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Ashley Stevens on the Enactment of Bayh-Dole

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Ashley Stevens on the Enactment of Bayh-Dole 3B2 Version Number 7.51a/W (May 2 2001) {Kluwer}Jott/JOTT 29 1/5254243.3d Date: 13/11/03 Time 16:03pm Page 93 of 99 The Enactment of Bayh–Dole Ashley J. Stevens ABSTRACT. The Bayh–Dole Act of 1980 reversed 35 years reforms of some of its provisions (Nelson et al., of public policy and gave universities and small businesses the 2001). unfettered right to own inventions that resulted from federally funded research. The Act was opposed by the Carter Given Bayh–Dole’s success, it is surprising that administration, which had a different view of how to utilize there is not more general awareness of how fragile the results of federally funded research to drive economic the coalition was that passed Bayh–Dole and development. It is not widely appreciated that the bill had died indeed that it almost didn’t get passed at all. in the regular sessions of the 96th Congress and was only passed Bayh–Dole was passed in a lame duck session of into law in a lame duck session necessitated to pass the budget. Only a magnanimous gesture of respect for Senator Birch Bayh, Congress thanks to an incredible example of who had been defeated in the 1980 election, on the part of Senatorial courtesy and barely survived a pocket Senator Russell Long allowed the bill to receive the unanimous veto by Jimmy Carter, who signed it into law on consent needed to pass a bill in lame duck session. This article the last day possible. lays out the roles of the key congressional staffers who forged Joseph Allen, currently the President of the this historic compromise and the last minute maneuvers needed to obtain President Carter’s signature. National Technology Transfer Center in Wheel- ing, West Virginia was at the center of the drama. JEL Classification: O Economic development, technological In 1974, Joe was 24 years old and got his first job change, and growth. O3 Technological change. O31 Innovation and invention: Processes and incentives. O32 Management of on Capitol Hill on the staff of Senator John technological innovation and R&D Tunney (D., CA). Tunney was defeated in the 1976 election and Senator Birch Bayh (D., IN) took over Tunney’s Subcommittee of the Senate Judi- A recent article in the Economist (2002) said: ciary Committee. Allen joined Bayh’s Subcommit- tee staff. PossiblyUncorrected the most inspired piece of legislation to be ProofComing out of World War II, the United States enacted in America over the past half-century was the was unchallenged in its political and economic Bayh–Dole act of 1980. leadershipof the free world. However, by the end It is unlikely that anyone in the technology of the 1970s it was clear that U.S. industry had lost transfer community would dispute this statement, its international competitiveness to Europe and and foreign countries are now adopting the Bayh– particularly Japan. This process had started with Dole model, most recently Germany and, in the the success of the U.S. programs to rebuild its United Kingdom, Cambridge University, because Allies and former enemies and was completed by they want to replicate the high technology-led the impact of the oil shocks of the 1960s and 1970s economic development that Bayh–Dole is gener- on an economy dependent on cheap domestic ally credited with having helped create. In the energy. Examples of the loss of competitiveness United States, however, a small number within abounded, from the loss of U.S. leadershipin both academia and on Capitol Hill have expressed mature industries such as automobiles and televi- concerns about some of the consequences of sions and emerging industries such as memory Bayh–Dole, discounted its impact and advocated chips and the creation of new industries dominated by Japanese companies but based on American and European innovations such as VCR’s and Office of Technology Transfer compact discs. Community Technology Fund Boston University Stock market indices vividly quantify the swings 108 Bay State Road in relative economic power. On August 6, 1957, Boston, MA 02215 the Dow Jones Industrial Average closed at 501, Journal of Technology Transfer, 29, 93–99, 2004 # 2004 Kluwer Academic Publishers. Manufactured in The Netherlands. M11099 Kluwer Academic Publishers Journal of Technology Transfer (JOTT) Tradespools, Frome, Somerset 3B2 Version Number 7.51a/W (May 2 2001) {Kluwer}Jott/JOTT 29 1/5254243.3d Date: 13/11/03 Time 16:04pm Page 94 of 99 94 Stevens while the Nikkei Stock Average of 225 major non-exclusively licensed—the ‘‘favor everyone Tokyo stocks closed at 496. That was the last time one’’ philosophy. Realizing that the policy nulli- the Dow closed ahead of the Nikkei for almost 50 fied economic incentives for commercial develop- years. On December 29, 1989, the Nikkei peaked ment, Presidents Kennedy, Johnson and Nixon at 38,916, an astonishing fourteen times higher issued limited exceptions to this rule through than the Dow, which closed at 2,753 that day. Not Presidential policy memoranda. However, in quick until mid 2002 would the Dow again close higher succession, the federal government sued Stokely than the Nikkei. Van Campin 1965 to force the companyto As the 1970s came to a close therefore, the U.S. abandon the patents filed on Gatorade by Dr. Congress was struggling to find ways to rejuvenate Robert Cade at the University of Florida and then the U.S. economy. Three philosophies were strug- sued the University of Wisconsin to obtain title to gling for supremacy and bore an unerie resem- the anti-cancer drug, 5-flurouracil, after a secre- blance to some of the opposing philosophies that tarial coding error had attributed the purchase of had fought for supremacy in the newly indepen- $120 worth of reagents to a federal grant in a dent America. A microcosm of this debate was major project otherwise totally funded by a drug reflected in the discussion over how best to manage company. more than $75 billion a year invested in Govern- Some people had started to realize that this ment sponsored R&D: idealistic approach was inhibiting the development of promising inventions simply because the gov- . The first philosophy was a Hamiltonian belief ernment owned the rights. Norman Latker, that the solution lay with a strong central Deputy General Counsel at the Department of government, which should take charge and Health Education and Welfare had therefore actively manage these resources. In the 1970s, created Institutional Patent Agreements that this philosophy was advocated by Senator allowed universities to take title to inventions Adlai Stevenson (D., IL) and the Carter that resulted from their work under federally Administration. funded grants. However, these agreements were . The second philosophy was a Jeffersonian totally at the government’s discretion and only belief that the solution lay with the individual applied to grants from HEW. and that the best thing government could do to The momentum for a fundamental legal over- provideUncorrected incentives for success was get out of Proofhaul of federal patent policy started in Bayh’s the way of these individuals. This mantle was home state of Indiana. Purdue had made several borne by Senators Birch Bayh (D., IN) and important discoveries under grants from the Robert Dole (R., KS). Department of Energy, which didn’t issue Institu- . The third philosophy, in some ways in the tional Patent Agreements. Ralph Davis, the middle of the first two but in some ways at the Technology Transfer Manager at Purdue com- opposite apex of a triangle from them, held plained to Bayh, who asked Allen to investigate. that government could only hurt and that it Allen met with Howard Bremer, Ralph Davis and should make sure that everyone benefited Norm Latker and confirmed the problem. Coin- financially from government’s efforts; the flag cidently, Barry Leshowitz, who was on leave from bearer of this philosophy was the populist the University of Arizona as an intern on the staff Senator Russell Long (D., LA). of Senator Robert Dole (R., KS) sensitized Dole to the fact that important discoveries were being The seemingly arcane issue of government bottled upat the agencies (Etzkovitz, 2002). patent policy became a battlefield for these Agreeing to collaborate, Bayh and Dole directed competing philosophies as economic stagnation their staffs to developa bill that, because of pushed this issue to the fore. Starting after World Senatorial courtesy, was called the Dole–Bayh Bill War II, the government had been taking an in the 95th Congress with the understanding that increasingly strident position that any inventions during re-introduction in the 96th Congress it that resulted from federally funded research would be the Bayh–Dole bill. belonged to the government and would only be M11099 Kluwer Academic Publishers Journal of Technology Transfer (JOTT) Tradespools, Frome, Somerset 3B2 Version Number 7.51a/W (May 2 2001) {Kluwer}Jott/JOTT 29 1/5254243.3d Date: 13/11/03 Time 16:04pm Page 95 of 99 The Enactment of Bayh–Dole 95 Introducing the Bill to the Senate on September Two days of hearings on the bill were held on 13, 1978, Birch Bayh said: May 16 and June 6, 1979, before the Senate Judiciary Committee, pitting two heavyweight A wealth of scientific talent at American colleges and witnesses on opposite sides of the argument. universities—talent responsible for the development Arguing the case for Bayh–Dole was Elmer Staats, of numerous innovative scientific breakthroughs each Comptroller of the United States. He testified to year—is going to waste as a result of bureaucratic red the failure of non-exclusive licensing to stimulate tape and illogical government regulations . investment in early stage inventions.
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