1. Protecting IP Rights Under Federal Grants Richard W. OehlerEric A. Aaserud Tel: (206) 359-8419Tel: (208) 387-7526 roehler@perkinscoie.comeaaserud@perkinscoie.com

2. 2 Overview  The Federal Government is providing substantial research and product development funds through federal grants  This money, however, does come with strings, including providing the Government with some IP rights  Judicious planning, and following proper procedures, can possibly minimize, but not eliminate, these Government rights

3. 3 Overview (cont)  There are a number of ways in which a company can accept federal funding, including procurement contracts, CRADAs, grants and cooperative agreements (which are cost-sharing grants)  We will focus on grants and cooperative agreements

4. 4 Overview (cont)  Further, we will focus primarily on DOE grants, although there are other federal agencies that award grants under somewhat different regulations  We also will address a variant of DOE grants called Technology Investment Agreements ("TIAs")

5. 5 Overview (cont) General areas:  Patent rights  Data rights  Technology Investment Agreements

6. 6 Patent Rights  All federal grants, including DOE grants, incorporate Bayh-Dole Act provisions  Bayh-Dole Act:  Under any "subject invention," the Government obtains a Government purpose patent license (which is a nonexclusive, nontransferable, irrevocable, global, paid-up, perpetual license to practice an invention for Government purposes)

7. 7 Patent Rights (cont)  "Subject Invention" is an invention conceived or first actually reduced to practice in performance of the DOE grant  "Conceived" - inventor has a definite idea of a complete and operative invention  "Reduced to practice" - invention will perform as intended beyond a probability of failure  "Government Purpose" - practice for or on behalf of the U.S. the invention on a worldwide basis

8. 8 Patent Rights (cont)  Under non-DOE grants, the company can obtain title to the invention by following certain procedures  Under DOE grants, that remains true for small businesses and non-profit organizations

9. 9 Patent Rights (cont)  For large businesses, DOE retains title to the invention and the large business obtains a nonexclusive license  Large businesses, however, can ask DOE to waive title to the invention on an individual basis or on an advance waiver basis  Also, certain DOE grant programs, such as ARPA-E, permit large businesses to take title to subject inventions through a "class waiver"

10. 10 Patent Rights (cont)  ARPA-E program provides a class waiver for large businesses that –  cost share at least 20%, and  agree to manufacture in the U.S. new technology created under the award or to provide other net economic benefits to the U.S.  Large business recipients that do not qualify may still request an individual waiver before or within 30 days after the award

11. 11 Patent Rights – Notice Requirements Small businesses and non-profits  To obtain title, recipient must disclose the subject invention to Government within 2 months after the inventor discloses the invention to recipient

12. 12 Patent Rights – Notice (cont) Small businesses and non-profits  Recipient may elect to obtain title to the invention by notifying DOE within 2 years of disclosure to DOE

13. 13 Patent Rights – Notice (cont) Small businesses and non-profits  Recipient must file its initial patent application on an elected invention –  within 1 year after election  or, if earlier, prior to the end of any statutory period wherein valid patent protection can be obtained in the U.S. after a publication, on sale, or public use

14. 14 Patent Rights – Notice (cont) Large businesses (under class waiver)  Recipient must disclose subject invention to DOE –  within 6 months after conception or first actual reduction to practice, whichever occurs first  in any event, prior to any sale, public use, or public disclosure of such invention

15. 15 Patent Rights – Notice (cont) Large businesses (under class waiver)  Recipient shall elect in writing whether or not to retain title by notifying DOE within 8 months of disclosure, as to those countries (including the U.S.) in which recipient will retain title

16. 16 Patent Rights – Filing Large businesses (under class waiver)  Recipient must file its initial patent application on an elected invention –  within 1 year after election  but not later than at least 60 days prior to the end of any statutory period wherein valid patent protection can be obtained in the U.S. after a publication, on sale, or public use

17. 17 Other Patent Rights Issues  Domestic preference  March-in rights

18. 18 Domestic Preference  Recipient agrees that neither it nor an assignee will grant an exclusive right to use or sell any subject invention in the U.S. unless such person agrees that products embodying the subject invention will be manufactured substantially in the U.S.

19. 19 Domestic Preference  Potential waiver of preference requirement upon a showing by the recipient or its assignee that –  Reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the U.S.; or  Domestic manufacture is not commercially feasible

20. 20 March-in Rights  Under specific circumstances the Government can require forced licensing to a "responsible applicant" through march-in rights  Circumstances include:  failure to diligently take steps to achieve practical application  alleviation of health or safety needs which are not reasonably satisfied by recipient  failure to meet the domestic manufacturing requirement  These rights have never been exercised

21. 21 Patent Rights - Strategies  Consider that, at a minimum, the Government will obtain a Government purpose license and the impact on your future plans  Consider whether you should patent certain activities before starting performance under a DOE grant

22. 22 Data Rights  Refers to a license to the Government of rights in data that you generate in performance of the agreement and deliver to the Government  "Data" is recorded information regardless of form or the media on which it may be recorded

23. 23 Data Rights (cont)  Data can be either computer software or technical data  The rights range from Limited or Restricted to Unlimited generally based on (i) the funding source and (ii) whether proper procedures were followed in data delivery

24. 24 Data Rights (cont)  Limited Rights (technical data) or Restricted Rights (computer software)  Best set of rights from the recipient's perspective

25. 25 Limited Rights License  Under DOE Limited Rights – Data may be reproduced and used by the Government with the limitation that they will not be used for purposes of manufacture nor disclosed outside Government, except....

26. 26 Limited Rights License (cont)  Government may disclose data outside Government for – 1.Use by support services contractors within the scope of their contracts 2.Disclosure for evaluation purposes under the restriction that data retained in confidence and not be further disclosed 3.Disclosure to other recipients participating in the same grant program under the restriction that data be retained in confidence and not be further disclosed.

27. 27 Limited Rights License (cont) 4.Use by the Government or others on its behalf for emergency repair or overhaul work under the restriction that the data be retained in confidence and not be further disclosed; and 5.Release to a foreign government, as the interests of the U.S. Government may require, for information or evaluation, or for emergency repair or overhaul work by such government.

28. 28 Restricted Rights License  Under Restricted Rights, computer software may not be used, reproduced, or disclosed by the Government, except that it may be – 1.Used or copied for use with the computers for which it was acquired 2.Used or copied for use in a backup computer if the computer for which it was acquired becomes inoperative

29. 29 Restricted Rights License (cont) 3.Reproduced for backup purposes 4.Modified or combined with other computer software, provided that the modified or adapted portions are made subject to the same Restricted Rights

30. 30 Restricted Rights (cont) 5.Disclosed to and reproduced for use by support service Recipients provided the Government makes such disclosure or reproduction subject to the same Restricted Rights 6.Used or copied for use in a replacement computer

31. 31 Development at Private Expense  Government obtains Limited or Restricted Rights in data developed at private expense  The data must also (i) embody trade secrets or (ii) be commercial or financial and confidential or privileged  Government obtains Unlimited Rights in data developed at Government expense

32. 32 Protecting Privately Developed Data Key #1  Deliverable data developed at private expense should be identified as such in your proposal or application

33. 33 Protecting Privately Developed Data Key #2  Properly mark the data before delivery by "affixing" either the Limited Rights or Restricted Rights legend  These legends are found at 10 CFR 600, Appendix A to Subpart D and are too lengthy to state here

34. 34 Protected Rights  In some programs, such as ARPA-E, the recipient may, with DOE's approval, claim as "protected data" any data first produced in the performance of the award that would have been a trade secret if developed at private expense

35. 35 Protected Rights License  Data may not be published, disseminated, or disclosed to others outside the Government until 5 years after development of information, unless express written authorization is obtained from the recipient  After 5 years, the Government takes Unlimited Rights in the data

36. 36 Protected Rights Notice  To enjoy protection, must deliver data with Protected Rights Notice affixed to the data.  Use exact same language as set forth in Protected Rights Notice in the grant. (The text in the instrument can vary slightly from the clause.)  If the Notice is not in the grant, then use the exact language found in the clause set forth at 10 CFR App. A to Subpart D of Part 600.)

37. 37 Strict Compliance  Failure to properly identify and mark data puts the Government in position to claim Unlimited Rights in the data  In fact, failure to properly mark data with the proper notice means the data "shall be deemed to have been furnished with Unlimited Rights"

38. 38 Technology Investment Agreements  ARPA-E funding opportunity announcement:  "ARPA-E anticipates awarding grants, cooperative agreements, or Technology Investment Agreements" and "[c]ooperative agreements and TIAs are the most likely instruments to be used."

39. 39 TIAs (cont)  Two types of TIAs: 1.Cooperative agreement with more flexible provisions tailored for commercial firms but with IP provisions in full compliance with the DOE IP statutes and regulations; and 2."Other transaction" in which intellectual property provisions can vary from DOE IP statutes and regulations

40. 40 TIAs (cont)  Cooperative agreement type of TIA:  A cooperative agreement with more flexible provisions tailored for commercial firms (as distinct from a cooperative agreement subject to all the requirements in 10 CFR 600), but with IP provisions in full compliance with the DOE intellectual property statutes (i.e., Bayh-Dole and 42 U.S.C. 2181 and 5908)  E.g., reduction of financial management system requirements, access to records, etc.

41. 41 TIAs (cont)  ARPA-E general policy limited by Recovery Act:  ARPA-E FOA: "Recovery Act... includes express requirements with respect to audit provisions and property management... Otherwise, it is ARPA-E’s general policy to avoid requirements that would force participants to use different financial management, property management, and purchasing systems than those currently in use."

42. 42 TIAs (cont)  "Other transaction" type of TIA:  Authorized if the grants officer determines there is a unique, exceptional need to vary from the standard IP requirements. 10 CFR 603.105(b).  ARPA-E FOA focuses on this second type of TIA: ("In a TIA the intellectual property rights are not subject to the requirements of the Bayh-Dole Act or 42 U.S.C. 5908 and are negotiable.")

43. 43 TIAs (cont)  Examples of possible variance under "other transaction" type of TIA:  Data rights: Remove the 5-year limit on Limited/Restricted Rights or increase the 5-year period to, say, 10 years  Data rights: Narrow the scope of the Unlimited Rights license (to something more like DOD's Government Purpose Rights, for example)  Patents: Eliminate or narrow the scope of the broad "nonexclusive paid-up" patent license

44. 44 Negotiating Use of a TIA  ARPA-E FOA: "An applicant may request a TIA if the applicant believes that using a TIA could benefit the objectives of the program and can document these benefits."

45. 45 Negotiating Use of a TIA (cont)  Recipient might emphasize such factors as  High cost sharing commitment on the part of recipient  High cost of privately developing the proprietary information  Importance of protecting recipient's proprietary information from recipient's and DOE's perspective  Benefits in meeting overall program objectives 17737540