Why March‑In Rights Matter And Who’s at Risk
If your patent was developed using federal funding, even partially, the U.S. government can force licensing to a competitor under certain conditions. The recent NIST draft framework raises the real possibility that pharma and medtech patent owners could lose exclusive commercial control if pricing or access issues arise.
These regulatory changes create immediate risk for technology owners.
What This Means for You: Immediate Action Required
This policy change demands urgent attention from IP holders:
Who’s at Risk: Biotech founders, medical-device startups, and university spin-offs commercializing federally funded research.
Consequence: Loss of exclusive commercial control over your patented technology.
Time-Sensitivity: The NIST feedback window is closing, and policy finalization is imminent, making immediate IP audit and compliance review critical.
What Are March-In Rights and How Do They Affect Your IP?
“March-in” rights are a regulatory mechanism that allows the government to intervene in the licensing processes of federally funded inventions under specific, non-delegable circumstances.
The core goal of the framework released by the National Institute of Standards and Technology (NIST) is to clarify and potentially recalibrate the balance between public interest and private profits derived from taxpayer-funded research.
This change is not theoretical; it directly impacts the commercial viability and control of your intellectual property.
The NIST Draft Framework: Key Considerations
Clarification of Circumstances for Exercise: The framework aims to provide clearer guidelines on when the government can exercise “march-in” rights, seeking to balance encouraging private sector investment in innovation with safeguarding public interest.
Impact on Public Access and Pricing: This is the central point of contention. The framework might influence the availability and affordability of products—specifically targeting high-cost items—developed from federally funded research, particularly in the healthcare sector.
Feedback and Future Directions: NIST is actively seeking feedback from various stakeholders. The final policy could evolve significantly based on input from the public, industry, and academia, underscoring the immediate need for IP holders to assess their exposure.
Who Is Affected by the New NIST Framework?
The implications of the new framework are not uniform. They are especially critical for intellectual property owned by:
Biotech Founders & Pharma Companies: Firms commercializing drugs developed with NIH or similar funding.
Medical Device Startups: Companies seeking FDA approval for devices that relied on federal research grants.
University Spin-Offs: Entities commercializing research that originated in academic labs via SBIR/STTR grants.
Any Recipient of Federal Funding: Any non-profit or small business whose patented technology is rooted in a government grant (per the Bayh-Dole Act).
The Continuing Debate: Rooted in the Bayh-Dole Act of 1980
The exercise of Bayh-Dole march-in rights has long been a topic of debate within patent law and public administration. At its core, the concept is rooted in the Bayh–Dole Act of 1980.
This pivotal law allowed universities, nonprofits, and small businesses to own patents on inventions derived from federally funded research, thus incentivizing their commercialization.
Context of the Bayh-Dole Act
Before 1980, very little government-funded research was commercialized. The focus of the Bayh-Dole mechanism was to make the commercialization of government-funded research economically attractive by granting ownership to the developers.
However, the government retains certain rights, including “march-in” rights.
These rights enable the government to “march in” and license patents to other parties if the original patent holder fails to meet specific requirements, such as making the invention available to the public on “reasonable terms.”
What are “Reasonable Terms”? This term is intentionally broad, but generally refers to making the invention available on terms that are acceptable to the public. Under the new NIST framework, the definition is likely to be sharpened to specifically address high pricing that restricts public access.
Deeper Dive: The Statutory Basis for March-In
The right of the government to intervene is not arbitrary; it is strictly limited by the four statutory conditions outlined in 35 U.S.C. § 203. Understanding these limits is key to legal defense.
The Four Statutory Conditions
A funding agency (like NIH or DoD) can initiate march-in proceedings only if one of the following conditions is met:
Practical Application: The contractor (patent owner) has not taken, or is not expected to take, effective steps to achieve practical application of the subject invention.
Public Needs: Action is necessary to meet requirements for public health or safety which are not reasonably satisfied by the contractor. (This is the most relevant condition for drug pricing debates).
Federal Needs: Action is necessary to meet requirements for public use specified by federal regulations.
U.S. Manufacturing: The contractor has failed to satisfy the requirement that the invention be manufactured substantially in the United States.
The March-In Administrative Process
Despite no formal exercise of these rights to date, the process is clearly defined. This highlights that a march-in action is a serious, high-level administrative proceeding, not an instant intervention.
How a Petition is Filed and Reviewed
Petition: Any interested party (e.g., a competitor, consumer advocacy group) can file a formal petition requesting the federal agency to exercise its march-in rights.
Agency Review: The funding agency reviews the petition. If it finds the grounds potentially valid, it must give the patent owner notice and an opportunity to present evidence and arguments.
Hearing: A formal hearing or proceeding takes place, where both the petitioner and the patent holder can argue their cases. This often involves significant legal and economic analysis.
Final Determination: If the agency determines that the contractor has failed to comply with the statutory requirements, it may issue an order requiring the patent holder to grant a license to a third party. This decision is subject to judicial review.
Potential Risks for Patent Holders: Real-World Scenario
The NIST draft framework aims to prevent potential abuses and ensure that federally funded inventions fulfill their intended public benefit.
The Delicate Balance: Innovation vs. Access
Critics and proponents of the framework alike recognize the delicate balance it seeks to achieve:
Risk 1: Incentivizing Innovation (Private Concern): There is a need to incentivize private companies to invest vast sums in development. The process is extremely costly: new drug development often exceeds $1 billion and can take a decade, and “march-in” could undermine that investment.
Risk 2: Safeguarding Public Interest (Government Concern): There is a public interest in ensuring that these technologies, especially those funded by taxpayer dollars, are accessible and affordable. This is the greatest concern regarding the pricing of drugs and other healthcare products.
Real-World Scenario of Government Patent Intervention
For example, if a life-saving oncology drug developed with NIH funding is priced beyond public access, the government could authorize a competing manufacturer to license the patent under march-in rights to bring a more affordable version to market.
This government patent intervention carries the ultimate risk: the original patent holder could lose control over their key IP and the resulting revenue stream.
Proactive Legal Strategies to Mitigate Risk
To protect your business from the risks associated with Bayh-Dole march-in rights and the evolving NIST draft framework 2024, preventative legal planning is essential.
Actionable Steps for IP Holders
Thorough IP Audit: Conduct an immediate, detailed audit of all patents to identify which were developed using federal funds (even indirectly) and are therefore subject to Bayh-Dole.
Compliance Review: Ensure strict adherence to the U.S. manufacturing requirement. Document all substantial manufacturing steps performed domestically.
Commercialization Documentation: Maintain robust records proving that effective steps are continuously being taken to achieve practical application (e.g., market launch plans, clinical trial progress, licensing agreements).
Strategic Pricing Justification: Develop a defensible strategy for pricing, justifying costs based on R&D investment and market conditions, especially for critical health products.
FAQ: March-In Rights and Your Patents
This section addresses common queries regarding Bayh-Dole IP compliance:
Question | Answer |
|---|---|
Can the government take my patent? | No, the government cannot take ownership, but it can force you to license it to another party if you fail to meet public benefit requirements. |
Has march-in ever been used? | No agency has ever formally exercised “march-in” rights under the Bayh-Dole Act in its 40+ year history, but the new NIST framework signals a potential shift. |
Does Bayh-Dole apply to private companies? | Yes, if the invention resulted from research that received federal funding, even if the final IP is held by a private commercial entity. |
What specifically triggers march-in rights? | The most common triggers are failure to achieve practical application, failure to satisfy public health needs, or failure to meet the manufacturing requirement (i.e., not manufacturing the product substantially in the U.S.). |
Conclusion and Public Influence
NIST’s call for public feedback is a crucial aspect of this process. It reflects an understanding that the framework’s success depends on its ability to address the concerns of a diverse range of stakeholders. The feedback period is an opportunity for these parties to influence the final policy, ensuring it effectively balances the need for innovation with the public interest.
The debate surrounding “march-in” rights is a microcosm of broader discussions about the government’s role in innovation and the importance of ensuring that the fruits of publicly funded research are shared in a way that benefits society as a whole. NIST’s efforts to refine and clarify these rights are a step toward resolving these complex issues, offering a blueprint for how similar challenges might be approached in the future.
How Crowley Law LLC Can Help You
If your technology was developed with federal funding, or if the funding history is unclear, now is the time for a proactive legal review. With updated regulations on the horizon, early action can save you from forced licensing or loss of exclusivity.
At Crowley Law, we offer full‑service legal support for tech, biotech, med‑tech, diagnostics, and life‑sciences companies – from entity formation and IP protection to funding, licensing, regulatory compliance and scaling.
Let us help you:
Trace funding & compliance exposure – identify grants or research funds that may trigger march‑in rights
Secure and manage your IP & corporate structure – ensuring clean ownership, licensing readiness, and deal‑ready documentation
Navigate regulatory, licensing, and investor-related obligations – so you can scale without unexpected legal risks
Schedule a confidential review today and safeguard the value of your innovation while regulations evolve.