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.

By Joseph Allen
—

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.

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.

For additional information
regarding this and other related topics, please see:

• "NEJM Perspective Calls for Recalibration
of Bayh-Dole Act," September 10, 2013
• "Senator Leahy Urges
NIH to Use March-In Rights on Myriad BRCA Test," July 17, 2013
• "Patent Docs Author Testifies at Genetic
Diagnostic Testing Hearing," February 16, 2012
• "AUTM Survey Shows Significant Increases in University Patent Filings and Issuances in FY2010," October 5, 2011
• "USPTO Recognizes
30th Anniversary of Bayh-Dole Act," December 9, 2010
• "University Start-ups and Licensing Activity Held Steady During Recession," October 7, 2010
• "AUTM Survey Shows Drop in Issued Patents," March 9, 2010
• "BIO Comes out
Swinging against SACGHS Report," February 4, 2010

• "Patent Haters Take
Notice! University Innovation Fuels Robust Economic Activity," IPWatchdog, August 7, 2013
• "Intellectual
Dishonesty About Bayh-Dole Consequences," IPWatchdog, May 10, 2013
• "The Good Steward —
Turning Federal R&D into Economic Growth," IPWatchdog, August 2, 2012
• "University Tech
Licensing Has Substantial Impact on Economy," IPWatchdog, December 10, 2012
• "AUTM Survey:
University Licensing Strong Despite Economy," IPWatchdog, December 17, 2010
• "Statement of
Senator Birch Bayh on the 30th Anniversary of the Bayh-Dole Act," IPWatchdog, December 5, 2010