Navigating Bayh-Dole Compliance In 2025: Risks And Risk Mitigation Strategies

A significant number of inventions made at academic and research institutions, non-profit research organizations and businesses are developed using some amount of federal government funding (e.g., from NIH, NSF, DOD, and including SBIR and STTR grants to businesses¹). Such inventions represent a substantial portion of patented innovation in the U.S.² Before the enactment of the Bayh-Dole Act of 1980, inventions developed with federal funds were owned by the government and rarely commercialized. The Bayh-Dole Act³ provided a clear path for federal grant recipients to secure ownership of patent rights, facilitating commercialization of federally-funded inventions.

Failure to comply with Bayh-Dole Act requirements may, however, give the government a discretionary (though very rarely exercised⁴) right to seize ownership of such inventions or to initiate the never to-date exercised right to "march-in" by granting a license to a third party. Federal agencies have not traditionally exercised such rights, in part due to lack of expertise, resources, and incentives to commercialize the inventions on their own. However, Bayh-Dole non-compliance, if proven, can provide a legal basis for the government to exercise its enumerated rights, potentially against select federally-funded entities (or their licensees) and/or entities holding high value patents. There are signs that the government may be moving in this direction.

On August 8, 2025, the U.S. Department of Commerce sent a letter⁵ to Harvard University expressing concerns as to whether Harvard had complied with "statutory, regulatory and contractual requirements tied to Harvard's federally funded research programs and intellectual property arising therefrom, including patents." The letter notified Harvard of the government's initiation of a comprehensive review of Harvard's federally funded research programs. The letter also purported to give Harvard notice of the initiation of a "march-in" process pursuant to which the government would grant licenses to third parties or take ownership of Harvard's patents in the event of non-compliance. Specifically, the Commerce Department's letter stated that it was initiating a process to investigate the following alleged Bayh-Dole Act violations:

1. failures to comply with the requirements for timely disclosure of inventions and election of title;
2. failures to comply with Bayh-Dole's preference for U.S. industry; and
3. failures to take effective steps to achieve practical application of subject inventions.

A federal grant recipient's failure to timely disclose the invention and elect title allows the government to request and obtain title to patent rights in subject inventions, while non-compliance with the latter two requirements (U.S. industry preference and achievement of practical application) allows the government to "march-in" and grant licenses to third parties.

The Trump Administration's investigation of Harvard's Bayh-Dole compliance and the initiation of a "march-in" process are unprecedented developments signaling a potential shift to stricter Bayh-Dole Act enforcement. The action underscores the importance of strict Bayh-Dole compliance and imposes new risks on commercial partners when considering whether to license inventions made with federal funding.

This paper summarizes key obligations under Bayh-Dole, offers practice tips to comply with such obligations, and discusses potential consequences of non-compliance for federal fund recipients and their licensees.

Is the invention subject to the Bayh-Dole Act requirements?

Bayh-Dole applies to any invention "conceived or first actually reduced to practice in the performance of work under a [federal] funding agreement," referred to as a "subject invention."⁶ Any evaluation of applicability of Bayh-Dole should start with determination of whether an invention (most often as embodied in the claims of a patent application) is, in fact, a "subject invention" under Bayh-Dole. In making this determination, the questions that should be asked are (i) whether inventor(s) formed a definite and permanent idea of the invention (i.e., conceived the invention), or (ii) for the first time showed that the invention works for its intended purpose (i.e., first actually reduced it to practice), while doing work wholly or partially funded by the grant. This determination is critical and too often delegated to inventors, academic researchers and others not trained in such analyses, which may lead to inadvertent over- and under- reporting under the Bayh-Dole Act.

Particularly in view of recent developments, it may be prudent for federal grant recipients ("contractors"), including academic technology transfer offices, to introduce additional checks ensuring accuracy of "subject invention" determinations.

One important consideration in the evaluation is that the "subject invention" determination may change over time because of changes to inventorship entity and/or patent claims. If patent claims are later amended to cover an invention conceived or first actually reduced to practice using federal funding, the invention may then become a "subject invention." Conversely, if patent claims are amended to cover an invention not conceived or first actually reduced to practice using federal funding, the invention may no longer be a "subject invention." Similarly, adding or removing inventor(s) (e.g., as a result of claim amendment or later realization of inventor's contribution or lack thereof) whose presumed contribution was made with federal funding, may change the "subject invention" determination under the Bayh-Dole Act.

In view of this, inventorship correction and/or a substantial amendment to the claims in a patent application naming at least one federal grant recipient as an inventor should trigger reassessment of the "subject invention" determination under the Bayh-Dole Act.

While resource-consuming, rigorous "subject invention" determination procedures could go a long way to alleviate risks of losing ownership of patent rights to "subject inventions." It could also ensure that government rights are not inadvertently conferred for inventions not actually conceived or first actually reduced to practice with federal funds.

Bayh-Dole non-compliance that may lead to contractor's loss of ownership rights

Every "subject invention" must be first disclosed to the federal funding agency in writing within two months after the inventor discloses the invention in writing to the contractor's personnel responsible for patent matters.⁷ Then, the contractor must make a written election to retain title to the subject invention within two years of the initial disclosure to the federal agency, but no more than 60 days before the end of a statutory period for U.S. patent protection (which may be triggered by filing a provisional patent application, publication, public use or sale).⁸ The disclosure and election of title are made via the Interagency Edison (iEdison) website.⁹

Failure to meet the disclosure and election requirements under the Bayh-Dole Act may lead to the most drastic consequence – as a penalty, upon the government's discretionary written request, the contractor must convey its ownership rights to the funding agency. For federal grants awarded after May 14, 2018 (or where an agency amends an earlier funding agreement to incorporate the new rules), the government can request title at any time after a missed deadline, placing a cloud on the ownership of patent rights.¹⁰

It is advisable to notify the federal agency and correct a defect in disclosure and/or election compliance as soon as non-compliance is discovered. Although a later correction does not necessarily cure non-compliance defects for inventions developed with federal grants awarded after May 14, 2018, federal agencies may be more likely to exercise their discretion to allow a late disclosure or election if contractor's non-compliance was inadvertent and if correction serves the public interest. Prompt disclosure and election upon learning of non-compliance shows that the contractor is acting in good faith and is committed to compliance, circumstances likely to weigh in favor of relief for a missed Bayh-Dole deadline.

The contractor also must file its initial patent application on the subject invention within one year after electing title, or earlier if required to avoid a statutory bar (such as a publication or public use).¹¹ If a provisional application is filed as the initial application, a non-provisional and any foreign applications must be filed within 10 months of the provisional filing date unless an extension of time is obtained.¹² Because of this, it is prudent to request an extension of time for filing a non-provisional application immediately after the filing of a provisional. However, if a contractor files a non-provisional application after the 10 month deadline (without requesting an extension) and the federal agency does not act promptly to request title before the non-provisional filing, the contractor continues to retain title.¹³ So absent a quick action by the government, failure to file within the shorter 10 month period is unlikely to lead to contractor's loss of ownership rights.

To date there have been very few cases of federal agencies requesting title as a result of non-compliance with disclosure, election or filing obligations under the Bayh-Dole Act.¹⁴ But this may become a more common tool in the government's arsenal of Bayh-Dole Act enforcement. Even if there is a will for stricter Bayh-Dole Act enforcement, the challenge lies in the detection of non-compliance, especially where the failure is the failure to disclose a relevant invention to the federal agency. In the absence of self-reporting of delayed compliance by a federal grant recipient, such detection would require the government to undertake a complex factual analysis of patented inventions, federal grants, and their timelines. However, this challenge is not insurmountable if focused on select, e.g., high value, patent portfolios covering inventions the government suspects were made with federal funds (and that were not disclosed as such).

Assumption of title to patent rights by the government due to non-compliance affects both the federal funds recipient (contractor) and its licensee. The contractor stands to lose precious royalties enjoyed from licensing valuable patent portfolios. But this also brings great uncertainty to licensees, since the existing license is not automatically binding on the government as new patent owner. The government may decide to recognize the license or decline to do so, and it may undertake to negotiate new license terms and exclusivity provisions. In this situation, it is advisable for a licensee promptly to seek recognition of the existing license or a replacement license from the government (assuming that a license is still needed to avoid infringement of the underlying patent rights).

Bayh-Dole non-compliance that may lead to government's exercise of march-in rights

The government may exercise march-in rights if the contractor or its licensee fails to:¹⁵

• achieve practical application of the subject invention, making it available to the public on reasonable terms (where inquiry is focused on utilization and availability, assessing, for example, delays in commercialization, failure to meet reasonable milestones, failure to supply or scale, refusal to license on reasonable terms to enable use, etc.);
• reasonably satisfy public health or safety needs (assessing, for example, sustained supply failure of a product critical for health or safety, refusal or inability to scale manufacturing or sublicense to third party manufacturers during a health emergency, quality or compliance issues that curtail availability, etc.);
• meet requirements for public use (if specific federal regulations tied to the funding, such as for certain public health programs, are not satisfied); or
• obtain exclusive licensee's agreement that any products embodying the subject invention or produced through the use of the invention are manufactured substantially in the United States, or obtain a waiver under 35 U.S.C. § 204.

If non-compliance with the above provision(s) is suspected, a federal agency may undertake a review and thereafter initiate a "march-in" process. In principle, if after a hearing the grounds for march-in are met, the agency may require licensing the patented invention to third parties. But "march-in" rights have never been exercised to date, despite a number of march-in petitions have been filed (each was denied). In particular, agencies have been asked but were reluctant to "march-in" on the basis of an allegedly excessive price charged for a commercial product (based on a "subject invention" under the Bayh-Dole Act), as a high price alone has not yet been treated as a failure to achieve practical application or reasonably satisfy health or safety needs. In the current climate, "march-ins" or threats thereof may become more common.

The government's "marching-in" and licensing of patent rights to third parties would affect the entity commercializing the invention, which would lose its exclusivity. Unlike with the loss of title situation, "march-in" rights are not meant to deprive the federal fund recipient contractor of royalties or the original licensee of its (now non-exclusive) rights to the invention. The exercise of march-in rights, however, would likely significantly reduce the licensee's market share, margins and profits, and may also affect the amount of royalties received by the contractor.

Other obligations under the Bayh-Dole Act

Bayh-Dole Act's additional provisions include obligations to¹⁶:

• provide the government with a confirmatory (non-exclusive) license to the subject invention;
• require contractor's employees to promptly and in writing disclose "subject inventions" to the contractor and assign their rights to the subject invention to the contractor;
• no less than 60 days prior to the statutory deadline, notify the federal agency of any decision leading to abandonment, such as a decision not to continue prosecution of a non-provisional application, not to pay maintenance or annuity fees, or not to defend a patent in a reexamination or opposition proceeding;
• include in any U.S. patent or application covering the subject invention a statement acknowledging government support and the government's rights in the invention;
• agree to certain reporting obligations, including submission of patent application filing and patent issuance details, reporting acceptance for publication of manuscripts describing the "subject invention" or sale or public use planned, and periodic (usually annual) reports on utilization of subject inventions;
• certain use of royalties if a contractor is a non-profit organization, including sharing royalties with inventors and, after allowable expenses such as payments to inventors, use of royalties to support scientific research or education; and
• a preference for a small business licensees.

While the Bayh-Dole Act does not specify penalties for non-compliance with the above provisions, failure to comply may be alleged to constitute a breach of the funding agreement and could lead to the imposition of contractual remedies (such as suspension or termination of funding), audits and other scrutiny.

What can federal fund recipients and their licensees do to minimize risks?

Bayh-Dole Compliance Tips

• Federal grant recipient employers are advised to have employment agreements requiring employees promptly disclose inventions in an invention disclosure form and have a present assignment language assigning their rights to inventions to the employer.
• Develop oversight procedures to ensure that the assessment of Bayh-Dole's applicability, i.e., whether an invention is a "subject invention" under Bayh-Dole, is accurate. This can be done by developing checklists to assist employees in providing relevant information, engaging federal fund recipient's personnel responsible for patent matters in making this assessment, and turning to legal counsel for guidance where the assessment requires complex factual and/or legal analysis. The assessment should involve evaluation of the inventive concept (embodied or likely to be embodied in the claims), potentially relevant federal grants awarded to each inventor, and the relative timing of the invention's conception/first reduction to practice and the grant award(s). This determination is critical as it serves as a trigger for timely and standard Bayh-Dole compliance procedures.
• Have procedures in place for timely and accurate compliance with disclosure (within 2 months of inventor's disclosure), election of title (within 2 years of disclosure and at least 60 days before a statutory deadline), filing (provisional within 1 year of election of title and before a statutory deadline, and non-provisional within 10 months unless an extension is obtained), government license, pre-abandonment notice (at least 60 days before abandonment), and fulfilment of reporting procedures via iEdison by federal fund recipient's personnel responsible for patent matters.
• Reassess whether an invention is a "subject invention" under Bayh-Dole when inventorship is changed and/or when a substantial amendment to the claims of a patent application is made.
• Notify the funding agency and correct a defect in disclosure and/or election compliance as soon as non-compliance is discovered. Consult with legal counsel to consider risks and develop best strategy in view of the grant award timing (i.e., before or after May 14, 2018, which determines whether the funding agency has a time limit to seize title).
• Potential licensees should conduct due diligence of Bayh-Dole applicability and compliance before licensing, when licensing patent rights from entities receiving federal funds. Even where licensed patents are not identified as arising from federally funded research (and thus not identified as subject to the Bayh-Dole requirements), consider requesting identification of all federal grants awarded to the inventors of the patents and relating to the patented subject matter, to investigate whether the licensed patents may be subject to Bayh-Dole and at risk of non-compliance.
• In a license, include provisions standard for inventions made with federal funds including an acknowledgement of government's rights, the requirement for manufacture substantially in the U.S. for exclusive licensees (unless a waiver is obtained from the funding agency), commitment to Bayh-Dole compliance including ongoing reporting and promoting invention's utilization (by setting developmental milestones and commercialization timelines), and consider risk allocation provisions including representations and covenants of Bayh-Dole compliance, as well as indemnification, remedies and termination rights in the event government assumes ownership or exercises march-in rights.

Strict Bayh-Dole compliance can be complex and costly but potentially critical for preservation of valuable rights to federally funded inventions. The reward is an unencumbered right to the revenue streams resulting from the commercialization of such inventions.

Footnotes

1 National Institutes of Health ("NIH"); National Science Foundation ("NSF"); U.S. Department of Defense ("DOD"); Small Business Innovation Research ("SBIR"); Small Business Technology Transfer ("STTR").

2 See, e.g., Fleming et al., 2019, Science 364 (6446), pp. 1139-1141.

3 Patent and Trademark Law Amendments Act (P.L. 96-517); 35 U.S.C. §§ 200–212.

4 A rare precedent is Campbell Plastics Engineering & Mfg., Inc. v. Brownlee, 389 F.3d 1243 (Fed. Cir. 2004), where the U.S. Army Chemical Research, Development and Engineering Center demanded title following a federal funding recipient's failure to timely disclose a subject invention. The court ruled for the Army.

5 https://x.com/howardlutnick/status/1953967726135063023

6 See 35 U.S.C. §§ 201(e), 202; 37 CFR § 401.14(a)(2) and (b).

7 See 35 U.S.C. §202(c)(1); 37 CFR § 401.14(c)(1).

8 See 35 U.S.C. §202(c)(2); 37 CFR § 401.14(c)(2).

9 http://www.iedison.gov.

10 For federal grants in effect before May 14, 2018, the federal agency has only 60 days after learning of the disclosure and/or election non-compliance to request title. See 37 CFR § 401.14(d)(1)(i) in 52 Fed. Reg. 8554 (March 18, 1987). The revisions to the Bayh-Dole Act that became effective on May 14, 2018 eliminated the 60 day time limit for the federal agency to request title. See 37 CFR § 401.14(d)(1)(i) in 83 Fed. Reg. 15954 (April 13, 2018).

11 See 35 U.S.C. §202(c)(3); 37 CFR § 401.14(c)(3).

12 See 37 CFR § 401.14(c)(3),(5).

13 See 37 CFR § 401.14(d)(1)(ii).

14 See footnote 4.

15 See 35 U.S.C. §203(a).

16 See 35 U.S.C. §202(c); 37 CFR § 401.14(b), (c), (f), (h) and (k); 37 CFR § 401.5(f).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.