Order Code RL32051
Innovation and Intellectual
Property Issues in
Homeland Security
Updated January 17, 2007
John R. Thomas
Visiting Scholar
Resources, Science, and Industry Division

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Innovation and Intellectual Property Issues
in Homeland Security
Summary
The U.S. government and private firms alike seek high technology solutions to
detect and prevent future terrorist attacks, as well as to respond to any future attacks
that do occur. Some concerns exist, however, that patents, trade secrets or other
intellectual rights may impede the prompt, widespread and cost-effective distribution
of innovations that promote homeland security. In 2001, these concerns arose with
respect to pharmaceutical CIPRO, an antibiotic that treats inhalation anthrax. Some
commentators called for the U.S. government to “override” a privately owned patent
in order to distribute CIPRO to persons who were potential anthrax victims.
Although the patent holder ultimately chose to increase production of CIPRO and
lower costs, this scenario remains a possibility for other technologies that bear upon
homeland security.
Perhaps not fully appreciated during the CIPRO incident was the fact that
existing laws provide mechanisms for addressing potential conflicts between
intellectual property rights and homeland security needs. The principal statute
concerning U.S. government use of intellectual property is 28 U.S.C. § 1498. This
statute allows the federal government to exercise eminent domain authority against
private intellectual property rights. As a result, the federal government may use
patented inventions without the prior consent of the patent owner, subject to an
obligation to compensate the rights holder on a monetary basis. The federal
government may not be enjoined from infringement of an intellectual property right.
Intellectual property owners may enforce this government compensation obligation
by bringing suit in the U.S. Court of Federal Claims.
A number of more specialized statutes, such as the Atomic Energy Act, also
allow federal government officials to declare a compulsory license with respect to a
particular patent. Reportedly these provisions have been used infrequently.
Legislative initiatives have proposed that U.S. law provide for other kinds of
compulsory licenses, including a compulsory license that the government could
invoke during a public health emergency. Existing legislation and proposed reforms
should be evaluated in view of the Agreement on Trade-Related Aspects of
Intellectual Property Rights. This “TRIPS Agreement” places some limits on the
ability of WTO member states to award compulsory licenses for the use of a private
person’s patented invention.
If an invention was developed using federal government funding, the
government may possess certain rights in that invention even though the government
contractor obtained a patent. Many entities of the federal government enjoy the
statutory authority to purchase a patent or other intellectual property right.
Several other statutes and legislative proposals also concern issues at the
intersection of homeland security and intellectual property. The Invention Secrecy
Act controls the disclosure of inventions that raise national security concerns.
Legislative proposals would also call for patent term extensions to award
technological progress in anti-terrorism technologies.

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Contents
Fundamentals of Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Patent Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Patent Acquisition and Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Government Use of Privately Owned Intellectual Property . . . . . . . . . . . . . . . . . . 7
Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Government Contractors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Other Compulsory Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
The Implications of the TRIPS Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 12
Government-Sponsored Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Other Issues at the Interface Between Intellectual Property and Homeland
Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Government Purchase of Intellectual Property . . . . . . . . . . . . . . . . . . . . . . 16
The Invention Secrecy Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Incentives for Bioterrorism Countermeasure Development . . . . . . . . . . . . 18
Concluding Observations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

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Innovation and Intellectual Property Issues
in Homeland Security
Terrorist attacks on the World Trade Center and the Pentagon on September 11,
2001, resulted in significant endeavors to combat terrorism and ensure homeland
security. Among other efforts, the U.S. government and private firms are seeking
high technology solutions to detect and prevent such attacks, as well as to respond
to any future attacks that do occur.1 Biometrics, digital surveillance and vaccines are
among the anti-terrorism technologies subject to current research.2
The intellectual property laws have a role to play in the research and
development of anti-terrorism technologies. The patent system has long been viewed
as a promoter of technological development, including inventions that may aid
homeland security efforts.3 On the other hand, some commentators have expressed
concern that the existence of intellectual property rights may impede homeland
security needs.4 One possibility is that an individual or firm might own a patent that
covers an anti-terrorism technology. In such circumstances, the exclusive patent
right may be perceived as conflicting with the rapid and widespread deployment of
that technology for purposes of homeland security.5 Intellectual property rights might
also increase the market price of the patented technology and limit the ability of
others to further develop it.6 If the patent is owned by a foreign individual or
enterprise, then additional security complications may potentially arise.
U.S. government demand for the antibiotic Cipro in late 2001 provides a past
example of this potential conflict. In October 2001, an unknown person or persons
sent a refined form of the bacteria Bacillus anthracis, commonly known as anthrax,
1 See CRS Report RL31914, Research and Development in the Department of Homeland
Security, by Daniel Morgan.
2 CRS Report RL31669, Terrorism: Background on Chemical, Biological, and Toxin
Weapons and Options for Lessening Their Impact, by Dana A. Shea; Shane Ham & Robert
D. Atkinson, Using Technology to Detect and Prevent Terrorism, Progressive Policy
Institute Policy Brief (Jan. 2002).
3 Roger E. Schechter & John R. Thomas, Intellectual Property: The Law of Copyrights,
Patents and Trademarks (Thomson-West Group, St. Paul, Minnesota 2003).
4 See Matt Fleischer-Black, “The Cipro Dilemma,”34 The American Lawyer no. 1 (Jan.
2002), 53.
5 See CRS Report RS21367, Emergency Preparedness and Response Directorate of the
Department of Homeland Security, by Keith Bea.
6 See Grace K. Avedissian, “Global Implications of a Potential U.S. Policy Shift Towards
Compulsory Licensing of Medical Inventions in a New Era of ‘Super-Terrorism’,” 18
American University International Law Review (2002), 237.

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through the U.S. mail to members of Congress and members of the media.7 The U.S.
government responded by administering treatment of a pharmaceutical compound
known as “ciprofloxacin hydrochloride” to affected individuals.8 Ciprofloxacin is
sold under the trademark Cipro by the German firm Bayer AG.9 Although widely
prescribed for several medical indications, Cipro was at that time the only antibiotic
approved by the U.S. Food and Drug Administration (FDA) for inhalation anthrax.10
As the incident proceeded, attention focused on the availability of large
quantities of ciprofloxacin hydrochloride for public use. Some observers noted that
Bayer owned the pertinent U.S. patents on ciprofloxacin hydrochloride and therefore
possessed the ability to exclude other pharmaceutical companies from selling generic
versions of the drug in the United States.11 Additional commentators encouraged the
U.S. government to purchase ciprofloxacin hydrochloride from generic
manufacturers, who had been producing and selling the drug in foreign countries
where Bayer did not possess patent rights.12 These commentators observed that
generic versions of ciprofloxacin hydrochloride were available for much lower prices
than Bayer was charging in the United States.13 Others went even further, calling for
the U.S. government to “override” Bayer’s patent and purchase ciprofloxacin
hydrochloride from other suppliers.14
Subsequent events ultimately diffused public concern over the availability of
Cipro. Bayer agreed to reduce the prices it charged the U.S. government and to
increase production.15 Also, the FDA quickly approved alternative antibiotics for the
treatment of certain strains of anthrax, including the one used in the attacks.16
7 See Stephen Engelberg & Judith Miller, “Sign of Escalating Threat,” New York Times
(Oct. 17, 2001), A1.
8 Kathleen Pender, “Cipro Had Big Boost From U.S.,” San Francisco Chronicle (Oct. 25,
2001), D1.
9 Ibid.
10 See U.S. Food and Drug Administration, Approval Letter (Aug. 30, 2000) (available at
[http://www.fda.gov/cder/foi/nda/2000/19-537S038_Cipro_approv.pdf]).
11 See, e.g., U.S. Patent No. 4,670,444.
12 See Letter from Ralph Nader and James Love to Department of Health & Human Services
Secretary Tommy Thompson (Oct. 18, 2001) (available at [http://www.cptech.org/ip/health
/cl/cipro/nadethom10182001.html]).
13 Ibid.
14 See Press Release from U.S. Senator Charles E. Schumer, “Schumer: New Cipro Source
Could Dramatically Increase Supply,” available at [http://www.senate.gov/schumer/state-
101601_cipro.htm] (Oct. 16, 2001).
15 Keith Bradsher, “Bayer Agrees to Charge Government a Lower Price for Anthrax
Medicine,” New York Times (Oct. 25, 2001), B8.
16 See U.S. Food and Drug Administration, Cipro (Ciprofloxacin Hydrochloride) for
Inhalation Anthrax: Information on Cipro for Consumers: Questions and Answers (Nov. 14,
2001) (available at [http://www.fda.gov/cder/drug/infopage/cipro/cipro_faq.htm]).

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Nonetheless, this scenario remains a possibility for other technologies that bear upon
homeland security.
Perhaps not fully appreciated during the Cipro incident was the fact that existing
laws provide mechanisms for addressing potential conflicts between intellectual
property rights and homeland security needs.17 These mechanisms include a
government taking of the intellectual property, subject to reasonable compensation
owed to the patent owner, as well as government purchase of patents. Legislation
introduced in the 107th Congress would have called for the award of a compulsory
patent license in the event of a public health emergency. Other current or proposed
legislation also relates to the intersection between intellectual property and homeland
security, including the Invention Secrecy Act and a proposed patent extension for
firms that develop anti-terrorism technologies. This report addresses each of these
issues in turn.
Fundamentals of Intellectual Property
The term “intellectual property” identifies a number of legal instruments,
including copyrights, patents and trade secrets, that provide innovators with
proprietary interests in their intangible creations.18 Copyright provides authors with
exclusive rights in their writings, visual works and other works of authorship; patents
relate to products, processes and other useful inventions; while trade secret law
concerns secret information that is of commercial value.19 Discussion concerning the
intersection of homeland security issues and the intellectual property law has
principally concerned patents. As a result, this report will focus upon the patent law,
although its broader discussion of the relationship between homeland security and
intellectual property is applicable to trade secrets, copyrights and other similar
proprietary interests.
Patent Policy
By providing individuals with exclusive rights to their inventive products and
processes, the patent law allows innovators to secure the economic benefits of their
discoveries. Absent a patent system, competitors might readily be able to appropriate
the benefits of an innovator’s research and development efforts. Aware of these
potential “free riders,” firms might devote few, if any resources towards innovation.
The patent law solves this market failure problem by providing economic incentives
for individuals and institutions to engage in research and development.20
17 See Fleischer-Black, supra note 4.
18 Schechter & Thomas, supra note 3, at 1-2.
19 Gordon U. Sanford, III, “An Intellectual Property Roadmap: The Business Lawyer’s Role
in the Realm of Intellectual Property,” 19 Mississippi College Law Review (1998), 177.
20 Simone Rose, “Patent ‘Monopolyphobia’: A Means of Extinguishing the Fountainhead?,”
49 Case Western Reserve Law Review 509 (1999).

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The patent system is also said to encourage the disclosure of new technologies.21
Each issued patent must include a description sufficient to enable skilled artisans to
practice the patented invention.22 Issued patents may also encourage others to “invent
around” the patentee’s proprietary interest. Others can build upon the patentee’s
disclosure to produce their own technologies that fall outside the exclusive rights
associated with the patent.23
Patent rights may also facilitate technology transfer.24 Absent patent rights, an
inventor may have no tangible asset to sell or license. In addition, an inventor might
otherwise be unable to police the conduct of a contracting party. Any technology or
know-how that has been disclosed to a prospective buyer might be appropriated
without compensation to the inventor. The availability of patent protection decreases
the ability of contracting parties to engage in opportunistic behavior. By lowering
such transaction costs, the patent system may make technology-based transactions
more feasible.25
The patent system may also provide a more socially desirable outcome than its
chief legal alternative, trade secret protection. Trade secrecy guards against the
improper appropriation of valuable, commercially useful information that is the
subject of reasonable measures to preserve its secrecy.26 Taking the steps necessary
to maintain secrecy, such as implementing physical security measures, imposes costs
that may ultimately be unproductive for society.27 Also, while the patent law obliges
inventors to disclose their inventions to the public,28 trade secret protection requires
firms to hold their protections in secret. The disclosure obligations of the patent
system may better serve the goals of encouraging the diffusion of advanced
technological knowledge.
The patent system has long been subject to criticism, however. Some observers
believe that the patent system encourages industry concentration and presents a
barrier to entry in some markets.29 Others believe that the patent system too
21 Keith E. Maskus, “The Role of Intellectual Property Rights in Encouraging Foreign Direct
Investment and Technology Transfer,” 9 Duke Journal of Comparative and International
Law (1998), 10.
22 35 U.S.C. § 112 (2006).
23 Rebecca S. Eisenberg, “Patents and the Progress of Science: Exclusive Rights and
Experimental Use,” 56 University of Chicago Law Review (1989), 1017.
24 Jonathan Eaton & Samuel J. Kortum, “Trade in Ideas: Patenting and Productivity in the
OECD,” 40 Journal of International Economics (1996), 251.
25 Robert P. Merges, “Intellectual Property and the Costs of Commercial Exchange: A
Review Essay,” 93 Michigan Law Review (1995), 1570.
26 American Law Institute, Restatement of Unfair Competition Third § 39 (1995).
27 David D. Friedman et al., “Some Economics of Trade Secret Law,” 5 Journal of
Economic Perspectives (1991), 61.
28 35 U.S.C. § 112 (2006).
29 John R. Thomas, “Collusion and Collective Action in the Patent System: A Proposal for
(continued...)

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frequently attracts speculators who prefer to acquire and enforce patents rather than
engage in socially productive activity.30 Still other commentators suggest that the
patent system often converts pioneering inventors into technological suppressors,
who use their patents to block subsequent improvements and thereby impede
technical progress.31
When analyzing these contending views, it is important to note the lack of
rigorous analytical methods available for analyzing the effect of the patent law upon
the U.S. economy as a whole. The relationship between innovation and patent rights
remains poorly understood. Concerned observers simply do not know what market
impacts would result from changing the patent term from its current twenty-year
period, for example.32 Consequently, current economic and policy tools do not allow
us to calibrate the patent system precisely in order to produce an optimal level of
investment in innovation.
Patent Acquisition and Enforcement
Patent rights do not arise automatically. Inventors must prepare and submit
applications to the U.S. Patent and Trademark Office (“USPTO”) if they wish to
obtain patent protection.33 USPTO officials known as examiners then assess whether
the application merits the award of a patent.34
In deciding whether to approve a patent application, a USPTO examiner will
consider whether the submitted application fully discloses and distinctly claims the
invention.35 In addition, the application must disclose the “best mode,” or preferred
way, that the applicant knows to practice the invention.36 The examiner will also
determine whether the invention itself fulfills certain substantive standards set by the
patent statute. To be patentable, an invention must be useful, novel and nonobvious.
The requirement of usefulness, or utility, is satisfied if the invention is operable and
provides a tangible benefit.37 To be judged novel, the invention must not be fully
anticipated by a prior patent, publication or other knowledge within the public
29 (...continued)
Patent Bounties,” University of Illinois Law Review (2001), 305.
30 Ibid.
31 See Robert P. Merges & Richard R. Nelson, “On the Complex Economics of Patent
Scope,” 90 Columbia Law Review (1990), 839.
32 See F. Scott Kieff, “Property Rights and Property Rules for Commercializing Inventions,”
85 Minnesota Law Review (2001), 697.
33 35 U.S.C. § 111 (2006).
34 35 U.S.C. § 131 (2006).
35 35 U.S.C. § 112 (2006).
36 Ibid.
37 35 U.S.C. § 101. (2006).

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domain.38 A nonobvious invention must not have been readily within the ordinary
skills of a competent artisan at the time the invention was made.39
The USPTO publishes most pending patent applications approximately 18
months after they are filed.40 For example, if an inventor filed a patent application
on August 1, 2006, then the USPTO will make that application available to the public
on or after February 1, 2008. Pre-grant publication of patent applications potentially
alerts interested parties of the possibility that a patent might later be issued.41
However, if the inventor has abandoned the application, or has certified that no
patent applications on the same technology will be sought outside the United States,
then the USPTO will not publish the pending application.42
If the USPTO allows the patent to be issued, the patent proprietor obtains the
right to exclude others from making, using, selling, offering to sell or importing into
the United States the patented invention.43 The maximum term of patent protection
is ordinarily set at 20 years from the date the application is filed.44 The patent
applicant gains no enforceable rights until such time as the application is approved
for issuance as a granted patent, however. Once the patent expires, others may
employ the patented invention without compensation to the patentee.
Patent rights do not enforce themselves. A patentee bears responsibility for
monitoring its competitors to determine whether they are using the patented invention
or not. Patent proprietors who wish to compel others to observe their intellectual
property rights must usually commence litigation in the federal district courts. The
U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) possesses exclusive
national jurisdiction over all patent appeals from the district courts.45 In turn, the
U.S. Supreme Court possesses discretionary authority to review cases decided by the
Federal Circuit.46
38 35 U.S.C. § 102 (2006).
39 35 U.S.C. § 103 (2006).
40 35 U.S.C. § 122(b) (2006).
41 See Joseph M. Barich, “Pre-Issuance Publication of Pending Patent Applications: Not So
Secret Any More,” Journal of Law, Technology and Policy (Fall 2001), 415.
42 35 U.S.C. § 122(b) (2006).
43 35 U.S.C. § 271(a) (2006).
44 35 U.S.C. § 154(a)(2) (2006). Although patent term is based upon the filing date, the
patentee gains no enforceable legal rights until the USPTO allows the application to issue
as a granted patent. A number of Patent Act provisions may modify the basic 20-year term,
considering examination delays at the USPTO and delays in obtaining marketing approval
for the patented invention from other federal agencies.
45 28 U.S.C. § 1295(a)(1) (2006).
46 28 U.S.C. §1254(1) (2006).

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Government Use of Privately Owned
Intellectual Property
Episodes such as the Cipro incident have raised the possibility that intellectual
property rights may clash with homeland security needs.47 If a firm owns a patent
that covers an anti-terrorism technology, the exclusive patent right may be perceived
as impeding the rapid and widespread deployment of that technology for purposes of
homeland security. Current laws provide several possibilities for addressing this
conflict, however. One option is a U.S. government taking of the intellectual
property, subject to reasonable compensation owed to the patent owner. Another is
that the federal government purchase any applicable patents from their owners.
Legislative proposals submitted before Congress have suggested additional
mechanisms for resolving issues at the interface between homeland security and
intellectual property.
Eminent Domain
The U.S. government possesses the power to take private property for public
use. For example, the government may condemn a parcel of land in order to build
a highway. This authority is ordinarily termed “eminent domain.” This government
right is not unlimited, however. In particular, in some circumstances the government
must compensate the property owner for use of the property. 48
These general principles are most frequently applied to real estate, but they
generally apply to intellectual property as well.49 As a result, the U.S. government
effectively enjoys the ability to declare a “compulsory license” that allows it to use
a patented invention without obtaining the permission of the patentee. In turn, the
federal government has consented to suit by private patent owners in order to obtain
compensation for government uses.50 Section 1498(a) of Title 28 of the U.S. Code
provides in part:
Whenever an invention described in and covered by a patent of the United States
is used or manufactured by or for the United States without license of the owner
thereof or lawful right to use or manufacture the same, the owner’s remedy shall
be by action against the United States in the United States Claims Court for the
recovery of his reasonable and entire compensation for such use and
manufacture.
47 See supra notes 7-16 and accompanying text.
48 U.S. Library of Congress, Congressional Research Service, Takings Decisions of the U.S.
Supreme Court: A Chronology, by Robert Meltz, Report 97-122 A, 2 July 2002.
49 Thomas F. Cotter, “Do Federal Uses of Intellectual Property Implicate the Fifth
Amendment?,” 50 Florida Law Review (1998), 529.
50 See Lionel Marks Lavenue, “Patent Infringement Against the United States and
Government Contractors Under 28 U.S.C. § 1498(a) in the United States Court of Federal
Claims,” 2 Journal of Intellectual Property Law (1995), 389.

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The remaining paragraphs of § 1498 provide analogous provisions pertaining to other
intellectual property rights, including copyright, plant variety protection certificates,
and semiconductor mark works.51
Section 1498 potentially applies to the use of any patented invention by the
federal government, not necessarily those directly related to homeland security. To
the extent the U.S. government engages in such activities as filling abandoned
mines52 or constructing highways,53 it may be subject to a suit under § 1498(a) if it
uses a patented invention without authorization. Certainly a number of these cases
have concerned uses by the military, however.54 At least one § 1498 suit involved
the federal government use of the patented pharmaceutical meprobamate, an anti-
anxiety agent.55
Under § 1498(a), all patent suits against the U.S. government are litigated in the
U.S. Court of Federal Claims. From 1855 through 1982, this tribunal was known as
the U.S. Court of Claims, and from 1982-1992 it was named the U.S. Claims Court.56
The Court of Federal Claims also possesses jurisdiction over a number of other
causes of action against the U.S. government, including certain tax and government
contract cases.57 The President appoints sixteen judges to the Court of Federal
Claims for fifteen-year terms.58 The Court of Federal Claims has national jurisdiction,
allowing the court to subpoena witnesses and documents anywhere in the United
States or its possessions.59
Court proceedings against the government under § 1498(a) are conducted using
the same general standards as does litigation between private parties. The patent
owner represents itself, while the Attorney General and Department of Justice are
responsible for representing the U.S. government in § 1498 cases.60 Unlike private
patent suits, however, there are no jury trials in § 1498 cases.61 Appeals from the
51 28 U.S.C. § 1498 (2006).
52 Dow Chemical Co. v. United States, 226 F.3d 1334 (Fed. Cir. 2000).
53 Levine v. United States, 76 F. Supp. 716 (Ct. Cl. 1948).
54 E.g., Brunswick Corp. v. United States, 152 F.3d 946 (Fed. Cir. 1998) (camouflage
screens designed to be draped over military hardware); McCreary v. United States, 114 F.3d
1206 (Fed. Cir. 1997) (patented hovercraft invention allegedly used in a U.S. Navy
Amphibious Assault Landing Craft); Gargoyles, Inc. v. United States, 113 F.3d 1572 (Fed.
Cir. 1997) (patented ballistic/laser protective eyewear alleged used by U.S. Army).
55 See Carter-Wallace, Inc. v. United States, 496 F.2d 535 (Ct. Cl. 1974).
56 Peter Verchinski, “Are District Courts Still a Viable Forum for Bid Protests?,” 32 Public
Contract Law Journal (2003), 393.
57 28 U.S.C. § 1346 (2006); 41 U.S.C. § 609 (2006).
58 28 U.S.C. § 171 (2006).
59 28 U.S.C. § 2521 (2006).
60 28 U.S.C. § 516 (2006).
61 28 U.S.C. § 2402 (2006).

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United States Court of Claims proceed to the U.S. Court of Appeals for the Federal
Circuit.62
As compared to remedies available in patent infringement suits against private
parties, the remedies available in § 1498(a) suits are more limited. In private patent
litigation, the adjudicated infringer is ordinarily enjoined from using the patented
invention throughout the remaining term of the patent.63 The adjudicated infringer
may also have to compensate the patent owner for profits lost due to the
infringement.64 Additionally, if a court deems the defendant to have been a “willful
infringer,” the court may order the defendant to pay the patent owner up to three
times the actual damages suffered.65
In contrast, § 1498(a) limits available remedies to “reasonable and entire
compensation” to the patent owner. As a result, the government may not be enjoined
from practicing a patented invention. The courts have also generally limited the
damages that the government must pay to the patentee to the level of a “reasonable
royalty.”66 A “reasonable royalty” for purposes of patent infringement damages is
“the amount that a person desiring to manufacture or use a patented article, as a
business proposition, would be willing to pay as a royalty and yet be able to make or
use the patented article, in the market at a reasonable profit.”67 Finally, tripled
damages for willful infringement are not available against the government.68
The number of § 1498 suits has been relatively modest over the years. One
commentator reports that since 1949, the Court of Federal Claims and its predecessor
courts have decided an average of 5.5 cases per year.69 In the twelve-month period
ending September 30, 2002, a total of 6 suits under § 1498(a) were filed in the Court
of Federal Claims.70 This number compares with a total of 2,520 patent infringement
62 28 U.S.C. § 1295(a)(3) (2006).
63 28 U.S.C. § 283 (2006).
64 See Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978).
65 35 U.S.C. § 284 (2006).
66 See Tektronix, Inc. v. United States, 552 F.2d 343 (Ct. Cl. 1977). Some more recent
precedent has suggested that in some cases, the U.S. government may be obliged to pay the
full lost profits of the patentee rather than a reasonable royalty. See Gargoyles, Inc. v.
United States, 113 F.3d 1572 (Fed. Cir. 1997). However, reportedly the last instance that
an award of lost profits was made for government use of a patented invention was in 1930.
David M. Schlitz & Richard J. McGrath, “Patent Infringement Claims Against the United
States Government,” 9 Federal Circuit Bar Journal (2000), 351.
67 Wright v. United States, 53 Fed. Cl. 466 (2002).
68 DeGraffenried v. United States, 228 Ct. Cl. 780 (1981).
69 Lavenue, supra note 50.
70 Administrative Office of the U.S. Courts, Judicial Business of the United States Courts
2002, U.S. Court of Federal Claims — Cases Filed, Terminated and Pending for the 12-
Month Period Ending September 30, 2002 (available at [http://www.uscourts.gov
/judbus2002/appendices/g2asep02.pdf]).

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suits filed against private defendants in the U.S. federal district courts during the
same period.71
Government Contractors
Often the federal government purchases goods and services from private
contractors. In the event that a private contractor infringes a patent while performing
obligations under a federal government contract, § 1498 ordinarily applies. As a
result, the patent proprietor’s infringement remedy consists of an action in the Court
of Federal Claims against the U.S. government. In such cases the private contractor
may not be enjoined from infringing the patent while performing a government
contract.
In the event the Court of Federal Claims decides that a patent infringement has
occurred, ordinarily the U.S. government pays any resulting monetary judgment.72
If the contract between the private contractor and federal government includes a so-
called “patent indemnity” clause, however, the private contractor may have to
reimburse the federal government for any damages owed for patent infringement.
The Federal Acquisition Regulations (FAR) include a complex set of rules that
require a patent indemnity clause for certain government contracts, prohibit it for
others, and render the clause optional for still others. For example, the FAR requires
that a government contract for any kind of performance that normally appears for sale
on the open market include a patent indemnity clause.73 However, government
contracts for small purchases, or for performance that occurs outside the United
States, may not contain a patent indemnity clause.74
Other Compulsory Licenses
As noted previously, 28 U.S.C. § 1498 provides a compulsory license in favor
of the U.S. government for the use of patented inventions. A modest number of
additional compulsory licenses exist within the U.S. patent system, each pertaining
to specialized subject matter.75 For example, the Atomic Energy Act allows for
compulsory licenses “if the invention or discovery covered by the patent is of primary
importance in the production or utilization of special nuclear material or atomic
energy.”76 The Clean Air Act contains a similar provision relating to devices for
71 Administrative Office of the U.S. Courts, Judicial Business of the United States Courts
2002, U.S. District Courts — Civil Cases Commenced, by Basis of Jurisdiction and Nature
of Suit, During the 12-Month Period Ending September 30, 2002 (available at
[http://www.uscourts.gov/judbus2002/appendices/c02sep02.pdf]).
72 Lavenue, supra note 50.
73 48 C.F.R. § 27.203-1(a).
74 48 C.F.R. § 27.203-1(b)(3), (4).
75 Dawson Chemical Co. v. Rohm and Haas Co., 448 U.S. 176 n.21 (1980).
76 42 U.S.C. § 2183 (2006).

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reducing air pollution.77 Finally, the Plant Variety Protection Act provides for the
compulsory licensing of seed-bearing plants that are protected by plant variety
certificates, a patent-like instrument granted by the Department of Agriculture.78
Legal research completed in connection with this report has failed to discover
even a single instance where any of these compulsory licenses has actually been
invoked. Plainly, none of these provisions has been frequently employed in the
past.79 Some commentators speculate that the threat of a compulsory license usually
induces the grant of contractual licenses on reasonable terms. As a result, there is no
need for the government to invoke a compulsory license formally.80
Legislation introduced in the 109th Congress would have created an additional
compulsory license in the patent law. H.R. 4131, the Public Health Emergency
Medicines Act, would have allowed the government to use the patented invention
without the patent owner’s permission if the Secretary of Health and Human Services
determined that the invention is needed to address a public health emergency. Under
the bill, the Secretary of Health and Human Services would have determined
compensation for government use of the patented invention. The bill provided in
part:
In determining the reasonableness of remuneration for use of a patent, the
Secretary of Health and Human Services may consider —
(1) evidence of the risks and costs associated with the invention claimed in the
patent and the commercial development of products that use the invention;
(2) evidence of the efficacy and innovative nature and importance to the public
health of the invention or products using that invention;
(3) the degree to which the invention benefitted from publicly funded research;
(4) the need for adequate incentives for the creation and commercialization of
new inventions;
(5) the interests of the public as patients and payers for health care services;
(6) the public health benefits of expanded access to the invention;
(7) the benefits of making the invention available to working families and retired
persons;
(8) the need to correct anti-competitive practices; and
(9) other public interest considerations.81
77 42 U.S.C. § 7608 (2006).
78 7 U.S.C. § 2404 (2006).
79 See Kenneth J. Nunnenkamp, “Compulsory Licensing of Critical Patents Under
CERCLA?,” 9 Journal of Natural Resources and Environmental Law (1993-94), 397, 406
(noting that “there seems to have been no attempts to actually use the compulsory licensing
provision” of the Clean Air Act).
80 Stephen Pericles Ladas, Patents,Trademarks and Related Rights: National and
International Protection (Cambridge, Mass., Harvard University Press 1975), 427.
81 H.R. 4131, Section 2 (proposing to add a new § 158 to the Patent Act). The bill had been
previously introduced in the 109th Congress as H.R. 4102.

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The Implications of the TRIPS Agreement
A leading international agreement on intellectual property bears upon the
availability of compulsory licenses under U.S. law.82 The TRIPS Agreement, or
Agreement on Trade-Related Aspects of Intellectual Property Rights, forms one
component of the treaties comprising the World Trade Organization (WTO).83 The
TRIPS Agreement addresses a number of intellectual property laws, including
patents, copyrights, trademarks and trade secrets. In part this agreement requires
WTO signatory states, including the United States, to ensure that their intellectual
property laws comply with specified standards.
Part III of the TRIPS Agreement addresses compulsory licenses. As noted
above, compulsory licensing refers to the grant of a license by a government to a
third party to use a patent without the authorization of the patent holder.84 The
TRIPS Agreement places some limits upon the ability of WTO member states to
award compulsory licenses for the use of a private person’s patented invention.
Among the most detailed provisions of the TRIPS Agreement, Article 31 imposes in
part the following restrictions upon the issuance of compulsory licenses:
! Each application for a compulsory license must be considered on its
individual merits.
! The proposed user must have made efforts to obtain authorization
from the patent owner on reasonable commercial terms and
conditions and must demonstrate that such efforts have not been
successful within a reasonable period of time. However, this
requirement may be waived in the case of a national emergency or
other circumstances of extreme urgency.
! Any such use shall be authorized predominantly for the supply of the
domestic market of the member authorizing such use.
! The compulsory license must be revocable if and when its
motivating circumstances cease to exist and are unlikely to recur.
! The patent owner must be paid adequate remuneration in the
circumstances of each case, taking into account the economic value
of the authorization.
! The legal validity of any decision relating to the authorization of
such use shall be subject to judicial or other independent review.
In light of this obligation, any proposed compulsory licensing provision may
need to be examined for its compliance with the TRIPS Agreement. It should be
noted that in the 109th Congress, the proposed Public Health Emergency Medicines
Act, H.R. 4131, included the following provision:
82 See CRS Report RL31132, Multinational Patent Acquisition and Enforcement: Public
Policy Challenges and Opportunities for Innovative Firms, by John R. Thomas.
83 See Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994,
Annex 1C, 33 I.L.M. 1197 (1994) [hereinafter “TRIPS Agreement”].
84 See supra notes 49-50 and accompanying text.

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CONSISTENCY WITH TRIPS- The Secretary of Health and Human Services
may adopt regulations to implement the purposes of this section, consistent with
the Agreement on Trade-Related Aspects of Intellectual Property Rights referred
to in section 101(d)(15) of the Uruguay Round Agreements Act.
In the event that a U.S. law did not comply with the TRIPS Agreement standard, the
possibility exists that the United States could be called before the WTO Dispute
Settlement Body (DSB).85 Under the WTO agreements, if one WTO member state
believes that another member state is in violation of the TRIPS Agreement, the
member states may enter into consultation through the DSB. If the member states
cannot resolve their dispute, then the DSB will convene a panel to hear and resolve
the dispute. Panel decisions are subject to review by the DSB Appellate Body. The
WTO Agreement calls for compensatory trade measures in circumstances where the
DSB finds a member state to be in violation of the TRIPS Agreement, yet that
member does not amend its laws.86
In addition to the possibility of trade sanctions under the TRIPS Agreement,
policy makers at the intellectual property-homeland security interface should be
aware of recent U.S. foreign policy that has supported the creation of strong patent
rights overseas. Many commentators credit the United States with incorporating
minimum standards for patent protection within the framework of the WTO.87 Since
the TRIPS Agreement came into effect, the United States has continued to encourage
other countries to limit the issuance of compulsory licenses.88 Some commentators
believe that calls from certain U.S. government officials to “override” Bayer’s Cipro
patent have made it difficult to defend the U.S. view that developing countries should
avoid issuing compulsory patent licenses to address their own domestic health
needs.89 As a result, if future discussion occurs over potential reforms to the patent
system in view of homeland security needs, it may be advisable to account for
possible U.S. foreign policy implications.
Government-Sponsored Research
Some patented inventions of interest to homeland security may have resulted
from government funding of research and development that was performed by the
85 Understanding on Rules and Procedures Governing the Settlement of Disputes, 15 Apr.
1994, WTO Agreement, Annex 2, Legal Instruments — Results of the Uruguay Round vol.
31, 33 International Legal Materials (1994), 1226.
86 Mark Clough, “The WTO Dispute Settlement System — A Practitioner’s Perspective,”
24 Fordham International Law Journal (2000), 252.
87 E.g., Susan K. Sell, “Industry Strategies for Intellectual Property and Trade: The Quest
for TRIPS, and Post-TRIPS Strategies,” 10 Cardozo Journal of Comparative and
International Law (2002), 79.
88 See Ellen ‘t Hoen, “TRIPS, Pharmaceutical Patents, and Access to Essential Medicines:
A Long Way from Seattle to Doha,” 3 Chicago Journal of International Law (2002), 27.
89 Divya Murthy, “The Future of Compulsory Licensing: Deciphering the Doha Declaration
on the TRIPS Agreement and Public Health,” 17 American University International Law
Review (2002), 1299.

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private sector.90 Current laws set the balance of rights and responsibilities between
the federal government and private researchers concerning patented inventions. As
the federal government has increased funding for research and development of anti-
terrorism technologies,91 public-private intellectual property ownership issues may
be increasingly important in the field of homeland security.
The Bayh-Dole Act governs the ownership of patent rights in inventions
resulting from research and development supported by federal government funding.92
The Bayh-Dole Act is the popular name for P.L. 96-517, which is codified in sections
200-212 of Title 35 of the U.S. Code.93 The Bayh-Dole Act establishes a
presumption that ownership of all patent rights in government-funded research will
vest in any contractor who is a nonprofit research institution or small business.94 A
1987 presidential memorandum instructed federal agencies to apply some Bayh-Dole
rights to all contractors, regardless of their size.95
The purpose of the Bayh-Dole Act was to encourage companies to undertake the
additional efforts necessary to bring government-funded inventions to the
marketplace. Experience showed that without title to an invention, firms were less
likely to commit resources to commercialize inventions. By providing universities,
nonprofit institutions and small businesses with intellectual property rights, Congress
intended both to promote collaboration between commercial concerns and nonprofit
organizations, as well as to promote the commercialization and public availability of
inventions.96
The Bayh-Dole Act describes in some detail the license given to the federal
government on any subject invention made under a government contract. The
contractor may elect to retain title to the invention unless the U.S government
determines that it is in the nation’s best interest to take title to the invention.97 If the
U.S. government makes this determination, the U.S. government must pursue a
lengthy process of justifications and approvals before it can take title under the
statute. If the contractor is allowed to retain title, the federal government receives “a
nonexclusive, nontransferable, irrevocable, paid-up license to practice or have
practiced for or on behalf of the United States any subject invention throughout the
90 See CRS Report RS21542, Department of Homeland Security: Issues Concerning the
Establishment of Federally Funded Research and Development Centers (FFRDCs), by
Michael E. Davey.
91 See Morgan, supra note 1.
92 35 U.S.C. § 210 (2006).
93 See Diane M. Sidebottom, “Updating the Bayh-Dole Act: Keeping the Federal
Government on the Cutting Edge,” 30 Public Contract Law Journal (2001), 225.
94 35 U.S.C. § 202 (2006).
95 See Exec. Order No. 12,591, 3 C.F.R. 220 (1988).
96 See CRS Report RL30320, Patent Ownership and Federal Research and Development
(R&D): A Discussion of the Bayh-Dole Act and Stevenson-Wydler Act, by Wendy H.
Schacht.
97 35 U.S.C. § 202(a) (2006).

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world.”98 This license is not negotiable and is the minimum that the government
receives under a procurement contract, grant, or cooperative agreement. This
minimum license allows the government to use the intellectual property for its own
purposes and to give such intellectual property to any other entity, including another
commercial entity, to build or to use on the government’s behalf.99
The Bayh-Dole Act also provides for so-called “march-in rights.” The U.S.
government can require the contractor to grant reasonable licenses to third parties
under a specific set of circumstances. For example, if a patentee fails to take effective
steps in a reasonable amount of time to achieve practical application of the invention,
or the action is necessary for public health and safety reasons, or is required by public
use regulations, the federal government can require a contractor to grant a license or
can even grant a license itself.100
The federal government has also established “data rights regulations” that
operate independently of the Bayh-Dole Act. These regulations apply both to
“technical data” and computer software produced during the performance of
government contracts.101 The term “technical data” includes research and
development data, engineering drawings, manuals and any other recorded
information of a scientific or technical nature that is proprietary to the government
contractor.102 The data rights regulations provide the federal government with the
right to access and utilize computer software and technical data that belongs to
government contractors. The regulations also establish conditions under which
contractors can maintain rights in their software and data against the government.103
The data rights regulations have been described as “some of the most
complicated regulations in the government procurement system.”104 In brief,
however, when technical data and computer software are developed by a contractor
exclusively with federal funds, the United States enjoys “unlimited rights” to use the
information and freely disclose it to others.105 In other circumstances, however, the
government obtains more restrictive rights to use contractor technical data and
software. For example, if the government has funded only part of the costs of
developing technical data, and the contractor indicates that the data is confidential,
98 35 U.S.C. § 202(c)(4) (2006).
99 Sidebottom, supra note 93.
100 35 U.S.C. § 203 (2006). See Tamsen Valoir, “Government Funded Inventions: The
Bayh-Dole Act and the Hopkins v. Cellpro March-In Rights Controversy,” 8 Texas
Intellectual Property Law Journal (2000), 211.
101 SeeLionel M. Lavenue, “Technical Data Rights in Government Procurement: Intellectual
Property Rights in Computer Software and the Indicia of Information Systems and
Information Technology,” 32 University of San Francisco Law Review (1997), 1.
102 48 C.F.R. § 27.401 (2002).
103 See generally Leonard Rawicz & Ralph C. Nash, Jr., Intellectual Property in Government
Contracts: Technical Data Rights (Commerce Clearing House 2001).
104 Lavenue, supra note 101, at 31.
105 10 U.S.C. § 2320(a)(2)(A) (2006).

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then in some circumstances the government has a reduced ability to share the data
with others and must maintain the data as confidential.106
Opinions vary on whether the Bayh-Dole Act and data rights regulations have
been fair and effective. Some commentators believe that these rules are inflexible
and overly favor the government’s position vis-a-vis contractors. For example,
Richard N. Kuyath, an attorney in the Office of General Counsel of Minnesota
Mining and Manufacturing Company (3M), contends that unless the laws are
reformed to improve the intellectual position of government contractors, “many
commercial laboratories will continue to refuse government-sponsored R&D.”107
Attorney Diane Sidebottom has argued in accord, contending that current government
contracting rules are too rigid and lead to “one size fits all” thinking. In her view, the
governing laws and regulations should be changed to “encourage flexibility in the
negotiation of intellectual property rights in government contractual
arrangements.”108 On the other hand, controversy continues over the ability of
government contractors to obtain valuable proprietary interests in the fruits of
research that was financed by taxpayer dollars.109
Other Issues at the Interface Between Intellectual
Property and Homeland Security
Alongside the various laws pertaining to U.S. government use of subject matter
protected by an intellectual property right, other legislation relates to the issues at the
intersection of homeland security and intellectual property. This report next
considers the more significant of these statutes.
Government Purchase of Intellectual Property
In addition to invoking a compulsory license of a proprietary right, another
government option is to seek a voluntary license, or simply purchase outright, an
intellectual property right that pertains to homeland security. Congress has already
authorized the Armed Forces to license, or purchase outright, patents and other
proprietary rights:
Funds appropriated for a military department available for making or procuring
supplies may be used to acquire any of the following if the acquisition relates to
supplies or processes produced or used by or for, or useful to, that department:
(1) Copyrights, patents, and applications for patents.
(2) Licenses under copyrights, patents, and applications for patents.
106 Lavenue, supra note , at 58-64.
107 Richard N. Kuyath, “Barriers to Federal Procurement: Patent Rights,” 36 Procurement
Law (Fall 2000), 1.
108 Sidebottom, supra note 101, at 241.
109 E.g., Brett Frischmann, “Innovation and Institutions: Rethinking the Economics of U.S.
Science and Technology Policy,” 24 Vermont Law Review (2000), 347.

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(3) Design and process data, technical data, and computer software.
(4) Releases for past infringement of patents or copyrights or for unauthorized
use of technical data or computer software.110
This legislation provides for a voluntary negotiation between the Armed Forces
and the intellectual property rights holder. The extent to which the Armed Forces,
or any other federal government entity, has in fact licensed or purchased an
intellectual property right from a private party is unclear. Notably, if a U.S.
government entity in fact uses the patented invention without authorization, the
maximum extent of its liability is “reasonable and entire compensation” to the patent
owner within the meaning of 28 U.S.C. § 1498. This amount is ordinarily set to the
value of a voluntarily negotiated license, an amount presumably less than the total
worth of the intellectual property right.111 Given the availability of 28 U.S.C. § 1498,
the ability to license or purchase an intellectual property may be of comparatively
limited value to the government.
The Invention Secrecy Act
Although technological innovations may contribute to the solution of national
security problems, in some circumstances the disclosure of new technologies may
itself lead to possible homeland security issues.112 Recognizing this potential,
Congress enacted the Invention Secrecy Act of 1951 in order to control the disclosure
of certain inventions based upon concerns of national security.113 Under the act, the
Director of the USPTO possesses the power to withhold from issuance patent
applications due to national security concerns. If the Director believes that the
disclosure of a particular invention may be detrimental to national security, he makes
the patent application available to the head of the appropriate defense agency.114 If
that individual agrees with the Director’s assessment, the Director may issue a
secrecy order on that patent application. This order obliges the applicant not to
disclose the invention to others for the duration of the order.115 Failure to comply
results in the rejection of the patent application and possibly a fine and
imprisonment.116
110 10 U.S.C. § 2386 (2006).
111 See supra notes 66-68 and accompanying text.
112 See CRS Report RL31845, “Sensitive But Unclassified” and Other Federal Security
Controls on Scientific and Technical Information: History and Current Controversy, by
Genevieve J. Knezo.
113 Invention Secrecy Act of 1951, ch. 4, 66 Stat. 3 (1952). See Sabing H. Lee, “Protecting
the Private Inventor Under the Peacetime Provisions of the Invention Secrecy Act,” 12
Berkeley Technology Law Journal (1997), 345.
114 35 U.S.C. § 181 (2006).
115 35 U.S.C. § 181 (2006).
116 35 U.S.C. § 186 (2006).

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Secrecy orders are announced for one-year periods.117 They may be renewed on
an annual basis upon a showing by the appropriate agency head that the national
interest continues to support the secrecy order. Secrecy orders can be terminated
prematurely if these national security interests cease to exist.118
Inventors whose applications are subject to a secrecy order are entitled to certain
relief. First, applicants may file a petition to have the secrecy order withdrawn.119
Applicants whose patents have been withheld due to a secrecy order have a right to
compensation.120 If a patent does ultimately issue from an application that was
subject to a secrecy order, the patent is entitled to term extension on a day-per-day
basis for the length of the secrecy order. Because the 20-year patent term is
ordinarily based upon the filing date, this provision ensures that the inventor receives
the same term that he would have had the patent been issued without a secrecy
order.121
Incentives for Bioterrorism Countermeasure Development
During the 109th Congress, several bills were introduced (although not enacted),
including S. 3, the Protecting America in the War on Terror Act, S. 975, the Project
Bioshield II Act, and S. 1873, the Biodefense and Pandemic Vaccine and Drug
Development Act, that would have generated additional incentives for the creation
of new technologies to counteract potential biological threats. S. 3 and S. 975 would
have allowed for the restoration of that portion of the patent term used during the
FDA approval process, and/or the extension of a patent term to reward technological
innovation in the area of bioterrorism countermeasures. The proposed legislation
also would have provided for additional FDA-administered marketing exclusivities
for eligible and designated countermeasures. S. 1873 would have permitted a
countermeasure product to qualify as an orphan drug and thereby obtain a ten-year
period of marketing exclusivity. These unenacted legislative proposals are addressed
in greater detail in a separate report.122
117 35 U.S.C. § 181 (2006).
118 Ibid.
119 37 C.F.R. § 5.4 (2006).
120 35 U.S.C. § 183 (2006).
121 See James W. Parrett, Jr., “A Proactive Solution to the Inherent Dangers of
Biotechnology: Using the Invention Secrecy Act to Restrict Disclosure of Threatening
Biotechnology Patents,” 26 William & Mary Environmental Law & Policy Review (2001),
145.
122 See CRS Report RL32917, Bioterrorism Countermeasure Development: Issues in Patents
and Homeland Security, by Wendy H. Schacht and John R. Thomas.

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Concluding Observations
Intellectual property is an important consideration for the federal government
as it shapes homeland security policy. Policy makers should be aware that there is
a long history of using patents in order to encourage innovation, accompanied by
legislative safeguards that protect government interests. In particular, existing law
allows intellectual property owners to obtain compensation should the government
use privately owned intellectual property to protect public health and safety without
prior authorization. This and other laws attempt to achieve the goals of the prompt,
widespread use of critical anti-terrorism technologies, along with the continued
encouragement of firms to use their research and development capabilities to help the
government fight terrorism in the future.
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