and Trademark Office, including but 
not limited to a pre-issuance submission, a post-issuance submission, 
and supplemental examination.
    (g) * * *
    (1) The contractor will include this clause, suitably modified to 
identify the parties, in all subcontracts, regardless of tier, for 
experimental, developmental or research work to be performed by a 
subcontractor.
* * * * *
    (k) * * *
    (4) It will make efforts that are reasonable under the 
circumstances to attract licensees of subject inventions that are small 
business firms and that it will give a preference to a small business 
firm when licensing a subject invention if the contractor determines 
that the small business firm has a plan or proposal for marketing the 
invention which, if executed, is equally as likely to bring the 
invention to practical application as any plans or proposals from 
applicants that are not small business firms; provided, that the 
contractor is also satisfied that the small business firm has the 
capability and resources to carry out its plan or proposal. The 
decision whether to give a preference in any specific case will be at 
the discretion of the contractor. However, the contractor agrees that 
the Federal agency may review the contractor's licensing program and 
decisions regarding small business applicants, and the contractor will 
negotiate changes to its licensing

[[Page 78097]]

policies, procedures, or practices with the Federal agency when the 
Federal agency's review discloses that the contractor could take 
reasonable steps to implement more effectively the requirements of this 
paragraph (k)(4). The Federal agency or the contractor may request that 
the Secretary review the contractor's licensing program and decisions 
regarding small business applicants.
    (l) * * *
    [Complete according to instructions at Sec.  401.5(b)]
0
9. In Sec.  401.16:
0
a. Remove the word ``may'' from paragraphs (a), (b), and (c), and add 
in its place the word ``shall''; and
0
b. Add paragraph (d).
    The addition reads as follows:


Sec.  401.16   Electronic filing.

* * * * *
    (d) Other written notices required in this clause may be 
electronically delivered to the agency or the contractor through an 
electronic database used for reporting subject inventions, patents, and 
utilization reports to the funding agency.
0
11. Revise Sec.  401.17 to read as follows:


Sec.  401.17   Submissions and inquiries.

    All submissions or inquiries should be directed to the Chief 
Counsel for NIST, National Institute of Standards and Technology, 100 
Bureau Drive, Mail Stop 1052, Gaithersburg, Maryland 20899-1052; 
telephone: (301) 975-2803; email: [email protected]. Information 
about and procedures for electronic filing under this Part are 
available at the Interagency Edison Web site and service center, http://www.iedison.gov, telephone (301) 435-1986.

PART 404--LICENSING OF GOVERNMENT OWNED INVENTIONS

0
12. The authority citation for 37 CFR part 404 continues to read as 
follows:

    Authority:  35 U.S.C. 207-209, DOO 30-2A.

0
13. Revise Sec.  404.8 to read as follows:


Sec.  404.8   Application for a license.

    (a) An application for a license should be addressed to the Federal 
agency having custody of the invention and shall normally include:
    (1) Identification of the invention for which the license is 
desired including the patent application serial number or patent 
number, title, and date, if known;
    (2) Identification of the type of license for which the application 
is submitted;
    (3) Name and address of the person, company, or organization 
applying for the license and the citizenship or place of incorporation 
of the applicant;
    (4) Name, address, and telephone number of the representative of 
the applicant to whom correspondence should be sent;
    (5) Nature and type of applicant's business, identifying products 
or services which the applicant has successfully commercialized, and 
approximate number of applicant's employees;
    (6) Source of information concerning the availability of a license 
on the invention;
    (7) A statement indicating whether the applicant is a small 
business firm as defined in Sec.  404.3(c)
    (8) A detailed description of applicant's plan for development or 
marketing of the invention, or both, which should include:
    (i) A statement of the time, nature and amount of anticipated 
investment of capital and other resources which applicant believes will 
be required to bring the invention to practical application;
    (ii) A statement as to applicant's capability and intention to 
fulfill the plan, including information regarding manufacturing, 
marketing, financial, and technical resources;
    (iii) A statement of the fields of use for which applicant intends 
to practice the invention; and
    (iv) A statement of the geographic areas in which applicant intends 
to manufacture any products embodying the invention and geographic 
areas where applicant intends to use or sell the invention, or both;
    (9) Identification of licenses previously granted to applicant 
under federally owned inventions;
    (10) A statement containing applicant's best knowledge of the 
extent to which the invention is being practiced by private industry or 
Government, or both, or is otherwise available commercially; and
    (11) Any other information which applicant believes will support a 
determination to grant the license to applicant.
    (b) An executed CRADA which provides for the use for research and 
development purposes by the CRADA collaborator under that CRADA of a 
Federally-owned invention in the Federal laboratory's custody (pursuant 
to 35 U.S.C. 209 and 15 U.S.C. 3710a(b)(1)), and which addresses the 
information in paragraph (a) of this section, may be treated by the 
Federal laboratory as an application for a license.

Kent Rochford,
Associate Director for Laboratory Programs.
[FR Doc. 2016-25325 Filed 11-4-16; 8:45 am]
 BILLING CODE 3510-13-P