A Reply to the New England Journal of Medicine

by McDonnell Boehnen Hulbert & Berghoff LLP
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Editor's Note:  Yesterday, we reported on a perspective, entitled "Patents, Profits, and the American People -- The Bayh–Dole Act of 1980," that was published in the August 29 issue of the New England Journal of Medicine.  Earlier today, we received an e-mail from Joseph Allen, who noted that he had authored a reply to the NEJM article.  His response was originally published on IPWatchdog, and is being republished here with the permission of IPWatchdog founder Gene Quinn.  Patent Docs thanks Mr. Allen and Mr. Quinn for allowing us to republish Mr. Allen's response.

In its August 29, 2013 edition, the New England Journal of Medicine saw fit to print two "perspective" pieces attacking the Bayh-Dole Act.  The primary article is by Dr. Howard Markel entitled "Patents, Profits, and the American People -- The Bayh–Dole Act of 1980."  It repeats previously refuted charges that patenting and licensing federally funded inventions harms the public interest.  To give the author due "credit," Dr. Markel does invent some new allegations as well which simply cannot go unanswered.

The Bayh-Dole Act was passed because Congress was rightly concerned that potential benefits from billions of dollars of federally funded research were lying dormant on the shelves of government.  Government funded inventions tend to be very early stage discoveries -- more like ideas than products -- requiring considerable private sector risk and investment to turn them into products that can be used by the public.Allen, Joe

Under prior patent polices, government agencies took such inventions away from their creators and offered them non-exclusively for development.  There were no incentives for the inventors to remain engaged in product development.  Not surprisingly, few such inventions were ever commercialized even though billions of dollars were being spent annually on government R&D.  This failure spurred two Senators from opposing sides of the aisle, Birch Bayh of Indiana and Bob Dole of Kansas, to form a remarkable partnership seeking a remedy.

But here's how Dr. Markel characterizes the impetus for Senator Bayh's involvement:

In 1978, a group of constituents representing Purdue University lobbied Bayh to seek ways of reaping profits from government allocations for university-based research, arguing that although the United States spent billions of dollars annually funding more than half of all academic research and owned 28,000 patents, it had little to show for the investment.

Unlike Dr. Markel, I was actually in that meeting.  Ralph Davis, who then ran Purdue's technology transfer office, is no longer with us to defend himself.  Neither Ralph nor anyone else present was looking for "ways of reaping profits from government allocations for university-based research." Quite the contrary, Ralph said that Purdue had made several promising inventions under Dept. of Energy grants which would never benefit U.S. taxpayers unless they were effectively licensed and developed.

This motivation was reflected in Senator Bayh's statement on introducing the bill:

The bill addresses a serious and growing problem: hundreds of valuable medical, energy and other technological discoveries are sitting unused under government control, because the government, which sponsored the research that led to the discoveries, lacks the resources necessary for development and marketing purposes, yet is unwilling to relinquish patent rights that would encourage and stimulate private industry to develop discoveries into products available to the public.

The cost of product development exceeds the funds contributed by the government toward the initial research by a factor of at least 10 to 1.  This, together with the known failure rate for new products, makes the private development process an extremely risky venture, which industry is unwilling to undertake unless sufficient incentives are provided.

The consequences of our inadequate government patent policy have not gone unnoticed.  In the energy area, bureaucratic delays caused by case-by-case review of each patent application are now running behind by almost two years. . . .

But nowhere is the patent situation more disturbing than in biomedical research programs.  Many people have been condemned to needless suffering because of the refusal of agencies to allow universities and small businesses sufficient rights to bring new drugs and medical instrumentation to the marketplace.  The exact magnitude of this situation is unknown, but we are certain that the cases we have uncovered to date are but a small sample of the total damage that has been done and will continue to be done if Congress does not act.

Dear Colleague letter from Senator Birch Bayh on the introduction of Bayh-Dole, Sept. 6, 1978.

Senator Bayh's wife was then suffering from a cancer which would later take her life.  Senator Bayh was very grateful for the help she received from the doctors at the National Institutes of Health.  His determination to enact Bayh-Dole to ensure that new treatments for relieving human suffering were being developed was driven by a passionate concern for patients, not "reaping profits."

Markel repeats the discredited allegation that technology licensing was more successful before Bayh-Dole than claimed by proponents of the law.  This charge used to be widely circulated leading my colleagues Norman Latker and Howard Bremer to look up the actual source materials the critics cited.  Perhaps not surprisingly, they found the critics were misreading the data.  See "The Bayh-Dole Act and Revisionism Redux," pp. 9-10.

Dr. Markel lightly dismisses as "[m]ore difficult to confirm" the meticulous work that Lori Pressman and her team (which included economists at the Department of Commerce) put into a ground breaking study estimating the significant economic impact of university patent licensing on the U.S economy.  Lori documented the methodology behind the study which until now, no one has challenged.  Perhaps Dr. Markel's "difficulty" would be solved if he actually read the paper.  To make it easy, here's the link: "The Economic Contribution of University/Nonprofit Inventions in the United States: 1996-2010."

Adding insult to injury, Markel continues:  "Indeed, the law's many critics question how much it has actually benefited the economy (as opposed to individuals and stakeholders) and the extent of its social costs."

Here's some data that may help Dr. Markel and the other critics:

• Since 1980 more than 9,000 new firms have been created around university inventions, more than 4,000 of which are still in business.  These companies tend to locate in the same state as the university, spurring economic growth.

• 705 new companies were created by university patented inventions in FY 2012 alone, along with 591 new commercial products introduced for consumers to use.  Not a bad performance in an economy otherwise stuck in the doldrums.

• There are now more than 40,000 active licenses and options in place on university inventions, the majority of which are with small businesses.

• No new drugs were commercialized when the government took inventions away from universities before Bayh-Dole.  Since then at least 153 are now on the market fighting the scourge of disease world-wide according to a study published in the New England Journal of Medicine.  See "The Role of Public-Sector Research in the Discovery of Drugs and Vaccines."

A new Forbes magazine analysis calculates that it now costs $5 billion to develop a new drug -- expenses that are borne by the private sector.  If the critics ever get their way and succeed in undermining Bayh-Dole, we could return to the days when we again pull the plug on drugs developed from federally funded research.  One has to wonder where those suffering will then turn for relief.  It's unlikely the critics will be able to offer them much solace.

While not in Dr. Markel's article, publications covering it surmised from his characterization of its legislative history that enactment of Bayh-Dole was "fluke ridden" (University of Michigan Health.org) or a "rocky and somewhat inglorious road to passage by a lame duck Congress" (Tech Transfer News blog).  Such language reflects a fundamental lack of understanding of the legislative process.  Bayh-Dole passed on its merits in the full light of day, not through any legislative sleight of hand.

The bill not only went through all of the steps for passing a new law that you read about in civics class, it was subjected to additional scrutiny not normally required for legislation:  it needed a unanimous vote of approval in the closing days of the Congress.  Bayh-Dole was even attacked by its bureaucratic opponents after enactment who sought to undermine the new law by wrecking the regulations needed for its implementation.  See "The Enactment of Bayh-Dole, An Inside Perspective."

Dr. Markel saves his "best" for last:

It's time for Congress to recalibrate Bayh-Dole.  Profits and patents can be powerful incentives for scientists, businesspeople, and universities, but new and ongoing risks -- including high prices that limit access to lifesaving technologies, reduced sharing of scientific data, marked shifts of focus from basic to applied research, and conflicts of interest for doctors and academic medical centers -- should be mitigated or averted through revisions of the law.  All Americans should be able to share in the bounties of federally funded research.

Oh my, where to begin?  Would Dr. Markel feel better knowing that a survey of academic researchers concluded that "patenting does not seem to limit research activity significantly, particularly among those doing basic research," with only 1% of their random sample of 398 academic respondents reporting a project delay of more than a month due to patents on knowledge inputs necessary for their research, and none reporting abandoning of a research project due to the existence of patents?  See Final Report to the National Academy of Sciences' Committee Intellectual Property Rights in Genomic and Protein-Related Inventions: Patents, Material Transfers and Access to Research Inputs in Biomedical Research (Sept. 20, 2005).

Would he feel better knowing that Bayh-Dole has not shifted the focus of federal R&D from basic to applied research?  See "The Bayh-Dole Act and Revisionism Redux," pp. 11-12.  This is hardly surprising as federal agencies fund research either in pursuit of expanding the frontiers of knowledge or to meet their mission needs.  With industry abandoning basic research, being able to partner with our unparalleled public research institutions is a tremendous competitive advantage for the United States.  Bayh-Dole makes this possible.

Perhaps Dr. Markel will feel better knowing that all Americans can only share in the bounty of federally funded research when embryonic ideas are taken from the lab and turned into new products they can actually use, while creating new jobs and companies where they can work.  The United States is leading the world in this regard -- thanks to the Bayh-Dole Act.


About the Author

Joesph Allen is a 30-year veteran of national efforts to foster public/private sector commercialization partnerships, and author of numerous articles on technology management for national publications.  Mr. Allen served as a Professional Staff Member on the U.S. Senate Judiciary Committee with former Senator Birch Bayh (D-IN), and was instrumental in working behind the scenes to ensure passage of the historic Bayh-Dole Act.  Mr. Allen has served as the Executive Director of Intellectual Property Owners, Inc., a trade association representing major R&D companies, he was involved in the creation of the Court of Appeals for the Federal Circuit, and he also served at the U.S. Department of Commerce as the Director of the Office of Technology Commercialization.  From 1992 until 2004, Mr. Allen was with the National Technology Transfer Center (NTTC), becoming President in 1997.  Clients included NASA, the Department of Defense, EPA, the Department of Veterans Affairs, and the Department of Commerce.  Between 2004 until 2007, Mr. Allen was the Vice President and General Manager of the West Virginia High Technology Consortium Foundation.  In 2008, he founded Allen & Associates to continue to facilitate public/private partnerships between universities, federal laboratories, and industry.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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