Commerce Moves to Take Cut of Research Patents

Commerce Secretary Howard Lutnick says he is looking to take a cut from university patents that result from federally funded research, going against the Bayh-Dole Act, a 1980 law that allows universities full ownership of such patents.

In a September interview with Axios, Lutnick argued that taxpayers should receive half the profit from university patents, comparing it to fully funding a private business.

Once the government starts taking that 50% cut, Lutnick said, “our social security system will be paid for and we won’t be a broke country running $2 trillion deficits, because we’re the richest country in the world, we’re just dopey,” adding, “We give away between $200 and $300 billion a year in grants.”

Lutnick said every U.S. university should be subject to such profit-sharing, with “a few universities to start and then a master deal.” Lutnick sent a letter to Harvard University in August regarding its patents and said he planned to send another to the University of California system.

The administration has so far struck deals with Columbia University and Brown University to restore federal funding and has been pursuing other university deals, the latest being the “Compact for Academic Excellence in Higher Education” offered first to nine higher ed institutions and now open to all. However, none of these mention patents.

The Commerce Department began implementing new patent-related policies soon after Lutnick’s interview, with the National Institute of Standards and Technology issuing a broad funding solicitation for which awardees may be required to issue royalties or otherwise share revenue with the Commerce Department “to ensure a return on investment to the government.”

In response to Lutnick’s remarks, the Bayh-Dole Coalition, which advocates for protecting the legislation, said taxpayers “already benefit greatly under the current system,” adding that the law has enabled nearly $2 trillion in economic output, supported 6.5 million jobs, and helped launch more than 19,000 startups since 1996.

The coalition added that lawmakers considered including a similar profit-sharing model in early versions of the Bayh-Dole Act, but abandoned it after federal agencies “correctly concluded” that it would deter licensing and commercialization.

Stephen Ezell from the Information Technology and Innovation Foundation think tank wrote in response to Lutnick’s remarks that the federal government receives 20 times more in tax revenues from university research parks than it would by taking half of university royalty revenues. The government also benefits from the “extensive innovations” produced and the tax revenue from “trillions in industrial output and millions of jobs created as a result of university tech transfer,” Ezell wrote.

However, some scholars have argued that the Bayh-Dole framework is ineffective, causing universities to prioritize profits rather than commercialization potential and even discouraging innovation overall. A 2018 article from Issues in Science and Technology theorizes that Bayh-Dole stifles biomedical innovation because the resulting exclusive licensing agreements prevent other university and industry scientists from using new basic knowledge. “More effective innovation policies would provide incentives for universities to make their commercializable discoveries freely available and to disseminate them widely,” the article states.

More recently, witnesses testifying before the House Science Committee have suggested that the Bayh-Dole framework needs improvement. “I actually think that some of the federal laws with respect to intellectual property need to change,” said Heather Wilson, president of the University of Texas at El Paso, at a hearing in February. “From my perspective, the value of the research as a university is in the research and the development of the PhDs through doing research. We do a lousy job of getting that IP out into companies. So things like Bayh-Dole may actually limit the amount of research that can be transferred out,” she added.

March-in on Harvard

The Bayh-Dole Coalition wrote a letter to President Donald Trump in March asking him to reverse actions from the Biden administration that infringe upon Bayh-Dole. Among these was a draft guidance from NIST that would permit agencies to exercise their “march-in rights” if a company’s product does not have a “reasonable” price. March-in rights, which are established in the Bayh-Dole Act, allow the funding agency to compel the patent owner or an exclusive licensee to grant a license to third parties in specific circumstances.

The Trump administration has not rescinded the NIST guidance. Moreover, Lutnick moved to exercise the Commerce Department’s march-in rights in his August letter to Harvard , potentially taking ownership of Harvard’s patents or granting licenses to third parties. The letter asserts that Harvard has failed to comply with regulations regarding timely disclosure and election of title, preferencing U.S. industry, and taking “effective steps to achieve practical applications of subject inventions.”

“If Harvard won’t honor the Bayh-Dole Act, then we will find someone who will,” Lutnick wrote on X. Harvard has not issued a response.

The Council for Innovation Promotion, a coalition focused on IP rights, criticized the move, adding that no administration has exercised its march-in rights before. “Just as no one would build a house on land they might lose, innovators and entrepreneurs will not invest in discoveries if their patent rights can be revoked at will,” C4IP Executive Director Frank Cullen said in a statement.

Lutnick’s letter is just one element of the Trump administration’s attacks on Harvard this year, which so far have included terminating all of the university’s federal grants — which have since been restored by court order— and considering debarment, which would prevent the university from receiving any federal funding or contracts.

Separately, other high-level members of the Trump administration have floated ideas for using march-in rights for other purposes. In an op-ed last year, Paul Dabbar and Ted Garrish, who now respectively serve as deputy secretary of commerce and assistant secretary for nuclear energy, suggested starting a China IP Initiative that would use march-in rights to prevent Chinese entities from illegally appropriating U.S. federally funded discoveries.