Bayh-Dole Beyond Borders

29 Pages Posted: 21 Feb 2017 Last revised: 11 Oct 2017

See all articles by Daniel J. Hemel

Daniel J. Hemel

New York University School of Law

Lisa Larrimore Ouellette

Stanford Law School

Date Written: February 11, 2017


The Bayh-Dole Act, which encourages patents on federally funded inventions, has been criticized for forcing consumers to "pay twice" for patented products – first through the tax system and again when the patentee charges a supracompetitive price. Supporters counter that patents promote commercialization, but it is doubtful that this benefit can justify the Act's present scope. One important feature of Bayh-Dole, however, has been overlooked in this debate – a feature that arises from the global-public-good nature of knowledge. Without patents on US taxpayer-funded inventions, the United States would have no practical way of internalizing the positive externalities these inventions confer on consumers in other countries. Put differently, the charge that Bayh-Dole forces US consumers to "pay twice" misses the point that eliminating some Bayh-Dole patents would permit non-U.S. consumers to avoid paying at all. To be sure, this "internalization theory" was not the rationale upon which sponsors of the Act relied. And like commercialization theory, it cannot justify the Act's present scope. Rather than relying on internalization theory to defend Bayh-Dole, we highlight ways in which this novel theory can inform Bayh-Dole debates.

Keywords: Bayh-Dole, patents, grants, R&D, international

JEL Classification: H41, K33, O31, O34, O38

Suggested Citation

Hemel, Daniel J. and Ouellette, Lisa Larrimore, Bayh-Dole Beyond Borders (February 11, 2017). Journal of Law and the Biosciences, Vol. 4, No. 2, p. 282-310, 2017, DOI: org/10.1093/jlb/lsx011, Stanford Law and Economics Olin Working Paper No. 504, University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 801, U of Chicago, Public Law Working Paper No. 619, Available at SSRN:

Daniel J. Hemel

New York University School of Law ( email )

Lisa Larrimore Ouellette (Contact Author)

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305
United States


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