The Bayh-Dole Act is widely credited with kickstarting a new era of American innovation involving the launch of 17,000 startup companies and some 495,000 inventions.
Yet despite this success, Bayh-Dole now finds itself vulnerable — and from a surprising source.
Back in 1980, a young senator from Delaware named Joe Biden was among those who supported Bayh-Dole in the Senate Judiciary Committee. His “yes” contributed to the bill’s 91-4 approval in the Senate. Later in his Senate career, Biden voted against then-Rep. Bernie Sanders’ attempt to amend the law so the government could second-guess the pricing of successfully commercialized inventions. As president, his administration issued one of the strongest denials of attempts to misuse the law for the same purpose.
But last week, the administration changed course, announcing plans to radically reinterpret Bayh-Dole.
The law hasn’t changed. So the move can only be explained by politics.
As the executive director of the Bayh-Dole Coalition, which works to inform policymakers and the public of the Bayh-Dole Act’s many benefits, I shudder to imagine a future in which the law is upended. What world-changing innovations might never come to fruition? Technologies to fight climate change? A cure for cancer? The answer to food insecurity?
The Bayh-Dole Act was a response to the malaise of the late 1970s when American industry struggled to keep up with international competitors.
Part of the problem was that universities, small companies, and federal labs were making breakthrough discoveries with government funding — but they were rarely commercialized.
That’s because, at the time, government agencies retained the patent rights on discoveries made in whole or part with federal support. Since the government could license these patents to anyone, investors lacked the incentives needed to risk turning early-stage inventions into useful products.
In fact, according to the Government Accountability Office, fewer than 5% of the 28,000 patents held by federal agencies before Bayh-Dole were ever licensed.
In light of these facts, Sens. Birch Bayh, a Democrat, and Bob Dole, a Republican, conceived a plan. Under their act, universities, federal research labs, and small companies would retain the patent rights to their discoveries if they had received federal grants or contracts.
Universities could then license those patents to private companies. This change ignited an unprecedented innovation revolution, catapulting the U.S. to dominance.
The law aligned the incentives of private companies with those of universities. It also rewarded taxpayers, who now benefited from the commercialization of discoveries made with federal funding.
Countless products we take for granted wouldn’t exist without Bayh-Dole — including Google, touchscreen phones, and a host of breakthrough medicines. Bayh-Dole is helping today’s innovative companies bring tomorrow’s technologies to the market in fields like quantum computing, robotics, and AI.
Sens. Bayh and Dole foresaw potential pitfalls in their legislation and created safeguards against them.
One possibility was the prospect of a deep-pocketed corporation licensing research, not with the intent of developing it, but simply to keep a rival from using it.
Suppose one of the big three automakers bought exclusive rights to commercialize electric-car technology, only so it could shelve the concept and keep selling gas-guzzlers?
The answer was what would come to be known as “march-in.” If a patent-holder failed to commercialize a discovery in a timely way, or the university was trying to license it on unreasonable terms, the government could “march in” and force the university to license the technology to someone else on reasonable terms.
The government could also march in if the product wasn’t being manufactured domestically as the licensee had agreed to do or produced in sufficient quantity to meet health or safety needs or to meet federal regulatory requirements. But in 43 years, Washington has never had to exercise its march-in authority, because universities diligently enforce licensing agreements.
This hasn’t stopped the law’s opponents from claiming to have found a hidden meaning in the law’s march-in provision. In 2002, two academics took to the Washington Post to claim that the law could be used to regulate drug prices. Never mind that the law says no such thing. Bayh and Dole even replied to the op-ed by declaring, “Bayh-Dole did not intend that government set prices on resulting products.”
Nonetheless, ever since then, critics of Bayh-Dole have argued that price should trigger march-in. Every administration has rejected this claim. Until now.
That includes the Obama administration, the Trump administration, and even the Biden administration, which in March 2023 rejected activists’ petition to relicense patents on Xtandi, the prostate cancer drug.
What every administration understood is that if patent protections can be yanked for subjective reasons, then Bayh-Dole’s foundation becomes shaky, with patent licensing deals left vulnerable to bureaucratic whim.
But now the Biden administration has changed course. Last week, it proposed a framework that, if codified, would allow government agencies to exercise march-in if someone doesn’t like how a successfully commercialized product is priced. That’s a completely capricious concept.
This radical reinterpretation would discourage public-private partnerships and prevent transformational discoveries from reaching consumers.
Why would anyone assume the expense and risk of commercializing a federally supported invention if, at any time, Washington could give the fruits of your labor to copiers?
Even if entrepreneurs were themselves willing to shoulder those risks, they’d struggle mightily to raise capital, since any federally backed patent would effectively have a scarlet letter attached. The framework would allow political activists and rival companies, or even our foreign competitors, to petition the government at any time and for any reason. And even if these petitions are ultimately rejected, they cast a cloud over the technology and would hamstring the entrepreneurial small companies which drive our economy just as they are most vulnerable.
Why would administration officials permit such a body blow to the world’s best innovation system? The recently released march-in guidelines were heralded as a potent weapon to lower drug costs. They are no such thing; the vast majority of drugs are protected by multiple patents, most of which were made by the developer at their own expense, so not susceptible to march-in. And the impact would be felt across all industries, including energy, agriculture, computing, and so much else.
A full seven in 10 university patent licenses go to small companies. They are the ones who now have a target on their backs.
For 43 years, Bayh-Dole has been a driver of our economy and the source of incredible public benefits. This simply cannot be lightly jeopardized just to score political points.
Joseph P. Allen is executive director of the Bayh-Dole Coalition.