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3. Bayh-Dole-Thatcher

By Graham Richards

The Bayh-Dole Act

In 1980 the United States became concerned about declining productivity and rising competition from Japan. As a response Congress passed the Bayh-Dole Act, which enabled universities to patent federally-funded research and pursue ownership of an invention in preference to the government. Universities were thus offered the opportunity to licence campus-based inventions to private companies in exchange for royalties. In the years following, Congress passed a number of additional laws to encourage university-industry links, notably generous tax breaks for corporations willing to invest in academic research.

There are those who were unhappy about the Bayh-Dole Act since in a sense giving private firms the rights to inventions generated at public expense means that the public has to pay twice for the same invention – once through taxes to support the research that yielded the invention and then again through higher monopoly prices and restricted supply when the invention reaches the market. However, the legislation does contain safeguards, such as a march-in provision enabling the federal government to terminate an exclusive licence if the licensee fails to take effective steps to bring the invention into practical application within three years. A royalty-free licence is also included to enable the government to use the technology at any time.

What is quite certain is that the Act produced a massive increase in the amount of academic research being commercialised in the USA, more in terms of licensing than in the creation of spin-out companies. There was a ten-fold increase in patents generated and cumulative increases in industry funding for universities, rising to an annual $2 billion by the turn of the millennium. In June 2011, however, the US Supreme Court in Stanford v Roche cut back the effect of Bayh-Dole. Quite how much remains to be seen.

The Thatcher initiative

The much-repeated truism that Britain is good at invention, but poor at exploitation, is based on a long history of innovative science and woeful commercial success. In the 19th century Perkin produced the first synthetic dye, mauveine, and even started to manufacture it commercially. The country had a unique lead but by 1914 when it was necessary to send an army to France, the only source of khaki dye for the uniforms was I.G. Farbenindustrie and some of the British Expeditionary force went to war in navy blue uniforms dyed with woad, the natural dye favoured by the ancient Britons.

The BBC started television broadcasts in 1938, some ten years before a television service began in the USA, but by the end of the 1960s there were no British companies making TV sets. Computing is often traced back to Babbage, but the first modern computer was built at Bletchley as part of the Enigma code cracking project by Tommy Flowers, based on the theoretical work of Alan Turing. In the early 1960s possibly the best electronic computers in the world were built by the UK Ferranti company. My own first experience of computing was with the wonderful Ferranti Mercury in 1962. By the 1970s the industry had disappeared overseas.

The modern era was much influenced by the second world war. In the dark days of 1941 when Britain stood alone after the fall of France, the USA came to the aid of the old country by providing 50 ships to help make up for convoy losses in the Atlantic. The deal was known as lend-lease, since at its heart was the provision of permanent leases on bases in the West Indies to the Americans. Less widely known is the fact that in the small print of the agreement between Churchill and Roosevelt, the UK agreed not to patent three strategic British inventions: radar, the jet engine and penicillin. All were potentially vital to the war effort and only the USA had the industrial power to exploit these technologies. They helped the allies to win the war, but at huge financial loss to post-war Britain.

That fact was not lost on the post-war Atlee British government which in 1948 set up the National Research for Development Corporation (the NRDC). This Quango was created to commercialise innovations resulting from publicly-funded research at government research centres and universities, with research support from the state-funded research councils. Amongst their successes were the pyrethroid insecticides developed at Rothamsted; the cephalosporin antibiotics, from the same Oxford laboratories which had exploited penicillin; magnetic resonance imaging; and Interferon. The NRDC became the British Technology Group (BTG) following a merger with the National Enterprise Board and was privatised in 1992.

In its days as a state monopoly the NRDC, despite a few big successes, was essentially risk averse, bureaucratic and not subject to normal commercial pressures. Most notoriously it failed to patent monoclonal antibodies, although it is not clear exactly who was to blame for that mistake which perhaps cost the UK Treasury hundreds of millions of pounds. This happened under the premiership of Margaret Thatcher who had great sensitivity to commercialisation (she was an Oxford-trained chemist as well as a lawyer).

Indeed, virtually nothing happened in the UK regarding university IP exploitation until Mrs Thatcher shook up the system. She had been responsible for a crucial innovation in the tax rules to encourage venture capital. In 1987 she [Margaret Thatcher] took a seminal decision to hand over the ownership of intellectual property derived from government funding to the universities in which the IP had been generated, provided they set up a mechanism to encourage exploitation, or has it has become known technology transfer. This was a British version of Bayh-Dole because universities were funded by the government. This crucial step set the stage for the flowering of spin-out companies in the UK.

A current perspective

It is now 30 years since the Bayh-Dole Act and 25 since Mrs Thatcher’s equivalent revolutionary change in the UK. Many feel that the time is ripe to revisit the scene. A number of credible and influential individuals and august professional bodies have expressed concerns as to whether other forms of knowledge transfer might be impeded by the system we have in place and that commercialisation might damage the prime mission of universities to pursue fundamental knowledge, even if only by steering research away from curiosity-driven projects.

The National Academy of Sciences view

The influential US body, the National Academy of Sciences (NAS) in 2010 undertook a major investigation into the management of university IP in the public interest. The principal findings support the Bayh-Dole process, above all because it removed inconsistencies and gave rise to the surge in patenting and licensing activity. Further, the findings suggested that academic norms do not seem to have been undermined. In a very long and thorough report the committee did nonetheless make a series of recommendations aimed at reducing tensions which might occur between the various university goals of knowledge dissemination, regional economic development, service to faculty, generation of revenue for the institution and addressing humanitarian needs.

One of the suggested moves was the creation of a clear mission statement and the setting up of standing advisory committees, with the technology transfer office being accountable to the university’s research management with a formal code of good practice. The committee was also strongly of the view that the exchange of scientific materials should be made simpler. Standardised terms for licensing university technology to start-up enterprises were suggested as well. Overall, though, the report is supportive of the Bayh-Dole Act.

The Manchester Manifesto

In the UK a group originating in the University of Manchester’s Institute for Science Ethics and Innovation produced a much more radical document, posing the question ‘Who owns Science?’

In a later chapter of this book the group explain their views more fully, but it is worth noting that most of the signatories to the manifesto are philosophers and ethicists rather than scientists. One major exception to this is the prominent name of Nobel laureate Sir John Sulston, who led the research into the sequencing of the human genome at Hinxton near Cambridge. No doubt his views must have been coloured by the extraordinary antics of some commercial bodies in trying to patent genes, even when they had no idea of their function or possible use. Nonetheless the views of such an eminent scientist carry considerable weight.

Certainly the question of what can be patented needs constant monitoring, but it may be worth remembering that Sulston’s own work was funded in large part by The Wellcome Trust whose wealth ultimately derives from the pharmaceutical patents taken out by The Wellcome Foundation.

The importance of balance

Particularly in the area of patents and above all in the field of health, drugs, diagnostics and devices, there are inevitable tensions among parties with competing interests. Scientists want their work to be published as soon as possible and to receive recognition; companies who have invested in research do not want rivals to benefit from their investment without contributing; the public wants drugs to be as cheap as possible and people of a generous spirit would like the poor countries of the world to benefit from research on purely humanitarian grounds; and investors in new companies will not provide funds unless they have some certainty that the newly created entity is protected from copying by rivals. Finding the correct balance between all these interests is far from easy.

Scientists are naïf if they take a simplistic view. Often they see themselves as particularly exploited, but even that is not universally true and it is worth remembering that there are academic rogues who are just as malevolent as the most avaricious companies.