The federal government may soon finalize guidance that could weaken ownership of intellectual property throughout the U.S. economy. This would affect a huge swathe of industries, among them biotechnology, clean energy, agriculture, and defense.
More specifically, the new guidance would cause companies large and small, as well as their investors, to balk at licensing and developing promising new technologies -- with severe consequences for American innovation.
The problem is that the guidance would bring deep uncertainty to the question of who controls patent rights. Shepherding a promising idea from lab to marketplace is already a daunting task, as I know firsthand. My consulting firm, Fuentek, helps universities, non-profit research institutions, and companies turn early-stage discoveries into real-world inventions -- a laborious and risky process known as "tech transfer." We've worked with more than 5,000 technologies in a wide range of industries and facilitated more than 500 tech transfer agreements.
The Bayh-Dole Act of 1980 invented tech transfer as we know it today, and has since created more than six million jobs and added nearly $2 trillion to U.S. gross industrial output. Before the law passed, the government kept any patents resulting from federally funded research at universities. But government offices had no expertise in licensing patents, nor any incentive to do so. Of the 28,000 patents Washington held in 1980, less than 5% had been licensed for further development. The rest languished. Taxpayers got little in return for their investment.
Bayh-Dole changed the equation by allowing universities to retain patents on their work, which enabled them to license the rights to private companies. The universities were also able to share their expertise with the new licensees, a critical part of successful product development. Tech transfer was born.
Now, the proposed guidance would reinterpret the section of Bayh-Dole that allows the government to "march in," to take patents from one company, and reassign them to another. By law, this can only happen if the licensee has failed to develop a product based on the patent. But under the new proposal, the government could march in if it decided a product's price was unreasonable. Though the original licensee took on the risk and expense of developing the new invention, rival firms would be able to copy it on the cheap.
The stated purpose of the proposed policy is to lower drug prices. But while I share that goal, the proposal fails to consider the risk and cost of bringing the first pill to market.
Most technologies coming out of university labs are nascent. Converting an initial breakthrough into a usable medicine requires a lengthy process of development, testing, and certification -- and most projects that enter this pipeline never come to fruition. Any successful medicine has to recoup both its own development expenses and those of the 10 that failed before it. If we don’t allow companies to earn back these costs, they'll simply stop investing in new drugs. We would all be worse off. Even new generic drugs (brought to market cheaply after the patent expires) would not exist for our benefit.
For many years, third parties have petitioned the government to march in on high-priced drugs. Both Democratic and Republican administrations have declined to do so, because the law doesn't permit march-in on the basis of price.
If the government decides to upend decades of legislative precedent by moving forward with its march-in proposal, the effect will be to sharply curtail drug development. The broader impact will be even worse, because the guidance isn't industry-specific. It would apply to all fields in which government grants have contributed to new discoveries -- in other words, all high-tech sectors.
And anyone would be able to petition the government to march in. A corporation could demand that the government take patents from a smaller competitor, promising to produce the same product at a lower cost without the upfront investment. Or a foreign company, seeking access to American technology, could file a march-in petition by alleging that the price set by the U.S. firm was unwarranted.
Additionally, reinterpreting the law to allow march-in based on price wouldn't even lower most drug costs for consumers. That's because the vast majority of drugs on the market -- some 98% of those approved by the FDA between 1985 and 2022 -- wouldn't be eligible for march-in, because they're not based exclusively on patents resulting from federally funded research.
In short, if the proposed guidance is finalized, the United States will see an alarming loss of innovation as companies retreat from our most cutting-edge sectors -- with little or no upside. For the sake of our innovation-based economy, I urge the administration to reconsider.
Laura Schoppe is President of Fuentek, a Research Triangle-based consulting firm that helps universities, non-profit research institutions, and companies turn early-stage discoveries into real-world inventions. She has worked in the technology transfer field for 30 years.
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