Intellectual property (IP) rights for recipients of funding under the American Reinvestment and Recovery Act of 2008 (ARRA) are receiving increased attention and concern, particularly as such funding is reaching entities that have not previously received government funding. For example, under the ARRA Smart Grid Investment Grant Program managed by the U.S. Department of Energy (DOE), the recipient will be subject to government ownership of IP. There are two exceptions. First, non-profits and small businesses retain their rights under the Bayh-Dole Act to seek IP ownership, albeit with the government retaining certain rights including the right to “march-in” and take title to the IP at a later date. Second, the DOE may choose to waive all or any part of its rights in funded inventions, although no guidance has been provided as to how the decision to waive or not waive ownership rights will be made.

Similarly, under both 42 U.S.C. §5908 (for large entities) and 35 U.S.C. §202 (for small entities and non-profits), the government receives rights in inventions that were conceived of or actually reduced to practice “under” the relevant funding grant. Thus, even where the invention has been previously conceived, and potentially even where a patent application has been filed, government rights may attach.

“Actual reduction to practice” occurs when an invention is embodied in tangible form and its practical utility for its intended purpose is demonstrated, which can easily be envisioned, for example, with an electrical transmission or distribution systems may not be practical to actually build absent the government funding. Further, if the recipient is a regulated public utility receiving smart grid funding, there may be competing interests involved where ratepayers are being asked to pay for expenses relating to research for which the utility will not retain the IP rights.

IP rights should be included among the numerous issues considered prior to deciding to seek government funding. For example, the extent of the government’s rights may be managed through earlier actual reduction to practice or narrowly tailoring the funded activities to protect vital inventions from government rights.