The Patent and Trademark Law Amendments Act of 1980, more commonly known as the Bayh-Dole Act, represents an essential, well-functioning component of America’s national innovation system. The Economist magazine has called the Bayh-Dole Act:
Possibly the most inspired piece of legislation to be enacted in America over the past half-century. Together with amendments in 1984 and augmentation in 1986, this [Act] unlocked all the inventions and discoveries that had been made in laboratories throughout the United States with the help of taxpayers’ money. More than anything, this single policy measure helped to reverse America's precipitous slide into industrial irrelevance.
Countries throughout the world—including Brazil, China, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, South Africa, and Taiwan, among many others—have been inspired by the legislation and since followed the United States’ lead in establishing similar policies.
The Bayh-Dole Act, which affords universities rights to the intellectual property (IP) generated from federal funding, has played a pivotal role in catalyzing American competitiveness by achieving three key accomplishments.
First, before Bayh-Dole, the vast majority of federally funded research simply sat on shelves. As late as 1978, the federal government had licensed less than 5 percent of the as many as 30,000 patents it owned. Moreover, as former Comptroller General Elmer Staats found, “not a single drug had been developed when patents were taken from universities [by the federal government].”
Second, in creating a pathway for technology commercialization of federally funded research and development (R&D), it transformed American universities into engines of innovation. As Harvard University’s Naomi Hausman has written, “The sort of large scale technology transfer from universities that exists today would have been very difficult and likely impossible to achieve without the strengthened property rights, standardized across granting agencies, that were set into law in 1980.”
Allowing U.S. institutions to earn royalties through the licensing of their research provided a powerful incentive for universities and other institutions to pursue commercialization opportunities. The Bayh-Dole Act almost immediately led to an increase in academic patenting activity. For instance, while only 55 U.S. universities had been granted a patent in 1976, 240 universities had been issued at least one patent by 2006. Similarly, while only 390 patents were awarded to universities in 1980, by 2009, that number had increased to 3,088—and by 2015, to 6,680. Another analysis found that in the first two decades of Bayh-Dole (i.e., 1980 to 2002) American universities experienced a tenfold increase in their patents, and created more than 2,200 companies to exploit their technology. In total, over 80,000 U.S. patents have been issued to academic research institutions over the past 25 years. Moreover, academic technology transfer has supported the launch of over 12,000 start-ups since 1995. According to a report prepared for the Association of University Technology Managers (AUTM) and the Biotechnology Industry Organization (BIO), from 1996 to 2015, academic patents and their subsequent licensing to industry—substantially stimulated by the Bayh-Dole Act—bolstered U.S. GDP by up to $591 billion, contributed to $1.3 trillion in gross U.S. industrial output, and supported 4,272,000 person years of employment.
Third, Bayh-Dole has been particularly impactful in stimulating American biomedical innovation. Most don’t know it, but the United States used to be a global also-ran in life-sciences innovation: European-headquartered companies innovated twice as many new-to-the world drugs as American ones did in the latter half of the 1970s (149 to 66) and as late as 1988 less than 5 percent of the world’s drugs were introduced first in the United States (now that share stands at over 60 percent). The Bayh-Dole Act played a pivotal role in helping change that, facilitating a pathway through which the intellectual property derived from government-funded, university-conducted basic life-sciences research could be licensed, predominantly to small companies, for commercialization and development. This process has now contributed to the development of, at least, well over 200 (and probably closer to more than 300) novel drugs.
The architects of Bayh-Dole included provisions for march-in rights. However, these were principally designed to ensure patent owners commercialized their inventions. As Senator Birch Bayh himself explained, “When Congress was debating our approach fear was expressed that some companies might want to license university technologies to suppress them because they could threaten existing products. Largely to address this fear, we included the march-in provisions.”
As the Congressional Research Service notes, the Bayh-Dole Act proscribes four specific instances in which the government is permitted to exercise march-in rights:
- If the contractor or assignee has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention;
- If action is necessary to alleviate health or safety needs not reasonably satisfied by the patent holder or its licensees;
- If action is necessary to meet requirements for public use specified by federal regulations and such requirements are not reasonably satisfied by the contractor, assignee, or licensees; or
- If action is necessary, in exigent cases, because the patented product cannot be manufactured substantially in the United States.