The Bayh-Dole Act: Giving the Power of Innovation Back to Universities and Small Businesses

Universities, hospitals, small businesses, and research centers have long been hotbeds of scientific innovation and discovery. However, in the past many of the scientific advances being made at these institutions failed to be developed into products and medicines that could benefit society. In large part, they remained ideas and visions because the existing policies and legislation did not incentivize researchers or their institutions to further develop and commercialize their work. This all changed in 1980 with the passage of the Bayh-Dole Act, which reimagined patent and copyright policies applied to federally funded research and facilitated the development of numerous products and medications.

The federal government has been a large, if not the largest funder, of basic research carried out in the United States since the end of World War II. This longstanding investment in scientific and technological research can arguably be traced back to the 1945 report by Vannevar Bush, then head of the U.S. Office of Scientific Research and Development, entitled “Science, The Endless Frontier.” In this report, Bush argued that “Scientific progress is one essential key to our security as a nation, to our better health, to more jobs, to a higher standard of living, and to our cultural progress.”

Bush’s argument encouraged President Harry S. Truman to boost government spending on research and development, increasing the research capacities of the nation’s labs and universities. However, despite significant in the amount of federal funds designated for scientific research, the full potential of these discoveries was not being reached. Innovations developed with federal funding were typically early stage developments and not fully formed marketable products. Nevertheless, the title (ownership) of any invention created from federally funded research were retained by the government; cutting-edge research being funded by American tax dollars was was languishing. In fact, in certain instances companies from other countries like Japan were taking research done by American scientists and funded by the American people and developing it into marketable products that were being sold back to American consumers.

The government’s legal ownership over any potential inventions created using federal grants complicated the public and private sector research efforts. Often researchers never fully developed their ideas into finalized, marketable products because they did not possess legal rights to the fruits of their research. Joe Allen, a former staffer for Senator Birch Bayh and champion of the Bayh-Dole Act, said “We basically had a segregated wall between the best and the brightest in our public and private sectors. It was a barrier for the private and public sectors doing joint research.” This barrier was evidenced by a study done in the 1970s that found that approximately 28,000 patents from federally funded research had been accumulated by the government, yet less than 5 percent of those innovations had been commercially developed and additionally, no drugs had been developed from drug related research. Allen and others, he worked with realized that they “must structure the incentives of the patent system so that when someone made an invention with government funding they had the incentive to develop it. If a researcher did not own their invention, they would not have the incentive to remain involved with it and it would never be commercialized.”

With the onset of the 1970’s economic recession the issues surrounding the potential missed opportunities of public benefit from federal research funding reached a critical new juncture. Allen reflects, “We could no longer afford to give away the fruits of billions and billions of hard earned tax payer research and get nothing out of it.” During this time Joe Allen, as a representative for Democratic Senator Birch Bayh of Indiana, began meeting with staff from Purdue University and the University of Wisconsin, who complained that the ownership of innovations created through federally funded research were not being retained by their institutions.

Birch Bayh, partnered with Republican Senator Bob Dole of Kansas to co-sponsor the Bayh-Dole Act or the Patent and Trademark Law Amendments Act. This act transferred the ownership of innovations created through federally funded research from the federal government to those universities, small business, and non-profits, thereby incentivizing them. The act stipulated that the federal government retain a non-exclusive license; that they must give a preference for United States based manufacturers and small businesses, thereby incentivizing the creation of American Jobs; that any royalties from the inventions must go back into education and research; and that the institutions reward the inventors, consequently increasing those individual’s stake in the product’s development. “Basically,” says Allen, “the main concept was to have the government fund the research and oversee a few basic rules, but then to get out of the way and not try to predict what was going to happen with any given invention.”

The Bayh-Dole Act was officially enacted in December 12, 1980 and has been largely seen as a success over the past few decades. Between 1996 and 2013 it added $1.18 trillion dollars to the economy, created over 3.8 million jobs[1] and an average 2.5 companies a day[2]. Furthermore, it currently accounts for almost a third of the value of NASDAQ[3]. The Economist Technology Quarterly said it is, “Probably the most inspired piece of legislation to be enacted in America over the past century[4].”

The Bayh-Dole Act also enabled the development of the profession of technology transfer with offices at most universities and research based non-profits across the United States, including Emory’s own Office of Technology Transfer (OTT). Thanks to Bayh-Dole, Emory OTT has had many success stories over the years, including the widely-used HIV antiretrovirals (emtricitabine & lamivudine), Factor VIII (rpfVIII, tradename Obizur®), or FACBC (tradename Axumin™)  Without the Bayh-Dole Act, the world today would look very different and the visionary research being done at universities like Emory would never be translated into products, medicines, and therapies that shape the world we live in today.