PATENT OWNERSHIP AND FEDERAL RESEARCH AND DEVELOPMENT (R&D): A DISCUSSION ON THE BAYH-DOLE ACT AND THE STEVENSON-WYDLER ACT

CRS Report for Congress
Patent Ownership and Federal Research and
Development (R&D): A Discussion on the Bayh-
Dole Act and the Stevenson-Wydler Act
Updated December 11, 2000
Wendy H. Schacht
Specialist in Science and Technology
Resources, Science, and Industry Division

Congressional Research Service The Library of Congress

Patent Ownership and Federal Research and Development
(R&D): A Discussion on the Bayh-Dole Act and the
Stevenson-Wydler Act
Summary
Two major laws govern the dispensation of patents associated with federal
research and development (R&D) activities. Both P.L. 96-418, the Stevenson-Wydler
Technology Innovation Act, as amended, and P.L. 96-517, Amendments to the Patent
and Trademark Act (commonly referred to as “Bayh-Dole” after its two main
sponsors, former Senators Birch Bayh and Robert Dole), are the foundation for
efforts to utilize patent ownership to encourage the commercialization of technologies
and techniques that have their roots in the federal R&D enterprise. The Stevenson-
Wydler Act contains provisions concerning assignment of title to inventions arising
from collaborative work between federal laboratories and outside cooperating parties
where no direct federal funding is involved. Bayh-Dole primarily addresses the
distribution of patents resulting from federally-funded research and development
performed by outside organizations, and prescribes the licensing of government-
owned patents. While the result of different legislative histories and concerns, these
laws were enacted to encourage the use of technologies funded by and/or developed
by the government in pursuit of federal mission requirements.
Congressional interest in patent ownership as an incentive to private sector
development and utilization of federally-funded R&D has been part of a legislative
agenda designed to encourage increased innovation-related activities in the business
community and to remove barriers to technological advancement, thereby permitting
market forces to operate. Patents offer an economic incentive for companies to
pursue the activities necessary to move the results of research from the laboratory to
the marketplace in the form of new products, processes, or services. Ownership of
title to inventions is a way to encourage the additional, and often substantial,
investments in both money and time necessary to generate new and improved
technologies and techniques. In an academic setting, the possession of title is
expected to provide motivation for the university to license the technology to industry
for further refinement in expectation of royalty payments.
This CRS report looks at both the Stevenson-Wydler Act and the Bayh-Dole Act
and attempts to identify the differences and similarities inherent in the provisions of
each law. The information is intended to provide a better understanding of the
framework within which decisions are made concerning patent ownership and
licensing given the context of on-going congressional interest in this arena. The
report will be updated as warranted by congressional activity.

Contents
Introduction ................................................... 1
Patents: In Brief.................................................2
The Bayh-Dole Act..............................................3
Rationale .................................................. 3
Title to Inventions Made With Federal Funding.....................5
Licensing of Government-Owned Inventions.......................6
Stevenson-Wydler Technology Innovation Act.........................6
Background ................................................ 6
Cooperative Research and Development Agreements.................7
Government Employee Inventions...............................9
Additional Considerations........................................10

Patent Ownership and Federal Research and
Development (R&D): A Discussion on the Bayh-
Dole Act and the Stevenson-Wydler Act
Introduction
Two major laws govern the dispensation of patents associated with federal
research and development (R&D) activities. Both P.L. 96-418, the Stevenson-Wydler
Technology Innovation Act, as amended, and P.L. 96-517, Amendments to the Patent
and Trademark Act (commonly referred to as “Bayh-Dole” after its two main
sponsors, former Senators Birch Bayh and Robert Dole), are the foundation for
efforts to utilize patent ownership to facilitate cooperative R&D, technology transfer,
and the commercialization of technology supported by the federal government. While
the result of different legislative histories and concerns, these laws were enacted to
encourage the use of technologies funded by and/or developed by the federal
government in pursuit of the departments’ and agencies’ mission requirements.
However, they address intellectual property issues that arise from different R&D
relationships. Stevenson-Wydler legislates the granting of title to inventions made
through cooperative efforts between the government and outside partners when there
is no direct federal funding to the collaborating institution. The provisions of Bayh-
Dole pertain to patents resulting from R&D paid for by the government but performed
elsewhere.
Congressional interest in patent ownership as an incentive to private sector
development and utilization of federally-funded R&D was evident in a series of
legislative debates in the mid to late 1970s. This was soon followed by expanded
congressional attention to additional means of fostering technological advancement
and commercialization in industry. During the 1980s (and continuing to this day),
various initiatives resulted in laws designed to encourage increased innovation-related
activities in the business community and to remove barriers to technology
development, thereby permitting market forces to operate. Patents offer an economic
incentive for companies to pursue the activities necessary to move the results of
research from the laboratory to the marketplace in the form of new products,
processes, or services. Ownership of title to inventions is a way to encourage the
additional, and often substantial, investments in both money and time necessary to
generate new and improved technologies and techniques. In an academic setting, the
possession of title is expected to provide motivation for the university to license the
technology to industry for further refinement in expectation of royalty payments.
This paper looks at both the Stevenson-Wydler Act and the Bayh-Dole Act and
attempts to identify the differences and similarities inherent in the provisions of each
law. The information is intended to provide a better understanding of the framework
within which decisions are made concerning patent ownership and licensing given the

context of on-going congressional interest in this arena. It should be noted that while
the original Stevenson-Wydler Act was passed prior to the Bayh-Dole Act, the
amendments to P.L. 96-480 that are relevant to the current discussion were enacted
after Bayh-Dole took effect. Since several of the amended provisions of Stevenson-
Wydler are based upon components of Bayh-Dole, the Bayh-Dole Act will be
addressed first in this report.
Patents: In Brief
Interest in the value of intellectual property has grown as technology becomes
increasingly important to the United States. It is now widely accepted that
technological progress accounts for up to one-half of the nation’s economic growth.¹
Patents protect the inventor’s investments in generating the knowledge that is the
basis for innovation. As written in the Constitution, patents are intended to promote
“science and the useful arts” and serve as an incentive to the commercialization of
new ideas. As R&D has become more expensive, ownership of title to inventions has
been used by the federal government as a means to foster increased interest in private
sector support for such efforts.
The patent system was created by Article I, Section 8, Clause 8 of the U.S.
Constitution to encourage new discoveries and their reduction to practice, commonly
known as innovation. The grant of a patent provides the inventor with a means to
capture returns to his invention through exclusive rights on its practice for 20 years
from date of filing. This is intended to encourage those investments necessary to
further develop an idea and generate a marketable technology. At the same time, the
process of obtaining a patent places the concept on which it is based in the public
domain. In return for a monopoly right to specific applications of the knowledge
generated, the inventor must publish the ideas covered in the patent. As a disclosure
system, the patent can, and often does, stimulate other firms or individuals to invent
“around” existing patents to provide for parallel technical developments or meet²
similar and expanded demands in the marketplace.
The utility of patents to companies varies among industrial sectors. An
assessment of the aircraft and semiconductor industries found that patents were not
the most successful mechanism for capturing the benefits of investments. Instead,
lead time and the strength of the learning curve were determined to be more

¹Tassey, Gregory. The Economics of R&D Policy (Connecticut: Quorum Books, 1997), 54.
See also: Edwin Mansfield, Intellectual Property Rights, Technological Change, and
Economic Growth, in Intellectual Property Rights and Capital Formation in the Next
Decade, eds. Charls E. Walker and Mark A. Bloomfield (New York: University Press of
American, 1988), 5.
²For more information see: Congressional Research Service, Patents and Innovation: Issues
in Patent Reform, by Wendy H. Schacht, CRS Report 97-599, updated 24 August 1999, and
Congressional Research Service, R&D Partnerships and Intellectual Property: Implications
for U.S. Policy, by Wendy H. Schacht, CRS Report 98-862, 21 October 1998.

important.³ In contrast, patents are perceived as critical in the drug and chemical
industries. That may reflect the nature of R&D performed in those sectors, where the
resulting patents are more detailed in their claims and therefore easier to defend.⁴ The
degree to which industry perceives patents as effective is “. . . positively correlated
with the increase in duplication costs and time associated with patents.”⁵ In certain
industries, patents significantly raise the costs incurred by nonpatent holders wishing
to use the idea or invent around the patent — an estimated 40% in the pharmaceutical
sector, 30% for major new chemical products, and 25% for typical chemical goods
— and are thus viewed as important. However, in other industries, patents have
much smaller impact on the costs associated with imitation (e.g. in the 7%-15% range
for electronics), and are considered less successful in protecting resource⁶
investments.
Despite questions as to their efficacy, firms continue to patent their inventions.
The number of domestic patents granted to U.S. inventors is growing.⁷ This activity
appears to be the result of additional perceived benefits including royalty payments,
delays to imitators, and the ability to use patents as bargaining tools to meet
alternative priorities of the firm.⁸ The low expiration rate of high technology patents
relative to patents on less sophisticated technologies may indicate the value that
companies assign to such protection, even in industries where the life cycle of
inventions is short.⁹
The Bayh-Dole Act
Rationale
P.L. 96-517, the Bayh-Dole Act evolved out of congressional interest in
developing a uniform federal patent policy to encourage the commercialization of

³Levin, Richard C. and Alvin K Klevorick, Richard R. Nelson, and Sidney G. Winter.
Appropriating the Returns for Industrial Research and Development, Brookings Papers on
Economic Activity, 1987, printed in The Economics of Technical Change, ed. Edwin
Mansfield and Elizabeth Mansfield. (Vermont, Edward Elgar Publishing Co., 1993), 253.
⁴Ibid., 255 and 257. See also: Mansfield, Edwin. Intellectual Property Rights, Technological
Change, and Economic Growth, in eds. Charles Walker and Mark A. Bloomfield, Intellectual
Property Rights and Capital Formation in the Next Decade, (New York, University Press
of America, 1988), 12 and 13.
⁵Appropriating the Returns for Industrial Research and Development, 269.
⁶Mansfield, Edwin, Mark Schwartz, and Samuel Wagner. Imitation Costs and Patents: An
Empirical Study, The Economic Journal, December 1981, in The Economics of Technical
Change, 270.
⁷National Science Foundation, Science and Engineering Indicators 1998, February 1998, A-

373.

⁸Intellectual Property Rights, Technological Change, and Economic Growth, 14.
⁹Quigg, Donald J. Safeguarding Intellectual Property — Stimulus to Economic Expansion,
in Intellectual Property Rights and Capital Formation in the Next Decade, 40.

technology resulting from government funding of research and development. While
there was on-going and long-term debate over what government patent policy should
entail, there was general agreement that the policy adopted should promote the¹⁰
utilization of inventions. The intent of the legislation, as articulated in the House
Judiciary Committee report to accompany the relevant bill, was to replace
. . . the existing melange of 26 different agency policies on vesting of patent rights
in government funded research . . . [with] a single, uniform national policy
designed to cut down on bureaucracy and encourage private industry to utilize
government funded inventions through the commitment of the risk capital
necessary to develop such inventions to the point of commercial application.¹¹
At the time the legislation was under consideration only 5% of federally-owned
patents were being used. This was one consequence of the practice by many agencies
of taking title to all inventions made with federal funding while only permitting the
nonexclusive licensing of contractor inventions.¹² Without title to inventions, or at
least exclusive licenses, companies are less likely to engage in and fund the additional
R&D necessary to bring an idea to the marketplace. Bayh-Dole, by providing
universities, nonprofit institutions, and small businesses with ownership of patents
arising from federally-funded R&D, offers an incentive for cooperative work and
commercial application. Royalties derived from intellectual property rights provides
the academic community an alternative way to support further research and the
business sector a means to obtain a return on their financial contribution to the
endeavor.
In enacting P.L. 96-517, the Congress accepted the proposition that vesting title
in a contractor will encourage commercialization and that this should be used to foster
innovation in specific segments of the economy. As stated in the law:
It is the policy and objective of the Congress to use the patent system to promote
the utilization of inventions arising from federally-supported research and
development; . . . to promote collaboration between commercial concerns and
nonprofit organizations, including universities; . . . to promote the
commercialization and public availability of inventions made in the United States
by United States industry and labor; [and] to ensure 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 of¹³
inventions. . . .
The anticipated payback to the country through increased revenues from taxes on
profits, new jobs created, improved productivity, and economic growth were seen as

¹⁰House Committee on Science and Technology, Government Patent Policy, 95^th Cong., 2^nd
sess., May 1978, H.Prt. 4.
¹¹House Committee on the Judiciary, Report to Accompany H.R. 6933, 96^th Cong. 2^nd sess.,

1980, H.Rept. 96-1307, Part 1, 3.

¹²Government Patent Policy, 5.
¹³35 U.S.C. §200

a balance for the initial cost of the technology to the government or any potential
unfair advantage to any recipient.
To achieve such goals, the Bayh-Dole Act addresses two areas of intellectual
property as it pertains to the federal government: title to inventions made with federal
R&D funding and licensing of government-owned patents. The relevant provisions
are discussed below.
Title to Inventions Made With Federal Funding
Each nonprofit organization (including universities) or small business is
permitted to elect (within a reasonable time frame) to retain title to any “subject
invention” made as a result of R&D funded by the federal government; except under
“exceptional circumstances 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 chapter.”¹⁴ The owner of the intellectual property must
commit to commercialization of the patent within a predetermined time frame agreed
to by the supporting agency and the performing organization. As stated in the House
report to accompany the bill, “the legislation establishes a presumption [emphasis
added] that ownership of all patent rights in government funded research will vest in
any contractor who is a nonprofit research institution or a small business.”¹⁵
Certain rights are reserved for the government to protect the public interest. The
government retains “. . . a nonexclusive, nontransferable, irrevocable, paid-up license
to practice or have practiced for or on behalf of the United States any subject
invention throughout the world. . . .” The government also retains “march-in rights”
that enable the federal agency to require the contractor (whether he owns title or has
an exclusive license) to “. . . grant a nonexclusive, partially exclusive, or exclusive
license in any field of use to a responsible applicant or applicants. . .” with due
compensation, or to grant a license itself under certain circumstances. The special
situation necessary to trigger march-in rights involves a determination that the
contractor has not made efforts to commercialize within an agreed upon time frame
or that the “action is necessary to alleviate health or safety needs. . .” that are not
being met by the contractor (15 U.S.C. §203).
The government is authorized to withhold public disclosure of information for
a “reasonable time” until a patent application can be made. This supplements
additional law that prohibits the Patent and Trademark Office from releasing
information associated with a patent until it is issued. Licensing by a contractor
retaining title under this Act is restricted to companies that will manufacture
substantially within the United States. Initially, universities were limited in the time
they could grant large companies exclusive licenses for patents derived from
government-sponsored R&D (5 of the then 17 years of the patent). This restriction,
however, was voided by P.L. 98-620, the Trademark Clarification Act of 1984.
According to Senate report 98-662, extending the time frame for licensing to large

¹⁴Ibid.
¹⁵Report to Accompany H.R. 6933, 3.

firms “. . .is particularly important with technologies such as pharmaceuticals, where
long development times and major investments are usually required prior to
commercialization.”¹⁶
Under these provisions, several of the government-owned, contractor-operated
laboratories of the Department of Energy (DOE) receive title to inventions under
Bayh-Dole because they are operated by universities or nonprofit institutions. Those
contractor-operated laboratories run by large firms also receive patent rights from
DOE which has waived the agency’s intellectual property claims under authority of
the Atomic Energy Act of 1954 and through their management and operating
contracts. As discussed above, certain rights continue to be retained by the
government.
Licensing of Government-Owned Inventions
Bayh-Dole also addressed the licensing of inventions to which the government
retained title typically because of past agency practices or because of a public interest.
Title 35 U.S.C. §209 proscribes the licensing of this type of invention. The law
permits federal departments to offer nonexclusive, exclusive, or partially exclusive
licenses under certain conditions and with specific rights retained by the government.
These include the right to terminate the license if commercialization is not pursued
as provided in the business plan or if the government needs the license for public use.
The agencies are required to inform the public about the availability of a patent for
licensing. Originally, notices were to be published in the Federal Register for a period
of three months and if a company displayed intent to license, the laboratory was
mandated to place an additional notice and offer 60 days for objections. However,
P.L. 106-404, the Technology Transfer Commercialization Act, makes changes in
these practices to decrease the time delays associated with this procedure. In light of
the ability of the Internet to offer widespread notification and the necessity of time
constraints faced by industry in commercialization activities, public notice is now to
be provided 15 days prior to the grant of a license. In providing licenses, small
businesses are given preferences and licensees must agree that “. . .any products
embodying the invention or produced through the use of the invention will be
manufactured substantially in the United States.”
Stevenson-Wydler Technology Innovation Act
Background
P.L. 96-480, The Stevenson-Wydler Technology Innovation Act, as amended,
was enacted to encourage use of technologies developed in the federal laboratory
system. This is to be accomplished by technology transfer, the process by which
technology generated in one organization, in one area, or for one purpose is applied
in another organization, in another area, or for another purpose. In the defense and

¹⁶Senate Committee on the Judiciary, Report to Accompany S. 2171, 98^t^h Cong., 2^nd sess.,

1984, S.Rept. 98-662, 3.

space arenas it is often called “spin-off.” Technology transfer can have different
meanings in different situations. In some instances, it refers to the transfer of legal
rights, such as the assignment of patent title to a contractor or the licensing of a
government-owned patent to a private firm. In other cases, the transfer endeavor
involves the informal movement of information, knowledge, or skills through person-
to-person interaction. The crucial aspect in a successful transfer is the actual use of
the product or process through which the benefits from more efficient and effective¹⁷
provision of goods and services can be achieved.
In pursuit of mission requirements, federal departments and agencies spend
approximately $79 billion per year on research and development; almost a third of this
goes to support R&D performed in the government laboratory system. Such an effort
has resulted in new and improved technologies and manufacturing techniques that
may provide additional benefits beyond specific mission-related use. For example,
while the major portion of total federal R&D spending has been in the defense arena,
government-financed work has led or contributed to new commercial products and
processes including, but not limited to, antibiotics, plastics, jet aircraft, computers,
electronics, and genetically engineered drugs (e.g., insulin and human growth
hormone). Technology transfer is one way, proponents argue, that federally-funded
R&D can be further developed and applied by the private sector to meet other
national needs associated with economic growth. The increasing competitive
pressures on U.S. firms in the international marketplace, coupled with the
government’s requirements for goods and services, can make the collaboration
between federal laboratories and industry through technology transfer beneficial to
both sectors. Although opponents may argue that these activities detract from
budgeted research, the knowledge base created by agency-supported R&D may serve
as a foundation for additional commercially relevant efforts in companies while the
government research enterprise is advanced through interaction with innovative firms.
This transfer is facilitated by cooperative research and development agreements
(CRADAs), a particular legal instrument created by P.L 99-502, the Federal
Technology Transfer Act of 1986 (amending Stevenson-Wydler), and applicable to
government-owned, government-operated laboratories. The right to use CRADAs
was extended to government-owned, contractor-operated laboratories by an
additional amendment to Stevenson-Wydler contained in P.L. 101-189, the FY1990
Department of Defense Authorizations.
Cooperative Research and Development Agreements
A cooperative research and development agreement (CRADA) is a specific legal
document (not a procurement contract) that defines the collaborative venture. It is
intended to be developed at the laboratory level, with limited agency review. In
agencies that operate their own laboratories, the laboratory director is permitted to
make decisions to participate in CRADAs as a means of decentralizing and expediting
the technology transfer process. However, at agencies that use contractors to run

¹⁷For additional information see: Congressional Research Service, Technology Transfer: Use
of Federally Funded Research and Development, by Wendy H. Schacht, CRS Issue Brief

85031, updated regularly.

their laboratories, specifically the Department of Energy, the CRADA also has to be
approved by headquarters.
The work performed under a cooperative research and development agreement
must be consistent with the laboratory’s mission. In pursuing these joint efforts, the
laboratory may accept funds, personnel, services, and property from the collaborating
party and may provide personnel, services, and property to the participating
organization. The government can cover overhead costs incurred in support of the
CRADA, but is expressly prohibited from providing direct funding to the industrial
partner.
The legislation does not specify the dispensation of patents derived from the
collaborative work, allowing agencies to develop their own policies. Under a
CRADA, title to, or licenses for, inventions made by a laboratory employee may be
granted in advance to the participating company by the director of the laboratory (15
U.S.C. §3710a). In addition, the director may waive, in advance, any right of
ownership the government might have on inventions resulting from the joint effort
regardless of size of the collaborating company. At the least, the law permits the
collaborating party the “option to choose an exclusive license for a pre-negotiated
field of use for any such invention under the agreement.” The director also may
negotiate licensing agreements for related government-owned inventions previously
made at that laboratory to facilitate cooperative ventures.
In all cases, the government retains certain rights, including a “nonexclusive,
nontransferable, irrevocable, paid-up license to practice the invention or have the
invention practiced throughout the world by or on behalf of the Government for
research or other Government purposes.” Under “exceptional circumstances,” the
government may exercise its right to require a party, to which it assigned title or
granted exclusive license to an invention, to license the technology to another
organization if it is necessary to address health and safety needs not being addressed;
to meet requirements for public use specified by federal regulation not being met; or
if the cooperating party has not performed its obligations as specified in the
agreement. Information related to obtaining a patent is protected from disclosure for
a period of time (15 U.S.C. §3710a) .
Typical agency activities are summarized below. It should be noted that the
dispensation of title to inventions made under a CRADA involving a government-
owned, contractor-operated laboratory is influenced by provisions of the Bayh-Dole
Act that gives title to inventions made by those contractors that are universities or
nonprofits. In addition, under the Atomic Energy Act of 1954 (P.L. 83-703), the
Department of Energy has provided similar rights to all contractors as outlined in their
management and operations contracts. In general:
!If an invention is made solely by an employee of a government-owned,
government-operated laboratory the agency may keep title to the invention or
may provide title to the collaborating party.
!If an invention is made solely by an employee of a government-owned,
contractor-operated laboratory, the contractor may keep title to the invention
(either under the auspices of the Bayh-Dole Act if the contractor is a university

or a nonprofit institution or under the provisions of the management and
operations contract in which the Department of Energy agrees to relinquish
title) and license it to the collaborating party.
!If an invention is made jointly by an employee of a government-owned,
government-operated laboratory and a collaborating party, joint ownership of
patent title may occur or the government may relinquish its interest in the
patent.
!If an invention is made jointly by an employee of a government-owned,
contractor-operated laboratory and a cooperating institution, both
organizations may co-own the title.
!If an invention is made solely by a collaborating party, that party may keep title
to the invention, with certain rights reserved by the government.
Laboratory personnel and former employees are permitted to participate in
commercialization activities if these are consistent with the agencies’ regulations and
rules of conduct. Federal employees are subject to conflict of interest restraints. In
the case of government-owned, contractor-operated laboratories, P.L. 101-189
required that conflict of interest provisions regarding CRADAs be included in all
operating contracts. Preference in determining CRADAs is given to small businesses,
companies that will manufacture in the United States, or foreign firms from countries
that permit American companies to enter into similar arrangements. According to
Senate report 99-283 that accompanied the legislation, “the authorities conveyed by
[the section dealing with CRADAs] are permissive” to promote the widest use of this
arrangement.¹⁸
It should be noted here that CRADAs are only one form of cooperative activity,
but because they can be easily identified and quantified they tend to be the most
visible. Other mechanisms include personnel exchanges and visits; licensing of
patents; work for others; educational initiatives; information dissemination; the use
of special laboratory facilities and centers set up in particular technological areas;
cooperative assistance to state and local programs; and the spinoff of new firms.
Currently, federal laboratories legislatively are prohibited from competing with the
private sector and can only offer the use of expertise and equipment which is not
readily available elsewhere. Technology transfer and cooperative efforts are expressly
forbidden to interfere with the laboratories’ R&D mission-related activities.
Government Employee Inventions
Under Stevenson-Wydler, as amended, federal employees responsible for an
invention are to receive at least 15% of royalties generated by the licensing of that
government-owned patent (15 U.S.C. §3710c). The agencies may establish their own
royalty sharing programs within certain guidelines contained in the legislation. The
inventor may not receive more than $100,000 per year without the consent of the

¹⁸Senate Committee on Commerce, Science, and Transportation, Federal Technology
Transfer Act of 1986, Report to Accompany H.R. 3773, 99^th Cong. 2^nd sess., 1986, S.Rept.

99-283, 10.

President. If the federal agency has the right to an invention but chooses not to
patent, the inventor, either a current federal employee or a former one, may obtain
title to that invention subject to the reservation by the government of a non-exclusive,
non-transferable, irrevocable, paid up license to practice or have practiced the
invention on behalf of the government.
The Stevenson-Wydler Act also provides instructions on the distribution to
federal agencies of royalties derived from cooperative R&D agreements (15 U.S.C.
§ 3710c). If, after the 15% payment to the inventor, royalty income exceeds 5% of
the government-operated laboratory budget, the laboratory may retain 25% of the
excess, with the remainder paid to the U.S. Treasury. The funds retained by the
laboratory are to be used for expenses incurred in the administration and licensing of
inventions; to reward the scientific, engineering, and technical personnel of the
laboratory; to provide for personnel exchanges between laboratories; for education
and training consistent with the laboratories’ and agencies’ missions; or for additional
technology transfer activities. Royalties earned by government-owned, contractor-
operated laboratories under a CRADA may be used for payments to inventors, as well
as additional related education, training, R&D, and/or scientific exchanges.
Additional Considerations
The Bayh-Dole Act and the Stevenson-Wyder Act address the ownership of
inventions made under different circumstances but which have their roots in the
federal R&D enterprise. As discussed above, Bayh-Dole primarily addresses the
dispensation of patent title to inventions resulting from federally-funded research and
development and prescribes the licensing of government-owned patents. The
Stevenson-Wydler Act contains provisions concerning ownership of patents arising
from collaborative work between federal laboratories and outside cooperating parties
where no direct federal funding is involved. However different they may be on the
surface, both laws are intended to promote the commercialization of technology.
Congressional support for such efforts is founded on the idea that the process of
bringing new products, processes, and services to the marketplace can generate
economic growth in the form of new jobs, greater productivity, and improvements in
the health and welfare of the population. Profound changes in our society have been
brought about by advances in federally-funded R&D in the areas of medicine,
semiconductors, computers, and materials, just to name a few.
Over the years, the legislation has been amended to reflect problems and^t^h
opportunities in the implementation of these laws. During the 106 Congress, there
were efforts to make changes in the way government-owned patents are licensed.
P.L. 106-404, signed into law on November 1, 2000, shortens the time required by
the Bayh-Dole Act (15 U.S.C. §209) to publicize the availability of technologies for
licensing. This law also allows licenses for existing government-owned inventions to
be included in CRADAs under changes made to the Stevenson-Wydler Act.
The legislative initiatives taken by the Congress during the past 20 years reflect
the concern that companies that do not control the inventions arising from their
investments (in money or effort) tend to be less likely to engage in related R&D

necessary to bring an idea to the marketplace. Under the Bayh-Dole and Stevenson-
Wydler Acts, patent ownership may be provided in return for commercialization of
the results of research and development. The prospect of new products and processes
to improve our health, welfare, and standard of living has been viewed as promoting
the public interest. Proponents of this approach contend that these benefits are more
important than the initial cost of the technology to the government or any potential
unfair advantage one company may have over another in their dealings with the
federal departments and agencies.
However, as the environment within which R&D and innovation are performed
changes, the effects of Stevenson-Wydler and Bayh-Dole may be altered. New
challenges and opportunities in this area may be expected. Disputes have arisen over
competing claims to intellectual property developed under government-industry
ventures. Delays still exist in the negotiation of CRADAs due to disagreements over
the dispensation of intellectual property. Concerns have been expressed regarding the
right of drug companies to set prices on drugs that were developed in part with
federal funding or in collaboration with federal agencies. Problems have been
encountered in obtaining technologies for research use by federal laboratories because
of apprehensions over diminished effectiveness of intellectual property if new
applications are discovered. As these and other related issues continue to be explored,
the information contained in this paper is designed to provide background for any
additional congressional activity associated with the implementation of both the Bayh-
Dole Act and the Stevenson-Wydler Act.