INTERPLAY Patent-Related Issues in the Government Contracts Universe Lawrence M. Prosen & Gunjan Talati Presented to: 2017 Kilpatrick Townsend
Roadmap Introductions Government Contracting Basics Bayh-Dole Act Patent Related FAR Clauses Patent Infringement 2
POLLING QUESTION NO. 1 How many of your companies participate in government contracts at the federal level? This can include contracts, grants and cooperative agreements? 1. YES 2. NO 3. DO NOT KNOW 3
POLLING QUESTION NO. 2 Are you familiar with the Federal Acquisition Regulations (FAR)? 1. YES 2. NO 3. DO NOT KNOW 4
POLLING QUESTION NO. 3 If you have a subject invention created or first reduced to practice on a government contract should you: 1. Do nothing (you don t want the Government to get any piece of the action after all do you?) 2. Turn over everything to the Government (isn t that what someone told you everything belongs to the Government on a government contract?) 3. Disclose the invention and take necessary steps to protect the subject invention (is this even possible?) 5
What Does The Government Buy? 6
Government Contracts Basics Contracts Based on Regulations Force & Effect of Law = Christian Doctrine Federal Acquisition Regulation Agency supplements DFARS 7
So Simple.NOT Source: Intellectual Property: Navigating Through Commercial Waters: Issues and Solutions When Negotiating Intellectual Property With Commercial Companies (Version 1.1). Office of the Under Secretary of Defense for Acquisition, Technology & Logistics Oct. 15, 2001. 8
Patents & Government Contracts Historically Government used to take title to virtually all inventions that would arise during performance of contracts Congress recognized the chilling impact this had on companies willing to be government contractors and innovation In 1980 (back when Congress still passed legislation), Congress passed.. 9
Bayh-Dole Act Bayh-Dole allows universities, non-profit organizations, and small businesses to own, patent, and produce inventions developed using federal funding. (35 U.S.C. 202) A 1983 Presidential Memorandum & Executive Order expanded Bayh-Dole to apply to large businesses This has since been promulgated in the FAR Subpart 27.3 (48 CFR) 10
Bayh-Dole Act Bayh-Dole and subsequent Presidential positions form the foundation of the FAR s patent policies Department of Energy & NASA have different considerations because statute requires them to take title Applies to FUNDING AGREEMENTS Contracts Grants Cooperative Agreements 11
The FAR & Patent Applicability FAR Subparts 27.2 (Patents & Copyrights) & 27.3 (Patent Rights Under Government Contracts) Implementing Clauses in FAR Subpart 52: FAR 52.227-1 Authorization & Consent FAR 52.227-2 Notice & Assistance re Patent & Copyright Infringement FAR 52.227-3 Patent Indemnity FAR 52.227-4 Patent Indemnity Construction Contracts FAR 52.227-5 Waiver of Indemnity FAR 52.227-6 Royalty Information FAR 52.227-7 Patents Notice of Government Licensee FAR 52.227-8 Reserved FAR 52.227-9 Refund of Royalties FAR 52.227-10 Filing of Patent Applications Classified Subject Matter FAR 52.227-11 Patent Rights Ownership by the Contractor FAR 52.227-12 Reserved FAR 52.227-13 Patent Rights Ownership by the Government 12
The FAR & Patents DFARS DoD FAR Supplement DOE FAR Supplement & NASA FAR Supplement Number of different requirements from FAR clauses 13
You Have the Right (and Obligation) to. Determine Disclose Elect 14
What s Covered? Subject Invention Any invention of the contractor Conceived OR First actually reduced to practice during or in The performance of work under a Government contract Definition of invention: Any invention or discovery that is or may be patentable or otherwise protectable under title 35 of the U.S. Code, or any variety of plant that is or may be protectable.... Definition is disjunctive - uses OR 15
Door #1 or Door #2? FAR 52.227-11, Patent Rights Ownership by the Contractor FAR 52.227-13, Patent Rights Ownership by the Government 16
FAR 52.227-11: Ownership by Contractor Contractor may retain ownership of invention throughout the world if requirements of this clause are followed. Even if contractor forfeits IP ownership rights, they retain royalty-free license in each invention as long as they disclose the invention within required time limits. 17
FAR 52.227-11: Ownership by Contractor What Do Contractors Have to do to Retain Title? Disclose in writing within 2 months to Contracting Officer after the inventor discloses it to personnel responsible for patent matters Identify inventors Identify contract Sufficiently complete in technical detail Identify publication, sale, or public use of invention Elect whether to retain ownership within 2 years of notifying agency of invention That time can be shortened in certain circumstances File for provisional or non-provisional patent within 1 year after election Ask for extensions of time BEFORE the applicable period runs! 18
FAR 52.227-11: Ownership by Contractor What Does the Government Get? Proper disclosure and election? Government gets a nonexclusive, nontransferable, irrevocable, paid-up license to practice, or have practiced for or on its behalf, the subject invention throughout the world No proper disclosure or election? Title/Ownership! But only if the agency requests title within 60 days of learning the Contractor s failure to disclose or elect within required timeframes March-in Rights Can require licensing Ability to restrict contractor and assignees from granting others exclusive rights to project unless manufactured substantially in the United States 19
FAR 52.227-11: Ownership by Contractor Subcontracting Considerations: Subcontracts are a mix of state contracting law and federal common law Flow down required clauses including FAR 52.227-11 Primes are still responsible to the Government for delivering even if they haven t flowed down clauses Government can work directly with subcontractors on their IP 20
FAR 52.227-13: Ownership by Government FAR 52.227-13 requires contractors to assign title to the Government of each invention created using government funds Used instead of FAR 52.227-11 if : The contractor does not have a place of business in the US or is under the control of a foreign government There are exceptional circumstances and Government must determine that restriction of the contractor s ownership rights will better promote patent policy National security 21
FAR 52.227-13: Ownership by Government What do Contractors Get? A revocable, nonexclusive, paid-up license License extends to domestic subsidiaries and affiliates Right to apply for a patent in foreign countries where Government elects not to apply for a patent Can ask for greater rights But granting (or denying) such a request is left to the Agency 22
Protections Contractors Receive on Government Contracts What happens if you re a contractor working on a government contract and you get sued for patent infringement? 28 U.S.C. 1498(a) & FAR 52.227-1, Authorization & Consent 23
FAR 52.227-1: Authorization & Consent Exclusive remedy for patent infringement in performance of a government contract is monetary damages against the Government. No direct cause of action allowed against a contractor if infringement is done with consent of government. Government assumes liability for all infringement which occurs under protected circumstances. Indemnification may be necessary under FAR 52.227-3. 24
52.227-3: Patent Indemnity Contractor must indemnify government for any liability for patent infringement arising out of manufacture or delivery of supplies, performance of services, or construction of real property under the contract, except in specific circumstances: Government fails to inform contractor of suit as soon as practicable or contractor is not given opportunity to participate in defense; or Infringement results from compliance with specific, written instruction from Contracting Officer; or Infringement results from addition to or change in supplies furnished or construction work performed, if such change is made after delivery or performance; or Infringement suit is unreasonably settled without consent of contractor 25
QUESTIONS? Larry Prosen, Partner Washington, DC 202.481.9940 lprosen@kilpatricktownsend.com Gunjan Talati, Partner Washington, DC 202.481.9941 gtalati@kilpatricktownsend.com 26