[Federal Register Volume 86, Number 1 (Monday, January 4, 2021)]
[Proposed Rules]
[Pages 35-44]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27581]



[[Page 35]]

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DEPARTMENT OF COMMERCE

National Institute of Standards and Technology

37 CFR Parts 401 and 404

[Docket No.: 201207-0327]
RIN 0693-AB66


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.

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SUMMARY: The National Institute of Standards and Technology (NIST) 
requests comments on proposed revisions to regulations that would 
further the Return on Investment (ROI) Initiative for Unleashing 
American Innovation. The proposed revisions to ``Rights to Inventions 
Made by Nonprofit Organizations and Small Business Firms under 
Government Grants, Contracts, and Cooperative Agreements'' and 
``Licensing of Government-Owned Inventions'' make technical 
corrections; reorganize certain subsections; remove outdated and/or 
unnecessary sections; institute a reporting requirement on Federal 
agencies; and provide clarifications on definitions, communications, 
scope of march-in rights, filing of provisional patent applications, 
electronic filing, the purpose of royalties on government licenses, and 
the processes for granting exclusive, co-exclusive and partially 
exclusive licenses and for appeals. NIST intends to hold a webinar 
regarding the proposed changes and information on that webinar will be 
available to the public at https://www.nist.gov/tpo/bayh-dole.

DATES: 
    For Comments: Comments must be received no later than April 5, 
2021.
    For Public Webinar: Details about accessing the public webinar will 
be made available via the Technology Partnerships Office website at 
http://www.nist.gov/tpo/bayh-dole.

ADDRESSES: Submit your comments, identified by docket identification 
(ID) number: 201207-0327, 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). See SUPPLEMENTARY INFORMATION 
for file formats and other information about electronic filing. All 
submissions, including attachments and other supporting materials, will 
become part of the public record and subject to public disclosure. NIST 
reserves the right to publish relevant comments publicly, unedited and 
in their entirety. Personal information, such as account numbers or 
Social Security numbers, or names of other individuals, should not be 
included. Do not submit confidential business information, or otherwise 
proprietary, sensitive or protected information. Comments that contain 
profanity, vulgarity, threats, or other inappropriate language or 
content will not be posted or considered.
    For Public Webinar: Details about accessing the public webinar will 
be made available via the Technology Partnerships Office website 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: 

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 received or would like to receive Federal funding for scientific 
research and development.

II. Statutory Framework

    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'' or ``Bayh-Dole,'' 
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. 200 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 under Bayh-Dole, 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 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(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(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(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(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(f)(2); notifying the Federal agency of 
any decision not to continue the prosecution of a patent application, 
37 CFR 401.14(f)(3); and including in the specification of any U.S. 
patent

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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(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(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(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(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 a proposed rulemaking to 
revise Parts 401 and 404 of Title 37 of the Code of Federal Regulations 
which address rights to inventions made under Government grants, 
contracts, and cooperative 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.

III. Return on Investment Initiative

    In 2018, NIST undertook a large-scale stakeholder engagement effort 
to inform the development of the Lab-to-Market Cross Agency Priority 
(CAP) goal, part of the 2018 President's Management Agenda. The Lab-to-
Market CAP goal's stated purpose is to ``. . .improve the transition of 
federally funded innovations from the laboratory to the marketplace by 
reducing the administrative and regulatory burdens for technology 
transfer and increasing private sector investment in later-stage 
research and development (R&D); develop and implement more effective 
partnering models and technology transfer mechanisms for Federal 
agencies; and enhance the effectiveness of technology transfer by 
improving the methods for evaluating the ROI and economic and national 
security impacts of federally funded R&D, and using that information to 
focus efforts on approaches proven to work.''
    Beginning in April 2018, NIST utilized a number of avenues to seek 
input from the public on ways to improve federal technology transfer 
and the commercialization of federally funded inventions. These 
included a Request for Information that NIST published in the Federal 
Register,\1\ four public meetings,\2\ a summit hosted by NIST, 
extensive consultations with interagency working groups responsible for 
technology transfer issues, and multiple stakeholder engagement 
sessions. These public inputs, as well as an extensive literature 
review of government and academic publications on federal technology 
transfer, ultimately informed NIST Special Publication 1234: Return on 
Investment Initiative To Advance the President's Management Agenda, 
Final Green Paper.
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    \1\ ``Request for Information Regarding Federal Technology 
Transfer Authorities and Process'' published in the Federal Register 
on May 1, 2018 (83 FR 19052).
    \2\ San Jose, California, May 17, 2018; Denver, Colorado, May 
21, 2018; Oak Lawn, Illinois, May 29, 2018; NIST Campus 
Gaithersburg, Maryland, June 14, 2018.
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    The Green Paper described 15 findings from NIST's stakeholder 
engagement process that may have the potential to ``unleash American 
innovation'' and advance the goals of Lab-to-Market through regulatory 
or legislative changes, updates to policy and guidance, and the 
development of new tools and services. In addition to the overall Lab-
to-Market strategy to ``Identify regulatory impediments and 
administrative improvements in Federal technology transfer policies and 
practices'' (which supports the Administration's stated goal to 
streamline and reduce regulatory burdens), seven of the Green Paper's 
15 findings noted potential changes to the Bayh-Dole implementing 
regulations that could improve compliance, enhance a contractor's 
ability to commercialize subject inventions, and increase the return on 
investment of Federal funding through new goods and services to the 
public. Four of those seven findings are considered in this notice of 
proposed rulemaking (NPRM or proposed rule).
    As part of the overall streamlining effort in this proposed rule, 
some outdated or redundant text has been proposed for removal. This 
includes Sec. Sec.  401.1(a), 401.1(c), 401.1(d), 401.1(f), 401.3(g), 
401.8, 401.11(a), 401.11(b)(5), 401.13(b) and 404.4. Other text has 
been moved or substantially reincorporated into new sections in the 
proposed rule as follows: Sec.  401.5(f) moved to Sec.  401.14(c)(1) 
and (3); Sec. Sec.  401.7 and 401.14(m) incorporated into Sec. Sec.  
401.14(k)(4) through (6); Sec.  401.13(a) moved to Sec.  401.14(c)(6); 
Sec.  401.15 incorporated into Sec.  401.9; Sec.  401.16 moved to Sec.  
401.14(m); Sec.  404.2 incorporated into Sec.  404.1(b); and Sec.  
404.4 incorporated into Sec.  404.5(g).
    In addition to these changes and technical corrections throughout 
the regulation, the proposed revisions to 37 CFR part 401 will:
    (1) Clarify in Sec.  401.1 the scope of the regulation and 
applicability to large businesses unless otherwise directed by statute, 
and remove the outdated requirement for multiple copies of agency 
regulations to be submitted to the Secretary prior to OMB review.
    (2) Update the definitions of electronically filed and electronic 
system in Sec.  401.2(k) and (l) to remove outdated references to 
``optical electronic system''.
    (3) Update the definitions of patent application and initial patent 
application in Sec.  401.2(m) and (n) to encompass U.S. provisional and 
non-provisional applications, applications filed in a foreign country 
or international patent office directly, PCT applications, and 
applications for Plant Variety Protection certificates.
    (4) Update Sec.  401.5(a) to reflect that modifications to 
paragraph Sec.  401.14(g) are no longer needed due to the applicability 
of 37 CFR part 401 to all businesses regardless of size pursuant to 
E.O. 12591.
    (5) Revise Sec.  401.5(b) for clarity by removing the ambiguity of 
``instructions'' to the agency versus ``instructions'' to the 
contractor.
    (6) Revise the existing text at Sec.  401.6(b) [new Sec.  
401.6(a)(1)] to clarify the informal agency consultation process with 
the contractor prior to the exercise of march-in rights, and increase 
the allowable time frame an agency has

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to respond to the contractor following the informal consultation from 
60 days to 120 days.
    (7) Clarify Sec.  401.6 to include a provision that march-in rights 
shall not be exercised by an agency exclusively on the basis of 
business decisions of a contractor regarding the pricing of commercial 
goods and services arising from the practical application of the 
invention.
    (8) Revise Sec.  401.9 to clarify the statutory authority and 
process for assigning rights to an employee/inventor, and to clarify 
said employee/inventor's responsibilities under 37 CFR part 401 when 
receiving an assignment of rights to a subject invention made under a 
funding agreement, and incorporate streamlined text from Sec.  401.15 
to clarify the process by which a contractor may make a request for 
greater rights in an invention when the funding agreement contains an 
alternate provision in accordance with Sec.  401.3(a)(2), and remove 
the requirement for an agency to reimburse the contractor for the costs 
of filing a patent application while a greater rights request is under 
review.
    (9) Revise Sec.  401.13 to streamline the text and clarify the 
confidentiality of contractor submissions made under Sec.  401.14(c) as 
it relates to Freedom of Information Act requests, copies of documents 
filed with a patent office, and agency policies on public dissemination 
of results supported by agency funding programs.
    (10) Revise Sec.  401.14(c)(3) to clarify the procedures for filing 
more than one provisional patent application on a disclosed subject 
invention.
    (11) Revise Sec.  401.14(d) to add a new paragraph permitting 
agencies, at their discretion, to release the contractor from the 
requirement to waive title to the agency after one of the conditions in 
Sec.  401.14(d) has occurred.
    (12) Revise Sec.  401.14(k) to streamline the requirements for 
small business considerations into a single section by incorporating 
language from Sec. Sec.  401.7 and 401.14(m).
    (13) Move the electronic filing requirements from Sec.  401.16 into 
the standard clause at Sec.  401.14; update the requirements to include 
that if the patent information and periodic reports in Sec.  
401.14(c)(3) and/or the close-out report Sec.  401.14(c)(1) are 
required by an agency, they will be electronically filed unless 
otherwise directed by the agency; and permit other written notices to 
be electronically transmitted between the contractor and the agency.
    (14) Implement a requirement [new Sec.  401.16] for federal 
agencies to report annually on activities under 37 CFR part 401, 
including the number of subject inventions reported, the number of 
patent applications filed on reported subject inventions, the number of 
issued patents on subject inventions, the number of requests made and 
granted for extensions of time under Sec.  401.14(c)(5), the number of 
subject inventions to which title has been conveyed to the Government, 
the number of requests made and granted for a waiver of the preference 
for U.S. industry requirement, and the number of requests for 
assignment of invention rights.
    (15) Remove the telephone number for the Interagency Edison service 
center so that contact information can be updated in a timelier fashion 
via the iEdison website.
    This proposed rulemaking does not address government assignment to 
contractor of rights in invention of government employee (Sec.  401.10) 
or licensing of background rights to third parties (Sec.  401.12).
    In addition to the aforementioned streamlining changes and 
technical corrections throughout the regulation, the proposed revisions 
to 37 CFR part 404 will:
    (1) Revise Sec.  404.1 to clarify that licensing royalties are not 
considered an augmentation of appropriated funds.
    (2) Revise Sec.  404.2 to clarify the link between establishing 
patent license financial terms and the goal of promoting commercial 
use, by noting that the government may consider licensing payments as a 
means to ensure commercialization by the licensee and thus promote the 
practical application of a subject invention.
    (3) Streamline Sec.  404.7 by removing duplicative sections and 
revising the paragraph to align the process for granting exclusive, co-
exclusive and partially exclusive licenses with the requirements of 35 
U.S.C. 209 as it pertains to the required information and publication 
site for a notice of intent to grant an exclusive license, the 
requirement to consider the interests of the Federal Government or 
United States industry in foreign commerce before granting an exclusive 
license on a foreign patent application or patent, and the additional 
provisions that apply to exclusive licenses beyond the requirements of 
Sec.  404.5.
    (4) Revise Sec.  404.10 to remove the requirement that a Federal 
agency notify sublicensees of an intent to modify or terminate a 
license.
    (5) Revise Sec.  404.11 to clarify who has standing to appeal the 
grant, denial, modification, or termination of a license by limiting a 
claim of damage by the agency's granting of an exclusive license to 
that which denies a party the opportunity to promote the 
commercialization of an invention, and by requiring all agencies to 
establish procedures for considering appeals.
    This proposed rulemaking does not address definitions (Sec.  
404.3), nonexclusive licenses (Sec.  404.6), application for a license 
(Sec.  404.8), protection and administration of inventions (Sec.  
404.12), or transfer of custody (Sec.  404.13).

IV. Request for Comments

    NIST is requesting comments about 37 CFR 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 specific revisions to the language in Sec.  401.14(b) 
that could help clarify the existing scope of the Government Use 
License for owners and licensees working to achieve practical 
application of subject inventions?
    3. 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?
    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. All submissions, including attachments and other supporting 
materials, will become part of the public record and subject to public 
disclosure. NIST reserves the right to publish relevant comments 
publicly, unedited and in their entirety. Personal information, such as 
account numbers

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or Social Security numbers, or names of other individuals, should not 
be included. Do not submit confidential business information, or 
otherwise proprietary, sensitive or protected information. 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.
    ix. The following formats are preferred for comment submissions: 
.doc or .docx, .pdf, and .txt.

V. References

1. National Institute of Standards and Technology (2019). Unleashing 
American Innovation: Return on Investment Initiative to Advance the 
President's Management Agenda, Final Green Paper. NIST Special 
Publication 1234, retrieved from: https://www.nist.gov/unleashing-american-innovation/green-paper.
2. Copan, W. and Kratsios, M. (2019). Lab to Market: Cross Agency 
Priority Goal Quarterly Progress Update, December 2019. Retrieved 
from: https://www.performance.gov/CAP/action_plans/dec_2019_Lab_to_Market.pdf.
3. Additional Actions Needed to Improve Licensing of Patented 
Laboratory Inventions (2018). GAO-18-327, Retrieved from: https://www.gao.gov/assets/700/692961.pdf.
4. National Institute of Standards and Technology (2019). Federal 
Laboratory Technology Transfer, Fiscal Year 2016 Summary Report to 
the President and the Congress. Retrieved from: https://www.nist.gov/tpo/reports-and-publications. See ``Federal Licenses'' 
table on page 8.
5. Federal Laboratory Consortium for Technology Transfer (2013). 
Technology Transfer Desk Reference. Retrieved from: https://federallabs.org/media/publication-library/flc-technology-transfer-desk-reference.

VI. Statutory and Executive Order Reviews

Executive Order 12866

    This rulemaking is a significant regulatory action under Executive 
Order 12866. 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.

Executive Order 13771

    This final rule is considered to be an E.O. 13771 deregulatory 
action. The proposed regulation is deregulatory in that it is removing 
duplicative text and streamlining and/or reducing regulatory burdens, 
all at no additional cost.
    The proposed regulation: (1) Updates the definitions of patent 
application and initial patent application in Sec.  401.2(m) and (n) to 
encompass U.S. provisional and non-provisional applications, 
applications filed in a foreign country or international patent office 
directly, PCT applications, and applications for Plant Variety 
Protection certificates, which reduces patent filing burdens for 
recipients of federal funding by providing additional options to 
fulfill the regulation's filing requirements. (2) Clarifies Sec.  401.6 
to include a provision that march-in rights shall not be exercised by 
an agency exclusively on the basis of business decisions of a 
contractor regarding the pricing of commercial goods and services 
arising from practical application of the invention, which limits the 
government's use of this provision and provides additional certainty to 
licensees. (3) Moves the electronic filing requirements from Sec.  
401.16 into the standard clause at Sec.  401.14; update the 
requirements to include that if the patent information and periodic 
reports in Sec.  401.14(c)(3) and/or the close-out report Sec.  
401.14(c)(1) are required by an agency, they will be electronically 
filed unless otherwise directed by the agency; and permit other written 
notices to be electronically transmitted between the contractor and the 
agency, which reduces the burden on recipients of federal funding to 
complete and submit paper forms.

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 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, remove outdated material, and streamline the 
regulation, and is not anticipated to have any quantifiable economic 
impact with respect to small entities. Several proposed changes would 
reduce administrative burdens and increase the ability of small 
entities to fulfill regulatory requirements through electronic 
submissions, while clarifying the confidentiality of said submissions 
so as to not affect the ability to seek patent protection on a subject 
invention. The proposed change to the definition of an ``initial patent 
application'' expands the applications by which a contractor can fulfil 
the filing requirement of the regulation, providing additional 
flexibility for small entities. Proposed revisions to 37 CFR 401.6 
provide additional clarity on the scope of the Government's march-in 
rights, while the proposed revision to 37 CFR 401.14(d) provides an 
avenue for an agency to release a small entity from the requirement to 
convey title to the Government if they have taken corrective actions 
after failing to meet a

[[Page 39]]

regulatory requirement--these revisions will all increase the ability 
for a small entity to more effectively attract outside funding for 
their inventions. Proposed revisions to 37 CFR 401.9 and Sec.  401.15 
will clarify the process by which small entities and sole proprietors 
may request title to their inventions when not otherwise automatically 
granted title by the funding agreement. While the requirements for 
small business considerations in licensing have been significantly 
streamlined, the proposed revision greatly increases the clarity of 
these requirements while not affecting any of the statutory 
requirements that a contractor must fulfill with regard to small 
entities. Finally, revisions to 37 CFR 404.7 will make it easier for 
small entities to seek exclusive, co-exclusive, or partially exclusive 
licenses.
    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. Revise Sec.  401.1 to read as follows:


Sec.  401.1   Scope.

    (a) This part implements 35 U.S.C. 200 through 204 and is 
applicable to any funding agreement with a nonprofit organization or 
small business firm as defined by 35 U.S.C. 201, except for an 
agreement made primarily for educational purposes under 35 U.S.C. 212. 
This part also applies to any funding agreement with business firms 
regardless of size in accordance with section 1, paragraph (b)(4) of 
Executive Order 12591, as amended by Executive Order 12618, unless 
directed otherwise pursuant to NASA or DOE vesting statutes.
    (b) This regulation supersedes OMB Circular A-124 and shall take 
precedence over any regulations or other guidance dealing with 
ownership of inventions made by businesses and nonprofit organizations 
which are inconsistent with it. Only deviations requested by a 
contractor and not inconsistent with Chapter 18 of Title 35, United 
States Code, may be made without approval of the Secretary. 
Modifications or tailoring of clauses as authorized by Sec.  401.5 or 
401.3, when alternate provisions are used under Sec.  401.3(a)(1) 
through (6), are not considered deviations requiring the Secretary's 
approval.
    (c) This part is not intended to apply to arrangements under which 
nonprofit organizations, small business firms, or others are allowed to 
use government-owned research facilities and normal technical 
assistance provided to users of those facilities, whether on a 
reimbursable or nonreimbursable basis. This part is also not intended 
to apply to arrangements under which sponsors reimburse the government 
or facility contractor for the contractor employee's time in performing 
work for the sponsor. Such arrangements are not considered ``funding 
agreements'' as defined at 35 U.S.C. 201(b) and Sec.  401.2(a).
0
3. Amend Sec.  401.2 by revising the introductory text and paragraphs 
(k) through (o) to read as follows:


Sec.  401.2   Definitions.

    In addition to the definitions in 35 U.S.C. 201, as used in this 
part--
* * * * *
    (k) The term electronically filed means any submission of 
information transmitted by an electronic system.
    (l) The term electronic system means a software-based system 
approved by the agency for the transmission of information.
    (m) The term patent application or ``application for patent'' may 
be the following:
    (1) A United States provisional application as defined in 37 CFR 
1.9(a)(2) and filed under 35 U.S.C. 111(b); or
    (2) A United States nonprovisional application as defined in 37 CFR 
1.9(a)(3) and filed under 35 U.S.C. 111(a); or
    (3) A patent application filed in a foreign country or an 
international patent office; or
    (4) A patent application filed under the Patent Cooperation Treaty 
as defined in 37 CFR 1.9(b) which designates the United States; or
    (5) An application for a Plant Variety Protection certificate.
    (n) The term initial patent application means, as to a given 
subject invention:
    (1) The first United States provisional application as defined in 
37 CFR 1.9(a)(2) and filed under 35 U.S.C. 111(b); or
    (2) The first United States nonprovisional application as defined 
in 37 CFR 1.9(a)(3) and filed under 35 U.S.C. 111(a); or
    (3) The first patent application filed in a foreign country or an 
international patent office; or
    (4) The first patent application filed under the Patent Cooperation 
Treaty as defined in 37 CFR 1.9(b) which designates the United States; 
or
    (5) The first application for a Plant Variety Protection 
certificate.
    (o) The term statutory period means the one-year period before the 
effective filing date of a claimed invention in a patent application 
during which exceptions to prior art exist per 35 U.S.C. 102(b) as 
amended by the Leahy-Smith America Invents Act, Public Law 112-29.


Sec.  401.3  [Amended]

0
4. Amend Sec.  401.3 as follows:
0
a. Remove ``Sec.  401.5(g)'' and add in its place ``Sec.  401.5(f)'' in 
paragraph (c)(3);
0
b. Remove ``of Commerce'' from the fourth sentence of paragraph (f); 
and
0
c. Remove paragraph (g) and redesignate paragraphs (h) and (i) as 
paragraphs (g) and (h).

[[Page 40]]

Sec.  401.4  [Amended]

0
5. Amend Sec.  401.4 as follows:
0
a. Remove ``35 U.S.C. 202(b)(4)'' and add in its place ``35 U.S.C. 
202(b)(3)'' in the first sentence of paragraph (a); and
0
b. Remove ``United States Claims Court'' and add in its place ``United 
States Court of Federal Claims'' in the last sentence of paragraph 
(b)(6).
0
6. Amend Sec.  401.5 as follows:
0
a. Revise paragraphs (a) and (b);
0
b. Remove paragraph (f) and redesignate paragraphs (g) and (h) as 
paragraphs (f) and (g);
0
c. Revise the newly redesignated paragraph (g).
    The revisions 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. 
If the funding agreement is a grant or cooperative agreement, paragraph 
(g)(3) of the clause may be deleted.
    (b) Agencies should complete paragraph (l) of the clause in Sec.  
401.14, ``Communication'' by designating a central point of contact for 
communications on matters relating to the clause. Agencies may also 
include additional information on communications in paragraph (l) of 
the clause in Sec.  401.14.
* * * * *
    (g) If the contract is for the operation of a government-owned 
facility, agencies may add paragraph (f)(6) 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
7. Amend Sec.  401.6 as follows:
0
a. Remove the period from the end of paragraph (a) introductory text 
and add in its place a colon;
0
b. Add paragraphs (a)(1) through (7);
0
c. Redesignate paragraph (b) as paragraph (a)(1) and revise the newly 
redesignated paragraph (a)(1);
0
d. Redesignate paragraphs (c) and (d) as paragraphs (a)(2) and (3);
0
e. Redesignate paragraph (e) as paragraph (a)(4) and revise the newly 
redesignated paragraph (a)(4);
0
f. Redesignate paragraphs (f) through (h) as paragraphs (a)(5) through 
(7) respectively;
0
g. Redesignate paragraph (i) as paragraph (b);
0
h. Redesignate paragraph (j) as paragraph (c) and revise the newly 
redesignated paragraph (c);
0
i. Redesignate paragraph (k) as paragraph (d);
0
j. Add a new paragraph (e);
0
k. Redesignate paragraph (l) as paragraph (f).
    The revisions and additions read as follows:


Sec.  401.6  Exercise of march-in rights.

    (a) * * *
    (1) Whenever an agency receives information that it believes might 
warrant the exercise of march-in rights, before initiating any march-in 
proceeding, it shall notify the contractor in writing (including 
electronic means) of the information and request an informal 
consultation and information relevant to the matter with the contractor 
to understand the nature of the issue and consider possible actions 
other than exercising march-in rights. In the absence of response from 
the contractor to the agency request for informal consultation within 
30 days, the agency may, at its discretion, proceed with the procedures 
below. If informal consultation occurs within 30 days, or later if the 
agency has not initiated the procedures below, then the agency shall, 
within 120 days after informal consultation, either notify the 
contractor of the initiation of the procedures below with a summary of 
the efforts taken, or notify the contractor, in writing, that it will 
not pursue march-in rights on the basis of the available information.
    (2) A march-in proceeding shall be initiated by the issuance of a 
written notice by the agency to the contractor and its assignee or 
exclusive licensee, as applicable and if known to the agency, stating 
that the agency is considering the exercise of march-in rights. The 
notice shall state the reasons for the proposed march-in in terms 
sufficient to put the contractor on notice of the facts upon which the 
action would be based and shall specify the field or fields of use in 
which the agency is considering requiring licensing. The notice shall 
advise the contractor (assignee or exclusive licensee) of its rights, 
as set forth in this section and in any supplemental agency 
regulations. The determination to exercise march-in rights shall be 
made by the head of the agency or his or her designee.
    (3) Within 30 days after the receipt of the written notice of 
march-in, the contractor (assignee or exclusive licensee) may submit in 
person, in writing, or through a representative, information or 
argument in opposition to the proposed march-in, including any 
additional specific information which raises a genuine dispute over the 
material facts upon which the march-in is based. If the information 
presented raises a genuine dispute over the material facts, the head of 
the agency or designee shall undertake or refer the matter to another 
official for fact-finding.
    (4) Fact-finding shall be conducted in accordance with the 
procedures established by the agency. Such procedures shall be as 
informal as practicable and be consistent with principles of 
fundamental fairness. The procedures should afford the contractor the 
opportunity to appear with counsel, submit documentary evidence, 
present witnesses and confront such persons as the agency may present. 
A transcribed record shall be made and shall be available at cost to 
the contractor upon request. The requirement for a transcribed record 
may be waived by mutual agreement of the contractor and the agency. Any 
portion of the march-in proceeding, including a fact-finding hearing 
that involves testimony or evidence relating to the utilization or 
efforts at obtaining utilization that are being made by the contractor, 
its assignee, or licensees shall be closed to the public, including 
potential licensees. In accordance with 35 U.S.C. 202(c)(5), agencies 
shall not disclose any such information obtained during a march-in 
proceeding to persons outside the government except when such release 
is authorized by the contractor (assignee or licensee) or otherwise 
required by law.
    (5) The official conducting the fact-finding shall prepare or adopt 
written findings of fact and transmit them to the head of the agency or 
designee promptly after the conclusion of the fact-finding proceeding 
along with a recommended determination. A copy of the findings of fact 
shall be sent to the contractor (assignee or exclusive licensee) by 
registered or certified mail. The contractor (assignee or exclusive 
licensee) and agency representatives will be given 30 days to submit 
written arguments to the head of the agency or designee; and, upon 
request by the contractor oral arguments will be held before the agency 
head or designee that will make the final determination.
    (6) In cases in which fact-finding has been conducted, the head of 
the agency or designee shall base his or her determination on the facts 
found, together with any other information and written or oral 
arguments submitted by the contractor (assignee or exclusive licensee) 
and agency representatives,

[[Page 41]]

and any other information in the administrative record. The consistency 
of the exercise of march-in rights with the policy and objectives of 35 
U.S.C. 200 shall also be considered. In cases referred for fact-
finding, the head of the agency or designee may reject only those facts 
that have been found to be clearly erroneous, but must explicitly state 
the rejection and indicate the basis for the contrary finding. Written 
notice of the determination whether march-in rights will be exercised 
shall be made by the head of the agency or designee and sent to the 
contractor (assignee of exclusive licensee) by certified or registered 
mail within 90 days after the completion of fact-finding or 90 days 
after oral arguments, whichever is later, or the proceedings will be 
deemed to have been terminated and thereafter no march-in based on the 
facts and reasons upon which the proceeding was initiated may be 
exercised.
    (7) An agency may, at any time, terminate a march-in proceeding if 
it is satisfied that it does not wish to exercise march-in rights.
    (b) The procedures of this part shall also apply to the exercise of 
march-in rights against inventors receiving title to subject inventions 
under 35 U.S.C. 202(d) and, for that purpose, the term ``contractor'' 
as used in this section shall be deemed to include the inventor.
    (c) An agency determination unfavorable to the contractor (assignee 
or exclusive licensee) shall be held in abeyance pending the exhaustion 
of appeals or petitions filed under 35 U.S.C. 203(b).
    (d) For purposes of this section the term exclusive licensee 
includes a partially exclusive licensee.
    (e) March-in rights shall not be exercised exclusively based on the 
business decisions of the contractor regarding the pricing of 
commercial goods and services arising from the practical application of 
the invention.
    (f) Agencies are authorized to issue supplemental procedures not 
inconsistent with this part for the conduct of march-in proceedings.


Sec.  Sec.  401.7 and 401.8  [Removed and Reserved]

0
8. Remove and reserve Sec. Sec.  401.7 and 401.8.
0
9. Revise Sec.  401.9 as follows:


Sec.  401.9  Contractor and contractor employee inventor requests for 
rights in inventions.

    (a) Agencies shall allow a contractor to request greater rights in 
an invention, including a request to return title to an invention to 
the contractor, when the funding agreement contains alternate 
provisions in accordance with Sec.  401.3(a)(2):
    (1) The agency shall consider if the circumstances which originally 
led the agency to invoke an exception under Sec.  401.3(a) are 
currently valid and applicable to the actual subject invention.
    (i) The agency shall provide the contractor the opportunity to 
submit information on its plans and intentions to bring the subject 
invention to practical application pursuant to 35 U.S.C. 200.
    (ii) The agency shall assess whether government ownership of the 
invention will better promote the policies and objectives of 35 U.S.C. 
200 than the plans and intentions submitted by the contractor.
    (iii) The agency shall consider whether to allow the standard 
clause at Sec.  401.14 to apply with additional conditions imposed upon 
the contractor's use of the invention for specific uses or 
applications, or with expanded government license rights in such uses 
or applications.
    (2) The agency shall reply to the contractor with its determination 
within 90 days after receiving a request and any supporting information 
from the contractor. If a bar to patenting is sooner than 90 days from 
receipt of a request, the agency may either file a patent application 
on the subject invention or authorize the contractor to file a patent 
application at its own risk and expense.
    (3) The Department of Energy is authorized to process deferred 
determinations either in accordance with its waiver regulations or this 
section.
    (b) Pursuant to 35 U.S.C. 202(d), a contractor is required to 
obtain approval from a funding Agency before assigning rights to a 
subject invention made under a funding agreement to an employee/
inventor. When an employee/inventor retains rights to a subject 
invention made under a funding agreement, either the Agency or the 
contractor must ensure compliance by the employee/inventor with at 
least those conditions that would apply under paragraphs (b), (d), 
(f)(4), (h), (i), and (j) of the clause at Sec.  401.14.
0
10. Amend Sec.  401.11 as follows:
0
a. Remove paragraph (a);
0
b. Redesignate paragraph (b) as paragraph (a);
0
c. Revise the newly redesignated paragraphs (a)(1) through (4);
0
d. Remove newly redesignated paragraph (a)(5);
0
e. Redesignate paragraphs (c) through (e) as paragraphs (b) through 
(d), respectively, and revise the newly redesignated paragraphs (b) 
through (d).
    The revisions read as follows:


Sec.  401.11  Appeals.

    (a) * * *
    (1) A refusal to grant an extension under paragraph (c)(5) of the 
standard clause at Sec.  401.14.
    (2) A request for a conveyance of title under paragraph (d)(1) of 
the standard clause at Sec.  401.14.
    (3) A refusal to grant a waiver under paragraph (i) of the standard 
clause at Sec.  401.14.
    (4) A refusal to approve an assignment under paragraph (k)(1) of 
the standard clause at Sec.  401.14.
    (b) Each agency shall establish and publish procedures under which 
any of the agency actions listed in paragraph (a) of this section may 
be appealed to the head of the agency or designee. Review at this level 
shall consider both the factual and legal basis for the actions and its 
consistency with the policy and objectives of 35 U.S.C. 200-206.
    (c) Appeals procedures established under paragraph (b) of this 
section shall include administrative due process procedures and 
standards for fact-finding at least comparable to those set forth in 
Sec.  401.6(a)(4) through (6) whenever there is a dispute as to the 
factual basis for an agency request for a conveyance of title under 
paragraph (d) of the standard clause at Sec.  401.14, including any 
dispute as to whether or not an invention is a subject invention.
    (d) To the extent that any of the actions described in paragraph 
(a) of this section are subject to appeal under the Contract Dispute 
Act, the procedures under the Act will satisfy the requirements of 
paragraphs (b) and (c) of this section.
0
11. Revise Sec.  401.13 to read as follows:


Sec.  401.13   Confidentiality of contractor submissions.

    Pursuant to 35 U.S.C. 202(c)(5) and 205, the following procedures 
shall govern confidentiality of documents submitted under paragraph (c) 
of the standard clause found at Sec.  401.14:
    (a) Agencies shall not disclose to third parties pursuant to 
requests under the Freedom of Information Act (FOIA) any information 
disclosing a subject invention during the time which an initial patent 
application may be filed under paragraph (c) of the standard clause 
found at Sec.  401.14 or such other clause in the funding agreement. 
This prohibition does not apply to information that has previously been 
published by the inventor, contractor, or otherwise.
    (b) Agencies shall not disclose or release, pursuant to requests 
under the Freedom of Information Act or

[[Page 42]]

otherwise, copies of any document which is part of an application for 
patent with the U.S. Patent and Trademark Office or any foreign patent 
office filed by the contractor (or its assignees, licensees, or 
employees) on a subject invention to which the contractor has elected 
to retain title. This prohibition does not extend to disclosure to 
other government agencies or contractors of government agencies under 
an obligation to maintain such information in confidence. This 
prohibition does not apply to documents published by the U.S. Patent 
and Trademark Office or any foreign patent office.
    (c) When implementing policies that encourage public dissemination 
of the results of work supported by the agency through government 
publications or other publications of technical reports, agencies shall 
not include copies of documents submitted by contractors pursuant to 
Sec.  401.14(c) when a contractor notifies the agency that a particular 
report or other submission contains a disclosure of a subject invention 
to which it has elected title or may elect title, or such publication 
could create a statutory bar to obtaining patent protection.
0
12. Amend Sec.  401.14 as follows:
0
a. Revise paragraphs (a)(2) and (7), and (c)(1) and (3);
0
b. Add paragraph (c)(6);
0
c. Revise paragraph (d);
0
d. Remove ``sucessor'' and add in its place ``successor'' in the final 
sentence of paragraph (e)(1);
0
e. Revise paragraph (f)(3);
0
f. Remove ``incidential'' and add in its place ``incidental'' in 
paragraph (k)(3);
0
g. Revise paragraph (k)(4);
0
h. Add paragraphs (k)(5) and (6);
0
i. Add paragraph (m).
    The revisions read as follows:


Sec.  401.14  Standard patent rights clauses.

* * * * *
    (a) * * *
    (2) Subject invention means any invention of a contractor conceived 
or first actually reduced to practice in the performance of work under 
a funding agreement; provided that in the case of a variety of plant, 
the date of determination (as defined in section 41(d) of the Plant 
Variety Protection Act, 7 U.S.C. 2401(d)) must also occur during the 
period of contract performance. An invention that is conceived and 
reduced to practice without the use of any federal funds is not 
considered a subject invention.
* * * * *
    (7) The term statutory period means the one-year period before the 
effective filing date of a claimed invention in a patent application 
during which exceptions to prior art exist per 35 U.S.C. 102(b) as 
amended by the Leahy-Smith America Invents Act, Public Law 112-29.
* * * * *
    (c) * * *
    (1) The contractor will disclose each subject invention to the 
Federal agency within two months after the inventor discloses it in 
writing to contractor personnel responsible for patent matters. The 
disclosure to the agency shall be in the form of a written report and 
shall identify the contract under which the invention was made and the 
inventor(s). It shall be sufficiently complete in technical detail to 
convey a clear understanding to the extent known at the time of the 
disclosure, of the nature, purpose, operation, and the physical, 
chemical, biological or electrical characteristics of the invention. 
The disclosure shall also identify any publication, on sale or public 
use of the invention, and whether a manuscript describing the invention 
has been submitted for publication and, if so, whether it has been 
accepted for publication at the time of disclosure. In addition, after 
disclosure to the agency, the contractor will promptly notify the 
agency of the acceptance of any manuscript describing the invention for 
publication or of any on sale or public use planned by the contractor. 
If required by the Federal agency, the contractor will 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, and will provide a report prior to the close-out of a funding 
agreement listing all subject inventions or stating that there were 
none.
* * * * *
    (3)(i) The contractor will file its initial patent application on a 
subject invention to which it elects to retain title within one year 
after election of title or, if earlier, prior to the end of any 
statutory period wherein valid patent protection can be obtained in the 
United States after a publication, on sale, or public use. Subject to 
the grant of an extension by an agency under paragraph (c)(5) of this 
clause, if the contractor files a provisional application as its 
initial patent application, it shall file a non-provisional application 
within 10 months of the filing of the provisional application.
    (ii) Each provisional application filed following the initial 
patent application must contain additional written description of the 
subject invention not previously disclosed in a patent application. The 
contractor shall file or notify the government that they do not intend 
to file a non-provisional application within 10 months of the last 
filed provisional application that is consistent with this section.
    (iii) The contractor will file patent applications in additional 
countries or international patent offices within either ten months of 
the first filed patent application or six months from the date 
permission is granted by the Commissioner of Patents to file foreign 
patent applications where such filing has been prohibited by a Secrecy 
Order.
    (iv) If required by the Federal agency, the contractor will provide 
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.
* * * * *
    (6) In the event a subject invention is made under funding 
agreements of more than one agency, at the request of the contractor or 
on their own initiative the agencies shall designate one agency as 
responsible for administration of the rights of the government in the 
invention.
    (d) Conditions When the Government May Obtain Title
    (1) A Federal agency may require the contractor to convey title to 
the Federal agency of any subject invention--
    (i) If the contractor fails to disclose or elect title to the 
subject invention within the times specified in paragraph (c) of this 
clause, or elects not to retain title.
    (ii) In those countries in which the contractor fails to file 
patent applications within the times specified in paragraph (c) of this 
clause; provided, however, that if the contractor has filed a patent 
application in a country after the times specified in paragraph (c) of 
this clause, but prior to its receipt of the written request of the 
Federal agency, the contractor shall continue to retain title in that 
country.
    (iii) In any country in which the contractor decides not to 
continue the prosecution of any non-provisional patent application for, 
to pay a maintenance, annuity or renewal fee on, or to defend in a 
reexamination or opposition proceeding on, a patent on a subject 
invention.
    (2) A Federal agency, at its discretion, may waive the requirement 
for the contractor to convey title to any subject invention.
* * * * *
    (f) * * *
    (3) For each subject invention, the contractor will, no less than 
60 days

[[Page 43]]

prior to the expiration of the statutory deadline, or 60 days prior to 
the date if 401.14(c)(5) applies, notify the Federal agency of any 
decision.
* * * * *
    (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, when appropriate, it will give a preference to 
a small business firm when licensing a subject invention;
    (5) 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 policies, 
procedures, or practices with the Federal agency when the Federal 
agency's review discloses that the contractor could take reasonable 
steps to more effectively implement the requirements of paragraph 
(k)(4) of this clause; and
    (6) The Federal agency may take into consideration concerns 
presented by small businesses in making such determinations in 
paragraph (k)(5) of this clause.
* * * * *
    (m) Electronic Filing
    (a) Unless otherwise requested or directed by the Federal agency--
    (1) The written disclosure required in (c)(1) of this clause shall 
be electronically filed;
    (2) The written election required in (c)(2) of this clause shall be 
electronically filed; and
    (3) If required by the agency to be submitted, the close-out report 
in paragraph (c)(1) of this clause and the patent information and 
periodic reporting identified in paragraph (c)(3) of this clause shall 
be electronically filed.
    (b) 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.


Sec.  401.15  [Removed and Reserved]

0
13. Remove and reserve Sec.  401.15.
0
14. Revise Sec.  401.16 to read as follows:


Sec.  401.16  Federal agency reporting requirements.

    Federal agencies will report annually to the Secretary of Commerce 
on data pertaining to reported subject inventions under a funding 
agreement, including--
    (a) Number of subject inventions reported to the Federal Agency;
    (b) Patent applications filed on subject inventions;
    (c) Issued patents on subject inventions;
    (d) Number of requests and number of requests granted for extension 
of the time for disclosures, election, and filing per 37 CFR 
401.14(c)(5);
    (e) Number of subject inventions conveyed to the Government in 
accordance with 37 CFR 401.14(d);
    (f) Number of waivers requested and waivers granted per 37 CFR 
401.14(i); and
    (g) Number of requests for assignment of invention rights. Such 
information will be received by the Secretary no later than the last 
day of October of each year.


Sec.  401.17  [Amended]

0
15. Amend Sec.  401.17 by removing the phrase ``, telephone (301) 435-
1986'' before the final period of the paragraph.

PART 404--LICENSING OF GOVERNMENT OWNED INVENTIONS

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

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

0
17. Revise Sec.  404.1 to read as follows:


Sec.  404.1  Scope of part.

    (a) This part prescribes the terms, conditions, and procedures upon 
which a federally owned invention, other than an invention in the 
custody of the Tennessee Valley Authority, may be licensed. This part 
does not affect licenses which:
    (1) Were in effect prior to April 7, 2006;
    (2) May exist at the time of the Government's acquisition of title 
to the invention, including those resulting from the allocation of 
rights to inventions made under Government research and development 
contracts;
    (3) Are the result of an authorized exchange of rights in the 
settlement of patent disputes, including interferences; or
    (4) Are otherwise authorized by law or treaty, including 35 U.S.C. 
202(e), 35 U.S.C. 207(a)(3) and 15 U.S.C. 3710a, which also may 
authorize the assignment of inventions. Although licenses on inventions 
made under a cooperative research and development agreement (CRADA) are 
not subject to this regulation, agencies are encouraged to apply the 
same policies and use similar terms when appropriate. Similarly, this 
should be done for licenses granted under inventions where the agency 
has acquired rights pursuant to 35 U.S.C. 207(a)(3).
    (b) Royalties collected pursuant to this part are not intended as 
an alternative to appropriated funding or as an alternative funding 
mechanism.
0
18. Revise Sec.  404.2 to read as follows:


Sec.  404.2  Policy and objective.

    It is the policy and objective of this subpart to promote the 
results of federally funded research and development through the 
patenting and licensing process. In negotiating licenses, the 
Government may consider payments under a licensing agreement as a means 
for promoting the practical application of a subject invention and as a 
method to ensure commercialization by the licensee.


Sec.  404.4  [Removed and Reserved]

0
19. Remove and reserve Sec.  404.4.


Sec.  404.5  [Amended]

0
20. Amend Sec.  404.5 by removing ``Sec.  404.5(a)(2)'' from paragraph 
(b)(8)(iv) and adding in its place ``35 U.S.C. 209(b)''.
0
21. Revise Sec.  404.7 to read as follows:


Sec.  404.7  Exclusive, co-exclusive, and partially exclusive licenses.

    (a) Exclusive, co-exclusive or partially exclusive licenses may be 
granted on Government owned inventions, only if:
    (1) Notice of a prospective license, identifying the invention at a 
minimum, has been published and responses, if any, reviewed in 
accordance with 35 U.S.C. 209. The agency, in its discretion, may 
include other information as appropriate;
    (2) After expiration of the public notice period and consideration 
of any written objections received in accordance with 35 U.S.C. 209(e), 
the Federal agency has determined that:
    (i) The public will be served by the granting of the license, as 
indicated by the applicant's intentions, plans and ability to bring the 
invention to the point of practical application or otherwise promote 
the invention's utilization by the public;
    (ii) The proposed scope of exclusivity is not greater than 
reasonably necessary to provide the incentive for bringing the 
invention to practical application, as proposed by the applicant, or 
otherwise to promote the invention's utilization by the public; and
    (iii) Exclusive, co-exclusive or partially exclusive licensing is a 
reasonable and necessary incentive to call forth the investment capital 
and expenditures needed to bring the invention to practical application 
or otherwise promote the invention's utilization by the public;
    (3) The Federal agency has determined that the grant of such a 
license will not tend substantially to

[[Page 44]]

lessen competition or create or maintain a violation of the Federal 
antitrust laws;
    (4) The Federal agency has given first preference to any small 
business firms submitting plans that are determined by the agency to be 
within the capability of the firms and as having equal or greater 
likelihood as those from other applicants to bring the invention to 
practical application within a reasonable time; and
    (5) In the case of an invention covered by a foreign patent 
application or patent, the interests of the Federal Government or 
United States industry in foreign commerce will be enhanced.
    (b) In addition to the provisions of Sec.  404.5, the following 
terms and conditions apply to exclusive, co-exclusive and partially 
exclusive licenses:
    (1) The license shall be subject to the irrevocable, royalty-free 
right of the Government of the United States to practice or have 
practiced the invention on behalf of the United States and on behalf of 
any foreign government or international organization pursuant to any 
existing or future treaty or agreement with the United States.
    (2) The license shall reserve to the Federal agency the right to 
require the licensee to grant sublicenses to responsible applicants, on 
reasonable terms, when necessary to fulfill health or safety needs.
    (3) The license shall be subject to any licenses in force at the 
time of the grant of the exclusive, co-exclusive or partially exclusive 
license.
    (4) The license may grant the licensee the right to take any 
suitable and necessary actions to protect the licensed property, on 
behalf of the Federal Government.
    (c) Federal agencies shall maintain a record of determinations to 
grant exclusive, co-exclusive or partially exclusive licenses.


Sec.  404.10  [Amended]

0
22. Amend Sec.  404.10 by removing ``and any sublicensee of record''.
0
23. Revise paragraphs (a) introductory text, (a)(3), and (b) to read as 
follows:


Sec.  404.11  Appeals.

    (a) The following parties may appeal to the agency head or designee 
any decision or determination concerning the grant, denial, 
modification, or termination of a license:
* * * * *
    (3) A person who timely filed a written objection in response to 
the notice required by Sec.  404.7 and who can demonstrate to the 
satisfaction of the Federal agency that such person may be damaged by 
the agency action due to being denied the opportunity to promote the 
commercialization of the invention.
    (b) The Federal agency shall establish appropriate procedures for 
considering appeals under paragraph (a) of this section.
0
24. Revise Sec.  404.14 to read as follows:


Sec.  404.14  Confidentiality of information.

    35 U.S.C. 209(f) requires that any plan submitted pursuant to Sec.  
404.8(a)(8) and any report required by 35 U.S.C. 209(d)(2) shall be 
treated as commercial or financial information obtained from a person 
and privileged and confidential and not subject to disclosure under 5 
U.S.C. 552.

Kevin Kimball,
Chief of Staff.
[FR Doc. 2020-27581 Filed 12-31-20; 8:45 am]
BILLING CODE 3510-13-P