Lou Berneman

Lou Berneman

Don’t kill the goose laying golden eggs

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By Lou Berneman

For years, China has stolen hundreds of billions of dollars’ worth of American companies’ intellectual property — everything from patented software code and computer chips to prescription drug formulas and weapons systems.

Thankfully, the Biden administration is making a concerted effort to curtail this theft. Federal investigators now open a new counterintelligence case against Chinese actors every twelve hours on average.

But while administration officials fight China’s high-tech piracy with one hand, they’re threatening Americans’ intellectual property with the other hand. They are threatening to undermine a 42-year-old law that has enabled universities to effectively move research discoveries from the laboratory to the marketplace. This academic-to-industry “tech transfer” process is a foundation of pharmaceutical and high-tech innovation — and upending it would kill the goose that has been laying golden eggs for four decades.

Lou Berneman

Lou Berneman

That law, commonly known as the Bayh-Dole Act, allows universities to patent discoveries made, in part, with federal research funds and license those patents to startups and established companies capable of turning the discoveries into real-world products.

Before Congress passed that transformative bipartisan legislation in 1980 — with the support of then-Senator Joe Biden — the federal government retained ownership of patents resulting from taxpayer-funded research. Not unexpectedly, it did a poor job of licensing those patents to the private sector. Of 28,000 patents held by the federal government before Bayh-Dole passed, fewer than 5% were licensed for development.

One study estimates that by putting universities in charge of this “technology transfer” process, Bayh-Dole spurred the creation of some 15,000 startup companies and brought nearly 6.5 million jobs to our economy — boosting economic output by $1.9 trillion overall.

Despite this overwhelming success, dozens of U.S. lawmakers now want to use a provision of the Bayh-Dole Act, its so-called “march-in” rights, to upend the incentive system the law created.

Their goal is to reduce the price of certain medicines that originated from discoveries in university labs. Their intentions may be admirable, but their methods are misguided.

They claim that if startup and established drug companies have licensed patents from universities that benefited from federal grants, the government forever retains the legal authority under Bayh-Dole to “march in” and revoke those licenses if officials decide the medicines that result are unreasonably expensive. The government could then re-license the patents to other drug companies that promise to sell the medicines more cheaply.

As Senators Birch Bayh and Bob Dole themselves attested in 2002, the Bayh-Dole Act doesn’t allow the government to “march-in” and relicense patents merely because officials don’t like the price of a commercially available product.

Giving government officials such sweeping authority would defeat the purpose of the law — which was to spur innovation by putting universities, rather than bureaucrats, in charge of the technology transfer process. Allowing the government to rescind patent licenses by marching in will curtail investments in startup and established companies. The chilling effect on high-tech R&D, public and private, would extend well beyond pharmaceuticals. It would undermine the United States as the global leader in academic-to-industry technology transfer and the development of new technologies.

The Biden administration is wise to combat IP theft by the Chinese and others. Now, the administration needs to stand up to its allies in Congress seeking to undermine American innovators that transform university research into real-world inventions.

Lou Berneman is founding partner emeritus of Osage University Partners. He served as managing director of UPenn CTT, and president of AUTM.

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