- Disclose Your Inventions...Or Else
- December 13, 2004 | Author: David A. Wormser
- Law Firm: Pepper Hamilton LLP - Washington Office
Disclose your inventions in the manner your government contract requires, or risk losing them.
That is the message the U.S. Court of Appeals for the Federal Circuit clearly conveyed in a case of first impression, Campbell Plastics Engineering and Manufacturing, Inc. v. Brownlee, No. 03-1512 (slip op. November 10, 2004). The court, applying the Bayh-Dole Act of 1980, 35 U.S.C. §§200-211, 301-307, and the Federal Acquisition Regulation, affirmed an administrative contracting officer's demand on behalf of the Department of the Army for full title to a contractor's patent, because although the contractor had disclosed the invention to the Army through various other means, it had not disclosed it in the manner its contract required. While the result is not particularly surprising, it provides an important reminder that contractors can lose the protections of Bayh-Dole if they do not play by the rules.
The Bayh-Dole Act
Congress enacted the Bayh-Dole Act of 1980, among other things, to promote the commercialization and public availability of inventions made in the United States by U.S. industry and labor, while at the same time ensuring that the government obtains sufficient rights in federally supported inventions to meet the needs of the government and protect the public against nonuse or unreasonable use of inventions. 35 U.S.C. §200.
Under the Bayh-Dole regime, the private party (the "contractor") to a government contract, grant or other "funding agreement" may in most cases elect to retain title to the inventions the contractor conceives or reduces to practice in the course of performing the funding agreement (each, a "subject invention"). The contracting agency is required to include in the funding agreement provisions requiring the contractor to disclose subject inventions within a reasonable time and elect within two years of disclosure to take ownership of the invention.
If the contractor elects to take ownership, the government automatically receives a nonexclusive, non-transferable, irrevocable, paid-up license to practice or have practiced the subject invention for or on behalf of the United States anywhere in the world. The government also is granted so-called "march-in rights" under which it may recover all rights to the invention if the contractor fails to meet various requirements for filing patent applications and exploiting the invention.
The Act extends its benefits only to small businesses and not-for-profit entities. President Reagan, though, by executive order extended Bayh-Dole's effect to all government contracts without regard to the size or for-profit status of the contractor. Memorandum to the Heads of the Executive Departments and Agencies, Subject: Government Patent Policy, 1983 Pub. Papers 248.
Federal Acquisition Regulation
The FAR implements the Act in the government contract realm at Patents, Data, and Copyrights, provisions and clauses for FAR Part 27-§52.227. Section 52.227-11 requires that the contractor disclose to the contracting federal agency any subject invention developed under a government contract. Disclosure is to be made in a written report identifying the contract under which the invention was made and describing the invention in sufficient detail to convey a clear understanding of the nature of the invention. Subsection (d) permits the government to recover title to the invention if the contractor fails to make the required disclosure within two months of disclosing it in writing to the contractor personnel responsible for obtaining patent protection for the invention. The Defense Federal Acquisition Regulation Supplement (DFARS) 552.227-7039 requires contractors to disclose subject inventions in interim reports furnished every 12 months and in a final report submitted within three months following completion of the contract.
The Campbell Plastics Case
The Campbell Plastics case arose from a September 1992 cost-plus-fixed-fee contract between Campbell Plastics Engineering & Mfg., Inc. and the Army for the development of certain components of an aircrew protective mask. According to the court's opinion, the contract incorporated various FAR clauses, including those cited above. The contract, in a provision titled "Patent Rights Reports," required the contractor to submit "interim and final invention reports" on "DD Form 882, Report of Inventions and Subcontracts." Shortly after the parties signed the contract, an Army representative advised Campbell Plastics' president that the company was required to file a DD Form 882 at least once every 12 months.
Over the term of the contract, Campbell Plastics faxed letters, drawings, sketches and diagrams describing a "sonic welding" technique Campbell Plastics proposed to use in producing the protective mask. Over the same period, Campbell Plastics filed multiple DD Forms 882 stating that no invention had been developed under the contract.
In July 1997, the Army published a report describing research on protective masks and referencing sonic welded components.
In August 1997, Campbell Plastics contacted an attorney who drafted and in October 1997 filed a patent application for a "Sonic Welded Gas Mask and Process." The U.S. Patent Office made the application available to the Army for the limited purpose of determining whether national security considerations would justify keeping the invention secret. The Army reviewed the application in January 1998. The patent, which issued in April 1999, expressly reserved for the government "a paid-up license in this invention and the right in limited circumstances to require the patent owner to license others on reasonable terms as provided for by the terms of Contract No. DAAA15-92-C-0082 awarded by The Army." Campbell Plastics notified the Army in writing of the patent shortly after it issued.
The Army then claimed in a letter to Campbell Plastics that it jointly owned the subject invention with Campbell Plastics. When Campbell Plastics disputed the claim, the administrative contracting officer ruled that Campbell Plastics had forfeited the patent because it had not adhered to the disclosure requirements established by FAR Section 52.227-11. Campbell Plastics appealed the ACO's decision to the Armed Services Board of Contract Appeals, which ruled in the Army's favor.
In the Federal Circuit, Campbell Plastics argued that it had continually disclosed all of the features of the invention throughout the contractual period. Campbell also cited the government's own report describing the invention and the Army's secrecy review of the patent applications. Finally, Campbell Plastics argued that the law disfavors forfeitures.
The court rejected Campbell Plastics' arguments in favor of the clear requirements of the contract:
The language of the [contract] and the incorporated FARs is 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.
It ruled Campbell Plastics' piecemeal disclosures did not meet the requirements of the contract. The plain language of the Bayh-Dole Act trumps any common law aversion to forfeitures. Absent evidence that the Army had acted in bad faith or otherwise abused its discretion, the Army was within its rights to claim ownership of the resulting patent.
As the Campbell Plastics case shows, the Bayh-Dole Act and Federal Acquisition Regulation provide real incentives for government contractors not just to disclose their inventions to the contracting agency, but to do so in the manner and within the time periods specified by their contracts. It is not clear whether the Army would have claimed sole ownership of the patent but for other disputes between the parties. As the court's opinion notes, the parties had a disagreement over the Army's claim to joint ownership. The Army may well have seen Campbell Plastics' reporting lapses as providing the best opportunity for resolving the dispute in its favor. The fact remains that contractors who fail to comply with the letter of the reporting requirements do so at their peril.