The Bayh-Dole Act allows nonprofits, small businesses,  and universities to retain ownership of federally funded inventions to  promote the utilization of inventions created through federal research and  development programs, and to provide an incentive for contractors to  commercialize federally funded inventions for sale in the marketplace. DOE Relies on Contractor Self- Reporting and Agency Procedures to Help Ensure Disclosure of Agency Funded Inventions During Fiscal Years 2009 through 2013, DOE Initiated Nearly 6,000 Financial Assistance Awards

During fiscal years 2009 through 2013, DOE initiated nearly 6,000  financial assistance awards. During this period,  according to DOE patent counsel, contractors reported approximately  5,800 inventions, elected to take ownership of about 2,800 inventions,  and were issued more than 700 patents. DOE Relies on Contractor Self-Disclosure and Agency Procedures to Help Ensure Disclosure of Agency Funded Inventions

Contractors disclose agency funded inventions to DOE through a variety  of reporting mechanisms including e-mail, regular mail, and Interagency  Edison (iEdison)—which is an electronic reporting system that allows  federal grantees and contractors to report federally funded inventions,  patents, and utilization data.contractor discloses an invention developed with DOE funds, patent staff  create a file for that invention. DOE Faces Challenges in Ensuring that Contractors Disclose Agency Funded Inventions and Is Taking Actions to Address Them

DOE faces challenges in ensuring that contractors disclose inventions  they develop with agency funding and is taking actions to address them. Specifically, one challenge DOE faces is not having a documented  process for ensuring that contractors disclose agency funded inventions  after financial assistance awards end, and the agency has initiated two  pilot projects to identify the extent of potentially undisclosed inventions. However, DOE has no  documented process to monitor inventions after award closeout. As a result, the potential exists for  DOE to be unaware of inventions that it funded and in which it would  retain interests. One  pilot project is an audit of a sample of previously completed financial  assistance awards to determine the extent to which contractors did not  disclose DOE funded inventions. The second pilot project involves cross- referencing U.S. Patent and Trademark Office data against DOE  information on inventions it funded. Under the draft audit procedures,  DOE patent counsel (1) audit contractor activities for any indication of  patents, patent applications, or inventions that might have been  developed with DOE funding but were not disclosed to DOE; (2) submit  demand letters to contractors to obtain ownership of any potentially  undisclosed inventions; and (3) work with contractors, depending on the  circumstances of nondisclosure, to allow them to retain ownership of the  inventions. DOE Is Planning to Update Data Systems to Address Challenges in Managing Invention Disclosure Information but Does Not Have an Implementation Plan with Key Milestones

DOE faces a challenge in managing information on disclosed inventions,  which underpins its ability to protect its interests in agency funded  inventions. This is because, according to DOE patent counsel, the  department’s two older invention data management systems—IP Master  and PATMIS—are outdated, unable to communicate with each other, and  do not have functionality for electronically updating invention disclosure or  patent status, hampering their ability to manage information and data  related to inventions developed with DOE funding. Under federal standards for internal control, information should be  recorded and communicated to management and others within the entity  who need it and in a form and within a time frame that enables them to  carry out their internal control and other responsibilities. Also, the implementation plan  with milestones DOE developed for the additional capability it wants to  add to the IP Manager system will help it track and communicate  progress toward completing this effort. DOE Proposed Regulatory Changes to Address Challenges to Monitoring and Influencing Contractor Utilization and Domestic Manufacture of Agency Funded Inventions

DOE faces challenges in monitoring and influencing contractor utilization  and domestic manufacture of agency funded inventions to protect its  interests in them, and the agency has proposed regulatory changes to  address these challenges. In turn, DOE would be able to use these plans as criteria in  assessing funding proposals and making financial assistance award  decisions. DOE patent counsel  explained that requiring and enforcing U.S. Manufacturing Plans  increases the agency’s ability to influence the domestic manufacture of  inventions it funded. Recommendation for Executive Action

To help provide greater assurance that DOE is making timely progress  toward obtaining the information management capabilities it needs to  protect its interests by monitoring contractor disclosure of agency funded  inventions, we recommend that the Secretary of Energy develop an  implementation plan, including appropriate milestones, to guide DOE’s  efforts to improve its data management capabilities.
Why GAO Did This Study

DOE provides funding to contractors for research and development of new technologies. To incentivize participation in federal research projects and promote the use of federally funded inventions, the 1980 Bayh-Dole Act and other laws and regulations allow contractors receiving federal research and development funds to retain ownership of inventions they create so long as they adhere to certain requirements, including disclosing inventions developed with agency funding. DOE's ability to protect its interests in these inventions—including their utilization and domestic manufacture—depends on its knowledge of their existence.
GAO was asked to review DOE efforts to protect its interests in agency funded inventions. This report examines: (1) DOE funding for contractor research for fiscal years 2009 through 2013 and how DOE ensures that contractors disclose agency funded inventions, (2) the challenges DOE faces in ensuring invention disclosure and actions it is taking to address them, and (3) the challenges DOE faces in protecting its interests in these inventions and the actions it is taking to address them. GAO reviewed laws, regulations, and other documents and interviewed DOE patent counsel responsible for intellectual property issues, representatives of organizations that facilitate the development of federally funded technology, and others.

What GAO Found

The U.S. Department of Energy (DOE) provided at least a total of $11 billion ($12 billion in fiscal year 2014 dollars) in research and development funding to contractors for fiscal years 2009 through 2013. Contractors reported about 5,800 inventions and 700 patents developed with DOE funding during this time period. To ensure disclosure of these agency funded inventions, DOE relies primarily on contractor self-reporting and financial assistance award closeout procedures. Contractors are generally required to adhere to specific time frames for invention disclosure. Following contractor invention disclosure, DOE patent counsel monitor the invention through the end of a financial assistance award to ensure contractor compliance with time frame requirements for electing to retain ownership and applying for patent protection of the invention.
DOE faces challenges in (1) ensuring that contractors disclose agency funded inventions and (2) managing information related to these disclosures and is taking steps to address them.
Limited ability to ensure invention disclosure after funding ends: DOE does not have a documented process to ensure contractors disclose inventions after financial assistance awards end. To address this, DOE recently began two pilot efforts to determine the extent of undisclosed inventions. One is an audit of a sample of previously completed financial assistance awards and the other involves cross-referencing U.S. Patent and Trademark Office data against DOE information on inventions it funded. DOE is still implementing these efforts but reported identifying more than 100 potential undisclosed inventions. DOE will assess the results of the pilots to determine whether to continue them, according to DOE patent counsel.
Data management limitations: DOE faces a challenge in managing information related to agency funded inventions because it relies on two different data systems that are outdated, unable to communicate with each other, and do not allow for electronic reporting. Under federal internal control standards, information should be recorded and communicated to management and others within the entity who need it and in a form and within a time frame that enables them to carry out their responsibilities. DOE is in the process of updating its data systems and is planning the development of an electronic reporting function but has not established an implementation plan with milestones against which it can track its progress toward completing these efforts. By developing such a plan, DOE would have greater assurance that it is making timely progress toward these efforts.
In addition, DOE faces challenges in its ability to monitor and influence the utilization and domestic manufacture of inventions it funded to protect its interests in them. DOE has proposed regulatory changes to address these challenges that would (1) require contractors to report on the utilization and domestic manufacture of agency funded inventions, (2) allow DOE to assess manufacturing plans as criteria for funding decisions, and (3) require contractors to obtain DOE authorization for changes in their control—including ownership—under certain circumstances. According to patent counsel, DOE expects to finalize these regulatory changes in fiscal year 2015.

What GAO Recommends

GAO recommends that DOE develop an implementation plan with milestones for improving its data management systems. DOE agreed with this recommendation.