The “Invent Here, Make Here” Act Should Fully Advance, Not Partially Impede, Bayh-Dole’s Mission
The Senate Commerce Committee on Thursday plans to markup S. 1956, the “Invent Here, Make Here Act of 2023.” The legislation, sponsored by Sens. Tammy Baldwin (D-WI) and J.D. Vance (R-OH), seeks to facilitate the domestic commercialization and manufacture of products developed in part as a result of federal research and development (R&D) funding. This is certainly a commendable goal, and indeed Section 204 of the Bayh-Dole Act—which gives universities, small businesses, and nonprofit research institutions rights to the intellectual property (IP) stemming from federally funded R&D—requires those products to be manufactured in the United States, if commercially feasible. But while the Invent Here, Make Here Act proposes useful steps to facilitate domestic commercialization, which Congress should support, it overreaches in placing excessive restrictions when innovators prove unable to identify domestic manufacturing capabilities despite their best efforts.
On the positive side, the legislation calls for increased coordination among federal government agencies—notably the Departments of Defense and Energy and the National Science Foundation (NSF)—to identify domestic manufacturers that can develop commercial products based on research supported by federal agencies and calls on the Small Business Administration to identify domestic investors that could support the development of such commercial products. Importantly, it calls on the U.S. government to “maintain a publicly accessible and searchable database of domestic manufacturers and their capabilities with respect to commercialization of federally funded research.”
The Manufacturing Extension Partnership (MEP) once had a National Innovation Marketplace and still offers an effective Supplier Scouting Service through which MEP helps small manufacturers, “identify U.S. manufacturers with specific production and technical capabilities and connect them to new customers in the supply chains of larger companies and government agencies.” Separately, the Department of Defense operates its own Defense Innovation Marketplace. The Information Technology and Innovation Foundation (ITIF) certainly supports efforts to raise visibility into the capabilities of America’s manufacturing base to foster the domestic commercialization and manufacture of Bayh-Dole-enabled products. The legislation also helpfully calls for a comprehensive review study of commercialization of federal research by domestic manufacturers within a year and a quarter.
Where the legislation runs into difficulty is where it must confront the reality that America’s manufacturing base has been eviscerated over the past-quarter century. For instance, between 2000 and 2020 the U.S. global share of all manufacturing fell by 37.2 percent (or 9.6 percentage points). America’s share was 25.7 percent in 2000 and 16.1 percent in 2020. Similarly, ITIF’s Hamilton Index, which examined 40 countries’ market shares in 10 of today’s most strategically important industries, found that America’s global share in these industries fell by 22.8 percent from 2000 to 2020. The unfortunate reality is that, in way too many cases, America’s product innovators don’t have credible domestic manufacturers to turn to.
This is why, although the Bayh-Dole Act forbids the manufacture of federally funded inventions outside the United States, it permits innovators to seek a waiver from the funding agency if “reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States” or “under the circumstances domestic manufacture is not commercially feasible.”
But that waiver process has been chaotic, inconsistent, and variable by agency. A survey of university tech transfer offices conducted by the Association of University Technology Managers (AUTM) found one-quarter reporting that it took more than one year to receive a waiver request response from the funding agency. The survey included a response that, “The waiver process is completely busted. Not only did we spend precious non-profit research dollars on requesting legal help in navigating the waiver process, it was useless. The end result is that because the company could not get a US waiver, the availability of the product for US patients was blocked. The product is available globally except in the US because of this issue. So, US patients are suffering.” Federal agencies need to be much more alacritous when responding to such waiver requests.
The legislation’s intent that American innovators should manufacture to the greatest extent possible in the United States, and not strategic competitor nations such as China, is certainly commendable. However, initial versions of the legislation which attempted to define “manufactured substantially in the United States” took an ultra-strict approach to rules of origin, for instance including “all articles, materials, or supplies mined, produced, or manufactured in the United States.” Given the hollowing out that’s happened to so much of American manufacturing, and America’s dependence on countries such as China for a variety of rare earths, critical minerals, and inputs to industrial processes such as rare earth magnets, and superabrasives (e.g., diamond cutting tools) (with one report finding that the United States is entirely dependent on China for superabrasive materials, for instance), it’s important that this legislation not categorically preclude U.S. innovators from manufacturing or commercializing their product even in a nation such as China should they have absolutely no other resort. And adding factors such as “mining” to the list of requirements an entrepreneur or small manufacturer trying to commercialize an innovative product would have to evaluate would impose significant compliance burdens on those enterprises. It’s important that policy not preclude promising technologies from seeing the light of day, even if they can’t be manufactured in every instance in the United States.
Lastly, it’s important that the legislation not amend the Bayh-Dole Act, as that is the jurisdiction of Senate Judiciary, not Senate Commerce. Rather, instead of focusing on amending the Bayh-Dole Act, policymakers’ efforts should focus on addressing the extant problems in the domestic manufacturing waiver process.
Ultimately, what should happen is universities, companies, or small businesses commercializing a product stemming from federally funded research should seek out domestic manufacturers in the first order. Failing that, they should consult the aforementioned database of U.S. manufacturers, and only then resort to seek a waiver from the funding agency. One improvement the legislation could make is to call for the U.S. government to develop a similar database of manufacturers in key like-minded nations; or at least to make it easier for U.S. small businesses to access such databases in like-minded nations. Efforts such as those by the Development Finance Commission (DFC), the Quad (the partnership between Australia, India, Japan, the United States), and even the Indo-Pacific Pacific Economic Framework (IPEF) Supply Chain Pillar to deepen supply chain partnerships could make this an important part of their work. If something can’t be manufactured in the United States, let’s make every effort to investigate if it can be manufactured in an allied nation. That could present much-needed options for innovators before having to resort to look for manufacturers in countries of concern, such as China. Regardless, if a waiver should ultimately be needed, the agency should respond to the request within 90 days, and the waiver should be deemed as permitted if the agency has failed to respond in a timely fashion.
Lastly, policymakers are absolutely correct to be focusing on revitalizing American manufacturing. However, so much more needs to be done. ITIF has outlined a comprehensive set of policies to revitalize U.S. manufacturing and innovation. Foremost among these, Congress should restore first-year expensing on capital equipment, which would allow all firms to expense in the first year for tax purposes expenditures on such equipment. Congress should also work with the incoming administration to ensure its first budget includes doubling the R&D tax credit rate from 20 to 40 percent for the regular credit and from 14 to 28 percent for the Alternative Simplified Credit (ASC), as well as permitting full expensing of R&D expenditures for tax purposes and expanding the refundable R&D credit for pre-profit startups.
The Manufacturing Extension Partnership program remains chronically underfunded, compared to both its own historical norms (when it was launched it’s funding as a share of GDP was it least one-quarter more than it is today) and to comparative funding by peer nations. Germany invests 6.2 times the amount the United States does on a per-GDP basis to help its SMEs modernize through similar programs; Japan invests 54 times more. Policymakers should also be funding the CHIPS and Science Act commitments in full—unfortunately, NSF funding for FY 2024 has come in 40 percent below CHIPS’ targets. Meanwhile, the National Institute of Standards and Technology (MEP’s home) saw its FY 2024 funding drop by 8 percent (to $1.16 billion) from the prior year, putting it 11 percent below the CHIPS target.
Lastly, policymakers must soundly oppose the Biden administration’s “Draft Interagency Framework for Considering the Exercise of March-in Rights,” which would significantly undermine Bayh-Dole by countenancing agency ability to march-in on IP stemming from federally funded research should an agency believe that the price of a resulting product is too high.
Policymakers must adopt a comprehensive set of policies to rebuild America’s manufacturing base and industrial commons: only achieving that will solve the problem this legislation is grappling with in terms of trying to facilitate greater domestic commercialization and manufacturing of innovative products stemming from federally funded research.
