The Patent and Trademark Law Amendments Act of 1980 is commonly referred to as the “Bayh-Dole Act” after the bipartisan sponsors Birch Bayh and Bob Dole. The Bayh-Dole Act was intended to enable contractors of research funding agreements with the U.S. government to commercialize their government-funded inventions by conferring to the contractor certain patent rights for inventions arising from government funding subject to certain conditions.[1] The Bayh-Dole Act has certainly been a success, with over 162,000 patents arising from federal contracts from 1996 to 2020.[2]
The Bayh-Dole Act provides a framework for universities, nonprofit institutions, and small businesses that receive government grants—collectively referred to as “contractors”—to “elect to retain title” in inventions resulting from that research.[3] Contractors electing ownership are expected to seek patent protection on inventions they choose to own in order to effectuate commercialization of those inventions and report progress toward commercialization to the funding agency (which is presently effectuated through the iEdison website portal).[4]
Since its enactment, the Bayh-Dole Act has led to the formation of a significant number of startup companies, lifeextending drugs, and, unfortunately, resentment. Universities often receive royalties from their licensed patents, thereby impacting drug prices. Recent presidential administrations have sought to utilize the Bayh-Dole Act to advance their public policy purposes. While ChatGPT or Wikipedia can quickly summarize the Bayh-Dole Act, this discourse will further explain from a former university technology transfer manager’s perspective the etiology and intentions of the Bayh-Dole Act in an attempt to dissuade its application to achieve short-term political advances.
Act Enables Commercialization of Government-Funded Inventions for Public Benefit
The Bayh-Dole Act is the fundamental legal structure presently underlying the licensing of government-funded inventions to nongovernment entities for purposes of commercialization. Before the implementation of the Bayh-Dole Act, there were certain federal regulations that required funding contracts to include clauses to grant invention rights to either the federal government or to federal contractors and their inventors should the funding agency determine that the public interest was better served by allowing the contractor or inventor to retain exclusive rights to the invention. The regulations, unfortunately, were administered piecemeal by federal agencies.[5]
The result was that very few drugs were developed by government funding. A 1998 report by the General Accounting Office found that “fewer than 5 percent of the 28,000 patents being held by federal agencies had been licensed.”[6] In comparison, in a recent report by the University of California technology transfer office, 238 patents were licensed from 1,570 patents obtained in 2022, yielding a license rate of around 15%, a threefold increase from before the Bayh-Dole Act.[7]
The Bayh-Dole Act attempted to minimize confusion by applying uniform regulations to both government-funded inventions by contractors and government-funded inventions by the federal government by decentralizing the management of these inventions from the federal government directly into the hands of their creating institutions.
Historically, the federal government funded basic science education and research at high levels during World War II. Little of this funding resulted in commercialized products, in particular drug products, for the American public. Prior to the passage of the Bayh-Dole Act in 1980, companies in European countries were more productive at commercializing drugs than companies in the United States.[8] In 1980, companies headquartered in the United States were responsible for less than 10% of all new drug launches, yet by 2025 U.S. companies had discovered, patented, and conducted clinical research to achieve regulatory approval for 46% of the 634 novel drugs approved globally from 2015 to 2025, and this was twice the output of all companies headquartered in Europe.[9] It is more than coincidental that the United States has become a larger global promulgator of approved drugs after the passage of the Bayh-Dole Act.
The Bayh-Dole Act is codified in 35 U.S.C. §§ 200–212, and is implemented by 37 C.F.R. part 401 for federal funding agreements with contractors and 37 C.F.R. part 404 for licensing of inventions owned by the federal government.
Act Includes Guardrails to Ensure Public Receives Benefit
Expectedly, the Bayh-Dole Act includes certain provisions that ensure the public receives the benefit of any inventions arising from a federal funding contract. These provisions impose certain obligations on contractors in addition to an onerous reporting requirement. For example, the contractor must grant a nonexclusive, irrevocable, nontransferable, worldwide, fully paid-up license to the government to practice or have practiced for or on behalf of the United States any invention arising from the contract.[10] In addition, under 35 U.S.C. § 203, the government retains “marchin” rights to government-funded inventions, and under certain criteria, the government can require a contractor to grant a license to a third party or grant such a license itself. Finally, the “public” receiving the benefit of the bargain is the United States, and so the Bayh-Dole Act includes domestic manufacture requirements.[11] The Bayh-Dole Act also expresses a “preference,” but not an obligation, for contractors to license or assign their patent rights to small businesses.
To effectuate commercialization of any technology developed from a federal contract, the Bayh-Dole Act requires the contractor to make an election to retain rights to any invention.[12] Should the contractor decline to retain such rights, the rights to the invention revert entirely to the federal government, or may be granted to the inventor.[13]
Further, the Bayh-Dole Act requires contractors, within one year of developing a technology, to file a patent application on the invention. Should the contractor decline to pursue a foreign Patent Cooperation Treaty (PCT) application, the right to do so reverts to the federal government.[14] Thus, there could exist a situation where a contractor has rights to a U.S. patent, but the federal government has sublicensable rights to the same family member application in foreign countries. As practitioners are aware, this presents an issue of possible inconsistent patent prosecution arguments that could imperil a patent under challenge. Thus, federal contractors (grant recipients) should strongly consider their foreign PCT filing strategy when pursuing patent coverage of inventions developed under federal funding.
Small business contractors will likely commercialize their inventions directly, while universities and some nonprofits will likely out-license patent rights to their inventions to companies that will carry forward the commercialization efforts. The out-license process today is very common and buttresses the existence of university technology transfer offices and a professional organization, AUTM (formerly referred to as Association of University Technology Managers[15]).
The consequence of failing to timely report (e.g., through iEdison, which is managed by the National Institute of Standards and Technology (NIST)) any invention developed through the Bayh-Dole Act is that the federal government may receive title to any such invention.[16] Thus, when conducting due diligence, practitioners may want to inquire as to whether the contractor complied with the onerous reporting rules, as the title to any patent application covering an invention may be at risk.
To put the public on notice that a patent is subject to unvested federal government rights, the Bayh-Dole Act also requires inclusion of a federal rights clause in a patent application covering an invention arising from a federal contract.[17] The absence of such a notification paragraph does not remove the rights of the federal government to the patent, however. The term “shall have” indicates the federal government has rights in the underlying patent regardless of whether the federal rights clause is included in the text of the specification of a patent. Thus, practitioners performing due diligence may want to be mindful of any undisclosed yet existent federal government rights to any patent that could have arisen from a federal contract.
March-In Rights Guardrail Could Negate Intent of Act If Improperly Exercised
The most publicly discussed aspect of the Bayh-Dole Act in recent years has been the provision of “march-in rights” to any patent arising from a federal contract.[18] Under 35 U.S.C. § 203(a), the federal government in all federal contracts
shall have the right . . . to require the contractor, an assignee or exclusive licensee of a subject invention to grant a nonexclusive, partially exclusive, or exclusive license . . . to a responsible applicant or applicants, upon terms that are reasonable under the circumstances, and if the contractor, assignee, or exclusive licensee refuses such request, to grant such a license itself.[19]
Were the federal government to take a contractor’s exclusive patent rights and license them to another entity, that contractor’s patent rights may be seen as ephemeral. Contractors (including their licensees) would not expend significant resources to commercialize an invention if the exclusive patent rights to the invention could be removed through exercise of march-in rights. If the intent of the Bayh-Dole Act was to effectuate commercialization of government-funded inventions, the existence of march-in rights would appear to negate such design. For reasons discussed, however, the likelihood of the federal government ever exercising its march-in rights is minimal, even though recent administrations have sought to apply march-in rights to further their public policy objectives.
The federal government may only exercise its march-in rights if it determines that action is necessary based on any
one of four statutory criteria:
(1) action is necessary because the contractor or assignee has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention in such field of use;
(2) action is necessary to alleviate health or safety needs which are not reasonably satisfied by the contractor, assignee, or their licensees;
(3) action is necessary to meet requirements for public use specified by Federal regulations and such requirements are not reasonably satisfied by the contractor, assignee, or licensees; or
(4) action is necessary because the [domestic manufacture] agreement required by section 204 has not been obtained or waived or because a licensee of the exclusive right to use or sell any subject invention in the United States is in breach of its agreement obtained pursuant to section 204.[20]
The first, second, and third criteria have been cited by some as the basis for exercising march-in rights to reduce drug prices.[21] High drug prices are allegedly not a “practical application” of the inventions because they limit drug access. The term “practical application” is not further clarified in the Bayh-Dole Act. This ambiguity has been cited by certain politicians and the Biden administration to apply march-in rights to reduce drug prices.
Senator Angus King (I-ME) proposed legislation in 2017 that would require the Department of Defense to issue compulsory licenses under Bayh Dole “whenever the price of a drug, vaccine, or other medical technology is higher in the U.S. than the median price charged in the seven largest economies that have a per capita income at least half the per capita income of the U.S.”[22]
In December 2023, the Biden administration proposed a framework to identify whether a licensed drug met the “practical application” test such that march-in rights should be exercised to remove a company’s exclusive patent rights.[23] The framework provided questions for a granting agency to consider when determining whether march-in rights should be exercised. Of greatest relevance to drug companies, the proposed questions would have an agency consider whether drug prices offered to the U.S. public are reasonable, in determining whether the first statutory criterion is met (whether effective steps have been taken to achieve practical application): “If the contractor or licensee has commercialized the product, but the price or other terms at which the product is currently offered to the public are not reasonable, agencies may need to further assess whether march-in is warranted.”[24]
While many commenters have criticized the misinterpretation of these march-in rights criteria for controlling drug prices, the most influential statements are those by the very authors of the Bayh-Dole Act, former Senators Birch Bayh and Bob Dole: “The law makes no reference to a reasonable price that should be dictated by the government. This omission was intentional; the primary purpose of the act was to entice the private sector to seek public-private research collaboration rather than focusing on its own proprietary research.”[25]
It should also be noted that the first criterion is the only criterion that does not apply to “licensees.” Licensees—not universities or nonprofit entities—set drug prices. Thus, march-in rights cannot be asserted against licensees for failure to achieve a “practical application” of a licensed invention.
While the federal government has march-in rights, it has never exercised them, even in instances where petitioners have requested that the government exercise its march-in rights. For example, in 1997, CellPro Inc. lost an infringement suit involving a patent to an invention funded by the National Institutes of Health (NIH) where the licensees of the technology had not yet obtained U.S. Food and Drug Administration (FDA) approval for a product.[26] CellPro then requested that NIH exercise its march-in rights and grant a license to CellPro so that its product could remain on the market. Although NIH acknowledged that CellPro’s device was the only FDA-approved product on the market, NIH denied CellPro’s petition, noting that the patentee had not immediately sought to enjoin CellPro and that the licensees were making reasonable efforts to commercialize their own product.
Since CellPro’s petition, several others have been submitted to NIH in unsuccessful attempts to obtain access to lower priced drugs. In one widely cited example, NIH turned down a 2016 petition to exercise its march-in rights where the petition cited the difference in drug pricing of Xtandi (enzalutamide) in the United States and in other high-income nations.[27] In denying the petition, NIH noted that Xtandi was widely available and there was no evidence that the drug was in short supply. There have been several other petitions since the CellPro matter in which petitioners have sought to force the federal government to exercise its march-in rights, but all have been declined at the executive branch level.
Finally, even if the federal government were to exercise its march-in rights against a contractor’s invention, the Bayh- Dole Act provides for an appeals procedure, including review by the U.S. Court of Federal Claims, such that the contractor is afforded due process before the federal government removes the contractor’s exclusive patent rights to the invention.[28] As the federal government has never exercised its march-in rights, there is no case law available to interpret the parameters of the criteria under which the federal government may justify exercising its march-in rights.
If the public policy were to reduce drug prices by taking over intellectual property (IP), there are other laws under which the government has more express rights than the march-in rights described in the Bayh-Dole Act. For example, the federal government has the right to exercise eminent domain under 28 U.S.C. § 1498(a) to take certain IP rights while paying a reasonable royalty, the Defense Production Act under 50 U.S.C. §§ 4501 et seq. allows the government to redirect manufacturing priorities during times of emergencies, and the Inflation Reduction Act includes mandated Medicare negotiation for the highest priced drugs.[29] Thus, if public policy were to reduce drug prices, the federal government has several alternative mechanisms other than exercising march-in rights under the Bayh-Dole Act.
In summary, while much discussed, march-in rights are unlikely to be successfully asserted by the federal government and thus should not be used as a vehicle to further public policy objectives outside of the commercialization of inventions arising from federal contracts.
Taxing Bayh-Dole License Royalties Risks Destroying the Act
Another attempted misuse of the Bayh-Dole march-in rights was proposed by the second Trump administration for applying a “patent tax” on universities for royalty income derived from subject inventions.[30] As described, this procedure would only apply to university contractors, so small business contractors (and their licensees and assignees) would not be affected. Secretary Howard Lutnick described the tax as a “return on investment” from the federal contracts.
The University of California technology transfer system recirculates a portion of its patent royalties back into university-funded research, and often the unsupported infrastructure to conduct such, thereby further catalyzing the discovery of new inventions. As Chief Justice Marshall noted, “the power to tax involves the power to destroy,”[31] and so a tax on licensing royalties will erode, if not destroy, the ecosystem developed by universities and nonprofit research institutions to advance commercialization of inventions created under the Bayh-Dole Act. The administration likely recognized the impact of such a proposed tax, and as of the date of this writing has withdrawn the proposal.[32]
The Future of the Act Relies on Allowing It to Remain as Precedent
Since the enactment of the Bayh-Dole Act, numerous startup companies have emerged, enabling the federal government to achieve practical application of government-funded inventions. According to the Bayh-Dole Coalition, between 1996 and 2020 through the Bayh-Dole Act, over 6.5 million jobs were supported by funding, over $1.9 trillion was contributed to the U.S. GDP from commercialized inventions, and over 19,000 startup companies were created.[33] Significant technologies developed under this law include nicotine patches, Google’s search technology, certain AIDS drugs, and high-resolution television displays.
With the success of the Bayh-Dole Act in improving commercialization of government-funded research, there should be little need to change the Act or interpret its provisions.
Ryan C. Smith, Ph.D., is a partner at Duane Morris, where he practices in the area of patent law. He has extensive experience in IP due diligence and U.S. and international patent prosecution in the areas of biotechnology and chemical arts. He can be reached at rcsmith@duanemorris.com.
Endnotes
1. 35 U.S.C. § 200 (“It is the policy and objective of the Congress to use the patent system to promote the utilization of inventions arising from federally supported research or development; to encourage maximum participation of small business firms in federally supported research and development efforts; to promote collaboration between commercial concerns and nonprofit organizations, including universities; to ensure that inventions made by nonprofit organizations and small business firms are used in a manner to promote free competition and enterprise without unduly encumbering future research and discovery; to promote the commercialization and public availability of inventions made in the United States by United States industry and labor; to ensure that the Government obtains sufficient rights in federally supported inventions to meet the needs of the Government and protect the public against nonuse or unreasonable use of inventions; and to minimize the costs of administering policies in this area.”).
2. Technology Transfer Infographic, AUTM (2025), https://autm.net/AUTM/media/SurveyReportsPDF/Survey%20Reports%20Images/AUTM-FY25-US-Infographic.pdf.
3. 35 U.S.C. § 202(a).
4. Invention Reporting (iEdison), Nat’l Insts. of Health SEED, https://seed.nih.gov/small-business-funding/small-businessprogram-basics/grant-policy/ip (last visited July 28, 2026).
5. See, e.g., H.R. Rep. No. 96-1307, pt. 1, at 3, 5 (1980); S. Rep. No. 96-480, at 2–3 (1979); Tech. Dev. Corp. v. United States, 597 F.2d 733, 745–46 (Ct. Cl. 1979); Mine Safety Appliances Co. v. United States, 364 F.2d 385, 387–93 (Ct. Cl. 1966).
6. U.S. Gen. Acct. Off., GAO/RCED-98-126, Technology Transfer: Administration of the Bayh-Dole Act by Research Universities 3 (1998), https://www.gao.gov/assets/rced-98-126.pdf.
7. Julia Busiek, UC Inventions Garnered More Patents Than Any Other University in the World Last Year, Univ. of Cal. (Feb. 15, 2024), https://www.universityofcalifornia.edu/news/uc-inventions-garnered-more-patents-any-other-university-world-last-year. The University of California system typically only licenses within the same year or year after an application has been filed, so this number is approximate.
8. David Michels et al., U.S. Int’l Trade Comm’n, Review of Global Competitiveness in the Pharmaceutical Industry 2–3 (1999), https://www.usitc.gov/publications/332/pub3172.pdf.
9. IQVIA Inst. for Hum. Data Sci., America’s Greatness in the Biopharmaceutical Sector: Sustaining U.S. Leadership 2 (2025), https://www.iqvia.com/-/media/iqvia/pdfs/institute-reports/americas-greatness-in-the-biopharmaceutical-sector/iqvia-institute-greatness-in-biopharma-2025-web.pdf.
10. 35 U.S.C. § 202.
11. Id. § 204 (subject to certain exceptions, the technology must “be manufactured substantially in the United States”).
12. Id. § 202(a) (“Each nonprofit organization or small business firm may, within a reasonable time after disclosure as required by paragraph (c (1) of this section, elect to retain title to any subject invention.”).
13. Id. § 202(d) (“If a contractor does not elect to retain title to a subject invention in cases subject to this section, the Federal agency may consider and after consultation with the contractor grant requests for retention of rights by the inventor subject to the provisions of this Act and regulations promulgated hereunder.”).
14. Id. § 202(c)(3) (“[T]he Federal Government may receive title to any subject inventions in the United States or other countries in which the contractor has not filed patent applications on the subject invention within such times.”).
15. Who We Are, AUTM, https://autm.net/about-autm/who-we-are/ (last visited July 28, 2026).
16. 35 U.S.C. § 202(c)(1) (“[T]he contractor [must] disclose each subject invention to the Federal agency within a reasonable time after it becomes known to contractor personnel responsible for the administration of patent matters, and . . . the Federal Government may receive title to any subject invention not disclosed to it within such time.”).
17. Id. § 202(c)(6) (“[T]he contractor [is obligated], in the event a United States patent application is filed by or on its behalf or by any assignee of the contractor, to include within the specification of such application and any patent issuing thereon, a statement specifying that the invention was made with Government support and that the Government has certain rights in the invention.”).
18. Stephen Ezell, Info. Tech. & Innovation Found., The Bayh-Dole Act’s Vital Importance to the U.S. Life-Sciences Innovation System 2–3 (2019), https://www2.itif.org/2019-bayh-dole-act.pdf.
19. 35 U.S.C. § 203(a) (emphasis added).
20. Id.
21. Peter S. Arno & Michael H. Davis, Why Don’t We Enforce Existing Drug Price Controls? The Unrecognized and Unenforced Reasonable Pricing Requirements Imposed upon Patents Deriving in Whole or in Part from Federally Funded Research, 75 Tul. L. Rev. 631 (2001); Peter Arno & Michael Davis, Paying Twice for the Same Drugs, Wash. Post, Mar. 27, 2002, at A21.
22. Joseph Allen, Proposal from Senator King Won’t Reduce Drug Prices, Just Innovation, IPWatchdog (July 17, 2017),
https://www.ipwatchdog.com/2017/07/17/senator-king-reduce-drug-prices-innovation/.
23. Request for Information Regarding the Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights, 88 Fed. Reg. 85593 (Dec. 8, 2023), https://www.federalregister.gov/d/2023-26930.
24. Id. at 85598 (emphasis added).
25. Birch Bayh & Bob Dole, Our Law Helps Patients Get New Drugs Sooner, Wash. Post (Apr. 10, 2002), https://www.washingtonpost.com/archive/opinions/2002/04/11/our-law-helps-patients-get-new-drugs-sooner/d814d22a-6e63-4f06-8da3-d9698552fa24/.
26. Off. of the Dir., Nat’l Insts. of Health, Determination in the Case of Petition of CellPro, Inc. (Aug. 1, 1997), https://www.techtransfer.nih.gov/sites/default/files/documents/policy/cellpro-marchin.pdf.
27. Letter from Lawrence A. Tabak, Dir., Nat’l Insts. of Health, to Robert Sachs and Clare Love (Mar. 21, 2023), https://www.techtransfer.nih.gov/sites/default/files/documents/pdfs/NIH_Decision_Xtandi_March-In_Request(2023).
28. 35 U.S.C. § 203(b).
29. Inflation Reduction Act of 2022, Pub. L. No. 117-169, 136 Stat. 1818, https://www.govinfo.gov/app/details/PLAW-117publ169.
30. A University Patent Royalty Tax Would Sabotage America’s Innovation Engine, Bay-Dole Coal. (Dec. 2025), https://bayhdolecoalition.org/wp-content/uploads/2025/12/One-Pager_-Impacts-of-Proposed-Patent-Royalty-Tax.pdf.
31. McCulloch v. Maryland, 17 U.S. 316, 431 (1819).
32. Aruni Soni, Lutnick Denies Plan to Add Value-Based Fee on US-Issued Patents, Bloomberg L. (Feb. 10, 2026), https://news.bloomberglaw.com/ip-law/lutnick-denies-plan-to-add-value-based-fee-on-us-issued-patents.
33. Technical Summary of the Bayh-Dole Act, Bayh-Dole Coal. (Oct. 2025), https://bayhdolecoalition.org/wp-content/uploads/2025/10/Technical-Summary-of-the-Bayh-Dole-Act.pdf.
(Landslide, Vol. 18, No. 4, June/July 2026 is available in full at the American Bar Association website, subscription required.)
