Bayh-Dole Act

Enacted in 1980, the Bayh-Dole Act was designed to facilitate the commercialization of federally funded research by encouraging cooperation and collaboration among government, industry, and academia. The legislation championed patent ownership as a necessary incentive for private sector investment in the commercialization process. Prior to the Bayh-Dole Act, the U.S. government retained ownership of inventions created and developed with the aid of federal research funds. While the government offered non-exclusive licenses to anyone who wanted to practice an invention, few federally funded technologies flowed into the private sector for commercialization.1 As a result, taxpayers were largely denied returns of useful products and economic development from their investment in research.

The Bayh-Dole Act was formulated to address this low utilization of government funded technology and sought to remedy hurdles in the existing commercialization process. Accordingly, the Bayh-Dole Act provided a uniform policy concerning the ownership of federally funded research. Under this law, universities and other non-profit organizations are allowed the option of retaining ownership of inventions made under the auspices of federal funding. Under the provisions of the Bayh-Dole Act, universities are also permitted to seek commercialization through exclusive licensing agreements with the private sector.

The authors of the Bayh-Dole Act realized that taking an idea from the lab to the market requires an investment of capital. As a 2002 article in The Economist points out, "A dollar's worth of academic invention or discovery requires upwards of $10,000 of private capital to bring [it] to market."2 Such an investment of private capital in turn requires a certain level of protection. The legislation offered this protection by defining ownership of the resulting intellectual property and providing the ability to exclusively license it to potential investors. These provisions incentivized the investments of private capital required for the effective commercialization of technology.

In addition to these rights, universities and other non-profits also incurred certain obligations under the Bayh-Dole Act. These obligations pertain to inventions conceived or developed under federal grants and include requirements of timely disclosure, election of title, and patent filing. Failure to comply with these statutory obligations could result in the default of the contractor's rights or exercise of the government's reserved "march-in" rights to any sponsored invention. The government also retains a non-exclusive, royalty-free license to practice the sponsored invention throughout the world.

The Bayh-Dole Act effectively placed the responsibility for commercialization in the hands of the university. This arrangement allows for greater involvement of the inventors in the commercialization process and encourages research partnerships between universities and industry. Since the Bayh-Dole Act charged universities with the mission of commercialization, technology transfer offices have played an important role in this process by serving a variety of functions related to the patenting and licensing of technology.

  1. "Technology Transfer: Administration of the Bayh-Dole Act by Research Universities," U.S. Government Accounting Office Report to Congressional Committees, May 7, 1998.
  2. "Innovation's Golden Goose," The Economist, December 14, 2002.