The role of the federal government and federal spending in contributing to American innovation is an especially interesting aspect of intellectual property law.
Christine M. Matthews in Federal Support for Academic Research, June 17, 2011, Congressional Research Service, writes:
"Historically, the federal government has been the primary source of funding for basic research at colleges and universities. In FY[fiscal year]2008, the federal government provided approximately 60% of an estimated $51.9 billion of R&D funds expended by academic institutions.[National Science Foundation, “Universities Report $55 Billion in Science and Engineering R&D Spending for FY2009: Redesigned Survey to Launch in 2010,” InfoBrief, NSF10-329, September 2010, p.1. ]"Prior to 1980, university research was not commercialized and academic discoveries and inventions flowed into the public domain where they could be used by all, greatly boosting the American economy. Since Bayh-Dole, it has been a downhill slide.
On December 12, 1980, as written at AUTM.net, the Association of University Technology Managers:
"The Bayh-Dole Act (P.L. 96-517, Patent and Trademark Act Amendments of 1980) "created a uniform patent policy among the many federal agencies that fund research, enabling small businesses and non-profit organizations, including universities, to retain title to inventions made under federally-funded research programs."Essentially, the federal government by Bayh-Dole gave up its intellectual property rights to research that the taxpayers were funding via federal dollars and gave those IP rights as a gift to academic institutions and private persons -- who then patented the inventions for their own profit against those same taxpayers.
The Bayh-Dole Act has been lauded in many quarters, but a critical assessment by impartial observers indicates that the positive impact of Bayh-Dole has been greatly overstated by its supporters.
As written by Annetete Lin, Sarah Sorscher, Neha Gupta, Ethan Guillen and Krista Cox in a UAEM White Paper on the Proposed Indian Bayh-Dole Analogue:
"While the Bayh-Dole Act of 1980 led to a dramatic increase in patenting and licensing of publicly funded research, there is little evidence that the legislation was necessary for or successful in accomplishing the goals which inspired its drafting. The practice of licensing at universities in the US has raised serious concerns regarding the application of similar legislation in India."See also As India Mulls Bill Modeled on Bayh-Dole, Critics Claim It May Stifle Innovation.
A more detailed view of American innovation and Bayh-Dole is presented at So AD, Sampat BN, Rai AK, Cook-Deegan R, Reichman JH, et al. 2008 Is Bayh-Dole Good for Developing Countries? Lessons from the US Experience. PLoS Biol 6(10): e262. doi:10.1371/journal.pbio.0060262, found online at
PLoS Biology: Is Bayh-Dole Good for Developing Countries? Lessons from the US Experience
where it is written:
"Throughout the 20th century, American universities were the nation's most powerful vehicles for the diffusion of basic and applied research results , which were generally made available in the public domain, where industry and other public sector researchers could use them. These activities were central to the rise of American technological success broadly and to the growth of knowledge-based industries, such as biotechnology and information technology, in particular.
Public sector research institutions also relied on generous public funding for academic research—from a highly diverse group of federal funding agencies—which grew dramatically after the Second World War, and on the availability of venture capital to foster the development of early-stage ideas . These and other unique features of the US research and development system explain much more about innovation in the US after BD [Bayh-Dole] than the rules about patenting that BD addressed.
In the pre-BD era, discoveries emanating from public research were often commercialized without patents, although academic institutions occasionally patented and licensed some of their publicly funded inventions well before BD, and these practices became increasingly common in the 1970s . Since the passage of the Act in 1980, US academic patenting, licensing, and associated revenues have steadily increased. BD accelerated this growth by clarifying ownership rules, by making these activities bureaucratically easier to administer, and by changing norms toward patenting and licensing at universities . As a result, researchers vested with key patents sometimes took advantage of exclusive licenses to start spin-off biotechnology companies. These trends, together with anecdotal accounts of “successful” commercialization, constitute the primary evidence used to support emulating BD in other countries. However, it is a mistake to interpret evidence that patents and licenses have increased as evidence that technology transfer or commercialization of university technology has increased because of BD.
Although universities can and do patent much more in the post-BD era than they did previously, neither overall trends in post-BD patenting and licensing nor individual case studies of commercialized technologies show that BD facilitated technology transfer and commercialization. Empirical research suggests that among the few academic patents and licenses that resulted in commercial products, a significant share (including some of the most prominent revenue generators) could have been effectively transferred by being placed in the public domain or licensed nonexclusively [6,18].
Another motivation for BD-type legislation is to generate licensing revenues for public sector research institutions. In the US, patents are indeed a source of revenues for some universities, but aggregate revenues are small. In 2006, US universities, hospitals, and research institutions derived US$1.85 billion from technology licensing compared to US$43.58 billion from federal, state, and industry funders that same year , which accounts for less than 5% of total academic research dollars. Moreover, revenues were highly concentrated at a few successful universities that patented “blockbuster” inventions . [emphasis added by LawPundit]
A recent econometric analysis using data on academic licensing revenues from 1998 to 2002 suggests that, after subtracting the costs of patent management, net revenues earned by US universities from patent licensing were “on average, quite modest” nearly three decades after BD took effect. This study concludes that “universities should form a more realistic perspective of the possible economic returns from patenting and licensing activities” . Similarly, the head of the technology licensing office at MIT (and former President of the Association of University Technology Managers) notes that “the direct economic impact of technology licensing on the universities themselves has been relatively small (a surprise to many who believed that royalties could compensate for declining federal support of research)… [M]ost university licensing offices barely break even” .
It is thus misleading to use data about the growth of academic patents, licenses, and licensing revenues as evidence that BD facilitated commercialization in the US. And it is little more than a leap of faith to conclude that similar legislation would automatically promote commercialization and technology transfer in other, very different, socioeconomic contexts.
[T]he present impetus for BD-type legislation in developing countries is fueled by overstated and misleading claims about the economic impact of the Act in the US, which may lead developing countries to expect far more than they are likely to receive. Moreover, political capital expended on rules of patent ownership may detract from more important policies to support science and technology, especially the need for public funding of research. Given the low level of public funding for research in many developing countries, for example, the focus on royalty returns at the expense of public goods may be misplaced . "Today, we are faced with a federal government in the United States that is essentially bankrupt because of the inequality of income and because of reduced taxation for the increasingly smaller percentage of the population who increasingly have more of that income and who increasingly are hoarding more of the nation's wealth, while paying fewer and fewer taxes.
Those same people in America who have the wealth are unwilling to pay the taxes to keep the country afloat.
When we add to that development the fact of legislation such as Bayh-Dole which has been giving away the company store to private persons who now are milking the public for every penny they have through the ill-conceived patent system of the USA, then it is small wonder that the federal government has no money.
You can not give away the "company" assets and hope to survive.
Worse, Bayh-Dole has corrupted universities and unimpeded inquiry by turning them into avenues for private commercialization of taxpayer-funded research directed at private profit objectives. Janet Rae-Dupree at the New York Times in When Academia Puts Profit Ahead of Wonder writes:
"In trying to power the innovation economy, we have turned America’s universities into cutthroat business competitors, zealously guarding the very innovations we so desperately want behind a hopelessly tangled web of patents and royalty licenses."