What Is the Bayh-Dole Act? A Game-Changer for IP Ownership

Before the Bayh-Dole Act was enacted in 1980, the federal government typically claimed ownership of patents for inventions developed with its funding. This often left groundbreaking innovations languishing in bureaucratic limbo, with little incentive for private entities to bring them to market. The Bayh-Dole Act flipped this model on its head, empowering recipients of federal grants to take control of their intellectual property.

Under the Act:

- Eligible Entities: Small businesses, nonprofits, and universities receiving federal funding can elect to retain title to inventions they develop under government grants.

- Patent and Licensing Rights: These entities can patent their inventions and license them to third parties, opening the door to commercialization and profit.

- Government’s Role: While the government relinquishes ownership, it secures a non-exclusive, royalty-free license to use the invention for its own purposes. In essence, the government says, “We helped fund this, so we get to use it—but you can still monetize it.”

This shift has fueled innovation across industries, from biotech to renewable energy, by giving grant recipients the tools to turn federally funded research into marketable products.

Key Conditions for Grantees Under Bayh-Dole

Retaining IP rights under the Bayh-Dole Act isn’t a free-for-all. Grantees must comply with specific requirements to maintain their ownership and avoid government intervention.

These include:

- Prompt Patent Filing: Grantees must file for patents in a timely manner to secure their rights.

- U.S. Manufacturing Preference: When licensing the invention, grantees must prioritize U.S.-based manufacturers.

- Royalty Sharing: Inventors (e.g., university researchers) must receive a portion of the royalties generated from the IP.

- Commercialization Efforts: Grantees are expected to take reasonable steps to bring the invention to market.

Failure to meet these conditions can trigger the government’s march-in rights, a mechanism we’ll explore later.

Exceptions to Bayh-Dole: DoD, NASA, and More

Not all federal grants fall under the Bayh-Dole Act’s umbrella. Agencies like the Department of Defense (DoD), NASA, and the Department of Energy (DOE) often impose their own rules, especially for projects tied to national security or sensitive technology.

- DoD Contracts: Governed by the Federal Acquisition Regulation (FAR) and Defense FAR Supplement (DFARS), DoD contracts may allow contractors to retain patent rights. However, the government typically secures broader rights to technical data and software developed under the contract, ensuring it can use or share these assets as needed.

- NASA and DOE: For high-stakes projects, these agencies may claim ownership of IP or demand expanded rights, limiting the grantee’s control.

- SBIR/STTR Programs: Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, used across agencies like the DOE, align with Bayh-Dole principles. Small businesses can retain IP rights, while the government gets its standard non-exclusive license.

These exceptions highlight the importance of reviewing the specific terms of your federal grant or contract to understand your IP rights fully.

March-In Rights: The Government’s Rarely Used Trump Card

The Bayh-Dole Act includes a safeguard known as march-in rights, allowing the government to step in under certain conditions. The government can force a grantee to license the invention to others—or even reclaim control—if:

- The invention isn’t being made available to the public (e.g., it’s sitting unused).

- It’s needed to address health, safety, or national emergencies.

- The grantee fails to meet the U.S. manufacturing preference.

Despite this authority, march-in rights are rarely exercised. As of April 2025, no successful march-in case has been recorded in the U.S. However, the provision remains a hot topic in debates over drug pricing and access to taxpayer-funded technologies, especially in the pharmaceutical industry. Advocates argue it could lower costs for critical medications, while critics warn it might discourage innovation.

Why the Bayh-Dole Act Matters in 2025

The Bayh-Dole Act continues to shape the landscape of innovation in the United States, balancing the interests of private entities and the public sector. For small businesses, nonprofits, and universities, it offers a pathway to profit from federally funded research. For the government, it ensures access to inventions without stifling commercialization. And while march-in rights remain a theoretical tool rather than a practical one, their potential looms large in policy discussions.

If you’re navigating IP rights under a federal grant, consult the specific terms of your agreement—whether it’s a Bayh-Dole-eligible grant or a DoD contract under FAR/DFARS. Understanding your rights and obligations is key to maximizing the value of your invention.