By JOSEPH P. ALLEN
For 43 years, the Bayh-Dole Act has been driving American innovation. It provides the incentives needed to transform inventions from ideas in the laboratory into useful products, improving lives here and around the world. It allows universities and small companies to retain ownership of what they invent if they use federal funds to do it. The universities are expected to obtain patents, which they keep, and use any royalties to fund more research and reward their inventors.
Before 1980, few federally funded inventions were commercialized. They were mired in government micromanagement that destroyed the intended protections of our patent system, which are necessary to motivate companies to invest the time and money required for development.
The Bayh-Dole Act, spearheaded by former U.S. Sens. Birch Bayh of Indiana and Bob Dole of Kansas, cut that Gordian knot. It decentralized technology management, shifting it from the federal government to the universities that make discoveries with agency support. It provided the needed incentives for commercialization, launching an unprecedented era of American innovation that continues to this day.
But that changed in December, when the Biden administration issued its draft guidelines for implementing the law — guidelines that attempt to change its meaning. Now anyone accepting federal research and development funds does so at their peril.
When crafting the law, the authors wanted to ensure that good faith efforts were made to develop government-funded discoveries whenever possible. It was feared that big companies might license a university’s federally funded invention and keep it from being developed if it threatened an existing product. There were also concerns that since universities were new at technology transfer, they might include unreasonable terms in their licenses that discourage development. The law included “march-in” rights, meaning the government can force a university to license its technology to others in those cases, or do so itself if the school refuses.
Luckily, that tool has never been needed.
For the past 20 years, those opposed to the law, wanting us to return to the pre-Bayh-Dole days of D.C. micromanagement, have filed a series of petitions against successfully developed products, asking the funding agency to march in and impose price control. They claimed that if a product was commercialized but not sold “at a reasonable price,” the government could license others to make it more cheaply. Every filing was rejected under Democratic and Republican administrations. Most were rebuffed under the Obama-Biden administration.
In March 2023, the Biden administration issued one of the clearest rebukes to that argument to date. That makes it astonishing that nine months later, the current administration’s guidelines endorsed the “reasonable pricing” theory it had just rejected.
The White House claims that it is unleashing a potent new weapon to control drug costs, saying the government can affect prices by licensing copiers. But the proposed action will have little, if any, impact on drug prices. It will, however, have a major impact on the entrepreneurial small companies that drive American innovation.
Seventy percent of university patent licenses go to small businesses. Under Bayh-Dole, we form approximately three new startups around university inventions every day of the year. No other country comes close to that record.
These companies are highly dependent on attracting high-risk venture capital. But now investors will shy away, knowing that rival companies or foreign competitors can file march-in petitions alleging that a product’s price is too high. The possibility of a filing throws a cloud over the technology to hamstring our entrepreneurs when they are most vulnerable.
The vast majority of drugs have multiple patents protecting them, most of which were derived from the company’s own research. Those are not subject to march-in rights. A new study found that 99% of new drugs developed between 2011-20 would not be affected by march-in rights. But march-in rights don’t only apply to drugs — they apply to any invention made with federal funding.
Small companies licensing academic, environmental, energy and food production inventions are more likely to have key patents covered by Bayh-Dole. It’s now open season on them.
In 1980, I helped enact Bayh-Dole to free America’s research system from the crushing weight of government red tape and bureaucracy. In the decades since, this landmark law has reinvigorated U.S. innovation — which has delivered thousands of groundbreaking products to ordinary consumers and generated trillions of dollars in economic growth.
It’s imperative that the Biden administration abandon its destructive proposal, which risks undoing that enormous progress. The stakes couldn’t be higher.
Joseph P. Allen served on former U.S. Sen. Birch Bayh’s staff and helped enact the Bayh-Dole Act. He now serves as executive director of the Bayh-Dole Coalition. This column first appeared in the Seattle Times.