The Legacy of Bayh-Dole's Success on U.S. Global Competitiveness Today

By: Gabrielle Athanasia

Widely considered to be one of the most important pieces of legislation for American innovators and inventors, the Patent and Trademark Law Amendments Act of 1980 -better known as the Bayh-Dole Act- played a key role in renewing American innovation policy in response to the perceived competitiveness challenge from Japan. The lessons of how this legislation came together is once again relevant as we confront today’s innovation challenge from China.
The Implications of the Bayh-Dole Act
The Bayh-Dole Act deals with intellectual property arising from federal government-funded research. The Act permits universities, businesses, and non-profit organizations that receive federal funding to pursue ownership of an idea or product they created, rather than forfeiting the rights to that technology or invention to the federal government. In essence, it allows institutions and other grant recipients to hold patents on inventions that stem from government-funded research, enabling them to license the rights to those inventions to private sector partners who can then commercialize them. In this way, Bayh-Dole created an incentive for private sector development and commercialization of federally funded research and development (R&D). It decentralized technology management to universities and businesses that invented the product with government support.
The Bayh-Dole Act in the Context of International Competition
Beginning around 1950, shortly following World War II, the U.S. began to establish a new national security enterprise to address the imperatives of the Cold War. The Soviet Union’s launch of the Sputnik satellite in 1957 further accelerated this mission, leading to the creation (among others) of the National Aeronautics and Space Administration (NASA) and the Defense Advanced Research Projects Agency (DARPA) in 1958. To fast track research ideas to deployment, the Department of Defense revived a system that enhanced the development of government funded research through prototype testing and demonstration to aid in national security missions. But this system was not designed to exploit the broader commercial possibilities of government funded research.

This limitation became more apparent when, leading into the 1970s, the U.S. started to face notable commercial competition from Japan. At the time, the U.S. government had taken the position that any inventions created from federally funded research would belong strictly to the government and would be solely non-exclusively licensed. This not only lessened economic incentives for commercial development but inhibited would-be inventors from pursuing invention since the government would own the rights to whatever they created. During this period, there was no comprehensive government policy regarding the ownership of inventions created by institutions under federal funding. The inconsistencies that arose among funding agencies further limited transfer of government-funded inventions to the private sector.

Meanwhile, Japan’s modernization of its industrial production process began to yield tangible gains. Advances in precision machining technologies gave Japanese cars and electronics an edge over the American products in the global market.

To rise to the challenge posed by Japan’s industry, the U.S. launched a range of policy experiments that sought to encourage innovative small firms and start-ups grow and compete in global markets.
A Bipartisan Effort
Adopted in 1980, the Bayh-Dole Act was sponsored by two senators, Sen. Birch Bayh of Indiana, and Sen. Bob Dole of Kansas. The momentum for an overhaul of the federal patent system began in Bayh’s home state of Indiana when Norman Latker, Deputy General Counsel of the Department of Health Education and Welfare, realized that billions of dollars of federally funded research were wasted because the government had a monopoly on the patent rights associated with universities’ inventions. While on opposite sides of the political spectrum, Senators Bayh and Dole agreed to collaborate and develop the Dole-Bayh Bill in the 95th Congress (later to become the Bayh-Dole Act in the 96th Congress). In his introduction of the Bill to the Senate floor in September 1978, Senator Bayh explained the necessity of a policy addressing technology transfer:

“A wealth of scientific talent at American colleges and universities—talent responsible for the development of numerous innovative scientific breakthroughs each year—is going to waste as a result of bureaucratic red tape and illogical government regulations. The problem, very simply, is the present policy followed by most government agencies of retaining patent rights to inventions…Unless private industry has the protection of some exclusive use under patent or license agreements, they cannot afford the risk of commercialization expenditures. As a result, many new developments resulting from government research are left idle.”

Over a year later on December 12, 1979, the Senate Judiciary Committee unanimously approved and reported S. 414, which was the Bayh-Dole Bill, titled “The University and Small Business Patent Procedures Act”. Amidst the competitive crisis facing U.S. industry, Congress was eager to build partnerships between the public and private sectors. On April 23, 1980, Bayh-Dole once again came to the Senate floor for debate and was approved on a 91-4 vote.

Progress for Bayh-Dole looked promising until the election of 1980, which produced what is now regarded as a major change in history to the American political ecosystem, in the partisan makeup of Congress. In that year, Ronald Reagan defeated Jimmy Carter for the presidency, and the Republicans gained control of the Senate for the first time since 1953. Senator Birch Bayh was defeated in his own race for office.

However, before the election, Congress had adjourned without passing a budget and had to return for a lame duck session, providing one final opportunity for Senator Bayh to pass the Bayh-Dole Bill. At this time, the Bill had no corresponding House counterpart that could lead to the President signing the Bill into law. Once the House passed H.R. 6933 (with Bayh-Dole inserted), the Bill came to the Senate once again in November of 1980. As is mandated by a lame duck session, the Bill would have to pass the Senate through unanimous consent. After a series of sideline discussions and stipulations amongst senators, Bayh-Dole finally passed through the Senate on November 21st. On December 12, 1980, President Jimmy Carter signed the Bayh-Dole Act into law.

A Lasting Impact on U.S. Innovation
Years later, the Bayh-Dole Act continues to have a significant and lasting impact on U.S. innovation and industry. Since it was enacted in 1980, the Act has led to over $1.3 trillion in U.S. economic growth, created more than 4.2 million jobs across the country, and contributed to the success of over 11,000 new startup companies from universities throughout America. Bayh-Dole continues to encourage American entrepreneurship today, helping to strengthen the nation’s innovative capacity.

As the U.S. faces new challenges to its role as a leading innovator, the bipartisan legacy of Bayh-Dole and its remarkable role in creating new incentives to spur innovation and entrepreneurship stand out as important lessons for the project of renewing America's innovation system.

Gabrielle Athanasia is a Program Coordinator and Research Assistant with the Renewing American Innovation Project at the Center for Strategic and International Studies in Washington, DC.

The Perspectives on Innovation Blog is produced by the Renewing American Innovation Project at the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
Gabrielle Athanasia

Gabrielle Athanasia

Former Program Coordinator and Research Assistant, Renewing American Innovation Project