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A researcher working in a university lab makes a discovery that could lead to a new cure. Investors who see the potential of the discovery provide the staff and infrastructure needed to turn the one-off lab experiment into a marketable product.
That’s been a typical model for innovation for decades. But there was a time when it was hard to make that model work if the university researcher, like many university researchers, received some government funding.
In 1981, the Bayh-Dole Act solved that problem by allowing universities to own and license their inventions, even if the inventor had accepted a federal grant. As long as intellectual property is in private hands, investors can support further development that will bring the idea to market, so that society can benefit from these innovations.
While the concept sounds simple, the Bayh-Dole Act, which celebrates its 45th anniversary on Dec.17, has enabled an explosion of innovation.
From 1996-2020, Bayh-Dole increased U.S. economic output by up to $1.9 trillion, supported 6.5 million jobs, encouraged creation of 19,000 start-up companies, and led to more than half a million inventions and 149,000 patents, according to the Bayh-Dole Coalition, a group seeking to celebrate and protect the ideas behind the Act.
“The Bayh-Dole Act provides the incentives and authorities for federally funded inventions to be developed,” Bayh-Dole Coalition Executive Director Joseph Allen told a Dec. 12 webinar to mark the law’s anniversary. “It doesn’t cost the public anything, we didn’t create bureaucracy, but it’s working literally every day of the year.”
Essential for biotech
Bayh-Dole has enabled inventions as diverse as the Google search engine and the flat screen TV. But it has particularly been a boon to research-heavy fields like biotechnology, where ideas are an essential part of the value.
That’s why the Biotechnology Innovation Organization (BIO) shares the goals of the Bayh-Dole Coalition. BIO recognizes the value of intellectual property for biotech, where clear ownership of the results of research enables the investment in ideas that brings innovation to market.
As Dr. Hans Sauer, BIO’s Vice President for IP and Deputy General Counsel, noted private investment that focuses on making specific inventions ultimately pays for close to 70% of biomedical R&D. Government funding covers a smaller piece of the investment, but it comes at a time when ideas do not yet have a clear commercial value, Sauer wrote.
“Thanks to Bayh-Dole, these two types of investment can work together, helping to drive the innovation ecosystem that makes America a leader in biotech and other innovation,” Sauer said recently. “The value of the inventions coming out of Bayh-Dole exceed by many multiples the federal investment.”
Statistical analysis backs up this statement. The main federal seed funding initiative to support early stage research, the Small Business Innovation Research and Small Business Technology Transfer (SBIR/STTR) programs, “generated a 22:1 return for every federal dollar spent,” according to a study by AZ BIO.
A challenge to private ownership
Even though the Bayh-Dole Act has proven to be a boon for taxpayers, there are still occasional misguided policy attempts to chip away at the benefits of the Act. Ultimately, any attempt to interfere with the principles of Bayh-Dole and seek government control of innovations that can be traced to publicly-funded science will backfire, according to Sauer.
“If an investor knows that a new invention comes with unpredictable strings attached because the federal government is going to demand control and payments, they won’t invest in that idea,” he explained. “Disadvantaging federally-funded research will create a market that favors privately-funded ideas simply because of their funding model, not because they are better ideas.”
The most recent threat to the policy and spirit of the act is a proposal from Commerce Secretary Howard Lutnick, who said in October that the federal government should get 50% of any royalties that universities make off of research conducted with federal grants.
Lutnick’s proposal ignores the benefits that America obtains from university innovation, according to critics.
An Oct. 8 survey of its membership by the Bayh-Dole Coalition found that “100% of respondents said royalty-sharing would generate less federal revenue than the current system, which already delivers large tax gains through product commercialization and company formation.”
A challenge to market pricing
Another attack against the principles of Bayh-Dole was an idea to misuse the “march-in rights” of the Bayh-Dole Act for price controls. The Act stipulates that, if the patent holder of an innovation developed with federal support does not commercialize the invention, the government can “march-in” and give the patent to someone else.
The law only allows “march-in” under limited circumstances, like a public health crisis, and the NIH has never used march-in rights. However, under the Biden Administration, the National Institute of Standards and Technology (NIST) submitted a framework to consider whether march-in rights could be used to take away patent rights when the price of a drug is deemed too high.
Although the idea did not move forward, the Bayh-Dole Coalition wrote to President Trump, in March warning that the NIST’s framework had not yet been repealed. The repeal has still not been announced.
“You have to keep going back over and over again. It’s not that people are dumb, but you have to educate people on how the law works,” Bayh-Dole Executive Director Allen told a panel at the BIO International Convention.
Sauer agreed, saying federal officials need to remain aware of the benefits of the 45-year-old legislation.
“The White House Office of Science and Technology Policy recently issued a call for information and ideas on furthering American scientific enterprise,” he said. “There are few measures more efficient at strengthening American leadership in science and technology than Bayh-Dole.”
