100 Misguided Lawmakers Could Undermine American Universities
But with taxpayer dollars comes political scrutiny. Recently, 100 members of Congress proposed a reinterpretation of the law that fuels this world-class R&D engine. And their short-term political ploy, if adopted, would undermine U.S. leadership in higher education.
Let’s start with some history.
Back in the 1970s, leaders in Congress realized that America’s research apparatus was not achieving all that it could. While federal funds supported groundbreaking research in academic labs across the nation – at one point garnering 28,000 patents – those funds came with strings attached. Namely, the government retained title to patents if they arose from research funded in any part by taxpayer dollars.
And the government did a poor job of finding companies willing to invest in turning that patented basic research into actual, useful products. The maze of federal rules and regulations meant that the feds licensed fewer than 5% of those patents to the private sector. Taxpayer-funded research essentially sat in bureaucratic limbo. Without private investment in the development of those inventions, the public received no benefit.
University and small business leaders proposed a solution to this waste: decentralization. Rather than Washington bureaucrats licensing federally funded inventions, universities and small companies themselves could license patents they developed with government support.
Formalized in a bipartisan 1980 law colloquially known as the Bayh-Dole Act, this arrangement unleashed a frenzy of university research and successful commercialization.
Today, Bayh-Dole’s research ecosystem has contributed up to $1 trillion to U.S. GDP and supported 6.5 million jobs. Some innovations attributable to Bayh-Dole’s R&D structure include Google’s search algorithm, once-a-day HIV medication, and high-definition television.
In 2020 alone, university technology transfers made possible by Bayh-Dole helped launch more than 1,000 startups and resulted in more than 900 new products coming to market.
Bayh-Dole spurs practicable research at universities across the United States, creating a virtuous cycle of innovation that’s the envy of the world.
Thanks to the current congressional proposal, however, Bayh-Dole and sponsored research at America’s universities could soon be eviscerated.
Hoping to find a silver bullet to cut drug prices, lawmakers zeroed in on an obscure provision of the Bayh-Dole Act. It allows the government to “march in” and relicense patents derived from federally funded research in a few rare circumstances (such as if the original licensee fails to make a good-faith effort to bring the patented tech to market).
These lawmakers, however, want to twist the original intent of this provision in hopes of marching in on innovative products that, thanks to Bayh-Dole, are already on the market. Essentially, they’re proposing to use march-in rights as de facto price controls, either to bully existing license holders into lowering prices or to relicense the patents to rival companies that agree to produce and sell the products at a lower price.
The authors of the 1980 law, the late senators Birch Bayh (D-IN) and Bob Dole (R-KS), definitively stated that Congress never intended to grant such authority to the federal government. Moreover, federal officials – under both Republican and Democratic presidents – have expressly refused to endorse this concocted interpretation of Bayh-Dole.
And for good reason. If the private sector believed that the government could rip up carefully negotiated license agreements on a whim, firms would not license university research, nor would they pour hundreds of millions, or even billions, of dollars into sponsoring academic research and then developing that research into useful commercial products. The revenue from those licenses and from that sponsored research, which funds additional research and the students and faculty who perform it, would quickly dry up.
We’ve already run this experiment, and it has proven that the threat is not hypothetical. In 1989, at the urging of activists pushing a similarly flawed interpretation of Bayh-Dole, the federal government began inserting a “reasonable pricing clause” into patent licenses and cooperative research and development agreements (CRADAs) between federally funded academic institutions and the private sector.
Instead of lowering drug prices, however, this policy repelled private industry from collaborating with academia. National Institutes of Health Director Harold Varmus revoked it in the mid-1990s, admitting that “the pricing clause has driven industry away from potentially beneficial scientific collaborations . . . without providing an offsetting benefit to the public.”
Resurrecting these failed policies would once again deal a blow to America’s research universities. Sophisticated research performed in America’s academic institutions is funded not only by taxpayer dollars but also by private funding in the form of sponsored research. The opportunity to perform that research, and collaborate with industry, attracts thousands of bright foreign students to the United States every year. Over half of U.S. graduate students studying engineering and computer science are international.
By and large, these students stay in the country and help America maintain a net positive trade imbalance in “intellectual capital.” Seventy-two percent of foreign STEM doctorate recipients were still here 10 years after receiving their degrees, according to National Science Foundation research.
International students also help university budgets; they are far more likely than domestic students to pay full sticker price for their schooling.
But talented students follow the best opportunities. Gutting American academic research means that more of those students will take their talent and their tuition dollars to competing markets. That’d be a tragic outcome.
Destroying Bayh-Dole’s virtuous research and development cycle could upend American higher education. That’s an unfathomably high price to pay. Let’s not do it.
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