March in rights destroy the tech industry—chill investment and prevent development, shifts innovation to China.

The Biden Administration's Unprecedented Proposal for Government Intervention in Technology Companies under the Bayh-Dole Act

On December 7, 2023, the Biden administration released a request for information (RFI) regarding an unprecedented proposal for the government to take over the patents of start-ups and other companies where those patents are the byproduct of a federal grant. The proposal is based on a never-used provision of the Bayh-Dole Act -- exercising the government's so-called "march in" rights. The administration's proposal would apply to all technologies and all sectors of the economy and likely halt private sector investment in many early-stage, developing technologies.

➢ The proposal would affect any entity owning patents in any technology that arises from federally-supported research, ranging from semiconductors and quantum computing to agricultural and green technology.

➢ Although Bayh-Dole has always allowed the government to march-in and reclaim title to federally-funded inventions, administrations under both parties have never exercised this right -- understanding that the Act's intent was to allow seizure only for egregious failure to engage in developing federally-funded patents.

➢ Bayh-Dole transformed the practical utilization of inventions arising from federally-funded research. Before the Act, less than 4% of patents resulting from federal funding were licensed and put to work. After the Act, it is estimated that the tech transfer it enabled has added nearly $2 trillion to the U.S. GDP, along with countless life-changing innovations.

➢ The administration's proposal would empower federal bureaucrats to second-guess the business strategy and adequacy of a licensee's marketplace progress rather than the research institute that actually developed the technology and understands it better.

➢ Under the administration's proposal, some large market incumbents (including foreign entities with U.S. operations) will be permitted to regularly petition the government to march-in and transfer patents to these incumbents. This will hurt the small companies and start-ups that are the biggest licensees of federally-funded patents and that take the risk of developing federally-funded inventions.

➢ Under the administration's proposal, VCs will again refrain from investing in companies with federally-funded patents -- because the more successful such a company is, or the more promising the invention, the more likely it is to be a target for government march-in. Investors cannot afford to take that chance.

➢ The administration's proposal -- if not affirmatively rejected and withdrawn -- will chill private investment in federally-funded patents just as the U.S. is fighting to maintain its global technological leadership. Moreover, undeveloped federally-funded patents will provide a blueprint for state-driven economies like China, which can direct funds to commercialize the inventions sitting unused on the shelves of America's research institutions for their own benefit.

The administration's misguided initiative would decimate America's innovation economy and must be stopped before it goes any further.