By#160 Pamela Winston Bertani
Pamela W. Bertani is an associate in Weintraub Genshlea Chediak Tobin & Tobin Sproul’s Intellectual Property group.#160 Her practice includes providing advice in obtaining various forms of intellectual property protection, including patent, trademark, and copyright protection.#160 Ms. Bertani is a member of the United States Patent Bar, and her practice also includes both patent litigation and prosecution.
It is a well known fact that federal funding recipients have been notoriously non-compliant with Bayh-Dole Act disclosure requirements, and federal agencies have been lax in enforcing those requirements.#160 But, the Federal Circuit’s recent Campbell Plastics opinion should serve as a serious wake-up call for federal fund recipients that do not believe in the prospect of losing – completely – title to valuable patent rights.#160 Universities, small businesses and other entitles receiving federal funding to conduct research, which results in patentable inventions, could very well forfeit valuable patent rights in those inventions if they fail to comply strictly with Bayh-Dole Act disclosure requirements.#160 The Federal Circuit’s Campbell Plastics case makes clear that noncompliance could result in patent rights being stripped away under these circumstances, even if reporting noncompliance did not harm the funding agency.#160
Campbell Plastics Engineering & Mfg., Inc. v. Brownlee (Nov. 10, 2004) 389 F.3d 1243. Congress enacted the Bayh-Dole Act approximately 25 years ago to encourage United States innovation by giving inventors an incentive to create valuable technology using federal funding. (35 U.S.C. �߬� 200-212.)#160 Under Bayh-Dole, persons or entities receiving federal funding are allowed to apply for patents rights to corresponding inventions, so long as those persons or entities comply with specific disclosure requirements spelled out in the Act at 35 U.S.C. 202 and corresponding Federal Acquisition Regulations (“FARs”).#160 Pursuant to the Bayh-Dole Act, each government contract entered into under the Act must contain provisions that require the contractor to disclose each discovered invention to the federal agency providing funding within a reasonable time after the invention is discovered, and – importantly – the federal government may receive title to any such invention not disclosed within a reasonable time.#160 The Act not only provides nonprofit organizations and small businesses the right to elect title to an invention created with federal funding, but also gives the government the right to a royalty-free license to the invention when the contractor elects to retain title.
FAR 52.227-11 derives from the Bayh-Dole Act statutory scheme and provides, inter alia, the detailed timeline for invention disclosures, and the format in which those disclosures are to be made to funding agencies.#160 For instance, FAR 52.227-11(c) requires disclosure of each subject invention within two months after the invention is disclosed to the contractor’s patent personnel, and that each disclosure be made via detailed written reports.#160 FAR 52.227-11(d)(1) expressly states that upon government request, a contractor will convey patent title to the federal government when that contractor fails to disclose the subject invention within the timeframe and format requirements specified in FAR 52.227-11(c).
Campbell Plastics profiled what has become a prototypical federal funds recipient that carelessly disregarded its Bayh-Dole reporting requirements – but this time lived to regret it.#160 In 1992, Campbell Plastics entered into a contract with the United States Army to develop certain components of an aircrews protective mask.#160 The government contract incorporated the FAR 52.227-11 reporting requirements.#160 Between 1992 and 1997 Campbell Plastics submitted to the Army a series of piecemeal disclosures, which neither substantively nor procedurally complied with the Bayh-Dole/FAR reporting requirements.#160 The reports were not submitted in the proper format, and did not disclose the very invention, developed with federal funds, to which Campbell Plastics ultimately obtained patent title.#160 Rather, the Army became aware of the invention only after the Patent and Trademark Office forwarded the patent application to the Army for a statutory security determination.#160 The patent application issued on April 20, 1999, expressly reserving for the Army a royalty-free license, and a week later Campbell Plastics notified the Army in writing of the issued patent.#160
The Army demanded title to the invention for Campbell Plastics’ failure to comply with its Bayh-Dole reporting requirements, and the Federal Circuit affirmed an administrative decision awarding the Army title.#160 The Federal Circuit likened its analysis to a breach of contact claim, and found that the plain meaning of the
FARs was clear, unambiguous, and breached by Campbell Plastics’ noncompliance.#160 The Court also found that the plain-meaning interpretation of the contract was buttressed by policy considerations behind the Bayh-Dole Act.#160 According to the Court:
[W]hile Congress clearly intended to promote the commercialization and public availability of inventions made in the United States by United States industry and labor, and to encourage maximum participation of small business firms in federally supported research and development efforts, it also provided the government with certain aforementioned rights to the inventions and sought to ensure the safeguard of those rights by requiring government contractors to disclose subject inventions.
Sound policy is promoted by the rule of strict compliance with the method of disclosure demanded by the contract.
The Court concluded that Campbell Plastics’ piecemeal disclosures did not adequately disclose the subject invention under the parties’ contract, which entitled the Army to invoke forfeiture proceedings and obtain title to the patent.#160 Importantly, the Court also found that the Army was not required to show harm from Campbell Plastics’ reporting noncompliance in order to obtain patent title.#160 According to the Court, FAR 52/227-11(d) vests discretion in the government in determining whether to invoke forfeiture when an invention has not been correctly disclosed to it, and harm is not a requirement for the government to obtain title under these circumstances.
This case is important because it signals a new – stricter – approach to enforcing Bayh-Dole Act disclosure requirements, and conceivably all other requirements set forth in government contracts.#160 Apparently gone are the days of careless disregard for compliance with these requirements.#160 The Federal Circuit’s tone in Campbell Plastics is sharp and succinct – its rulings clear and to the point – comply or lose your patent rights.#160 Thus, a word to the wise – take your Bayh-Dole Act reporting requirements (and all funding contract provisions) seriously and comply in a timely manner – otherwise risk irrevocably losing title to corresponding patents.