Giachino (00:05.0039 - 00:30.0620)
Welcome to IP Protection Matters. I'm your host, Renee Giachino. Today, we are joined by Dr Stephen Susalka, Chief Executive Officer of AUTM.
We will be talking today about how the development of academic research and intellectual property protection afforded to those works changes the world and drives innovation forward. Dr. Susalka, welcome to IP Protection Matters.
Susalka (00:30.0770 - 00:32.0619)
Thanks for having me, Renee. Looking forward to it.
Giachino (00:32.0819 - 00:36.0799)
Can you please share with us the mission and history of AUTM?
Susalka (00:36.0939 - 01:49.0940)
Sure, happy to do that. Let's start with the mission. It's a good place to jump off. So AUTM has a very simple mission, and that is to grow and advance technology transfer and knowledge exchange globally. Many of your listeners might know what technology transfer is, and others might not. However, all of your readers have experienced it.
Whether you had that Honeycrisp apple at lunch yesterday that came from the University of Minnesota, or you had a family member that had laser cataract surgery, or you had seasonal allergies and took Allegra that came from Georgetown, those are all examples of successful technology transfer. So if I take a step back, our organization is focused on supporting those technology transfer professionals that sit in universities, hospitals, and research institutions across the country that are responsible for taking that early stage innovation that arises, sometimes coming out of federal funding, and turning that into the next product or service.
As you can imagine, the University of Minnesota does not sell Honeycrisp apples, but they've identified a company that can advance that further and actually turn that into the product you see on the grocery shelves today.
Giachino (01:50.0589 - 02:32.0389)
A lot of the work that is done through these universities comes in partnership obviously through this tech transfer community. It's the relationships that have developed between the industry and the universities. That I understand is in large part due to the Bayh-Dole Act, which was a bipartisan legislation that was passed now four decades ago. It's been very critical to the innovation, job, and economic growth in the United States.
Can you share with us what you believe to be the impetus for this important legislation? And what it has meant in terms of the economic growth and job growth in the United States?
Susalka (02:32.0750 - 05:35.0369)
Sure, happy to. Maybe to answer that question, let's go back in the “wayback machine.” Prior to 1980, the majority of research funding, as it is today, actually [came] from the federal government. When inventions were developed on campuses across the country, those inventions were actually owned by the federal government and so the university was responsible for disclosing that invention to the government.
The government was then responsible for advancing that and turning it into a product or service. You can imagine that wasn't that efficient. It took the inventor out of the equation. It took the inventing institution out of the equation. It actually was fairly difficult to license intellectual property from the federal government, as you can imagine. So there actually was a phrase for this prior to 1980. It was called “contaminated by federal funding.”
So what that meant was when companies were going to universities, which really are the hotbeds of innovation, and trying to identify the next invention they wanted to advance, they would ask, "hey, is this federally funded or not?" If it was federally funded, those inventions really were not being pursued by industry. So prior to 1980, you had this issue where the majority of our research was funded by the federal government, but really no inventions were actually turning into products and services that were benefiting the public.
That led to the Bayh-Dole Act, as you mentioned, [which] passed in 1980. It was bipartisan legislation by Senator Bob Dole and Senator Birch Bayh. They identified that the challenge here was that universities were cut out of the integral part of developing that invention, protecting that invention, and licensing that invention.
Again, prior to 1980, it was owned by the federal government. The government was responsible for everything. So starting in 1980 when it was passed, the Bayh-Dole Act said a number of things. But if I really boil it down, the Bayh-Dole Act said universities can now retain the rights to their inventions provided they do a number of things.
A couple of those things include [that] they share any revenues with the inventor, so that provides an incentive for the inventor. That's great. They are responsible for commercializing that invention. If they didn't have any resources or an office or any way to advance that invention, then you might as well send that to the federal government. So they were required to have a technology transfer office and they also had to provide a fully paid-up license to the federal government in the case of those federally funded inventions. That really catalyzed innovation in the United States.
Giachino (05:35.0450 - 05:47.0829)
The follow up to that, which I think you were going to get to, is to tell us the economic impact that this legislation has had then over the last 40 years.
Susalka (05:48.0089 - 07:01.0049)
It is almost too difficult to calculate because the impact of the Bayh-Dole Act really runs through every single type of technology you could think of, from medicine to medical devices to food and nutrition to animal health. You name it. What we did at AUTM along with our partner BIO is we commissioned an economic contribution report that looked over a 25-year period and said here are the inventions that were developed. What was the economic impact?
What we found was from 1996 to 2020, so that 25-year period, what we found was there was an economic impact up to $1 trillion to the U.S. GDP, another $1.9 trillion to gross output, and then 6.5 million jobs supported. The impact of advancing those innovations, one, provided societal help across the nation, and, two, provided that economic impact and job growth that is so needed.
Giachino (07:01.0709 - 07:22.0880)
We've been discussing the impact of the Bayh-Dole Act on university partnerships, partnerships with private industry, and partnerships with federal funding that comes with it. But it doesn't stop there. Let's talk about the impact that the Bayh-Dole Act has had for small businesses, these startups.
Susalka (07:23.0079 - 09:01.0898)
Startups are a huge area of growth in our business ecosystem. Let's step back for a second and talk about the inventions that arise out of universities. So they're very early stage. They are developed within the halls of that university hospital or research institute as best as possible. Ultimately, they need to be licensed to a company to advance those into that product or service we use today. There are really two routes to getting that invention out of the university into the hands of industry.
Number one, it can go to an established company - a company that exists today. That does happen often. However, often the technology is so cutting edge there literally does not exist a company or an industry to even advance that technology. In many cases what then results is a new startup company is formed. Just to give you some reference, we calculate about 950 to 1,000 startups every single year that arise out of university research institutions and hospital innovations. So that's 1,000 new startup companies every single year.
The other thing we've recognized is about 70% of those, a little over actually, reside in the home state where the invention was created. That makes a lot of sense. That startup company wants to locate right around the university that developed that invention in the first place.
Giachino (09:02.0328 - 09:50.0934)
So we're talking about more than $1 trillion in innovation that has happened over the decades. It seems that things are working really, really well. All too often we see instances where the government policymakers may get involved to try to come up with a solution to a problem that doesn't even exist.
That may be the situation that we're going to talk about next, which is that there are some politicians and regulators who have seemingly set their sights on those March-In provisions that you talked about. They want to expand the government's ability to exercise them well beyond what was ever intended. What is happening in this arena, Dr. Susalka?
Susalka (09:51.0145 - 12:59.0650)
That's a really good question. I think history is always a wonderful guide. So let me first start answering the question by giving just a little bit of history. I used to always assume that the U.S. was the epicenter of drug development. I just assumed that was the case the entire time, but it turns out prior to 1980 that was not the case. Drug development was really centered in Europe, and it was the Bayh-Dole Act that allowed those university innovations to be harnessed that really allowed us to become that powerhouse. Again, I'm just talking about one industry, but this holds true for many other industries as well.
So, that's how it used to be. We were not the head of drug development in that case. Today we are. As we go forward, there are groups that are looking at a 40 plus year old law and saying, you know what, there's a loophole in here, and that loophole is something called March-In rights. So let me just describe quickly what March-In rights are.
If we go on the “wayback machine,” and go back to 1980, one of the requirements [was] that every university that retained the rights to their inventions needed to have a tech transfer office. However, at that time there were about a dozen tech transfer offices, not the hundreds you see today. And it made a lot of sense. There really were no inventions to license because the majority of them were federally funded back then.
So one of the concerns that the senators had was, well, maybe we're going to get into a situation where the university is going to make some poor decisions in licensing and those inventions are not going to come to market. And so to prevent that from happening, they created these March-In rights. These March-In rights are four very specific circumstances where the government can come in to the university who might have licensed that invention to somebody else and say, you know what, you guys have violated one of these four circumstances and we are taking the rights back from you because you did a poor job.
I will say that petitions for March-In have been issued about nine times so far. And each one, whether it was a Republican or a Democratic administration, was found not to be valid and March-In has not actually been exercised. One of the things I do want to say about that is I have airbags in my car. But the fact that the airbags have never deployed in my car does not mean they don't work. It means I'm a safe driver. And that's exactly how I view the March-In rights provisions in the Bayh-Dole Act. They are that airbag that should things go wrong, they can be implemented, but fortunately our really talented tech transfer professionals have not needed to have that implemented.
Giachino (13:00.0000 - 13:37.0789)
Let's go back to the discussion of drug development. As you mentioned, that is only one piece of American innovation. But a critically important one, obviously, and one that, as you said - the epicenter of drug development - has made it to the United States thanks in large part to the Bayh-Dole Act.
Critics claim that using March-In rights as a price control mechanism will lower drug costs in America, which is obviously a great goal for all of us to have. In your opinion, is that a fact or myth?
Susalka (13:38.0030 - 17:53.0969)
That is absolutely a myth. It's a myth on multiple different levels. So let's kind of start from the beginning. Number one, the law does not say that. I don't know if you can't see my air quotes, but the interpretation of the March-In rights provisions of the Bayh-Dole Act kind of showed up about 25 years ago. So a good couple of decades into the Bayh-Dole Act, and there was this thought that March-In could be used to drive down drug prices.
And so if drug prices were too high, the government could "march in," grab the drug from the existing company that's selling it, and provide it to some other company to sell it. This is a myth of using March-In rights. However, one, the law doesn't actually allow for that, and second, this was refuted by Senators Bayh and Dole specifically.
In fact, I'm going to read three sentences. So this was a Washington Post article that came out after this new interpretation of March-In came out. Their quote said “Bayh-Dole did not intend that government set prices on resulting products. The law makes no reference to a reasonable price that should be dictated by the government. This omission was intentional.” So this was actually thought about back in the 1980. However, it was dismissed. So you asked me if it's a fact or fiction. I told you it was fiction. I just gave you two reasons. One, the law doesn't support it. Two, the intent of the law, as explained by the authors of the law, also doesn’t support it.
The third thing is, even if you could implement March-In rights, out of the 350+ drugs that were looked at recently, you could only technically March-In on five. So even if you could do it, which is a terrible idea, and I'll get into why in a second, it actually would only affect about five drugs on the market. So that's not good.
Then I also mentioned why we are really concerned about inappropriate use of March-In, and that is because of the key concern of predictability. So innovations have a decades-long time cycle, and prediction and predictability are absolutely critical for a company to be willing to invest the time, money, and resources in developing that product into that service of tomorrow or solution of tomorrow. If there is this unclear, unsupported by law or intent reimagining of what March-In says, all of a sudden those companies that would have invested time and energy are thinking I'm a little concerned that this can be yanked away from me.
I'll give sort of an example of this. Imagine you bought a piece of land from a university, and you had a deed for that land. Call that deed the patent. And you decide, I'm going to build a two-story colonial house on this. I'm going to have a two-car garage. You're going to put in a swimming pool, the whole nine yards. You invest all that time and money. A little later, after you do all that stuff, the government comes in and says, you know what this house is a little too high in price, and I'm just taking the deed for the house. Would you ever invest in buying land and then building on that land again? And again, my analogy is those companies license that intellectual property, the land, through the deed, and then develop that further to put that house and the pool on. And so this would have a chilling effect on the innovation ecosystem. There were thousands of comments about this when this was highlighted earlier.
Giachino (17:54.0479 - 18:03.0920)
Where does that proposed rulemaking/legislation stand right now? Is it hopefully DOA at this point - dead on arrival?
Susalka (18:04.0170 - 18:46.0719)
Honestly, it's sort of up in the air right now. Number one, there is no legislation that's pending, which is great. There have been potential regulations or under the past administration, March-In rights guidelines that were provided that tried to breathe life into this false interpretation of the Bayh-Dole Act.
So everything is kind of just in limbo right now. Nothing is moving forward and I certainly hope that nothing does move forward for the sake of us all. In that it will chill university innovation and we'll be going in the wrong direction.
Giachino (18:47.0010 - 18:56.0969)
The impact of that, Dr. Susalka, extends beyond just the innovation of new drugs and medical technologies, isn't that right?
Susalka (18:57.0219 - 20:20.0250)
That's exactly right, yes. So we focus on drug pricing and for reasons that I understand and just to be super clear, our professionals are responsible for licensing the intellectual property to those companies that turn those inventions into products and services. We do not set drugs pricing or anything like that, but many of the drugs you use today actually arose from university innovations.
So I think I mentioned Allegra for seasonal allergies before. If any of your listeners are taking Lyrica for nerve pain or fibromyalgia or certain types of seizures, that actually came out of Northwestern University and there are literally hundreds of these innovations or drugs that have arisen.
That being said, your point is well taken, and that is any type of reimagining what the March-In rights provision says would actually affect every single class of innovations. It wouldn't be limited to drugs. It would be absolutely everything from AI to retractable seatbelts, [which] are actually a university invention. So you have these inventions that really span every aspect of our lives that would be impacted by such a foolish proposal.
Giachino (20:20.0599 - 21:14.0989)
Our guest is Dr. Stephen Susalka, Chief Executive Officer of AUTM. AUTM.net is where you can follow their wonderful work.
Let me go back to the technology transfers and what that actually means on a university campus. On your website, you highlight some of the benefits that include the university's ability to retain entrepreneurial faculty, to attract outstanding graduate students, to contribute to the institution's reputation for innovation, to augment the research programs through the interaction with the private sector, and then enhance its reputation for providing highly trained students for those workforces.
So when these universities realize the revenue from this licensing, how is that then used to further augment what is happening on the campus?
Susalka (21:15.0359 - 23:01.0949)
So one of the things we say is tech transfer is about impact, not income. Now yes, sometimes income is generated by the university, and when that is generated, it is, as I mentioned earlier, shared in part with the inventors as well as fed back into the research ecosystem to develop the next generation of innovations. So that money is reinvested, but as I mentioned, it's about impact and that impact can be seen in many different areas.
You've mentioned a couple of them already. Whether that's extended recognition of a university. So Gatorade, where did that come from? University of Florida - the Florida Gators. That is just one example. The blood thinner Coumadin. If any of your listeners have had that, it's also known by the name Warfarin. That actually came from the Wisconsin Alumni Research Foundation or WARF.
So these are examples of reputation enhancers that show, wow, that university is really creating impactful cutting-edge science. So that's another example of impact. You also mentioned this idea of attracting top scientists. When I was in the tech transfer office at a couple of universities, we actually used to be interviewed by the potential incoming faculty. And the reason we were interviewed is those were brilliant faculty, and they wanted to know as they continued in their research if they developed something that could be commercialized, was it in good hands? And so that's another example of the importance of strong technology transfer.
Giachino (23:02.0479 - 23:20.0390)
So we've talked about the importance of strong technology transfer, the importance of strong, reliable, predictable intellectual property rights. Let me close by asking you, what do you believe to be the biggest threats to IP protection today?
Susalka (23:21.0170 - 25:08.0010)
Great question. So, I will go back to what I said earlier, which is one of the most important things for the entire innovation ecosystem is a strong and predictable intellectual property system. There have been some challenges recently, whether that is with Inter Partes Review (IPR), which are another way to challenge a patent under a completely different review process.
Now, fortunately, the current Director has developed some new regulations that are enhancing that and preventing that from occurring. So I would say strong and predictable intellectual property rights. That also includes this recognition that a patent really gives you one right, and that is to exclude others. But there have been some Supreme Court cases that have made it virtually impossible to keep someone else from using your invention. So allowing you the ability to provide injunctions. I think that is another challenge that our IP ecosystem has. If you have a right that you can't enforce, that's pretty tricky.
So again, a combination of strong and predictable IP rights. You need to know the rules of the game. It is going to take years to develop. It's going to span administrations. It's going to span university leadership changes. So having strong and predictable rights that you know are going to be the same 10, 15, 20 years down the road is important. And then addressing this huge challenge of having a patent yet not being able to enforce it.
Giachino (25:08.0390 - 25:37.0359)
Well, Dr. Susalka, we thank you so much for your time today, for the wonderful work that AUTM is doing in order to continue for us to enjoy the growth in these technology transfer programs, and what it means to bring this innovation to our lives every single day.
Again, we applaud the work. You can follow their work at AUTM.net. Thank you again. Dr. Stephen Susalka has been our guest here today on IP Protection Matters. Have a wonderful afternoon.
Susalka (25:37.0359 - 25:38.0020)
Thank you for having me.