Giachino (00:05.0280 - 00:22.0590)
Welcome to IP Protection Matters. I'm your host, Renee Giachino.
Today we are joined by Joseph Allen, Executive Director of the Bayh-Dole Coalition. We'll be talking today about the history and success of this vital legislation. Joe, welcome to the show. Thank you for joining me.
Allen (00:22.0600 - 00:24.0579)
Well, thank you very much. I'm delighted to be here.
Giachino (00:24.0590 - 00:32.0924)
Before we dive into this important topic. Tell us a little bit more about some of the work that's being done at the Bayh-Dole Coalition.
Allen (00:32.0935 - 02:01.0125)
Well, basically, we were started about five years ago to preserve the Bayh-Dole Act. Actually, I worked for Senator Birch Bayh many years ago and he worked with Bob Dole. And they created the law, which is named after them, which basically opened up the doors for collaborations between our public and private sectors. It's actually revolutionized the U.S. economy. That's really actually not an exaggeration. And unfortunately, the law was passed in 1980, which is not unfortunate, but a lot of people have forgotten about it, and we actually have people who didn't like it then and don't like it now that have been trying to undermine it.
So, the coalition was established just to remind people how important it is to have these relationships between our public and private sectors, the burden that's placed on entrepreneurs to really bring forth the resources and time necessary to take a government-funded invention and turn to a product, and also to make people understand that this is a very fragile thing. If you start undermining the law by letting the government micromanage it or have people deliberately misinterpret it - saying that the government can impose price controls on resulting products - we're going to be in a bad situation. So, we're doing everything we can to alert people to... This is one of the best laws that we passed in probably the last half century. But like any other law, it's fragile, so it really can be abused and people really need to understand how important it is to our future and make sure we keep it working as it has since 1980.
Giachino (02:01.0535 - 02:56.0134)
So centuries ago, a politician was quoted as saying that laws are like sausages and it's best not to see how they're made. But as you indicated, you were there, you were working both behind the scenes and in front of the scenes. I mean, as I understand it, what I have read about our guest today is, in your capacity as a professional staff member on the U.S. Senate Judiciary Committee, a key staffer, you are credited actually with securing the passage of this seminal legislation. So, I appreciate your humble introduction, but I want to make sure folks know that we've got Joseph Allen, the Executive Director of the Bayh-Dole Coalition, with us here to take us behind the scenes. Can we roll back the clock just a little bit before those 40 years ago? What was the impetus for this important bipartisan legislation? What did the landscape look like at that time?
Allen (02:56.0145 - 04:16.0010)
Well, I was in the sausage factory, so I'll be happy to take you back to those days.
Basically, after World War II, the government started funding basic research, which we really didn't do much with before the war. But Franklin Roosevelt got a paper from Vannevar Bush called, "Science, The Endless Frontier," and decided that should be something the government did, which is I think very laudable.
The problem was no one really knew or anticipated that you're going to have inventions made from that. So, basically what started was back in 1940s and 1950s, and even the 1960s, we didn't really have any international competition. World War II pretty much flattened the rest of the industrial world except for the United States. So, we basically had a policy that if the government funded any research, even a small percentage, the invention would be taken by the government and anybody could use it for free. Which sounds very noble, but the problem is the government's not doing commercialization, particularly in basic research. So, what started happening was, even in the 1950s, it became apparent that that policy was not having things developed. And so President Kennedy and Nixon started making exceptions to the policy saying on a case-by-case basis, people could apply with the government to try to get rights to inventions they've made with government funding. But it took a long time.
Allen (04:16.0149 - 05:48.0709)
So fast forward to when I came on the scenes in the late 1970s, on the Senate Judiciary Committee staff for Senator Bayh. We did have international competition. We had the Germans and the Japanese that were eating our lunches, and we were losing. That's when we had started having the industrial rust belt, which actually powered the U.S. through World War II, suddenly it was being hollowed out and we were losing steel and electronics and aeronautics and other industries that we dominated. So, people started asking why are we spending billions of dollars on government-funded research and very little is coming out of it?
So, we had some folks from Purdue University, which is an alumni of Senator Bayh from Indiana, came by and talked to us about an invention they'd made with government funding that was going to be taken away and never developed. And that was news to us. And so, we found out that that was not an anomaly it was happening across the board. And even worse than that, we found out that not a single invention had been turned into a new drug from National Institutes of Health funding when the government took the rights away.
So, we thought, well, this is crazy. I mean, how can we have billions of dollars going into it and we're literally giving the results away to our competitors? They had as much access to our research as we did.
We found out that Senator Bob Dole who was a conservative Republican had the same interest. And so Bayh and Dole teamed up and we decided that we would change the law and focus on universities and small companies, which is the crux of the problem, because sometimes big contractors were able to negotiate better rights than a university or a small company could.
Allen (05:48.0880 - 07:00.0570)
So what the Bayh-Dole Act does, very simply is, it decentralized technology management for the Washington bureaucracy and says if a university or a or a small company makes an invention, they can own it and commercialize it. The government can use it for free mainly for research purposes. There's a couple of clauses in there: you have to give a preference in licensing to a small company, to people making in the United States, you have to reward university inventors, and any royalties to come back to the university have to be used for more research or to pay costs.
And that really ignited the greatest renaissance in innovation in American history, because suddenly for the first time, we had the best and brightest minds of our universities and federal laboratories and industry working together. Whereas for the previous 40 years, they were segregated. If you were in a company, you didn't want to spend anything at a university or federal lab, because if the invention was made, it was taken away from you.
The Economist Technology Quarterly said the Bayh-Dole Act was possibly the most inspired piece of legislation passed in the half century, more than anything it helped reverse America's precipitous slide into industrial irrelevance. So, it really is a big deal even though most people have never heard of it.
Giachino (07:00.0579 - 07:21.0459)
So we know economists love numbers. Can you help us quantify the economic impact that this legislation has had over the last four decades or more, in terms of output, jobs, start-up companies, inventions. I mean, is there a way to quantify that in some sense?
Allen (07:21.0489 - 08:26.0316)
Well, there actually have been economic studies of the impact of it. And what they did was, they looked at university licensing and used some economic metrics which are above my head. But what they found is - again, the law passed in 1980 - but they looked from 1996 to 2022 and they found it's had more than a $2 trillion, with a T, impact on the U.S. economy, has created 7 million good jobs, we're starting three new start-up companies every day of the year from university inventions, commercializing two new products - things like Google came out of Bayh-Dole, HIV treatments came out of Bayh-Dole, flu mist bar scanners. I mean, it's across the board.
But one of the biggest impacts has been on the life sciences. Before Bayh-Dole, the U.S. was number three in the life sciences. Ever since then, we've been number one by far. It really has transformed the American economy. And again, not just in life sciences. In environmental technologies. I mean, anything the government is funding. Honey crisp apples came out of Bayh-Dole.
Allen (08:26.0325 - 09:49.0090)
So, it's really been one of those things with which... When I was on Senator Bayh's staff, we had a briefing from the CIA and they were actually looking at - again, this is like in the late 1970s - the 10 critical technologies of the future. Of those 10, we'd already lost three and it was predicted we were going to lose four more to Japan and Germany. That didn't happen. In fact, we regained our lead across the board.
Part of the reason, not the whole reason, but part of the reason was our public and private sectors started cooperating. And I think one of the most sincere forms of flattery is the Chinese are adopting Bayh-Dole to their universities. It's recognized as the best practice. So, it has had a profound impact and it's one of the reasons why we've injected entrepreneurship and patent rights into publicly funded research rather than just giving the results away.
But the real heroes of Bayh-Dole are the entrepreneurial companies, because even though an invention was made there, there's no guarantee it's going to be a commercial success. And I'm sure as your listeners know, more times than not, things fail in development. Under Bayh-Dole, that risk is placed on the private sector. So, it's hardly a windfall... You know, our opponents try to pretend like the government is funding research and development. That is absolutely not the case.
Allen (09:46.0000 - 10:27.0000)
And the final thing I'll say is about 75% of government-funded inventions from university and federal laboratories go to small companies. They're the ones that are really driving our innovation. That's really one of the keys of the American economy, that unlike Japan and Europe, we're driven by small high-tech companies or high-risk companies across the board. But those people are betting their shirts and many times they lose their shirts.
So again, Bayh-Dole is not a get-rich-quick scheme, but it does inject the incentives of entrepreneurship into government-funded research. And it's actually one of the reasons why universities now have become centers of entrepreneurship and why you have companies spinning out of universities, not just people with degrees.
Giachino (10:27.0479 - 11:03.0539)
Our guest is Joseph Allen, Executive Director of the Bayh-Dole Coalition. You can follow his work and the work of the coalition at BayhDoleCoalition.org. Joe, anyone who follows these issues and cares about IP protections is aware of the fact that our lead, the lead you talked about that that we held for so long, is slipping - when it comes to investment, when it comes to innovation. So, what has changed over the last 40 years, or maybe we could even target it to just the last four years?
Allen (11:03.0549 - 12:24.0000)
Well, I'd say a couple of things have actually changed. One of which is, Bayh-Dole didn't just happen in isolation. Also ... three things happened at the same time as Bayh-Dole, which really jump started the innovation revolution I talked about.
One of which was Bayh-Dole, which again gave authorities and incentives and got the government out of the way for government-funded research. The second thing was the Chakrabarty decision by the Supreme Court that said that man-made organisms were actually patentable. And the third thing was - I also was fortunate enough to work, two years after Bayh-Dole passed - on creating a thing called the Court of Appeals for the Federal Circuit, which at the time restored confidence in the patent system. Because before then, various circuit courts had developed their own standards of patentability, and the industry just had no confidence that the patent system was reliable.
And unfortunately, the last two pillars have really eroded, because our patent system, I would say, has really been weakened. I think people now really wonder what the value of it is. You've had a lot of Supreme Court decisions kind of weakening the patent system. And I think that's one thing that... if you're an entrepreneur, particularly a small company, if you can't protect your investment and if you can't stop a copier, why are you spending your time doing it?
Allen (12:24.0000 - 13:16.0122)
And I think, that's why back to why we started the Bayh-Dole Coalition: we've got to remind people of the basic stuff. And as you probably know... the patent system actually arose from the Constitution - Article I, Section 8. I mean, it wasn't a byproduct. They saw back in the 18th century, if the U.S. was really going to be more than a third-world country supplying raw products to England, we had to be doing our own innovation. Alexander Hamilton certainly got that.
And I think, in a lot of ways, we've gotten away from that. Rather than focus on the needs of entrepreneurs, we've gotten into this thing where entrepreneurs are vilified, companies are vilified. Again, you really can't have innovation if you're not going to protect and reward your entrepreneurs that are taking all the risk.
Allen (13:16.0132 - 13:53.0320)
I'm old enough now to have been around the cycle once and we're basically sort of doing the same kind of thing we were doing when I worked on Senator Bayh's staff. We're trying to educate people, alert people that there's a reason why we became so successful. But if we forget those lessons, we're going to go right back to where we were back in the late 1970s and 1980s when the bottom looked like it was falling out of the U.S. economy. You know, our foreign competitors are playing for real. This can be a win-lose game if you're not on your Ps and Qs. And unfortunately, I think in a lot of ways, we've taken our eye off the ball.
Giachino (13:53.0650 - 14:16.0119)
So one place where a lot of folks have set their sights, and I think it's admirable and certainly necessary, but there's been a lot of discussion, work and investment going on with respect to green technology and sustainability. What role does the Bayh-Dole Act play to achieving the world's sustainability goals? What role do you see it playing there?
Allen (14:16.0130 - 15:24.0560)
Well, again, Bayh-Dole applies across all agencies. It's not technology specific. So, any invention made with government funding from any agency is going to fall under Bayh-Dole.
And I think if you look at environmental technologies and energy technologies, it's another great example. You're going to have the government funding, early-stage research - maybe a little bit further down the line there - but then it's going to come up to an entrepreneur to really turn that into a company and actually make it into a product that's actually useful. And that's really why I think the private sector is much better at doing that than people in the public sector are. They understand money, they understand markets, they understand risk. So, even if you look at environmental technologies and even energy technologies, it's again characterized by small companies taking risks that a large dominant company probably won't take.
Now, maybe they're going to get acquired later, maybe they're going to become a big company themselves. But the thing that makes the U.S. economy different from everyone else in the world is, we don't have the government sort of directing commercialization. They can provide incentives to tax systems and things like that, but it turns up to an entrepreneur to really do that.
Allen (15:24.0565 - 16:37.0020)
What the Bayh-Dole Act does is says, okay, here's the rules. The rules are understandable, they've been in place for 40 years, and if you play by the rules and you do the things you're supposed to under Bayh-Dole - again, license a small company if possible, make it in the United States if possible, - then in fact, you can be rewarded.
Now, if we start undermining that and say the rules aren't predictable - and there are some people trying to do that right now - then no entrepreneur is going to do that. So, it really comes back to, in clean technology or any other technology, can I protect my investment? Is it worth my time to spend 10 years of my life, maybe mortgage my house, borrow everything I can, is it worth that to take a shot at producing a new technology? Can I keep the rewards for it? If the answer is yes, people will do it. If the answer is no or maybe, they're going to find something else to do. And I think that's one of the problems we're having right now is a lot of entrepreneurs are wondering, is the system really safe and predictable or is it arbitrary. If I'm successful, can people just come in and say, I don't like what you did. I don't like the price of it and just take it away from you. You know, then you're sort of on the road to Venezuela.
Giachino (16:37.0340 - 17:03.0909)
What about the march-in provision that's included in the Bayh-Dole Act that allows the federal government to mandate the relicensing of federally funded patents under four narrow circumstances. We are certainly seeing, right now, some folks have set their sights on those march-in provisions and are wanting to expand the government's ability to exercise them well beyond what was ever intended. Can you share your thoughts on that?
Allen (17:03.0919 - 18:05.0150)
Absolutely. In fact, that's really what I've been referring to when I talked about people undermining the system. When we passed Bayh-Dole in 1980, universities had never really managed technologies before for the simple reason, they were taken away from them. So, as I mentioned before, Bayh-Dole gives incentives and authorities to universities, but it also has some requirements to make sure that the system is working. Because again, the purpose of Bayh-Dole is to make sure that, if at all possible, a government-funded intervention is being commercialized and turned into something useful for the public.
So we have things called march-in rights and that's where, under specific circumstances, if the government sees that the commercialization is not happening in good faith or if people have violated the provisions of Bayh-Dole, it can march in and force the university to license to other people. One of the big concerns of Congress when we passed Bayh-Dole was we were concerned that a dominant company may license a university technology not to commercialize it but to suppress it. For example, if it threatened an existing product.
Allen (18:05.0155 - 19:15.0115)
So the first march-in - there's four march-in triggers, as you said - the first one is to make sure, and this one applies only to the university, to make sure that they're trying to bring it to practical application. In other words, that good faith efforts are being made to turn it into a product. And also to make sure it's available on reasonable terms.
Now, when we said reasonable terms, we're talking about the university is licensing it on terms that are conducive to commercialization. In other words, you can't charge a million dollars upfront or require the company developing it to hire your son or daughter as the CEO or to build your new football stadium. That's not reasonable. So that's what the first that's what the first trigger means.
The other two are to make sure that, if the company is commercializing it, they can meet the needs of a national health or a national security emergency.
And the fourth one is, as I mentioned before. people get a preference for licensing a university invention if they say they're going to make it in the United States. So, if you violate that, the government can march in. If you say you're going to make it in America and you're making it in Mexico, the government can march in and force the university to license to another person on reasonable terms.
Allen (19:15.0400 - 21:15.0306)
So for 20 years, no one had any question about how the law worked. But we do have people that don't like Bayh-Dole. And 20 years after Bayh-Dole passed, a couple of enterprising professors wrote a law review article in Tulane Law Review and they claimed they'd found a secret meaning in Bayh-Dole - that when we said that the university had to make it available on reasonable terms, that meant reasonable pricing. And Senator Bayh and Dole and myself and everyone who was involved in the law said, no, no, no, that's not how the law works. But nevertheless, again, people that don't like Bayh-Dole have filed a series of petitions against products that were commercialized saying, we don't think the price is reasonable. And they've asked the government to march in.
Every one of those has been denied, including under the Biden administration. But after they denied the last one in 2023 - and every administration, Republican and Democratic, have said that's not how the law works. But after the Biden administration denied the last march in petition in 2023 - again, holding as every other agency did, that the price control is not a factor under Bayh-Dole - they set up an interagency group to come up with a framework for using march-in rights? Part of the framework said that if a product is not available on a reasonable price, that could be the basis of marching in.
And so the Bayh-Dole coalition, venture capital people, even the generic drug industry have said, no, no, no, that would kill American innovation. There's no definition in the law, or in the framework, about ... what's a reasonable price?
So that would just turn the Bayh-Dole Act on its head, because anyone can file a march-in petition. A foreign competitor. Your brother-in-law who doesn't like you. Anyone who just wants to harass you could file a march-in petition, claiming your price isn't reasonable. Again, there's no definition of that. So you'd have to have some bureaucrat arbitrarily decide what's your reasonable price or not. So that's one of the things that would collapse Bayh-Dole overnight because it would be completely unpredictable.
Allen (21:15.0869 - 22:45.0319)
Back to our discussion, what entrepreneur is going to commercialize a new product if, in fact, once you're in the market, anybody can say, hey, I don't think your price is reasonable. Go to the Department of Agriculture and have some GS 14 decide whether or not it's a reasonable price and if they don't like it, then they can require the university to license a competitor. You know, in fact, we've had a number of venture capital people saying we would never fund a company. Who would fund a company without hanging over your head.
So that's one of the things that is one of the top priorities of the Bayh-Dole Coalition. We're hoping the framework is going to be withdrawn. It hasn't come out yet. It's been, I guess pending now for about eight months. But that would be devastating to the U.S. economy.
And it's being proposed under the guise of lowering drug prices. Ironically, the place that march-in rights would have the least impact is on drugs, because most drugs are covered by multiple patents. Maybe one or two are federally funded. So even if you marched in, you couldn't copy the drug. But it would have a devastating impact on environmental technologies, energy technologies, agriculture, because in those cases, you're going to have fewer patents and, in fact, those may be subject to march-in rights.
So again, we're really hoping the administration will think twice about this, because it's really a dumb idea. It's not based on the law. It's already having an impact. We're already having people being afraid to get into a licensing deal with this hanging over their heads.
Giachino (22:45.0599 - 23:28.0485)
Certainly sounds like one of the biggest threats to IP protection today. Thank you so much for sharing your thoughts and helping us understand why IP protection matters, why we need to keep in its current form and strength the Bayh-Dole Act.
Our guest has been Joseph Allen. Joe Allen, the Executive Director of the Bayh-Dole Coalition. Joe, thank you so much for all of your time today and educating us on the Bayh-Dole Act and the importance of this legislation. As you said, perhaps the most, or the Economist Technology Quarterly said, perhaps the most inspired piece of legislation to be enacted in America over the past half century. We appreciate your time.
Joe, any parting thoughts?
Allen (23:28.0495 - 23:42.0381)
No, I've enjoyed talking with you very much and if people want to learn more about the Bayh-Dole Coalition, it's BayhDoleCoalition.org. There's a lot of information there and I've enjoyed talking to you. So thank you very much for inviting me.
Giachino (23:42.0391 - 23:51.0199)
Thank you. We'll have you back again soon. I appreciate it. We'll be watching what happens with this framework. Hopefully it will die a quick death. Regardless, we'd love to have you back with us. Thanks, Joe.