California’s universities are among the most productive research institutions in the world. As the holders of hundreds of patents, these universities combine to drive innovation and the development of inventions that support healthcare ecosystems, technological advancements and other facets of life. Yet this rich ecosystem of invention is under threat from the Biden administration, which is considering policies that would unravel the legal underpinnings of research universities that enable such discoveries.
As of 2021, the University of California system holds 671 patents, and when you add Stanford University (205 patents) and CalTech (173 patents), you have a cluster of university research that is unrivaled in its penchant for invention. These figures illustrate a shift in the legal dynamics that took place decades ago that allowed universities to protect the rights to such inventions.
Before 1980, when a university received federal funds to perform research that led to a patent, the government controlled the patent. Universities could not license that patent to a private company that might be able to mass produce the invention and sell it, with royalties going back to the university. Moreover, before 1980, private companies were not interested in partnering with universities because, without securing patent protection, any product they brought to market out of a university could be copied immediately by a competitor.
In 1980, the passage of the Bayh-Dole Act changed all of this. It provided the legal infrastructure for today’s thriving university research community. Bayh-Dole not only allowed universities to keep the patent rights for something developed with federal funds, but the law also forced universities to partner with private companies on their patents. Bayh-Dole states that if universities and their business partners do not commercialize their patents within a reasonable period, the government can “march-in” and take the patent away.
It is vital to note that “march-in” rights have never been exercised by the federal government because it is understood that it would have a chilling effect on university partnerships with private companies.
On March 21, the Biden administration announced the creation of an Interagency Working Group for Bayh-Dole that would “develop a framework for the implementation of the march-in provision of the Bayh-Dole Act.”
A joint effort of the Department of Health and Human Services and the Commerce Department, the working group was launched around the premise of “increasing access to healthcare and lowering costs.”
However, the administration did not form the group to encourage universities to commercialize their patents. Instead, the administration wants to “march-in” and strip the patents from biotech and drug companies if the original patent was developed at a university using federal funds. After the government marches in and swipes the patent, any generic company can cheaply copy the drug. In theory, this could create better access and lower costs. Such “march-in” actions would have devastating downstream effects on the healthcare ecosystem and other sectors that rely on public-private partnerships.
Setting aside the morality and legality of the government using naked power to strip intellectual property protections from private companies, this action would undoubtedly have a devastating effect on the university research community. Private companies would avoid partnering with universities on their patents, fearing the government someday stripping away their patent protection. Royalty revenues would dry up, and university patents would become irrelevant.
The larger pharmaceutical companies would fund their basic research and avoid universities. But the companies most harmed would be smaller, entrepreneurial biotech companies that can now harvest great ideas from university research and turn them into valuable products.
It would not only be life sciences research at universities that would be harmed. Any scientific discovery at a university that led to a patent would be avoided by commercial companies. Many sectors of the American economy depend upon university research. The exercise of “march-in” rights by the government would return us to the pre-1980 university research system, whereby university patents were put in a box somewhere and did not lead to useful inventions.
One can also see a lobbying frenzy develop around march-in rights, as lobbyists for large companies would ask the government to march-in on the patents of a competitor by arguing that “our company can make that product more cheaply.”
The Bayh-Dole system of commercialized university research has given the United States a competitive advantage for decades, an advantage now under threat. International students flock to the laboratories of universities in California and elsewhere because they know some of the things discovered in these labs will revolutionize the markets for many products.
However, the ecosystem that has built up around university research is a fragile one. The twisting of the Bayh-Dole Act to gain political advantage on the issue of drug prices would shatter that university research ecosystem, a blow that would be difficult to overcome.