INVENTIONS - REPORTS, ROYALTY INCOME, AND RELATED MATTERS:  IMPORTANTNOTICE FOR INVESTIGATORS AND OFFICIALS RESPONSIBLE FOR PATENT MATTERS



NIH GUIDE, Volume 21, Number 38, October 23, 1992



P.T. 34



Keywords:

  Grants Administration/Policy+ 



Public Health Service



This notice directs the attention of recipients of PHS research

grants, contracts, and cooperative agreements to certain terms of

these awards that protect the public's interest in inventions made

with Federal assistance.  (The term recipient will apply to both

grantees and contractors.)



EMPLOYEE/EMPLOYER RESPONSIBILITIES:  Acceptance of grant or contract

funds obligates recipients to comply with the "standard patent

rights" clauses at 37 CFR 401.14 or FAR 52.227-11.  So that

recipients can comply with the reporting provisions of Paragraph (c)

of these clauses, Paragraph (f) - "Contractor Action to Protect the

Government's Interest," among other things, directs recipient

institutions to require, by means of a written agreement, their

employees, other than clerical and nontechnical employees, to

disclose promptly inventions made with Federal assistance to the

recipient official responsible for patent matters.  Further, through

employee agreements or educational programs, recipients are required

to instruct such employees on the importance of reporting such inven-

tions in sufficient time to permit the filing of patent applications

prior to U.S. or foreign statutory bars.  Additional guidance on

recipient reporting requirements for inventions can be found in the

NIH Guide for Grants and Contracts, Vol. 19, No. 23, June 22, 1990,

and the PHS Grants Policy Statement, page 8-22 (rev. 9/1/91).  Note:

Inventions made with NIH (or former ADAMHA) funds should be reported

to the Extramural Inventions Office at the address shown below,

whereas inventions made with funds from other PHS agencies should be

reported to that agency's Grants Management Officer or Contracting

Officer.



SUBCONTRACTS UNDER GRANTS AND CONTRACTS:  Recipients must include, at

least by specific reference, the Standard Patent Rights clause of 37

CFR 401.14 or FAR 52.227-11, as appropriate, in all contracts or sub-

contracts under grants and contracts for experimental, developmental,

or research work, regardless of tier.



UTILIZATION REPORTS vis-a-vis FINANCIAL STATUS REPORTS:  Questions

have arisen regarding interpretation of language concerning grant-

related income in Chapter 8 of the PHS Grants Policy Statement, or

more particularly in the Department's regulations, 45 CFR 74, Subpart

F.  There, patent and copyright royalty income is included as a

portion of "program income."  In turn, Subpart I requires reporting

of "program income" on the annual Financial Status Report for each

project.  The PHS has agreed that for the special case of patent and

invention royalties the preferred reporting channel, and the one that

meets the requirements of Subpart I, is the annual utilization report

of subject inventions authorized by 35 U.S.C. 202(c)(5), 37 CFR

401.14(h), and FAR 52.227-11(h).  Such reports by recipients and

their licensees or assignees shall contain information regarding the

status of development, date of first commercial sale or use, and

gross royalties received by the recipient.  Recipients may develop

their own, simplified format for these reports.  This information

shall be treated as confidential, privileged information, not subject

to disclosure under the Freedom of Information Act without permission

of the recipient.



Previous issues of the NIH Guide for Grants and Contracts, February 9

and June 22, 1990, specified a biennial reporting cycle.  In view of

the foregoing discussion, recipients are hereby directed to institute

the utilization reporting process on an annual basis.  Since these

reports are being submitted to the funding agency, there is no

requirement for additional, separate reporting to the Department of

Commerce as some have done in the past.



NOTE:  Utilization reports are required ONLY for licensed inventions

that have generated royalty or licensing income.



COPYRIGHT ROYALTY INCOME:  If a Notice of Grant Award specifies that

the deductive or matching option must be used for the disposition of

copyright royalty income, such income must be reported on the

Financial Status Report.  Utilization reports are not required for

copyrighted material.



ACKNOWLEDGEMENT OF FEDERAL SUPPORT:  Recipients are required to

include within the specification of any U.S. patent application and

any patent issuing thereon the following statement, "This invention

was made with government support under (identify the grant or

contract) awarded by the PHS.  The government has certain rights in

the invention."



ROYALTY-FREE SALES:  By law, the Federal Government has a royalty-

free license to practice the subject inventions for or on its behalf.

Thus, when licensing staff of the recipient institution are drafting

commercial licenses they should exercise care and include a provision

for this license to the Government.



COMPLIANCE:  Failure to comply with requirements of the "patent

rights clause" can result in loss of the recipient's rights in

inventions, (37 CFR 401.14(d), or FAR 52.227-11(d)).



INQUIRIES AND RECEIPT POINT FOR NIH UTILIZATION REPORTS:



Howard P. Jenerick, Ph.D.

Extramural Inventions Office

National Institutes of Health

Building 31, Room 5B41

Bethesda MD  20892

Telephone:  (301) 402-0850

FAX:  (301) 496-0166



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