By Natalie Derzko, Of Counsel, and Kassandra Maldonado, an Associate, with Covington & Burling LLP in the firm’s Washington, DC office.
INTRODUCTION
The Bayh-Dole Act’s (“Bayh-Dole” or the “Act”) impact on U.S. innovation has been so meaningful as to lead some to opine that the Act is “[p]ossibly the most inspired piece of legislation to be enacted in America” since the 1950s. Innovation’s Golden Goose, The Economist, Dec. 14, 2002. Bayh-Dole fundamentally changed the nature of technology transfer in the United States by shifting the paradigm of ownership of Bayh-Dole inventions to the university or small business that did the actual inventing, rather than providing for funding agencies to obtain ownership. This immensely effective change on technology transfer programs at research institutions has significantly increased the licensing of early-stage research to commercial entities that have the knowledge and resources required to transform research into market-ready products that span across many sectors.
Bayh-Dole has been both praised and criticized. The expansion and success of the biopharmaceutical industry and increasing concerns over the cost of U.S. healthcare and drug spending has heightened these contrasting views. Innovators and economists argue that the Act works exactly as intended by encouraging private industry to partner with public or publicly funded institutions to ensure that inventions make it to the American marketplace, increasing both technological innovation and economic development. Some researchers and policy commenters argue that the insertion of commercial interests into academic research and development creates inevitable conflicts that threaten to insert bias into the research process. Other policy makers focused on the cost of healthcare and prescription medicines argue that the taxpayers who fund research grants to academic institutions should not have to pay for inventions resulting from such early investment, and state that the government should retain, and use, greater “march-in” rights in resulting inventions for the benefit of the public.
There are differing views among academics, scientists, and policy makers on the legislative purpose of the Bayh-Dole Act and the scope to which is applies. Lawmakers and drug-pricing activists concerned over the cost of prescription drugs have argued that Section 203 of the Bayh-Dole Act can be exercised when an invention subject to the Bayh-Dole Act needs to be practiced in connection with a product that is considered too expensive. Section 203 provides the government the right to “march-in” on the inventor’s exclusive right to her invention and issue a non-exclusive, partially exclusive, or exclusive license in exceptional circumstances. However, the Act does not mention price in its bases for march-in, leaving those with knowledge of the legislative history to explain that the Act’s requirement for benefits of the Bayh-Dole invention to be “available to the public on reasonable terms,” 35 U.S.C. §§ 201(f) and 203(a)(1), was never intended to cover the price of the invention. Birch Bayh, Statement of Senator Birch Bayh to the National Institutes of Health at 3 (May 15, 2004).
The purpose of this Contemporary Legal Note is to examine the Bayh-Dole Act and the “march-in rights” it grants to the government in limited situations. To do so, it will examine the goals and purposes of the Act as stated within the legislative history, and the language of the Act itself as it lays out the rights and obligations of stakeholders.
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