Management Guide to Intellectual Property for State Departments of Transportation (2015)

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10 2.1 Overview Successful IP management requires long-term commitment within the state DOT. Adopting processes and procedures that support the DOT’s mission is very important. One early decision is whether to carry out these activities internally or to outsource them via contracting services. This decision will help determine what level of budget and resources will be required to carry out both business and legal IP management activities. Typically, business activities may involve IP marketing and some aspects of licensing negotiations, whereas legal activities will involve IP registration. The state DOT also needs to establish its goals for IP management. These goals often align with the state DOT’s technology transfer initiatives. For state DOTs, it is important to manage IP for the benefit of the public good, not necessarily for maximizing profit. If some IP assets generate revenue, it will be necessary to manage that revenue and re-invest it into the state. The sections in this chapter briefly present the key components of an IP management process. A flowchart of the process is shown in Figure 3. Knowledge of this process is useful for state DOTs whether they plan to manage IP internally, externally, or using some combination of internal and external resources. It is recommended that any contractor selected have, at a minimum, the capability to perform processes similar to those detailed in Figure 3. These six steps briefly outline the suggested flow of an IP management process: Step 1: Identify the person(s) or form an office that will be responsible for handling IP issues within the organization. Although there are several functional units within most state DOTs, it is recommended that a centralized contact be identified from which IP information can be managed and brokered. Step 2: Establish a disclosure process. The entry point for identifying and documenting IP is the disclosure form. It is recommended that these forms be submitted and revised during periodic reviews of projects or other work activities being conducted by state DOT employees or by contractors working for or on behalf of the state. Step 3: Screen and review. The screening and review process should include at minimum a review of prior art (when applicable); assessment of the field of application; identification of the key features and benefits of the potential IP; identification of the expected users and key stakeholders; and assessment of the IP’s value to the state DOT. Technology assessment (review of competitors, market analysis, and review of similar and substitute technology) should be conducted on a case-by-case basis. Step 4: Make the decision. It is important that the decision-makers consider the various opportunities presented in terms of social impact, financial impact, and overall long-term C H A P T E R 2 Overview of the IP Management Process

Overview of the IP Management Process 11 impact on the DOT. For the state DOT, the decision will also be affected by the sources of project or activity funding and their requirements regarding work used on projects or other activities performed by state DOT employees or by contractors working for or on behalf of the state DOT. In the case of activities funded wholly by the state, the DOT has more control over how IP is managed. For activities with mixed funding and federal-only funding, IP management options will be highly restricted by the Bayh-Dole Act (the Patent and Trademark Law Amendments Act of 1980, PL 96-517). Some options are available to a state DOT that is using an alternative contracting method, such as a Cooperative Research and Development Agreement (CRADA). The CRADA is one of the principal mechanisms used by federal laboratories to engage in collabora- tive efforts with nonfederal partners to achieve the goals of technology transfer. The CRADA, which is not an acquisition or procurement vehicle, is designed to be a relatively easy mechanism to implement, requiring less time and effort to initiate than previous methods for working with nongovernment organizations. The CRADA also is intended to take into account the needs and desires of private industry when commercializing a product. Because each agency and laboratory is free to develop its own CRADA model, technology transfer personnel must ensure that they utilize their agency’s specific wording and format for CRADAs. (More information is available at the Federal Laboratory Consortium website, http://www.federallabs.org/home/faqs/).This mechanism provides a template for negotiating some of the rights and access to jointly developed IP. Figure 3. IP management process.

12 Management Guide to Intellectual Property for State Departments of Transportation In addition to the funding-source constraints, the state DOT must determine what the best forms of IP protection are, and if protections are necessary, who should pursue them (e.g., state DOT, contractor, and/or employee). Step 5: Performing technology transfer. It is important to determine how the technology will be transferred to the public. Details include: • Should the IP title and technology transfer responsibilities be taken by the contractor, the employee, or the state DOT? • Should the IP be distributed freely and shared in the public domain? • Should the state DOT take title to the IP with a requirement to actively pursue licensing to third parties to transfer the technology? Step 6: Monitoring. Depending on the technology transfer decision, it may be important to monitor and audit any agreements (e.g., CRADAs) as well as any licensing compliance issues. (Further discussion of IP audits is provided in Section 2.12 in this chapter.) Additionally, it will be important to measure the success of the IP management effort. These assessments may provide a trigger to initiate march-in rights (essentially, the right to acquire title if the IP holder is not satisfying certain criteria for commercialization), if applicable. Each element of the flowchart presented in Figure 3 will be discussed in more detail in subse- quent chapters of this Guide. 2.2 State DOT IP Management: Current Guidance State DOTs lean heavily on the policy guidance provided by FHWA, because the funding of transportation projects involves a large component of federal money. Following the legal guid- ance for developing, using, and managing IP is required to remain eligible for federal money to assist in the creation of a state’s transportation program. Generally, the federal government maintains that an open and competitive process must be utilized to encourage responsible and competitive prices for publicly funded transportation projects. FHWA regulations concerning the use of patented and proprietary products are contained in 23 CFR 635.411. This updated guidance is posted on the FHWA website: http://www.fhwa.DOT. gov/programadmin/contracts/011106qa.cfm. In summary, the guidance: • Clarifies that a state DOT may specify proprietary products when the state DOT certifies that there is no suitable alternative product (such as an innovative product offering better performance) or that the product is needed for synchronization. • Clarifies that FHWA must approve, through a public interest finding, the specification of a proprietary product when other equally suitable alternatives exist. • Provides for the Internet posting of FHWA’s approval of public interest findings on FHWA’s website and encourages the posting of state DOT certifications on the AASHTO Product Evaluation List (APEL) website. • Clarifies that additional approvals are not required when proprietary products are being evalu- ated in FHWA-sponsored programs such as Highways for LIFE, the Innovative Bridge Research and Deployment Program, and the Innovative Pavement Research and Deployment Program. Based on the guidance suggested by FHWA, the research surveys conducted for NCHRP Project 20-89, a review of past and present legal challenges within the state DOT, and interviews with state DOT personnel, it seems that most state DOTs are very concerned with: • Ensuring that the state DOT has continued access to innovations developed using state DOT funding by employees and/or by contractors.

Overview of the IP Management Process 13 • Obtaining access (e.g., reciprocal licenses) to innovations developed by other public bodies (e.g., FHWA, other state DOTs, other state agencies). • Avoiding becoming “captive” to incumbent contractors with proprietary technology. • Establishing IP management policies that encourage thorough documentation, attribution, registration, and permissions, thus shielding state DOT contractors from IP infringement claims by other state DOT contractors or third-party patent owners. • Enabling and encouraging the most efficient methods to transfer new innovations to practice. • Encouraging and supporting the creativity of employee-inventors and creators. Because state DOTs may operate differently from one another, no one-size-fits-all approach works for IP management. For most, however, the mission and goal have a common theme: to create, maintain, and support an infrastructure for the effective movement of people, goods, information, and services within the state. In pursuing the state DOT’s goals, the various operational units each do their part to accomplish the mission of the agency. Naturally, any operational group may have deliverables that are appropriately managed through patent, copyright, trademark, and/or trade secret; but some forms of IP may be more prevalent in certain operational units than in others. Because tasks and duties differ across operational units, certain types of IP may be more relevant for a specific unit. For example, the research and materials groups are more likely to generate IP that is potentially patentable, whereas IP generated by the planning, public communication, and legal groups may be more appropriately protected by copyrights or trademarks. Table 2 shows some categories of potential IP that may be held by a state DOT and what may be appropriate forms of protection. This list is definitely incomplete, but it should serve as an example of how a state DOT may approach identifying and understanding their IP. Research Materials Legal Transit Method of testing (patent) Products or devices (patent) Treatise (copyright) Method of testing (patent) Products or devices (patent) Slogans (trademark) Databases (copyright) Arrangements of facts (copyright) Logo (trademark) Names of products and services (trademark) Safety Trafic Motor Vehicles Design Cartoon characters (copyright) Public service announcements (PSAs) (copyright) Training materials (copyright) Databases (copyright) Slogans (trademark) Software titles (trademark) Software with algorithms (patent) Databases (copyright) Architectural drawings (copyright) Construction Maintenance Operations Engineering designs/ plans (copyright) Products or devices (patent) Blueprints (copyright) Method of testing (patent) Products or devices (patent) Training material (copyright) Training material (copyright) Table 2. Potential IP within DOT functional units.

14 Management Guide to Intellectual Property for State Departments of Transportation 2.3 Responsibility for IP Oversight Deciding how to administer IP management begins with a thorough analysis of organizational goals, organizational policies, organizational strategy, resource constraints, regulatory constraints, and legal constraints with respect to IP management (16). Among the most important first steps are deciding if any IP management activities will be performed in-house and, if so, determining what activities will be done in-house and what will be outsourced. Determining who, what, how, and why in regards to IP management is important for designating a unit, individual, or an organization to have responsibility for IP management matters for the state DOT. 2.4 Disclosure It is important to have a mechanism for receiving and documenting inventions, ideas, concepts, and creative works that may or should be managed as IP. A best practice implemented by many mature IP management offices is use of a formal disclosure form. This form is typically submitted by the creator(s) of the idea, concept, document, or invention. On this form, the inventor or creator provides an overview and description of the invention, concept, work, or idea. It is important that the form capture sufficient information for the IP unit to decide appropriately whether to pursue IP protection and, if the decision is yes, to implement a strategy for managing the IP. 2.5 Screening and Reviewing When disclosure forms are submitted to the unit responsible for IP management, a process is needed for screening and reviewing the inventions, ideas, and/or creative works. This process needs to include a review of similar prior art, a business case analysis, assessment of the type of IP, and documentation of key applications and benefits. This process should have a time limit, ideally 6 to 8 weeks (17). In most cases, the screening time needed will be affected by disclosure backlog and the staff available to perform the screenings and review. 2.6 Deciding on IP Protection Not all creative works that arise from state DOT–funded activities warrant IP protection. The screening and reviewing process helps identify the ones that should be considered more closely. If the state DOT decides not to proactively manage a particular invention or creative work, dedicating it to the public domain is a very suitable alternative. It is important to note that dedicating a creative work to the public domain relinquishes some level of control over that asset. If the invention or creative work is the output of activities performed by a contractor, the language in the contract will dictate the state DOT’s jurisdiction over the IP. The contract language should allocate final authority regarding who controls what can or cannot happen with the IP rights. 2.7 Determining the Appropriate Forms of IP Protection and Registration The four primary types of IP protection are patents, copyrights, trade secrets, and trademarks. Each form covers specific aspects of a subject matter. However, it is fairly common to cover a single invention or creation using multiple forms of IP protection. Additionally, while certain common-law IP rights may arise upon invention (trade secrets), creation/fixation (copyrights), and/or commercial use (trademarks), depending on the form of IP, it is typically necessary to file for patent protection, register a copyright, or register a trademark with the federal government in order to obtain the full scope of IP rights. The content will determine which form or forms

Overview of the IP Management Process 15 of IP protection will be appropriate; however, it is also important to apply a strategic focus in choosing how to protect IP. To illustrate, consider the following example: Having documented in hardcopy and/or electronic form the steps, methodology, and procedures to perform a pro- cess, a state DOT could rightly claim copyright based on the rules of copyright law. However, a copyright will not protect the actual steps and methods used in the process, because a copyright does not protect methods and procedures. If the goal is to protect the right to use the actual steps, procedures, or methods, then the creative work requires patent protection. The takeaway here is that it is very important to understand what rights are covered by the different forms of IP protection and what the strategic reasons are for that form of protection. 2.8 IP Management Options It is no secret that public funding and public institutions have been at the forefront of new technologies, ideas, and a host of creative content from which private firms have adopted and created significant innovations (e.g., the Internet, global positioning system technology). Many observers have argued that the IP system is not perfect, but it has been somewhat effective at catalyzing growth in new technologies and businesses. For a state DOT, several alternatives may be available for managing such IP. Although the overarching goal is widespread use for the public good, other incentives may include increasing revenue to the state by licensing IP and/or supporting economic development by supporting start-ups and established businesses within the state. The policy that a state DOT puts in place to govern its IP rights will affect how these alternatives can be used to reach the goals and expectations from their IP management program. 2.9 Defending IP Rights A key benefit of—and in some ways a constraint to—IP protection is control over the utiliza- tion of the IP asset. IP protection gives the owner the right to restrict others’ use of the IP. This can have the consequence of both enhancing and thwarting innovation. Nonetheless, for an IP management program to work effectively, the state DOT must be willing to defend the rights afforded by the IP protection. Failure to do so could result in losing those protected rights. In the case of a public institution, this may be a very sensitive situation, given the DOT’s mission to serve the public. Typically, many options are available when IP rights are being misappropriated, such as negotiation, mediation, arbitration, and litigation. In a given dispute, all of these options can be invoked before the dispute is finally resolved. 2.10 Managing Revenue Earned from IP If a state DOT decides to use its IP to generate revenue, a mechanism is needed to ensure that the revenue will be returned to the state. The money may go to a general fund, to specific pro- grams to support economic development activities, or may be returned to the taxpayers in some other form. Although state DOTs are not driven by profit maximization, it remains important to recognize that useful technology often attracts licensees. This may represent a substantial future revenue opportunity for state DOTs. 2.11 Measuring the Effectiveness of IP Management Efforts The success of IP management outcomes should be defined by the mission and goals of the state DOT. If a state DOT has a priority to generate revenue from its investments in technology, then a licensing royalty is important; therefore, one metric of success will be the number

16 Management Guide to Intellectual Property for State Departments of Transportation of licensing deals signed to date and the amount of revenue received in these transactions. If widespread use of an innovation is the driving goal, then the number of technology transfer or deployment agreements would be a key metric. A state DOT may want to use a number of metrics or criteria to assess its IP management activities and policy. 2.12 IP Audit As a precursor to implementing the IP management process discussed at the beginning of this chapter, a state DOT may undertake an IP audit. One primary purpose of an IP audit is to identify the organization’s IP assets, including IP that has been registered by the organization (i.e., through patents, copyrights, and trademarks), IP that does not confer rights enforceable against others (e.g., pending patent applications or unregistered copyrights), IP that the organi- zation has acquired or licensed from others, and the organization’s trade secrets (18). The IP audit may also be used to evaluate the state DOT’s existing formal and informal IP management processes. For example, the IP audit may be used to identify the organization’s existing processes for collecting IP assets (e.g., employee disclosure incentives), the organiza- tion’s existing processes for maintaining IP assets (e.g., nondisclosure agreements and periodic maintenance fee payments), and the organization’s existing processes for avoiding the unauthorized use of IP belonging to others (e.g., periodic license renewals) (19). Once identified, the existing processes will need to be addressed by and/or incorporated into a comprehensive IP management program.