‘March-in’ rights: Why Biden’s changes contradict the point of the Bayh-Dole Act

The unintended consequences of President Biden’s proposal to dictate prices would destroy the US’ thriving tech transfer framework—and in industries far beyond pharmaceuticals, explain former USPTO directors Andrei Iancu and David Kappos.

It's a striking show of unity. Nine former senior officials from the US Department of Commerce spanning more than 20 years and five administrations—both Democratic and Republican—have joined forces to write to President Joe Biden.

In a letter published on February 2, the signatories urge Biden to withdraw his administration's proposed framework for exercising ‘march-in rights’ under the Bayh-Dole Act.

We are signatories to this letter. We served as director of the US Patent and Trademark Office (USPTO) under Presidents Obama and Trump, respectively.

In this effort we join with former Secretaries of Commerce Gary Locke and Carlos Gutierrez to protect a longstanding pillar of America's innovation economy: the Bayh-Dole Act of 1980.

Also joining us are four former directors of the National Institute of Standards and Technology(NIST), the agency charged with administering the Act.

From research to real-world products

For more than 40 years, Bayh-Dole has allowed universities and businesses to take discoveries arising from federally funded research and turn them into real-world products through technology licensing agreements.

Before the Act, fewer than 5% of patents for such research were licensed. Today, approximately 60% of patents are. Tens of thousands of new inventions across virtually every economic sector have reached consumers thanks to Bayh-Dole's incentive structure, with America reaping billions in economic benefits annually as a result.

As a nation, we should maintain this commitment to increased economic prosperity through innovation. Yet, in an effort to address concerns about high out-of-pocket costs of prescription medications, the administration has put forward a policy proposal that would undo the Bayh-Dole incentives for all innovation.

Biden’s proposal urges the US government to assert a hitherto unused authority under Bayh-Dole—so-called ‘march-in rights’—to force manufacturers in any industry to lower their prices, or risk compulsory relicensing of their patents to allow copycats to enter the market.

While the desire to reduce costs at the pharmacy counter is commendable, this framework is too blunt an instrument.

In suddenly declaring pricing fair grounds for compulsory relicensing, the administration's proposal seeks to rewrite four decades of understanding between government and private sector partners. Doing so would jeopardise wide swaths of America's innovation ecosystem—including in fields far beyond pharmaceuticals.

No limiting principle

Bayh-Dole enables critical technological development across nearly every economic sector, from agriculture to aerospace and national defence. The proposed framework quite explicitly asserts a blanket government right to march-in on any patented discovery that received so much as a penny in government research funding. The proposal contains virtually no limiting principle.

Invoking march-in rights to control prices goes far beyond both the letter and the intent of the Bayh-Dole Act. Former Senators Birch Bayh and Bob Dole carefully limited march-in authority to a few narrow situations, such as the failure to achieve practical application of an invention within a reasonable timeframe.

The omission of price controls from Bayh-Dole was intentional and obvious to all concerned. In fact, the US Congress considered amendments to the law in the 1990s that would have added pricing as a basis for agencies to march in.

Had the authority already existed, there would have been no need to add it. Nor did Congress add it then, rejecting the proposed amendments.

Price considerations never the aim

In 2002, Senators Bayh and Dole underscored the point. "Bayh-Dole did not intend that government set prices on resulting products," they wrote. "The law makes no reference to a reasonable price that should be dictated by the government."

Every administration since Bayh-Dole's enactment, Democratic and Republican alike—including the Biden administration—has explicitly rejected petitions to employ march-in rights to reduce prices. This consistent approach reflects the shared understanding that pricing considerations were never the provision's aim.

Were the proposal implemented, start-ups and established companies alike would become instantly wary of licensing university and federal lab discoveries in need of substantial private funding for development and marketing at scale.

The effect would be to drive the process of discovery out of the federally funded university and lab settings—with collateral damage to a system that currently attracts top scientific talent and trains successor generations. The government’s ability to catalyse foundational scientific research would be severely undermined.

Innovation would slow not only in healthcare, but also across many vital areas like sustainable energy, microelectronics, advanced materials, and quantum information science—all priorities for US competitiveness.

‘Weaponisation’ of march-in

What's more, with weaker justifications required to exercise march-in rights, petitions seeking march-in could be weaponised across all industries by competing companies looking to reap the fruit of the others' investments.

This change would threaten America's global technology leadership. China and other competitors closely study US science and technology policies to inform their own competitive strategies. Opening doors to commercial gamesmanship under expanded Bayh-Dole march-in rules would further advantage Chinese efforts to surpass the US in innovation.

The mere prospect of scoring a windfall licence also invites additional march-in requests. University-based startups and small businesses organised around a single new and promising technology currently drive growth in licensing of federally funded inventions. They would face particularly heavy burdens.

Threat to start-ups

Defending against march-in petitions consumes precious time and funding. Yet the failure to mount a defence risks losing licensing rights, thus undermining the rationale for founding the start-up in the first place. Faced with this lose-lose dilemma, far fewer start-ups will form to develop publicly funded discoveries.

Finally, this framework places extraordinary new burdens on federal agencies to investigate and litigate march-in petitions spanning vast expanses of the US economy. Agencies are simply not equipped for this massive new role.

Evaluating march-in requests across countless product areas would require major resource expenditures and staff expansion.

Lengthy petition deliberation processes would have to weigh such complex factors as whether alternatives providing ‘reasonable’ pricing exist, or if supply is meeting consumer ‘needs’ -- blurry standards which agencies have no experience in assessing.

The task would be comparable in complexity to supervising a centrally planned economy.

Washington’s ‘control’ over innovation

Indeed, in the 44 years since the enactment of Bayh-Dole, the overwhelming majority of march-in petitions have been filed to the NIH on pharmaceuticals—none of which have been granted.

Yet now, the Biden administration asserts that its new "framework is not meant to apply to just one type of technology or product" and indicates through eight examples that many different government agencies would be involved.

The proposal's Washington-based concentration of control over innovation is completely contrary to the central tenet of Bayh-Dole reform—decentralising patent management to unleash the US' vibrant entrepreneurial forces for maximal societal benefit.

That's why the administration would be wise to heed the bipartisan warning of leaders who are intimately familiar with the nation's technology commercialisation system. The unintended consequences of this proposal would destroy the thriving tech transfer framework Bayh-Dole enabled.

Withdrawing this damaging proposal would reinforce the administration's commitment to expanding prosperity and opportunity through science and technology—goals that we share. Asserting march-in authority to dictate prices would work squarely against these objectives.

Maintaining the US' global edge in producing societal benefits from basic discoveries requires strong innovation policy. We have that now.

The administration can halt its drive toward destroying our nation's well-functioning innovation ecosystem by speedily withdrawing the Bayh-Dole march-in proposal in its entirety.

Andrei Iancu served as the undersecretary of Commerce for intellectual property and director of the USPTO from 2018 to 2021.

David Kappos served as the undersecretary of Commerce for intellectual property and director of the USPTO from 2009 to 2013.

Both serve as board co-chairs of the Council for Innovation Promotion. They can be contacted at: contact@c4ip.org.