Taking the Mystery Out of March-in Rights

By any objective metric, the Bayh-Dole Act of 1980 has been an unqualified success in growing the U.S. economy and making lives better around the world. 

Previously, if an invention was made even partially with government support, it was taken from its creators and warehoused in Washington. The incentives of patent ownership were destroyed, and nearly 28,000 inventions simply gathered dust on the shelves.

Bayh-Dole reversed this waste, allowing universities and small businesses to own inventions they created with federal support, wisely decentralizing technology management from Washington to those making the discoveries.

Today, public-private R&D alliances drive our economy. We launch approximately three new companies and bring three new products to market based on academic inventions every day of the year.

But critics remain, and they claim to have discovered a previously hidden meaning in the law that would bring Washington micro-management back with a vengeance. They say the law allows the government to set prices on products that resulted, in part, from federal funding. This is done, they allege, through the "march-in rights" provision of Bayh-Dole. 

So, what are march-in rights?

March-in rights give the federal government the authority to forcibly relicense a patent that resulted from any amount of federal funding, if good-faith efforts aren't being made by the patent-holder to commercialize the research. 

Four instances can trigger the government to march in:

• First, if the action is necessary because the patent owner isn't taking steps to achieve practical application in a reasonable time. For example, if a university finds a potential cure for Alzheimer's disease, and a company working on a different approach negotiates exclusive rights for the purpose of suppressing a competing technology. In that case the government could "march in" to license another company willing to commercialize the academic invention.
• Second, if the action is necessary to "alleviate health or safety needs" that the developer can't meet. For example, a company has a vaccine desperately needed to combat a raging pandemic, but it can't produce enough doses itself and refuses to partner with others who could. In that case, the government can march in.
• Third, if the action is necessary to meet the requirements for public use specified by Federal regulations. An example would be a filter needed to protect public drinking water per EPA regulations, but again the developing company can't produce enough products itself and refuses to sublicense others who could, to meet the need.
• Fourth, if the developer violates its pledge to manufacture the product substantially in the U.S. The law requires that preferences be given in exclusive licensing to companies that pledge to manufacture the resulting product in the United States. If a licensee said it would produce a breakthrough solar panel in Ohio but was discovered to actually be manufacturing them in Mexico, the government could march in.

Twenty years after the law was enacted opponents announced they had discovered a hidden meaning in Bayh-Dole. They claimed that the first trigger allowed the government to ensure that resulting products are "reasonably priced." 

Senators Bayh and Dole immediately denounced that theory, but the critics began filing a series of petitions asking the National Institutes of Health (NIH) to march in against various drugs. As the NIH was considering the first petition in a public meeting, Senator Bayh appeared to show how the petition deliberately misrepresented the legislative history of his law. That and all subsequent march-in petitions urging the government to assert price controls have been rejected under Democratic and Republican administrations as unfounded under the law. 

Apart from it not being sanctioned under the law, misusing march-in rights to implement government price controls would be disastrous public policy. 

Today nearly 70% of academic licenses go to small companies. They must raise venture funding — and the vast majority of the time they fail, and their investors lose their money.

While the current attempts to misuse march-in rights are focused on drugs, if the critics ever succeeded, any product made under Bayh-Dole would be subject to attack if someone didn't think their price was "reasonable," a completely arbitrary standard. No company — or investor — would ever assume the expense and risk required to turn a federally funded invention into a useful product if the government could license copycats.

Our system works. It should be appreciated and supported if we want to remain ahead of our competitors. With China running as hard as it can to overtake us, this is no time to shoot ourselves in the foot in the midst of a race that we have to win.

Joseph P. Allen is executive director of the Bayh-Dole Coalition.