"Possibly the most inspired piece of legislation to be enacted in America over the past half-century was the Bayh-Dole Act of 1980."
THE ECONOMIST

Bayh-Dole +25

In 1980, Congress passed the bill that would trigger commercialization of discoveries made in publicly funded laboratories. The act has since been amended to broaden its scope. What has happened since 1980? Senators Birch Bayh and Bob Dole, the authors, offer their judgment.

Remarkable Benefits, Remarkable Breakthroughs
BY BIRCH BAYH
(portrait of Birch Bayh)

Since the Enactment of the University Small Business Patent Procedure Act (P.L. 96-517), also known as the Bayh-Dole Act, in 1980, I have periodically been asked to provide some thoughts on the Act and how successful it has been in achieving the goals we had in drafting it. As I tracked its progress over the years I have been pleasantly surprised by how well Bayh-Dole has turned out. An editorial in the December 2002 issue of The Economist found that,
"Possibly the most inspired piece of legislation to be enacted in America over the past half-century was the Bayh- Dole Act of 1980. Together with amendments in 1984 and augmentation in 1986, this unlocked all the inventions and discoveries that had been made in laboratories throughout

Please see BAYH, Page 29

Effective Legislation Without a High Price tag
BY BOB DOLE
(portrait of Bob Dole)

ONE OF THE GREAT rewards of a life spent in politics is the ability to reflect on legislative successes and, if you are lucky, the positive impact they have had. One of those successes for me is the Bayh-Dole Act of 1980. This is a law that strives to make sure that innovative new products that emerge from federally funded research in our nation's universities make it into the marketplace. When we drafted this legislation, I do not think we had any idea of the impact it would have over time. I give Senator Bayh much of the credit as he was the leading proponent of this legislation.
A long time before Bayh-Dole, the scientific accomplishment of the Manhattan Project demonstrated the contribution that university research can make to national defense.

Please see DOLE, Page 33

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BAYH, from Page 12

the United States with the help of taxpayers' money. More than anything this single policy measure helped to reverse America's precipitous slide into industrial irrelevance."
It has been a long journey for Bayh-Dole from inspiration to The Economist. In 1977 as chairman of the Senate Subcommittee on the Constitution, I began a series of hearings and investigations into the nation's patent laws. One of the issues the subcommittee examined concerned government patent policies regarding federally funded research and development and its impact on innovation and commercial utilization of inventions resulting from this use of taxpayer dollars.

THE GOVERNMENT POLICY at that time generally retained rights to any intellectual property arising from federally funded research and provided for only nonexclusive licenses to industry. The theory underlying this policy was that any economic rewards resulting from federally funded research and development should be largely captured by the government, for the benefit of the taxpayers, and generally not shared on an exclusive basis with non-governmental entities. However, in the final analysis, the result of the policy was that there was absolutely no incentive to develop government financed inventions for the commercial market. Consequently, any discoveries made through this government-financed research simply sat on the shelf gathering dust. By 1978, the federal government owned 28,000 patents but only 5 percent had ever been licensed.

This policy was not only wasting tax dollars, but it had a very negative impact on U.S. technological innovation and ultimately undercut American competitiveness. For several years, the number of patentable inventions made under federally supported research had been in decline. American productivity was growing at a much slower rate than that of many of our world competitors. Simply put, American efforts at innovation, in which we were once the undisputed world leader, were stagnating and falling behind those of other nations.

The Bayh-Dole Act was designed to inject the incentive of the free market into what had become a slumbering

"The Bayh-Dole Act has worked remarkably well in achieving the goals we had in mind for it."

U.S. patent system. It permitted universities and small businesses to retain patent rights to inventions developed with the support of the federal government so that technology could be licensed to private companies and new products could be brought to the marketplace. The legislation sought to strike a careful balance between the rights of the government to use inventions arising out of research that the government helped to support, and the equally important right of the public to see that the inventions realized their full potential in the marketplace and actually reached the people that they were intended to benefit.

All indications are that since its enactment in 1980, the Bayh-Dole Act has worked remarkably well in achieving the goals we had in mind for it. It has succeeded in moving patents off the shelves of the federal bureaucracy and into the marketplace. While prior to 1981 fewer than 150 patents per year were issued to universities, a decade later almost 1,600 patents were being issued to universities each year. By 2003, 3,450 patents were issued to these institutions.

The annual license survey conducted by the Association of University Technology Managers shows that this surge of economic development and innovation unleashed by the act continues and, in fact, is accelerating. An economic impact model developed by the association shows that in 1995, $21 billion of economic activity and over 180,000 jobs were attributable to academic licenses. By 1999 the survey showed $40.9 billion of economic activeity could be attributed to the results of academic licensing, supporting 270,900 jobs, and directly contributing about $5 billion in tax revenues to federal, state and local governments.

IT SHOULD ALSO BE NOTED that while Bayh-Dole has produced remarkable economic benefits, it has also helped produce significant breakthroughs in important product development. In August of 2001, the National Institute of Health delivered a report to Congress titled A Plan to Assure Protection of Taxpayers Interest. The report concluded:

"It is impossible to overstate the achievements of the global macroeconomic impact of taxpayer-supported biomedical research. Federal funded biomedical research, aided by the economic incentives of Bayh-Dole, has created the scientific capital of knowledge that fuels medical and biotechnology development. American taxpayers, whose lives have improved and extended, have been the beneficiaries of the remarkable medical advances that comes from this enterprise."

I am pleased that this relatively brief statute has had enormous impact in terms of stimulating economic activity, bringing advanced research to the marketplace and developing products of significant benefit to society. It was Abraham Lincoln who said that the patent system should work to add the "fuel of interest to the fire of genius." That is what Bayh-Dole was designed to do and that is what it continues to do. TC

BIRCH BAYH, A DEMOCRAT, REPRESENTED INDIANA IN THE U.S. SENATE FOR 18 YEARS. HE IS A PARTNER AT THE VENABLE LAW FIRM IN WASHINGTON, D.C.

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OSL, from Page 19

read the dosimeter from any compatible reader in the world.

Following their success with the OSL process for personnel dosimetry, PNNL researchers began exploring other uses for the technology, including medical equipment sterilization and food irradiation. That technology, which received an R&D 100 Award in 2000, has been licensed to Sunna Systems of Richland, Wash. TC

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One thing I might want to do is narrow this depending on what side of the deal you are on. A phrase like "and all intellectual property of every kind and nature that is furnished or disclosed by one party to the other, regardless of the means or location of disclosure" could be dangerously broad. Conceivably, broad language like this could be used as a weapon against you if the other side claims you stole their intellectual property.

The final part of this provision is somewhat standard:

"Confidential Information shall not include information which (i) is or becomes (through no improper action or inaction by the receiving party or its affiliates, agents, consultants or employees) generally available to the public, or (ii) was in the receiving party's possession or known by it prior to receipt from the disclosing party, or (iii) was rightfully disclosed to the receiving party by a third party who is not subject to a non-disclosure agreement with the disclosing party or (iv) was independently developed by the receiving party with- out use of any information of the dis closing party. "Having said that it's somewhat standard doesn't mean that I won't read it critically to see how it might apply to the deal at hand. However, for the most part, language like this is usually acceptable to both sides. TC

MARK GROSSMAN, IS AN ATTORNEY SPECIALIZING IN TECHNOLOGY LAW AT DEWITT GROSSMAN, P.L., MIAMI. IF YOU HAVE ANY COMMENTS, PLEASE SEND THEM TO MGROSSMAN@DEWITTGROSSMAN.COM.
Disclaimer: The advice given in this column should not be considered legal advice. This column only provides general educational information. @ 2005 Mark Grossman.

DOLE, from Page 12

Scientific advisors to President Truman emphasized the value of university research as a vehicle for enhancing the economy and the health of our citizens by increasing the flow of knowledge to industry through support of basic science. From this recognition arose a path to the creation of the National Institutes of Health, the National Science Foundation, the Office of Naval Research and other agencies.

However, federal funding alone was not enough. Through the 1960s and 1970s, the federal government had a dismal track record when it came to promoting the adoption of new university-born technologies by industry. Patent policies regarding inventions made through the use of federal dollars were set by the granting agency. Inconsistent policies on the ownership of inventions and an extremely cumbersome process by which companies could license inventions from the government resulted in limited commercialization of government-funded inventions. In 1980, fewer than 5 percent of the approximately 28,000 patents held by the federal government were licensed to industry to develop commercial products.

Senator Bayh and I saw an opportunity and responded by working together to co-author the Bayh-Dole Act. The law permits small businesses and non-profits, including universities, to retain ownership of inventions made under federally funded research programs. It creates a uniform policy to encourage federally funded research to be transferred into the private sector. In return, institutions must comply with a number of requirements. The purpose was to spur the interaction between public and private research so

that the public would receive the benefits of innovative science more quickly.

We put several provisions in the Act that we thought were necessary to protect the public good. For instance, under the Act, the government retains the right to practice the invention on a royalty- free basis. In addition, the government retains what are called "march-in rights" that allow it to take steps to require that reasonable licenses be granted and commercialization takes place, either if it does not appear as though the patent holder will commercially develop the invention within a reasonable time, or if public health or safety needs could be satisfied that are not being reasonably satisfied by the patent holder.

There are more nuances to the law, but the long and short of it is that under Bayh-Dole, inventors and institutions can pursue commercialization of inventions derived from federally funded research. However, they also have a responsibility to the public to capture and develop intellectual output for the common good.

Did it work? It seems it did. Before Bayh-Dole, fewer than 250 patents were issued to universities in the United States each year. By 2002, that number had increased by almost 15 times—a growth that outpaced the overall increase in patenting during that period. Since 1980, over 4,000 new companies have been formed based on a license from an academic institution. It has been estimated that the economic benefits flowing from university licensing activities adds about $41 billion a year to the United States economy and supports hundreds of thousands of jobs. Bayh-Dole has even been credited with providing incentives that helped to create the biotechnology industry.

In addition to the tremendous benefits this brings to the American public and to our economy, I am possibly most proud of the fact that all of these good results were achieved without any separate appropriation of government funds to establish or manage the effort. Bayh-Dole stands as an example that effective legislation does not have to come with a high price tag. Tc

BOB DOLE REPRESENTED KANSAS IN THE U.S. SENATE FOR 28 YEARS. IN 1996 HE WAS THE REPUBLICAN PRESIDENTIAL CANDIDATE. HE IS SPECIAL COUNSEL AT ALSTON & BIRD LLP, A WASHINGTON, D.C. LAW FIRM.

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MARKET, from Page 30

In his book Crossing the Chasm, Geoffrey Moore, a leading expert in technology marketing, provides a template that can help companies develop positioning statements. Because positioning and the value proposition are so closely related this can be a useful tool. Here is a rendition of Moore's outline:
For (target customers)
Who (are dissatisfied with current options, or have the following problem)
Our product is a (describe the product or solution)
That provides (the key problem-solving capability)
Unlike (the alternatives or competition),
Our product (describe the key points of competitive differentiation)
If you find that certain sections are difficult to complete, or if you find you are relying on intuition or unsubstantiated belief to fill it in, this may indicate that you need to do more research. Tc

GRACE BRILL IS DIRECTOR OF MARKET RESEARCH AT TECHNOLOGY VENTURES CORPORATION.


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