Universities have become a major source of innovation for local and regional economic development. In the latest survey performed by the Association of University Technology Managers (AUTM), a survey of fiscal year 2013 activity, it is reported that 818 new startup companies were formed to commercialize university research. During FY 2013 there were 5,198 new licenses were granted primarily to small businesses. Since 1980, more than 10,000 new startup companies have been established to develop and market academic research, with 4,206 startups still operating as of the end of FY2013.
There is no doubt that Bayh-Dole has been an enormous success. The legislation was passed with the purpose of moving university research into the private sector so it could benefit society. Prior to Bayh-Dole little, if any, university research was ever commercialized because of the byzantine process for obtaining a license. That meant a great number of revolutionary discoveries and innovations were wasting away, doing no good to anyone. Thanks to Bayh-Dole that all changed.
As the new academic year starts in earnest we can be sure that the all too familiar attacks on Bayh-Dole will reemerge, as they always seem to do. These attacks are really on the patent system more generally, but as the critics of the patent system so often do they attack piece by piece in an attempt to inch forward toward the world they would prefer: A world without any patents.
The attacks on Bayh-Dole, and the patent system more generally, occur with metronome like precision. Critics, who are not averse to making provably false claims, seem to believe that if they repeatedly say something that is false enough times it will miraculously become true. Hard to pin down, these patent critics will deflect reality with thought experiments based in fiction and fantasy. They demand what we know to be true is actually false, as if we are in some parallel, bizzaro universe where up is down and white is black.
If you listen to patent critics they will tell you that Bayh-Dole has been a dismal failure. For example, according to the Congressional Research Service, the Bayh-Dole Act is believed by critics to be a failure because it has been too successful. On this point Wendy H. Schacht, who is the author of the aforementioned Congressional Research Service report, writes: “The successes of the Bayh-Dole Act and the visibility of the results of its implementation have generated certain concerns, many of which are associated with the role of the university in research, as well as biomedical and biotechnology R&D, particularly as related to the availability and cost of pharmaceuticals.”
Let that sink in for a minute. Bayh-Dole has been so objectively successful that critics are concerned? These same critics that claim there is no evidence that Bayh-Dole has succeeded at all are voicing concerns because the legislation has been so successful. Talk about arguing in the alternative. You just can’t have it both ways. Either Bayh-Dole is a success, or it is not a success. Bayh-Dole cannot be a failure because it has been so wildly successful. To claim something is a failure because it has been successful beyond any wild expectations is tortured logic even for an academic blinded by bias and an unrelenting desire to ignore the volumes of objective economic evidence.
By any fair and rational review of the facts, Bayh-Dole has been remarkably successful. On this point the Congressional Research Service admits that “[t]he Bayh-Dole Act has been seen as particularly successful in meeting its objectives.” Indeed, not only have there been thousands of new high-tech startup companies formed, which bring with them good jobs, but also there have been numerous groundbreaking innovations commercialized.
As a result of research conducted at U.S. universities since 1980 there have been at least 153 new vaccines or drugs approved by the Food and Drug Administration (FDA). According to an article published in the New England Journal of Medicine, “[m]ore than half of these drugs have been used in the treatment or prevention of cancer or infectious diseases.” The article also goes on to note that “[v]irtually all the important, innovative vaccines that have been introduced during the past 25 years have been created by [Public-sector research institutions].”
Furthermore, the public and private partnerships formed between universities and the private sector have enormously contributed to the U.S. economy in financial terms. According to one study, between 1996 and 2010, university and nonprofit institution patent licensing contributed to $836 billion in U.S. gross industry output, with an impact of $388 billion on U.S. gross domestic product.
There are some that question whether this remarkable success, none of which happened prior to Bayh-Dole, can actually be attributed to Bayh-Dole. The familiar, yet annoying, refrain goes like this — correlation is not causation. Some of the most intellectually dishonest critics will take things several steps further, saying that there is no way to know whether Bayh-Dole caused the tremendous explosion in innovation coming from U.S. universities, which they then conclude means that there really is no evidence at all that Bayh-Dole or university patenting generally has had any positive impact.
After summarily, and rather ridiculously, ignoring volumes of evidence these critics then conclude that there is no evidence whatsoever to support the proposition that Bayh-Dole has been anything other than a drag on innovation. They then propose to back to the regime in place prior to the enactment of Bayh-Dole. Of course, turning the clock back to 1979 cannot be considered a serious proposal, or a sane proposal for that matter. We know what happened prior to passage of Bayh-Dole — absolutely nothing!
Only a charlatan of epic proportions, or an academic with tenure who is un-tethered to reality, could make such a bizarre suggestion. Newsflash — we know what happened before universities were patent owners and from an innovation standpoint that marketplace was a barren wasteland. Anyone who suggests repealing Bayh-Dole and going back to the past really needs to have their heads examined, and for goodness sake take those people out of the classroom so they don’t poison our children with faux logic and half-witted theories.
The Congressional Research Service aptly sums everything up in one sentence. “It is only through commercialization, a function of the business sector, that a significant stimulus to economic growth occurs.” I couldn’t agree more. This is precisely why patents are an essential component behind the overwhelming success of Bayh-Dole.
If you cannot own the innovation why in the world would you ever invest in the innovation? You wouldn’t, which means the innovations society wants most simply won’t happen. For better or worse innovating in the 21st century costs a lot of money, and without the possibility to recoup investment plus a reasonable rate of return the business sector can’t and won’t become involved.
While universities are very good at making basic scientific discoveries and engaging in early stage feasibility research, universities are simply not equipped to do commercialization research. It is a fantasy of epic proportions for Bayh-Dole critics to claim that the federal government pays for the research so the people own the innovations. Anyone who makes that argument fundamentally misunderstands university research. At best the federal government pays for the scientific breakthrough, which could take years or even decades to mature into a commercialized product. That is exactly why public-private partnerships are so critical, and exactly what Bayh-Dole was meant to foster.
According to the Congressional Research Service, “[a]ctual experience and cited studies suggest that companies which do not control the results of their investments—either through ownership of patent title, exclusive license, or pricing decisions—tend to be less likely to engage in related R&D.” This is hardly surprising if you actually take time to think about it. If a company cannot own title to the innovation they simply cannot afford to engage in the commercialization research necessary. If the private sector invested in R&D without an ownership interest they would be worse off than the free riders that follow because a free rider wouldn’t have to recoup the cost of the R&D and could, and would, under sell the commercial innovator.
Despite all of the scientific and economic evidence that objectively demonstrates the success of Bayh-Dole, the attacks will continue. That these intellectually bankrupt attacks come from academics is both typical and tragic. At a time when many university graduates have racked up so much crushing debt academics are more interested in engaging in intellectual absurdity rather than teaching students. Perhaps if academics actually taught students and teaching were considered a priority students would be better off and academics wouldn’t have enough time to work to dismantle a system that works.
For more on Bayh-Dole please see: