Erik Iverson: Biden administration patent policy would hurt Wisconsin tech sector

Clean energy took a huge step forward at the end of 2022 when scientists crashed together hydrogen isotopes to achieve fusion ignition for the first time. The old joke that fusion will always be 50 years away no longer applies. The world could have cheap, clean, limitless power in our lifetimes.

Realta Fusion right here in Madison is one of the companies advancing this revolutionary technology. Realta was spun out of research in the UW-Madison Physics Department, and my organization, the Wisconsin Alumni Research Foundation, is proud to be an early investor.

Unfortunately, a policy change proposed by the Biden administration threatens to derail not only Realta but any company developing innovative technologies based on patented university research.

The proposal would allow the government to appropriate products that have been patented by universities and developed with the resources of private companies, if the underlying research received any federal funding and the products are deemed unreasonably priced. Officials have so far given no indication of what constitutes a “reasonable” price.

The framework relies on a strained misinterpretation of the 1980 Bayh-Dole Act’s “march-in” provision, which permits the government to forcibly relicense federally funded patents under certain rare circumstances, such as when a licensee of a patent makes no effort to develop a real-world product. But the law’s drafters stated explicitly that price does not trigger marching in.

To understand what’s at stake, consider WARF’s track record of enabling UW-Madison research to solve the world’s problems. We pioneered the university patenting office in 1925 and have been supporting the development of technologies based on UW-Madison research ever since.

Our results: More than 4,200 patents assigned to WARF, 190 startups companies formed, untold jobs and investment brought to Wisconsin, and $4.4 billion of grant support for UW-Madison research, including the construction of 53 new research facilities. Today, WARF has more than 630 active licensing agreements with 55 more signed each year.

WARF and UW-Madison also have deep ties to Bayh-Dole. In 1968, we inked a historic agreement with the government that allowed our university to retain patents on discoveries funded by federal grants. Twelve years later, that agreement provided the basic framework for Bayh-Dole.

From WARF’s founding in 1925 through 1980, we had been issued less than 350 patents. Since 1980, we’ve been issued almost 4,000. WARF’s post-1980 success is no coincidence. It’s a direct result of Bayh-Dole.

We’re far from alone. Bayh-Dole benefits universities in every region of the country. The “tech transfer” system the law established has generated $1.9 trillion in industrial output and created 6.5 million jobs in just the last 25 years. University discoveries have spawned spin-off companies that have produced breakthrough medicines, medical devices, touch screens and even the Google search engine.

The Biden administration’s framework will threaten similar success in the future by making it harder for universities to attract private sector licensing partners. Few start-ups and investors would be willing to risk millions of dollars transforming a patent into a product if the government can relicense that patent to a rival firm that can charge customers less only because they spent none of the research and development costs.

Despite the rhetoric about “lowering drug prices,” the new rules would apply to every technology, from medicines and electric vehicles to quantum computing and fusion. Any slowdown in innovation and investment undermines President Joe Biden’s goals for economic growth and global competitiveness.

For WARF, patents and licensing agreements are more than legal documents. They are the foundation of the decades-long relationships we build with campus inventors, entrepreneurs, investors and corporate partners. Using march-in rights to set prices would threaten those relationships by allowing the government to overrule public-private agreements years after they were signed.

The new framework ignores years of input from experts. Prior to the guidelines being issued, federal agencies concluded a review of Bayh-Dole begun in 2016 with close collaboration from universities. They found no legal justification to redefine march-in rights as a price-control tool. Independent legal research supports the same conclusion.

The Biden administration should listen to the experts. If this march-in proposal goes forward, Wisconsin companies, consumers and patients will pay the price.