Congressional interest in facilitating U.S. technological innovation led to the passage of P.L. 96 - 517 , Amendments to the Patent and Trademark Act, commonly referred to as the "Bayh-Dole Act" after its two main sponsors former Senators Robert Dole and Birch Bayh. Under this 1980 law, as amended, title to inventions made with government support may be provided to the contractor if that contractor is a small business, a university, or other non-profit institution. The legislation is intended to use patent ownership as an incentive for private sector development and commercialization of federally funded research and development (R&D). As a response to congressional efforts to create a unified government patent policy pertaining to inventions made with federal support, the Bayh-Dole Act promotes cooperative activities among academia, small business, and industry leading to new products and processes for the marketplace. This report discusses the rationale behind the passage of P.L. 96 - 517 , its provisions, and implementation of the law. Observers generally agree that the Bayh-Dole Act has successfully met its objectives. However, some experts argue that the issues associated with the law's patent policies should be revisited given the current R&D environment. Much of the renewed interest is a result of the legislation's effect on the biotechnology and pharmaceutical industries where critics assert that the private sector is receiving benefits to the detriment of the public interest. Other analysts, particularly in the defense arena, maintain that the existing rights maintained by the government are too restrictive and prevent industry from meeting national needs. Many of these issues and concerns are similar, if not identical to those addressed during the 15 to 20 years of deliberation prior to enactment of the law. These too will be explored to provide a context for current discussions. In the late 1970s, the United States Congress was involved in a series of legislative debates over ways to promote private sector development and utilization of federally funded research and development. This was soon followed by expanded congressional interest in additional means to foster technological advancement and commercialization in industry. During the 1980s and 1990s, various initiatives resulted in laws designed to encourage increased innovation-related activities in the business community and to remove barriers to technology development, thereby permitting market forces to operate. Laws promoting cooperative R&D and/or joint ventures involving the federal government, industry, and academia have been a cornerstone of the majority of these efforts and include legislation that created a system to transfer technology from federal laboratories to the private sector; implemented tax incentives for collaborative work; instituted direct and indirect government support for increased R&D; and changed government patent policy to provide an economic inducement for commercialization of federally funded technology, the subject of this report. P.L. 96 - 517 , the Bayh-Dole Act, was one of the first of these initiatives. Prior to 1980, only 5% of government owned patents were ever used in the private sector although a portion of the intellectual property portfolio had potential for further development, application, and marketing. The Bayh-Dole Act was constructed, in part, to address the low utilization rate of these federal patents. The House report to accompany H.R. 6933 (the House counterpart to the Senate bill that eventually became the Bayh-Dole Act) noted that, at the time the bill was considered, 26 different agency policies existed regarding the use of the results of federally funded R&D. Generally the government retained title to inventions made with government support whether the research was performed in federal laboratories, in universities, or by individual companies. Licenses to use government patents were then negotiated with firms either on a non-exclusive basis (meaning additional companies could use the technology) or, more rarely, for the exclusive use by one manufacturer. However, it was widely argued that without title (or at least an exclusive license) to an invention and the protection it conveys, a company would not invest the additional, and often substantial time and money necessary to commercialize a product or process for the marketplace. In 1980, the federal expenditure for research and development totaled $55.5 billion (in constant 2000 dollars). The money typically was used to support research and development to meet the mission requirements of the federal departments and agencies (e.g., defense, public health, environmental quality) or to finance work in areas where there was an identified need for research, primarily basic research, not being performed in the private sector. While the government's investment led to many new inventions that have profoundly influenced our society, many in Congress were of the opinion that additional applications could be pursued by the private sector if provided the proper incentives. The intent of the new law was to replace this situation with a "single, uniform national policy designed to cut down on bureaucracy and encourage private industry to utilize government financed inventions through the commitment of the risk capital necessary to develop such inventions to the point of commercial application." Expanded technology commercialization was to be accomplished by employing the patent system to augment collaboration between universities (as well as other nonprofit institutions) and the business community to ensure that inventions are brought to market. The Bayh-Dole Act also provides for the increased participation of small firms in the national R&D enterprise under the assumption that these companies tend to be more innovative than larger companies. The patent system was created to promote invention and innovation. Article I, Section 8, Clause 8 of the U.S. Constitution states: "The Congress Shall Have Power ... To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.... " Patents are widely believed to encourage innovation by simultaneously protecting the inventor and fostering competition. They provide the inventor with a right to exclude others, temporarily, from use of the invention without compensation. Patents give the owner an exclusive right for 20 years (from date of filing) to further develop the idea, commercialize a product or process, and potentially realize a return on the initial investment. Concurrently, the process of obtaining a patent places the concept in the public arena. As a disclosure system, the patent can, and often does, stimulate other firms or individuals to invent "around" existing patents to provide for parallel technical developments or meet similar market needs. Not everyone agrees that the patent system facilitates innovation. Critics argue that patents provide a monopoly which induces additional social costs. Others assert that the patent system is unnecessary due to market forces that already suffice to create an optimal level of innovation. The desire to obtain a lead time advantage over competitors, as well as the recognition that technologically backward firms lose out to their rivals, may well provide sufficient inducement to invent without the need for further incentives. Some commentators believe that the patent system encourages industry concentration and presents a barrier to entry in some markets and that cross licensing between companies can result in exploitation of other markets. Still other observers believe that the patent system too frequently attracts speculators who prefer to acquire and enforce patents rather than engage in socially productive activity. The importance of patents varies among industrial sectors. Patents are perceived as critical in the drug and chemical industries in part because of the ease of replicating the finished product. While it is expensive, complicated, and time consuming to duplicate an airplane, it is relatively simple to chemically analyze a pill and reproduce it. Studies have found that in many other industries the protection offered by patents is diminished by the ability to invent around the patent and limited by the disclosure of vital information in the patent itself. In the aircraft and semiconductor industries, patents have not been the most successful mechanism for capturing the benefits of investments. Instead, lead time and the strength of the learning curve were determined to be more important. Later studies bear this out; secrecy and lead time were deemed to have greater effect than patents in the semiconductor and related equipment industry, as well as the aerospace and machine tool industries, among others. Patents can provide an economic incentive for companies to pursue further development and commercialization. Studies indicate that research funding accounts for approximately one-quarter of the costs associated with bringing a new product to market. According to The Economist , "A dollar's worth of academic invention or discover requires upwards of $10,000 of private capital to bring [it] to market." Patent ownership is seen as a way to encourage the additional, and often substantial investment necessary for new goods and services, particularly in the case of small business. In an academic setting, the possession of title to inventions is expected to provide motivation for the university to license the technology to the private sector for commercialization in anticipation of royalty payments. Changes to the patent laws embodied in the Bayh-Dole Act had as an objective the facilitation of collaborative ventures between and among academia, industry, and government. In 1980, universities performed 14% of the R&D undertaken in the United States (similar to today); much of this the fundamental research basic to technological advance. The work is accomplished as part of the education process and provides training for scientists, engineers, and managers subsequently employed by the private sector. Universities, however, generally do not have the means of production necessary to take the results of research and generate marketable products. Such activities are carried out by industry. Thus, the emphasis in the Bayh-Dole Act on the promotion of cooperative efforts between academia and the business community. By providing universities with intellectual property ownership with which to pursue and structure collaborative ventures, the legislation is intended to encourage the two sectors to work together to generate new goods, processes, and services for the marketplace. Such joint work allows for shared costs, shared risks, shared facilities, and shared expertise. Prior to World War II, industry was the primary source of funding for basic research in universities. This financial support helped shape priorities and build relationships. However, after the war, the federal government supplanted the private sector as the major financial contributor and became the principal determinant of the type and direction of the research performed in academic institutions.