Chapter 3: Introduction to Technology Licensing
3.5 US Legislation: Bayh-Dole Act
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TTO will have to have in-depth discussion with potential licensee, to negotiate the best licensing deal for both parties.
3.5 US Legislation: Bayh-Dole Act
In 1980, Birch Bayh and Bob Dole in the United States sponsored the Patent and Trademark Law Amendment Act, always known as the Bayh-Dole Act and was signed it into the law in December 12, 1980. The act was initially known as Patent and Trademark Law Amendment Act or The University and Small Business Patent Procedure Act27. The Bayh-Dole Act is codified in 35 U.S.C. §200-212 and is implemented by 37 C.F.R. 401.
The key change of the law was the allocation of ownership of a federally funded invention. Before the Bayh-Dole Act, federal research funding grants and contracts require the inventor to assign the invention back to the federal government. Bayh-Dole Act allows a university, small business enterprise and non-profit organization the right to retain ownership in preference to the government. If an organization does not elect to retain the title of the ownership, then the control of the invention goes back to the government. However, the government could waive its right to take the invention, and the right goes back to the inventor.
The Bayh-Dole Act did two things in one stroke: By transferring the ownership of an invention from the government that funded the research to the research institute that had actually carried out the research, it ensures the researcher involved to receive part of the revenue derived from the commercialized product. The feeling of being involved will give inventor more incentive to perform a better research in the future.
Following are a few contributions Bayh-Dole brings to the society28:
1. Effectively promote the collaboration and interaction between business corporates and research institutes;
27 王偉霖、劉江彬（2010），p105，國際技術轉移制度理論與實務－兼論台灣立法與產學研因應之策略，
華泰文化。
28王偉霖、劉江彬（2010），p106，國際技術轉移制度理論與實務－兼論台灣立法與產學研因應之策略，
華泰文化。
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2. Provide incentives to researcher in the research institute to understand the need in the business industry, and thus solving problem faced in the business industry;
3. Unifies the divergence in patent policy among different government bodies, relieving government’s burden from patent application fee and management expenses; and
4. Indirectly facilitate economy development29.
Before Bayh-Dole Act, it was not common for universities to apply for patents.
In 1965, only 28 universities applied for 96 U.S. patents30. However, 10 years after the enactment of Bayh-Dole Act, the trend has shifted in 1991. According to AUTM U.S.
Licensing Activity Survey FY2012 Highlights, patents applied by U.S. universities and patents granted by USPTO has been growing at a very steady pace, while universities in total spend 345 million dollar in patent applications and patent-related litigation in FY2012, at a 4.5% growth compared to FY2011 (Table 3).
Table 3 Number of Patents being Applied and Granted by AUTM Members from 1991-2012 (AUTM, 2012)
FY 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 after the enactment of Bayh-Dole Act, commercially licensed patents were running up hill in recent years (Table 4).
Table 4 Cases of Licensing and Options by AUTM Members from 1991-2012 (AUTM, 2012)
FY 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
29 United State General Account Office (1986), Patent Policy: Universities’ Research Efforts Under Public Law.
30 Henderson, R., Jaffe, A., Trajtenberg, M. (March, 1999), Universities as a source of commercial technology:
A detailed analysis of university patenting, 1965-1988, NBER Working Paper, No. 5068.
31 United State General Account Office (1986), Patent Policy: Universities’ Research Efforts Under Public Law.
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patent rights clauses in federal funding agreements with nonprofits, including universities, and small businesses. The standard patent rights clause is set forth at 37 CFR 401.14(a)32. The clause is incorporated into federal funding made to universities and contracts made with for-profit companies33.There are a few obligations an organization has to meet in order to retain the inventor’s ownership; among them these are some of the most important obligations:
• Grant to the government 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;
• File its initial patent application within one year after its election to retain title;
• Report on the utilization of subject inventions;
• Require in exclusive licenses to use or sell in the United States that products will be manufactured substantially in the United States; and
• Agree to allow the government to "march in" and require licenses to be granted, or to grant licenses, in certain circumstances under 35 USC § 20334,35, such as if the organization has not taken effective steps to achieve practical application of the
32 The template of the standard patent rights agreement could be found here: http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=b1b3f0363cc8f316c1f41b2628e8e005&rgn=div8&view=text&node=37:1.0.4.13.1.0.218.14&i dno=37
33 Loise, V., Stevens, A., (December 2010), The Bayh-Dole Act Turns 30, Les Nouvelles December 2010: 185-94. 34 35 USC § 203: March-in rights, With respect to any subject invention in which a small business firm or nonprofit organization has acquired title under this chapter, the Federal agency under whose funding agreement the subject invention was made shall have the right, in accordance with such procedures as are provided in regulations promulgated hereunder to require the contractor, an assignee or exclusive licensee of a subject invention to grant a nonexclusive, partially exclusive, or exclusive license in any field of use to a responsible applicant or applicants, upon terms that are reasonable under the circumstances…
35 The U.S. federal agencies have never used their march-in power to grant licenses for over the past thirty years.
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invention, or the preference for United States industry is not met under 35 USC § 20436,37.