A government plan to rule out innovation

The federal government may soon finalize guidance that could weaken ownership of intellectual property throughout the U.S. economy. This would affect a huge swathe of industries, among them biotechnology, clean energy, agriculture, and defense.

More specifically, the new guidance would cause companies large and small, as well as their investors, to balk at licensing and developing promising new technologies -- with severe consequences for American innovation.

Shepherding a promising idea from lab to marketplace is already a daunting task, as I know firsthand. My consulting firm, Fuentek, helps universities, non-profit research institutions, and companies turn early-stage discoveries into real-world inventions -- a laborious and risky process known as “tech transfer.” We’ve worked with more than 5,000 technologies in a wide range of industries and facilitated more than 500 tech transfer agreements.

The Bayh-Dole Act of 1980 invented tech transfer as we know it today, and has since created more than six million jobs and added nearly $2 trillion to U.S. gross industrial output. Before the law passed, the government kept any patents resulting from federally funded research at universities. But government offices had no expertise in licensing patents, nor any incentive to do so. Taxpayers got little in return for their investment.

Bayh-Dole changed the equation by allowing universities to retain patents on their work, which enabled them to license the rights to private companies. The universities were also able to share their expertise with the new licensees, a critical part of successful product development. Tech transfer was born.

Now, the proposed guidance would reinterpret the section of Bayh-Dole that allows the government to “march in,” to take patents from one company and reassign them to another. By law, this can only happen if the licensee has failed to develop a product based on the patent. But under the new proposal, the government could march in if it decided a product’s price was unreasonable. Though the original licensee took on the risk and expense of developing the new invention, rival firms would be able to copy it on the cheap.

The stated purpose of the proposed policy is to lower drug prices. But while I share that goal, the proposal fails to consider the risk and cost of bringing the first pill to market.

Converting an initial breakthrough into a usable medicine requires a lengthy process of development, testing, and certification -- and most projects that enter this pipeline never come to fruition. Any successful medicine has to recoup both its development expenses and those of the 10 that failed before it. If we don’t allow companies to earn back these costs, they’ll simply stop investing in new drugs.

If the government decides to upend decades of legislative precedent by moving forward with its march-in proposal, the effect will be to sharply curtail drug development. The broader impact will be even worse because the guidance isn’t industry-specific. It would apply to all fields in which government grants have contributed to discoveries -- in other words, all high-tech sectors.

In short, if the proposed guidance is finalized, the United States will see an alarming loss of innovation as companies retreat from our most cutting-edge sectors -- with little or no upside. For the sake of our innovation-based economy, I urge the administration to reconsider.

Laura Schoppe is President of Fuentek, a Research Triangle-based consulting firm that helps universities, non-profit research institutions, and companies turn early-stage discoveries into real-world inventions. She has worked in the technology transfer field for 30 years. This piece originally ran in RealClearHealth.