Advancing Commercialization of Digital Products from Federal Laboratories (2021) / Chapter Skim
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4 Patents, Trade Secrets, Digital Products, and Federal Laboratories
4 Patents, Trade Secrets, Digital Products, and Federal Laboratories
Pages 39-58
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From page 39... ...
This chapter examines federal labs' use of patents and trade secrets for digital products and the impact on the dissemination and commercialization of those products. Noted in the discussion is that many valuable digital products created by federal labs lack formal IP protection and that labs may compensate for this lack of legal protection by imposing restrictive contractual terms and technological control mechanisms on those products.
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From page 40... ...
Software patents differ substantially from copyrights covering computer software. Copyright protects the expression of a work -- the lines of code written by a programmer, the executable version of that code, and the screen displays and images generated by the code.
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From page 41... ...
Over the course of the decades-long controversy surrounding software patents detailed above, researchers attempting to examine this question have used differing definitions for software, and their results have differed substantially based on the definition used (Rai et al., 2009)
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From page 42... ...
The growth of patents on human DNA sequences, often referred to as "gene patents," caused concern in some quarters, and by 2005, two Massachusetts Institute of Technology (MIT) researchers estimated that a full 20 percent of human genes were covered by patent claims to some degree (Jensen and Murray, 2005)
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Accordingly, DNA sequence data today are largely considered ineligible for patent protection. Patents and Federal Digital Products Federal laboratories have patented digital products for many years.
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From page 44... ...
began to file patent applications covering short DNA segments known as "expressed sequence tags" (ESTs) , arguing that they could help locate much larger genes more quickly and efficiently than would sequencing the entire genome, making NIH one of the first agencies to seek patents on human DNA sequences.
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From page 45... ...
. Further, despite NIH's overt opposition to patents covering raw DNA sequence data and its public release of large quantities of genomic data, the federal government remains a major holder of patents covering more specifically focused DNA-based inventions.
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From page 46... ...
Accordingly, these data are consistent with the possibility, advanced by some federal lab representatives, that few labs currently seek software patents. Additionally, even the number of software patents sought and secured by federal labs pre-Alice may represent only a small percentage of the total software produced by the labs.
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From page 47... ...
granted exclusive or partially exclusive licenses covering more than 200 federal patents to seven different PAEs. As has been widely reported in the popular media, PAEs are extremely controversial to the extent that they extract monetary licensing fees or litigation settlements from existing market actors, and do not themselves innovate, utilize technology, or bring products to market.
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From page 48... ...
Perhaps more important, there appears to be no effective remedy for violation of the Section 209 requirements on the part of federal agencies. Such remedies as recognition of such a violation as constituting an affirmative defense to a claim of infringement by an exclusive licensee of a federal patent or as giving rise to a private cause of action for the violation would help ensure that exclusive licensing by federal labs was in the public interest.
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From page 49... ...
In principle, however, the lab retains the right to use, or have used, the invention for government purposes.7 Likewise, CRADAs must allow for the collaborating party to retain title to any invention made by its employees, subject to the granting of a nonexclusive license permitting the lab to use, or have used, the invention for government purposes.8 While no reporting requirements attach to patents on inventions owned by collaborating parties, the USPTO does require that the face of issued patents reflect the use of federal funding by contractors. Other Federally Funded Inventions Under the Bayh-Dole Act, entities that receive federal funding, including contractors of GOCO laboratories, are entitled to retain rights to inventions they make in the course of government-funded research.9 These entities are free to license such rights, with the provision that any exclusive licensee must agree that products embodying, or produced using, the licensed invention will be manufactured substantially in the United States.10 In contrast with the comparable U.S.
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From page 50... ...
TRADE SECRETS This section provides an overview of trade secret law and its intersection with the Freedom of Information Act (FOIA) for federal digital products.
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From page 51... ...
Thus, commercial data and databases, which are not protected by copyright in the United States, are often treated as trade secrets, as are proprietary algorithms, particularly because patent protection for pure algorithms is unavailable. Computer software may also be treated as a trade secret, even when copyright protection exists as well.
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concludes that the release of genomic data into the public domain by the HGP was associated with the generation of more commercial products relative to the release of genomic data kept as trade secrets (and licensed accordingly) by Celera, the HGP's major private competitor (Williams, 2013)
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From page 53... ...
Thus, software may or may not be within the scope of federal works accessible to the public under FOIA, at least in the view of DOD. Trade Secret Status for Federal Digital Products As early as the 1990s, critics of the federal government's open-access policies argued that FOIA has been an "impediment" to agencies' technology commercialization activities, given that "a foreign competitor can come in 18 Gellman, 1994, p.
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From page 54... ...
§ 209, and the software was originally developed to meet DOD's military needs.23 Such licenses may be exclusive or nonexclusive. The first reported license issued under this authority was granted by the Air Force Research Laboratory to Pratt & Whitney and United Technologies Corporation in 2018 on a nonexclusive basis.24 Given the arguments raised above regarding the impact of trade secrets on innovation, it is clear that unless there is a national security issue, from a public interest perspective, trade secrets are a less desirable form of IP protection for federal labs' digital products.
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From page 55... ...
In addition, patents are difficult to obtain for digital inventions, and FOIA eliminates the less desirable trade secret protection for unclassified agency information. Nevertheless, federal agencies seeking to incentivize commercialization and/or extract rent from the transfer of these digital products to the private sector can circumvent this lack of protection via two distinct routes.
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From page 56... ...
FINDINGS AND RECOMMENDATIONS Finding 4-1: Given documented cases in which federal laboratories have licensed software patents to patent assertion entities, it appears that federal labs do not always adhere to the requirements in Section 209 of the Bayh-Dole Act, which include allowing licensing only if such action is necessary to achieve practical application. However, evidence of how common such breaches are is limited.
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From page 57... ...
PATENTS, TRADE SECRETS, DIGITAL PRODUCTS, AND FEDERAL LABS 57 operated laboratory contractors that are comparable to those imposed on their government-owned, government-operated counterparts under Section 209 of the Bayh-Dole Act. Recommendation 4-4: Congress should consider rescinding the Section 801 authority provided by the 2008 National Defense Authorization Act that allows agencies to assert trade secrets even for unclassified information with no national security implication.
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