Part II: Terms and Conditions of NIH Grant Awards
Subpart A: General -- Part 6 of 7
Availability of Research Results: Publications, Intellectual Property
Rights, and Sharing Biomedical Research Resources
It is NIH policy to make available to the public the results and accomplishments of the activities that it funds. Therefore, PIs and grantee organizations are expected to make the results and accomplishments of their activities available to the research community and to the public at large, and to effect their timely transfer to industry for commercialization. If research findings result in inventions, grantees have the right to retain title to these inventions, as long as they abide by the provisions of the Bayh-Dole Act of 1980, as implemented in 37 CFR 401, for their utilization, commercialization, and public availability. In general terms, these regulations encourage grantees to utilize patent and licensing processes to transfer grant-supported technology to industry for development. Alternatively, when an invention is useful primarily as research tool, technology transfer, in the form of journal articles or other publications or through the dissemination of research products or resources, may be a more appropriate means of promoting utilization, commercialization, or public availability of an invention.
The importance of each of these outcomes of funded research is reflected in the specific policies pertaining to rights in data, sharing of biomedical research resources, and inventions and patents that follow.
Rights in Data (Publication and Copyrighting)
In general, grantees own the data generated by or resulting from a grant-supported project. Special terms and conditions of the award may specify alternative rights, e.g., under a cooperative agreement or if there are shared rights to data. Except as otherwise provided in the terms and conditions of the award, the grantee is free to copyright without NIH approval when publications,
data, or other copyrightable works are developed under, or in the course of, work under an NIH grant. Copyrighted or copyrightable works also include materials developed by students, fellows, or trainees under awards whose primary purpose is to further the education or training of such individuals. Whenever any work subject to this copyright policy is developed by a consortium participant or a contractor (or subcontractor) under a grant, the written agreement/contract must require the consortium participant/contractor (subcontractor) to comply with these requirements and can in no way diminish NIH's rights in that work. NIH must be provided a royalty-free, nonexclusive, and irrevocable license for the Government to reproduce, publish, or otherwise use the material and to authorize others to do so for Federal purposes.
Grantees may arrange for publication of initial reports of original research, supported in whole or in part by NIH grant funds, in primary scientific journals and for copyright by the journal unless the journal's copyright policy would preclude individuals from making or having made, by any means available to them without regard to the copyright of the journal and without royalty, a single copy of any such article for their own use (see 45 CFR 74.36 and 92.34). The disposition of royalties and other income earned from a copyrighted work is addressed in "Administrative Requirements—Management Systems and Procedures—Program Income." Grantees are encouraged to assert copyright in scientific and technical articles based on data produced under the grant where this is necessary to effect publication in academic, technical, or professional journals, symposia, proceedings, or similar works.
Grantees are required to place an acknowledgment of NIH grant support and a disclaimer, as appropriate, on any publication written or published with such support and, if feasible, on any publication reporting the results of, or describing, a grant-supported activity. An acknowledgment shall be to the effect that:
"This publication was made possible by Grant Number ________ from _________" or "The project described was supported by Grant Number ________ from ________" and "Its contents are solely the responsibility of the authors and do not necessarily represent the official views of the (name of awarding office or NIH)."
In the event that the recipient wishes to join with NIH in a simultaneous news release announcing the results of a project, the action should be coordinated with the awarding office.
One copy of each publication resulting from work performed under an NIH grant-supported project must accompany the annual progress report submitted to the NIH awarding office (see "Administrative Requirements—Noncompeting Continuation Awards").
Sharing Biomedical Research Resources
NIH has published "Principles and Guidelines for Recipients of NIH Research Grants and Contracts on Obtaining and Disseminating Biomedical Research Resources" (64 FR 72090, December 23, 1999). The purpose of these guidelines is to assist recipients in determining reasonable terms and conditions for disseminating research tools as well as for acquiring research tools, consistent with the objectives of furthering biomedical research and adhering to the requirements of the Bayh-Dole Act (see "Inventions and Patents" in this subsection) and the terms and conditions of their NIH awards.
Organizations that receive NIH grants or cooperative agreements (or contracts) have an obligation to preserve research freedom, safeguard appropriate authorship, and ensure timely disclosure of their scientists' research findings by such means as publications and presentations at scientific meetings. Recipients are expected to avoid signing agreements that unduly limit the freedom of investigators to collaborate and publish, or that automatically grant co-authorship or copyright to the provider of an invention used primarily as a research tool. NIH also recognizes the need for reasonable restrictions on collaboration by academic researchers involved with an industrial partner that avoid conflicting obligations to other industrial partners.
NIH expects recipients to determine the appropriate means of effecting prompt and effective access to research tools (including inventions for which patents and exclusive licenses are inappropriate) to further advance scientific research and discovery. If further research, development, and private investment are not necessary to realize the primary usefulness of a research tool, publication, deposit in an appropriate databank or repository, widespread non-exclusive licensing, or other dissemination techniques may be appropriate. For example, investigators may distribute the materials through their own laboratory or organization or submit them, if appropriate, to entities such as the American Type Culture Collection or other repositories.
Investigators are expected to submit unique biological information to the appropriate data banks; otherwise, they are not truly accessible to the scientific community. When distributing unique resources, investigators are to include pertinent information on the nature, quality, or characterization of the materials. Categories of these resources include, but are not limited to, synthetic compounds, organisms, cell lines, viruses, cell products, and cloned DNA, as well as DNA sequences, mapping information, crystallographic coordinates, and spectroscopic data. Specific examples include specialized and/or genetically defined cells, including normal and diseased human cells; monoclonal antibodies; hybridoma cell lines; microbial cells and products; viruses and viral products; recombinant nucleic acid molecules; DNA probes; nucleic acid and protein sequences; certain types of animals, such as transgenic mice; and intellectual property, such as computer programs.
Organizations and investigators may charge the requester for the reasonable cost of production of unique biological materials and for packing and shipping. Such costs may include the costs of personnel, supplies, and other directly related expenses. Investigators should note that income earned from these charges is considered and needs to be accounted for as program income (see "Administrative Requirements—Financial Management System Standards—Program Income"). This should not be an impediment to the distribution of materials.
If additional non-Federal involvement is needed to assist with maintenance, reproduction, and/or distribution of the research tool, or if further research and development are needed to realize the usefulness of an invention as a research tool, licensing terms should be developed that ensure widespread and appropriate dissemination of the final tool product.
Recipients of NIH grants should adopt streamlined procedures for disseminating research tools, including transfer of materials developed with NIH funds to for-profit organizations for internal use by those organizations (as opposed to commercial development and sale or provision of services). Grantees also should develop and implement clear policies articulating acceptable conditions for acquiring research resources. Examples of these policies can be found in the guidelines cited above.
Investigators must exercise great care to ensure that resources involving human cells or tissues do not identify original donors or subjects, directly or through identifiers such as codes linked to the donors or subjects.
Any question regarding this policy or the treatment of income should be directed to the designated GMO.
Inventions and Patents
Pursuant to the Bayh-Dole Act and Executive Order 12591 (April 10, 1987), all recipients of NIH research funding (i.e., all NIH grantees and contractors and consortium participants and other organizations receiving funds under NIH grants and contracts, whether small businesses, large businesses, or non-profit organizations) are subject to the same invention reporting requirements and regulations. These are included in the regulations issued by the Department of Commerce, found at 37 CFR Part 401.
Grantees (and, in some cases, employee inventors) have rights to inventions ("subject inventions") conceived or first actually reduced to practice in the performance of work under an NIH award. Grantee organizations must fulfill the following requirements:
- Establish and implement an employee invention reporting policy (37 CFR 401.14(f)(2));
- Report all subject inventions within 2 months to OPERA (37 CFR 401.14(c) and (l));
- Elect title (or waive title) within 2 years of reporting to OPERA (37 CFR 401.14(c)(2) and (l));
- File for patent within 1 year of electing title or public disclosure, whichever comes first (37 CFR 401.14(c)(3)); Upon election of title, provide a confirmatory license to the Government (37 CFR 401.14(b));
- Acknowledge NIH support in any patent application or patent (37 CFR 401.14(f)(4));
- Notify OPERA of any decision not to pursue patent rights (or licensing) (37 CFR 401.14(f)(3) and (l));
- Submit an annual utilization report for all inventions where election of title is made and for unpatented, yet licensed, inventions (37 CFR 401.14(h));
- Exercise preference for U.S. industry and, if the grantee is a non-profit organization, preference for small businesses (37 CFR 401.14(i));
- Provide one copy of each publication resulting from work performed under an NIH grant-supported project to the NIH awarding office with the annual progress report; and
- Submit a final invention statement and certification to the NIH awarding office within 90 days of the end of the project period. (37 CFR 401.14(f)(5)).
Failure of the grantee to comply with these provisions may result in the loss of patent rights. If the grantee waives its rights to the employee-inventor, these requirements apply to the employee-inventor.
As specified in 45 CFR Part 74 and 37 CFR 401.1(b), fellowships, scholarships, and training grants, which are funded by NIH primarily for educational purposes, are not subject to invention reporting requirements. The Federal Government (NIH) has no rights to any inventions, or any income resulting from inventions conceived or first actually reduced to practice during the course of such educational activities.
Invention reporting requirements and the use of the Extramural Invention Information Management System (Edison) are discussed under "Administrative Requirements—Monitoring—Reporting."
To provide a more complete description of the invention and patent reporting requirements, the complete text of the standard patent rights clauses (37 CFR 401.14) is included here and also may be found on the NIH link to the Interagency Edison Web site (www.iedison.gov).
Sec. 401.14, Standard Patent Rights Clauses (Small Business Firms and Non-profit Organizations) (July 1997) (NOTE: While the title of these clauses refers to small businesses and non-profit organizations, the provisions also apply to large for-profit businesses. The term "contractor" in the text applies equally to grantees.)
(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) Subject invention 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)) may also occur during the period of contract performance.
(3) Practical Application means to manufacture in the case of a composition 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.
(4) Made when used in relation to any invention means the conception or first actual reduction to practice of such invention.
(5) Small Business Firm means a small business concern as defined at section 2 of Pub. L. 85-536 (16 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) Non-profit 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 (25 U.S.C. 501(a)) or any non-profit scientific or educational organization qualified under a state non-profit organization statute.
401.14(b) Allocation of Principal Rights.
The contractor may retain the entire right, title, and interest throughout the world to each subject invention subject to the provisions of this clause and 35 U.S.C. 203. With respect to any subject invention in which the contractor retains title, the Federal Government shall have a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States the subject invention throughout the world.
401.14(c) Invention Disclosure, Election of Title and Filing of Patent Application by Contractor.
(1) The contractor will disclose each subject invention to the Federal agency within two months after the inventor discloses it in writing to contractor personnel responsible for patent matters. The disclosure to the agency 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 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.
(2) The contractor will elect in writing whether or not to retain title to any such invention by notifying the Federal agency within two years of disclosure to the Federal agency. However, in any case where publication, on sale or public use has initiated the one year statutory period wherein valid patent protection can still be obtained in the United States, the period for election of title may be shortened by the agency to a date that is no more than 60 days prior to the end of the statutory period.
(3) The contractor will file its initial patent application on a subject invention to which it elects to retain title within one year after election of title or, if earlier, prior to the end of any statutory period wherein valid patent protection can be obtained in the United States after a publication, on sale, or public use. The contractor will file patent applications in additional countries or international patent offices within either ten months of the corresponding initial patent application or six months from the date permission is granted by the Commissioner of Patents and Trademarks to file foreign patent applications where such filing has been prohibited by a Secrecy Order.
(4) Requests for extension of the time for disclosure, election, and filing under subparagraphs (1), (2), and (3) may, at the discretion of the agency, be granted.
401.14(d) Conditions When the Government May Obtain Title.
The contractor will convey to the Federal agency, upon written request, title to any subject invention—
(1) If the contractor fails to disclose or elect title to the subject invention within the times specified in (c), above, or elects not to retain title; provided that the agency may only request title within 60 days after learning of the failure of the contractor to disclose or elect within the specified times.
(2) In those countries in which the contractor fails to file patent applications within the times specified in (c) above; provided, however, that if the contractor has filed a patent application in a country after the times specified in (c) above, but prior to its receipt of the written request of the Federal agency, the contractor shall continue to retain title in that country.
(3) In any country in which the contractor decides not to continue the prosecution of any application for, to pay the maintenance fees on, or defend in reexamination or opposition proceeding on, a patent on a subject invention.
401.14(e) Minimum Rights to Contractor and Protection of the Contractor Right to File.
(1) The contractor will retain a nonexclusive royalty-free license throughout the world in each subject invention to which the Government obtains title, except if the contractor fails to disclose the invention within the times specified in (c), above. The contractor's license extends to its domestic subsidiary and affiliates, if any, within the corporate structure of which the contractor is a party and includes the right to grant sublicenses of the same scope to the extent the contractor was legally obligated to do so at the time the contract was awarded. The license is transferable only with the approval of the Federal agency except when transferred to the successor of that party of the contractor's business to which the invention pertains.
(2) The contractor's domestic license may be revoked or modified by the funding Federal agency to the extent necessary to achieve expeditious practical application of the subject invention pursuant to an application for an exclusive license submitted in accordance with applicable provisions at 37 CFR part 404 and agency licensing regulations, if any. This license will not be revoked in that field of use or the geographical areas in which the contractor has achieved practical application and continues to make the benefits of the invention reasonably accessible to the public. The license in any foreign country may be revoked or modified at the discretion of the funding Federal agency to the extent the contractor, its licensees, or the domestic subsidiaries or affiliates have failed to achieve practical application in that foreign country.
(3) Before revocation or modification of the license, the funding Federal agency will furnish the contractor a written notice of its intention to revoke or modify the license, and the contractor will be allowed thirty days (or such other time as may be authorized by the funding Federal agency for good cause shown by the contractor) after the notice to show cause why the license should not be revoked or modified. The contractor has the right to appeal, in accordance with applicable regulations in 37 CFR part 404 and agency regulations, if any, concerning the licensing of Government-owned inventions, any decision concerning the revocation or modification of the license.
401.14(f) Contractor Action to Protect the Government's Interest.
(1) The contractor agrees to execute or to have executed and promptly deliver to the Federal agency all instruments necessary to:
(i) establish or confirm the rights the Government has throughout the world in those subject inventions to which the contractor elects to retain title, and
(ii) convey title to the Federal agency when requested under paragraph (d) above and to enable the Government 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 non-technical 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), above, and to execute all papers necessary to file patent applications on subject inventions and to establish the Government's rights in the subject inventions. This disclosure format should require, as a minimum, the information required by (c)(1), above. 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.
(3) The contractor will notify the Federal agency 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 thirty days before the expiration of the response period required by the relevant patent office.
(4) The contractor agrees to include, within the specification of any United States patent applications 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 (identify the Federal agency). The Government has certain rights in the invention."
(5) The contractor agrees to provide a final invention statement and certification prior to close-out listing all subject inventions or stating that there were none.
(6) The contractor will provide the patent application filing date, serial number and title; copy of the page of the patent application with the statement identified in (4) above (and, upon request, a copy of the patent application); and patent number and is due date for any subject invention in any country in which the contractor has applied for patent.
(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 to be performed by a small business firm or domestic non-profit organization. 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 subcontract, obtain rights in the subcontractor's subject inventions.
(2) The contractor will include in all other subcontracts, regardless of tier, for experimental developmental or research work the patent rights clause required by (cite section of agency implementing regulations or FAR).
(3) In the case of subcontracts, at any tier, when the prime award with the Federal agency was a contract (but not a grant or cooperative agreement), the agency, subcontractor, and the contractor agree that the mutual obligations of the parties created by this clause constitute a contract between the subcontractor and the Federal agency 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 any proceedings under paragraph (j) of this clause.
401.14(h) Reporting on Utilization of Subject Inventions.
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. 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 agency in connection with any march-in proceeding undertaken by the agency in accordance with paragraph (j) of this clause. As required by 35 U.S.C. 202(c)(5), the agency agrees it will not disclose such information to persons outside the Government without permission of the contractor.
401.14(i) Preference for United States Industry.
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 inventions in the United States unless such person agrees that any products 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 Federal agency 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.
401.14(j) March-in Rights.
The contractor agrees that with respect to any subject invention in which it has acquired title, the Federal agency has the right in accordance with the procedures in 37 CFR 401.6 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 Federal agency has the right to grant such a license itself if the Federal agency 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 (i) 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.
401.14(k) Special Provisions for Contracts with Non-profit Organizations.
If the contractor is a non-profit organization, it agrees that:
(1) Rights to a subject invention in the United States may not be assigned without the approval of the Federal agency, 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 agency deems it appropriate) when the subject invention is assigned in accordance with 35 U.S.C. 202(e) and 37 CFR 401.10;
(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 invention that are small business firms and that it will give a preference to a small business firm when licensing a subject invention if the contractor determines that the small business firm has a 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 also is 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 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 when the Secretary's review discloses that the contractor could take reasonable steps to implement more effectively the requirements of this paragraph (k)(4).
All NIH-related disclosures, elections, confirmatory licenses to the Government, face page of a patent application, waivers and other routine communications should be sent to the following address:
Inventions and Extramural Reporting Branch
Division of Grants Policy, OPERA/OER/NIH
Rockledge I, Room 1136, MSC-7750
Bethesda, MD 20892-7750
FAX: (301) 480-0272
For other awarding agencies, please follow their instructions. In most cases, invention information and communications should be sent to the cognizant GMO.
The NIH link to the electronic Interagency Edison extramural invention reporting system can be accessed through the Web (www.iedison.gov). This electronic reporting system was designed to facilitate reporting compliance and timeliness, and to reduce paperwork. Edison also has an e-mail address (Edison@od.nih.gov).
(End of clause)
In the most recent revision of 37 CFR 401, grantees are provided the option of meeting reporting requirements through electronic filing. Section 401.16, as stated below, describes changes in provisions to accommodate electronic filing.
401.16 Electronic Filing.
Unless otherwise requested or directed by the agency:
(a) The written report required in (c)(1) of the standard clause in sec. 401.14 may be electronically filed,
(b) The written election required in (c)(2) of the standard clause in sec. 401.14 may be electronically filed, and
(c) The closeout report in (f)(5) of the standard clause in sec. 401.14 and the information identified in (f)(2) and (f)(3) of sec. 401.5 may be electronically filed.
Management Systems and Procedures
Grantee organizations are expected to have systems, policies, and procedures in place by which they manage funds and activities. Grantees may use their existing systems to manage NIH grant funds and activities as long as they are consistently applied regardless of the source of funds and meet the standards and requirements set forth in 45 CFR Part 74 or 92 and in this policy statement. NIH may review the adequacy of those systems in order to protect the Government's interests and may take appropriate action, as necessary, including, but not limited to, the use of special terms and conditions. NIH also will oversee the performance of the grantee's systems as part of its routine postaward monitoring. The grantee's systems also are subject to audit (see "Administrative Requirements—Monitoring—Audit").
NIH seeks to foster within grantee organizations an organizational culture that is committed to compliance, leading to both exemplary research and exemplary supporting systems and use of resources to underpin that research. Actions to achieve this result should include a clear delineation of the roles and responsibilities of the organization's staff, both programmatic and administrative, written policies and procedures, training, management controls and other internal controls, performance assessment, administrative simplifications, and information sharing.
Financial Management System Standards
Grantees are required to meet the standards and requirements for financial management systems set forth or referenced in 45 CFR 74.21 or 92.20, as applicable. The standards and requirements for a financial management system are essential to the grant relationship. NIH cannot support the research unless it has assurance that its funds will be used in an appropriate manner, adequate documentation of transactions will be maintained, and assets will be safeguarded.
Grantees must have in place accounting and internal control systems that provide for appropriate monitoring of grant accounts to assure that obligations and expenditures are reasonable, allocable, and allowable, and that are able to identify large unobligated balances, accelerated expenditures, inappropriate cost transfers, and other inappropriate obligation and expenditure of funds. Grantees must notify NIH when problems are identified.
A grantee's failure to establish adequate control systems constitutes a material violation of the terms of the award, and NIH may include special conditions on awards or take any of the range of actions specified in "Administrative Requirements—Enforcement Actions," as necessary and appropriate.
Program income is gross income earned by a grantee, a consortium participant, or a contractor under a grant that was directly generated by the grant-supported activity or earned as a result of the award. Program income includes, but is not limited to, income from fees for services performed, the use or rental of real or personal property acquired under the grant, the sale of commodities or items fabricated under an award, and license fees and royalties on patents and copyrights. The requirements for accountability for these various types of income under NIH grants are specified in this subsection. Accountability refers to whether NIH will specify how the income is to be used and whether the income needs to be reported to NIH and for what length of time. Unless otherwise specified in the terms and conditions of the award, NIH grantees are not accountable for program income accrued after the period of grant support.
Consortium agreements and contracts under grants are subject to the terms of the agreement or contract with regard to the income generated by the activities, but the terms specified by the grantee must be consistent with the requirements of the grant award. Program income must be reported by the grantee as discussed in this subsection.
Program income earned during the period of grant support (other than income earned as a result of copyrights, patents, or inventions or as a result of the sale of real property, equipment, or supplies) shall be retained by the grantee and may be used in one or a combination of the alternatives indicated in Table II-3 as specified by NIH. This includes income earned from charges to third parties for use of equipment or supplies acquired with NIH grant funds as well as charges for research resources.
NIH may require an different use of program income than that indicated in Table II-3 if a grantee has deficient systems or the PI has a history of frequent, large annual unobligated balances on previous grants or has requested multiple extensions of the budget/project period. Regardless of the alternative applied, program income may be used only for allowable costs, in accordance with the applicable cost principles and the terms and conditions of the award.
REQUIREMENTS FOR PROGRAM INCOME ACCOUNTABILITY
Use of Program Income
Added to funds committed to the project or program and used to further eligible project or program objectives.
Applies to NIH awards subject to expanded authorities and to awards under the SBIR/STTR programs, unless the terms and conditions of the award specify the use of another alternative.
Deducted from total allowable costs of the project or program to determine the net allowable costs on which the Federal share of costs will be based.
Applies to NIH awards issued to non-SBIR/STTR for-profit organizations and to other awards if specified in the terms and conditions of award.
Uses all program income up to (and including) $25,000 as specified under the additive alternative and any amount of program
income exceeding $25,000 under the deductive
Applies to all other awards, unless the terms and
conditions of the award indicate otherwise.
Used to satisfy all or part of the non-Federal share of a project or program.
Available for use by NIH programs that require matching.
Sale of Real Property, Equipment, and Supplies
The requirements that apply to the sale of real property are addressed in "Construction Grants." For equipment and supplies purchased under NIH grants for basic or applied research by non-profit institutions of higher education or non-profit organizations whose principal purpose is the conduct of scientific research, the grantee is exempt from any requirement to account to NIH for proceeds from the sale of the equipment or supplies; however, NIH has certain rights with respect to such property as specified in "Administrative Requirements—Management Systems and Procedures—Property Management System Standards."
All other types of grants/grantees are subject to the requirements in 45 CFR 74.34 or 92.32, if title to the equipment vests in the grantee rather than in NIH. If the grant-supported project or program for which equipment was acquired is still receiving NIH funding at the time of sale, the grantee shall credit the NIH share of the proceeds to the grant and use that amount under the deductive alternative for program income. If the grantee is no longer receiving NIH grant support, the amount due should be paid in accordance with instructions from NIH. These grants/grantees also are subject to the requirements in 45 CFR 74.35 or 92.33 with respect to the use or sale of unused supplies. If the grantee retains the supplies for use on other than federally sponsored activities, an amount is due NIH as if they were sold.
Reporting of Program Income
If a grantee is accountable for the use of program income during the period of grant support (other than income resulting from royalties or licensing fees, for which there may be no accountability or which will be reported separately), the amount earned and the amount expended must be reported on the FSR (SF-269—Long Form). The costs associated with the generation of the "gross" amount of program income, if they are not costs charged to the grant, should be deducted from the "gross" program income earned, and the "net" program income should be the amount reported. Program income subject to the additive alternative must be reported on lines 10r and 10s, as appropriate, of the FSR (SF-269); program income subject to the deductive alternative must be reported on lines 10c and 10q of the FSR (SF-269); and program income subject to the matching alternative must be reported on lines 10g and 10q of the
FSR (SF-269). (See "Administrative
Requirements—Monitoring—Reporting.") For awards under SNAP, the amount of program income earned must be reported in the noncompeting continuation request and the amount expended reported on line 11g of the FCTR (SF-272). The FSR for the competitive segment must include the aggregate amounts earned and spent.
Income earned from the sale of equipment must be reported on the FSR for the period in which the proceeds are received and in accordance with the reporting requirements for the program income alternative specified. Amounts due NIH for unused supplies must be reflected as a credit to the grant on line 10c of the FSR (SF-269).
Where the terms of the NGA, including this policy statement, do not specify any accountability requirement for income earned, no reporting of income is required. Reporting requirements for accountable income accrued after grant support ends will be specified in the NGA.
Royalties and Licensing Fees from Copyrights, Inventions, and Patents
Unless specific terms and conditions of the award provide otherwise, NIH grantees are not required to account for income earned from copyrighted material. However, grantees must account for royalties and licensing fees that result from NIH-funded inventions and patents. Income of this nature must be reported on the annual utilization report, which is required if the grantee decides to elect title to the invention or when licensing fees are generated for inventions that are not patented (i.e., some biological materials and unique research resources) (see "Administrative Requirements—Availability of Research Results: Publications, Intellectual Property
Rights, and Sharing Biomedical Research Resources" and "
Administrative Requirements—Monitoring—Reporting"). If commercialization of an invention is an anticipated outcome of a research project, the NGA may include additional terms and conditions regarding the disposition of program income.
Property Management System Standards
Generally, grantees may use their own property management policies and procedures for property purchased, constructed, or fabricated as a direct cost using NIH grant funds, provided they observe the requirements in 45 CFR 74.31 through 74.37 or 92.31
through 92.34, as applicable, and the following.
The dollar threshold for determining the applicability of several of the requirements in those regulations is based on the unit acquisition cost of an item of equipment. As defined in 45 CFR 74.2, the cost of an item of equipment to the recipient includes necessary modifications, attachments, etc., which make it usable for the purpose for which it was acquired or fabricated. When such accessories or attachments are acquired separately and serve to replace, enhance, supplement, or otherwise modify the equipment's capacity and they individually meet the definition of equipment (see "Glossary"), any required NIH prior approval for equipment must be observed for each item. However, the aggregate acquisition cost of an operating piece of equipment will be used to determine the applicable provisions of 45 CFR 74.34 or 92.32. If property is fabricated from individual component parts, each component must itself be classified as equipment if it meets the definition of equipment. In this case, the aggregate acquisition cost of the resulting piece of equipment will determine the appropriate requirements for accountability in 45 CFR 74.34 or 92.32.
Grantees are required to be prudent in the acquisition of property under a grant-supported project. It is the grantee's responsibility to conduct a prior review of each proposed property acquisition to ensure that the property is needed and that the need cannot be met with property already in the possession of the organization. If prior approval is required for the acquisition, the grantee must ensure that appropriate approval is obtained in advance of the acquisition. The grantee also must follow appropriate procurement procedures in acquiring property as specified in "Administrative Requirements—Management Systems and Procedures—Procurement System Standards and Requirements."
Recipients of NIH grants other than Federal institutions cannot be authorized to use Federal supply sources.
See "Construction Grants—Administrative Requirements—Real Property Management Standards" for requirements that apply to the acquisition, use, and disposition of real property. Fixed equipment that is part of a construction grant is subject to those requirements.
Equipment and Supplies
In general, title to equipment and supplies acquired by a grantee with NIH funds vests in the grantee upon acquisition, subject to the property management requirements of 45 CFR 74.31, 74.34, 74.35, and 74.37, or 92.32 and 92.33. Limited exceptions to these general rules are States, which shall use, manage, and dispose of equipment acquired under a grant in accordance with State laws and procedures, and certain research grant recipients with exempt property. These requirements do not apply to equipment for which only depreciation or use allowances are charged, donated equipment, or equipment acquired primarily for sale or rental rather than for use.
Under the Federal Grant and Cooperative Agreement Act, 31 U.S.C. 6306, NIH may permit non-profit institutions of higher education and non-profit organizations whose primary purpose is the conduct of scientific research to obtain title to equipment and supplies acquired under grants for support of basic or applied scientific research without further obligation to the Federal Government, except that NIH has the right to require transfer of title to equipment with an acquisition cost of $5,000 or more to the Federal Government or to an eligible third party named by the NIH awarding office under the conditions specified in 45 CFR 74.34(h). NIH may exercise this right within 120 days of the completion or termination of an award or within 120 days of receipt of an inventory, as provided in 45 CFR 74.34(h)(2), whichever is later.
All other equipment and supplies acquired under all other NIH grant-supported projects by any other type of grantee are subject to the full range of acquisition, use, management, and disposition requirements of 45 CFR 74.34 and 74.35, or 92.32 and 92.33. Property acquired or used under an NIH grant-supported project, including any federally owned property, also is subject to the requirements for internal control specified in 45 CFR 74.21 or 92.20, and, pursuant to 45 CFR 74.37, equipment (and intangible property and debt instruments) acquired with, or improved with, NIH funds shall not be encumbered without NIH approval.
The grantee's property management system for equipment must meet the requirements of 45 CFR 74.34(f) or 92.32, which include:
- Records that adequately identify (according to the criteria specified in the regulations) items of equipment owned or held by the grantee and state the current location of each item.
- A physical inventory of the equipment, at least once every 2 years, to verify that the items covered by the records exist and are either usable and needed or listed as surplus. A statistical sampling basis is acceptable.
- Control procedures and safeguards to prevent loss, damage, and theft and adequate maintenance procedures to keep the equipment in good condition.
- Proper sales procedures when the grantee is authorized to sell the equipment.
For items of equipment having a unit acquisition cost of $5,000 or more, NIH has the right to require transfer title to the equipment to the Federal Government or to an eligible third party named by the NIH awarding office under the conditions specified in 45 CFR 74.34(h) and 92.32, respectively. This right applies to all types of grantees, including Federal institutions, under all types of grants under the stipulated conditions.
If there is a residual inventory of unused supplies exceeding $5,000 in aggregate fair market value upon termination or completion of the grant and if the supplies are not needed for other federally sponsored programs or projects, the grantee may either retain them for use on other than federally sponsored activities or sell them, but, in either case, the grantee shall compensate the NIH awarding office for its share as a credit to the grant.
State, local, or Indian tribal governments must not use equipment acquired with grant funds to provide services for a fee to compete unfairly with private companies that provide equivalent services unless the terms and conditions of the award provide otherwise.
As permitted under Federal property management statutes and regulations and NIH property management policies, federally owned tangible personal property may be made available to grantees under a revocable license agreement. The revocable license agreement between NIH and the grantee provides for the transfer of the equipment for the period of grant support under the following conditions:
- Title to the property remains with the Federal Government.
- NIH reserves the right to require the property to be returned to the Federal Government should it be determined to be in the best interests of the Federal Government to do so.
- The use to which the grantee puts the property does not permanently damage it for Federal Government use.
- The property is controlled and maintained in accordance with the requirements of 48 CFR 45.5 (the Federal Acquisition Regulation).
Procurement System Standards and Requirements
Grantees may acquire a variety of goods or services in connection with a grant-supported project, ranging from those that are routinely purchased goods or services to those that involve substantive programmatic work. States shall follow the same policies and procedures they use for procurements from non-Federal funds. All other grantees must follow the requirements in 45 CFR 74.40 through 74.48 or 92.36, as applicable, for the purchase of goods or services through contracts under grants. The requirements for third-party activities involving programmatic work are addressed under "Consortium Agreements."
A contract under a grant must be a written agreement between the grantee and the third party. The contract must, as applicable, state the activities to be performed, the time schedule, the policies and requirements that apply to the contractor, including those required by 45 CFR 74.48 or 92.36(i) and other terms and conditions of the grant (these may be incorporated by reference where feasible), the maximum amount of money for which the grantee may become liable to the third party under the agreement, and the cost principles to be used in determining allowable costs in the case of cost-type contracts. The contract must not affect the grantee's overall responsibility for the direction of the project and accountability to the Government. Therefore, the agreement shall reserve sufficient rights and control to the grantee to enable it to fulfill its responsibilities.
In situations where a grantee enters into a service-type contract the term of which is not concurrent with the budget period of the award, the costs of the contract may be charged to the budget period in which the contract is executed even though some of the services will be performed in a succeeding period if:
- The NIH IC has been made aware of this situation either at the time of application or through postaward notification,
- The project has been recommended for a project period extending beyond the current year of support, and
- There is a legal commitment on the part of the grantee to continue the contract for its full term.
However, costs will be allowable only to the extent that they are for services that are provided during the period of NIH support. In order to limit liability in the event that continued NIH funding is not forthcoming, it is recommended that grantees insert a clause in such contracts of $100,000 or less stipulating that payment beyond the expiration of the current budget period is contingent on continued Federal funding. The contract provisions prescribed by 45 CFR 74.48 and 92.36(i)(2) specify termination provisions for contracts in excess of $100,000.
The procurement standards in 45 CFR 74.44 and 92.36(g) allow NIH to require approval of specific procurement transactions under the following circumstances (and provide a mechanism for governmental grantees to be exempt from this type of review):
- A grantee's procurement procedures or operations do not comply with the procurement standards required by those regulations.
- The procurement is expected to exceed the "small purchase threshold" (now "simplified acquisition threshold") established by the Federal Property and Administrative Services Act, as amended, (currently $100,000) and is to be awarded without competition or only one bid or proposal is received in response to a solicitation.
- A procurement that will exceed the small purchase threshold specifies a "brand name" product.
- A proposed award over the small purchase threshold is to be awarded to other than the apparent low bidder under a sealed bid procurement.
- A proposed contract modification changes the scope of a contract or increases the contract amount by more than the amount considered to be a small purchase.
When NIH prior approval is required, the grantee must make available sufficient information to enable review and approval or disapproval. This may include, at NIH discretion, pre-solicitation technical specifications or documents, such as requests for proposals or invitations for bids, or independent cost estimates. Approval may be deferred pending submission of additional information by the applicant or grantee or may be conditioned on the receipt of additional information. Any resulting NIH approval does not constitute a legal endorsement of the business arrangement by the Federal Government nor does such approval establish NIH as a party to the contract or any of its provisions.
Contracting with Small Businesses, Minority-Owned Firms,
and Women's Business Enterprises
Grantees must make positive efforts to use small businesses, minority-owned firms, and women's business enterprises as sources of goods and services whenever possible. Grantees are required to take the following steps to implement this policy:
- Placing qualified small, minority, and women-owned business enterprises on solicitation lists.
- Ensuring that small, minority, and women-owned business enterprises are solicited whenever they are potential sources.
- Considering contracting with consortia of small businesses, minority-owned businesses, or women's business enterprises when an intended contract is too large for any one such firm to handle on its own, or, if economically feasible, dividing larger requirements into smaller transactions for which such organizations might compete.
- Making information on contracting opportunities available and establishing delivery schedules that encourage participation by small, minority, and women-owned business enterprises.
- Using the services and assistance of the Small Business Administration and the Minority Business Development Agency of the Department of Commerce, as appropriate.
- Requiring the prime contractor, if subcontracts are to be let, to take the affirmative steps listed above.