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Intellectual Dishonesty About Bayh-Dole Consequences


Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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Posted: May 10, 2013 @ 12:19 pm
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Senator Birch Bayh (right) with then Staffer Joe Allen (left) in a Bayh-Dole Act hearing in 1980.

As I sat there this morning having breakfast and drinking my coffee I was reading Innovation, which has as its tag line America’s Journal of Technology Commercialization.

Really? I find it impossible to believe that a magazine that purports to be a journal of technology commercialization would publish the complete and utter nonsense that I read this morning.

Newsflash… Bayh-Dole is objectively positive and has been extraordinarily successful in its mission. The FACTS are overwhelming. Anyone who suggests Bayh-Dole is anything other than successful beyond anyone’s wildest dreams is simply not being honest and is ignoring factual evidence. Indeed, detractors frequently make arguments that fly directly in the face of facts. Many believe they simply lie or make up what they are saying to forward their own agenda.

Witness Bahy-Dole Has its Consequences, written by Walter Valdivia, who is a Fellow in Governance Studies and the Center for Technology Innovation at the Brookings Institution. His knowledge, or lack thereof, is breathtaking and his article is an embarrassment to anyone who cares about truth influencing public policy. He should be ashamed and it is perplexing how a magazine titled Innovation could publish such provably false drivel.

It was the third paragraph before Valdivia’s article really showed his disdain for the truth. He wrote:

The ostensible goal of Bayh-Dole was precisely to maximize the social benefit of federal R&D investments. We must then ask if this policy has delivered and if taxpayers are receiving a social return commensurate to their investment in research. The answer is inconclusive. There is some evidence that the translation of federally funded research into market products has increased but Bayh-Dole has also had unanticipated consequences — patenting has moved upstream to research tools creating what legal scholars Michael Heller and Rebecca Eisenberg have characterized as the tragedy of anticommons.

If a student were to write this they would receive an F, both to signify a failing grade and to signify that the paragraph is pure Fiction. A Fantasy that operates only so long as you disregard all available factual evidence.

Meet Betsy de Parry

Betsy hugs Senator Bayh, December 2010.

Case in point — Betsy de Parry. I met Betsy in December 2010 at the Bayh-Dole 30th Anniversary celebration in Washington, DC. During the ceremony she took to the podium and turned to Senator Birch Bayh (ret.) who was the primary driver of the Bayh-Dole legislation. She said to him: “I am alive today because of you!”

Betsy had a rare form of cancer, but thanks to treatments invented and then commercialized as a result of Bayh-Dole she has been cancer free for a decade. Betsy is not alone. There are many individuals and families who will forever be indebted to the politician who cared enough to listen, understand there was a problem and take action to seek a better future. For more on the passage of Bayh-Dole see Exclusive Interview with Senator Birch Bayh and The Enactment of Bayh-Dole.

In November 2012, Betsy wrote an op-ed titled Why Bipartisanship Matters, which we published on IPWatchdog.com. In part she explained:

Have you or a loved one taken Tamoxifen or Herceptin for breast cancer? How about Revlimid for multiple myeloma? Bexxar for non-Hodgkin lymphoma? Gleevec for chronic myelogenous leukemia? Did Neulasta ever keep you safe from infection while undergoing chemotherapy?

Then you have benefited from bipartisanship, because these and nearly 200 other drugs are available today as a result of the 96th Congress passing a little-known bill that laid the foundation for the development of therapies that have saved — literally — millions of lives, including mine and perhaps yours or that of someone you know or love. That bill became known as the Bayh-Dole Act.

Prior to its passage, the government retained the rights to federally-funded discoveries. Then, as now, the federal government was the largest single source of funds for basic research because basic research is generally too risky and too expensive for private industry to undertake alone.

But by retaining the rights to federally funded discoveries, taxpayers got no return on their investment because government is not in the business of turning discoveries into products that benefit people. That’s up to private industry, but private industry couldn’t commercialize discoveries to which they had no rights. As a result, discoveries languished as pieces of paper — i.e., patents — in government offices.

The Bayh-Dole Act unlocked those discoveries that were made with taxpayer money. It allowed businesses and nonprofits, such as universities, to retain title to their inventions that were made with federal funds and to license them to private companies for commercialization.

Striking how those touched by the success of Bayh-Dole understand that taxpayers get no return on investment when university research is not commercialized. Why can’t the best and brightest legal scholars and Fellows at world renowned think tanks grasp such a simple concept?

But surely there would have been a cure for Betsy without Bayh-Dole, right? Wrong.

Prior to the enactment of Bayh-Dole there were a grand total of 0… that is ZERO… drugs commercialized from underlying university research. Whether we like it or not, pharmaceutical companies are for-profit entities and that means that they cannot research and develop drugs for every disease, let along rare disease. Since Bayh-Dole became law 153 new drugs, vaccines, or new uses for existing drugs are fighting disease world-wide. See The Role of Public-Sector Research in the Discovery of Drugs and Vaccines, The New England Journal of Medicine, February 10, 2011. So Betsy may have exaggerated a little, but not much, at least if you are willing to believe The New England Journal of Medicine, which is one of the most respected journals in any field, period.

If you are keeping score that is Bayh-Dole 153 – Valdivia 0.

Just the Facts

I’m not satisfied at 153 – 0. Above I stated that there is overwhelming evidence that Bayh-Dole has been extraordinarily successful. So allow me to pile and demonstrate the level of intellectual dishonesty in the community challenging Bayh-Dole.

  • Since 1980, more than 8,778 new firms have been established to develop and market academic R&D, with “3,927 start ups still operating as of the end of FY2011.” Association of University Technology Managers, AUTM U.S. Licensing Activity Survey Highlights: FY2011.
  • According to a study of the Biotechnology Industry Organization, “without accounting for product substitution effects… over the period 1996 to 2007, university licensing agreements based on product sales contributed at least $47 billion and as much as $187 billion to U.S. GDP.” See The Economic Impact of Licensed Commercialized Inventions Originating in University Research.
  • University patent licensing contributed approximately $836 BILLION to U.S. gross domestic output, $388 BILLION to our gross domestic products, while supporting 3 Million jobs between 1996 and 2012.  The Economic Contribution of University/Nonprofit Inventions in the United States: 1996- 2010
  • 591 new products and 670 startup companies were created in one year alone under Bayh-Dole, and 3,927 university spinoffs are in operation across the U.S.  FY 2011 Licensing Survey, Association of University Technology Managers
  • According to the GAO, by 1987 all university administrators indicated that the Bayh-Dole Act had “been significant in stimulating business sponsorship of university research, which has grown 74 percent” from FY1980 to FY1985. See The Bayh-Dole Act: Selected Issues in Patent Policy and the Commercialization of Technology, December 3, 2011 at page 8 (prepared by the Congressional Research Service and hereinafter referred to as “CRS report”).
  • Industry financing of university research expanded from 3.9% of university R&D in 1980 to 7.2% in 2000, although by FY2009 industry support had dropped to 5.8% of academic R&D. The GAO found that this increase in industry financing was believed to be directly attributed to changes in patent laws brought about by Bayh-Dole. See CRS report at page 8-9.
  • Fears over Universities abandoning basic research in favor of applied research are wholly unfounded and based only on erroneous anecdotal evidence.  A study of 3,400 faculty at six major research institutions by Professors Jerry Thursby and Marie Thursby found that “the basic/applied split in research did not change over the period 1983-1999 even though licensing had increased by a factor greater than 10.” University Licensing and the Bayh-Dole Act. Furthermore, data collected by the National Science Foundation appear to support this assessment. According to the National Science Foundation, in 1980 basic research comprised 66.6% of academic R&D endeavors while applied research and development were 33.4% of the total. In 2009, the percent of academic R&D expenditures devoted to basic research increased to 74.6% while applied research and development declined to 25.4% of the total.
  • The following is a small list of important innovations that were invented and then commercialized under the Bayh-Dole act: (1) drugs to treat breast cancer; (2) Hepatitis B vaccine; (3) synthetic penicillin; (4) cysplatin and carboplatin (cancer therapies); (5) human growth hormone; (6) treatment for Crohn’s disease; (7) avian flu vaccine; and (8) countless clean water technologies.
  • Bayh-Dole has lead to countless green-technologies, such as the lithium ion battery, biomass gasifier that produces clean synthetic gas for electricity and heating, pesticide-free methods to eradicate bed bugs and revolutionary nanomaterials for the solar industry. See Bayh-Dole Makes Everyday Earth Day.
  • HyperSolar, Inc., a start up associated with the University of California, Santa Barbara, has developed a technology that they claim will produce hydrogen that is renewable and utilizes natural power sources: sunlight and water. According to a press release HyperSolar and UC have filed a patent application asking for the “protection and stability of electroactive units used for production of fuels and chemicals.” According to HyperSolar, Inc., their invention could greatly reduce the cost of manufacturing and using fuel cells.  See Fuel Cells and Bayh-Dole. This and other revolutionary research is occurring by and between universities and private industry thanks to Bayh-Dole. This and many other exciting innovations will revolutionize our economy, our way of life and improved the environment and quite possibly save the planet.

While I could go on and on, this article is not intended to be a treatise. Allow me to conclude with “the facts” by pointing out that in 2010, as Bayh-Dole was celebrating 30 years, Vicki Loise and Ashley Stevens wrote The Bayh-Dole Act Turns 30. In this article they included the figure below, which shows a remarkable growth in the number of licenses and also in the number of invention disclosures.

Notice just how many more invention disclosures occur over time while patenting increases at a FAR more moderate pace. Even those who pretend that patents harm innovation would have to celebrate anything that increases innovation without patenting, right? Well you would think that if you were dealing with intellectually honest commentators.

Now the Subjective

Now allow me to layer on some subjective.

  • According to The Economist, Bahy-Dole has been extraordinarily successful. The magazine wrote: “Possibly the most inspired piece of legislation to be enacted in America over the past half-century was the Bayh-Dole act of 1980… More than anything, this single policy measure helped reverse America’s precipitous slide into industrial irrelevance.” Economist Technology Quarterly, Dec. 14, 2002.
  • Yale President Richard Levin argued that the purpose of the Bayh-Dole Act is to transition the results of government funded research “into practice for the benefit of humanity” and that results indicate a “pretty emphatic positive answer that the Bayh-Dole Act has created public benefits” with minimal costs. Via the CRS report citing National Academy of Sciences, Board on Science, Technology, and Economic Policy, Workshop on Academic IP: Effects of University Patenting and Licensing on Commercialization and Research, April 17, 2001 [transcript], 261-262.
  • According to the former President of the NASDAQ Stock Market, an estimated 30% of its value is rooted in university-based, federally-funded research results, which might never have been commercialized had it not been for the Bayh-Dole Act.
  • Mark Myers, retired Senior Vice-President of Xerox, told a meeting of the National Academy of Sciences, “[t]he role of the research university is growing ever important as an economic force in our economy…. ” Workshop on Academic IP: Effects of University Patenting and Licensing on Commercializations and Research, 255.
  • The Congressional Research Service in December 2012 concluded: “The government receives a significant payback through taxes on profits and society benefits from new jobs created and expanded productivity. The importance of patent ownership has been reinforced by the positive effects studies have demonstrated [Bayh-Dole] is reported to have had on the emergence of new technologies and new techniques generated by American companies.” CRS report at page 24.

Conclusion

So what is all the hatred over Bayh-Dole really about? Fundamentally it is about hatred of the patent system. By any fair-minded assessment Bayh-Dole is objectively good for the economy, it is good for innovation and it is good for society. But if you hate patents, commerce and capitalism Bayh-Dole is terrible.

One statistic jumps out at me. University patenting has exploded from just 495 issued patents in 1980 to 3,278 in 2005. Thus, if you don’t like patents Bayh-Dole has been terrible because it is leading to more patents.

Detractors will tell you that patents harm innovation, but that is also simply not true and something that is equally provably false. Patents promote innovation. While a defense of the patent system as a whole is beyond the scope of this article, I’ll just say that if patents harmed innovation you would expect to see innovation growing nearly out of control and economies flourishing where there are no patent rights. To the contrary, what we witness world-wide is the reverse. Where patent rights do not exist or are weakest there is little or no innovation and countries are extremely economically depressed. See Forfeiting Our Future Over Irrational Fear of Patents. For more on the reality that patents promote innovation see:

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Posted in: Gene Quinn, IP News, IPWatchdog.com Articles, Patents, Technology & Innovation, US Economy

About the Author

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.

 

7 comments
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  1. What about Insulin and the Pacemaker?

    Wayne – your friendly neighborhood cynic

  2. Two examples do not make a trend Wayne. Yes SOME would happen without the patent motive but not nearly as much. Like it or not people are controlled by money. Without reward why get off your butt and do anything?

  3. Daniel,

    Both Insulin and the Pacemaker made, and are still making a lot of money, so I don’t see what you are talking about.

    Wayne

  4. Maybe but they are not making nearly as much money as they could be if they had patent protection. The pacemaker is hard to make and insulin is now made by several companies so ONE company doesn’t have the market to itself. Yes it is making a lot of money but for many different people. Insulin has a HUGE market so there is enough for several companies. Something with a smaller market (like most things) would not be produced by a company unless it can get a patent monopoly.

    The fact there are only two examples before the act and that two examples do not make a trend, as well as everything in the article, still stands.

  5. Maybe but they are not making nearly as much money as they could be if they had patent protection. The pacemaker is hard to make and insulin is now made by several companies so ONE company doesn’t have the market to itself. Yes it is making a lot of money but for many different people. Insulin has a HUGE market so there is enough for several companies. Something with a smaller market (like most things) would not be produced by a company unless it can get a patent monopoly.

    Why not? I know of a large variety of products that are produced without patent monopolies. In fact the vast majority of items for sale in the stores, aren’t covered by patents.

    If you don’t believe me, go check. In electronics stores, you’ll find a lot of stuff covered by patents. At your grocery store, you’ll find very little covered by patents. At your hardware store, you’ll find very little covered by patents. At your art supply store, you’ll find very little covered by patents. At your book store, you’ll find very little covered by patents. At your automotive supply store you’ll find a higher percentage of things covered by patents, but most of what they sell isn’t patented.

    The fact there are only two examples before the act and that two examples do not make a trend, as well as everything in the article, still stands.

    I’m in the middle of a book launch, so I can’t take the time this deserves right now, but I could easily come up with hundreds of examples, going back to the dawn of recorded history, and before.

    How about the wheel? Or the wheelbarrow? The hoe, the shovel, the gardening fork, knives of all sorts, swords of all sorts, thousands of varieties of armour, the saddle, reins, harnesses, carriages, horseshoes, saddlebags, gunpowder, guns of all sorts, including the harquebus, the caliver, the musket, the flintlocks, matchlocks, wheellocks, and on and on…

    Wayne

  6. Ah so you are obviously one of those who hates the patent system entirely. Well I don’t have time either (I’m a law student) to defend it as is needed, but yes many things are not protected by patents but like things in the grocery store they have been around a long time. Many more things there though ARE protected by patents now. New plant lines are patented and any genetically engineered plant has a utility patent – otherwise the millions of dollars spent on making them wouldn’t be spent.

    Yes before modern times things were not patented but anything that gave a group an advantage certainly was protected..or do you think the group that made the first bronze spear gave up the design to their enemies? The patent system supports and motivates innovation and is part and parcel of capitalism.

  7. Daniel,

    I’m a cynic. You haven’t proved to me that plant patents are necessary. You say they are, but prove it.

    I’ve seen a lot of crappy patents over the years, many for things that were already being sold long before the patent was applied for by different companies. One particular bad patent was destroyed when the defence lawyers showed up in court with a twenty-five year old computer that had the same capabilities as the five year old patent they were being sued under.

    A big part of the problem is that the United States Patent and Trademark Office is badly underfunded, and incapable of doing proper prior art searches. Of course that would mean cutting off funds going from the USPTO to other parts of the government, and it would also mean raising fees. It is impossible to do a proper evaluation on a new patent in less than forty hours, and probably needs as much as eighty hours for complex patents.

    Patent applicants don’t want their costs to rise, but the only way to make the system work is to increase them.

    Wayne