The transfer of research from universities to the marketplace is not new. In fact, ideas originating in academia have crossed over into commerce for more than 100 years. In the 1940s, however, presidential adviser Vannevar Bush authored a widely read report titled Science: The Endless Frontier, which highlighted the need for government to support basic science research that could cross over to benefit industry, and, in turn, both the economy and the greater well-being of society. The foundation of the National Institutes of Health (NIH) and the National Science Foundation (NSF) were direct results of efforts by Bush and others to reinforce university research in the sciences and ensure practical applications of that research.

Although the U.S. government began to invest heavily in university-based research in the 1950s and 1960s, one stumbling block stood in the way of the flow of beneficial technologies that Bush had envisioned. The federal government owned patents stemming from government-supported work in universities, but no mechanisms were in place to encourage the transfer of these patents to industry. Moreover, as many as 100 separate federal agencies held these patents, each with different rules and regulations about transfer and license of rights.

By 1980, the U.S. government held more than 28,000 patents, most resulting from research work funded in universities and university-affiliated government laboratories. Less than 5% of these were licensed to private companies for development. To some extent this was the result of the byzantine process of granting licenses, but more important was the fact that the government held onto ownership of patents. Companies wishing to develop new products could never be entirely sure whether the patents would be renewed or even licensed to competing companies at the same time. Scientists working in universities found themselves researching topics with clear and beneficial applications but with no promise of significant remuneration for themselves or their institutions or even control over the ultimate disposition of patents resulting from their work.

To remedy this situation, a legislative decision was made to give up tight government control of ownership of patents resulting from federally funded research and actively encourage the commercialization of such efforts. The Bayh-Dole Act was passed in 1980, with substantial amendments dealing with implementation in 1984. Under the provisions of the act, universities could license inventions and research discoveries directly to business and work directly with companies on ongoing and mutually beneficial research projects. Almost overnight, university labs that had previously funded research exclusively through series of government grants, only to see the products of such research languish without further development, found themselves the focus of business interest and significant new sources of income.

Among the provisions of the Bayh-Dole Act as it is currently enforced are:

• Universities must have clear and explicit written agreements with faculty and staff about disclosure and ownership of inventions.
• Universities must notify the federal funding agency sponsoring research about every new invention within 2 months after the inventor notifies the university in writing. This is required for ALL inventions funded either partially or entirely by the government.
• Each university now may decide whether to keep ownership of the invention and has a 2-year window in which to decide.
• Universities must share the revenue from licensing inventions with the inventor(s) of record.
• Profits made by universities from licensing inventions must go exclusively to support scientific research or education.
• The university must file a patent application within 1 year of making this decision, and must also decide whether to file foreign applications.
• Universities must give preference to small businesses (ideally in the United States) in marketing and developing inventions. The result has been a tremendous upswing in the number of tech-to-market small businesses that spin-off university-based inventions.
• The U.S. government retains a "right to practice" or limited right to develop the invention "on behalf of the U.S.," a clause that is seldom invoked.
• It is the responsibility of the university to report to the government on ongoing efforts to commercialize and develop the invention.
• The government retains "march-in" rights to take title to an invention and grant licenses. This provision was made for circumstances in which a university fails to license or develop a potentially beneficial discovery or where a new discovery has significant public health or safety implications.
  

For more information, see the comprehensive assessment of the effects of the Bayh-Dole Act by David C. Mowery et al.

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