In addition, the act provides the government march-in  authority. Under this authority, the federal agency that funded the  development of an invention has the right to require the contractor or  exclusive licensee to grant a license in any field of use to a responsible  applicant upon terms that are reasonable under the circumstances, if the  agency determines that:  the contractor has not made, and is not expected to make, efforts to  commercialize the invention within an agreed upon time frame;    public health or safety needs are not reasonably satisfied by the contractor  the use of the invention is required by the federal government and the  contractor or licensee cannot meet the government’s requirements; or  the owner of an exclusive license is not ensuring that the invention is  “manufactured substantially” in the United States and has not obtained the  necessary waivers to do so. Federal Agencies Use Department of Commerce Regulations to Implement the March- in Authority under the Bayh-Dole Act

Officials at DOD, DOE, NASA, and NIH rely on Commerce regulations for  the Bayh-Dole Act and on their agencies’ interpretations of the act to  determine whether to exercise their march-in authority. These officials  told us that the administrative processes developed by Commerce for  agencies to use when considering whether marching-in may be warranted  are detailed and time-consuming, and may make it difficult to initiate a  march-in proceeding. However, some officials also acknowledged that  because the regulations are detailed, they ensure that appropriate and fair  processes are followed during march-in proceedings. However, according to agency officials we spoke with, the agencies have  chosen not to develop agency-specific guidance for a variety of reasons. First, none of the agency officials we spoke with believe that the  regulations developed by Commerce are onerous enough to warrant the  development of agency-specific guidance. Second, both agency and  technology transfer officials told us that agency-specific guidance would,  in essence, pre-define how the federal government would exercise its  march-in authority and reduce the flexibility agencies have to examine the  specific circumstances of each individual case. Third, federal officials—as  well as officials from organizations that represent technology transfer  offices in colleges and universities—told us that creating an array of  agency-specific regulations could hinder the transfer of research results to  the market by increasing the regulatory burden on contractors. DOD, DOE, and NASA have neither  discovered nor received information that would lead them to initiate a  march-in proceeding or exercise their march-in authority during the last 20  years. In contrast, NIH has been petitioned formally to exercise its march- in authority three times, but in each case determined that the statutory  requirements for march-in proceedings had not been met. Nevertheless,  officials at three of the four agencies told us they value the authority  because, together with other tools, it provides them leverage to promote  commercialization of federally funded inventions. In contrast, DOE  officials do not believe march-in authority has significant value as  leverage, in part, because no agency has ever exercised the authority. According to the agency officials we spoke with, relying on the public for  information is a more efficient and effective mechanism for tracking  federally funded inventions, which would otherwise require federal  agencies to expend significant additional resources to monitor a large  volume of federally funded inventions for possible situations that might  lead to march-in proceedings. Although none of the agencies we reviewed has actually used its authority  to march in, officials in three of the four agencies we contacted said they  value the authority and they do not want it eliminated because it helps to  ensure that federally sponsored research results are commercialized. The government can also use patented technology without a license  subject to reasonable compensation being paid to the patent owner or  licensee, regardless of whether the invention had been developed with  federal funding. This section further describes these  four disincentives. Some agency, university, and industry officials we contacted said the  march-in authority could have a “chilling effect” on the willingness of  venture capital firms and other investors to provide funding for the further  commercial development of federally funded inventions. In the four fact-finding  instances we reviewed, the time to reach a decision not to initiate march- in proceedings ranged from 5 to 30 months. DOD, DOE, and NIH did not  provide overall comments, but NIH provided technical comments that we  incorporated, as appropriate. Appendix I: Objectives, Scope, and Methodology

The objectives of this report were to determine (1) what policies and  procedures federal agencies with significant research budgets have  established to determine whether march-in authority under the Bayh-Dole  Act should be exercised; (2) the extent to which these selected federal  research agencies have used Bayh-Dole march-in authority and what they  believe are its benefits; and (3) what barriers and disincentives, if any,  these agencies have encountered to the exercise of their march-in  authority under the Bayh-Dole Act. The top four agencies  receiving research and development funding were the Department of  Defense (DOD), the Department of Energy (DOE), the National  Aeronautics and Space Administration (NASA), and the National Institutes  of Health (NIH) within the Department of Health and Human Services.
Why GAO Did This Study

The Bayh-Dole Act, passed in 1980, allows recipients of federal research funds the option to retain patents on any inventions they create using those funds. At the same time, the act provides the government with rights intended to ensure that the public benefits from these federal research investments. One of these rights is known as the "march-in" authority, which allows federal agencies to take control of a patent when they have credible information that certain conditions described in the act have been met. Until March 2009, the Bayh-Dole Act required GAO to report periodically on its implementation. To meet that requirement, for select federal agencies, GAO reviewed (1) the policies and procedures used to determine whether march-in authority should be exercised; (2) how the march-in authority has been used; and (3) what barriers and disincentives have been encountered in exercising the march-in authority. GAO selected four agencies for this review that accounted for 89 percent of the federal research funding for fiscal year 2006. These were the Departments of Defense and Energy (DOD and DOE), the National Aeronautics and Space Administration (NASA), and the National Institutes of Health (NIH). GAO is not making any recommendations in this report. DOE, NASA, and NIH provided technical comments on this report that GAO incorporated, as appropriate.

What GAO Found

Officials at DOD, DOE, NASA, and NIH rely on Commerce regulations for the Bayh-Dole Act and on their agencies' interpretations of the act to determine whether to exercise their march-in authority. Agency officials said that the administrative processes developed by Commerce are detailed and time-consuming, and may make it difficult to initiate and exercise a march-in proceeding. However, some officials said the detailed regulations ensure that appropriate and fair processes are followed during march-in proceedings. The agencies have chosen not to develop agency-specific guidance for a variety of reasons. For example, none of the officials believe that the regulations are onerous enough to warrant the development of agency-specific guidance and agency-specific guidance would reduce the flexibility agencies have to examine the specific circumstances of each case. In addition, an array of agency-specific regulations could hinder the transfer of research results to the market by increasing the regulatory burden on recipients of federal research funds. None of the four agencies has chosen to exercise march-in authority. DOD, DOE, and NASA have neither discovered nor received information that would lead them to initiate a march-in proceeding or exercise their march-in authority during the last 20 years. In contrast, NIH has been petitioned formally three times, but in each case determined that the statutory requirements for march-in proceedings had not been met. Nevertheless, officials at DOD, NASA, and NIH said they value the authority because it provides leverage to promote commercialization of federally funded inventions. DOE officials disagree, in part, because no agency has ever exercised the authority. Agency officials said they do not have ongoing efforts to identify potential candidates for a march-in proceeding and primarily rely on the public, including potential competitors, to provide information that could lead to a march-in proceeding. According to these officials, their agencies would have to expend significant additional resources to track federally funded inventions because of the large number of inventions and because commercialization can take many years. Officials at DOD, NASA, and NIH said they value the march-in authority because it helps ensure that federally sponsored research results are commercialized. Also march-in authority is not the only tool to achieve the goals of the Bayh-Dole Act. For example, the government can take a patent without a license subject to reasonable compensation being paid to the patent owner or licensee that may allow for more timely interventions than would occur under the Bayh-Dole march-in process. Federal and technology transfer officials identified four disincentives to the use of march-in authority. One of these is that the use of the march-in authority could have a "chilling effect" on federal research. These officials said that if a march-in occurred, investors would be less likely to provide the funds to commercialize federal inventions for fear of losing their investments. Also, because the march-in process can be long, these officials believe that it would have limited utility in an emergency situation. For example, the time to complete the fact-finding process in the three cases NIH reviewed ranged from 5 to 8 months.