While the fiscal year 2018 budget is far from final, it is clear that budget cuts of some sort are on the horizon. As such, nonprofits would be well advised to understand and position themselves so that they are able to ensure that they are taking advantage of and securing all of their acquired assets, including the intellectual property (IP) rights they may be acquiring through existing federal government grants and cooperative agreements. This month, we outline and discuss some of the fundamental rules and considerations for nonprofits regarding intellectual property rights that may stem from their federal grants and cooperative agreements.
IP under the Uniform Guidance
The Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) define intellectual property as "intangible property," which means:
[P]roperty having no physical existence, such as trademarks, copyrights, patents and patent applications and property, such as loans, notes and other debt instruments, lease agreements, stock and other instruments of property ownership (whether the property is tangible or intangible).
2 C.F.R. § 200.59.
Importantly, "[t]itle to intangible property acquired under a federal award vests upon acquisition in the non-federal entity." Id. at § 200.315(a). However, the non-federal entity (i.e., nonprofit awardee) must use the property for the originally authorized purpose, not encumber the property (without federal government approval) and dispose of the property in accordance with Section 313 of the Uniform Guidance. Id.
A nonprofit may copyright any work that is subject to copyright, which was developed or acquired under a grant or cooperative agreement. Id. at § 200.315(b). However, the federal awarding agency reserves a "royalty-free, nonexclusive and irrevocable right to reproduce, publish, or otherwise use the work for federal purposes, and to authorize others to do so." Id. Notably, this right is limited to "federal purposes," meaning that third parties that receive these materials cannot use them for commercial purposes—only the owner of the copyright has that right.
Patents and Inventions
With respect to patentable developments and inventions, nonprofit grantees must follow the U.S. Department of Commerce's government-wide regulations (37 C.F.R. Part 401), which were implemented under the federal Bayh-Dole Act of 1980. As an incentive for private sector participation in federally funded research and development, this legislation and its implementing regulations generally permit nonprofits and other inventors to seek title to inventions developed with federal funds, as long as such efforts are perfected in a timely manner. Of course, the federal government will retain nonexclusive, nontransferable, irrevocable, paid-up license to such inventions.
When data is produced under a federal award, the federal government reserves the right to:
- Obtain, reproduce, publish or otherwise use such data; and
- Authorize others to receive, reproduce, publish or otherwise use such data.
Id. at § 200.315(d). Notably, this does not limit the use of such data for federal government purposes, similar to the copyright license. In fact, while this language does not automatically convey any rights to third parties unless authorized by the federal government, the regulation provides that under the federal Freedom of Information Act (FOIA) "the non-federal entity must provide [such] data so that they can be made available to the public." Id. at § 200.315(e)(1). This, however, does not include the nonprofit awardee's copyrightable materials, preliminary analyses, drafts of scientific papers, plans for future research, peer reviews, communications with colleagues or information that otherwise constitutes trade secrets. Id. at § 200.315(e)(2)-(3).
Notwithstanding the terms of the Uniform Guidance, many federal agencies supplement and/or replace the rights set out in the Uniform Guidance with terms that are more specific to the IP being developed for that particular agency or under a specific award. Accordingly, it is critical that nonprofit federal awardees closely review the terms of their grants and cooperative agreements to determine whether unique agency- or award-specific requirements exist that may limit ownership or impose conditions that they notify the agency to perfect their IP rights. Regardless, it is critical that nonprofit federal awardees understand these rights at the outset of their awards so they can take steps during the course of the program to best secure and utilize the IP.
Given the ground rules, nonprofit awardees should consider the following before, during and after each federal award:
- When submitting a proposal to work on a federal project, if a nonprofit is bringing certain IP or data to the program, it should make this clear in writing so the federal agency is on notice that such IP and/or data would not necessarily be subject to the various federal government rights set out above or in the agency- or award-specific terms. In fact, some programs may prohibit nonprofits from bringing IP and/or data to a program without prior notice and may therefore automatically assume anything not disclosed at the outset is subject to the applicable federal government IP terms.
- Irrespective of the IP rights, nonprofits should also be mindful of terms and conditions that may require appropriate attribution to the funding agency or the federal government at-large.
- The nonprofit must track any developments of IP even after an award. This is necessary to secure any patent rights under the Bayh-Dole Act, but also to prevent the nonprofit from later charging the federal agency for certain IP that it may have already paid for its development. Of course, if the IP has been changed or modified since then it may not be the same IP. Accordingly, tracking such changes or modifications provides the nonprofit with the information and documentation necessary to refute a federal government assertion that it already has license rights in such IP.