COMMENTARY – Collateral Damage: U.S. Innovation

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Guest columnist

The Biden administration recently proposed misinterpreting a decades-old law to try to lower drug prices. But as multiple studies have already shown, the White House’s plan would do nothing to achieve that goal.

By Walter G. Copan, Ph.D. 

Instead, it risks destroying our nation’s capacity for innovation across every high-tech sector by eliminating incentives for companies and entrepreneurs to license inventions arising from research at universities and research institutes.

By threatening to upend that law, commonly known as the Bayh-Dole Act of 1980, the administration also betrays a failure to grasp why the legislation was necessary in the first place. 

Prior to Bayh-Dole, most scientific breakthroughs at universities and federal labs weren’t being developed into real-world products. They collected dust on shelves. That’s because they had been funded, in part, by the federal government, which meant the government — not the research institution that made the breakthrough — retained the patent rights. And the government rarely licensed those patents to private companies that could turn the good ideas into tangible products.

Bayh-Dole fixed that logjam by allowing universities and other labs receiving federal dollars to retain the patents on their inventions. Unlike the federal government, they had a strong incentive to pursue licensing arrangements with private sector companies that could transform their inventions into commercialized products.

This altered the scientific and commercial landscape dramatically. Before Bayh-Dole, fewer than 5% of the roughly 30,000 patents the government held from university research had been licensed — a colossal waste of taxpayer money. In 2022 alone, universities and research institutions were awarded 7,739 patents and licensed 9,884 for development.

Between 1996 and 2020, Bayh-Dole also helped create over 17,000 startups, boosting U.S. gross industrial output by nearly $2 trillion.

Patent rights are a powerful incentive. When investors fund startups working to commercialize basic research, they do so with the expectation that the patents underlying a company’s nascent products are secure. It would be extremely foolish to undermine that investor confidence. The government accounts for only a small fraction of total R&D spending compared to what private sources contribute.

The administration’s proposal, put forward in December, holds that if even a small amount of federal research funding contributed to developing a unique invention, the federal government can reassert control of the patent and licensing rights. Bureaucrats will also be able to forcibly relicense the patents on an already commercialized product if they arbitrarily deem that its price is too high.

That would plainly violate the law. While the administration claims that Bayh-Dole’s obscure “march-in” provision enables them to forcibly relicense patents at will, the law clearly stipulates that such authority can only be used in rare circumstances, such as when a patent holder refuses to license their discovery in the first place.

Misusing march-in would signal to companies and venture capitalists that investing in the development of federally funded basic research is too risky. Entrepreneurs and investors would abandon the process altogether, crushing technology transfer. And because Bayh-Dole governs all technology that arises from federal funding — from drugs to advanced materials to quantum sensors — every high-tech sector of our economy would be jeopardized.

The administration must scrap this proposal. The future of our innovation economy demands no less.

Walter G. Copan, PhD, is vice president for research and technology transfer at Colorado School of Mines, and senior adviser with the Center for Strategic and International Studies and co-founder of its Renewing American Innovation project. He previously served as director of the National Institute of Standards and Technology (NIST).

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