Copyright 1999, Council on Governmental Relations. This document was prepared by the Council on Governmental Relations, primarily for the information of and use by its members. However, COGR encourages the use of its material by other members of the higher education community by inviting electronic linkage to the COGR homepage. Direct reproduction or display of the material for purposes of sale or profit is prohibited without the written consent of COGR.
COUNCIL ON GOVERNMENTAL RELATIONS
The transfer of new technology from university laboratories to the private sector has a long history and has taken many different forms. The current national emphasis on this activity, however, can be dated to the 1980 enactment of P.L. 96-517, The Patent and Trademark Law Amendments Act, more commonly known as the Bayh-Dole Act, and amendments included in P.L. 98-620, enacted into law in 1984.
This brochure reviews the Bayh-Dole legislation, the implementing regulations that have evolved, and the major issues associated with complying with the law and related regulations. It also highlights the significant benefits of the Bayh-Dole Act that impacts have occurred to date.
Technology transfer--the transfer of research results from universities to the commercial marketplace for the public benefit--is closely linked to fundamental research activities in universities. Although a handful of U.S. universities were moving science from the laboratory to industrial commercialization as early as the 1920s, academic technology transfer as a formal concept, is said to have originated in a report entitled "Science - The Endless Frontier" that Vannevar Bush wrote for the President in 1945. At that time, the success of the Manhattan Project had demonstrated the importance of university research to the national defense. Vannevar Bush, however, also recognized the value of university research as a vehicle for enhancing the economy by increasing the flow of knowledge to industry through support of basic science. His report became instrumental in providing a substantial and continuing increase in funding of research by the federal government. It stimulated the formation of the National Institutes of Health (NIH), the National Science Foundation (NSF), and the Office of Naval Research (ONR). Due to the success of these and other agencies, the funding of basic research by the federal government is now considered to vital to the national interest.
In the 1960s and 1970s, there was much study and debate surrounding federal patent policies. A major concern was the lack of success by the federal government in promoting the adoption of new technologies by industry. There was no government-wide policy regarding ownership of inventions made by government contractors and grantees under federal funding. Inconsistencies in policies and practices among the various funding agencies resulted in a very limited flow of government-funded inventions to the private sector. In 1980, the federal government held title to approximately 28,000 patents. Fewer than 5% of these were licensed to industry for development of commercial products. 
This problem was due, in part, to restrictions imposed on the licensing of new technologies and reluctance on the part of the agencies to permit ownership of inventions to vest in universities and other grantees. The government would not relinquish ownership of federally funded inventions to the inventing organization except in rare cases after petitions had moved through a lengthy and difficult waiver process. Instead, the government retained title and made these inventions available through non-exclusive licenses to anyone who wanted to practice them.
As a result, companies did not have exclusive rights under government patents to manufacture and sell resulting products. Understandably, companies were reluctant to invest in and develop new products if competitors could also acquire licenses and then manufacture and sell the same products. Accordingly, the Government government remained unsuccessful in attracting private industry to license government-owned patents. Although taxpayers were supporting the federal research enterprise, they were not benefiting from useful products or the economic development that would have occurred with the manufacture and sale of those products.
In 1980, however, legislators and the administration concluded that the public would benefit from a policy that permitted universities and small businesses to elect ownership of inventions made under federal funding and to become directly involved in the commercialization process. This new policy would also permit exclusive licensing when combined with diligent development and transfer of an invention to the marketplace for the public good. It was understood that stimulation of the U.S. economy would occur through the licensing of new inventions from universities to businesses that would, in turn, manufacture the resulting products in the U.S.
With the passage of the Bayh-Dole Act, colleges and universities immediately began to develop and strengthen the internal expertise needed to effectively engage in the patenting and licensing of inventions. In many cases, institutions that had not been active in this area began to establish entirely new technology transfer offices, building teams with legal, business, and scientific backgrounds. These activities continue to accelerate nationally as the importance of the Bayh-Dole Act becomes fully appreciated. Evidence of this is reflected in the fact that the membership of the Association of University Technology Managers (AUTM) increased from 200 in 1990 to 800 in 1999. 691 in 1989 to 2,178 in 1999. In 1979, the year before passage of the Bayh-Dole Act, the Association counted only 113 members.
University technology transfer offices perform a wide variety of highly specialized functions related to the patenting and licensing of inventions. In addition, these offices also perform a vital function at their institutions related to the formation of research partnerships with industry, and in negotiating the exchange of research materials and research tools.
In recent years, the wisdom of the new federal policy has become increasingly apparent. Growing numbers of universities have demonstrated that their newly formed technology transfer programs are effective in licensing inventions made with federal support to commercial partners. As a result, many new technologies have been diligently and successfully introduced into public use.
Another significant result of the Bayh-Dole Act is that it provides a strong incentive for university-industry research collaborations. At the national level, industry support for research and development at universities represents less than 7% of the total funding of university-based research. While small compared to the 60% provided by federal agencies, this private investment in the creativity of universities, including professors, students and staff, drives a form of technology transfer that is increasingly important to industry. The investment by industry rests on a secure footing because is it is based on the principles and provisions of the Bayh-Dole Act.
The principles of the Bayh-Dole Act were the result of years of intense and emotional debate, dealing with fundamental concerns. The record shows that the debate included such issues as whether exclusive licenses would lead to monopolies and higher prices; whether taxpayers would get their fair share; whether foreign industry would benefit unduly; and whether ownership of inventions by a contractor is anti-competitive. Safeguards were hammered out in numerous legislative drafts. It is certain that the Act became much stronger because of the thorough debate that took place prior to its passage.
From the beginning, it was obvious that economic interests rather than academic science interests were the driving forces for the change in government policy. As early as October l963, President Kennedy had issued a Presidential Memorandum and Statement of Government Policy. This memorandum marked the beginning of an intense discussion about the effect that government patent policy had on commercial utilization of federally sponsored inventions, on industry participation in federally sponsored R & D programs, and on business competition in the marketplace. It was not until industry, academe and the government recognized that their individual interests could be reconciled in the pursuit of commercialization that passage of the Bayh-Dole Act became possible and ended years of debate.
Until the Bayh-Dole Act became effective on July 1, 1981, the federal agencies kept tight control over intellectual property rights resulting from funded research, premised largely on traditional expectations rooted in the procurement process. After the passage of the Bayh-Dole Act, codifying and implementing it at the agency level was not an easy process. As the success of the Act became quickly apparent, subsequent legislative initiatives broadened its reach even further. These initiatives and the technical amendments involved are described in the Appendix.
Procedural details, other rights and obligations not cited above, and further information regarding these matters, can be found in 37 CFR Part 401 and 35 USC 200-212.
On November 8, 1994 the NIH published a notice in the Federal Register (59 FR 55673) entitled: "Developing Sponsored Research Agreements: Considerations for Recipients of NIH Research Grants and Contracts." This document is intended to ensure compliance with the requirements of the Bayh-Dole Act by providing NIH awardees with guidance in developing sponsored research agreements with commercial entities when that research may be partially funded by NIH or other federal agencies.
The NIH also issued two policy statements in the NIH Guide (Volume 25, Number 16, May 17, 1996; and Volume 25, Number 29, August 30, 1996) that establish procedures for managing certain patentable inventions. These rules apply to situations in which a university wishes to elect title to biological materials, which may be patentable, but does not want to file a patent application because the cost is not justified or because the patentability of the materials appears to be weak.
In May l999, the NIH published a proposed set of guidelines for grantees on the subject of obtaining and disseminating biomedical research resources. This guidance is intended to help avoid or minimize problems that sometimes result from the dissemination and use of proprietary research tools that involve the competing interests of intellectual property owners and research users. NIH issued this guidance because, as a public sponsor of biomedical research, it has a dual interest in accelerating scientific discovery through the use of research tools and facilitating product development.
When a university elects title to an invention, it assumes responsibility for taking certain actions to properly manage the invention and provide certain reports to the government regarding the invention as outlined in the section on Current Regulations above. Compliance with these obligations is critical to the success of, and ongoing federal support for, the Bayh-Dole Act. As public and Congressional interest in technology transfer increases, and as the volume of activity continues to grow, government reviews of the practices of institutions involved in the process of commercialization of inventions will be conducted more frequently. Accordingly, there will be an increasingly greater need for attention to the details involved in meeting Federal reporting obligations and other requirements imposed by 37 CFR Part 401.
Each Federal agency is responsible for maintaining and monitoring its own repository of information on inventions developed under its funding. In October 1995, the NIH established the "Interagency Edison" system, an electronic reporting system whereby universities can enter data directly into a national database to satisfy their reporting obligations to those Federal agencies participating in the system.
Federal agencies have the authority to periodically audit grantees and contractors for compliance with the Bayh-Dole Act. The General Accounting Office (GAO) in turn may also conduct studies to assess how effectively Federal agencies are overseeing their grantees and contractors in the management of government-funded inventions. 35 U.S.C. Section 202(b)(3) requires the Comptroller General to review the implementation of the Bayh-Dole Act at least once every five years and report its findings to the Judiciary Committees of the House and Senate. In 1991, the GAO focused its review on the licensing of federally-owned inventions (GAO/RCED-91-80 issued April 3, 1991). In 1992, the GAO reviewed federal agency mechanisms for controlling inappropriate access to federally funded research results (GAO/RCED-92-104 issued May, 1992). More recently, the GAO reviewed the implementation of the Bayh-Dole Act by research universities (GAO/RCED-98-126 issued May 7, 1998). In 1999, GAO issued a report on the number and characteristics of inventions licensed by six federal agencies (GAO/RCED-99-173, issued June 1999) and a report on compliance with reporting requirements for federally sponsored inventions (GAO/RCED-99-242, issued August 12, 1999). The GAO reports can be obtained from the Government Printing Office. See Web Resources below.
In order to assist grantees in their efforts to maintain compliance with regulatory compliance of the Act, some federal agencies have periodically issued guidance to the grantee community. An example is a question and answer document regarding invention reporting, printed in the NIH Guide to Grants and Contracts in l995. (NIH Guide, Vol.24, No.33, September 22, l995).
University patenting and licensing efforts under the Bayh-Dole Act have fostered the commercialization of many new technological advances that impact the lives of millions of people across the nation. A recent national survey conducted by AUTM  reports that 70% of the active licenses of responding institutions are in the life sciences--yielding products and processes that diagnose disease, reduce pain and suffering, and save lives. Most of the inventions involved were the result of Federal funding. While it would be impossible to list all such inventions, a few examples of technologies and products originating from federally funded university discoveries include:
These examples of successful new technologies demonstrate that a strong national infrastructure to support technology transfer has been established at academic institutions across the nation since passage of the Bayh-Dole Act. In 1980 there were approximately 25-30 universities actively engaged in the patenting and licensing of inventions. It is estimated that there has been close to a ten-fold increase in institutional involvement since then. National survey reflects the impact of this growth in activity:
In summary, the Bayh-Dole Act and its subsequent amendments created incentives for the government, universities, and industry to work together in the commercialization of new technologies for the public benefit. The success of this three-way partnership cannot be understated.
On a nation-wide basis, the results support the conclusion that the Bayh-Dole Act has promoted a substantial increase in technology transfer from universities to industry, and ultimately to the public. Certainty of title to inventions made under federal funding is perhaps the most important incentive for commercialization. Implementation of uniform patenting and licensing procedures, however, combined with the ability of universities to grant exclusive licenses, are also significant ingredients for success. This combination of factors led to a tremendous acceleration in the introduction of new products through university technology transfer activities.
Certainty of title to inventions made under Federal funding has one other significant benefit-it protects the right of scientists to continue to use and to build on a specific line of inquiry. This is fundamentally important to research-intensive institutions because of the complex way in which research is typically funded, with multiple funding sources. The retention of title to inventions by the institution is the only way of ensuring that the institution will be able to accept funding from interested research partners in the future. This is a critically important benefit of the Bayh-Dole Act that is not widely understood.
As Vannevar Bush foresaw, enormous benefits to the U.S. economy have occurred because of Federal funding of research. These benefits have been significantly enhanced by the adoption of federal policies encouraging technology transfer. Such policies have led to breathtaking advances in the medical, engineering, chemical, computing and software industries, among others. The licensing of new technologies has led to the creation of new companies, thousands of jobs, cutting-edge educational opportunities and the development of entirely new industries. Thus, the Bayh-Dole Act continues to be a national success story, representing the foundation of a successful union among government, universities, and industry.
http://search.info.nih.gov/ (search for NIH Bayh-Dole-related policies)
http://www.access.gpo.gov (GAO and other federal reports)
http://220.127.116.11/ (Interagency Edison project)
http://www.autm.net/ (AUTM home page)
http://www.cogr.edu/ (COGR home page)
The Bayh-Dole Act and subsequent amendments provide the basis for current university technology transfer practices. The federal patent and licensing policy was shaped by four events that occurred between 1980 and 1985.
On March 18, 1987 (52 FR 8552), all of the relevant provisions--the Bayh-Dole Act, the amendment, OMB Circular A-124, and the Presidential Memorandum--were finalized and consolidated in a rulemaking published by the Department of Commerce-appearing at 37 CRF Part 401. These regulations, augmented by the NIH guidelines discussed in this brochure, specify the rights and obligations of all parties involved and constitute the operating manual for technology transfer on a national basis.
 U.S. Government Accounting Office (GAO) Report to Congressional Committees entitled "Technology Transfer, Administration of the Bayh-Dole Act by Research Universities" dated May 7, 1998.
 The term "university" or "universities" as used in the text applies to all non-profit grantees /contractors.
 We gratefully acknowledge the courtesy and cooperation of AUTM in providing these statistics. See also AUTM Licensing Survey FY1991-1995 and subsequent years.
 In 1997, federal agencies provided an estimated $14.3 billion or about 60% of total support for research performed at universities. Academic institutions provided $4.5 billion of their own funds. State and local governments and nonprofit organizations each contributed $18.1 billion and industry $1.7 billion. Although the proportion of academic R&D expenditures supplied by industry has been rising fairly steadily, it still only represents a fraction (7%) of total academic R&D support. Science and Engineering Indicators 1998. National Science Board: 4-8 and 4-9.
 Presidential Memorandum and Statement of Government Patent Policy, issued October 10, 1963. Published in the Federal Register, Vol. 28, No. 200.
 The Secretary of Commerce delegated this authority under 35 USC 206 to the Assistant Secretary for Productivity, Technology and Innovation.
 Other circumstances, not clearly elucidated in the regulations, may be invoked by the government. Further detail can be found in 37 CFR Part 401.3; general appeal mechanisms are found in Part 401.4.
 March-in rights, including appropriate procedures, are described at 37 CFR Part 401.6.
. Notice for Public Comment, 64 FR 100, 28205-28209.
 AUTM Licensing Survey, Fiscal Year 1997.
 AUTM press release December 17, 1998.