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Bayh-Dole: A Success Beyond Wildest Dreams


Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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Posted: September 15, 2013 @ 9:00 am
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Senator Birch Bayh (ret.)

Senator Birch Bayh (ret.)

Recently in the news you may have read that some are questioning the success, viability and wisdom of Universities owning patents, pushing back against University patent rights in order to raise a debate over the usefulness of the Bayh-Dole Act of 1980. While perhaps predictable it is rather sad given the unquestionable truth that Bayh-Dole has been extraordinarily successful. The Economist 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. Lofty praise indeed, but the facts back up the claim.

The facts are overwhelmingly on the side of those who know and understand that Bayh-Dole has been a thorough and profound success. Indeed, if you actually look at the facts no one could ever objectively question whether Bayh-Dole is succeeding or has been good. Yet, year after year supposed experts and scholars choose to ignore the objective data and question whether we should go back to the way it used to be — back when no University technology was commercialized due to the enormous red-tape involved.

This isn’t just a philosophical debate. There is a right and a wrong answer, and to think that the New England Journal of Medicine would aline themselves with the clear and objectively wrong answer would be astonishing if it weren’t so predictable. The agenda of those who despite patents and the progress of science thanks to incentivizing behavior knows no boundaries.

Of course it would be wonderful to live in a world where self-interest takes a back seat to humanitarian efforts and altruism on all occasions; where financial incentives are not required to promote the greater social good. That, however, is not the world we live in and the regimes where this economic philosophy has been tried have unanimously faltered or failed. If we want maximum good for society pursuing a path that results in maximum good ought to be the agenda, not some pollyannish pursuit of the impossible because it feels better or fits into some pre-ordained social narrative that some deem acceptable. Failure for an altruistic reason is still failure, and when we are talking about the economy, jobs and hundreds of life saving treatments and cures the right thing is to do the most good. It is truly a pity that some would choose not to maximize social good simply because it means someone else will make money in the process.

But let’s start this discussion of Bayh-Dole from the beginning. Before Bayh-Dole was enacted virtually no University research was commercialized. Since the enactment of Bayh-Dole in 1980 thousands of innovations, including live saving innovations, have been commercialized. When I interviewed Senator Bayh back in November 2010, he explained the problem like this:

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 whether the critics like it or not, the objective truth was that prior to Bayh-Dole the system was fundamentally broken to the point that it wasn’t working at all. But since Bayh-Dole the story is quite different. While those who dislike Bayh-Dole will scream “correlation is not causation,” you can be the judge yourself. No patent licensed prior to Bayh-Dole and many tens of thousands of licenses since, with many thousands of start-up companies and many tens of thousands of employees working for those start-up companies and countless individuals who are alive today directly because of live saving innovations attributable to Bayh-Dole that were then commercialized and made available to the public. Before going any further allow me to point out, however, that not all University technology relates to live saving drugs, devices and treatments. Did you know that an inventor at the University of Texas invented the lithium ion battery? In fact, Universities are working on exciting clean, green technologies. See Being Green: Bayh-Dole Makes Every Day Earth Day.

At some point doesn’t the correlation become so overwhelming that the “correlation is not causation” argument loses its appeal? The truth is overwhelming and tells a tale that any objective observer must understand means that Bayh-Dole has been successful beyond any dreams.

Indeed, the facts and statistics are hard to argue with. For example, University patent licensing contributed approximately $836 billion to U.S. gross domestic output and supported 3 million jobs between 1996 and 2012.  The Economic Contribution of University/Nonprofit Inventions in the United States: 1996- 2010. Furthermore in fiscal year 2011, 591 new products and 670 startup companies were created in that single year alone under Bayh-Dole.  FY 2011 Licensing Survey, Association of University Technology Managers. Still further, Since 1980, more than 8,778 new firms have been established to develop and market academic R&D AUTM U.S. Licensing Activity Survey Highlights: FY2011. Even further still, industry financing of university research expanded from 3.9% of university R&D in 1980 to 7.2% in 2000. Even with the global economic downturn in 2008, industry financing was well above 1980 levels at 5.8% and a Government Accountability Office (GAO) report found that this increase in industry financing directly attributable to changes in patent laws brought about by Bayh-Dole. See CRS report at page 8-9.

Of course, there have always fears and the inevitable parade of horribles some will envision. With Bayh-Dole it was that Universities would abandon basic scientific research and instead focus on commercialization. But fears over Universities abandoning basic research in favor of applied research never held true. In fact, the exact opposite is true. 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. Thus, as a result of Bayh-Dole Universities are spending more time and energy research basic science than they are with development or commercialization research. That, of course, should be expected with a functioning public/private partnership between Universities and the private sector.

Simply stated, Bayh-Dole works.  But even if you are a head-in-the-sand kind of naysayer, or you still aren’t sold on the benefits to the public that come with the commercialization of University research, there is absolutely no questioning that American Universities engage in some cutting edge and truly special research, breaking new grounds and pushing the envelop of science and discovery.

One such University is the University of California, which comprises 10 campuses and a combined student body of more than 200,000 people. Year after year the University of California is the top patenting University in the United States. This public university system operates a number of national laboratories and research centers that develop inventions and innovations in various sectors, including nanoscience, biomedical technologies, energy and the environment.

Earlier this week we took a look looked through the United States Patent and Trademark Office database for our profile article about the University of California, taking a look at this research juggernaut.. We immediately see that the University system is highly focused on biomedical developments, especially at the molecular level. For example, U.S. Patent No. 8,518,871 titled Skin Permeating and Cell Entering (SPACE) Peptides and Methods of Use Therof, protects a type of medication that can enter the human body directly through the skin. Then there is U.S. Patent No. 8,512,943, titled Accessing the Toxic Potential of Nanomaterials, which protects a system of determining toxic materials at the nanostructure level.

Also of interest was U.S. Patent Application No. 20130210650, titled Peripheral Gene Expression Biomarkers for Autism. The patent explains that while there is no known medical treatment for autism, success has been reported for early intervention with behavioral therapies. Of course, you have to know which children should be directed toward behavioral intervention therapies, which is why this innovation and others in this field are critically important. And likewise interesting is the research toward a method of enhancing cognition in an aging brain, as described in U.S. Patent Application No. 20130216985, titled Method of Suppressing Irrelevant Stimuli.

This is hardly the full extent of the research that is going on within the University of California system, nor is the University of California alone with respect to doing cutting edge research. These aforementioned patents and patent applications published in August 2013 and are merely representative of recent activity. They show the important research going on that someday will hopefully be commercialized by a start-up company that will create jobs. If that happens, as it frequently does even with speculative and basic scientific research, the public will get the benefit of cutting edge research and scientific advances while at the same time jobs are created. Bayh-Dole and the technology transfer system put in place back in 1980 has provided this dual benefit over and over again.

If you are interested in longer treatment of some other exciting research within the University of California system please see: University of California Improves Diagnosis, Treatment of Arthritis and UC Patent Discloses Cell Phone to Brain Interface and University Patents: Focus on the University of California System. This coming week we will be moving to profile the University of Texas and Johns Hopkins, two more superior research Universities.

For an excellent discussion of how Bayh-Dole came to be please see The Enactment of Bayh-Dole, An Insider’s Perspective and Exclusive Interview: Senator Birch Bayh on Bayh-Dole at 30.

For additional defenses of the Bayh-Dole Act please see:

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

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.

 

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