Acquisition and Protection of Foreign Rights in Inventions; Licensing of Foreign Patents Acquired by the Government; Uniform Patent Policy for Rights in Inventions Made by Government Employees

SUMMARY: The interim final rule removes the regulation dealing with the

Government's foreign rights in inventions made by Government employees,

and expands the uniform patent policy for domestic rights in inventions

to include foreign rights in order to have a uniform patent policy for

all rights in inventions made by Government employees. The rule also

removes the regulation dealing with the licensing of foreign patents

acquired by the Government, which is inconsistent with 37 CFR Part 404

on the licensing of Government-owned inventions. This action is taken

in keeping with the goals of the National Performance Review and in

order to comply with recent Executive Orders that address regulatory

reforms.

The rule also revises the uniform patent policy to permit an agency

to impose certain conditions on the employee's title to the invention

where the agency decides not to file a patent application, some of

which are authorized by Sec. 15 of the Federal Technology Transfer Act

of 1986; to require agencies to provide the inventor, prior to appeal,

with a full explanation of the agency determination and a copy of 37

CFR Part 501 in all cases where the agency has determined that the

Government is entitled to title or a license in the invention in order

to reduce the number of appeals; and to require agencies to decide if

they should file any foreign patent applications within 8 months from

filing a patent application in the U.S. or to authorize agencies to use

an option to acquire foreign rights from the employee in order to avoid

the need to transfer back the foreign rights to the employee if the

agency does not file a foreign patent application within 8 months of

filing an unclassified patent application in the U.S.

DATES: This document is effective August 7, 1996.

Comments on the rule must be received on or before September 5,

1996.

The regulations will apply to any Rights Determination made after

August 7, 1996.

ADDRESSES: Comments on the rule may be mailed to Mr. John Raubitschek,

Patent Counsel, Office of the Chief Counsel for Technology, Room 4610,

Herbert C. Hoover Building, U.S. Department of Commerce, Washington, DC

20230.

FOR FURTHER INFORMATION CONTACT:

Mr. John Raubitschek at telephone: (202) 482-8010.

SUPPLEMENTARY INFORMATION: Under the authority of section 4, E.O.

10096, CFR, 1949-1953 Comp., p. 292, as amended by E.O. 10930, 3 CFR,

1959-1963 Comp., p. 456 and by E.O. 10695, 3 CFR, 1954-1958 Comp., p.

355; and the delegation by the Secretary of Commerce in DOO 10-17 and

DOO 10-18, the Under Secretary of Commerce for Technology is amending

37 CFR Part 501 to include the relevant portions of former 37 CFR Part

101 to reduce duplication and streamline the regulations.

On March 4, 1995, as part of the President's Regulatory Reform

Initiative, the President directed agencies to conduct a page-by-page

review of all regulations and eliminate or revise those that are

outdated or otherwise in need of reform.

Under the former rules, foreign rights in inventions made by

Government employees were covered by 37 CFR Part 101 while domestic

rights were covered by 37 CFR Part 501. After conducting a review of 37

CFR Parts 101 and 501, it was determined that some sections in Part 101

were no longer being followed by the agencies and others were

interpreted by agencies in an inconsistent manner. This review also

determined that Part 101 should be removed and Part 501 should be

amended to cover both foreign and domestic rights, so as to have a

uniform policy for the Government's domestic and foreign rights in

inventions made by Government employees. It is noted that E.O. 10096 is

not limited to domestic rights in invention made by Government

employees.

Accordingly, 37 CFR Part 101 is removed and reserved, and 37 CFR

Part 501 is amended as follows:

The title of Part 501 is changed to delete the reference to

``domestic'' rights so that this part will now cover both ``domestic''

and ``foreign'' rights.

The authority section is changed to make reference (1) to E.O.

10695, 3 CFR, 1954-1958 Comp., p. 355, which also amended E.O. 10096;

and (2) to the latest DOO 10-17 and 10-18, issued July 15, 1992, and

March 31, 1994, respectively.

Section 501.1 is changed to delete ``domestic'' so that this part

will now cover both ``domestic'' and ``foreign'' rights.

Section 501.3(a) is editorially amended by adding a comma (,) after

``Secretary.''

Section 501.3(b) retains the exclusion of the Department of Energy

although it follows the procedures in Part 501 because the exemption

for this agency is contained in E.O. 10096. Also, the Tennessee Valley

Authority and the Postal Service are excluded consistent with existing

practice.

Section 501.3(c) is changed to clearly indicate that the definition

of ``Government employee'' includes any special Government employee as

defined in 18 U.S.C. 202 or an individual working for a Federal agency

pursuant to the Intergovernmental Personnel Act (IPA), Pub. L. 91-648,

5 U.S.C. 1304 and 3371-3376. This section is also being changed to

provide a reference to the statute which defines the term ``part-time

employee.''

Section 501.3(d) is changed to further define the term ``art'' as a

``process'' which is the equivalent term used by the Patent and

Trademark Office (35 U.S.C. 100(b)).

New paragraph (e) is added to Sec. 501.3 to define the term

``made'' when used in relation to any invention as the conception or

first actual reduction to practice of such invention. See In re King, 3

USPQ2d (BNA) 1747 (Comm'r Pat. 1987).

Section 501.4 is changed to make reference to E.O. 10695, 3 CFR,

1954-1958 Comp., p. 355, which also amended E.O. 10096. This section is

also being editorially amended by deleting ``therein'' in the section

title; adding ``in and to the invention'' after ``rights;'' deleting

the words ``therein'' and ``herein;'' and adding ``Sec. '' before

``501.6.''

Section 501.6(a)(1) is changed to delete the reference to

``domestic'' rights so that this section will now cover both

``domestic'' and ``foreign'' rights.

Section 501.6(a)(1)(iii) is changed to delete the reference to 37

CFR Part 101 which is being removed.

Section 501.6(a)(2) is changed to delete ``domestic'' (twice) so

that this

[[Page 40998]]

section will now cover both ``domestic'' and ``foreign'' rights. Also,

the last five lines in the first sentence of this section is being

editorially amended by replacing ``purposes, such reservation, in terms

thereof, to appear'' with ``purposes. The terms of such reservation

will appear.''

Section 501.6(a)(3)(i) is changed to further define the term

``art'' as a ``process'' which is the equivalent term used by the

Patent and Trademark Office (35 U.S.C. 100(b)).

Section 501.6(a)(4)(i) is changed to delete ``domestic'' so that

this section will now cover both ``domestic'' and ``foreign'' rights.

Section 501.7(b) is revised to allow agencies to impose certain

conditions where the Government decides not to file a patent

application. Some of these conditions are contained in section 15 of

the Federal Technology Transfer Act (15 U.S.C. 3710(a)) which permits

an agency to condition the inventor's right to title on the timely

filing of a patent application in cases if it determines that the

Government has a need to practice the invention. Other conditions are

taken from the licensing regulation in 37 CFR Part 404.

Section 501.7(c) is revised to require the agency to provide to the

employee (inventor) a signed and dated statement of its determination

and reasons therefor, as well as a copy of 37 CFR 501 in all cases

where the agency has determined that the Government is entitled to

title or a license in the invention. It is expected that the revised

Sec. 501.7(c) will help reduce the number of appeals since an inventor

will now be provided with a full explanation for the initial

determination of the agency without having to file an appeal. Also, by

giving the inventor a copy of 37 CFR Part 501, it is ensured that the

inventor will become better aware of all his/her rights under 37 CFR

Part 501. It should be noted that some of the information previously

required by both Secs. 501.7(c) and 501.8(b) appears now only in

Sec. 501.8 (b)(2) and (b)(3) so that such information is needed only

when an appeal has been filed.

Section 501.8(a) is changed to clearly indicate that the Secretary

shall forward one copy of the appeal to the liaison officer of the

Government agency. This change will ensure conformance with Sec. 501.5.

Section 501.8(b) is changed to indicate that the agency liaison

officer will be the person in charge of furnishing the report to the

Secretary and the inventor.

Section 501.8(b)(1) is modified to delete the reference to

information which is no longer required by Sec. 501.7.

Section 501.8 (b)(2) and (b)(3) are added to include information

which was required by Secs. 501.(7) (c)(1) and (c)(2).

Section 501.8(b)(4) is former Sec. 501.8(b)(2) and changed to

indicate that a copy of the reply by the employee must be filed with

the agency liaison officer. This section is also being editorially

amended by deleting the words ``thereto'' and ``thereof'' and moving

the last sentence so that it is part of Sec. 501.8(b).

Section 501.9(a) is changed to require a ``prompt'' determination

by the agency about whether to seek patent protection in the United

States, which may include the filing of a provisional application. The

section would now explicitly allow any other agency or private law firm

authorized by the agency to seek patent protection on its behalf.

Section 501.9(b) is changed by replacing ``will'' with ``may'' to

remove the requirement that an agency determine whether patent

protection will be sought pending the Secretary's decision on the

dispute. The agency will now have the choice of seeking patent

protection pending the Secretary's decision on the dispute. This

section is also being editorially amended by dividing a long sentence

into two sentences.

Section 501.9(c) is editorially amended by adding a comma (,) after

``patent.''

New section 501.9(d) is added to give agencies 8 months from the

filing date of a patent application in the U.S. to decide if and where

they should file foreign patent applications. It is anticipated that

agencies will defer the selection of individual foreign countries by

filing an international application under the Patent Cooperation

Treaty. If an agency chooses not to file in any foreign country, then

the employee may request rights in that country subject to any of the

restrictions stated in Sec. 501.7(b) that may be imposed by the agency.

It should be noted that under this section, the rights would no longer

be retained by the inventor in any foreign country if the agency does

not cause a patent application to be filed in that country within

certain time periods previously set forth in 37 CFR 101.8. However,

Sec. 501.9(d) authorizes agencies to use an option to acquire foreign

rights from the employee similar to that in 37 CFR 101.8 except that

the time for exercising the option has been increased from 6 to 8

months from the filing of an unclassified application in the U.S.,

which is presently the practice in the Department of Army and National

Aeronautics and Space Administration. Use of such an option will avoid

the need to transfer back any foreign rights to the employee when the

agency chooses not to file a patent application in any foreign country

although such transfer is now authorized under section 6 of Pub. L.

104-113. If an agency determines that it wants to file a foreign patent

application after the 8-month option period has expired, it may do so

only after obtaining an assignment of the foreign rights from the

employee.

New section 501.11 is added to provide the address where any

submissions or inquiries should be sent.

Part 102 was established under the authority of Executive Order

9865 to provide for the administration of a uniform policy for the

licensing of foreign patents owned by the Government. In 1980 under

Pub. L. 96-517, all Government agencies were given authority to obtain

and license foreign and domestic patents. The procedures for granting a

license are contained in 37 CFR Part 404 and conflicts with Part 102 in

a number of respects. Since agencies no longer need the authority of

Executive Order 9865, it was determined to cancel Part 102.

Pursuant to Sec. 553(a)(2) of the Administrative Procedure Act (5

U.S.C. 553) (APA), the Under Secretary of Commerce for Technology finds

that the interim final rule involves a matter relating to agency

personnel since it concerns the foreign and domestic rights in

inventions made by Government employees; therefore, the rule is

exempted from the prior notice of proposed rulemaking and the delayed

effective date requirements. Furthermore, the rule provides a 30-day

comment period and any comments received will be considered prior to

finalization of the interim rule.

The rule has been determined to be not significant for purposes of

E.O. 12866.

The rule does not contain policies with Federalism implications

sufficient to warrant preparation of a Federalism assessment under E.O.

12612.

Because a notice of proposed rulemaking and an opportunity for

public comment are not required to be given for the interim final rule

by section 553 of the APA (5 U.S.C. 553) or by any other law, under

sections 3(a) of the Regulatory Flexibility Act (5 U.S.C. 603(a) and

604(a)), no initial or final Regulatory Flexibility Analysis has to be

or will be prepared.

The interim final rule does not involve a collection of information

under the Paperwork Reduction Act.

[[Page 40999]]

List of Subjects

37 CFR Part 101

Foreign rights in inventions, Inventions made by Government

employees.

37 CFR Part 102

Licensing of foreign patents acquired by the Government.

37 CFR Part 501

Uniform patent policy, Domestic rights in inventions, Inventions

made by Government employees, Foreign rights in inventions.

For the reasons set forth in the preamble and under authority of 5

U.S.C. 301, 37 CFR chapters I and V are amended as follows:

CHAPTER I--PATENT AND TRADEMARK OFFICE, DEPARTMENT OF COMMERCE

PART 101--[REMOVED AND RESERVED]

1. Part 101 is removed and reserved.

PART 102--[REMOVED AND RESERVED]

2. Part 102 is removed and reserved.

CHAPTER V--UNDER SECRETARY FOR TECHNOLOGY, DEPARTMENT OF COMMERCE

PART 501--UNIFORM PATENT POLICY FOR RIGHTS IN INVENTIONS MADE BY

GOVERNMENT EMPLOYEES

3. The authority citation for 37 CFR part 501 is revised to read as

follows:

Authority: Sec. 4, E.O. 10096, 3 CFR, 1949-1953 Comp., p. 292,

as amended by E.O. 10930, 3 CFR, 1959-1963 Comp., p. 456 and by E.O.

10695, 3 CFR, 1954-1958 Comp., p. 355; DOO 10-17, July 15, 1992, and

DOO 10-18, March 31, 1994.

4. The heading of part 501 is revised as set forth above.

5. Section 501.1 is revised to read as follows:

Sec. 501.1 Purpose.

The purpose of this part is to provide for the administration of a

uniform patent policy for the Government with respect to the rights in

inventions made by Government employees and to prescribe rules and

regulations for implementing and effectuating such policy.

6. Section 501.3 is revised to read as follows:

Sec. 501.3 Definitions.

(a) The term Secretary, as used in this part, means the Under

Secretary of Commerce for Technology.

(b) The term Government agency, as used in this part, means any

Executive department or independent establishment of the Executive

branch of the Government (including any independent regulatory

commission or board, any corporation wholly owned by the United States,

and the Smithsonian Institution), but does not include the Department

of Energy for inventions made under the provisions of 42 U.S.C. 2182,

the Tennessee Valley Authority, or the Postal Service.

(c) The term Government employee, as used in this part, means any

officer or employee, civilian or military, of any Government agency,

including any special Government employee as defined in 18 U.S.C. 202

or an individual working for a Federal agency pursuant to the

Intergovernmental Personnel Act (IPA), 5 U.S.C. 1304 and 3371-3376, or

a part-time consultant or part-time employee as defined in 29 U.S.C.

2101(a)(8) except as may otherwise be provided by agency regulation

approved by the Secretary.

(d) The term invention, as used in this part, means any art or

process, machine, manufacture, design, or composition of matter, or any

new and useful improvement thereof, or any variety of plant, which is

or may be patentable under the patent laws of the United States.

(e) The term made as used in this part in relation to any

invention, means the conception or first actual reduction to practice

of such invention as stated in In re King, 3 USPQ2d (BNA) 1747 (Comm'r

Pat. 1987).

7. Section 501.4 is revised to read as follows:

Sec. 501.4 Determination of inventions and rights.

Each Government agency has the approval of the Secretary to

determine whether the results of research, development, or other

activity in the agency constitute an invention within the purview of

Executive Order 10096, as amended by Executive Order 10930 and

Executive Order 10695, and to determine the rights in and to the

invention in accordance with the provisions of Secs. 501.6 and 501.7.

8. Section 501.6 is amended by revising paragraphs (a)(1)

introductory text, (a)(1)(iii), (a)(2), (a)(3)(i) and (a)(4)(i) to read

as follows:

Sec. 501.6 Criteria for the Determination of rights in and to

inventions.

(a) * * *

(1) The Government shall obtain, except as herein otherwise

provided, the entire right, title and interest in and to any invention

made by any Government employee:

* * * * *

(iii) Which bears a direct relation to or is made in consequence of

the official duties of the inventor.

(2) In any case where the contribution of the Government, as

measured by any one or more of the criteria set forth in paragraph

(a)(1) of this section, to the invention is insufficient equitably to

justify a requirement of assignment to the Government of the entire

right, title and interest in and to such invention, or in any case

where the Government has insufficient interest in an invention to

obtain the entire right, title and interest therein (although the

Government could obtain same under paragraph (a)(1) of this section),

the Government agency concerned shall leave title to such invention in

the employee, subject however, to the reservation to the Government of

a nonexclusive, irrevocable, royalty-free license in the invention with

power to grant licenses for all governmental purposes. The terms of

such reservation will appear, where practicable, in any patent,

domestic or foreign, which may issue on such invention. Reference is

made to section 15 of the Federal Technology Transfer Act of 1986 (15

U.S.C. 3710d) which requires a Government agency to allow the inventor

to retain title to any covered invention when the agency does not

intend to file a patent application or otherwise promote

commercialization.

(3) * * *

(i) To invent or improve or perfect any art or process, machine,

design, manufacture, or composition of matter;

* * * * *

(4) * * *

(i) Obtains the entire right, title and interest in and to an

invention pursuant to the provisions of paragraph (a)(1) of this

section nor

* * * * *

9. Section 501.7 is amended by revising paragraphs (b) and (c) to

read as follows:

Sec. 501.7 Agency determination.

* * * * *

(b) In the event that a Government agency determines, pursuant to

paragraph (a)(2) or (a)(4) of Sec. 501.6, that title to an invention

will be left with the employee, the agency shall notify the employee of

this determination. In cases pursuant to Sec. 501.6(a)(2) where the

Government's insufficient interest in the invention is evidenced by its

decision not to file a patent application, the agency may impose on the

employee any one or all of the following conditions or any other

conditions that may be necessary in a particular case:

(1) That a patent application be filed in the United States and/or

abroad, if

[[Page 41000]]

the Government has determined that it has or may need to practice the

invention;

(2) That the invention not be assigned to any foreign-owned or

controlled corporation without the written permission of the agency;

and

(3) That any assignment or license of rights to use or sell the

invention in the United States shall contain a requirement that any

products embodying the invention or produced through the use of the

invention be substantially manufactured in the United States. The

agency shall notify the employee of any conditions imposed.

(c) In the case of a determination under either paragraph (a) or

(b) of this section, the agency shall promptly provide the employee

with:

(1) A signed and dated statement of its determination and reasons

therefor; and

(2) A copy of 37 CFR part 501.

10. Section 501.8 is amended by revising paragraphs (a) and (b),

redesignating paragraphs (c) and (d) as paragraph (d) and (e), and

adding new paragraph (c) to read as follows:

Sec. 501.8 Appeals by employees.

(a) Any Government employee who is aggrieved by a Government agency

determination pursuant to Secs. 501.6(a)(1) or (a)(2), may obtain a

review of any agency determination by filing, within 30 days (or such

longer period as the Secretary may, for good cause shown in writing,

fix in any case) after receiving notice of such determination, two

copies of an appeal with the Secretary. The Secretary then shall

forward one copy of the appeal to the liaison officer of the Government

agency.

(b) On receipt of a copy of an appeal filed pursuant to paragraph

(a) of this section, the agency liaison officer shall, subject to

considerations of national security, or public health, safety or

welfare, promptly furnish both the Secretary and the inventor with a

copy of a report containing the following information about the

invention involved in the appeal:

(1) A copy of the agency's statement specified in Sec. 501.7(c);

(2) A description of the invention in sufficient detail to identify

the invention and show its relationship to the employee's duties and

work assignments;

(3) The name of the employee and employment status, including a

detailed statement of official duties and responsibilities at the time

the invention was made; and

(4) A detailed statement of the points of dispute or controversy,

together with copies of any statements or written arguments filed with

the agency, and of any other relevant evidence that the agency

considered in making its determination of Government interest.

(c) Within 25 days (or such longer period as the Secretary may, for

good cause shown, fix in any case) after the transmission of a copy of

the agency report to the employee, the employee may file a reply with

the Secretary and file one copy with the agency liaison officer.

* * * * *

11. Section 501.9 is revised to read as follows:

Sec. 501.9 Patent protection.

(a) A Government agency, upon determining that an invention coming

within the scope of Secs. 501.6(a)(1) or (a)(2) has been made, shall

promptly determine whether patent protection will be sought in the

United States by or on behalf of the agency for such invention. A

controversy over the respective rights of the Government and of the

employee shall not unnecessarily delay the filing of a patent

application by the agency to avoid the loss of patent rights. In cases

coming within the scope of Sec. 501.6(a)(2), the filing of a patent

application shall be contingent upon the consent of the employee.

(b) Where there is an appealed dispute as to whether Secs. 501.6

(a)(1) or (a)(2) applies in determining the respective rights of the

Government and of an employee in and to any invention, the agency may

determine whether patent protection will be sought in the United States

pending the Secretary's decision on the dispute. If the agency decides

that an application for patent should be filed, the agency will take

such rights as are specified in Sec. 501.6(a)(2), but this shall be

without prejudice to acquiring the rights specified in paragraph (a)(1)

of that section should the Secretary so decide.

(c) Where an agency has determined to leave title to an invention

with an employee under Sec. 501.6(a)(2), the agency will, upon the

filing of an application for patent, take the rights specified in that

paragraph without prejudice to the subsequent acquisition by the

Government of the rights specified in paragraph (a)(1) of that section

should the Secretary so decide.

(d) Where an agency has filed a patent application in the United

States, the agency will, within 8 months from the filing date of the

U.S. application, determine if any foreign patent applications should

also be filed. If the agency chooses not to file an application in any

foreign country, the employee may request rights in that country

subject to the conditions stated in Sec. 501.7(b) that may be imposed

by the agency. Alternatively, the agency may permit the employee to

retain foreign rights by including in any assignment to the Government

of an unclassified U.S. patent application on the invention an option

for the Government to acquire title in any foreign country within 8

months from the filing date of the U.S. application.

12. A new Sec. 501.11 is added to read as follows:

Sec. 501.11 Submissions and inquiries.

All submissions or inquiries should be directed to Chief Counsel

for Technology, telephone number 202-482-1984, Room H4835, U.S.

Department of Commerce, Washington DC 20230.

Dated: July 22, 1996.

Bruce A. Lehman,

Assistant Secretary of Commerce and Commissioner of Patents and

Trademarks.

Dated: July 26, 1996.

Mary L. Good,

Under Secretary of Commerce for Technology.

[FR Doc. 96-19713 Filed 8-6-96; 8:45 am]

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