Submitted by Heidi Sease Nebel, partner and patent attorney, McKee, Voorhees and Sease
The concept of “march-in” rights, the federal government “marching in” to take back its intellectual property (IP) ownership of drugs made from federally funded research, and then presumably licensing the same to all comers, has an initial appeal. More players must mean lower prices, right? The reality, however, is that the Bayh-Dole Act, under which such march-in rights would be predicated, simply does not provide this option for the vast majority of drugs. Further, the chilling effect it would create by taking away the economic incentives from those willing to invest in the costly and unpredictable endeavor of new drug development is potentially devastating for all areas of technology.
IP continues to be a massive economic driver for jobs and investment in the United States. According to the U.S. Department of Commerce, IP supports $7.8 trillion in gross domestic product and more than 47 million jobs. A big piece of this is from the Bayh-Dole Act. So much so, that this legislation has been emulated around the world. Japan, France, the United Kingdom, Germany, Austria, Denmark, Norway, Portugal, Spain and Finland have all either passed or are considering similar legislation.
Why? Because the Bayh-Dole Act is an unprecedented success. The Bayh-Dole Act was a bipartisan act proposed by Sens. Birch Bayh, a Democrat from Indiana, and Bob Dole, a Republican from Kansas, and signed into law by then-President Jimmy Carter in 1980. The purpose of the act: to ensure basic innovations discovered through federally funded research are developed into real-life products. It enables universities, small businesses and nonprofit institutions to take ownership of inventions, so they can license these for further applied research and broader public use. With the passage of the act, scientific advances have gone from lab benches and the stuff of lofty scientific journal articles to actual commercial products in our drug stores, computer stores and grocery shelves. The concept of march-in as a part of the act allows the government, in certain limited circumstances, to require additional licensing of inventions to others if the invention is not being made available for public use.
The act removed the primary obstacle to commercialization by granting back to universities the opportunity for exclusivity, which creates financial incentive for companies willing to take the risk of commercializing inventions. No company would agree to license a university invention with no promise of reward for success. No venture capitalist would fund a startup company with the threat of the government taking back the resultant product after years of investment and product development.
This process, termed technology transfer, is the method by which basic science from federal labs, universities or other research institutions is transferred to industry where it can be developed into a commercial product or service.
Products that touch our lives every day, like Gatorade, PET scans, Kentucky bluegrass varieties, e-readers, the COVID vaccine and Lyrica, were all developed from basic science advances at the University of Florida, the University of Pittsburgh, Rutgers, Stanford University, the University of Oxford and Northwestern University. Studies show that technology transfer has contributed between $631 billion and $1.9 trillion to U.S. industry gross output, has catalyzed the formation of 17,000 startup businesses, and supported between 2.4 million and 6.5 million jobs in the United States over the past 25 years alone.
Prior to the passage of this act, with the federal government retaining rights to all inventions, scientific advances remained literally and figuratively shelved in our research libraries.
Here in Iowa, we have also seen economic development spurred by technology transfer. Groundbreaking discoveries generated right here at our public universities have included a human gene promoter, developed at the University of Iowa, which generated over $160 million in royalties, and a lead-free solder discovered at Iowa State University that generated royalty income of about $60 million and was licensed by more than 50 companies in 13 countries.
According to the Board of Regents, in 2023, Iowa’s three public schools generated $1.3 billion in sponsored research, developed 213 startup companies and employed over 3,600 Iowans. Iowa companies received $11.5 million in revenue from technology transfer and $5.3 million in royalties and license fee income, all thanks to the Bayh-Dole Act.
The premise of march-in rights to remove exclusivity from licensed technology threatens the critical partnership required between public sector research and private commercial investment. This results in economic loss for us all. Ironically, the march-in promise of cheaper and more drugs, could have exactly the opposite effect, chilling private investment and commercial product development, resulting in fewer innovations and lifesaving drugs for us all.