Why does NRL license inventions?

In 1980, the U.S. Congress passed the Technology Innovation Act to foster economic growth by requiring federal laboratories to take an active role in the transfer of technologies resulting from their research and development efforts. Subsequently, a series of laws and Executive Orders further mandated technology transfer mechanisms and incentives to promote the commercialization of federally funded inventions. Federally funded inventions have been a major contributor to U.S. economic growth and new job creation.

NRL's research often results in inventions of use for both government and commercial applications. The Navy is authorized to apply for, obtain, maintain and own domestic and foreign patent protection for its inventions. This protection gives NRL the right to exclude others from making, using, selling, or importing the claimed invention. By granting a commercial license to a qualified company, NRL can convey and control the right to make, use, and sell products and services claimed in an NRL patent, thereby assuring the appropriate commercialization as intended by Congress and the Executive Branch.

What can NRL license?

NRL can grant licenses to its domestic and foreign patents and patent applications by authority under 35 U.S.C. 207 - 209. It can also license its trademarks and wordmarks. However, material that is developed by Federal employees in the course and scope of employment cannot be copyrighted and is freely available without license. In all licenses the Federal Government retains a non-exclusive right to make, use, or have made any Federal Government funded invention for Government purposes.

What types of licenses are available?

Both non-exclusive and exclusive licenses are available. Most exclusive licenses are granted for specific fields of use and geographical area. Because of these restrictions, these licenses are sometimes referred to as "partially exclusive". For companies using NRL inventions solely in the performance of a government contract, a Government Purpose License is available on request.

What are the criteria considered when NRL evaluates license applications for exclusivity?

Government regulations reflect a preference for non-exclusive licenses; however, exclusive licenses are available when appropriate to promote successful commercial development of a licensed invention. The criteria TTO uses when evaluating an application for an exclusive license are based on the requirements set forth in 37 CFR ยง404.7. These criteria include whether an exclusive license:

  1. Is a reasonable and necessary incentive to promote the investment of risk capital to bring the invention to practical application.
  2. Contains terms and conditions that are not broader than necessary.
  3. Will not lessen competition.

Are there additional steps in obtaining an exclusive vs. a nonexclusive license?

Yes, notice of a proposed exclusive license (other than those resulting from a CRADA) is required by law. Notice is published in the Federal Register to provide an opportunity for public comment. Comments must be received within 15 days from the publication date of the notice of intent to grant an exclusive license. All comments are evaluated, and a final determination is made whether or not an exclusive license is warranted.

Can NRL license technology to a foreign-owned company?

Yes, under certain conditions. Because one of the objectives of technology transfer is to promote benefit to the U.S. economy from Federal R & D investments, there is a preference given to companies located in the United States that will manufacture the licensed products substantially in the United States. A license may be granted to a foreign-owned or foreign-controlled entity if such a license enables the United States to realize economic, environmental, and societal benefits of the technology.

Note that any license to a foreign entity must comply with export control regulations.

Are there other preferences when granting a license?

Preference is also given to small businesses.

At what stage of development are the technologies and inventions that are licensed?

NRL licenses inventions resulting from both basic and applied research, so stages range from an invention requiring "proof of concept" through working prototype.

How does a company start the licensing process?

After contacting the Technology Transfer Office to determine the availability of a technology for licensing, the company can initiate the licensing process by submitting a completed Application to Practice Navy Inventions together with a copy of its commercialization plan. Frequently, a company will first evaluate the technology for applicability to its interests by entering into a Cooperative Research and Development Agreement (CRADA) with NRL.

What should be included in the commercialization plan submitted with a license application?

Any standard business plan format is acceptable. The amount of detail and length of the plan will vary with the size of the market and the maturity of the technology being licensed. Typically a business plan includes the following information:

  • Executive Summary
  • Introduction
  • Company History
  • Company Structure
  • Resumes of Key Personnel
  • Product
    • Description of Product
    • Field of Use
    • History (How company arrived at Product)
    • Development Plan
    • Regulatory Compliance Requirements (if appropriate)
    • Testing
    • Specific Milestones for Commercialization
  • Market Analysis and Competing Technologies
  • Marketing Strategy
  • Marketing and Sales Plan
  • Manufacturing and Distribution
  • Company Financials
  • Financing Strategy
  • Financial Projections (5 year projection)
  • Intellectual Property

What are typical terms and conditions of NRL licenses?

NRL licenses include a specific field (or fields) of use for the patented invention; geographical areas where the patented invention will be made, used, and/or sold; performance milestones for product development; financial compensation such as upfront payments, milestone payments, and running royalties; reporting requirements; and other terms consistent with accepted business practice.

How does NRL monitor performance under a license?

All NRL licenses contain specific milestone requirements that must be achieved to retain the license. Milestones are agreed upon based on the commercialization plan submitted by the licensing company in its Application to Practice Navy Inventions. NRL recognizes that unexpected problems may occur, especially during the early development and/or commercialization, and is generally willing to amend the milestones upon demonstration of good faith attempts to solve such problems.

Do inventors participate in negotiations with potential licensees?

Inventor input is encouraged as a source of leads for potential licensees, for giving TTO a professional assessment of the technical feasibility of the invention, and for suggestions on potential commercial products. However, because of potential conflicts of interest, NRL inventors are not permitted to participate in the actual negotiation of license agreements with potential licensees. The conflicts of interest arise because the inventors personally receive a share of licensing revenues.

Do NRL inventors receive financial incentives for licensed inventions?

Annually, each inventor who has assigned rights in the licensed invention to the Government receives a share of the royalties, not to exceed $150,000 per year. The Laboratory uses the remainder of the revenues for technology transfer related matters such as education, training, and awards. Revenues from trademark and wordmark licensing are remitted to the U.S. Treasury General Fund and are not distributed to NRL or the inventors.

Have more questions? Contact NRL TTO.