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Royalty Policy Regarding Licensed Inventions

July 9, 1998


Under current legislation, Congress included economic incentives for Government researchers participating in the patenting process. These incentives result in inventors receiving a share of the Government's royalty payments under the licensing agreement. The National Technology Transfer and Advancement Act of 1995 (NTTAA) specifies the distribution of royalty payments as follows:

[t]he head of the agency or laboratory, or such individual's designee, shall pay each year the first $2,000, and thereafter at least 15 percent of the royalties or other payments to the inventor or coinventors. (Section 14(a)(l)(A)(I) of the Stevenson-Wydler Technology Innovation Act, 15 U.S.C. 3710c, as amended by section 5 of Pub. L. 104-113.)


  1. The Government seeks to obtain a fair financial return on the public's investment through the negotiation of royalty-bearing licenses with licensees. Further, royalties or other payments received under licenses are distributed to inventors and other laboratory employees who substantially increase the technical value of the particular inventions.
  2. Royalties may be received by FDA for technologies developed in FDA laboratories or from extramural sources who have waived title of the technology to FDA.
  3. Royalties from licensed technologies will be received consistent with the terms and conditions of the licensing agreement.
  4. Progress reports are submitted by the licensee under the terms and conditions of the licensing agreement.
  5. Royalty payments, including inventor royalties, are distributed periodically, currently twice yearly. Usually, inventor payments are distributed in late winter (March) and early fall (October). The royalties are received by NIH on behalf of FDA and then transferred to FDA's Office of Financial Management (OFM) for distribution.
  6. All royalty payments are distributed by the Office of Financial Management (OFM). No royalties are ever paid directly to any inventor(s) by any licensee.
  7. A formal review and approval process is followed in receiving and administering royalty distribution.
  8. Overall, FDA will allocate royalty income on the basis of income received and each inventor will be given:

The sum of these, as appropriate, will be the inventors' share in the royalties received by the Government. The maximum amount of royalties which can be received per inventor is $150,000 per year. Any amount above that requires Presidential approval.

After patent prosecution and any other costs are recovered, the remainder of the royalty income will be distributed to the laboratory in which the invention was made.

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