The Benefits in Being Attacked

Joe Allen
Executive Director
Bayh-Dole Coalition
 

 

While it’s certainly not fun, recent attacks on the Bayh-Dole system catalyzed the greatest alliance in its defense since the law was enacted 45 years ago. Until recently, debates over tech transfer policy were relegated to theoretical debates drawing little national attention. Now the issue is front and center in discussions on the nature and purpose of government and how to grow our economy while maintaining our technological lead over countries across the globe. That’s quite a change. 

Being challenged on the fundamental principles of Bayh-Dole forced us to present our arguments in a straightforward, jargon-free manner, while documenting our claims. That resonated with policy makers. the media, and the general public in ways we wouldn’t have thought possible just a few years ago. Previously, media coverage of Bayh-Dole issues was inspired by our critics and we got short shrift. That’s no longer the case.     

When the last Administration flirted with misusing Bayh-Dole as a way for Washington to impose price controls on resulting products, a broad coalition of academic, industry, and venture capital (VC) formed explaining that not only was the idea illegal, but even worse, it was bad policy. 

That exercise gave us the opportunity to explain that despite the claims of the critics, the government is not funding the development of Bayh-Dole inventions. That burden, which is a heavy one, falls upon the licensees and their financial backers. Under our system, most times these are small entrepreneurial companies whose very existence depends on that success. When those efforts fail, it is the private sector and their VC backers who take the hit, not the government.   

Further, at the time a license is signed, no one can predict what a “reasonable price” of a resulting product should be—certainly not the government bureaucracy. When that experiment was tried by the National Institutes of Health twenty years ago, the only thing that fell was partnerships with industry, not prices. 

As we documented and shared these arguments, our support grew. The Washington Post fact checker wrote:  “In the two decades since march-in was identified as a way to control drug prices, advocates of this approach have struck out every time they have sought to advance it. No administration or court has ever accepted this reasoning. For now, it remains just a theory.” 

Finally, the Biden Administration added to the count, denying the march-in petition filed on their watch in a very strong rejection letter. As a sop to Bayh-Dole critics, the Administration floated march-in guidelines including price controls, but did nothing to implement them. That was a big win. 

Secretary of Commerce Howard Lutnick recently floated the idea that the government should seize 50% of academic patent royalties generated under Bayh-Dole, because, according to Lutnick, there was no return on the government’s multibillion-dollar-a-year expenditure on academic research and development. 

Like the fight over march-in rights, how and why Bayh-Dole mandated that academic institutions could retain patent licensing royalties, and how they must be used, was little understood. 

That provision is in the law because most of the costs of patenting, licensing, and negotiating deals are not covered by the government. And those costs can be considerable. Further, while the costs are immediate, it may take years—or decades—for a university to receive royalties to pay them off once a product is finally commercialized.   

Another little-understood fact is that the law mandates that universities must share a percentage of any royalties it receives with the inventors named on the patent. Before Bayh-Dole, there were few incentives for researchers to inform their tech transfer office (if they even had one) that they might have made an invention because the government would take the patent rights. Royalty sharing provides a critical incentive for academic researchers to work with their TTO so patents can be filed in coordination with publication efforts. Otherwise, the technology is condemned to remain a research paper, not a product the public can use. 

The law mandates that any remaining royalties must be spent on funding additional research on campus or in educational efforts. 

The original Bayh-Dole bill contained a “government payback provision” which was dropped at the request of several agencies which didn’t want to have to track license agreements and said their best return on investment was having inventions resulting from their grants turned into useful products growing the economy while benefitting taxpayers. History shows they were correct. 

Ironically, Lutnick’s idea would cost the government much more money than it would generate, as draining the royalties needed by academic institutions to fund their technology transfer efforts means fewer technologies, jobs, companies, and even industries created—all of which generate much more in tax revenue than the proposed “royalty tax.”   

Furthermore, seizing royalties would harm states across the nation, as university innovation is an important driver of local and regional economic development.  

Like before, a broad coalition has been formed to oppose the proposed ‘royalty tax’ and defend the how’s and why’s of Bayh-Dole. The coalition’s work has led to indications that the Administration recognizes this approach may be counterproductive, both economically and politically. 

We’re not out of the woods yet, but we can say that as a result of these attacks, there’s a much greater appreciation of what the Bayh-Dole system does and the tremendous public return on investment (ROI) it generates.   

In addition to the money, there’s a more important benefit which is hard to quantify. At the 30th anniversary of the law, cancer survivor Betsy de Parry hugged Senator Birch Bayh, saying, “Without your law, I would not be alive today.” The lives benefitted, both here and abroad, is the most important ROI.  

That’s why we do what we do. That’s why we can’t give up the fight.