Over the weekend, I took my daughter and her best friend on a day trip from Northern Virginia to Hico, West Virginia. In just 120 minutes, we went from one of the statistically wealthiest areas in the U.S. to a residential neighborhood along one of the poorest roads in the region. My friend asked me why it was the way it was in West Virginia, and I could only reply, “What jobs do all your friends in Northern Virginia have?” She quickly responded, “Oh, most of them work at the Pentagon or Boeing. I know some kids whose parents go to Quantico.” This doesn’t answer why West Virginia is poorer, but it does explain Northern Virginia’s wealth. Its connection to the federal government is an economy in itself, and the tentacles of federal funding cover 61 square miles and the 10 counties known as the DMV.
Say what you want about Apple, a company that has irritated the US federal government with its dogmatic approach to consumer privacy and walled garden systems. We need more of that, not less.
Billions of dollars flow through Virginia and Maryland in the form of federal grants for research and development in technology, medicine, education and more, meaning there is hardly a microchip, vaccine, weapons system, satellite or AI tool that hasn’t directly or indirectly benefited from taxpayer dollars at some point in its development.
Government funding comes with conditions
This arrangement between the public and private sectors has historically been a boon for the US in the global economy, but it poses real risks to American innovation if certain norms are violated by lawmakers looking to score political points. The federal government could seize control of most patents for AI, microchip technology and pharmaceuticals, using a legal tool known as “march-in rights.”
As recently as last week, the Biden administration was under pressure from Democrats. Member of Parliament They can use march-in rights to lower the prices of medicines. This right is Bayh-Dole Act This law, enacted in 1980, gives the government the authority to take over patents on products developed with federal funds if those products are not fully available to the public.
Senators Elizabeth Warren (D-Mass.) and Angus King (I-Maine), along with Rep. Lloyd Doggett (D-Texas), sent a letter to Health and Human Services Secretary Xavier Becerra and Commerce Secretary Gina Raimondo urging them to quickly finalize guidance on the federal “right to march in.”
These Democrats see the use of march-in rights as a direct way to lower drug prices for consumers and would have observers believe it is merely a coincidence that it serves political advantage in an election year. Norms regarding “march-in rights” are essential.
This power exists, but has never been used. Some There have been numerous petitions over the past few decades urging the government to do so. As with most powers the federal government acquires, there is a good reason why this law was passed. The Bayh-Dole Act was originally enacted to encourage the commercialization of technological innovation by allowing universities and small businesses to retain patent rights on products developed with federal funds.
This allows many New Technologies Drugs ranging from a chemotherapy drug for cancer patients called Taxol to the common allergy drug Allegra and even the next generation of firefighting drones are being developed.
Federal agencies can theoretically use march-in rights to grant licenses for taxpayer-funded products if the following four conditions are met:
- The current licensees have not been able to achieve or are unlikely to achieve a “commercial application” of the invention.
- Action is required to address a “health or safety need.”
- This product must meet the “Public Use Requirements” set forth in Federal Regulations.
- This product is not primarily “made” in the United States.
It’s not surprising that the Biden administration is reluctant to let the market determine drug prices. debut A framework for how to leverage the Bayh-Dole Act to begin pricing certain drugs.
What could go wrong? (Everything.)
Most over-the-counter drugs on the market are the result of multiple patents held by their developers, rather than by researchers funded in part by the National Institutes of Health. In the latter scenario, there is always the possibility of government intervention and seizure of the patents.
That possibility scares innovators in some of the most important sectors of the American economy. High-risk ventures discourage companies from investing heavily. A good example of this is when the Federal Communications Commission introduced regulatory uncertainty into the broadband sector. This led to a 10% decrease Private investment in broadband has declined, and consumers across the country are experiencing reduced network coverage and reliability.
This could happen in the areas of artificial intelligence, microchips, and cloud computing. Federal money flows throughout these industries. Big companies like AMD, Intel, and Nvidia receive federal funding for AI and semiconductor research, and could be subject to march-in rights if their use is restricted. The government could be justified in seizing patents if it determines that the public interest or national security is at risk.
Consider what would happen if China were to eventually invade or blockade Taiwan, our tiny neighbor that produces 90% of the world’s supply of advanced chip technology. This would be a true emergency for sensitive government technologies used in consumer products and national security. The same could be said about the global race to develop AI technologies using federal research and development funds. If AI is not manufactured and deployed in a way that benefits the United States during a potential foreign war, the government could step in using march-in rights over products created under the Bayh-Dole Act.
In these scenarios, all norms limiting the government’s use of its power to seize patents would collapse, dramatically slowing the pace of innovation in the U.S. Even worse, the government could aggressively control these patented technologies and, when backed into a corner, award them to its most cooperative domestic partners.
Say what you want about Apple, a company that has irritated the US federal government with its dogmatic approach to consumer privacy and walled garden systems. We need more of that, not less.
Because so much of the next generation of technology is being developed in the Washington, DC, region with federal subsidies, we must vigorously resist calls for Congress to inappropriately exercise march-in rights. Drug prices should fall, but there are better ways to do this in a market economy, including streamlining the approval process for generic drugs, expanding the use of health savings accounts, and importing prescription drugs from overseas competitors.
