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The Good Steward – Turning Federal R&D into Economic Growth

Written by The Honorable Birch Bayh
United States Senator (1962-1980)
Partner, Venable LLP, Legislative and Government Affairs
Posted: Aug 2, 2012 @ 5:47 pm

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Stewardship: taking good care of the resources entrusted to one

 

Circa 1980: Senator Birch Bayh (right) and Staffer Joseph Allen (left) in a Bayh-Dole hearing.

What should we say about a steward that manages billions of dollars in public research funds not aimed at finding commercial products and turns them in to hundreds of billions of dollars in economic impact while supporting millions of jobs?  You would think that a sincere “thank you” was in order.  But many are saying that the system producing such riches is broken.  Remarkable.

A new study shows that this spinning of straw into gold is precisely what our academic research organizations have been quietly doing year after year.  The just released report “The Economic Contribution of University/Nonprofit Inventions in the United States: 1996-2010” provides a much needed dose of good economic news when we sorely need it.   It shows that the university/industry R&D partnership created by the Bayh-Dole Act of 1980 is essential to our economic growth while protecting public health and well-being.

Before 1980, inventions made with federal support were commonly taken away from inventing organizations and made freely available in Washington. Not surprisingly, such a system dampened the “fuel of interest added to the fires of genius” that President Lincoln (a patent owner himself) said was the intent of our patent system.  More than 28,000 government funded inventions lay wasting away on the shelves of the bureaucracy.

During an election year every bit as contentious as this one, Senator Bob Dole and I decided that such waste had to stop.  We crafted a bill cutting out the bureaucracy that was strangling academic and small business innovation. It gave ownership of inventions to nonprofit organizations and small companies engaged in federally supported R&D to restore the incentives needed for commercialization, provided that the federal agencies could use them for government purposes, and gave preferences in licensing university inventions to small businesses and those who would make resulting products in the U.S.

The Bayh-Dole Act created no new bureaucracy, costs taxpayers nothing, and decentralized technology management out of Washington.  It’s widely touted as a key in turning the U.S. economy around from the doldrums we were in 30 years ago. It continues to keep American innovation on the cutting edge today.  But up until now, we didn’t have solid data on how much of a contribution the Bayh-Dole Act has made to the overall economy.  Academic research is one of our most effective “secret weapons” keeping America competitive– and now we have hard numbers buttressing that assertion.

The report analyzed data on patented inventions licensed under Bayh-Dole  between 1996 and 2010.   It found that patents commercialized from university and nonprofit organizations (supported mainly by federal R&D dollars) contributed as much as:

  • $836 billion to the US gross domestic output;
  • $388 billion to the US gross domestic product; and supported
  • 3 million “person years of employment.”

During this period, federal investments in academic research averaged approximately $25 billion a year, mostly for basic research.  This is important to keep in mind.

The Bayh-Dole Act did not change the traditional emphasis of federally funded research on campus. It remains geared primarily toward pushing forward the frontiers of knowledge.  Basic research is where revolutionary new industries are created, but it is so far away from the commercial marketplace and so risky that industry has largely abandoned it. Luckily for us, the Bayh-Dole Act allows our private sector to partner with academia transforming research concepts into new products useful to the taxpayer.  All of the resultant development risk and expense (many times what the government invested initially) is borne by the private sector.   In the development of new drugs, it takes more than a decade and billions of dollars for such transformations to take place.  If the project fails, it’s the company which takes the hit.  Technology transfer is no place for the faint of heart!

Our system works.  The biotechnology industry spun out of federally funded academic research which entrepreneurs turned into unimagined new products and vibrant new companies.

Our foreign competitors such as China and India are trying to copy the Bayh-Dole model to better compete with us in the technology race defining the 21st Century.  It’s ironic that with success staring us in the face some insist on poor mouthing university technology transfer, insisting that we veer off onto unproven trails.  We would be foolish to follow such counsel.

The concept of stewardship of public resources is deeply ingrained in our culture, though perhaps not as widely practiced as we might wish.   Rather than ignoring –or abusing — those who perform such duties largely out of sight, it seems more fitting to say to our university technology transfer system: “Well done, my good and faithful servant.” They’ve performed public stewardship of the highest order.

 

About the Author

Senator Birch Bayh is a partner in the Legislative and Regulatory Group of Venable’s Government Division. He has a deep and thorough understanding of the legislative process, having represented the State of Indiana for 18 years in the U.S. Senate, followed by a 20 year law career representing individuals, corporate clients, and public entities before all three branches of government.

Senator Bayh was a Member of the United States Senate from 1962-1980. During his Senate career, he authored two Amendments to the Constitution – the Twenty-fifth Amendment on Presidential and Vice Presidential succession, and the Twenty-sixth Amendment lowering the voting age to 18 years of age. He is the author of Title IX to the Higher Education Act, which mandates equal opportunities for women students and faculty; co-author of the Bayh-Dole Act, which revitalized the nation’s patent system. The Economist has referred to the Bayh-Dole Act as the most influential and successful piece of domestic legislation in the post World War II era. The Bayh-Dole Act was revolutionary in its outside-the-box thinking, creating an entirely new way to conceptualize the innovation to marketplace cycle. It has lead to the creation of over 7,000 new businesses based on the research conducted at U.S. universities.

For more information about the Bayh-Dole Act please see: Bayh-Dole - 30 Years.

6 comments
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  1. If the Bayh Dole Act had transfered IP ownership of inventions to Universities – which according to the Supreme court in Roche vs Stanford, it absolutely did not – then it would have ‘dampened the fuel of interest added to the fire of genius.’. So arrogantly, foolishly and repeatedly misrepresented in such blogs is the obvious fact that the genius of invention is in the brain of the inventor, not his/her master. Depriving the inventor, student or faculty, from the ability to use his/her best efforts to choose how to best utilize their ‘genius’ invention absolutely dampens the drive required to maximize the utilization of their invention. The bureaucrats employed by universities to micromanage inventions are equally as toxic to economic growth as were their federal predecessors. If we really want growth, we must have freedom for these “geniuses” to continue to be in control of the destiny of their creations. Bureaucracy moved down to the state level is hardly a cure to our economic woes.

  2. Renee-

    Talk about wanting to have your cake and eat it too!

    Are you actually suggesting that researchers at universities should own the patent rights rather than the universities? That is absurd. No where in the United States does such a regime exist. Researchers are employed by universities the same way that researchers and scientists are employed by private corporations. Employment contracts govern ownership of intellectual property rights, and employees do not own those rights. Their employers do.

    You severely mischaracterize Standford v. Roche. The Supreme Court said merely that the rights initially vest in the inventor. What then happens as the result of employment contracts dictates who owns the rights. To suggest that the Supreme Court said that inventors should have the rights and universities should have no rights is absolutely absurd.

    Finally, it should be self evident that many, many researchers and scientists NEVER come up with innovative ideas or actual inventions that ever amount to anything. Those folks, however, are gainfully employed, receive a pay check, get health benefits and then retire very handsomely. That is the bargain and why you chose to ignore it is particularly curious. If you won’t want to give up your invention rights then invent yourself, without private or university resources and without the cushion of a pay check, benefits and retirement. But complaining about a system that researchers and scientists willingly buy into is ridiculous. No one put a gun at the head of the researchers or scientists and forced them to sign away invention rights.

    -Gene

  3. [...] IPWatchdog published an article by former Senator Birch Bayh highlighting a BIO commissioned study showing the economic impact of technology transfer on the U.S. economy.  “A new study shows that this spinning of straw into gold is precisely what our academic research organizations have been quietly doing year after year.  The just released report “The Economic Contribution of University/Nonprofit Inventions in the United States: 1996-2010” provides a much needed dose of good economic news when we sorely need it.   It shows that the university/industry R&D partnership created by the Bayh-Dole Act of 1980 is essential to our economic growth while protecting public health and well-being.” [...]

  4. Gene –
    We are in total agreement on Stanford Roche – the Supreme court said that initial ownership is with the inventor as it always has been, and that ownership can be conveyed by express written contract to the employer. However, Stanford attorneys took the position that the B-D Act, by Federal decree, vested all ownership rights automatically with the Universities. Every employment contract is different – the best ones balance employer and employee incentives. Some companies and some universities require 100% ownership of all inventions, some have no claims to inventions. Most companies only claim interest in inventions in their direct field of interest, or developed on campus, or during the workweek. Publicly funded universities are not identical to corporations; their primary mission is public service, not profit. Their research funds didn’t come from stockholders but from taxpayers, therefore the taxpayers’ interest, not employee or employers’, ‘should’ be paramount. Because faculty and students are not hired or required to engage in commercial enterprise, prudence suggests administrators would incentivize them effectively, rather than attempt to whip them into submission. The best alignment of all stakeholders’ interests assures global benefits. Unlike litigation, science is generally win win or lose lose. Just saying.

  5. Renee-

    You say: “Most companies only claim interest in inventions in their direct field of interest, or developed on campus, or during the workweek.”

    That is an overbroad statement. Anymore, based on what I see and what others in the industry confirm for me, most companies do the exact opposite. Most companies claim inventions across the board. In part this is because any invention that pertains to an area where the company may expand is almost certainly covered in an employee assignment. In fact, over the years, I can’t recall a single situation where an corporate, professional inventor contacted me and I opined that the inventor likely owned the invention and it wasn’t owned by the company.

    You say: “Because faculty and students are not hired or required to engage in commercial enterprise…”

    Again, that is a rather naive view of what happens in the Academy. Faculty that are not producing do not receive tenure and are out looking for work. Those without strong track records do not receive grants and have no funding for their research. Research faculty are certainly in the business of researching worthwhile things with the intent to develop the science or technology to a point where it could be useful for something.

    As for the argument about the taxpayers deserve the benefit, now you are getting dangerously close to the ridiculous argument made by the anti-patent and anti-Bayh-Dole squad that say that there should be no exclusive rights on the innovations developed with taxpayer funds. The trouble is that we know what that regime leads to. It is a failed regime. It did not work. We don’t need any thought experiments, just a view of history. The fact that the old view didn’t work is what lead to Bayh-Dole. Bayh-Dole has been successful beyond anyone’s imagination. It has lead to over 7,000 new start-up high-technology companies (and counting). It has been an incentivizing engine that spurs useful technological innovation and exciting, basic science that holds large promise. It has been an engine for job growth. That is where the taxpayers get their return… and a very handsome return for the investment. Dramatically improved technology, more jobs, broader tax base and a future driven by innovation.

    -Gene

  6. Despite the dismal results of the past, we could assign all rights to the inventor. Just a few questions:
    • Without their affiliation to a reputable institution, would investors have the same trust?
    • Invention don’t usually just happen. They start with a discovery, and often arise from an iterative dialogue between the potential inventor and a technology transfer professional who most often has an equally advanced degree in that field. How would you insert this knowledge into the system without disclosing the invention? Who will support this work and pay the tens of thousands of dollars for all the patent expenses until the invention is of interest to a licensee or investor? Remember all of this occurs long before someone with cash shows up. 
    • How many academic scientists have the business savvy to commercialize their invention on their own?

    Yes, there are uncommon cases where an academician has a commercially enabled idea and the complimentary skills to go it on their own, but what do we do for the rest?