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Biden's Bayh-Dole Act proposal misuses 'march-in rights'

By Paul Michel and Kathleen O'Malley

The Biden administration may soon gut the Bayh-Dole Act, one of our nation's most important and impactful laws that also supports nearly $2 trillion in economic activity.

In 1980, Congress passed the bipartisan act to help ensure that scientific breakthroughs at taxpayer-funded labs — especially at university labs that receive federal grants — would be turned into new, real-world products available to consumers. 

Before this passage, universities and other nonprofits that patented discoveries stemming from federally funded research had to turn the patent rights over to the government. And because the government rarely agreed to grant exclusive licenses to those patents, private-sector companies rarely licensed the research and developed it into tangible products. So, it went unused.

The Bayh-Dole Act changed all that by giving universities and nonprofits the ability to retain the patent rights on their researchers' discoveries, and then grant exclusive licenses to private companies in exchange for royalties. Private  — secure in the knowledge that they would hold the only ones holding the licenses — firms began working to commercialize university research.

The legislation has had a seismic impact on our nation's economy. From 1996 to 2020, technology transfer enabled by the Bayh-Dole Act contributed roughly $1.9 trillion to America's economic output, supported an estimated 6.5 million jobs, and helped launch 17,000 startups. 

Unfortunately, the Biden administration recently proposed changing how federal agencies interpret it. 

Under the proposal, if officials deem the price of an already on-market product "unreasonable," they can tear up any exclusive patent licensing agreements that were inked between federally funded labs and private companies. Officials could then relicense the patents to other firms, which could presumably create cheaper copycat products.

There is a big problem with this proposal: It is completely at odds with the spirit and the letter of the statute, which explicitly identifies only four circumstances when federal agencies can "march in" and relicense a patent. But none of the march-in circumstances reference price.

The proposal also directly contradicts Congress' intent. Sens. Birch Bayh (D-Indiana) and Bob Dole (R-Kansas) made that clear in 2002, when the theory that their law could be used as a back-door price control first circulated. 

In short, the Bayh-Dole Act does not give the government the legal authority to do what the Biden administration has stated it intends to do.

Over the past several decades, multiple administrations, both Republican and Democratic, have recognized this fact and rejected petitions to use the law to control prices. Government agencies have repeatedly concluded that they lack the power to relicense patents based solely on the price of an already developed product. "March-in rights" have never been exercised.

Rival nations would also benefit from this self-sabotage. China, which is increasingly subsidizing domestic innovation and has established its own model of the Bayh-Dole Act, stands to gain from the damage this proposal will wreak on our innovation economy.

For over 40 years, the Bayh-Dole Act has been the pilot light of American creativity. If bureaucrats seize the power to rip up patent licensing agreements, it will result in fewer life-changing inventions and a less dynamic economy for us all.

Paul Michel served on the United States Court of Appeals for the Federal Circuit from 1988 to 2010. Kathleen O'Malley served on the United States Court of Appeals for the Federal Circuit from 2010 to 2022 and the U.S. District Court for the Northern District of Ohio from 1994 to 2010. Both are board members of the Council for Innovation Promotion. This piece originally ran in the Detroit News.

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