This article comes from law firm Foley & Lardner LLC.

To promote cutting-edge research and development of advanced-energy technologies, the Department of Energy (DOE) formed the Advanced Research Projects Agency-Energy (ARPA-E).  The companies receiving ARPA-E contracts should consider several key patent issues before and during contract performance that could affect a company’s proprietary rights and subsequent revenues. A company’s invention rights and related requirements under an ARPA-E contract require a complex assessment of the particular technology, status of preexisting inventions, timing of development, and applicable provisions under the ARPA-E award.

Title to subject inventions
A fundamental consideration is whether certain technology constitutes a “subject invention.” This is defined as an invention conceived or first actually reduced to practice in the performance of work under the government award. Generally, actual reduction to practice refers to the invention being put into physical form and shown to be operative in the environment of its practical contemplated use. Companies must realize that filing a patent application does not constitute an actual reduction to practice. Rather, this is referred to as a “constructive reduction to practice”.

Provided that the company complies with the government’s rigorous notice, election, and other reporting requirements concerning patent protection, a contractor may retain title to its subject inventions. However, the government obtains a non-exclusive, nontransferable, irrevocable, paid-up license to practice or have practiced the subject invention by or on behalf of the U.S. government throughout the world.

ARPA-E agreements include two domestic manufacturing requirements for subject inventions: A preference for U.S. industry and U.S. competitiveness provisions. Both obligations require that, under specified circumstances, products embodying any subject inventions, or produced through use of any subject inventions, must be substantially manufactured in the U.S., unless the DOE grants a waiver. A determination of what constitutes substantially manufactured in the U.S. requires a complicated assessment of the physical manufacturing process, and the make-or-buy decisions down to the product’s component level.

Recommendations
A company’s scrutiny of its portfolio of inventions when working with the government will minimize the likelihood of potential loss of proprietary rights and maximize opportunities for enhancing corresponding revenues. Failure to do so could have onerous outcomes for companies participating under ARPA-E or other types of government agreements.

Foley & Lardner LLC

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