Coalition Launches to Celebrate and Protect the Bayh-Dole Act
North Charleston, South Carolina, the smaller, hard-working neighbor of the historic coastal city that shares its name, suddenly found itself at the center of a regional crisis.
Home to a thriving Navy base for nearly a century, it learned in the early 1990s the massive facility was on the short-list for closure. In 1996, the persistent rumors proved true.
Overnight, it seemed, tens of thousands of jobs were imperiled.
Not only was the city in dire straits, but so too were communities for miles around it.
Their response was to form a regional alliance and to hire a consultant to lend it some direction, and what the consultant advised them was key: stop relying on pillars like the defense industry and tourism.
Instead, embrace “business clusters” and never face the hazard of a complete economic collapse again.
Among the proposed clusters, one seemed particularly far-fetched — leveraging the state’s universities to foster a biotech and technology sector.
The idea was to create a series of endowed chairs, who would then make discoveries that could be morphed into local businesses. The plan worked, and biotech businesses thrived, creating science jobs not only in South Carolina’s lowcountry, but throughout the state.
And at its heart was something Congress did … albeit many years ago.
Passed in 1980, the Bayh-Dole Act has empowered universities, small businesses, and nonprofits that have received federal grants to retain ownership of any patented inventions — and license those patents to private firms.
This has led to the translation of basic scientific research into a wealth of life-saving drugs and medical devices, not to mention things like the internet, GPS technologies, rechargeable lithium-ion batteries, and countless other innovations.
According to its advocates, Bayh-Dole has bolstered U.S. economic output by $1.3 trillion, supported 4.2 million jobs, and led to more than 11,000 start-up companies.
Last month, a diverse group of research and scientific organizations, as well as those directly involved in commercializing new products, launched Bayh-Dole 40, a coalition that will both celebrate and protect the legislation — formally known as the University and Small Business Patent Procedures Act of 1980 — from those who believe no good thing should go unbroken.
“Bayh-Dole made the United States the engine of global innovation,” said Bayh-Dole 40 founder and executive director Joseph Allen, who helped enact the law as a member of Sen. Birch Bayh’s senate judiciary staff.
Getting it done, however, took a lot of minds a lot of years, Allen said during a recent interview with The Well News.
As he explained, it was Franklin D. Roosevelt who first raised the question of what was to be done with all the scientific and technical prowess being unleashed during World War II. He tasked Vannevar Bush, the engineer and inventor who headed the U.S. Office of Scientific Research and Development, with figuring it out.
Bush’s answer, delivered to President Harry Truman after Roosevelt’s death, was a paper entitled “Science: The Endless Frontier.”
In it, he said, the government should assume, from that time on, that funding basic and fundamental research that went well beyond its mission needs was a legitimate thing to do.
The paper led directly to the creation of the National Science Foundation.
But there was a flaw in Bush’s scheme.
“The policy stated if the government funds any percentage of the research, any invention that comes of it belongs to the government, which can take it away and make it available to anyone who wants to use it,” Allen said. “The intention behind this was noble. The problem was it destroyed the incentive for anybody to put their own money into developing it.”
Fast forward to the 1970s, a time when American businesses were being surpassed by their Japanese and German counterparts in everything from television and radios to cars and steel.
Birch Bayh, a liberal Democrat from Indiana, asked Allen to sit down and look at the issue, and what he found was the federal government was generously sinking billions of dollars into scientific research a year, only to give the research away and have nothing commercialized.
“The first thing we said was ‘this doesn’t make sense,’ and then we learned that Kansas Sen. Bob Dole, who was a conservative Republican, was looking at the same thing.
“In the end they got together and said, ‘look, we don’t agree on very much, but one thing we do agree on is the desire not to waste taxpayers’ dollars’ and with that they began to look at how to do things better,” Allan said.
What the Bayh-Dole Act said was that if a university made an invention with the help of government funding, the university owned it. The government could use the product for free, of course, because it paid for its creation. But at the same time the university could license it to a small company that would then agree to make the product in the U.S.
The Act also includes a provision that requires the company licensing the technology to make a “good faith” effort to bring it to market to ensure against businesses trying to hijack and stall competing technologies.
Allen said when Congress held hearings on the proposal not a single company testified. To them, the government’s involvement was suspect.
But around the same time as the hearings, Stanford University came up with a new biotech process it tried to sell to one of the big drug companies. When those efforts failed because the research was considered too risky, Stanford began spinning off companies on its own.
“That was the moment when Bayh-Dole took off,” Allen said. “Suddenly companies were interested in working with universities and they could see that their rights were protected … that the government just couldn’t come in and take the technology away.”
Then, about 20 years ago, a pair of professors concluded language in Bayh-Dole mandated that a certain “reasonable price” be adopted for products created through the program, and that if the price wasn’t deemed reasonable, the university would be forced to license the technology to somebody else.
Allen says that’s not at all how Bayh-Dole works, but the criticism has lingered.
“This is completely contrary to Bayh-Dole, which sought to take Washington out of the management equation, and give universities and small businesses an incentive to work together,” he said.
“In a sense, what we’re talking about is pure Jeffersonian democracy,” Allen continued. “We were trying to give people authority, give people rights, and then create a system where government did what it does best, which was funding the research, but then have it get out of the way.
“And we did this while creating no new bureaucracy and no new spending,” he said.
“And if you look at what happened, we went from an era when a lot of people were saying America’s best days were over … to an unprecedented explosion of U.S. entrepreneurs. In fact, the Economist technology quarterly said Bayh-Dole was the most important law passed in the last half century,” he said.
But Allen quickly said the bill’s authors were far from visionaries.
“I would love to say we were smart enough to perceive the future … but really, looking back, our thought was, whatever we come up with has got to be better than the current system,” he said.
Bayh-Dole 40’s founding members include AUTM, Biotechnology Innovation Organization, BioHealth Innovation, Council on Governmental Relations, Information Technology and Innovation Foundation, Licensing Executives Society, and PhRMA, spanning the entire U.S. innovation ecosystem.
The coalition’s goal is to educate lawmakers to ensure the Act is utilized in the way Senators Birch Bayh and Bob Dole envisioned.
“There’s always been a group of people who thought Bayh-Dole was a bad idea,” Allen said. “It’s probably a different group of people than in 1980, but it’s the same philosophy — people saying, ‘How dare somebody make money out of something that was initially supported by government funding!’ ‘There should be no such thing as exclusive licensing of this technology,’ ‘These breakthroughs should be available to everyone.’
“But it’s the same old, same old,” he said. “We’ve been down that road before. We’ve done the experiment and it just doesn’t work.”
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