35 U.S.C. § 202 — Disposition of rights

Page 89 TITLE 35—PATENTS § 202 Statutory Notes and Related Subsidiaries EFFECTIVE DATE Section effective July 1, 1981, but implementing regu- lations authorized to be issued earlier, see section 8(f) of Pub. L. 96–517, set out as an Effective Date of 1980 Amendment note under section 41 of this title. § 202. Disposition of rights (a) Each nonprofit organization or small busi- ness firm may, within a reasonable time after disclosure as required by paragraph (c)(1) of this section, elect to retain title to any subject in- vention: Provided, however, That a funding agreement may provide otherwise (i) when the contractor is not located in the United States or does not have a place of business located in the United States or is subject to the control of a foreign government, (ii) in exceptional cir- cumstances when it is determined by the agency that restriction or elimination of the right to retain title to any subject invention will better promote the policy and objectives of this chap- ter (iii) when it is determined by a Government authority which is authorized by statute or Ex- ecutive order to conduct foreign intelligence or counter-intelligence activities that the restric- tion or elimination of the right to retain title to any subject invention is necessary to protect the security of such activities or, (iv) when the funding agreement includes the operation of a Government-owned, contractor-operated facility of the Department of Energy primarily dedi- cated to that Department’s naval nuclear pro- pulsion or weapons related programs and all funding agreement limitations under this sub- paragraph on the contractor’s right to elect title to a subject invention are limited to inven- tions occurring under the above two programs of the Department of Energy. The rights of the nonprofit organization or small business firm shall be subject to the provisions of paragraph (c) of this section and the other provisions of this chapter. (b)(1) The rights of the Government under sub- section (a) shall not be exercised by a Federal agency unless it first determines that at least one of the conditions identified in clauses (i) through (iv) of subsection (a) exists. Except in the case of subsection (a)(iii), the agency shall file with the Secretary of Commerce, within thirty days after the award of the applicable funding agreement, a copy of such determina- tion. In the case of a determination under sub- section (a)(ii), the statement shall include an analysis justifying the determination. In the case of determinations applicable to funding agreements with small business firms, copies shall also be sent to the Chief Counsel for Advo- cacy of the Small Business Administration. If the Secretary of Commerce believes that any in- dividual determination or pattern of determina- tions is contrary to the policies and objectives of this chapter or otherwise not in conformance with this chapter, the Secretary shall so advise the head of the agency concerned and the Ad- ministrator of the Office of Federal Procure- ment Policy, and recommend corrective actions. (2) Whenever the Administrator of the Office of Federal Procurement Policy has determined that one or more Federal agencies are utilizing the authority of clause (i) or (ii) of subsection (a) of this section in a manner that is contrary to the policies and objectives of this chapter, the Administrator is authorized to issue regula- tions describing classes of situations in which agencies may not exercise the authorities of those clauses. (3) If the contractor believes that a determina- tion is contrary to the policies and objectives of this chapter or constitutes an abuse of discre- tion by the agency, the determination shall be subject to section 203(b). (c) Each funding agreement with a small busi- ness firm or nonprofit organization shall con- tain appropriate provisions to effectuate the fol- lowing: (1) That the contractor disclose each subject invention to the Federal agency within a rea- sonable time after it becomes known to con- tractor personnel responsible for the adminis- tration of patent matters, and that the Fed- eral Government may receive title to any sub- ject invention not disclosed to it within such time. (2) That the contractor make a written elec- tion within two years after disclosure to the Federal agency (or such additional time as may be approved by the Federal agency) whether the contractor will retain title to a subject invention: Provided, That in any case where the 1-year period referred to in section 102(b) would end before the end of that 2-year period, the period for election may be short- ened by the Federal agency to a date that is not more than sixty days before the end of that 1-year period: And provided further, That the Federal Government may receive title to any subject invention in which the contractor does not elect to retain rights or fails to elect rights within such times. (3) That a contractor electing rights in a subject invention agrees to file a patent appli- cation prior to the expiration of the 1-year pe- riod referred to in section 102(b), and shall thereafter file corresponding patent applica- tions in other countries in which it wishes to retain title within reasonable times, and that the Federal Government may receive title to any subject inventions in the United States or other countries in which the contractor has not filed patent applications on the subject in- vention within such times. (4) With respect to any invention in which the contractor elects rights, the Federal agen- cy shall have a nonexclusive, nontransferrable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States any subject invention throughout the world: Provided, That the fund- ing agreement may provide for such additional rights, including the right to assign or have assigned foreign patent rights in the subject invention, as are determined by the agency as necessary for meeting the obligations of the United States under any treaty, international agreement, arrangement of cooperation, memorandum of understanding, or similar ar- rangement, including military agreement re- lating to weapons development and produc- tion. (5) The right of the Federal agency to re- quire periodic reporting on the utilization or Page 90 TITLE 35—PATENTS § 202 efforts at obtaining utilization that are being made by the contractor or his licensees or as- signees: Provided, That any such information as well as any information on utilization or ef- forts at obtaining utilization obtained as part of a proceeding under section 203 of this chap- ter shall be treated by the Federal agency as commercial and financial information ob- tained from a person and privileged and con- fidential and not subject to disclosure under section 552 of title 5. (6) An obligation on the part of the con- tractor, in the event a United States patent application is filed by or on its behalf or by any assignee of the contractor, to include within the specification of such application and any patent issuing thereon, a statement specifying that the invention was made with Government support and that the Government has certain rights in the invention. (7) In the case of a nonprofit organization, (A) a prohibition upon the assignment of rights to a subject invention in the United States without the approval of the Federal agency, except where such assignment is made to an organization which has as one of its pri- mary functions the management of inventions (provided that such assignee shall be subject to the same provisions as the contractor); (B) a requirement that the contractor share royal- ties with the inventor; (C) except with respect to a funding agreement for the operation of a Government-owned-contractor-operated facil- ity, a requirement that the balance of any roy- alties or income earned by the contractor with respect to subject inventions, after payment of expenses (including payments to inventors) in- cidental to the administration of subject in- ventions, be utilized for the support of sci- entific research or education; (D) a require- ment that, except where it is determined to be infeasible following a reasonable inquiry, a preference in the licensing of subject inven- tions shall be given to small business firms; and (E) with respect to a funding agreement for the operation of a Government-owned-con- tractor-operated facility, requirements (i) that after payment of patenting costs, licensing costs, payments to inventors, and other ex- penses incidental to the administration of sub- ject inventions, 100 percent of the balance of any royalties or income earned and retained by the contractor during any fiscal year up to an amount equal to 5 percent of the annual budget of the facility, shall be used by the contractor for scientific research, develop- ment, and education consistent with the re- search and development mission and objec- tives of the facility, including activities that increase the licensing potential of other inven- tions of the facility; provided that if said bal- ance exceeds 5 percent of the annual budget of the facility, that 15 percent of such excess shall be paid to the Treasury of the United States and the remaining 85 percent shall be used for the same purposes described above in this clause; and (ii) that, to the extent it pro- vides the most effective technology transfer, the licensing of subject inventions shall be ad- ministered by contractor employees on loca- tion at the facility. (8) The requirements of sections 203 and 204 of this chapter. (d) If a contractor does not elect to retain title to a subject invention in cases subject to this section, the Federal agency may consider and after consultation with the contractor grant re- quests for retention of rights by the inventor subject to the provisions of this Act and regula- tions promulgated hereunder. (e) In any case when a Federal employee is a coinventor of any invention made with a non- profit organization, a small business firm, or a non-Federal inventor, the Federal agency em- ploying such coinventor may, for the purpose of consolidating rights in the invention and if it finds that it would expedite the development of the invention— (1) license or assign whatever rights it may acquire in the subject invention to the non- profit organization, small business firm, or non-Federal inventor in accordance with the provisions of this chapter; or (2) acquire any rights in the subject inven- tion from the nonprofit organization, small business firm, or non-Federal inventor, but only to the extent the party from whom the rights are acquired voluntarily enters into the transaction and no other transaction under this chapter is conditioned on such acquisi- tion. (f)(1) No funding agreement with a small busi- ness firm or nonprofit organization shall con- tain a provision allowing a Federal agency to re- quire the licensing to third parties of inventions owned by the contractor that are not subject in- ventions unless such provision has been ap- proved by the head of the agency and a written justification has been signed by the head of the agency. Any such provision shall clearly state whether the licensing may be required in con- nection with the practice of a subject invention, a specifically identified work object, or both. The head of the agency may not delegate the au- thority to approve provisions or sign justifica- tions required by this paragraph. (2) A Federal agency shall not require the li- censing of third parties under any such provi- sion unless the head of the agency determines that the use of the invention by others is nec- essary for the practice of a subject invention or for the use of a work object of the funding agree- ment and that such action is necessary to achieve the practical application of the subject invention or work object. Any such determina- tion shall be on the record after an opportunity for an agency hearing. Any action commenced for judicial review of such determination shall be brought within sixty days after notification of such determination. (Added Pub. L. 96–517, § 6(a), Dec. 12, 1980, 94 Stat. 3020; amended Pub. L. 98–620, title V, § 501(3)–(8), Nov. 8, 1984, 98 Stat. 3364–3366; Pub. L. 102–204, § 10, Dec. 10, 1991, 105 Stat. 1641; Pub. L. 106–113, div. B, § 1000(a)(9) [title IV, § 4732(a)(12)], Nov. 29, 1999, 113 Stat. 1536, 1501A–583; Pub. L. 106–404, § 6(1), Nov. 1, 2000, 114 Stat. 1745; Pub. L. 107–273, div. C, title III, § 13206(a)(13), Nov. 2, 2002, 116 Stat. 1905; Pub. L. 111–8, div. G, title I, § 1301(h), Mar. 11, 2009, 123 Stat. 829; Pub. L. 112–29, §§ 3(g)(7), 13(a), 20(i)(2), Sept. 16, 2011, 125 Stat. 288, 327, 334.) Page 91 TITLE 35—PATENTS § 202 Editorial Notes REFERENCES IN TEXT This Act, referred to in subsec. (d), probably means Pub. L. 96–517, Dec. 12, 1980, 94 Stat. 3015, which enacted sections 200 to 211 and 301 to 307 of this title, amended sections 41, 42, and 154 of this title, section 1113 of Title 15, Commerce and Trade, sections 101 and 117 of Title 17, Copyrights, and sections 2186 and 5908 and former section 2457 of Title 42, The Public Health and Welfare, and enacted provisions set out as notes under sections 13 and 41 of this title. For complete classification of this Act to the Code, see Tables. AMENDMENTS 2011—Subsec. (b)(3). Pub. L. 112–29, § 20(i)(2)(A), sub- stituted ‘‘section 203(b)’’ for ‘‘the section 203(b)’’. Subsec. (c)(2). Pub. L. 112–29, § 3(g)(7)(A), substituted ‘‘the 1-year period referred to in section 102(b) would end before the end of that 2-year period’’ for ‘‘publica- tion, on sale, or public use, has initiated the one year statutory period in which valid patent protection can still be obtained in the United States’’ and ‘‘before the end of that 1-year’’ for ‘‘prior to the end of the statu- tory’’. Subsec. (c)(3). Pub. L. 112–29, § 3(g)(7)(B), substituted ‘‘the expiration of the 1-year period referred to in sec- tion 102(b)’’ for ‘‘any statutory bar date that may occur under this title due to publication, on sale, or public use’’. Subsec. (c)(7)(D). Pub. L. 112–29, § 20(i)(2)(B), sub- stituted ‘‘except where it is determined to be infeasible following a reasonable inquiry, a preference in the li- censing of subject inventions shall be given to small business firms; and’’ for ‘‘except where it proves infea- sible after a reasonable inquiry, in the licensing of sub- ject inventions shall be given to small business firms; and’’. Subsec. (c)(7)(E)(i). Pub. L. 112–29, § 13(a), substituted ‘‘15 percent’’ for ‘‘75 percent’’, ‘‘85 percent’’ for ‘‘25 per- cent’’, and ‘‘described above in this clause;’’ for ‘‘as de- scribed above in this clause (D);’’. 2009—Subsec. (b)(3), (4). Pub. L. 111–8 redesignated par. (4) as (3) and struck out former par. (3) which read as follows: ‘‘At least once every 5 years, the Comp- troller General shall transmit a report to the Commit- tees on the Judiciary of the Senate and House of Rep- resentatives on the manner in which this chapter is being implemented by the agencies and on such other aspects of Government patent policies and practices with respect to federally funded inventions as the Comptroller General believes appropriate.’’ 2002—Subsec. (b)(4). Pub. L. 107–273, § 13206(a)(13)(A), substituted ‘‘section 203(b)’’ for ‘‘last paragraph of sec- tion 203(2)’’. Subsec. (c)(4). Pub. L. 107–273, § 13206(a)(13)(B)(i), sub- stituted ‘‘additional rights,’’ for ‘‘additional rights;’’. Subsec. (c)(5). Pub. L. 107–273, § 13206(a)(13)(B)(ii), struck out ‘‘of the United States Code’’ after ‘‘section 552 of title 5’’. 2000—Subsec. (e). Pub. L. 106–404 amended subsec. (e) generally. Prior to amendment, subsec. (e) read as fol- lows: ‘‘In any case when a Federal employee is a co- inventor of any invention made under a funding agree- ment with a nonprofit organization or small business firm, the Federal agency employing such coinventor is authorized to transfer or assign whatever rights it may acquire in the subject invention from its employee to the contractor subject to the conditions set forth in this chapter.’’ 1999—Subsec. (a). Pub. L. 106–113, in first sentence, substituted ‘‘(iv)’’ for ‘‘iv)’’ and struck out a second pe- riod at end. 1991—Subsec. (b)(3). Pub. L. 102–204 substituted ‘‘every 5 years’’ for ‘‘each year’’. 1984—Subsec. (a). Pub. L. 98–620, § 501(3), substituted ‘‘when the contractor is not located in the United States or does not have a place of business located in the United States or is subject to the control of a for- eign government’’ for ‘‘when the funding agreement is for the operation of a Government-owned research or production facility’’, struck out ‘‘or’’ before ‘‘(ii)’’, which was executed by striking out ‘‘or’’ before ‘‘(iii)’’ as the probable intent of Congress, and added cl. (iv). Subsec. (b)(1). Pub. L. 98–620, § 501(4), gave to the De- partment of Commerce oversight of agency use of the exceptions to small business or nonprofit organization invention ownership. Subsec. (b)(2). Pub. L. 98–620, § 501(4), substituted pro- visions authorizing the Administrator of the Office of Federal Procurement Policy to issue regulations de- scribing situations in which agencies may not exercise the authorities of clauses (i) or (ii) of subsec. (a), when- ever the Administrator has determined that one or more agencies are utilizing such authority in violation of this chapter for provisions which gave to the Comp- troller General oversight of agency actions under this chapter. Subsec. (b)(4). Pub. L. 98–620, § 501(4A), added par. (4). Subsec. (c)(1). Pub. L. 98–620, § 501(5), substituted pro- visions requiring disclosure of each invention within a reasonable time after it becomes known to contractor personnel responsible for the administration of patent matters for provision requiring disclosure of each in- vention within a reasonable time after it is made. Subsec. (c)(2). Pub. L. 98–620, § 501(5), substituted pro- visions requiring the contractor to make a written election within two years after disclosure to the Fed- eral agency (or such additional time as may be ap- proved by the Federal agency) whether the contractor will retain title to a subject invention for provision re- quiring election to retain title within a reasonable time after disclosure, and inserted provision author- izing the Federal agency to shorten the period for elec- tion under certain circumstances. Subsec. (c)(3). Pub. L. 98–620, § 501(5), substituted pro- visions requiring a contractor electing rights in a sub- ject invention to file a patent application prior to any statutory bar date that may occur under this title due to publication, on sale, or public use, and thereafter to file corresponding patent applications in other coun- tries in which it wishes to retain title within reason- able times for provisions requiring the contractor to file patent applications within a reasonable time. Subsec. (c)(4). Pub. L. 98–620, § 501(5), substituted pro- vision that the funding agreement may provide for such additional rights, including the right to assign or have assigned foreign patent rights in the subject invention, as are determined by the agency as necessary for meet- ing the obligations of the United States under any trea- ty, international agreement, arrangement of coopera- tion, memorandum of understanding, or similar ar- rangement, including any military agreement relating to weapons development and production for provision that the agency could, if provided in the funding agree- ment, have additional rights to sublicense any foreign government or international organization pursuant to any existing or future treaty or agreement. Subsec. (c)(5). Pub. L. 98–620, § 501(6), substituted ‘‘as well as any information on utilization or efforts at ob- taining utilization obtained as part of a proceeding under section 203 of this chapter shall be treated’’ for ‘‘may be treated’’. Subsec. (c)(7)(A). Pub. L. 98–620, § 501(7), struck out provision which made an exception for organizations which were not themselves engaged in or did not hold a substantial interest in other organizations engaged in the manufacture or sales of products or the use of proc- esses that might utilize the invention or be in competi- tion with embodiments of the invention. Subsec. (c)(7)(B). Pub. L. 98–620, § 501(8), redesignated cl. (C) as (B). Former cl. (B), relating to a prohibition against the granting of exclusive licenses under United States Patents or Patent Applications in a subject in- vention by the contractor to persons other than small business firms for periods in excess of certain specified periods and relating to commercial sales, was struck out. Subsec. (c)(7)(C). Pub. L. 98–620, § 501(8), added cl. (C). Former cl. (C) redesignated (B). Page 92 TITLE 35—PATENTS § 203 1 See References in Text note below. Subsec. (c)(7)(D). Pub. L. 98–620, § 501(8), added cl. (D). Former cl. (D) redesignated (E). Subsec. (c)(7)(E). Pub. L. 98–620, § 501(8), redesignated former cl. (D) as (E) and inserted provisions placing a limit on the amount of royalties that the contract op- erators of Government-owned laboratories are entitled to retain after paying patent administrative expenses and a share of the royalties to inventors, requiring pay- ment of amounts in excess of such limits to the United States Treasury, and requiring that, to the extent it provides the most effective technology transfer, the li- censing of subject inventions shall be administered by contractor employees on location at the facility. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2011 AMENDMENT Amendment by section 3(g)(7) of Pub. L. 112–29 effec- tive upon the expiration of the 18-month period begin- ning on Sept. 16, 2011, and applicable to certain applica- tions for patent and any patents issuing thereon, see section 3(n) of Pub. L. 112–29, set out as an Effective Date of 2011 Amendment; Savings Provisions note under section 100 of this title. Pub. L. 112–29, § 13(b), Sept. 16, 2011, 125 Stat. 327, pro- vided that: ‘‘The amendments made by this section [amending this section] shall take effect on the date of the enactment of this Act [Sept. 16, 2011] and shall apply to any patent issued before, on, or after that date.’’ Amendment by section 20(i)(2) of Pub. L. 112–29 effec- tive upon the expiration of the 1-year period beginning on Sept. 16, 2011, and applicable to proceedings com- menced on or after that effective date, see section 20(l) of Pub. L. 112–29, set out as a note under section 2 of this title. EFFECTIVE DATE OF 1999 AMENDMENT Amendment by Pub. L. 106–113 effective 4 months after Nov. 29, 1999, see section 1000(a)(9) [title IV, § 4731] of Pub. L. 106–113, set out as a note under section 1 of this title. EFFECTIVE DATE Section effective July 1, 1981, but implementing regu- lations authorized to be issued earlier, see section 8(f) of Pub. L. 96–517, set out as an Effective Date of 1980 Amendment note under section 41 of this title. § 203. March-in rights (a) With respect to any subject invention in which a small business firm or nonprofit organi- zation has acquired title under this chapter, the Federal agency under whose funding agreement the subject invention was made shall have the right, in accordance with such procedures as are provided in regulations promulgated hereunder to require the contractor, an assignee or exclu- sive licensee of a subject invention to grant a nonexclusive, partially exclusive, or exclusive license in any field of use to a responsible appli- cant or applicants, upon terms that are reason- able under the circumstances, and if the con- tractor, assignee, or exclusive licensee refuses such request, to grant such a license itself, if the Federal agency determines that such— (1) action is necessary because the con- tractor or assignee has not taken, or is not ex- pected to take within a reasonable time, effec- tive steps to achieve practical application of the subject invention in such field of use; (2) action is necessary to alleviate health or safety needs which are not reasonably satis- fied by the contractor, assignee, or their li- censees; (3) action is necessary to meet requirements for public use specified by Federal regulations and such requirements are not reasonably sat- isfied by the contractor, assignee, or licensees; or (4) action is necessary because the agree- ment required by section 204 has not been ob- tained or waived or because a licensee of the exclusive right to use or sell any subject in- vention in the United States is in breach of its agreement obtained pursuant to section 204. (b) A determination pursuant to this section or section 202(b)(4) 1 shall not be subject to chap- ter 71 of title 41. An administrative appeals pro- cedure shall be established by regulations pro- mulgated in accordance with section 206. Addi- tionally, any contractor, inventor, assignee, or exclusive licensee adversely affected by a deter- mination under this section may, at any time within sixty days after the determination is issued, file a petition in the United States Court of Federal Claims, which shall have jurisdiction to determine the appeal on the record and to af- firm, reverse, remand or modify, as appropriate, the determination of the Federal agency. In cases described in paragraphs (1) and (3) of sub- section (a), the agency’s determination shall be held in abeyance pending the exhaustion of ap- peals or petitions filed under the preceding sen- tence. (Added Pub. L. 96–517, § 6(a), Dec. 12, 1980, 94 Stat. 3022; amended Pub. L. 98–620, title V, § 501(9), Nov. 8, 1984, 98 Stat. 3367; Pub. L. 102–572, title IX, § 902(b)(1), Oct. 29, 1992, 106 Stat. 4516; Pub. L. 107–273, div. C, title III, § 13206(a)(14), Nov. 2, 2002, 116 Stat. 1905; Pub. L. 111–350, § 5(i)(2), Jan. 4, 2011, 124 Stat. 3850.) Editorial Notes REFERENCES IN TEXT Section 202(b)(4), referred to in subsec. (b), was redes- ignated section 202(b)(3) of this title by Pub. L. 111–8, div. G, title I, § 1301(h), Mar. 11, 2009, 123 Stat. 829. AMENDMENTS 2011—Subsec. (b). Pub. L. 111–350 substituted ‘‘chapter 71 of title 41’’ for ‘‘the Contract Disputes Act (41 U.S.C. § 601 et seq.)’’. 2002—Pub. L. 107–273 redesignated par. (1) as subsec. (a) and former subpars. (a) to (d) as pars. (1) to (4), re- spectively, redesignated former par. (2) as subsec. (b), struck out quotation marks and comma before ‘‘as ap- propriate’’, and substituted ‘‘paragraphs (1) and (3) of subsection (a)’’ for ‘‘paragraphs (a) and (c)’’. 1992—Par. (2). Pub. L. 102–572 substituted ‘‘United States Court of Federal Claims’’ for ‘‘United States Claims Court’’. 1984—Pub. L. 98–620 designated existing provisions as par. (1) and added par. (2). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1992 AMENDMENT Amendment by Pub. L. 102–572 effective Oct. 29, 1992, see section 911 of Pub. L. 102–572, set out as a note under section 171 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE Section effective July 1, 1981, but implementing regu- lations authorized to be issued earlier, see section 8(f)