SBE Council Comments on NIST’s “March-In” Guidance

By at 25 January, 2024, 4:05 pm

Via Electronic Submission

Laurie E. Locascio

National Institute of Standards and Technology

100 Bureau Drive

Gaithersburg, MD 20899

Comments to the National Institutes of Standards and Technology

Re: RFI Regarding the Draft Interagency Guidance Framework for Considering the Exercise of March-in Rights (Doc #230831-0207)


Dear Director Locascio,

On behalf of the Small Business & Entrepreneurship Council (SBE Council), thank you for the opportunity to submit comments on the Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights. We write to express our concerns about how the proposed framework could negatively impact small businesses in innovative industries and U.S. competitiveness. SBE Council is requesting that NIST withdraw the proposed guidance.

SBE Council is an education, advocacy, and research organization dedicated to protecting small businesses and promoting entrepreneurship. For 30 years, we have worked on a wide array of policy and private-sector initiatives to strengthen the ecosystem for startup activity and small business growth. SBE Council members include small business owners, entrepreneurs, state and local business groups, corporate partners and associations.

Many of SBE Council’s members play an outsized role in driving U.S. innovation forward. Small businesses and startups make up the large majority of firms in patent-intensive industries.[1] Particularly in industries that could be harmed by the misuse of march-in rights, small businesses are critical. For example, in the life sciences sector, nearly 80% of firms have fewer than 100 employees, and almost half have fewer than 10.[2] As of 2020, over 820,000 firms providing professional, scientific, and technical services had fewer than 100 employees.[3]

Small businesses are key drivers of innovation in the development of new drugs. Small entrepreneurial companies are crucial to research and development. Without them as partners, larger pharmaceutical companies could not function. In 2022, over half of all new drug approvals came from small-cap companies and private companies.[4]

Small pharmaceutical companies and startups are nimble and willing to take risks on cutting-edge treatments. But unlike larger pharmaceutical companies, they generally do not have previous successful drugs that generate revenue to fund their ongoing R&D endeavors. Instead, they must rely on other sources, such as venture capital, to fund their efforts.

In the over four decades since Bayh-Dole, investors have had the assurance that the startups they invest in would be able to control the intellectual property (IP) of their discoveries and products. The result was an explosion in the growth of private sector and university research and a corresponding boom in the economy and consumers’ access to new life-saving drugs and other inventions. Bayh-Dole has been responsible for the launch of over 17,000 startup companies and 495,000 inventions.[5]

Bayh-Dole “led to the remarkable growth of patenting and licensing activity by U.S. universities,” in the words of the USPTO.[6] It has added nearly $2 trillion to the U.S. economy.[7] Since 1996, over six million jobs have been supported by the tech-transfer system created by the Bayh-Dole Act.[8]

All of these benefits would be in jeopardy if the new proposal regarding march-in rights were to be implemented. Startups and their investors require certainty to take major risks on unproven technologies early in the R&D stages. They may not be willing to invest in the kind of research taking place in dynamic university laboratories if they do not have the assurance that they can maintain exclusive rights to the patents on any new products they invent.

Drug development is a formidable process, requiring massive outlays of time and capital. The process from start to market launch typically spans a decade or longer.[9] Most promising drugs that are researched will not make it to the market.[10] It takes private investment and the painstaking work of innovative researchers to identify the right ones and guide them through FDA approval.

Drug innovators, especially small businesses and startups, can only recoup the cost of development if they can maintain their IP protections and make their own business decisions. Thus, IP rights are a key catalyst, incentivizing funders to commit capital and allowing for the process of drug development to take place.

The framework in the “march-in” proposal would add layer upon layer of uncertainty to the process of developing and marketing new drugs. There are no clear criteria laid out by which a startup and its investors could evaluate the possibility that they might lose their exclusive license.

Instead, the guidance foresees highly subjective judgments that would lead to long and drawn-out court cases. The hypothetical case examples expressly contemplate the likelihood that most cases would end up being decided by the Court of Federal Claims.[11] The Bayh-Dole Act was intended to support small businesses, but the overly complicated and expensive adjudication process would favor big businesses and scare small entrepreneurs from investing their time and capital.

Foreign companies, including ones owned by America’s adversaries, could exploit the process by demanding access to American patents. Should the company holding the patent lose access to its exclusive license — regardless of who or what entity made the claim — foreign companies could take advantage of publicly disclosed patent information to exploit the fruits of American research.

This is not how Bayh-Dole was intended to be used. In the 43 years since its implementation, there has never been a case of the government using “march-in” rights to relicense a patent.[12] The language does not allow for a product’s price to be taken into consideration when deciding whether to “march-in,” and the authors of the act have stated that was never the intent of Congress.[13]

The guidance uses extremely vague terminology that could be subject to interpretation (and therefore the biases) of different judges and bureaucrats. There is no definition of what constitutes a “reasonable” price. The patent holders, researchers, and companies involved in creating a new invention are better able to make decisions about pricing and other commercial factors than would bureaucrats.

Moreover, while this proposed usage of march-in rights would predictably hinder drug development, it would not create any corresponding benefit to consumers or the economy. March-in rights would not improve consumer access to drugs, since 99% of approved drugs are not eligible to be marched-in upon.[14] The drugs for which one patent falls under the terms of Bayh-Dole are often the result of multiple patents, not all of which are covered.

The Proposal Extends Beyond Drug Companies and Their Patents

This proposal goes beyond the drug sector and would have deleterious effects on multiple industries, especially those in competitive, high-growth sectors and those critical to national security. One example is the tech industry, including the development of computer chips. Many advances in chip-making and artificial intelligence have come from research at universities that have been provided government grants.[15][16] The government is trying to encourage such research through the CHIPS and Science Act.[17] But the imposition of “march-in” rights could apply to tech inventions, too, and that would equally frighten investors from taking risks on new research.

Prior to the Bayh-Dole Act, much of the results of university research were wasted and yielded few if any benefits for consumers and the greater economy.[18] Between 1990 and 1995, the NIH’s experiments with the implementation of a reasonable pricing clause in Cooperative Research and Development Agreements also stifled collaboration between the industry and the NIH.[19] The NIST should not follow the same policies that have been tried and failed.

SBE Council appreciates the opportunity to weigh in on this important matter, and we urge you to consider the negative downstream impact of this proposal on the startup and small business ecosystem across sectors, how it would affect U.S. innovative competitiveness and investment, and the health of the overall U.S. economy.


Karen Kerrigan, President & CEO






















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