Rights to Federally Funded Inventions and Licensing of Government Owned Inventions, 17730-17740 [2023-06033]

Agencies

• DEPARTMENT OF COMMERCE
• National Institute of Standards and Technology

[Federal Register Volume 88, Number 57 (Friday, March 24, 2023)]
[Rules and Regulations]
[Pages 17730-17740]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-06033]


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DEPARTMENT OF COMMERCE

National Institute of Standards and Technology

37 CFR Parts 401 and 404

[Docket No.: 230315-0076]
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: Final rule.

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SUMMARY: The National Institute of Standards and Technology (NIST) 
announces revisions to regulations in order to make several technical 
corrections; reorganize certain subsections; remove outdated and/or 
unnecessary sections; institute a reporting requirement on federal 
agencies; and provide clarifications on definitions, communications, 
process for exercising march-in rights, filing of provisional patent 
applications, electronic filing of Bayh-Dole related reporting, the 
purpose of royalties on licenses from the Federal Government, and the 
processes for granting exclusive, co-exclusive, and partially exclusive 
licenses and for appeals. NIST has not

[[Page 17731]]

adopted in this final rule a provision in the proposed rule regarding 
exercising march-in rights on the sole basis of product pricing. 
Instead, NIST intends to engage with stakeholders and agencies with the 
goal of developing a comprehensive framework for agencies considering 
the use of march-in provisions.

DATES: This rule is effective April 24, 2023.

FOR FURTHER INFORMATION CONTACT: Bethany Loftin, via email at 
[email protected] or by telephone at 301-975-0496.

SUPPLEMENTARY INFORMATION: 

Background

    This final rule is 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., 
and commonly known as the ``Bayh-Dole Act'' or ``Bayh-Dole,'' and its 
implementing regulations, found at title 37 Code of Federal Regulations 
(CFR) parts 401 and 404.
    The rule shall apply to all new funding agreements as defined in 37 
CFR 401.2(a) that are executed after the effective date of the rule. 
The rule shall not apply to a funding agreement in effect on or before 
the effective date of the rule, provided that if such existing funding 
agreement is thereafter amended, the funding agency may, in its 
discretion, make the amended funding agreement subject to the rule 
prospectively.
    On January 4, 2021, NIST published a notice of proposed rulemaking 
(NPRM) in the Federal Register (86 FR 35) requesting public comments on 
proposed revisions to the regulations at 37 CFR parts 401 and 404, as 
well as general comments relating to federal technology transfer 
practices. The NPRM described the statutory framework for the proposed 
rule revisions under the Bayh-Dole Act and its implementing 
regulations. NIST received 81,253 submissions during the public comment 
period, which closed on April 5, 2021, including comments, questions, 
suggestions, and recommendations from, inter alia, individual members 
of the public, public and private universities, professional 
associations, research institutions, and non-profit foundations. Of the 
81,253 submissions received during the public comment period, the 
largest percentage of the comments related to the proposed addition to 
37 CFR 401.6(e) regarding exercising march-in rights on the sole basis 
of product pricing. A discussion of these comments and NIST's response 
is included in Comment 8 below. During the public comment period, on 
February 25, 2021, NIST also held a public webinar in which the 
proposed changes were reviewed, and public statements were accepted and 
made a part of the record. NIST appreciates and has considered the 
comments received, and this final rule reflects a number of changes to 
the regulations proposed in the NPRM based on this feedback.
    Additionally, severability clauses have been added to both Parts 
401 and 404 in this final rule. In the event that any part of the 
regulations is stayed or determined to be invalid, the remaining 
provisions should be severable and remain in effect.

Response to Comments

    All submissions were carefully reviewed, and NIST thanks the public 
for its engagement. NIST's responses to comments within the scope of 
this rulemaking have been correlated by topic and are summarized below.
    1. Comment: NIST's legal authority to promulgate regulations 
implementing the Bayh-Dole Act was questioned by one commenter, who 
asserted that the regulations should instead emanate directly from the 
Department of Commerce.
    Response: Authority to issue these regulations is granted to the 
Secretary of Commerce under 35 U.S.C. 206 and has been properly 
delegated to the Director of NIST under Department of Commerce 
Department Organization Order 30-2A.
    2. Comment: The NPRM stated that the rulemaking was not an 
``economically significant'' regulatory action under Executive Order 
12866, ``as it does not have an effect on the economy of $100 million 
or more in any one year . . . .'' This determination was questioned by 
a commenter based on the regulations' application ``to all Federal 
agencies,'' and the large number of inventions and patents in which the 
Federal Government maintains an interest.
    Response: NIST determined at the proposed rule stage that this 
rulemaking is not an economically significant regulatory action under 
section 3(f)(1) of Executive Order 12866. NIST conducted an analysis, 
by looking at all the proposed changes and the effect of those changes 
on the existing regulations, and concluded that the changes to the 
regulations are primarily clarifications and a reorganization of 
existing content. NIST has compared the text of the proposed rule to 
the text of this final rule and affirms its earlier determination that 
the regulatory changes are not economically significant.
    3. Comment: Two commenters objected to the proposed removal of 
Sec.  401.1(a), which describes the effect of third-party funding on 
the ownership of a ``subject invention'' and the treatment of any 
invention created under a project that is closely related to, but 
separate from, a project funded by the Federal Government. The 
objecting commenters requested that these clarifications be maintained, 
as they are of use in determining whether or not an invention is a 
``subject invention.''
    Response: NIST has re-inserted the introductory language at Sec.  
401.1(a) to maintain this additional guidance and clarification.
    4. Comment: Multiple commenters were supportive of, objected to, 
and/or requested additional clarification on the proposed revisions to 
the newly designated Sec.  401.6(a)(1) (previously Sec.  401.6(b)). 
Those who objected or requested additional information generally 
expressed concern that this process would be adversarial or asked that 
other title holders, including exclusive licensees, also be permitted 
to attend the consultation.
    Response: Both the original and the revised versions of this 
section establish an informal process between a funding agency and a 
contractor prior to the agency's initiation of march-in procedures, 
though the original version limited this process to ``informal written 
or oral comments from the contractor as well as information relevant to 
the matter.'' The proposed language expands this process to a full 
informal consultation and was more explicit about the nature of the 
consultation, explaining that the additional factfinding would allow 
the agency to better ``understand the nature of the issue and consider 
possible actions other than exercising march-in rights.'' It was not 
the intent of this addition to create an adversarial process; the 
intent was to encourage informal consultation and to potentially avoid 
the need to proceed to formal march-in procedures. Regarding 
commenters' requests to include licensees in the consultation, given 
its informal nature, agencies have discretion to include additional 
parties, if necessary. Therefore, NIST determined that explicitly 
including or requiring additional parties was unnecessary. To address 
commenters' concerns regarding the nature of the informal consultation, 
NIST has replaced ``actions'' with ``alternatives'' in this final rule 
and added the words ``may also'' to the statement regarding the funding 
agency's consideration of march-in alternatives.

[[Page 17732]]

    5. Comment: One commenter objected to the requirement under the 
newly designated Sec.  401.6(a)(1) (previously Sec.  401.6(b)) that the 
contractor respond to an agency request for informal consultation 
within 30 days, expressing the opinion that contractors should be 
allowed a longer amount of time in which to respond.
    Response: This 30-day response period was present in the previous 
regulations but required the contractor to provide written comments to 
the agency within 30 days. The revision provides this same 30-day 
period, but only requires the contractor to provide notice to the 
agency that the contractor wishes to proceed with informal 
consultation. Given that this revision only requires the contractor to 
make a determination regarding whether to participate in an informal 
consultation and not the time required to collect and compose comments, 
30 days is a sufficient amount of time for a contractor to provide such 
notice, and NIST declines to lengthen the response period in this final 
rule.
    6. Comment: A proposed revision to the newly designated Sec.  
401.6(a)(1) (previously Sec.  401.6(b)) increased the amount of time 
for an agency to issue a decision as to whether or not it will pursue 
march-in rights following an informal consultation with a contractor 
from 60 days to 120 days. A commenter questioned the necessity of this 
longer response period.
    Response: The longer period is believed appropriate to facilitate 
and ensure thorough agency consideration of all issues and 
supplementary information submitted by the contractor following 
informal consultation; thus, NIST has maintained the NPRM's extension 
from 60 days to 120 days in this final rule.
    7. Comment: Several comments were received relating to newly 
designated Sec.  401.6(a)(4) (previously Sec.  401.6(e)), which 
concerns the confidentiality of information obtained during march-in 
proceedings. Concern was expressed over the addition of language that 
allows an agency to disclose information obtained during a march-in 
proceeding to persons outside the Federal Government when ``otherwise 
required by law.''
    Response: The intent of this additional language is to put 
contractors on notice that other laws may require disclosure of the 
information, and compliance with such laws is mandatory, whether or not 
the phrase in question is added to the regulations. NIST has maintained 
the phrase in this final rule.
    8. Comment: The large majority of comments received related to the 
new language proposed at Sec.  401.6(e). (The NPRM redesignated the 
previous Sec.  401.6(e), which relates to fact-finding during the 
march-in process, as the new Sec.  401.6(a)(4)). The proposed new Sec.  
401.6(e) of the NPRM stated that ``[m]arch-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.'' These comments ranged in 
content. Many commenters stated that the provision should be removed 
and that the Federal Government's right to march-in should be exercised 
solely on the basis of product pricing. Some expressed general support 
for the addition, and others requested additional changes to further 
clarify and ensure that the Federal Government would not march-in based 
on product pricing.
    Response: The large number of comments received on this issue raise 
questions that warrant further consideration. Consistent with this, on 
July 9, 2021, the President issued Executive Order 14036 (``Promoting 
Competition in the American Economy''), which, inter alia, directed the 
Secretary of Commerce, acting through the Director of NIST and in light 
of the policies set forth in the Executive Order, to consider not 
finalizing ``any provisions on march-in rights and product pricing'' in 
the NPRM. Given the comments received, NIST's examination of them, and 
the Executive Order, NIST removed this provision from the final rule. 
The circumstances in which an agency might exercise its right to march-
in are enumerated in the regulations at Sec.  401.14(j) and include (a) 
a contractor's failure to take action to achieve practical application 
of a subjection invention, (b) a contractor's failure to meet health or 
safety needs, (c) a contractor's failure to meet public use 
requirements, and (d) a contractor's failure to comply with the 
preference for United States industry. NIST intends to engage with 
stakeholders and agencies with the goal of developing a comprehensive 
framework for agencies considering the use of march-in provisions. In 
this final rule, Sec.  401.6(e) of the NPRM is removed, and Sec.  
401.6(f) of the NPRM is redesignated as Sec.  401.6(e).
    9. Comment: The NPRM reorganized Sec.  401.13, relocating certain 
paragraphs (e.g., Sec.  401.13(a) became Sec.  401.14(c)(6)), removing 
outdated portions, and retitling the section from ``Administration of 
patent rights clauses'' to ``Confidentiality of contractor 
submissions.'' Several commenters that were supportive of the revisions 
asked NIST to expand the confidentiality provisions to apply to all 
information related to ``subject inventions.''
    Response: This final rule maintains the revisions to Sec.  401.13 
that were proposed in the NPRM, which includes confidentiality 
protections for contractor submissions under many circumstances. While 
NIST appreciates the importance of maintaining the confidentiality of 
information related to inventions for which patent protection has not 
yet been sought as well as business information, NIST cannot expand 
confidentiality provisions beyond those provided in the Bayh-Dole 
statute and therefore has not expanded the confidentiality provisions 
in this final rule.
    10. Comment: Several commenters objected to the proposed change in 
Sec.  401.14(a)(2) amending the definition of ``subject invention.'' 
These changes included a rephrasing of the definition and the 
incorporation of a clarifying statement explaining that ``[a]n 
invention that is conceived and reduced to practice without the use of 
any federal funds is not considered a subject invention.''
    Response: NIST has removed this revision from the final rule, as 
the additional guidance regarding inventions conceived without the use 
of any federal funds was reinstated at Sec.  401.1(a), as discussed in 
Comment 3 above.
    11. Comment: The NPRM revised Sec.  401.14(c)(3), creating 
(c)(3)(i)-(iv). Several commenters expressed concern with the proposed 
additional language in Sec.  401.14(c)(3)(ii) requiring that each 
provisional application filed after a first provisional application 
``contain additional written description of the subject invention not 
previously disclosed in a patent application.'' Commenters pointed to 
the increasingly common practice of re-filing provisional applications 
since the United States moved to a first-to-file patent system, and 
there was also confusion expressed as to whether prior agency approval 
would be needed before the filing of additional provisional patent 
applications.
    Response: NIST appreciates the submitted comments and the need for 
contractor flexibility in developing patent filing strategy. Therefore, 
NIST has removed the requirement that additional written description of 
the subject invention be included in subsequent provisional patent 
filings. NIST has further revised this provision to clarify that 
additional provisional

[[Page 17733]]

patent applications may be filed until the nonprovisional application 
is timely filed in accordance with Sec.  401.14(c)(3)(i) and allowing 
for additional extensions, if needed, granted under Sec.  401.14(c)(5). 
Nothing in these regulations supersedes any deadlines or requirements 
imposed by the United States Patent and Trademark Office.
    12. Comment: Under Sec.  401.14(c)(3)(iv) and if required by the 
funding agency, a contractor must provide information related to patent 
filings, including the filing date, application number, title, a copy 
of the patent application, patent number, and issue date. One commenter 
requested that this section be revised to remove the discretionary 
aspect, instead requiring each agency to ask for this information.
    Response: NIST notes that many agencies already request this 
information as a matter of course. However, NIST leaves the collection 
of specific information to the discretion of funding agencies.
    13. Comment: Several commenters supported the revision to Sec.  
401.14(d) allowing agencies to release the contractor from the 
requirement to convey title to a subject invention to the agency, 
although many commenters requested that there be a timeframe in which 
the agency must respond to a request for release under this provision.
    Response: NIST will work with the interagency community to provide 
additional guidance on the waiver process, as needed. Because each 
agency concerned must adhere to different internal requirements and 
processes in furtherance of their unique missions, a specific time 
limit for agency response would not be advisable, and NIST declines to 
impose the same in this final rule.
    14. Comment: At Sec.  401.14(k), (k)(4) of the regulations was 
revised and divided into the newly designated sections (k)(4) and 
(k)(5). Both the previous regulations and the NPRM contained the 
requirement at Sec.  401.14(k)(4) that the contractor make efforts that 
are reasonable under the circumstances to attract licensees of subject 
inventions that are small business firms and, when appropriate, give 
preference to a small business firm when licensing a subject invention. 
Part of the previous Sec.  401.14(k)(4) and the NPRM's newly designated 
Sec.  401.14(k)(5) require that the contractor ``negotiate changes to 
its licensing policies, procedures, or practices'' with the funding 
agency if the funding agency's review of the contractor's licensing 
programs and decisions discloses that the contractor could take 
reasonable steps to more effectively implement the small business 
consideration requirements. Several commenters requested an amendment 
to the language changing ``negotiate'' to ``consider.''
    Response: The language in question was not proposed for revision, 
as the requirement that small business firms be given a preference in 
the licensing of subject inventions is statutory, 35 U.S.C. 202. 
Requiring a contractor to only ``consider'' reasonable changes to 
implement this statutory requirement would be inadequate; thus, NIST 
has maintained the requirement that a contractor negotiate such 
reasonable changes with a funding agency in this final rule.
    15. Comment: One commenter objected to the removal of Sec.  401.15, 
stating that guidance on deferred determinations should be retained.
    Response: The guidance on deferred determinations previously found 
at Sec.  401.15 has been substantially retained in Sec.  401.9 of both 
the proposed and final rule.
    16. Comment: Previously entitled ``Electronic filing,'' Sec.  
401.16 was revamped in the NPRM and retitled ``Federal agency reporting 
requirements.'' Its requirements relate to information that must be 
reported by agencies internally, within the Federal Government. Several 
commenters requested the addition of language that would limit the 
information being reported to only that data that is already available 
within the iEdison system, as well as text that would require the 
agencies to pull the information from iEdison when fulfilling their 
reporting obligations so as to avoid creating an additional reporting 
burden for contractors.
    Response: As noted by the commenters, many of the data points for 
which reporting is required under Sec.  401.16 are currently available 
via iEdison, and NIST intends to incorporate the remainder in a 
forthcoming update to the iEdison system to minimize the burden on 
agencies in fulfilling this requirement. However, while NIST 
appreciates the commenters' concerns and strongly supports the use of 
iEdison by funding agencies, NIST cannot mandate or compel agency use 
of iEdison, nor can NIST dictate the manner in which the agencies 
collect data. Accordingly, NIST declines to make the suggested revision 
in this final rule.
    17. Comment: At Sec.  404.2, entitled ``Policy and objective,'' the 
NPRM amended and expanded the previous text. Comments were received 
objecting to the proposed revisions, observing the text's brevity as 
compared to the stated objectives in 35 U.S.C. 200 and questioning its 
consistency with the definition of ``practical application.''
    Response: The text of 35 U.S.C. 200 remains governing law. The 
revisions at Sec.  404.2 do not alter the definition of ``practical 
application'' found at Sec.  401.2. The amended text does not consider 
payments as achieving ``practical application''; it encourages the 
Federal Government to consider how the utilization of payments under a 
license agreement may encourage licensees to develop an invention in 
order to advance practical application and to promote commercialization 
by the licensee. NIST has slightly reworded Sec.  404.2, in order to 
clarify the intent in this final rule.
    18. Comment: One commenter objected to the removal of Sec.  404.4 
and requested additional language specific to certain action items, 
diseases, and/or products. NIST also received a comment from a federal 
agency to re-insert Sec.  404.4, because the requirement to notify the 
public of federally owned inventions available for license is not found 
elsewhere within the regulation.
    Response: The regulations are meant to apply to an invention 
without regard to invention type or industry sector, and therefore, 
NIST declines to add references to specific sectors, diseases, or 
products. However, although much of this section is already 
substantively included elsewhere, NIST agrees that the requirement to 
publish federally owned inventions is not. NIST will re-insert Sec.  
404.4 in its entirety keeping the language unchanged from the previous 
regulations.
    19. Comment: Many commenters objected to the NPRM's proposed 
amendment of Sec.  404.7(a)(1). The proposed rule retained the 
requirement that, prior to granting an exclusive, co-exclusive, or 
partially exclusive license on a Government owned invention, the 
Government must first publish a notice identifying the invention on 
which the proposed license is to be granted. However, the proposed rule 
removed the requirement that the identity of the prospective licensee 
of a Government owned invention also be published.
    Response: In order to keep the public apprised of prospective 
licensees of Government owned inventions, NIST has reincorporated the 
requirement that the identity of such a prospective licensee be 
published alongside the invention into this final rule.
    20. Comment: One commenter objected to the NPRM's proposed 
rewording at Sec.  404.7(a)(3) (previously Sec.  404.7(a)(1)(iii)). 
Under the previous language, before granting an exclusive, co-
exclusive, or partially exclusive license to a Government owned

[[Page 17734]]

invention, it was required that ``[t]he Federal agency ha[d] not 
determined that the grant of such a license [would] tend substantially 
to lessen competition or create or maintain a violation of the Federal 
antitrust laws.'' In the NPRM, the requirement of non-determination was 
altered into a requirement of affirmative determination, such that the 
license could be granted after ``[t]he Federal agency has determined 
that the grant of such a license will not tend to substantially lessen 
competition or create or maintain a violation of the Federal antitrust 
laws.''
    Response: The proposed changes in the NPRM were meant to mirror the 
wording in the corresponding statute at 35 U.S.C. 209(a)(4). While 
appreciative of the alternative language recommended, NIST only made 
one revision to the language proposed in the NPRM in this final rule, 
which moved the word ``to'' before the word ``lessen'' in order to 
mirror the exact wording at 35 U.S.C. 209(a)(4).
    21. Comment: Several commenters objected to the NPRM's proposed 
addition of language at Sec.  404.11(a)(3); Sec.  404.11(a) lists the 
parties who may appeal certain agency decisions or determinations 
relating to Government owned inventions.
    Response: Under this section, certain parties may appeal an agency 
decision or determination concerning the grant, denial, modification, 
or termination of a license, which, under Sec.  404.5, an agency may 
grant ``only if the applicant has supplied the Federal agency with a 
satisfactory plan for development or marketing of the invention, or 
both, and with information about the applicant's capability to fulfill 
the plan.'' The added language at Sec.  404.11(a)(3) provides that a 
person who files a written objection to an agency's notice of proposed 
licensing also demonstrate that the proposed license would deny that 
person the opportunity to commercialize the invention. If a third party 
who is not denied the opportunity to commercialize the invention 
opposes a proposed license, they need only find another party willing 
to license the invention to appeal. Requiring less would result in an 
appeal with the potential to result in no license or commercialization. 
Therefore, this additional language is maintained in the final rule.

Changes From the Proposed Rule

    1. Re-insert the guidance and examples in Sec.  401.1(a).
    2. Remove Sec.  401.2(m)(4) from the definition of ``patent 
application'' and redesignate the proposed Sec.  401.2(m)(5) as Sec.  
401.2(m)(4).
    3. Remove Sec.  401.2(n)(3) from the definition of ``initial patent 
application,'' redesignate Sec. Sec.  401.2(n)(4) and (5) as Sec. Sec.  
401.2(n)(3) and (4) and remove ``which designates the United States'' 
from the newly designed Sec.  401.2(n)(3).
    4. Revise the first sentence of Sec.  401.6(a)(1) to add ``may 
also'' and replace ``actions'' with ``alternatives''.
    5. Remove the proposed addition at Sec.  401.6(e) regarding the 
consideration of pricing of commercial goods and services and 
redesignate the proposed Sec.  401.6(f) as Sec.  401.6(e).
    6. Remove the proposed revisions to the definition of ``subject 
invention'' at Sec.  401.14(a)(2).
    7. Revise Sec.  401.14(c)(3) by moving the last sentence of Sec.  
401.14(c)(3)(i) to Sec.  401.14(c)(3)(ii).
    8. Revise Sec.  401.14(c)(3)(ii) to remove the requirement that 
additional written description be included in each provisional 
application filed following the initial patent application and to 
clarify that additional provisional applications may be filed so long 
as a nonprovisional is filed within the regulatory time frame, 
including any approved extensions.
    9. Remove the proposed revision to Sec.  401.14(f)(3).
    10. Revise Sec.  401.16 to add ``(h) Summary of utilization 
information provided by contractors,'' in accordance with the directive 
in Executive Order 14036 that the Secretary of Commerce, acting through 
the Director of NIST, consider such an addition to the regulations.
    11. Add Sec.  401.18 to include a severability clause in this Part.
    12. Revise Sec.  404.2 to clarify intent by stating that payments 
received under a license agreement may be considered as ``a means for 
encouraging the licensee to develop an invention in order to advance 
practical application and to promote commercialization by the licensee.
    13. Revise Sec.  404.1(b) to add ``and used in accordance with 15 
U.S.C. 3710c(a)(1)(B),'' to reiterate that royalties collected must be 
used in accordance with this statute.
    14. Re-insert Sec.  404.4 in its entirety.
    15. Revise Sec.  404.7(a)(1) to re-insert the phrase ``and the 
prospective licensee'' to the information required in a Notice of a 
prospective license.
    16. Revise Sec.  404.7(a)(3) to move the word ``to'' before the 
word ``lessen'' to be consistent with 35 U.S.C. 209(a)(4).
    17. Add Sec.  404.15 to include a severability clause in this Part.

Executive Order 12866 and Regulatory Impact Analysis

    This rulemaking is a significant regulatory action under section 
3(f)(4) of 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. This rule only makes 
administrative changes for ease, clarity, and transparency, and 
therefore does not have economically significant effects.

Executive Order 13132

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

Regulatory Flexibility Act

    The Chief Counsel for Regulation of the Department of Commerce 
certified to the Chief Counsel for Advocacy of the Small Business 
Administration during the proposed rule stage that this rule would not 
have a significant economic impact on a substantial number of small 
entities. The factual basis for this determination was published in the 
proposed rule and is not repeated here. No comments were received 
regarding the certification, and NIST has not received any new 
information that would affect its determination. As a result, a final 
regulatory flexibility analysis was not required and none was prepared.

Paperwork Reduction Act

    Notwithstanding any other provision of law, no person is required 
to respond to, nor is subject to a penalty for failure to comply with, 
a collection of information, subject to the requirements of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (PRA), unless 
that collection of information displays a currently valid Office of 
Management and Budget (OMB) Control Number. This rule contains a 
collection of information approved by OMB under the following control 
number: 0693-0090--iEdison. NIST believes any overall increases/
decreases in burdens and costs will be minimal and will fall within the 
already approved amounts for the existing collection. The public may 
access the current version of the collection, including all supporting 
materials, at www.reginfo.gov/public/do/PRAMain.

[[Page 17735]]

National Environmental Policy Act

    This 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 amends 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) Traditionally there have been no conditions imposed by the 
government on research performers while using private facilities which 
would preclude them from accepting research funding from other sources 
to expand, to aid in completing or to conduct separate investigations 
closely related to research activities sponsored by the government. 
Notwithstanding the right of research organizations to accept 
supplemental funding from other sources for the purpose of expediting 
or more comprehensively accomplishing the research objectives of the 
government sponsored project, it is clear that the ownership provisions 
of these regulations would remain applicable in any invention 
``conceived or first actually reduced to practice in performance'' of 
the project. Separate accounting for the two funds used to support the 
project in this case is not a determining factor.
    (1) To the extent that a non-government sponsor established a 
project which, although closely related, falls outside the planned and 
committed activities of a government-funded project and does not 
diminish or distract from the performance of such activities, 
inventions made in performance of the non-government sponsored project 
would not be subject to the conditions of these regulations. An example 
of such related but separate projects would be a government sponsored 
project having research objectives to expand scientific understanding 
in a field and a closely related industry sponsored project having as 
its objectives the application of such new knowledge to develop usable 
new technology. The time relationship in conducting the two projects 
and the use of new fundamental knowledge from one in the performance of 
the other are not important determinants since most inventions rest on 
a knowledge base built up by numerous independent research efforts 
extending over many years. Should such an invention be claimed by the 
performing organization to be the product of non-government sponsored 
research and be challenged by the sponsoring agency as being reportable 
to the government as a ``subject invention'', the challenge is 
appealable as described in Sec.  401.11(d).
    (2) An invention which is made outside of the research activities 
of a government-funded project is not viewed as a ``subject invention'' 
since it cannot be shown to have been ``conceived or first actually 
reduced to practice'' in performance of the project. An obvious example 
of this is a situation where an instrument purchased with government 
funds is later used, without interference with or cost to the 
government funded project, in making an invention all expenses of which 
involve only non-government funds.
    (b) This part implements 35 U.S.C. 202 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.
    (c) 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.
    (d) 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) 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 under the Patent Cooperation 
Treaty as defined in 37 CFR 1.9(b); or
    (4) The first application for a Plant Variety Protection 
certificate.
    (o) The term statutory period means the one-year period before the 
effective

[[Page 17736]]

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 the words ``Sec.  401.5(g)'' and add in their place ``Sec.  
401.5(f)'' in paragraph (c)(3);
0
b. Remove the words ``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).


Sec.  401.4  [Amended]

0
5. Amend Sec.  401.4 as follows:
0
a. Remove the words ``35 U.S.C. 202(b)(4)'' and add in their place ``35 
U.S.C. 202(b)(3)'' in the first sentence of paragraph (a); and
0
b. Remove the words ``United States Claims Court'' and add in their 
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 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)(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
7. Revise Sec.  401.6 to read as follows:


Sec.  401.6  Exercise of march-in rights.

    (a) The following procedures shall govern the exercise of the 
march-in rights of the agencies set forth in 35 U.S.C. 203 and 
paragraph (j) of the clause at Sec.  401.14:
    (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 may also consider possible 
alternatives 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, and any other information in the 
administrative record. The consistency of the exercise of march-in 
rights with

[[Page 17737]]

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) 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 to read 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. Revise Sec.  401.11 to read as follows:


Sec.  401.11  Appeals.

    (a) The agency official initially authorized to take any of the 
following actions shall provide the contractor with a written statement 
of the basis for his or her action at the time the action is taken, 
including any relevant facts that were relied upon in taking the 
action.
    (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 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

[[Page 17738]]

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. In Sec.  401.14, amend the clause by:
0
a. Revising paragraphs (a)(7) and (8); and (c)(1) and (3);
0
b. Adding paragraph (c)(6);
0
c. Revising paragraph (d);
0
d. Removing the word ``sucessor'' and adding in its place ``successor'' 
in the final sentence of paragraph (e)(1);
0
e. Removing the word ``incidential'' and adding in its place 
``incidental'' in paragraph (k)(3);
0
f. Revise paragraph (k)(4);
0
g. Add paragraphs (k)(5) and (6);
0
h. Add paragraph (m).
    The revisions read as follows:


Sec.  401.14  Standard patent rights clauses.

* * * * *
    (a) * * *
    (7) 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.
    (8) Contractor means any person, small business firm, or nonprofit 
organization, or, as set forth in section 1, paragraph (b)(4) of 
Executive Order 12591, as amended, any business firm regardless of 
size, which is a party to a funding agreement.
* * * * *
    (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.
    (ii) If the contractor files a provisional application as its 
initial patent application, it shall file a nonprovisional application 
within 10 months of the filing of the provisional application. So long 
as there is a pending patent application for the subject invention and 
the statutory period wherein valid patent protection can be obtained in 
the United States has not expired, additional provisional applications 
may be filed within the initial 10 months or any extension period 
granted under paragraph (c)(5) of this clause. If an extension(s) is 
granted under paragraph (c)(5) of this clause, the contractor shall 
file a nonprovisional patent application prior to the expiration of the 
extension(s) or notify the agency of any decision not to file a 
nonprovisional application prior to the expiration of the extension(s), 
or if earlier, 60 days prior to the end of any statutory period wherein 
valid patent protection can be obtained in the United States.
    (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 nonprovisional 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.
* * * * *
    (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

[[Page 17739]]

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
    (1) Unless otherwise requested or directed by the Federal agency--
    (i) The written disclosure required in (c)(1) of this clause shall 
be electronically filed;
    (ii) The written election required in (c)(2) of this clause shall 
be electronically filed; and
    (iii) 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.
    (2) 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 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);
    (g) Number of requests for assignment of invention rights; and
    (h) Summary of utilization information provided by contractors.
    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''.

0
16. Add Sec.  401.18 to read as follows:


Sec.  401.18  Severability.

    The provisions of this part are separate and severable from one 
another. If any provision is stayed or determined to be invalid, the 
remaining provisions shall remain in effect.

PART 404--LICENSING OF GOVERNMENT OWNED INVENTIONS

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

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

0
18. 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, and used in 
accordance with 15 U.S.C. 3710c(a)(1)(B), are not intended as an 
alternative to appropriated funding or as an alternative funding 
mechanism.

0
19. 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 encouraging the licensee to develop an invention in order to 
advance practical application and promote commercialization by the 
licensee.


Sec.  404.5  [Amended]

0
20. Amend Sec.  404.5 by removing the words ``Sec.  404.5(a)(2)'' from 
paragraph (b)(8)(iv) and adding in their 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 and 
the prospective licensee has been published and responses, if any, 
reviewed in accordance with 35 U.S.C. 209(e). 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 to substantially 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

[[Page 17740]]

    (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 the words ``and any sublicensee of 
record''.

0
23. Amend Sec.  404.11 by revising paragraph (a) introductory text and 
paragraphs (a)(3) and (b) to read as follows:


Sec.  404.11  Appeals.

    (a) The following parties may appeal to the agency head or designee 
of the Federal agency 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.

0
25. Add Sec.  404.15 to read as follows:


Sec.  404.15  Severability.

    The provisions of this part are separate and severable from one 
another. If any provision is stayed or determined to be invalid, the 
remaining provisions shall remain in effect.

Alicia Chambers,
NIST Executive Secretariat.
[FR Doc. 2023-06033 Filed 3-21-23; 4:15 pm]
BILLING CODE 3510-13-P