PUBLIC NOTICE:  DEVIATION TO THE STANDARD PATENT RIGHTS CLAUSE (FAR 52.227-11 
PATENT RIGHTS - RETENTION BY THE CONTRACTOR (SHORT FORM)), IN A CONTRACT TO BE 
AWARDED UNDER THE NIH ROADMAP:  “MOLECULAR LIBRARIES SMALL MOLECULE REPOSITORY”

RELEASE DATE:  January 30, 2004

RFP RELEASE DATE:  DECEMBER 31, 2003

NOTICE:  NOT-RM-04-008

National Institutes of Health (NIH)

COMMENTS/ALTERNATIVE PLAN RECEIPT DATE:  MARCH 2, 2004

DESCRIPTION

The NIMH is seeking public comments (or alternative plans) regarding potential 
use of a deviation to the standard patent rights clause (FAR 52.227-11 Patent 
Rights - Retention by the Contractor (Short Form), in a contract to be awarded 
under the NIH Roadmap:  “Molecular Libraries Small Molecule Repository”.  The 
proposed clause is included in full text below, and also in the solicitation for 
this contract (NIMH-04-DB-0001), which can be accessed at: 
http://www.nimh.nih.gov/grants/indexcon.cfm#RequestforProposal 
and in the FedBizOpps at: http://vsearch1.eps.gov/servlet/SearchServlet.

If a Determination of Exceptional Circumstances (DEC) were implemented, this 
clause deviation would serve to protect the pre-existing and future patent 
rights of suppliers of proprietary materials for synthesis or inclusion in the 
compound collection/repository.  The proposed clause deviation only applies to 
discoveries resulting from routine synthesis activities and repository 
activities involving the use of proprietary materials (compounds and procedures).
Discoveries resulting from research activities pertaining to the development or 
modification of chemical synthesis procedures, process development, or other 
unanticipated discoveries developed by the contractor without the use of 
proprietary materials will be covered by the standard Patent Rights Clause 
(FAR 52.227-11, Patent Rights - Retention by the Contractor (Short Form) 
(June 1997).  Furthermore, the Contractor will have the right to ask for 
greater rights, as defined in the clause, if the supplier of the proprietary 
compound is not interested in the subject invention.

Potential offerors and other interested parties are invited to submit comments 
herein or provide “alternative plans” when responding to the solicitation for this 
contract (http://www.nimh.nih.gov/grants/indexcon.cfm#RequestforProposal), which 
would serve to meet the objectives/goals of this Program without the use of this 
deviation.  All plans and comments will be considered and discussed with interested 
parties. 

Any comments or alternative plans regarding this clause should be submitted, in 
writing, by March 2, 2004, to Mr. Bruce Anderson, Contracting Officer, Contract 
Management Branch, NIMH, NIH, 6001 Executive Blvd., Rm. 8154 (MSC 9661), Bethesda, 
MD 20892 (for Fed Ex, UPS etc. use Rockville, MD 20852);Voice: (301) 443-2234; Fax: 
(301) 443-0501; E-Mail: ba9i@nih.gov.  See solicitation for instructions on 
submission of an “alternative plan” with a proposal.

The following Statement of Facts provides more detail into the potential use of a 
deviated patent rights clause:

Statement of Facts

The primary goal of the Molecular Libraries initiative is to improve public health 
by stimulating the discovery, development, and commercialization of new research 
tools and potential therapeutic compounds for the treatment of a variety of 
disorders and the validation of new targets for drug therapy.  We believe the 
synthesis and repository activities of this contract may constitute an exceptional 
circumstance where the imposition of a FAR deviation, through a Determination of 
Exceptional Circumstances (DEC), would further the achievement of the programmatic 
goals and meet the objectives of 35 U.S.C. 200.  Historically, the NIMH has 
obtained the approval of DECs in similar contract programs where proprietary 
materials are involved.

To meet the goals and objectives of the Molecular Libraries Small Molecule 
Repository, this contract will need to acquire and maintain a library of hundreds 
of thousands of diverse small molecules, which will become a major resource to 
investigators for further evaluation in a wide variety of assays of biological 
activity.  The small molecules collected in this repository will be arrayed and 
sent to screening centers (i.e., grantees, which are not part of this contract) or 
investigators, to be evaluated and screened for a large number of possible new 
activities and applications.  Screening will enhance the identification of small 
molecules that are useful as research tools (e.g., probes to alter the function of 
novel proteins or molecular imaging probes) or as starting points for the 
development of novel compounds with therapeutic potential.  The contractor shall 
maintain an appropriate quantity of each compound by either repurchasing additional 
quantities, or through synthesis efforts. Under this contract, both proprietary and 
non-proprietary materials will be provided directly by the compound suppliers (or 
through NIH) to the contractor for inclusion in the compound collection/repository.   
It is anticipated that some of the most unique and promising compounds with the 
most interesting biological activities will be proprietary.   Therefore, in order  
for this program to succeed, it will be essential to obtain a sufficient flow of 
proprietary materials.

Our previous experience and discussions with compound suppliers (i.e., 
investigators at academic institutions, biotechnology companies, and pharmaceutical 
companies) have shown that they will not submit their proprietary materials without 
complete assurance that their intellectual property rights will be protected, such 
as that which could be provided through a DEC.

Through discussions with these organizations it was determined that, except for the 
protection offered by this clause, the NIH would have no other method to gain 
access to some of these promising compounds; this would result in a less effective 
and less diverse and unique compound collection.  As many of the compounds with the 
most interesting activity will be proprietary, having an insufficient number of 
these compounds submitted for inclusion in the repository would inhibit the 
discovery of promising new leads for further development as potential research 
tools or therapeutics.  This would not appear to appropriately support the 
objectives of 35 U.S.C. 200, et. seq., or benefit the public health under this 
program.

Pharmaceutical and biotechnology companies are highly unlikely to invest in areas 
such as the development of research compounds to be used as research tools, imaging 
probes, or as therapeutics for rare or ‘orphan’ diseases because of cost-restraints 
and low potential returns. Therefore, this program will fill a critical need by 
supporting and stimulating the development of much-needed research tools and 
potential therapeutics that might not otherwise be developed.  It is expected that 
many investigators who use the compound collection will go on to further develop 
these compounds into much-needed agents and therapeutics to further research and 
benefit the public health.

We recognize the scientific expertise of the contractors and the importance of the 
Bayh-Dole Act in protecting the intellectual property rights of contractors.  While 
Bayh-Dole provides incentives for the commercialization of Government supported 
research and development by allowing contractors to retain rights to inventions, 
the Act also permits an exception to this provision under exceptional 
circumstances. In this instance, we believe that restriction or elimination of the 
contractor’s right to retain title to subject inventions, in a narrow field, may be 
needed to further the programmatic goals of research and development in order to 
benefit public health.

If adopted, use of the proposed restricted Patent Rights clause has been narrowly 
tailored to apply only to subject inventions using proprietary materials obtained 
and evaluated under these contracts, and not to subject inventions outside the 
scope of the deviated patent rights clause.  The Contractor will have the right to 
ask for greater rights, as defined in the clause, if the supplier of the 
proprietary materials is not interested in licensing or pursuing the invention. 
Furthermore, even if a DEC were implemented, rights to subject inventions made 
without the use of proprietary materials would remain with the contractor, and will 
be subject to the standard clause at FAR 52.227-11, Patent Rights-Retention by the 
Contractor (Short Form) (June 1997).

Based on previous experience with similar programs, we have discussed and 
considered approaches other than the use of a DEC for acquiring and evaluating 
proprietary materials, but we are not currently aware of any viable alternatives 
that would adequately address the concerns noted above.

[End of Statement of Facts]

Authority to use the following clause may be sought for the contract entitled 
“Molecular Libraries Small Molecule Repository”:

52.227-11  Patent Rights (Deviation)

This clause deviation applies to discoveries resulting from routine synthesis or 
repository activities involving the use of proprietary materials (compounds and 
procedures).  Discoveries resulting from research activities pertaining to the 
development of new assays or the development or modification of chemical synthesis 
procedures, process development or other unanticipated discoveries developed by the 
contractor without the use of proprietary materials will be covered by the standard 
Patent Rights Clause (FAR 52.227-11, Patent Rights – Retention by the Contractor 
(Short Form) (June 1997)

(a) Definitions.  (1) “Invention” means any invention or discovery, which is or may 
be patentable or otherwise protectable under title 35 of the United States Code, or 
any novel variety of plant which is or may be protected under the Plant Variety 
Protection Act (7 U.S.C. 2321, et, seq.)

(2) “Made” when used in relation to any invention, means the conception or first 
actual reduction to practice of such invention.

(3) “Nonprofit organization” means a university or other institution of higher 
education or an organization of the type described in section 501(c)(3) of the 
Internal Revenue code of 1954 (26 U.S.C. 501(c)) and exempt from taxation under 
section 501(a) of the Internal Revenue Code (26 U.S.C. 501(a)) or any nonprofit 
scientific or educational organization qualified under a state nonprofit 
organization statue.

(4) “Practical application” means to manufacture, in the case of a composition of 
matter or product; to practice, in the case of a process or method, or to operate, 
in the case of a machine or system; and, in each case, under such conditions as to 
establish that the invention is being utilized and that its benefits are, to the 
extent permitted by law or Government regulations, available to the public on 
reasonable terms.

(5)“Small business firm” means a small business concern as defined at section 2 of 
Pub. L. 85-536 (15 U.S.C. 632) and implementing regulations of the Administrator of 
the Small Business Administration.  For the purpose of this clause, the size 
standards for small business concerns involved in Government procurement and 
subcontracting at 13 CFR 121.3-8 and 13 CFR 121.3-12, respectively, will be used.

(6) “Subject Invention” for the purpose of this clause, means any invention of the 
contractor conceived or first actually reduced to practice in the performance of 
work under this contract, provided that in the case of a variety of plant, the date 
of determination (as defined in Section 41(d) of the Plant Variety Protection Act, 
7 U.S.C. 2401(d)) must also occur during the period of contract performance.

(7) “Compound Suppliers” means any entities or organizations that make available to 
NIMH  a composition of matter or product, patented or unpatented.

(8) “NIMH” means the National Institute of Mental Health of the National Institutes 
of Health (NIH).

(9) “NIH” means the National Institutes of Health.

(b) Allocation of principal rights.  (1) Retention of pre-existing rights.  
Compound Suppliers shall retain all pre-existing rights to those compounds in which 
the compound supplier has a proprietary interest.

(2) Assignment to the NIH or compound supplier.  The contractor agrees to assign to 
the NIH or to a Compound Supplier designated by NIMH the entire right, title, and 
interest throughout the world to each subject invention except to the extent that 
rights are retained by the contractor under subparagraph (b)(3) of this clause and 
subject to a nonexclusive, nontransferable, irrevocable, paid-up license to the 
United States Government to practice or have practiced the subject invention for or 
on behalf of the United States throughout the world.

(3) Greater Rights Determinations.  The contractor, or an employee-inventor after 
consultation by the NIMH with the contractor, may request greater rights to an 
identified subject invention of the contract in accordance with the procedures of 
FAR paragraph 27.304-1(b) and FAR paragraph 27.304-1(c) (in the case of an 
employee-inventor) subject to the considerations set forth below.  The NIMH will 
grant greater rights if the supplier is not interested in developing the invention.  
In addition to the considerations set forth in paragraph 27.304-1(b), NIMH will 
consider whether granting the requested greater rights will interfere with rights 
of the Government or any Compound Supplier or otherwise impede the ability of the 
Government or the Compound Supplier to develop and commercialize new compositions 
of matter, compounds, product designs, dosage forms, therapies, technologies or 
other approaches for the treatment of mental disorders in a rapid, efficient, and 
cost-effective manner.  A request for a determination of whether the contractor or 
the employee-inventor is entitled to retain such greater rights must be submitted 
to the NIMH Contracting Officer at the time of the first disclosure of the 
invention pursuant to subparagraph (c)(1) below, or not later than eight (8) months 
thereafter, unless a longer period is authorized in writing by the Contracting 
Officer for good cause shown in writing by the contractor.  Each determination of 
greater rights under this contract shall be subject to paragraph (c) of the FAR 
clause at 52.227-13, and to any reservations and conditions deemed to be 
appropriate by NIMH such as the requirement to assign or exclusively license the 
rights to subject inventions to the Compound supplier.  A determination by NIMH 
denying a request by the contractor for greater rights in a subject invention may 
be appealed within 30 days of the date the contractor is notified of the 
determination to an agency official at a level above the individual who made the 
determination.  If greater rights are granted, the contractor must file a patent 
application on the invention.  Upon request, the contractor shall provide the 
filing date, serial number and title, a copy of the patent application (including 
an English-language version if filed in a language other than English), and patent 
number and issue date for any subject invention in any country for which the 
contractor has retained title.  Upon request, the contractor shall furnish the 
Government an irrevocable power to inspect and make copies of the patent 
application file.

(c) Invention disclosure by contractor.  The contractor will disclose each subject 
invention to the NIMH Contracting Officer as provided in paragraph (j) within two 
months after the inventor discloses it in writing to contractor personnel 
responsible for patent matters.  The disclosure to the NIMH Contracting Officer 
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.  The 
disclosure shall also identify any publication, on sale (offer for sale), or public 
use of the invention and whether a manuscript describing the invention has been 
submitted for publication and, if so, whether it has been accepted for publication 
at the time of disclosure.  In addition, after disclosure to the agency, the 
contractor will promptly notify the agency of the acceptance of any manuscript 
describing the invention for publication or of any on sale or public use planned by 
the contractor.

(d) Contractor action to protect the Government’s interest.  (1) The contractor 
agrees to execute or to have executed and promptly deliver to the NIH all 
instruments necessary to – (i) Establish or confirm the rights the Government has 
throughout the world in subject inventions pursuant to paragraph b.2. above, and 
(ii) Convey title to the NIH or to a Compound Supplier when requested under 
paragraph b.2. of this clause and to enable the NIH or a Compound supplier to 
obtain patent protection throughout the world in that subject invention.

(2) The contractor agrees to require, by written agreement, its employees, other 
than clerical and nontechnical employees, to disclose promptly in writing to 
personnel identified as responsible for the administration of patent matters and in 
a format suggested by the contractor each subject invention made under contract in 
order that the contractor can comply with the disclosure provisions of paragraph 
(c) of this clause, and to execute all papers necessary to file patent applications 
on subject inventions and to establish the Government’s right or a Compound 
Supplier’s right in the subject inventions.  This disclosure format should require, 
as a minimum, the information required by subparagraph (c)(1) of this clause.  The 
contractor shall instruct such employees, through employee agreements or other 
suitable educational programs, on the importance of reporting inventions in 
sufficient time to permit the filing of patent applications prior to U.S. or 
foreign statutory bars.  The contractor will notify the NIH of any decisions not to 
continue the prosecution of a patent application, pay maintenance fees, or defend 
in a reexamination or opposition proceeding on a patent, in any country, not less 
than 30 days before the expiration of the response period required by the relevant 
patent office.

(3) The contractor agrees to include, within the specification of any United States 
patent application it files and any patent issuing thereon covering a subject 
invention the following statement, “This invention was made with Government support 
under (identify the contract) awarded by the National Institute of Mental Health.  
The Government has certain rights in the invention.”

(4) The contractor agrees to provide a final invention statement and certification 
prior to the close-out of the contract listing all subject inventions or stating 
that there were none.

(e) Subcontracts.  (1) The contractor will include this clause, suitably modified 
to identify the parties, in all subcontracts, regardless of tier, for experimental, 
developmental, or research work.  The subcontractor will retain all rights provided 
for the contractor in this clause, and the contractor will not, as part of the 
consideration for awarding the contract, obtain rights in the subcontractor’s 
subject inventions.

(2) In the case of subcontracts, at any tier, NIH, the subcontractor, and the 
contractor agree that the mutual obligations of the parties created by this clause 
constitute a contract between the subcontractor and NIH with respect to the matters 
covered by the clause; provided, however, that nothing in this paragraph is 
intended to confer any jurisdiction under the Contract Disputes Act in connection 
with proceedings under paragraph (c)(1)(ii) of FAR clause 52.227-13 which is 
incorporated by reference in paragraph b.3 of this clause.

(f) Reporting on utilization of subject inventions in the event greater rights are 
granted to the contractor.  The contractor agrees to submit, on request, periodic 
reports no more frequently than annually on the utilization of a subject invention 
or on efforts at obtaining such utilization that are being made by the contractor 
or its licensees or assignees when the NIH has granted a request under subparagraph 
b.3.  Such reports shall include information regarding the status of development, 
date of first commercial sale or use, gross royalties received by the contractor, 
and such other data and information as the agency may reasonably specify.  The 
contractor also agrees to provide additional reports as may be requested by the NIH 
in connection with any march-in proceeding undertaken by the NIH in accordance with 
paragraph (h) of this clause.  As required by 35 U.S.C. 202(c)(5), the NIH agrees 
it will not disclose such information to persons outside the Government without 
permission of the contractor.

(g)  Preference for United States industry in the event greater rights are granted 
to the contractor.  Notwithstanding any other provision of this clause, the 
contractor agrees that neither it nor any assignee will grant to any person the 
exclusive right to use or sell any subject invention in the United States unless 
such person agrees that any product embodying the subject invention or produced 
through the use of the subject invention will be manufactured substantially in the 
United States.  However, in individual cases, the requirement for such an agreement 
may be waived by the NIH upon a showing by the contractor or its assignee that 
reasonable but unsuccessful efforts have been made to grant licenses on similar 
terms to potential licensees that would be likely to manufacture substantially in 
the United States or that under the circumstances domestic manufacture is not 
commercially feasible.

(h) March-in rights in the event greater rights are granted to the contractor.  The 
contractor agrees that, with respect to any subject invention in which it has 
acquired title through the exercise of the rights specified in subparagraph (b)(3), 
the NIH has the right in accordance with the procedures in FAR paragraph 27.304-1 
and any supplemental regulations of the agency to require the contractor, an 
assignee or exclusive licensee of a subject invention to grant a nonexclusive, 
partially exclusive, or exclusive license in any field of use to a responsible 
applicant or applicants, upon terms that are reasonable under the circumstances, 
and if the contractor, assignee, or exclusive licensee refuses such a request the 
NIH has the right to grant such a license itself if the NIH determines that—

(1) Such action is necessary because the contractor or assignee has not taken, or 
is not expected to take within a reasonable time, effective steps to achieve 
practical application of the subject invention in such field of use;

(2) Such action is necessary to alleviate health or safety needs which are not 
reasonably satisfied by the contractor, assignee, or their licensees;

(3) Such action is necessary to meet requirements for public use specified by 
Federal regulations and such requirements are not reasonably satisfied by the 
contractor, assignee, or licensees; or

(4) Such action is necessary because the agreement required by paragraph (g) of 
this clause has not been obtained or waived or because a licensee of the exclusive 
right to use or sell any subject invention in the United States is in breach of 
such agreement.

(i)     Special provisions for contracts with nonprofit organizations in the event 
greater rights are granted to the contractor.  If the contractor is a nonprofit 
organization, it agrees that—

(1) Rights to a subject invention in the United States may not be assigned without 
the approval of the NIH, except where such assignment is made to an organization 
which has as one of its primary functions the management of inventions; provided, 
that such assignee will be subject to the same provisions as the contractor;

(2) The contractor will share royalties collected on a subject invention with the 
inventor, including Federal employee co-inventors (when the NIH deems it 
appropriate) when the subject invention is assigned in accordance with 35 U.S.C. 
202(e);

(3) The balance of any royalties or income earned by the contractor with respect to 
subject inventions, after payment of expenses, (including payments to inventors) 
incidental to the administration of subject inventions will be utilized for the 
support of scientific research or education; and

(4) It will make efforts that are reasonable under the circumstances to attract 
licensees of subject inventions that are small business firms, and that it ill give 
a preference to a small business firm when licensing a subject invention if the 
contractor determines that the small business firm has plan or proposal for 
marketing the invention which, if executed, is equally as likely to bring the 
invention to practical application as any plans or proposals from applicants that 
are not small business firms; provided, that the contractor is also satisfied that 
the small business firm has the capability and resources to carry out its plan or 
proposal.  The decision whether to give a preference in any specific case will be 
at the discretion of the contractor.  However, the contractor agrees that the 
Secretary of Commerce may review the contractor’s licensing program and decisions 
regarding small business applicants, and the contractor will negotiate changes to 
its licensing policies, procedures, or practices with the Secretary of Commerce 
when the Secretary’s review discloses that the contractor could take reasonable 
steps to more effectively implement the requirements of this subparagraph.

(j) Communications.  All invention disclosures and requests for greater rights 
shall be sent to the NIMH Contracting Officer.  Additionally, a copy of all 
disclosures, confirmatory licenses to the Government, face page of the patent 
applications, waivers and other routine communications should be sent to the Office 
of Extramural Inventions and Technology Resources Branch, OPERA, National 
Institutes of Health, Rockledge, II, 6701 Rockledge Drive, Room 3190, MSC 7750, 
Bethesda, MD 20892-7750

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