The Bayh-Dole Act: Balancing Innovation and Oversight

Has the Bayh-Dole Act created a stable environment for institutional invention, or has governmental power gone too far? 

The Bayh-Dole Act (the “Act”) was passed with the intention of encouraging research within publicly funded institutions by providing commercial incentives. 35 U.S.C. § 200 (1980). Aiming to streamline inventions created with funding from the US government, this act enables universities and other research entities that receive funding from taxpayer dollars to control the patents resulting from their scientific discoveries. Id. With the result being a life-saving treatment, the effects of this act are tremendous and can be a matter of life and death.  While the positive aspects of this act are significant, numerous risks and ambiguities have been highlighted through cases over the last four decades.  

A central debate surrounding the Bayh-Dole Act is the issue of ownership. The act’s primary purpose was to enable contractors—universities, non-profits, and others—to “elect to retain the title” to inventions created under this legislation. 35 U.S.C. § 202(a). However, this wording is ambiguous, as it implies that contractors already hold the title or will retain it. Bd. of Trs. of the Leland Stanford Junior Univ. v. Roche Molecular Sys., Inc., 131 S. Ct. 2188, 2188 (2011). Further, the act does not state that the title automatically vested in the contractor upon invention. Id. at 2190. This presents a problem because, initially, the rights belong to the inventor, not the institution. Id. To transfer those rights to the institution, a legal assignment is typically required, usually through an IP agreement or employment contract. 35 U.S.C. § 210(a). The role of the Bayh-Dole Act begins when the contractor secures rights from the individual inventor. 35 U.S.C. § 202(a). This issue is exemplified in Leland Stanford Junior University. v. Roche Molecular Systems, Incorporated, when Stanford researcher, Dr. Holodniy, developed technology for HIV testing, in part under federal funding provided to Stanford, while also collaborating with Cetus (now part of Roche Molecular Systems). Bd. of Trs. of the Leland Stanford Junior Univ, 131 S. Ct. 2188, at 2190.   Dr. Holodniy signed an agreement with Roche Molecular Systems Inc., which granted it the rights to his inventions while he was under an employment contract with Stanford. Id. at 2189. The contracts both had similar verbiage, but the contract with Roche was more declaratory regarding their right to Holodniy’s work. Id.  Stanford filed suit against Roche, arguing that, under the Bayh-Dole Act, it had ownership of the federally funded invention. Id.  The key issue at the center of this lawsuit was whether the Bayh-Dole Act automatically vests ownership in the contractors or the inventors. Id. at 2189. In this case, the Supreme Court held that these rights were not automatically vested in the contractors under the Bayh-Dole Act, as the initial rights are with the inventor. Id. at 2190. The rights can only be changed if there is a contractual agreement that states a transfer of rights. Id. The relationship protected by the Bayh-Dole Act is strictly between the funding agency and the contractor, not between the inventor and the contractor. This ruling highlights the exposure that institutions face if contractual agreements are not drafted adequately. Id.  This case clarified the scope of the statute’s protections and provided insight into how institutions should create contracts with their researchers to protect themselves adequately.  

Another aspect of the Bayh-Dole Act that has yielded controversy is march-in rights. March-in rights give the federal agency behind the funding the right to metaphorically “march in” and require the contractor to give the license to another institution. 35 U.S.C. § 203. This is in place as a safeguard for the federal agency. Id. The primary reason a federal agency would “march in” is if the institution holding the license is withholding the publicly funded invention from the public and not taking the necessary steps to ensure the practical application of the invention within a reasonable timeframe. Id. Practical application is specifically defined as the assurance that the product, along with the benefits it offers, is reasonably available to the public. 35 U.S.C. § 201(f). This was clarified in Johns Hopkins University v. Cellpro, Inc., where Johns Hopkins University received funding from the NIH to develop a stem cell treatment. 931 F. Supp. 303, 310 (D. Del. 1996). Hopkins, after developing the patents, granted the licensing exclusively to Baxter Healthcare Corp. Id. CellPro, a competing pharmaceutical company, was also working to develop a stem cell treatment and sued Baxter for infringement, arguing that Baxter was not working quickly enough to make the technology publicly available. Id. at 310. Its claim stated that the NIH should have marched in and added additional licensees. Id. The court ruled in favor of Baxter, as it was taking the necessary steps to achieve the intended practical application. Id. at 312.  Furthermore, this case barred entities from using march-in rights as a litigation strategy. These rights are intended exclusively for use by the agency providing funding to the contractor. Id. at 313. This was an important clarifying case, as it reinforced that the federal agency does not have authority to march-in unless there are no effective steps in place to make the invention publicly available.  

From a policy perspective, restricting access to a lifesaving drug directly undermines/is fundamentally at odds with the public interest, creating a reasonable case for the federal agency to use march-in rights.  While march-in rights are in place to ensure that there is a mechanism to avoid lifesaving drugs being withheld from the public, funding agencies have complete discretion regarding their use. It is critical to note that these rights have yet to be exercised by any federal agency. Peter S. Arno and Michael H. Davis, Why Don't We Enforce Existing Drug Price Controls? The Unrecognized and Unenforced Reasonable Pricing Requirements Imposed upon Patents Deriving in Whole or in Part from Federally Funded Research, 75 Tul. L. Rev. 631, 671–72 (2001). Those concerned with the public interest of the Bayh-Dole Act worry that this safeguard is in place to offer a superficial sense of reassurance to the public, as it has not been invoked. Id. Others see this as the federal agencies not intending to abuse the power that they reserve. Mary Eberle, March-In Rights Under the Bayh-Dole Act: Public Access to Federally Funded Research, 3 Marq. Intell. Prop. L. Rev. 155 (1999). Both sides present compelling arguments, contributing to/participating in a broader scholarly dialogue concerning the implications of the Bayh-Dole Act. Peter S. Arno and Michael H. Davis, Why Don't We Enforce Existing Drug Price Controls? The Unrecognized and Unenforced Reasonable Pricing Requirements Imposed upon Patents Deriving in Whole or in Part from Federally Funded Research, 75 Tul. L. Rev. 631, 671–72 (2001); Mary Eberle, March-In Rights Under the Bayh-Dole Act: Public Access to Federally Funded Research, 3 Marq. Intell. Prop. L. Rev. 155 (1999). 

The debate surrounding the Bayh-Dole Act encompasses a range of perspectives as it contains numerous ambiguities, making it open to interpretation and discussion. In light of these debates and ambiguities, it is undeniable that the Bayh-Dole Act has led to an increase in innovation and has been a key factor in many institutions retaining the rights to inventions that they would not have had before the act’s creation. With medical and technological innovation being at an all-time high, the Court will continue to interpret the Bayh-Dole Act and clarify significant controversies around it.