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By W. Samuel Niece
Thelen Reid Brown Raysman & Steiner LLP
Background
Before 1980, the U.S. government owned the rights to any invention created
with the aid of federal money, reflecting the prevailing belief that publicly
funded research belonged to the public.
Then, in 1980 Congress passed
and President Carter signed the Bayh-Dole University and Small Business Patent
Procedures Act (35 USC §§200-211), which
permits inventors to retain title to inventions funded under federal research
and development contracts if they grant the federal government a non-exclusive,
non-transferable, paid-up license to practice or have practiced such inventions
throughout the world.
While Bayh-Dole was limited
to inventions made under federal contracts with small businesses or non-profit
organizations (e.g., universities), President
Reagan in 1983 issued a Memorandum to the Heads of Executive Departments and
Agencies directing that “agency policy with respect to the disposition
of any invention made in the performance of a federally-funded research and
development contract, grant or cooperative agreement shall be the same or substantially
the same as applied to small business firms or nonprofit organizations under
Chapter 38 [now Chapter 18] of Title 35 of the United States Code.”
This policy was implemented
through the Federal Acquisition Regulation (FAR §27.302
(a)) to “promote the commercialization... of patentable results of federally
funded research by granting all contractors, regardless of size, the title
to patents made in whole or in part with Federal funds.”
But, 35 USC §202 (c) (1) requires that the contractor disclose each subject
invention to the contracting agency within “a reasonable time after it
becomes known to contractor personnel responsible for the administration of
patent matters” and provides that the government may receive title to
any subject invention not so disclosed. The implementing regulation (FAR §52.227-11
(c) (1)) establishes this reasonable time as two months.
The Defense Department FAR
Supplement (DFARS) provides an additional clause (DFARS §252.227-7039) for DOD research and development contracts. DFARS §252.227-7039
requires interim reports every 12 months and a final report within three months
after completion of the contract work “listing subject inventions during
that period and stating that all subject inventions have been disclosed or
that there are no such inventions.” DOD contracts typically specify that
these reports are to be made on DD Form 882 (available at www.dtic.mil/whs/directives/infomgt/forms/eforms/dd0882.pdf).
While the federal government “may” take title if an invention
is not properly disclosed, it seldom has done so – until now.
One Contractor’s Failure to Disclose
In 1992, the Army awarded Campbell
Plastics a contract to develop a gas mask to be worn by aircrews. The contract
incorporated FAR §52.227-11 and provided
that the interim and final reports required by the patent clause were to be
submitted on DD Form 882. Campbell submitted only one DD Form 882, in September
1994, in which it reported “NONE” in the “Subject Inventions” block.
During performance of the contract,
Campbell investigated using sonic welding in the fabrication of the gas masks.
Campbell reported its progress to Army
technical personnel. In June 1997, the Army published a report entitled “Design
of the XM45 Chemical-Biological Aircrew Protective Mask,” which included
references to sonic welding of the mask. The Army subsequently admitted that
this was a “completely enabling disclosure of the subject invention.”
In August 1997, Campbell contacted a patent attorney, who promptly filed a
patent application claiming a sonic welded gas mask and process which included
a disclaimer that the federal government had a paid-up license as provided
by the terms of the contract. On April 20, 1999, the application issued as
U.S. Patent No. 5,895,537. On April 28, 1999, Campbell wrote to the Army, notifying
it of the patent and stating that the federal government had a paid-up license
to practice the invention.
The Consequences of Non-Disclosure
In June 1999, the Army Administrative
Contracting Officer (ACO) notified Campbell that the Army was exercising
its rights to take title because Campbell had
failed to disclose the invention within two months of referral to contractor
personnel responsible for patent matters. In December 2000, the ACO issued
a “Final Decision” pursuant to the Contract Disputes Act of 1978
(41 USC §601 et seq.) concluding that Campbell had forfeited title to
the invention.
The ACO’s Final Decision triggered Campbell’s right to appeal
to the Armed Services Board of Contract Appeals (ASBCA) within 90 days or to
the U.S. Court of Federal Claims within 12 months. Campbell elected the ASBCA
and timely filed its appeal in March 2001. The ASBCA issued its decision on
March 18, 2003, denying Campbell’s appeal and affirming the ACO’s
Final Decision:
The Patent Rights clause required Campbell to disclose the invention within
two months of disclosing it to its own patent personnel. The contractually
prescribed means of doing this was by submission on a DD Form 882. The invention
was not disclosed in the contractually prescribed manner.
Appeal
of Campbell Plastics Engineering & Mfg., Inc., 03-1 BCA 32, 206
(ASBCA 2003, No. 53,319), 2003 WL 1518313.
The ASBCA found unpersuasive
Campbell’s arguments that the Army knew
all about the technology of the invention, instead pointing out that Campbell
had failed to identify the sonic welding technique as an invention until after
the patent had issued. The ASBCA gave Campbell the benefit of the doubt on
when the disclosure clock started to run, holding that the two-month disclosure
window opened when Campbell contacted a patent attorney. (Campbell was a very
small business; in a large business, the disclosure period could commence much
earlier, e.g. when an inventor submitted an invention disclosure statement
to an in-house intellectual property office.)
Untimely Motion for Reconsideration
Campbell Plastics received
the ASBCA’s March 18, 2003, decision on March
24, 2003. Under ASBCA Rule 29, Campbell Plastics had until April 23, 2003,
to move for reconsideration. Campbell Plastics’ motion for reconsideration
was submitted via Federal Express and received by the ASBCA on April 24, 2003 – one
day late. Accordingly, the ASBCA dismissed the motion. Appeal of Campbell
Plastics Engineering & Mfg., Inc., 03-2 BCA 32,407 (ASBCA 2003, No. 53,319), 2003
WL 22386316.
ASBCA Decision Upheld
Campbell Plastics appealed the ASBCA decision to the U.S. Court of Appeals for the Federal Circuit. In its decision, the court reviewed the federal policy considerations behind the Bayh-Dole Act, from which FAR §52.227-11 arises. The court noted that Congress intended "to promote the commercialization and public availability of inventions... while providing the government with certain rights to the inventions" and safeguarding "those rights by requiring government contractors to disclose subject inventions." Campbell Plastics Engineering & Mfg., Inc. v. Les Brownlee, 389 F.3d 1243 (Fed. Cir. 2004). The court emphasized Campbell Plastics' contract, in which ¶1.53 incorporated the "Patent Rights-Retention by the Contractor" clause of FAR §52.227-11 and ¶H.11 required the contractor to submit all interim and final invention reports on a DD Form 882.
The court determined that the language of the contract and the incorporated FAR provisions were clear and unambiguous: "It affords the government the opportunity to take title to any invention by the contractor that is or may be patentable and was conceived or first actually reduced to practice in the performance of work under the contract if the contractor fails to disclose on a DD Form 882 the technical aspects of the invention, the inventor and the contract under which the invention was developed, within two months of disclosing the invention to contractor personnel responsible for patent matters." Although Campbell Plastics submitted progress reports and drawings throughout contract performance, it did not submit the single written DD Form 882 report as required under the contract. The piecemeal submissions did not satisfy the method of disclosure demanded by the contract. Accordingly, the court upheld the ASBCA decision, entitling the government to take title to the invention.
Lessons Learned
The ASBCA stopped short of
holding that a disclosure in any form other than DD Form 882 would be invalid: “Campbell did not provide the substance
of the required information during the time prescribed by the Patent Rights
clause.” But, ASBCA made clear that a complete and time disclosure was
crucial.
The Federal Circuit was prepared to go further, advocating strict compliance with the contractually prescribed method of disclosing inventions. This is necessary to avoid chaotic styles of disclosure, where "the government never would be sure of which piece of paper, or which oral statement, might be part of an overall invention disclosure." The court held that here, the prescribed and proper form of disclosure was the DD Form 882 and refused to find Campbell Plastics' piecemeal style of disclosure sufficient.
A contractor with an invention arising under a DOD research and development contract, grant or cooperative agreement should strictly comply with the method of disclosure required by the DOD contract, grant or cooperative agreement and, if no form of disclosure is required, the contractor would be prudent to use DD Form 882 to make its disclosure.
Thus, the critical requirements in FAR §52.227-11 (c) (1) are two-fold. First, the contractor must provide the “substance of the required information” in the proper form:
The disclosure to the agency shall be in the form of a written report and
shall identify the contract under which the invention was made and the inventor(s).
It shall be sufficiently complete in technical detail to convey a clear understanding
to the extent known at the time of the disclosure, of the nature, purpose,
operation, and the physical, chemical, biological or electrical characteristics
of the invention. The disclosure shall also identify any publication, on sale
or public use of the invention and whether a manuscript describing the invention
has been submitted for publication and, if so, whether it has been accepted
for publication at the time of disclosure. In addition, after disclosure to
the agency, the contractor will promptly notify the agency of the acceptance
of any manuscript describing the invention for publication or of any on sale
or public use planned by the Contractor.
The second critical requirement
is that the contractor must make the disclosure “during
the time prescribed by the Patent Rights clause”:
To the Federal agency within 2 months after the inventor discloses it in writing
to Contractor personnel responsible for patent matters.
A contractor with an invention arising under a DOD research and development contract, grant or cooperative agreement should strictly comply with the method of disclosure required by the DOD contract, grant or cooperative agreement, and if no form of disclosure is specified, the contractor would be prudent to use DD Form 882 to make its disclosure.
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For more information about the issues covered in this report, please contact W. Samuel Niece in our Silicon Valley office at 408-282-1842 or at wsniece@thelen.com or contact your Thelen attorney. For more information about Thelen's Construction and Government Contracts Department, click here.
©2005 Thelen Reid Brown Raysman & Steiner LLP
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