Protect this Law for Our Health and Wealth
Every day, university researchers make discoveries in biology, chemistry, computer science, and dozens of other disciplines.
And those discoveries tangibly benefit ordinary Americans — thanks to an often-overlooked law that allows academic institutions to patent those discoveries and license them to companies, who then take significant risks in an attempt to turn those early-stage insights into useful products. That law, the 1980 Bayh-Dole Act, which then-Senator Joe Biden supported, helped transform the United States into the technological powerhouse it is today.
Now, President Biden faces a choice: whether or not to undermine the law that has served us so well.
In the waning days of the previous administration, the Commerce Department proposed a rule to strengthen Bayh-Dole. If the Biden administration approves the rule — with a few semantic changes — Americans will continue to enjoy the fruits of university research. If it doesn't, we could lose the public/private sector alliances that turbo-charge American innovation. Competitors like China could pass us by.
Before Bayh-Dole, the government retained the patents on any university discoveries developed, even in part, with federal funding. The rationale was that taxpayers helped pay for the discoveries, so they should be readily available to everyone.
That sounds laudable in theory, but in practice, it destroyed the incentives for private companies to invest in developing and refining universities' research. Of the 28,000 patents the government stockpiled before 1980, it licensed less than 5 percent. Even worse, not a single new drug was created from National Institutes of Health (NIH) research when the patent rights were taken.
That was a colossal waste of billions of federal R&D dollars.
Bayh-Dole ended that waste by allowing academic institutions and companies to own the patents that stemmed from their research. It restored the intended incentives of the patent system and spurred decades of American innovation. The Economist Technology Quarterly called Bayh-Dole "possibly the most inspired piece of legislation to be enacted over the past half-century… More than anything, this single policy measure helped reverse America's precipitous slide into industrial irrelevancy."
By encouraging the private sector to collaborate with universities, Bayh-Dole has contributed $1.7 trillion to U.S. industrial output, spawned more than 14,000 startups, and supported nearly 6 million jobs in the last 25 years. On average, we create 3 new companies and commercialize 3 new products every day thanks to the law.
Despite its success, Bayh-Dole is under attack — which is why we need the Commerce Department's clarifying rule.
The law requires that universities owning inventions under the law ensure that good faith efforts are being made to turn those discoveries into useful products. If that's not the case, or if the developer cannot meet the needs of a national emergency, the government can "march in" and relicense the patent to additional companies capable of developing the invention.
Twenty years after the law passed, critics claimed they had discovered a hidden meaning in the law: that the government can march-in if it doesn't think a resulting product's price is "reasonable."
The law never intended this. Its architects, Democratic Senator Birch Bayh of Indiana and Republican Senator Bob Dole of Kansas wrote in the Washington Post, the act "did not intend that government set prices on resulting products." Accordingly, the NIH has rejected every petition to use Bayh-Dole's march-in provision as a price control mechanism under both Democratic and Republican administrations.
Nevertheless, attempts to misuse the law's march-in rights continue, with potentially disastrous consequences. Companies will not make the high-risk investments needed to commercialize federally-funded inventions with this sword — the possibility that the government can license their competitors because someone doesn't like a price — hanging over their heads.
The proposed Commerce Department rule clarifies that march-in rights should only be used as defined in the statute. This clarification would be highly beneficial because the constant threat to misuse Bayh-Dole is eroding private companies' confidence in our universities and federal labs as reliable research partners. That is particularly dangerous as we may well need to mobilize our best and brightest minds in the public and private sectors to fight the next pandemic, just as we did for Covid-19.
Bayh-Dole has borne great fruit over 40 years at no cost to the taxpayer. It created thousands of products, from high-definition televisions, Google's search algorithm, treatments for multiple sclerosis, breast cancer, and cutting-edge mRNA Covid-19 vaccines.
That is quite a track record. With approval of the proposed Commerce Department rule, the Bayh-Dole Act will continue to make us healthier and wealthier. It also means that we will continue to meet the challenge of foreign competitors looking to surpass us. Supporting Bayh-Dole is both good law and good policy.
Joseph P. Allen is executive director of the Bayh-Dole Coalition.