Senator Birch Bayh
Bayh-Dole +25
April / May 2005
Volume 3 Number 2
Since the enactment of the University and Small Business Patent Procedure Act (P.L. 96-517), also known as the Bayh-Dole Act, in 1980, I have periodically been asked to provide some thoughts on the Act and how successful it has been in achieving the goals we had in drafting it. As I tracked its progress over the years I have been pleasantly surprised by how well Bayh-Dole has turned out. An editorial in the December 2002 issue of The Economist found that,
"Possibly the most inspired piece of legislation to be enacted in America over the past half-century was the Bayh-Dole Act of 1980. Together with amendments in 1984 and augmentation in 1986, this 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."
It has been a long journey for Bayh-Dole from inspiration to The Economist. In 1977 as chairman of the Senate Subcommittee on the Constitution, I began a series of hearings and investigations into the nation's patent laws. One of the issues the subcommittee examined concerned government patent policies regarding federally funded research and development and its impact on innovation and commercial utilization of inventions resulting from this use of taxpayer dollars.
The government policy at that time generally retained rights to any intellectual property arising from federally funded research and provided for only nonexclusive licenses to industry. The theory underlying this policy was that any economic rewards resulting from federally funded research and development should be largely captured by the government, for the benefit of the taxpayers, and generally not shared on an exclusive basis with non-governmental entities. However, in the final analysis, the result of the policy was that there was absolutely no incentive to develop government financed inventions for the commercial market. Consequently, any discoveries made through this government-financed research simply sat on the shelf gathering dust. By 1978, the federal government owned 28,000 patents but only 5 percent had ever been licensed.
This policy was not only wasting tax dollars, but it had a very negative impact on U.S. technological innovation and ultimately undercut American competitiveness. For several years, the number of patentable inventions made under federally supported research had been in decline. American productivity was growing at a much slower rate than that of many of our world competitors. Simply put, American efforts at innovation, in which we were once the undisputed world leader, were stagnating and falling behind those of other nations.
The Bayh-Dole Act was designed to inject the incentive of the free market into what had become a slumbering U.S. patent system. It permitted universities and small businesses to retain patent rights to inventions developed with the support of the federal government so that technology could be licensed to private companies and new products could be brought to the marketplace. The legislation sought to strike a careful balance between the rights of the government to use inventions arising out of research that the government helped to support, and the equally important right of the public to see that the inventions realized their full potential in the marketplace and actually reached the people that they were intended to benefit.
All indications are that since its enactment in 1980, the Bayh-Dole Act has worked remarkably well in achieving the goals we had in mind for it. It has succeeded in moving patents off the shelves of the federal bureaucracy and into the marketplace. While prior to 1981 fewer than 150 patents per year were issued to universities, a decade later almost 1,600 patents were being issued to universities each year. By 2003, 3,450 patents were issued to these institutions.
The annual license survey conducted by the Association of University Technology Managers shows that this surge of economic development and innovation unleashed by the act continues and, in fact, is accelerating. An economic impact model developed by the association shows that in 1995, $21 billion of economic activity and over 180,000 jobs were attributable to academic licenses. By 1999 the survey showed $40.9 billion of economic activity could be attributed to the results of academic licensing, supporting 270,900 jobs, and directly contributing about $5 billion in tax revenues to federal, state and local governments.
It should also be noted that while Bayh-Dole has produced remarkable economic benefits, it has also helped produce significant breakthroughs in important product development. In August of 2001, the National Institute of Health delivered a report to Congress titled A Plan to Assure Protection of Taxpayers Interest. The report concluded:
"It is impossible to overstate the achievements of the global macroeconomic impact of taxpayer-supported biomedical research. Federal funded biomedical research, aided by the economic incentives of Bayh-Dole, has created the scientific capital of knowledge that fuels medical and biotechnology development. American taxpayers, whose lives have improved and extended, have been the beneficiaries of the remarkable medical advances that comes from this enterprise."
I am pleased that this relatively brief statute has had enormous impact in terms of stimulating economic activity, bringing advanced research to the marketplace and developing products of significant benefit to society. It was Abraham Lincoln who said that the patent system should work to add the "fuel of interest to the fire of genius." That is what Bayh-Dole was designed to do and that is what it continues to do.
Birch Bayh, a Democrat, represented Indiana in the U.S. Senate for 18 years. He is a partner at the Venable law firm in Washington, D. C.
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