One of the most successful pieces of federal legislation enacted since World War II is the Bayh-Dole Act, which for the first time allowed patent rights to be owned by Universities rather than by the United States federal government. Bayh-Dole was enacted by Congress on December 12, 1980, which means we are a little more than one month away from the 30th Anniversary of the legislation being passed.
At IPWatchdog.com we will spend the next month celebrating Bayh-Dole. We kick off our month long celebration of Bayh-Dole with an exclusive interview with the chief architect of the legislation — The Honorable Birch Bayh, a former three-term United States Senator from the State of Indiana. Senator Bayh is now with Venable LLP, which is located in Washington, DC, and where I conducted my interview with him on October 13, 2010.
During this first installment of my two-part interview with Senator Bayh we discuss some of the accomplishments of Bayh-Dole and Senator Bayh tells the story of how Bayh-Dole came to be. I suspect many, if not most, will be amazed to learn just how close we came to not have this monumentally successful legislation. But for another Senator lifting a hold with an hour left in the 1980 lame duck session there would never have been a Bayh-Dole Act.
Without further ado, part 1 of my interview with Senator Birch Bayh.
QUINN: First, Senator, I want to thank you for taking the time to speak with me. It’s an honor to be here and to chat with you today. I suspect you may know this already but you’re a bit of a rock star in the patent community and with the 30th anniversary of the Bayh-Dole Act approaching I’d like to ask you a few questions about the Act, the process, what you were trying to accomplish and reflections on where we are today. So, I was wondering if you could give us a little background on the Act. I know that prior to Bayh-Dole becoming law virtually no government owned patents were licensing and acquiring rights required navigation of a nearly insurmountable obstacle field, but what did you specifically set out to try and accomplish with the legislation?
SENATOR BAYH: Well, first of all I appreciate your thoughtful entre here. If I had known you were going to call me a rock star I would have brought my guitar along and sing a few bars here.
QUINN: Do you play?
SENATOR BAYH: Used to, but it’s sort of like everything else in my life, it’s been in the closet a long time. This is a subject that’s near and dear to my heart and I appreciate your interest in it. It’s a subject that usually goes over the head of most people and I ask myself, “How do I get off the farm from Western Indiana, get a law degree and ended up eight years in the State legislature and 18 years, in the Senate. How did I get involved in licensing and patenting and this kind of thing?” because that has not been an expertise of mine. I don’t think I even took intellectual property in law school come to think of it.
This is a good example of how this Government responds, I think it still responds. It responded to the interest of concerned citizens who had somebody in the Senate who would listen to them and discuss the concerns with them, be convinced that they had a issue and start doing something about it. It isn’t something that I woke up in the middle of the night and said, “Let’s go amend the patent law,” nor did I read any volume on the subject. I got a call from a professor at Purdue University by the name of Russell Davis who said he was concerned about the way in which the United States was losing out in a competitive field with our allies in Germany and Europe and Japan — to a lesser extent, even in India — and he wanted to come down and talk to me about what we could do about it, what the reason was. I said, “Come on down.” He came down, he brought a friend of his by the name of Howard Bremer who was in the alumni from the University of Wisconsin. The Alumni Association handled all their patents and he was in charge of research and development of the patenting and the Alumni Association had ownership to it. He brought another fellow by the name of Norman Latker who was the Patent Counsel over at NIH and the three of them, we sat down and talked and he described a situation that you described here a moment ago where it was very difficult to get any ideas that had been developed by government research ever into the marketplace — into the medicine cabinet — so to speak. The problem was that whenever federal dollars went into research — as almost all of our universities were getting federal grants to do research — and any ideas that were developed from those dollars, those grants, the patents that were secured were owned by the government and no private individual or company could get access to them. This meant that unless the private sector could get involved, there was nobody to invest the risk capital.
The record showed that for every dollar that was spent on research, it usually took maybe as high as 9 or 10 dollars in investment capital — sometimes a million dollars — depending upon the sophistication of the product. So, I had a bright young assistant on my staff by the name of Joe Allen. He was, sat in on the meeting and I asked Joe to take a look at this and so he did. He went over to the Patent and Trademark Office, found out that there were 28,000 patents sitting there that had been developed by Federal Government research drawing dust. We’d spent 10 billion dollars on these 28,000 ideas, patents, and not one penny ever reached the consumer. So I said, “What do you fellows think we should do with something like this?” — and they said, “Well, there’s something to be said for the private enterprise system and we think we ought to hook the private enterprise system up with the intellectual enterprise in our universities so we have the entrepreneurial skills of the free enterprise system and the intellectual capacity of our researchers, we meld those together.” And, so we introduced this legislation that was the Small Business and University Patent bill — that’s not the exact title — but the basic idea was to emphasize small businesses and universities. Why was that? Well, we wanted to develop research where it wasn’t already being developed. What happened to these 28,000 ideas out there? Every company — large or small — had a component to research in it. The larger companies were spending billions of dollars. Probably as much or more than the Federal Government and they had their own research. What we were trying to do is to stimulate something that would deal with the problem of these 28,000 patents sitting out there. So, we decided that what we needed to do was to provide a way to provide ownership to the ideas that were discovered. We thought it was politically and perhaps ethically untenable to permit the large companies that had their own research dollars to gain access to ideas that were developed through Federal Government or tax payers dollars so we decided that this would be limited to universities and small businesses. We thought 1) that would work and 2) we think it would pass muster politically, both of which were important.
QUINN: How difficult was it to get members of Congress and the White House onboard with something like this?
SENATOR BAYH: Well, it was an easy sell to everybody but one and that was Russell Long and you don’t want Russell Long as an adversary — at least nobody did, I certainly didn’t — Russell was a friend of mine. Chairman of the Finance Committee — one of the 800 pound gorillas in the Senate — and here he was, he was adamantly opposed. If one dollar of money went into research in the university, then the product of that belonged to the taxpayers.
I got a phone call after I introduced this legislation from none other than Hiram Rickover, the father of the nuclear Navy. My wife said, “Do you know a Rickover?” I said, “Yeah, is that Admiral Rickover?” she said, “I don’t know. He just says it’s Rickover and he wants to talk to Senator Bayh. Need to talk to him right away.” So, I got on the phone and he said, “This is Admiral Rickover speaking.” I said, “Thank you, sir, what can I do for you?” He said, “Well, you’ve got to pull down and just get rid of this patent bill.” I said, “Why is that?” He said, “It’s gonna destroy the nuclear Navy.” I said, “Well, Admiral, I frankly don’t agree with you.” He said, “Well, I believe not only it’s bad for the Navy, it’s bad for the taxpayers,” and then he had the old jargon that Russell had, “If the taxpayers pay for the research to develop the idea, the taxpayers own the product,” which is the way it was at the time. That formula, although it makes nothing but good sense and it sounds equitable to the taxpayer and to the Country, it wasn’t working. Why? Because we weren’t able to convince people to invest the 9, 10, 20 – whatever it was — dollars of risk capital to bring this idea from the research laboratory, to the Patent Office, to the medicine cabinet and so that’s what we were trying to do.
He said, “I demand to testify.” I said, “Pardon me, Admiral, you don’t need to demand. I’ll invite you to come.” “All right.” So, he came, he and Russell Long both testified separately and they both were very sincere. Sincere in the belief that if a taxpayer spends the money, they ought to own the product. The only problem was that that nice theory, that common sense resolution wasn’t making sense. Admiral Rickover ignored the fact that in the Bayh-Dole bill there’s an exception for the U. S. Government to use any ideas that are necessary for the best interest of the Country which would certainly include the nuclear Navy. So, we started and it was a difficult battle.
The Association of University Technology Managers, AUTM, they played a critical role in this. I think I know how the system works and if you know how to work the system you usually get the results you want if the results are merited. So, what we did was we went around — and AUTM helped us — we went to all these universities that were getting research funds from the Federal Government who would benefit by claiming ownership to these products that were produced. They would have to cut a deal, of course, with the inventor and work out a royalty sharing system there that they could negotiate themselves but the final analysis, the universities were benefiting. So, the universities all over the Country started talking, coming in and visiting. Whenever we had had a problem with a Senator or were going to have a vote in the Committee, we made sure that the day before the vote that they got calls or visits by delegations from their universities back home, their alma maters a lot of them. And, so that’s the way we were able to convince many, it was just good old fashion politics. The issue made sense practically but politically it took the muscle power from the folks back home. This was a response to the constituents which is the way the darn system ought to work, you know?
SENATOR BAYH: If the people are concerned about something, their members of the House and Senate ought to pay attention to them — in this case they did. And, we got it through the House and through the Senate. The House made some minor changes to it and brought it back to the Senate and it was at the desk where it had to be called down and Russell Long had put a hold on it so we couldn’t bring it down. There was one thing that intervened then — in 1980 we had an election — it was a landslide sweep for Ronald Reagan and it put about 10 or 12 of us Senators out to pasture — I was one of them. So, when we came back to this lame duck session, I was a Senator that wouldn’t have a job as of the 3rd of January of the following year trying to get a bill passed and we had just a few days in order to get it passed — there it was stuck at the table, the desk — and here again is where Joe Allen comes into the picture.
Joe was on the floor of the Senate in the waning days — I think this was the last day of the Senate come to think of it – and Russell Long’s staff person came up to him and said, “Does Senator Bayh really want this patent bill? Is it really important to him?” Joe said, and I’m paraphrasing, “Boy, it’s the most important thing in the world to him right now, you know, he’s not going to be here, this would be a great going away present.” Within 20 minutes I had call from Russell Long. “Birch, take that patent bill, you’re entitled to it. You’ve earned it,” click. He withdrew his hold, the bill passed with probably less than an hour left in the session…
SENATOR BAYH: … that’s how close we came to not having all the benefits of Bayh-Dole.
QUINN: Oh, my goodness. I never realized that. Well, let me throw some facts out on the table. Since the enactment of Bayh-Dole more than 5,000 new companies have been formed around research from universities. University patenting has gone up from 495 issued patents in 1980 to well over 3,000 by the 25th anniversary of the Act and according to a former President in the NASDAQ Stock Market an estimated 30% of it’s value is rooted in university based federally funded research which might never have been commercialized but for Bayh-Dole. That together with the innovations created from flu vaccines to synthetic Penicillin to clean water technologies and more suggests that Bayh-Dole was successful beyond anybody’s wildest dreams. So, I’m wondering, did you have any sense back in 1980 that this was going to lead to something extraordinarily special?
SENATOR BAYH: You want me to be honest?
QUINN: Yeah, please.
SENATOR BAYH: No. We thought there was a problem there that needed to be resolved. We had no idea of the ripple effect that this would cause when you had the combination of universities with the entrepreneurial skills of small business, but that is as good as an example as you’re ever going to find in my lifetime of how the free enterprise system ought to work. Profit motive has worked pretty well. They had to be careful that you don’t have exorbitant profits and Bayh-Dole is capped so that the agency can sit in and if a company is making exorbitant profits, then you can come to grips with how you deal with that but, Gene, did I have any idea of all those facts and figures that you just described? I could get you a list — but the drugs that all of us would recognize. Breast cancer drugs, problems with your mouth, your teeth, bones, any …
SENATOR BAYH: Yeah, and, you know, more efficient gas engines, I mean, you name it. You have smart people working there in our universities and what we were able to do was to give them the resources to spend the time in their laboratories creating something that they wouldn’t otherwise have the resources necessary to spend their time — the university wouldn’t have it — put them working, get ideas, get the university and them to go get it patented and then have the opportunity for the university to license this out or perhaps, even more important, to permit the establishment of cottage industries around most of our high tech universities right now where you have researchers that will take an idea that they discovered, take two or three members of their staff, they’ll negotiate a deal, they’ll go out here in Bethesda and put down roots and start making widgets or whatever it is. That’s what really stimulated the economy — small companies developing all over the Country, small companies becoming large companies. And, did we have an idea? No. We thought it needed to be done but we had no idea that we were going to accomplish. It was sort of like the old story of taking the cork out of the bottle and here comes the Genie, only this is a good Genie.
QUINN: It strikes me is that this was perhaps the perfect example of the positives that can come from a truly representative form of government when you have interested people playing a role in government and you have leaders listening to those people in trying to solve a problem, the tremendous good that can come out of that collaboration. It seems almost inspiring in a way.
SENATOR BAYH: Well, I tell you, having spent a big chunk of my adult life in government, I still think as Churchill said after the war when they were raising hell with the United States in Parliament, he got on the floor and said, “That the form of government that the United States is the worst form of government known to mankind except any of the former governments,” …
SENATOR BAYH: … and that’s it, we’re not perfect, but I just feel so good when you had this professor from the University of Wisconsin and the guy who’s working at NIH. What did they have to gain with this? They had no idea, none of us had any idea what we were creating here. We thought, the philosophy, the theory behind profit hooked up with intellectual genius has worked pretty well throughout our Country.
QUINN: Yeas, the whole incentive structure.
SENATOR BAYH: Yes, and, you know, the whole thing has changed, of course, Gene, but after the war when our defeated allies began to get on their feet and the Germans and the Japanese particularly began to be more creative and they developed. They were giving us our lunch, I mean, they were getting more patents, more new products and our automobile industry was in decline, electronic industry was in decline. You name it, we were going right down the river and something had to be done and why was it happening this way? Because we had all this creative genius but it wasn’t reaching the marketplace.
QUINN: When did you first realize that this was not just something that was solving a problem but that this really was potentially a grand slam, home run, to win the World Series?
SENATOR BAYH: Well, obviously, it wasn’t while I was in the Senate because the ink was still dry, in fact, I think Joe Califano who was the Secretary of HEW at the time tried to get President Carter to veto the legislation, but I think our AUTM people had put enough pressure on the White House that he couldn’t do that, but it was one of the last pieces of legislation that he signed before he left office because he was on the way out just like the rest of us. Califano, of course, was with a large corporation then he went over and ran the Defense Department and then he was now over at HEW. He thought the Administration had a different bill. A bill that would make all of this available to the large companies as well as the small companies and he was very much opposed to ours.
Adlai Stevenson was one that was persuaded that this approach was too narrow. We had to sort of have a Mother Hubbard’s skirt that covers everything and touches nothing and so he tried to intervene and in fact, he went so far while we were working on this, he got Norman Latker fired at NIH and we sent him down to the Office of Federal Procurement Management because we recognized the importance of managing this sucker. Believe it or not, although some people criticized and say, “Our management is shoddy right now,” well, it isn’t because it wasn’t in an Executive Order. Executive Order 12-05-91, which established the procedure, we knew this needed to be policed which shouldn’t be allowed to run amuck, this is something new. The profit motive is fine but a lot of people might not have the national interest involved, so we put Norman Latker down there in that Agency because we knew that that was something that he would see was done. Then, we moved it over to Commerce and Latker went over to Commerce as well and then he was followed by Joe Allen. As long as those fellows were there, we had no problem. I guess right now we’ve got some problems where we had an Assistant Commerce Secretary under the Clinton Administration who didn’t believe in Bayh-Dole and she tried to use certain exceptions, which could only be used under certain circumstances. She just opened the door and said, “I don’t have to report to Congress. I just let these things go forward without any restrictions.” Now, this system needs to be governed like any other system and right now I think we may have some loose edges there, I’m not sure.
QUINN: Yes, and not only that but I think we have a number of folks who are starting to criticize the Act because they believe that government funded research shouldn’t be turned over to companies and should be freely available. That same argument is rearing it’s head all over again.
SENATOR BAYH: Like Yogi Berra says, “It’s de ja vu all over.”
SENATOR BAYH: Where have they been?
QUINN: It really is amazing. What would you say to those people that are raising that same criticism because to me it almost seems — and I’ll say what I think about it — I think it’s naive and ridiculous to the extreme because I can understand it being raised as an issue before we know what happened, but now that we know what happened. How could you possibly say that we should go back to the way that it was?
SENATOR BAYH: I can understand Russell Long and Admiral Rickover because it makes nothing but good sense to the average taxpayer on the street …
SENATOR BAYH: … “If I spend my tax dollars for research, I’ll know it.” What I would say is, get out your history book.
QUINN: Well, that’s the thing that strikes me as odd because they say, “Well, we’ve done this study and we’ve done this study and we’ve done that study,” and it’s like,
“Why don’t we just look at what happened — look at history — we don’t need to do a study because we know what actually happened prior to the Act and we know what happened as a direct result of the Act,” and the argument that a lot of folks make to that is this: “Well, causation and correlation are not the same thing.” Which seems to me to be code for: “We don’t want to acknowledge your facts and what really happened, we want to play mind games, hypothesize and ignore history.”
SENATOR BAYH: It’s almost the NIH theory, not invited to hear. It was my idea, if it’s mine or if it’s yours, we better look at it.
QUINN: Yes, and that seems to be what’s going on and it’s seems to be increasingly happening — not only in the Bayh-Dole area but in the patent area in general. We would be a great world if we didn’t have to, as I say, tickle the greed gene in order to get people motivated but …
SENATOR BAYH: That’s the free enterprise system.
QUINN: Exactly. I think what we should tickle that greed gene as much as we possible can as long as the output of it is beneficial to society.
SENATOR BAYH: Well, that’s why there needs to be control and I think some of the agencies themselves, sometimes NIH and other people want to take advantage of an exception to let an idea out here on the marketplace without adequate control. There was a recent National Academy of Science study, and there’s been a lot of studies. You have a prestigious organization like this, they came out with a ringing endorsement of what Bayh-Dole had done but the procedures need to be strengthened as far as control …
SENATOR BAYH: … you know, Birch Bayh, Joe Allen, Norman Latker, those people who were there at the beginning can’t be responsible for management of the damn thing here it is 30 years later.
SENATOR BAYH: And, there are those out there, who I won’t mention by name, that just plain didn’t like Bayh-Dole.
END PART 1
Continue Reading —> Exclusive Interview with Senator Birch Bayh, Part 2
PREVIEW — PART 2: In part 2 of my interview with Senator Bayh we will discuss the loft praise for Bayh-Dole from The Economist, statements of Vice President Biden (when he was Senator) regarding the tremendous success of Bayh-Dole, how the United States can stay on the cutting edge of technology, and how to successfully lobby for changes in the patent system.- - - - - - - - - -
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About the Author
Gene Quinn is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.