A federal appeals court ruled that the National Institutes of Health’s unilateral 15% cap on indirect research costs violated law and agency procedures, handing universities a legal win and immediate budget relief. The 1st U.S. Circuit Court of Appeals upheld a lower-court decision that NIH could not replace negotiated institution-specific overhead rates with a blanket ceiling. Universities and research leaders had warned the cap would cripple facilities, IT, compliance and lab operations at major research institutions; the court cited statutory language and Congress’s past protections for negotiated rates. NIH has declined comment on whether it will seek further appeal. Legal observers say the ruling preserves the long-standing model by which research overhead is negotiated individually with grantees. The decision arrives alongside a separate settlement that requires NIH to resume ordinary review processes for thousands of delayed grants — a separate federal case in which 16 states secured commitments from NIH to review and decide on previously delayed applications. That settlement commits NIH to restore review timelines for sets of applications and represents a parallel avenue of relief for institutions that faced months of uncertainty. Why it matters for campus leaders: the rulings and settlements restore predictable revenue streams for sponsored research, protect budgets for lab infrastructure and staff, and reduce the immediate risk of program cuts and faculty departures tied to grant funding interruptions.