February 1, 2024
March-In Rights Under the Bayh-Dole Act: Draft Guidance
On December 7, 2023, the U.S Department of Commerce’s
licenses to third parties in certain circumstances, known as
National Institute of Standards and Technology (NIST)
“march-in rights.”
issued a request for information (RFI) on its “Draft
Interagency Guidance Framework for Considering the
Statutory Bases for March-In Rights
Exercise of March-In Rights.” The RFI seeks public
Although Bayh-Dole generally allows federal contractors to
comment on the draft guidance, which NIST envisions as a
take ownership of patents on inventions created with federal
tool to help federal agencies evaluate when it is appropriate
funding, the federal government has the power to “march
to exercise “march-in rights.” March-in rights allow an
in” and grant compulsory licenses to third parties in some
agency to grant a compulsory license on a privately owned
circumstances. Specifically, the funding agency can require
patent to third parties, if the invention was developed with
the federal contractor to grant a patent license to a third
federal funding and the agency finds that certain statutory
party if the agency determines that any of four statutory
criteria apply.
conditions listed in 35 U.S.C. § 203(a) apply:
In the 40 years since Bayh-Dole’s enactment, no federal
(1) action is necessary because the contractor or
agency has exercised its march-in rights. This In Focus
assignee has not taken, or is not expected to take
provides background on march-in rights, analyzes NIST’s
within a reasonable time, effective steps to achieve
draft guidance, and reviews select considerations for
practical application of the subject invention . . . ;
Congress.
(2) action is necessary to alleviate health or safety
Patents and the Bayh-Dole Act
needs which are not reasonably satisfied by the
U.S. patents give their owners the exclusive right to make,
contractor, assignee, or their licensees;
use, sell, and import a new and useful invention for
(3) action is necessary to meet requirements for
approximately 20 years. Anyone else who wishes to use the
public use specified by Federal regulations . . . ; or
invention in the United States needs to obtain a license (i.e.,
permission) from the patent holder and typically pays a
(4) action is necessary because [the contactor or its
royalty for the license. Patents are meant to encourage
licensee did not comply with the preference for
innovation by giving inventors a “temporary monopoly” on
domestic manufacturing of the invention under 35
their inventions in exchange for disclosing their invention
U.S.C. § 204].
by filing a publicly accessible patent application.
A license granted using march-in rights must have “terms
To promote the utilization of inventions arising from
that are reasonable under the circumstances,” which may
federally supported research and development (R&D),
require the licensee to pay royalties to the patent holder.
Congress enacted the Patent and Trademark Act
The Debate over the Role of Pricing in
Amendments of 1980 (P.L. 96-517, as amended; commonly
called the “Bayh
March-In Determinations
-Dole Act” or “Bayh-Dole”). Bayh-Dole
established a uniform federal patent policy for inventions
NIST promulgates regulations governing agency
supported by federal funding. Such R&D often has
implementation of Bayh-Dole, which are codified at 37
applications beyond the scope and goals of the original
C.F.R. parts 401 and 404. Procedures governing the
research, including commercial applications. Without
exercise of march-in rights are set forth in 37 C.F.R.
further investment and sufficient private sector incentives,
§ 401.6, which directs a funding agency to initiate a march-
Congress was concerned that the commercial value of
in proceeding when it “receives information that it believes
federally funded inventions might not be fully realized.
might warrant” doing so.
Under Bayh-Dole, federal contractors or grantees
Anyone may urge an agency to invoke march-in rights.
(collectively, federal contractors) may elect to retain the
Such stakeholder petitions are most often raised with
patent rights to an invention made with federal support. The
respect to pharmaceutical drugs whose development was
federal contractor may then use the invention itself or
supported by federal funding. For example, a number of
license the patent(s) to industry partners. In exchange for
advocacy groups have petitioned the National Institutes of
retaining patent ownership, however, the federal contractor
Health (NIH) to exercise march-in rights based on the high
provides the federal agency with a government-use
prices of certain drugs developed with federal funding, such
license—that is, permission for the government to use the
as treatments for HIV/AIDS. NIH has rejected these
patented invention without paying a royalty. The United
petitions, contending that pricing concerns alone are an
States also retains the authority to grant compulsory
insufficient basis to exercise march-in rights—so long as
the invention is on the market and available to patients.
https://crsreports.congress.gov

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March-In Rights Under the Bayh-Dole Act: Draft Guidance
In January 2021, NIST requested public comment on its
terms.” Other groups argue that Bayh-Dole was never
proposal to revise Bayh-Dole regulations to state that
intended to be a price-control statute and that market
march-in “shall not be exercised exclusively based on the
availability satisfies the “practical application” requirement,
business decisions of the contractor regarding the pricing of
regardless of price.
commercial goods and services.” In response, NIST
received over 81,000 comments. Ultimately, the provisions
Stakeholder responses to NIST’s draft guidance have
of the proposed rule related to march-in rights and product
largely fallen along this existing divide. Groups such as the
pricing were not included in the final rule.
Bayh-Dole Coalition and AUTM (formerly known as the
“Association of University Technology Mangers”) have
NIST’s December 2023 Draft Guidance
criticized the draft guidance’s treatment of pricing. These
NIST’s December 2023 draft guidance aims to provide
groups argue that the government’s threat to license patents
“clear guidance to an agency on the prerequisites for
to competitors on pricing grounds would discourage public-
exercising march-in” rights and ensure the “consistent and
private partnerships and disincentivize critical investments
predictable application” of Bayh-Dole. In contrast to the
required to make nascent technologies commercially viable.
January 2021 notice of proposed rulemaking, NIST’s new
draft guidance treats price as an appropriate consideration
Critics of the proposed guidance argue that it would
in march-in determinations.
discourage innovation across a range of industries.
Representatives of the pharmaceutical industry argue that
Drafted by NIST and the Interagency Working Group for
the proposal would especially diminish U.S.
Bayh-Dole (IAWBD), the proposed framework sets out a
competitiveness in the pharmaceutical industry and
three-step process for agencies to use in determining
undermine R&D and investment in new treatments for
whether to exercise march-in rights on a particular patented
patients. The Biotechnology Innovation Organization stated
invention. First, the agency assesses whether Bayh-Dole
that the draft guidance would especially hurt “smaller
applies to the invention at issue (i.e., was the invention
biotech companies, which are responsible for the bulk of
conceived or reduced to practice using federal funds).
medical innovation.”
Second, the agency assesses whether one of the four
Groups that advocate for the use of march-in rights on the
statutory criteria (listed above) required to exercise march-
grounds of pricing have largely expressed qualified support.
in rights apply. The bulk of the draft guidance focuses on
For example, the Center for American Progress issued a
this step, providing a number of factors and questions
statement applauding the proposal. Other groups have
agencies may consider when assessing whether a particular
questioned whether the framework goes far enough in
scenario meets one of the statutory march-in criteria. The
encouraging federal agencies to exercise march-in rights.
draft guidance advises agencies to consider price as a factor
For example, Public Citizen stated that the guidance “must
in assessing whether the “practical application” and “health
go further to challenge big pharma’s monopoly power.”
and safety needs” statutory criteria apply. As to practical
The director of Knowledge Ecology International, which
application, the guidance considers “the reasonableness of
has petitioned NIH to exercise march-in rights to lower the
the price and other terms” as a factor that may
price of some federally funded drugs, criticized the
“unreasonably limit availability of the invention to the
framework for not using drug prices in other countries as a
public.” As to health and safety needs, the guidance would
metric for determining the reasonableness of drug prices.
have agencies consider whether “the price is extreme,
unjustified, and exploitative of a health or safety need,”
Considerations for Congress
among other considerations.
Congress might consider a range of actions in response to
NIST’s draft guidance. For example, Congress could
Third, the guidance asks the agency to assess whether the
consider legislation to amend 35 U.S.C. § 203 in a way that
exercise of march-in rights would support the policy and
either explicitly requires or prohibits the consideration of
objectives of Bayh-Dole, including whether invoking
specific factors, such as price, in march-in determinations.
march-in rights would incentivize innovation and promote
In considering possible responses, Congress may weigh the
public access to that innovation.
possible impacts that march-in rights have on pricing of
patented products and incentives for innovation and R&D,
NIST’s proposed framework is a draft document. The
as well as the potential effect the draft guidance may have
guidance states that the responses to the RFI will inform
on public-private partnerships.
NIST and IAWBD in developing a final framework. Even if
finalized, the framework would be a guidance document
Alternatively, Congress might choose to continue to engage
that, unlike formal regulations, would lack the force of law.
in oversight, since it is unclear what effect the draft
guidance would have on whether agencies exercise march-
Stakeholder Responses to the Draft Guidance
in rights. As such, Congress may choose not to pursue
There is a long-running legal, academic, and policy debate
legislative action in order to see whether the agency’s
over the appropriateness of considering a federally funded
guidance is finalized, and to assess the guidance’s practical
invention’s price as a reason to exercise march-in rights.
effect, if any, on agency march-in proceedings and
Some groups have urged federal agencies to march in when
determinations.
a federally supported invention is unduly expensive, noting
that the statute defines “practical application” to require that
Kevin J. Hickey, Legislative Attorney
the invention be “available to the public on reasonable
https://crsreports.congress.gov

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March-In Rights Under the Bayh-Dole Act: Draft Guidance

IF12582
Emily G. Blevins, Analyst in Science and Technology
Policy


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https://crsreports.congress.gov | IF12582 · VERSION 1 · NEW

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