America’s position as a global tech leader is under attack from within.
President Biden announced the government can claim patent rights on federally funded, private-sector inventions it deems unreasonably priced. As justification, he cites a 43-year-old law called the Bayh-Dole Act, which played a key role in establishing the United States as the world’s most innovative nation.
But the plan violates both the letter and the spirit of the Bayh-Dole legislation, which was never intended to serve as a mechanism for government price controls. Even worse, Biden’s plan would legitimize foreign businesses and governments that want to steal American inventions. If the U.S. government can’t be bothered to protect U.S. patents, why should anyone else respect them?
Drafted by Sens. Birch Bayh, a Democrat, and Bob Dole, a Republican, and signed by President Jimmy Carter in 1980, Bayh-Dole transformed how we turn breakthrough scientific discoveries into tangible products.
The law gives academic institutions ownership over discoveries their researchers have made with the help of federal dollars. Universities license those discoveries to both small and large private companies with the resources to turn them into products.
The result of the law was a great flourishing of innovation. In 2002, The Economist Technology Quarterly called the Bayh-Dole Act “possibly the most inspired piece of legislation to be enacted in America over the past half-century.”
Before 1980, the patent rights to nearly all discoveries made with federal aid belonged to the government — which mostly just sat on them. When Bayh-Dole passed, federal agencies held some 28,000 patents, of which fewer than 1,400 had been licensed for further development. None of the licenses were for new drugs.
After 1980, commercialization skyrocketed. Today, innovation spurred by Bayh-Dole supports millions of jobs and thousands of startups. Between 1996 and 2020 it contributed over $1 trillion to U.S. gross domestic product. Products that have come to market thanks to the Bayh-Dole Act include the allergy medication Allegra, Honeycrisp apples, high-definition television, and the Google search engine — to name only a few.
Due to unique circumstances that existed in 1980, Bayh-Dole allows the government to “march in” and relicense patents to third parties in certain well-defined, narrow circumstances. These circumstances include when a discovery isn’t being commercialized, when there is an urgent public safety or health need, and when a licensee violates the law’s so-called domestic manufacturing requirement.
But Sens. Bayh and Dole themselves affirmed that price did not count as a trigger for march-in. They repeatedly said that Bayh-Dole’s purpose was to encourage public-private collaboration that would benefit society through the creation of new products.
Does this system work? Consider that one of the reasons given for the rapid creation of COVID-19 vaccines was the ability of the private sector to use research from academic institutions. This public-private collaboration was made possible by the Bayh-Dole Act.
The Biden administration’s plan would send a chilling effect through our most innovative sectors. Startups and investors would balk at partnering with universities, knowing that the government could swoop in and claim patent rights for any product that benefited from federal research dollars at some point in its development.
Biden seems not to have considered that weakening our intellectual property system in this way could encourage foreign adversaries to scoop up American inventions for their own gain. China already steals some $600 billion worth of intellectual property and technology from the United States each year, according to a report from a 2023 bipartisan House select committee. They do not need any further incentive to steal U.S. innovations.
Biden has pitched the march-in proposal as a way to lower drug costs. In theory, if the government relicenses drug patents to companies other than the firms which developed the products, then more patients might be able to afford medications.
But even if that were an appropriate application of the law, the administration needs to consider the massive impact the plan would have on other industries. Tech transfer undergirds every high-tech sector. With patents under threat, investment and startup activity would drain away from artificial intelligence, quantum computing, and electric vehicle battery technology — precisely the areas where we most need innovation.
Biden’s proposal can’t become official policy until after a public comment period that ends in February. In the meantime, let’s hope the administration scraps the idea. The future of American innovation and prosperity does indeed hang in the balance.
John Fraser, a past president of AUTM and former executive director of commercialization at Florida State University, is president of Burnside Development, a consulting company.
