By Stephen B. Barone, Ph.D.
The Biden-Harris Administration announced on April 11, 2022, $1.5 billion in funding to build and improve the infrastructure of the U.S. national laboratories. [1] This activity, along with other policy initiatives, has been promoted as a means of supporting US competitiveness through federally funded research targeting key industries, including green energy, next-generation semiconductor chips, and quantum computing. While the economic and societal impact of these programs is far-reaching, agency-level policy changes over the last year may impact the ability of government laboratories and universities to manage and commercialize Intellectual Property (“IP”) arising from such federally funded research.
In June 2021, the Department of Energy (“DOE”) enacted the Determination of Exceptional Circumstances (“DEC”), increasing DOE oversight of IP developed under its contracts. The DEC extends the domestic industry requirement to all types of licenses (i.e., both nonexclusive and exclusive licenses) “unless the Contractor can show to the satisfaction of DOE that it is not commercially feasible.” [2] In addition, the DEC includes a new change of ownership provision that provides: “Should the Contractor or other such entity receiving rights in the invention(s): (1) undergo a change in ownership amounting to a controlling interest, or (2) sell, assign, or otherwise transfer title or exclusive rights in the invention(s), then the assignment, license, or other transfer of rights in the subject invention(s) is/are suspended until approved in writing by DOE.”
Since enactment of the June 2021 DEC, there has been skepticism from both outside and within the U.S. government. Joseph Allen, a former Professional Staff Member on the U.S. Senate Judiciary Committee to former Senator Birch Bayh, sent a letter to the DOE stating that the requirement to seek approval for any transfer of ownership made with agency funding had “no statutory basis” and “was counterproductive to its goal”. [3] Allen goes on to add that the “exceptional circumstances” of the DEC are “not a loophole for undermining that goal,” the goal being “uniform patent policies across all agencies,” but rather the overall problem is “complex and multi-dimensional,” as it is difficult to find “domestic firm(s) with the capability to competitively produce a product.” Ending the letter, Allen claims the new requirements of the DEC add “additional burden(s) on academic institutions to find a domestic manufacturer,” and are only “likely to increase… government micro-management—the very thing Bayh-Dole was enacted to prevent”. [4] Technology transfer professionals have also expressed concern around the new DEC requirements, including Stephen Susalka, CEO of AUTM, who believes the requirements may “impede startup companies working to develop cutting-edge technologies for which there is no domestic manufacturing capacity”. [5]
The U.S. Government Accountability Office (“GAO”) recently released an article discussing the feasibility and potential impact of extending the DEC to reach other federal agencies beyond the DOE. [6] The GAO’s rationale for this investigation, in part, arises from their examination of a case study of vanadium redox flow battery technology developed at the Pacific Northwest National Laboratory and subsequently sublicensed and commercialized in China in apparent violation of Section 6 of the Bayh-Dole Act. In part motivated by this case study, the GAO’s investigation concludes that the “DOE’s competitiveness provision extends the U.S. manufacturing requirement to cover non-exclusive licenses as well as the use and sale of subject inventions outside the United States,” but does not “preempt DOE’s ability to grant U.S. manufacturing waivers to companies who can demonstrate feasibility concerns, or for other reasons.” While this response appears out of step with the sustained skepticism of the DEC, it is not clear if other government agencies are sympathetic to the policy justification provided by the GAO.
One year out from enactment of the DEC, its practical impact on technology transfer, university/government lab start-up activity, and domestic industry remains uncertain. Only time will tell if this policy initiative is scaled back subject to the outspoken skepticism or if it will be extended to other governmental agencies, thus having an even broader impact.
[1] “Fact Sheet: Biden-Harris Administration Makes Historic Investment in America's National Labs, Announces Net-Zero Game Changers Initiative.” The White House, The United States Government, 18 Nov. 2022, https://www.whitehouse.gov/briefing-room/statements-releases/2022/11/04/fact-sheet-biden-harris-administration-makes-historic-investment-in-americas-national-labs-announces-net-zero-game-changers-initiative/
[2] “Department Of Energy Determination Of Exceptional Circumstances Under The Bayh-Dole Act To Further Promote Domestic Manufacture Of Doe Science And Energy Technologies,” Appendix 1 Science And Energy Determination Of Exceptional Circumstances, Department of Energy, https://www.energy.gov/sites/default/files/2021-11/APPENDIX%201%20SCIENCE%20AND%20ENERGY%20DETERMINATION%20OF%20EXCEPTIONAL%20CIRCUMSTANCES.pdf
[3] Allen, Joseph. “Doe's Misuse of Bayh-Dole's 'Exceptional Circumstances' Provision: How Uniform Patent Policies Slip Away.” IPWatchdog.com | Patents & Intellectual Property Law, 26 May 2022, https://ipwatchdog.com/2022/05/26/misuse-bayh-doles-exceptional-circumstances-provision-uniform-patent-policies-slip-away/id=149275/
[4] “Bayh-Dole Act.” Office of Research & Innovation, Drexel University, https://drexel.edu/research/innovation/technology-commercialization/bayh-dole-act/#:~:text=The%20Bayh%2DDole%20Act%2C%20formerly,research%20programs%20within%20their%20organizations
[5] Peterson, Andrea. “Doe Imposes Strict Domestic Manufacturing Requirements on R&D Funding Recipients.” American Institute of Physics, American Institute of Physics, 14 Oct. 2021, https://www.aip.org/fyi/2021/doe-imposes-strict-domestic-manufacturing-requirements-rd-funding-recipients
[6] Blevins, Emily G., and Marcy E. Gallo. “U.S. Technology Made in China: The Role of Federal Technology Licensing Policies.” Congressional Research Service, 20 Sept. 2022, https://crsreports.congress.gov/product/pdf/IN/IN12019
