Contractor Reporting Obligations under US Government Contracts:

A Trap for the Unwary

 

Nonprofit organizations and small businesses that enter into contracts with US federal government executive agencies such as the National Institutes of Health (gNIHh), the Centers for Disease Control and Prevention (the gCDCh), the National Aeronautics and Space Administration (NASA), the Federal Energy Regulatory Commission (FERC), the National Oceanic and Atmospheric Administration (NOAA), the National Institute of Standards and Technology (NIST), the US Agricultural Department (the gUSDAh), the Federal Aviation Administration (the gFAAh), and the US Department of Defense, (including the Air Force, Army, Marine Corps, and Navy) should realize that under the holding of a recent US case, failure to comply fully with contractual provisions may mean that contractors completely forfeit to the US federal government ownership of inventions made under the contracts.

 

 

1.  Summary

In November 2004, the US Court of Appeals for the Federal Circuit (the gCAFCh) held in the Campbell Plastics case[‚P] that because a contractor with the US Army Chemical Research, Development, and Engineering Center (the gArmyh) failed to comply with contractual provisions requiring it to disclose inventions under a single form within two months after the inventor disclosed the invention to contractor personnel in charge of patent matters, the contractor had forfeited its right to the invention, and the US federal government could take title to it.

 

 

2.  Background on the Contract and Campbellfs Activities

On September 25, 1992, Campbell and the Army entered into a contract to develop components for a face mask to be worn by aircraft crew. Several clauses taken directly from US Federal regulations[‚Q] that govern the way in which federal executive agencies acquire supplies and services were included in the contract. The contract included the following language:

 

gcthe Contractor will disclose each subject invention to the Federal agency within 2 months after the inventor discloses it in writing to Contractor personnel responsible for patent matters. The disclosure to the agency shall be in the form of a written report and shall identify the contract under which the invention was made and the inventor(s). It shall be sufficiently complete in technical detail to convey a clear understanding to the extent known at the time of the disclosure, of the nature, purpose, operation, and the physical, chemical, biological or electrical characteristics of the invention.[‚R]

 

The Contractor will convey to the Federal agency, upon written request, title to any subject invention-

(1)                               If the Contractor fails to disclose or elect title to the subject invention within the times specified in paragraph (c) of this clausec.[‚S]

 

The contract also required Campbell to disclose subject inventions on a specific form called a gDD Form 882h every twelve months and three months after completion of the contracted work.

 

3. History of Campbell Reporting Activities

On December 14, 1992 Mr. Richard Campbell, Campbellfs president, faxed handwriting drawings to a representative of the Army which identified a gsonic weldh for use on a facemask.

On February 11, 1993, Mr. Campbell faxed a drawing depicting a sonic weld, and later the next month, several documents, including a monthly report, describing sonic welding that planned for a mask. On July 21 and August 5 of 1993, he sent cost estimates to the Army and noted that the sonic welding concept was nearly complete. Finally, on October 18, 1993, he submitted a DD Form 882 which indicated no inventions had been made.

Although Mr. Campbell submitted a monthly progress report on June 6, 1994 that contained the phrase gEyelens Retaining System, Branson satisfied with Sonic Weld Concept – best under design restrictions,h and continued to report work on the sonic welding process in monthly progress reports in late 1994, Campbellfs final DD Form 882, submitted on September 15, 1994, did not list any inventions.

In August 1997, Campbell asked an attorney to draft a patent application on an invention entitled gSonic Welded Gas Mask and Process.h On January 30, 1998, the US Patent and Trademark Office allowed the Army to review the application to determine if the publication of the application or granting of a patent would be detrimental to US national security.[‚T]

On April 20, 1999, Mr. Campbell was issued a US patent that expressly reserved for the government a paid up license and the gright in limited circumstances to require the patent owner to license others on reasonable termsh as provided for by the terms of the contract.

Campbell notified the Army of the patent and the Army claimed joint ownership of the invention. The contract required that disputes between the parties be heard by the Armed Services Board of Contract Appeals, an adjudicative agency that hears disputes between the Army and its contractors.

 

 

4.  Campbellfs Stance

Campbell argued that even though its disclosure to the Army was not in the form of a DD Form 882, it had in fact disclosed all technical aspects of the invention, as shown by a report prepared by the Army and published in June 1997 that disclosed research conducted by the Army, and made reference to sonic welded components in the mask. The Army admitted that this report made an enabling disclosure of the invention. Campbell further argued that its failure to comply with the contract was a failure in form only that should not result in its forfeiture of the invention.

 

 

5.  The Armed Services Board of Contract Appeals Finding

The Armed Services Board of Contract Appeals held that despite the fact that the Armyfs own June 1997 report provided an enabling disclosure of the invention, and even though the Army did learn about the invention when it reviewed the patent application for US national security determination procedures, because Campbell had failed to perform its contractual obligations to inform the Army of the invention, Campbell had allowed the government the opportunity to take title to its patent. Campbell appealed this decision to the CAFC.

 

 

6. The CAFC Decision

The CAFC upheld the Armed Services Board of Contract Appeals finding, holding that Campbell forfeited title to the invention, and that the federal government could take title to it. The CAFC noted that FAR regulations, and the contractual clauses which are based on them, come from the Bayh-Dole Act[‚U], legislation that allows non-profit organizations and small business contractors to retain title to an invention made by them in the course of performing a government contract. The CAFC noted that a condition for retaining title to the invention is that the contractor disclose each invention within a reasonable time after it becomes known to the contractor in order to allow the government to protect its rights under the Bayh-Dole Act to receive a paid-up license to practice inventions if the contractor elects to retain title to it,[‚V]and to receive title to the invention in the US or any other country in which the contractor does not file a patent application prior to an applicable statutory bar date.[‚W]

The CAFC found that the policy of requiring a single, easily identifiable form on which to disclose inventions effectively protects the federal governmentfs interest in retaining its rights to contractor inventions is sound. Therefore, the contractual language gneeds to be strictly enforced.h As a result, the CAFC held that Campbellfs failure to comply with the form and substance of the contract terms allowed the federal government to take title to its patented invention.

  



[‚P] Campbell Plastics Engineering & MFG., Inc. v. Brownlee

http://fedcir.gov/opinions/03-1512.pdf.

 

[‚Q] Federal Acquisition Regulation 52.227-11 is available here: http://www.acqnet.gov/far/current/pdf/FAR.book.pdf .

 

[‚R] F.A.R. 52.227-11(c) (1).

 

[‚S] F.A.R 52.227-11(d) (1).

 

[‚T] On January 30, 1998, the US Patent and Trademark Office had allowed the Army to review the application under 35 USC Sec. 181, a US Patent law provision that allows the government to review a patent application to determine if the publication of the application or granting of a patent would be detrimental to the national security.

 

[‚U] 35 U.S.C. Secs. 200-212.

 

[‚V] 35 U.S.C. Sec. 202 (c) (4).

 

[‚W] 35 U.S.C. Sec. 202 (c) (3).





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