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Proposed March-in Guidance Signals Funding Agencies to Actively Evaluate Government Rights Under the Bayh-dole Act

The Bayh-Dole Act (“Bayh-Dole”) governs the rights to inventions made with federal assistance. It offers ownership rights to federal award recipients (“Contractors”) that “conceive or first actually reduce to practice” inventions utilising federal funding (“Subject Inventions”), but Bayh-Dole also comes with certain obligations that carry forward to licensees of government-funded technology. Bayh-Dole also provides rights to the U.S. government. Among these rights are two distinct but often conflated rights: the march-in and the request of title. Historically, the U.S. government has rarely exercised those rights. Indeed, in the nearly 45 years since the enactment of Bayh-Dole in 1980, no federal agency has exercised march-in rights (and the government has routinely declined to use march-in authority on request), and agencies have requested title only a handful of times.

On 8 December 2023, the Department of Commerce and the National Institute of Standards and Technology (NIST) published a Federal Register Notice titled “Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights” (“Draft Framework”) detailing a new paradigm for the assessment of march-in rights. The Draft Framework reflects the current executive administration’s effort to more aggressively monitor compliance by Contractors and encourage the exercise of government rights under Bayh-Dole.

March-In Threat Level Increases

March-In Threat Level Increases The “March-in right” refers to a federal funding agency’s right to require a Contractor, an assignee, or an exclusive licensee of a Subject Invention to grant a license to “a responsible applicant” (or applicants), or to grant a license itself, if certain conditions are met.1

The Draft Framework requests public comments on a proposed framework for the exercise of march-in. In view of President Biden’s Executive Order of 28 July 2023 (“Executive Order 14014”), which invoked changes to utilisation reporting, the Draft Framework strongly signals that federal agencies will be more proactive in searching for effective opportunities to exercise march-in rights. Per the Executive Order and recently promulgated regulations by NIST, as of 1 October 2023, all agencies are required to collect annual utilisation reports for Subject Inventions, and NIST “strongly encourages” agencies not currently participating in iEdison to do the same. NIST has also provided standard utilisation questions, and answers to these utilisation questions will provide agencies with information to help assess whether exercising march-in is warranted and can be done effectively, according to the Draft Framework.

Executive Order 14014 places a clear emphasis on Bayh-Dole’s domestic manufacturing requirement for exclusive licensees of Subject Inventions. This domestic manufacturing requirement is a statutory requirement and a major component of the Draft Framework. NIST’s standard utilisation questions will help agencies assess whether this domestic manufacturing requirement is being met. In this light, it would not be surprising if the first product subject to march-in rights is a product that lacks compliance with Bayh-Dole’s domestic manufacturing requirement.

Product Pricing in the Spotlight

In addition to the domestic manufacturing requirement, much attention has been directed at the Draft Framework’s inclusion of the “reasonableness of price” of a product as a consideration for march-in. However, agencies were not previously precluded from reviewing product price as a consideration for march-in.2