The Bayh-Dole Act was passed in 1980. The purpose of the policy is to encourage the utilization of inventions produced under federal funding.
The Bayh-Dole Act resulted in a unified patent rights clause that is included in all federal funding agreements, and it permits non-profit organizations, including non-profit universities, and small businesses to elect to retain title to inventions made in the performance of federally-funded research. The objectives of the Bayh-Dole Act include using the patent system to promote licensing and commercialization of new inventions and creating collaborations between nonprofit organizations and industry.
Through the paradigm shift of allowing non-profit organizations and small businesses to retain title to their inventions, the Bayh-Dole Act promotes the participation of these organizations in the development and commercialization process. It emphasizes the practical application of federally-funded inventions for public purposes and permits exclusive licensing opportunities of an invention for the public good. The government is granted a royalty-free, non-exclusive license to use the invention for government purposes (including use by government contractors)
- The term invention means any invention or discovery which is or may be patentable or otherwise protectable under Title 35 of the United States Code, or any novel variety of plant which is or may be protectable under the Plant Variety Protection Act (7 U.S.C. 2321 et seq.).
- The Bayh-Dole Act further defines a subject invention as "any invention of the contractor that is conceived or first actually reduced to practice in the performance of work under a funding agreement."
- In the case of subject inventions and a plant variety, the date of determination (as defined in section 41(d) of the Plant Variety Protection Act, 7 U.S.C. 2401(d)) must also occur during the period of contract performance.
- Each university agrees to require, by written agreement, its employees to disclose promptly in writing each subject invention made under contract in order that the university can comply with its federal obligations, including execution of all papers necessary to file patent applications on patentable subject inventions and establishing the government's rights in the subject invention.
- University must disclose invention to the government within two months after receipt of disclosure by inventor(s).
- University has two years after disclosure to the government in which to elect title.
- The University may retain the entire right, title and interest throughout the world to each subject invention.
- If title is elected by university, a patent application must be filed on patentable inventions within one year of election.
- If title is not elected by university, the right to take title of the subject invention defaults to the government.
- University may file foreign patent applications as well as US applications; the US government may additionally file in countries where university did not file patent applications.
- University shall instruct employees through employee agreements or other suitable educational programs on the importance of reporting inventions in sufficient time to permit the filing of patent applications prior to U.S. or foreign statutory bars.
- University may not assign the patent (including to the inventor), except to a patent management firm.
- University may exclusively license an invention, but must require that products will be substantially manufactured in the US (when licensee receives rights to sell or use in the US).
- University must try to give preferences to small businesses.
- The government retains a "march-in" right, allowing the government to require licenses to be granted, or to licenses itself, in limited circumstances.
- Institution must share licensing revenues with inventor(s) and use remainder of royalties, after related expenses, for education and research.