Biden Executive Order Puts Focus on Domestic Manufacturing of Inventions Created Using Federal Funding

President Biden recently signed Executive Order 14104, “Federal Research and Development in Support of Domestic Manufacturing and United States Jobs,” which places greater emphasis on manufacturing products in the United States that were developed using funding from the federal government. Although the Bayh-Dole Act addresses such situations, the executive order applies to all technology research and development agreements involving federal government funding and, in certain circumstances, goes beyond the requirements under the Bayh-Dole Act.

The policy underlying the executive order is that “when new technologies and products are developed with support from the United States Government, they will be manufactured in the United States whenever feasible and consistent with applicable law.” The executive order specifically states numerous times that it is not seeking to create new law but seeking to be consistent with current law.

The executive order called out several agencies in an effort to strengthen domestic manufacturing in these situations. Specifically, the secretaries of defense, agriculture, commerce, health and human services, transportation, energy, and homeland security; the director of the National Science Foundation; and the administrator of the National Aeronautics and Space Administration should consider domestic-manufacturing requirements in federal research and development agreement solicitations. The heads of these agencies are also charged with considering how their respective agencies’ agreements support broader domestic-manufacturing objectives. Indeed, the agencies’ heads are encouraged to add “‘domestic manufacturing’ to future interagency technology R&D roadmaps, as appropriate.”

Beyond the Bayh-Dole Act, which already requires exclusive licensees of subject inventions¹ to manufacture substantially in the United States any product embodying a subject invention intended for use or sale in the United States,² the executive order requests an evaluation of whether “exceptional circumstances” are present to warrant the extension of the domestic-manufacturing requirement to nonexclusive licensees of subject inventions and for the use and sale of products embodying subject inventions outside the United States.³

In considering this request, the heads of agencies shall “consider measures for technologies important to the United States economy and national security, including technologies such as energy storage, quantum information science, artificial intelligence and machine learning, semiconductors and microelectronics, and advanced manufacturing.” In considering these technologies, they shall also “consider narrowly tailored terms related to enhanced United States manufacturing while encouraging technology transfer and commercialization, and allowing small businesses and nonprofit organizations to retain ownership of and commercialize their federally funded subject inventions.”

In addition, the heads of agencies that have statutory authority to enter into Other Transactions (OTs) or that can use other business arrangements, not necessarily requiring Bayh-Dole Act requirements,⁴ are encouraged to purchase and invest in leading-edge technologies but also to ensure that the product is manufactured substantially in the United States.

The executive order also includes the modernization of reporting on invention utilization. The executive order seeks easier and more consistent utilization reporting across the agencies, including tracking and updating the location where the products embodying subject inventions are manufactured, as well as tracking and updating the names of licensees and their location of manufacture. The executive order also sets a deadline of calendar year 2025 for all agencies to transition to the iEdison web-based invention-reporting system.

In addition, Executive Order 14104 seeks to improve the process of obtaining a waiver of the domestic-manufacturing requirement. Among its suggestions is creating a waiver process that is “rigorous, timely, transparent and consistent, with all due regard for applicable authorities,” including another executive order⁵ and the Bayh-Dole Act’s waiver provisions. Executive Order 14104 lays out common waiver questions that should be included, such as the importance of the technology, the impact of manufacturing abroad (such as benefits that accrue to the United States economy and national security interests), and the conditions of the workplace (such as unionization, health and safety standards, labor and wage laws, and environmental concerns).

Given the stance of the executive order, recipients of funding from the federal government should be extremely diligent in reviewing the terms of any contract, grant, agreement, or otherwise with a federal agency to be knowledgeable of the terms of the agreement and what is expected with respect to the manufacture location of any resulting product. Moreover, waivers of the domestic-manufacturing requirement under the Bayh-Dole Act may come under additional scrutiny, particularly in the enumerated technologies. While it remains to be seen what impact the executive order will have on these matters, it is hopeful that more consistent and transparent processes are achieved, leaving all stakeholders with greater certainty of their position.

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^[1] A “subject invention” is an invention conceived or first actually reduced to practice in the performance of work under a funding agreement with a federal agency.
^[2] 35 US Code § 204.
^[3] For example, the Department of Defense already extends the manufactured substantially in the United States requirement to non-exclusive licensees and to products sold abroad.
^[4] Despite OTs and other business arrangements not requiring the inclusion of the Bayh-Dole Act regulations, most such agreements contain similar Bayh-Dole Act requirements, including the provision regarding products’ substantial manufacture in the United States.
^[5] Executive Order 14005 of January 25, 2021, “Ensuring the Future Is Made in All of America by All of America’s Workers.”