Biden Administration’s Patent Licensing Plan Threatens Small Businesses and Innovation
The Biden administration has recently unveiled draft guidance that could have far-reaching consequences for patent licensing agreements. While officials claim that the plan aims to reduce drug prices, its impact on small businesses across various sectors could be severe.
Bayh-Dole Act and Patent Rights
The proposed guidance centers around the Bayh-Dole Act, a 1980 law that allows universities, small businesses, and nonprofits to retain and leverage patent rights for discoveries funded by federal grants. This law empowers research institutions to license patents for further development and commercialization.
Previously, the government held the patent rights for discoveries resulting from federally funded research projects. However, this arrangement provided little incentive for the private sector to license these discoveries, as the government could have granted licenses to competing firms.
President Joe Biden is targeting bipartisan rules regarding patent licensing. The result could be devastating to small businesses.
(AP Newsroom)
Without intellectual property (IP) protections, investors and innovators would be hesitant to engage with discoveries, resulting in wasted taxpayer dollars. The Bayh-Dole Act has been instrumental in spurring America’s innovative economy by incentivizing businesses to bring federally supported discoveries to market.
From 1996 to 2020, the system created by Bayh-Dole contributed up to trillion in U.S. economic output and facilitated the launch of over 17,000 new startups. This success highlights the importance of property rights protections, particularly for small firms that take on the challenging task of licensing early-stage research and raising venture capital.
Threats to Small Businesses and Innovation
Small businesses play a significant role in patent-intensive industries, with 96% of firms falling into this category. However, without IP protections, raising capital and taking risks become much more challenging.
The Biden administration’s guidance instructs federal agencies to reinterpret a section of the Bayh-Dole Act concerning “march-in” rights. Currently, federal agencies can relicense patents on government-funded inventions in limited circumstances, such as when the original licensee fails to develop the discovery.
However, the administration’s interpretation suggests that federal agencies could invalidate exclusive patent rights if they deem a product’s price or terms unreasonable. This broad interpretation undermines the incentives for companies to invest capital and risks stifling innovation.
The Impact on Small Businesses
The consequences of the Biden administration’s plan would extend beyond the pharmaceutical industry. If federal agencies can invalidate patents based on pricing considerations, it could jeopardize countless entrepreneurial firms across all sectors.
Small business owners are concerned about the potential destruction of the innovation economy that Bayh-Dole has fostered. They hope that bipartisan support will emerge to counter this misguided proposal. Alternatively, they urge cooler heads at the White House to reconsider and withdraw this politically driven and economically destructive plan.
This success is a testament to the effectiveness of property-rights protections. Small firms disproportionately take on the difficult and risky work of licensing early-stage research and raising the venture capital that turns discoveries and inventions into real-world products.
The Biden administration’s patent licensing plan threatens to weaken U.S. innovation and competitiveness. It is essential for the long-term growth of the economy and the preservation of small businesses that this proposal is carefully reconsidered and revised.
Karen Kerrigan is the president & CEO of the Small Business & Entrepreneurship Council.
