Category: Government and Policy

Categories
Government and Policy McNair Center

True Impact of the Bayh-Dole Act

Addressing the True Impact of the Bayh-Dole Act

Since the passage of the Bayh-Dole Act in 1980, many researchers have debated its contribution to the transfer of technology from universities to industry. Some credit the act as an engine of economic growth responsible for the emergence of the biotechnology industry. Critics say that the law decreased data sharing and basic research and increased health care costs. Others think that the act had little impact and that changes in university patenting were inevitable.

University patenting would have increased regardless of the Bayh-Dole Act. However, the act did help universities license patents, creating positive economic benefits especially in the biotechnology industry.

Background

The Bayh-Dole Act was intended to improve the commercialization of federally funded research.

Former Senator Birch Bayh and Senator Bob Dole, authors of the Bayh-Dole Act, in Washington D.C. on July 22, 1985.
Former Senator Birch Bayh and Senator Bob Dole, authors of the Bayh-Dole Act, in Washington D.C. on July 22, 1985.

Before 1980, only 5% of government-owned patents were ever utilized in industry. Corporations found it difficult, risky or unappealing to receive licenses for government patents. Several government agencies did not want to give up ownership of patents to universities or corporations. Agencies such as the National Science Foundation tended to give nonexclusive licenses to anyone, unappealing for companies. As it was easy for any company to procure licenses, the system did not incentivize companies to purchase licenses; most wanted exclusive rights.

The Bayh-Dole Act enabled institutions to keep control of patents invented using federally funded research. The university or business could then grant licenses on its own terms. The act also required universities or businesses to have clear patent policies and encourage development of inventions.

Did the Bill Work?

Claims that the Bayh-Dole Act alone led to increased patenting and economic activity surrounding university patenting are not true. Economic models show that the acceleration of patenting would still have occurred even without the act. David Mowery finds that universities increased their shares of patenting from 0.3% in 1963 to 4% by 1999. However, he notes that this increase had already begun before 1980, which indicates that the Bayh-Dole Act was not its cause.

Since the passage of the Bayh-Dole Act, more than 5,000 new companies have formed from federally funded university research. In 2008, more than 600 new university products were introduced to the marketplace. According to MIT, about 30 billion dollars of economic activity per year and 250,000 jobs can be attributed to technology born in academic institutions.

The Bayh-Dole Act may not have been the only contributor, but these large numbers show the importance of university innovation to the economy and make it clear that innovation spurring legislature can have enormous positive effects on economic growth.

Creation of the Biotechnology Industry

From the 1968-1970 period to the 1978-1980 period, biomedical university patents increased by 295%. Biomedicine, an important part of biotechnology, was therefore growing rapidly before the introduction of the Bayh-Dole Act. Most likely increased funding in the field, advances in science and emergence industry interest also played major roles in the growth of university patenting in this area.

The Bayh-Dole Act likely contributed to increased licensing of university biotechnology patents. The ability of universities to license patents created strong incentives for many scientist-entrepreneurs to form companies around their inventions. At least 50% of current biotech companies began as a result of a university license. Additionally, 76% of biotechnology companies have at least one license from a university.

These license based biotech companies have made huge impacts on the economy. University licensing of biotechnology patents generated more than $40 billion in economic activity in 1999. According to Boston University, biotechnology companies represented over 1.42 million jobs in 2008, and the bioscience sector as a whole represents an employment impact of 8 million jobs. By 2009, 1,699 biotech firms generated annual sales of $48.2 billion.

Addressing Criticisms

Critics of the Bayh-Dole Act cite the decrease of data sharing, higher health care costs and a shift away from fundamental research as flaws of the law.

Because researchers patent new inventions, they might tie up research data in patent rights. This could prevent other researchers from accessing this data, slowing the research process. An article by Neil Thompson and others suggest that this isn’t true in practice. They find no evidence that licensing of academic patents limits the sharing of research data. However, their work leaves open whether licenses on research tools lead to restrictions on continual research in a subject.

Many also argue that health care costs have increased as a result of the Act. Biomedical university patents often can be utilized in the process of drug creation. As these discoveries are not final products, companies must license each patent that they use to create a drug. The cost of licensing many of these patents allegedly drives up the cost of the final product, hurting the consumer. The NIH and USPTO have created guidelines to prevent the unreasonable licensing of biomedical patents. However, these guidelines are not all concrete.

While this “royalty stacking” may contribute to high prices, it is unfair to blame the costs solely on the Bayh-Dole Act. Drug development includes a multitude of phases with high costs that extend beyond patents at each step. Many drugs could also not have been developed without the help of the patented technologies.

Finally, others point out that applied research generates more money from patenting. They argue that the Bayh-Dole Act therefore incentivizes universities to focus on applied research instead of basic research. This too is not true. According to the National Science Foundation, the percentage of basic science research from 1980 to 2001 increased from 66.6% to 74.1%. Applied researched actually decreased from 33.4% to 25.9%.

Conclusion

The Bayh-Dole Act was not the sole factor in the increase of university patenting. However, it does appear to have played an important role in the licensing of university patents, particularly in the biotechnology industry.

The biotechnology is sector is large and growing. In 1980, it was almost nonexistent. By 2009, the sales of just 1,699 biotech firms were worth more than 2.5% of U.S. GDP. Academic intellectual property provides the crucial foundation for this sector. Further incentivizes for university patenting and its licensing could therefore drive yet more economic growth.

In addition, the government could encourage the use of unlicensed academic patents by offering tax breaks to companies who commercialize them. It could also encourage universities that excel at technology transfer such as Stanford or MIT to share best practices to other universities.

Categories
Government and Policy McNair Center

Bureaucracy and Public Sector Innovation

The public benefits greatly when there are innovations in how our government approaches policymaking and regulation. However, sometimes barriers created by bureaucratic structures can slow implementation. When regulation and rigidity are holding us back, leaders are responsible for ensuring that our government institutions are allowing for change when our old ways of approaching challenges become antiquated.

Innovation in the Public Sector

Our traditional idea of innovation tends to point science and technology developments, like the iPhone or social media. Innovation within the public sector takes many forms. Journalist Alex Howard broadly defined public sector innovation as any government-created “new idea, technology or methodology that challenges and improves upon existing processes and systems, thereby improving the lives of citizens or the function of the society that they live within.” For example, the introduction of speeding cameras in the late 1980s in the U.S. is a public sector innovation that allowed local police to improve public safety by catching speeders more efficiently.

In the U.S., innovation in public policy takes place in many levels of government. For example, the Rebuild by Design program, launched in response to Superstorm Sandy, created a competition for innovators to develop creative solutions to problems posed by natural disasters. In Boston, this program created Climate Ready Boston (CRB). CRB works with the Boston city government to ensure that infrastructure is created to withstand the impacts of climate change, like rising sea levels and extreme temperatures. Another public sector innovation, the Citizen Archivist Initiative, uses online tools and crowdsourcing to make public records more easily accessible to the public.

United States Efforts to Encourage Public Sector Innovation

Within the last 30 years, federal executive and legislative action have also encouraged innovation within the public sector. For example, the Small Business Research and Development Enhancement Act of 1992 gave the Small Business Administration the ability to conduct the Small Business Innovation Research Program to better serve small businesses. Later, President Bill Clinton’s Executive Order 13103 placed an emphasis on increasing government awareness of computer vulnerabilities, demonstrating that the government would be adapting to new technologies.

President Barack Obama emphasized this as well. In 2009, his administration released the Strategy for American Innovation to increase efforts to support American innovators. In 2015, they released an updated strategy that placed importance on public sector innovation. The new strategy includes “new efforts to make the Federal government more innovative to improve performance and create a better environment for innovation by the private sector and civil society.”

Public Sector Innovation Around the World

Public sector innovation is not unique to the United States. The Organization for Economic Cooperation and Development’s Observatory of Public Sector Innovation tracks these innovations for each member country.  In Iceland, the Reykjavik Metropolitan Police Department began using social media to connect with citizens. In the United Kingdom, policy innovation took place through the creation of the What Works Network, an evidence-collection initiative to inform policy decisions.

Although there are success stories, innovation in the public sector can be difficult. Government agencies tend to be deeply entrenched in the rigidity of bureaucracy, a structure that can hinder creativity.

How Can We Boost Innovation within Government Agencies

We should want to encourage policy innovation. However, this is easier said than done. The hierarchical layout of many government agencies can be beneficial for clarity and accountability, but it can also inhibit creativity, thereby stifling innovation. Bureaucratic structures can prevent change and creativity. How can we overcome these obstacles?

University of Connecticut and Georgia Tech researchers found that workplace environment can enhance or curtail creativity. Encouraging creativity is essential for innovation. Employees must have the time, physical resources and supportive peers to implement innovative solutions. Within a government agency, these factors could manifest in many forms: Collaborative and open work spaces, efficient technologies like portable laptops and tablets and smart deadlines that are both challenging and realistic can all be effective.

The Importance of Leadership

The barriers to change in the government bureaucracies can make innovation difficult. Leadership plays a large role in whether bureaucratic organizations successfully overcome the obstacles that accompany bureaucracies. Leaders must actively prioritize innovation. The Harvard Business Review suggests, “Leaders of big bureaucracies need to get — and keep — everyone enthused, create and communicate a future vision, assure support during the transition, insist on excellence, create demands on managers and convince everyone of top management’s conviction and commitment to change.”

Simply articulating creativity as a goal can improve creativity of groups. When leaders direct groups to develop creative solutions, their groups generate more creative results than groups who are not given this instruction. If leaders want to see creativity amongst their employees, they should communicate that creativity is a goal for every project.

Hierarchies can often be complex and make it difficult for senior leadership to stay in touch with employees on the lower end of the hierarchy. To combat this, leaders need to make themselves available to employees. Open communication between leaders and lower-level employees can promote development of new ideas.

Further Applications

Any business that is looking to transform their culture to encourage creativity and innovation can use these lessons. Change requires sustained efforts on the part of leadership. With continuing organizational support, the benefits can be great.

Categories
Government and Policy McNair Center

Obama in the White House

Generating an Innovation Nation

The Obama administration’s policies toward small business and entrepreneurship have received mixed reactions. While Obama elevated the administrator of the Small Business Administration to a cabinet position and the SBA increased its lending to small businesses, some small business owners felt that the government bailed out big businesses at their expense after the 2008 financial crisis. Many small business owners are concerned about the effects of the Affordable Care Act.

Over the course of his presidency, Obama has played a part in connecting innovation with government. During his first term, he created the positions of Chief Technology Officer, Chief Data Scientist and Chief Performance Officer. In 2012, he began selecting entrepreneurs to work as Presidential Innovation Fellows within the federal government to make government more efficient, impactful and user-friendly.

Inspired by startups and music

Austin’s South by Southwest music and media festival inspired President Obama’s latest innovation project South by South Lawn (SXSL). Last month, the Obama administration invited community change-makers nominated by the public to attend SXSL. Innovators gathered at the White House to discuss how they use technology to advance areas like technology, food, art and collaboration.

On the technology panel “Fixing Real Problems,” innovators like Chris Redlitz (founding partner of Transmedia Capital and founder of The Last Mile), Jukay Hsu (founder of Coalition for Queens) and Nina Tandon (founder of EpiBone) addressed societal issues, including criminal justice reform, health care costs, access to higher education and job opportunities. Panelists emphasized the importance of understanding the impact of company growth on surrounding communities when planning for future endeavors. They emphasized the importance of creating inclusive access to the new opportunities brought about by societal transformation and technological change.

Focus on social entrepreneurship

With the Access Code program at Coalition for Queens, Jukay Hsu aims to increase economic opportunities in Queens. The program allows populations usually underrepresented in the technology field, like women and minorities, to gain the skills needed to enter the field. There are no upfront costs, but graduates of the program are expected to “pay it forward” by committing a percentage of their first two year’s salary toward funding future Access Code cohorts.

Chris Redlitz created The Last Mile in 2008 in an effort to reduce recidivism rates. For successful criminal justice reform, inmates need the skills to readjust to the outside world. To meet this need, the Last Mile started a six-month program for inmates to develop companies and pitch their ideas to the business community. In 2014, Redlitz created the first computer coding program in a United States prison, teaching HTML, JavaScript, CSS and Python.

Nod to for-profit entrepreneurship

At EpiBone, Nina Tandon provides patient-specific, customized bone grafts created from the patient’s own stem cells. Through this personalization of treatment, she aims to simplify procedures, provide more exact care and reduce the costs of post-surgery treatments. Each year, over 100,000 patients have bone-related surgeries in the United States alone. EpiBone could potentially increase access to these necessary operations through reducing costs and rehabilitation times.

Bringing innovation within government

Obama invited technology executives to join him in Washington to spearhead innovation in government. Former Google executive Megan Smith now serves as the United States Chief Technology Officer. Microsoft executive Kurt DelBene took a leave of absence in 2013 to help fix the problems with HealthCare.gov.

At SXSL, Presidential Innovation Fellows shared their projects to improve government efficiency at the “Startup in the White House” exhibit. Jacqueline Kazil’s GeoQ crowdsources geo-tagged photos to quicken disaster response. With the Green Button Initiative, John Teeter aims to help Americans understand and improve their energy use. The innovation company 18F has been developing NotAlone.Gov to provide students and schools with access to resources against sexual assault. Visitors saw how design and technology could potentially modernize the immigration system, improve veterans’ access to benefits and increase cancer patients’ access to clinical trials.

The first SXSL – and the last?

Although technology will not cure all of society’s ills, it has the potential to improve lives more quickly than any government institution could. Continuing initiatives that focus on creative solutions leads to a more widespread awareness of this potential. The federal government should focus on technology and innovation as integral contributors of growth.

Obama used SXSL to show innovation’s potential in policy solutions. Unfortunately, he made no mention of policy toward small businesses, particularly for-profit enterprises. Events like SXSL must also focus on policy that accelerates for-profit entrepreneurship that aid U.S. economy growth. There was no mention of how the federal government would incentivize entrepreneurship to strengthen the U.S. economy and maintain competitiveness in the global marketplace.

Whether through another South by South Lawn or the inclusion of innovators in policy solutions, the Trump administration should seek to make government more inclusive, transparent and effective. However, simply embracing startup culture and bringing entrepreneurs into government is far from enough. For entrepreneurship to play its full role, the U.S. needs policies that will actually help small businesses, not hinder. Only then will small enterprises and startups be able to take their place as drivers of economic growth.