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Proposed Rule

Rights to Inventions Made by Nonprofit Organizations and Small Business Firms Under Government Grants, Contracts, and Cooperative Agreements; Special Contracts To Provide Support Services for a Government-Owned and -Operated Laboratory Under a Cooperative Research and Development Agreement (CRADA) With a Collaborating Party

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Assistant Secretary for Technology Policy, Commerce.


Proposed rule with request for comments.


This proposed rule would authorize Federal agencies to use an alternate patent rights clause in certain contracts with nonprofit organizations and small business firms to provide support services at a Government-owned and -operated laboratory in connection with a CRADA between the laboratory and a collaborating party.


Comments must be received on or before October 11, 2000.


Comments should be mailed to Mr. Jon Paugh, Director, Technology Competitiveness, Office of Technology Policy, Room 4418, Herbert C. Hoover Building, U.S. Department of Commerce, Washington, DC 20230.

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Mr. John Raubitschek, Patent Counsel, at telephone: (202) 482-8010.

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Under the authority of 35 U.S.C. 206 and the delegation by the Secretary of Commerce in section 3(g) of DOO 10-18, the Assistant Secretary of Commerce for Technology Policy may issue revisions to 37 CFR part 401.

Under the Bayh-Dole Act (Pub. L. 96-517), nonprofit and small business contractors and grantees have the option to retain rights in their inventions in order to facilitate the commercialization of the results of federally funded research. However, this option may be limited if an exceptional circumstances determination is made by the funding agency under 37 CFR 401.3(a)(2). The criteria for such a determination are exacting and the contractor may appeal such a determination. There is a need to limit the rights of certain contractors and grantees in their inventions when Start Printed Page 54827they are performing research for the Government under a cooperative research and development agreement (CRADA) with a collaborating party as authorized by the Federal Technology Transfer Act (Pub. L. 99-502) (FTTA). If these rights are not limited, the collaborating party would not receive the rights to which it would normally be entitled under a CRADA, which includes the option for an exclusive license to any CRADA invention made by a Government employee. Contractors are now being used at certain federally-owned and -operated laboratories of various agencies such as the Department of Defense and the Environmental Protection Agency. The contracts are not usually entered into for securing research expertise of a particular company or individual but rather to provide general support to the operation of the laboratories.

Presently, some agencies using support contractors for CRADAs have notified their collaborating parties that they will endeavor to acquire the necessary rights from their contractors but cannot promise that those rights will be obtained. Other agencies preclude their contractors from working on CRADAs or permit them to own their inventions whether or not made under a CRADA. When the Department of Defense recently proposed a special clause for support contractors limiting rights in their inventions, the Department of Commerce was concerned that the exception was too broad and that the clause should encourage negotiation.

Since the laboratory's obligations under the FTTA do not technically apply to the inventions of its contractors, the Department of Commerce does not consider that there is an actual conflict between the Bayh-Dole Act and the FTTA. Nevertheless, we do believe that the situation presents a conflict between the general policies of the Bayh-Dole Act and the specific directives of the FTTA. We think that allowing a support contractor to work under a CRADA in such circumstances might be a negative factor or disincentive to the participation by private parties in a CRADA because they would not be assured of receiving rights in all CRADA inventions as mandated by the FTTA.

Accordingly, we propose to add as an alternate a new subparagraph to paragraph (b) of the basic patent rights clause that encourages the contractor to negotiate with the collaborating party but in the absence of an agreement, provides certain minimum rights for the collaborating party in the contractor's inventions. The provision of those minimum rights in a contract constitutes an exceptional circumstances determination by the agency pursuant to 37 CFR 401.3(a)(2) and would be appealable under § 401.4. The rights would be of the same scope and terms the collaborating party would receive in an invention made by a Government employee under the CRADA, which is typically an option for an exclusive license. Although negotiation should occur prior to the contractor starting work under the CRADA, it could be postponed with the permission of the Government until an invention is made by the contractor under the CRADA. The procedures for using the alternate clause are provided in new § 401.3(a)(5). The alternate clause is optional and laboratories may allow support contractors to own their inventions made under a CRADA.


Administrative Procedure Act: Pursuant to section 553(a)(2) of the Administrative Procedure Act (APA) (5 U.S.C. 553(a)(2)), the Assistant Secretary of Commerce for Technology Policy finds that the notice and comments requirements of the APA are not applicable. The Technology Administration, however, is interested in the views of interested parties and is, thus, soliciting comments on this policy.

Executive Order 12866

This proposed rule has been determined to be not significant for purposes of E.O. 12866 (58 FR 51735, October 4, 1993).

Executive Order 13132

This proposed rule does not contain policies with Federalism implications sufficient to warrant preparation of a Federalism assessment under E.O. 13132.

Regulatory Flexibility Act

In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), the Assistant General Counsel for Legislation and Regulation of the Department of Commerce has certified to the Chief Counsel for Advocacy, Small Business Administration that the proposed rule change would not have a significant impact on a substantial number of small entities. The principal impact of the rule is to encourage negotiations between the support contractor and the laboratory's collaborating party under a CRADA.

Paperwork Reduction Act

This proposed rule will impose no collection of information requirements under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).

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List of Subjects in 37 CFR Part 401

  • Inventions
  • Patents
  • Nonprofit Organizations
  • Small Business Firms
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For the reasons set forth in the preamble, 37 CFR part 401 is amended as follows:

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

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Authority: 35 U.S.C. 206 and the delegation of authority by the Secretary of Commerce to the Assistant Secretary of Commerce for Technology Policy at sec. 3(g) of DOO 10-18.

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2. Section 401.3 is amended by adding a new paragraph (a)(5) to read as follows:

Use of the standard clauses at § 401.14.
* * * * *

(a) * * *

(5) If any part of the contract may require the contractor to perform work on behalf of the Government at a Government laboratory under a Cooperative Research and Development Agreement (CRADA) pursuant to the statutory authority of 15 U.S.C. 3710a, the contracting officer may include alternate paragraph (b) in the basic patent rights clause in § 401.14. Because the use of the alternate is based on a determination of exceptional circumstances under § 401.3(a)(2), the contracting officer shall ensure that the appeal procedures of § 401.4 are satisfied whenever the alternate is used.

3. A new paragraph (c) is added to § 401.14 to read as follows:

Standard patent rights clauses.
* * * * *

(c) As prescribed in § 401.3, replace (b) of the basic clause with the following paragraphs (1) and (2):

(b) Allocation of principal rights. (1) The Contractor may retain the entire right, title, and interest throughout the world to each subject invention subject to the provisions of this clause, including (2) below, and 35 U.S.C. 203. With respect to any subject invention in which the Contractor retains title, the Federal Government shall have a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States the subject invention throughout the world.

(2) If the Contractor performs support services at a Government owned and Start Printed Page 54828operated laboratory directed by the Government to fulfill the Government's obligations under a Cooperative Research and Development Agreement (CRADA) authorized by 15 U.S.C. 3710a, the Government may require the Contractor to try to negotiate an agreement with the CRADA collaborating party or parties over the rights to any subject invention the Contractor makes, solely or jointly, in the course of its work under the CRADA. The agreement shall be negotiated prior to the Contractor undertaking the CRADA work or, with the permission of the Government, upon the identification of a subject invention. In the absence of such an agreement, the Contractor agrees to grant the collaborating party or parties an option for a license in its inventions of the same scope and terms set forth in the CRADA for inventions made by the Government.

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Kelly H. Carnes,

Assistant Secretary of Commerce for Technology Policy.

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[FR Doc. 00-23080 Filed 9-8-00; 8:45 am]