Addressing the True Impact of the Bayh-Dole Act

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Addressing the True Impact of the Bayh-Dole Act Since the passage of the Bayh-Dole Act in 1980, many researchers have debated its contribution to the transfer of technology from universities to industry. Many credit the act as an engine of economic growth responsible for the emergence of the biotechnology industry. Critics say that the law decreased data sharing and basic research and increased health care costs. Others think that the act had little impact and that changes in university patenting were inevitable. While university patenting would have increased regardless, the Bayh Dole Act helped universities license patents, creating positive economic benefits especially in the biotechnology industry.

Blog Post
Title Addressing the True Impact of the Bayh-Dole Act
Author Catherine Kirby
Content status Published
Publication date
©, 2016

Background The Bayh-Dole Act intended to improve the commercialization of federally funded research. Before 1980, only 5% of government-owned patents were ever utilized in industry. Corporations found it difficult, risky and unappealing to receive licenses for government patents. Several government agencies did not want to give up ownership of patents to universities or corporations. Agencies such as the National Science Foundation tended to give nonexclusive licenses to anyone, unappealing for companies. As it was easy for any company to procure licenses, the system did not incentivize companies to purchase licenses.

The Bayh-Dole Act enabled institutions to keep patents on federally funded research. The university or business can then grant nonexclusive or exclusive licenses to companies. The act also requires universities or businesses to make clear patent policies and encourage development of inventions.

Did the Bill Work? Despite claims that the Bayh-Dole Act alone led to increased patenting and economic activity surrounding university patenting, figures reveal that, even without the act, and acceleration of patenting would still have occurred. David Mowery notes that universities increased their shares of patenting from 0.3% in 1963 to 4% by 1999. However, he stated that this increase had already begun before 1980, which indicates that the Bayh-Dole Act was not the cause of the acceleration.

While the Bayh-Dole Act may not have lead to increased patenting, innovation legislature still has positive effects on the economy.Since the passage of the Bayh-Dole Act, more than 5,000 new companies have formed as a result of federally funded university research. In 2008, more than 600 new university products were introduced to the marketplace. According to MIT, about 30 billion dollars of economic activity per year and 250,000 jobs can be attributed to technology born in academic institutions. These large numbers show the importance of university innovation to the economy, and good patent legislature can add to economic prosperity.

The Bayh-Dole Act may not have been the only contributor to this growth, but clearly innovation spurring legislature can have positive effects on economic growth.

Creation of the Biotechnology Industry While some argue that the Bayh-Dole Act was not solely responsible for the creation of the biotechnology industry, the importance of licensing for biotech companies indicates that the significance of the Bayh-Dole Act should not be discounted. From the 1968-1970 period to the 1978-1980 period, biomedical university patents increased by 295%. As this growth predates the Bayh-Dole act, the act cannot be the sole creator of the biotech industry. Most likely the increased funding in the field, advances in the science and industry interest also played major roles in the growth of university patenting.

While the act may not have played a major role in sparking innovation, it most likely contributed to increased licensing. The ability of universities to license patents produced many scientist-entrepreneurs who formed companies around their inventions. At least 50% of current biotech companies began as a result of a university license. Additionally, 76% of biotechnology companies have at least one license from a university. As the previous amount of university patents licensed before Bayh-Dole was only 5%, the large number of companies licensing patents shows an improvement.

According to Boston University, these biotechnology companies represented over 1.42 million jobs in 2008, and the bioscience sector as a whole represents an employment impact of 8 million jobs. By 2009, 1699 biotech firms generated annual sales of $48.2 billion. University licensing of biotechnology patents generated more than $40 billion in economic activity.

The positive effects of the biotechnology industry has not gone unnoticed. According to MIT, the federal support for biomedical research has increased from $4.296 million in 1980 to $13.652 in 1996. While the Bayh-Dole act may not have been the only creator of the industry, government innovation policy has overall had a substantial impact on the U.S. economy.

Addressing Criticisms Critics of the Bayh-Dole Act cite the decrease of data sharing, higher health care costs and a shift away from fundamental research as flaws of the law. Because researchers patent new inventions, they tie up data in patent rights, preventing other researchers from accessing this data and slowing the research process. However, an article by Neil Thompson and others suggests that licensing of academic patents does not limit research communication communication, but licenses on research tools may lead to restrictions on continual research in a subject.

Many also argue that health care costs have increased as a result of the act. Biomedical university patents often can be utilized in the process of drug creation. As these discoveries are not final products, companies must license each patent that they use to create a final product. The cost of licensing many of these patents allegedly drives up the cost of the final product, hurting the consumer. While this may contribute to high costs, it is unfair to blame the high costs of care solely on the Bayh-Dole Act. Drug development includes a multitude of phases with high costs for each step. Thus, individual patents licenses on steps of the process cannot be the sole contributor to high costs.

The NIH and USPTO have created guidelines to prevent the unreasonable licensing of biomedical patents. However, these guidelines are not all concrete. Others argue that the Bayh-Dole act incentivizes universities to focus on applied research instead of basic research as applied research generates more money from patenting. However, according to the National Science Foundation, from 1980 to 2001 the percentage of basic science research increased from 66.6% to 74.1% and applied researched decreased from 33.4% to 25.9%.

Conclusion The Bayh-Dole Act was not the sole factor in the increase of university patents and the creation of the biotech industry. The government can still work to improve other policies to incentivize innovation. The government could encourage the use of unlicensed academic patents by offering tax breaks to companies. These companies can then commercialize patents, making them available to the public. Furthermore, the government can encourage universities that accel at technology transfer such as Stanford or MIT to share best practices to other universities. These two ideas can help spur innovation and give the public access to academic inventions that can improve lives and the economy.