Federal Money and Intellectual Property

Given the breadth of the research programs originating from Johns Hopkins, it’s not surprising that our office handles contractual opportunities from sponsors of myriad scope and size.  For every Gates Foundation, we’ll talk turkey with a small, limited-resource organization whose funding activities are not nearly as frequent as those of their larger colleagues.  Generally, we’ll push for roughly the same obligations for a project regardless of sponsor.  However, there are a few contractual terms that do vary depending on the nature of the funding party, and one such clause is that which relates to the ownership of any intellectual property created during the course of the funded project.

When the Prime is a non-federal entity, either party can usually own the output, with a license granted back to the non-owning party.  However, when the research is being funded by a federal agency, the requirements are more cut and dried, thanks to two elder statesmen of the U.S. Senate.

Prior to 1980, the U.S. Government was reluctant to allow non-profits to retain title to inventions created using federal funds, and would instead keep the patents for themselves so that they could more readily licensed.  Not surprisingly, while the Government ended up being owners of thousands of patent applications, the infrastructure was simply not available to license accordingly, and the vast majority of these technologies lay dormant.  However, this all changed with the Patent and Trademark Law Amendments Act of 1980, sponsored by Senators Birch Bayh (Indiana) and Bob Dole (Kansas), which sought to remove the licensing responsibilities from the shoulders of the Government.

Under “Bayh-Dole,” as it’s commonly now referred, non-profits and educational institutions now posses the first right of ownership to “subject inventions” that they create using federal funds.  In order to take advantage of this provision, these non-profits must report their inventions to the Government and take proper steps to vest their rights, the latter being even more important in light of the recent Supreme Court decision involving Stanford University.  The Government retains an automatic non-exclusive license in any such invention, and may even be able to obtain full ownership if the non-profit does not meet the requirements of the Act, such as licensing the technology within a certain time frame.  However, with very limited exceptions, no private entity is entitled to ownership of inventions falling within the scope of Bayh-Dole, as they are limited to receiving, at maximum, a license to anything created by their non-profit or educational subcontractor.

As an example, let’s consider the private company CompuGlobalHyperMegaNet.  CGHMN has obtained a grant from NIH for $10M, and decides to engage two subcontractors for separate areas of work: Globex Corporation, a for-profit entity, and Springfield University, an institution of higher learning.  As part of the terms of their agreement, CGHMN may require Globex to assign to them any and all inventions that arise during Globex’s work under the NIH-funded subcontract.  However, CGHMN may not make a similar requirement in its subcontract with Springfield University, since, under Bayh-Dole, SU is automatically entitled to the first right of ownership of such subject inventions.  Consequently, CGHMN’s attorney (a Mister L. Hutz) will have to make sure that his company’s contract with Springfield University properly notes the governmental provisions of Bayh-Dole and considers all of the applicable obligations arising thereunder.