Bayh-Dole Act and difference between March-In Rights and the world wide royalty free rights in patents

Bayh-Dole Act and difference between March-In Rights and the world wide royalty free rights in patents
KEI Briefing Note 2017:1

When the United States federal government funds research that results in patents, it obtains rights, either directly or through contracts, to the patents. These rights are retained even when the patents are licensed to a third party, for example, to develop a commercial product like a drug or a vaccine. The rights include (1) a royalty free right in the patents “though out the world” to be practiced “for or on behalf of the United States,” and (2) march-in rights in the patent.

The statute that requires the government to retain the royalty free right when the patent is claimed by a grant recipient or contractor” is 35 USC 202(c)(4):

35 U.S.C.
United States Code, 2011 Edition
Title 35 – PATENTS
PART II – PATENTABILITY OF INVENTIONS AND GRANT OF PATENTS
CHAPTER 18 – PATENT RIGHTS IN INVENTIONS MADE WITH FEDERAL ASSISTANCE
Sec. 202 – Disposition of rights
(c) (4) . . . With respect to any invention in which the contractor elects rights, the Federal agency shall have a nonexclusive, nontransferrable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States any subject invention throughout the world . . .

Similar statutory provisions exists for inventions owned by a federal agency, in 35 U.S.C. 209(d)(1).

35 U.S.C.
United States Code, 2011 Edition
Title 35 – PATENTS
PART II – PATENTABILITY OF INVENTIONS AND GRANT OF PATENTS
CHAPTER 18 – PATENT RIGHTS IN INVENTIONS MADE WITH FEDERAL ASSISTANCE
Sec. 209 – Licensing federally owned inventions

(d) Terms and Conditions.—Any licenses granted under section 207(a)(2) shall contain such terms and conditions as the granting agency considers appropriate, and shall include provisions—
(1) retaining a nontransferrable, irrevocable, paid-up license for any Federal agency to practice the invention or have the invention practiced throughout the world by or on behalf of the Government of the United States;

The statutes that define the march-in rights are the march-in statute 35 USC 203, as further informed by the statute on policy and objective 35 USC 200 and the definition of practical application in 35 USC 201(f).

The march-in right is available as a remedy to address an abuse of the patent rights.

The march-in right can also be delayed while the march-in authorization is being appealed.

35 USC 203 (b)
A determination pursuant to this section or section 202(b)(4) 1 shall not be subject to chapter 71 of title 41. An administrative appeals procedure shall be established by regulations promulgated in accordance with section 206. Additionally, any contractor, inventor, assignee, or exclusive licensee adversely affected by a determination under this section may, at any time within sixty days after the determination is issued, file a petition in the United States Court of Federal Claims, which shall have jurisdiction to determine the appeal on the record and to affirm, reverse, remand or modify, as appropriate, the determination of the Federal agency. In cases described in paragraphs (1) and (3) of subsection (a), the agency’s determination shall be held in abeyance pending the exhaustion of appeals or petitions filed under the preceding sentence.

Both the royalty free right and the march-in right are important. The royalty free right has several advantages, including (1) there is no requirement to establish an abuse by the patent holder, (2) there is no requirement to pay royalties to the patent holder, and (3) the action is not subject to a stay while the decision is appealed.

Since the royalty-free right is for use “by or on behalf of the Government of the United States,” there may be some limits to the cases where such a right is appropriate.

The march-in right requires the government to decide “upon terms that are reasonable under the circumstances” for the license, and this would normally involve a royalty. Compensation to patent owners will be seen as advantage in cases where such compensation is seen as appropriate for non-voluntary use of a patent.

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