New rules proposed on firms that receive U.S. funding

David Shepardson
Detroit News Washington Bureau

After two Republican senators raised concerns, the U.S. Energy Department is proposing to change its rules on intellectual property created by companies that receive government funding.

“The department always seeks to strike the right balance between advancing science and technology and protecting taxpayer investment in R&D. To that end, (The Energy Depeartment) seeks an appropriate commitment aimed at providing benefit to the U.S. economy,” wrote John Lucas, the Energy Department’s assistant general counsel for technology, transfer and intellectual property in a letter Friday.

The Energy Department recently said it would write new rules covering administrative requirements for grants and cooperative agreements, requiring disclosure of manufacturing plans for newly developed technologies and disclose inventions created in part with government support.

The proposed regulation “governs reporting on utilization of subject inventions and would require recipients to report annually for ten years,” wrote U.S. Sens. Charles Grassley, R-Iowa, and John Thune, R-S.D.

They have raised concerns since 2012 about the government’s role in “funding the development of intellectual property.”

The two were especially concerned about two companies — battery firm A123 and start-up automaker Fisker Automotive Inc. — that were acquired by Chinese firms.

In an October 2014 letter to Energy Secretary Ernest Moniz the pair said “in the course of our oversight into DOE's loans and grants to car manufacturer Fisker and battery producer A 123, we found few safeguards on DOE's control over the intellectual property it funds.”

Moniz said in a letter Friday that he appreciated “support of our recent proposed regulatory changes that would require applicants for R&D funding to submit U.S. manufacture plans for newly developed technology and utilization reports for resulting (intellectual property).... The department is mindful of your concerns and continues to strive for ways to increase protection of taxpayer investment in R&D, while maximizing the benefit to the U.S. economy of that investment.”

The senators raised concerns about secondary inventions.

“To date, no measures have been taken to identify or track secondary innovations that have stemmed from DOE-funded inventions. A more complete audit would allow DOE to register and claim title to subsequent inventions that trace back to federal support and may otherwise escape disclosure. ”

Moniz noted the senators were worried about the government tracking “secondary innovations.” But he said current laws that apply to Energy Department grants “limit the government's rights to new inventions made under those agreements.”

The Obama administration in January 2013 approved the sale of the bankrupt battery company to Wanxiang Group Corp. The company's U.S. subsidiary, Chicago-based Wanxiang America, won an OK to complete its $256.6 million acquisition of substantially all of the nongovernment business assets of A123 Systems Inc., which include its grid and commercial business assets and its U.S. facilities in Michigan, Massachusetts and Missouri.

A123 was awarded a federal grant of as much as $249.1 million and used about $132 million to build two plants in Michigan.

California-based Fisker Automotive Inc. filed for Chapter 11 bankruptcy in November 2013 with $203 million in debts. The filing came as the U.S. Energy Department sold its $169 million green-energy loan in Fisker for $25 million to investor group Hybrid Technology LLC. But the U.S. Bankruptcy Court in Delaware ultimately approved a sale of Fisker to Wanxiang Group Corp., the Chinese company that acquired battery maker A123 in 2012. A123 had built the batteries for the Fisker Karma. Taxpayers lost $139 million on the $192 million loan to the failed electric vehicle startup.