Collaborative R&D and the Cooperative Research and Technology Enhancement (CREATE) Act

Collaborative R&D and the Cooperative Research and Technology Enhancement (CREATE) Act

Order Code RS21882
Updated January 10, 2005
CRS Report for Congress
Received through the CRS Web
Collaborative R&D and the Cooperative
Research and Technology Enhancement
(CREATE) Act
Wendy H. Schacht
Specialist in Science and Technology
Resources, Science, and Industry Division
Summary
The Cooperative Research and Technology Enhancement (CREATE) Act, P.L.
108-453, was signed into law on December 10, 2004. Reflecting congressional interest
in encouraging cooperative research and development among universities, industry, and
government, this legislation addresses issues of patent ownership under collaborative
ventures. The act amends 35 U.S.C. section 103 to permit the patenting of inventions
made through joint research among multiple partners if certain conditions are met. The
change is in response to a 1997 decision of the Federal Court of Appeals in OddzOn
Products, Inc., v Just Toys, Inc. which stated that absent an assignment of rights to a
single entity prior to the start of a research endeavor, the sharing of information among
members of a research team could render any resulting invention unpatentable because
it does not meet the “nonobvious” requirements of the law. (To be nonobvious an
invention must not have been readily within the ordinary skills of a competent artisan
at the time the invention was made.) This Court decision was seen by some observers
to be an impediment to joint public-private research endeavors and contrary to the intent
of congressional policy facilitating such activities. This report will be updated as events
warrant.
Congress has had a long-standing interest in cooperative research and development
(R&D) and its connection to technological advance. It is now widely accepted that
technological advancement accounts for up to one-half of the Nation’s economic growth
over time. Joint ventures are an attempt to facilitate technological development within
the industrial community. Academia, industry, and government are often seen as playing
complementary roles in bringing new products, processes, and services to the
marketplace. While opponents argue that collaborative activities stifle competition,
proponents assert that they are designed to accommodate the strengths and responsibilities
of these sectors. Cooperative projects are intended to utilize and integrate what the
participants do best and direct these efforts to the goal of generating new technologies.
Proponents note that they allow for shared costs, shared risks, shared facilities, and shared
expertise.
Congressional Research Service ˜ The Library of Congress

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A major emphasis of legislative activity has been to augment research in the private
sector. This focus is reflected in executive branch and congressional efforts to encourage
companies to undertake cooperative R&D arrangements and to expand the opportunities
available for research. Various laws have created an environment conducive to joint
ventures between government and industry, or between industry and universities, as well
as among companies. Beginning in 1980 with the passage of legislation mandating the
transfer of technology from government laboratories and allowing certain contractors to
retain title to inventions made under federal funding, Congress has demonstrated its
support for facilitating innovation through cooperative R&D. This approach continues
today in laws designed to make additional alterations to policies regarding government-
owned intellectual property.1
A series of laws use patent ownership to foster collaboration between parties in the
research and development enterprise. Among these are P.L. 96-418, the Stevenson-
Wydler Technology Innovation Act; P.L. 96-517, Amendments to the Patent and
Trademark Act (commonly referred to as the “Bayh-Dole Act”); and P.L. 98-622,
Amendments to the Patent Act.2 Patents protect the inventor’s investments in generating
the knowledge that is the basis for innovation and serve as an incentive to the
commercialization of new ideas. As R&D has become more expensive, ownership of title
to inventions has been used as a means to encourage collaborative work among the
different players in the research enterprise.
The patent system is grounded in Article I, Section 8, Clause 8 of the Constitution
and is intended to stimulate new discoveries and their reduction to practice, commonly
known as innovation. The grant of a patent provides the inventor with a means to capture
returns to his invention through exclusive rights on its practice for (generally) 20 years
from date of filing. This is designed to encourage those additional investments necessary
to further develop an idea and generate a marketable technology. At the same time, the
process of obtaining a patent makes available to the public the concepts on which it is
based. In return for a monopoly right to specific applications of the knowledge generated,
the inventor must publish the ideas covered in the patent. As a disclosure system, the
patent can, and often does, stimulate others to invent “around” existing patents to provide
for parallel technical developments or to meet similar and expanded demands in the
marketplace.
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.3 To be judged novel, the invention must not be fully anticipated by an
earlier patent, publication, or other knowledge within the public domain, typically referred
1 For additional information see Cooperative R&D: Federal Efforts to Promote Industrial
Competitiveness, by Wendy H. Schacht, CRS Issue Brief IB89056 and R&D Partnership and
Intellectual Property: Implications for U.S. Policy, by Wendy H. Schacht, CRS Report 98-862.
2 For a detailed discussion of the first two laws see The Bayh-Dole Act: Selected Issues in Patent
Policy and the Commercialization of Technology, by Wendy H. Schacht, CRS Report RL32076
and Patent Ownership and Federal Research and Development: A Discussion on the Bayh-Dole
Act and the Stevenson-Wyder Act, by Wendy H. Schacht, CRS Report RL30320.
3 35 U.S.C. section 101.

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to as “prior art”.4 A nonobvious invention must not have been readily within the ordinary
skills of a competent artisan at the time the invention was made.5
In 1984, Congress enacted P.L. 98-622, Amendments to the Patent Act, as a response
to several court decisions which appeared to make the results of collaborative research
activities “nonobvious” because earlier discoveries of individual research team members
were considered “prior art” making the new inventions unpatentable.6 The 1984
legislation amended 35 U.S. C. section 103 to provide that background information shared
within an organization as part of a cooperative effort was not to be considered “prior art”
which would have prevented patenting of the resulting innovation. As stated in a section-
by-section analysis of H.R. 6286 (the bill which became law):
New technology often is developed by using background scientific or technical
information known within an organization but unknown to the public. The bill, by
disqualifying such background information from prior art, will encourage
communication among members of research teams, and patenting, and consequently
public dissemination, of the results of “team research.”7
The concept of what constituted an organization within which research was performed
was intended to be broad according to the House Committee on the Judiciary in the 108th
Congress:
In amending [section] 103 to promote collaborative research, Congress did not
expressly limit the benefit of the new law to circumstances in which the collaboration
involved researchers from within a single organization. Instead, it provided that
researchers from different organizations who had commonly assigned their rights to
a single entity could also benefit from the “safe harbor” created by the law.8
However, this interpretation was called into question in the Federal Court of Appeals
1997 decision in OddzOn Products, Inc., v. Just Toys, Inc. The Court found that the
sharing of information among research team members could result in the invention being
deemed “obvious” and therefore not subject to a patent if the participants had not
previously assigned intellectual property rights to a single entity prior to generating the
invention. Thus, if a structured research agreement specifying patent ownership had not
been implemented before work commenced, otherwise patentable products or processes
could be rendered unpatentable if, in the collaborative R&D process, the partners shared
information, even on a confidential basis.
The Federal Court decision has been seen by some observers as an impediment to
cooperative public-private research endeavors. This was thought to be contrary to the
4 35 U.S.C. section 102.
5 35 U.S.C. section 103.
6 House of Representatives, House Committee on the Judiciary, Cooperative Research and
Technology Enhancement (CREATE) Act of 2003, House Report 108-425, 108th Cong, 2d sess.,
February 24, 2004, 3.
7 Section-by-Section Analysis: Patent Law Amendments of 1984, 130 Congressional Record, H
10525, October 1, 1984.
8 Cooperative Research and Technology Enhancement (CREATE) Act of 2003, op.cit., 3.

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intent of established congressional policy facilitating such activities. “Many states and
the Federal Government operate under laws and practices that tend to prohibit the
assignment of inventive rights to a private sector collaborative partner, as Oddzon [stet]
putatively requires.”9 In undertaking government-industry cooperative research, the
federal departments and agencies may keep title to inventions made by government
employees, while the private sector party retains the intellectual property generated by its
staff. These rights may not be amenable to the transfer to a single commercial entity prior
to the start of the R&D enterprise because of existing law and current government
policies.
Universities are also restricted in what they are allowed to do with certain types of
intellectual property arising from cooperative R&D. Under the Bayh-Dole Act (35 U.S.C.
section 202(c)(7)) nonprofit organizations (including universities) are prohibited from
assigning to another institution the rights to an invention resulting from federally funded
R&D without the approval of the federal agency financing the research. According to
June 10, 2003 testimony before the House Committee on the Judiciary, Subcommittee on
Courts, the Internet, and Intellectual Property, Jeffrey Kushan argued that “. . . universities
cannot create the legal structures that will qualify them for the safe harbor of section
103(c) for their external research collaborations.” This, he maintains, results in a situation
where only certain institutions can protect their inventions under joint ventures while
other organizations involved in the innovation process are unable to do so.
Responding to these concerns, P.L. 108-453, the Cooperative Research and
Technology Enhancement (CREATE) Act allows for patenting of inventions made
through cooperative R&D with multiple parties if certain conditions are met. Under the
new law, inventions generated in the process of collaborative research are treated as if
they were made by a single inventor if a written cooperative agreement has been signed
prior to the development of the discovery. According to the House Committee on the
Judiciary, “the CREATE Act provides a simple means of extending the ‘safe harbor’
provisions of current law that treats inventions of a common owner similarly to inventions
made by a single person.”10 No longer would title to inventions need to be assigned to a
single entity before research commences in order to be deemed “nonobvious” under a
joint research endeavor. These provisions are prescriptive and do not apply retroactively.
9 Ibid, 5.
10 Ibid, 5.