By Tom Still
MADISON, Wis. – President Trump is a believer in the “Laffer curve,” so-named for economist Arthur Laffer and his work connecting the dots between taxation and productivity. In 2019, Trump said Laffer proved “the most powerful way to grow the economy and raise government revenue was not to increase tax rates but to adopt strong incentives that unleash the power of human freedom and innovation, create jobs, and deliver greater opportunity to all Americans.”
So why is Trump’s Commerce secretary musing about taking a bigger bite out of the fees paid by patent and trademark applicants?
Commerce Secretary Howard Lutnick recently suggested the government collect half of the patent revenue from U.S. universities for discoveries made using federal research grants. That’s a sharp increase from an existing fee schedule that will produce an estimated $4.5 billion to run the U.S. Patent and Trademark Office this year.
While such an increase would generate billions of dollars more for the federal government – at least, initially – it would bend the core concept of the Laffer Curve: Over-taxing something means less productivity from those paying the tax or fee.
Wisconsin universities aren’t talking about Lutnick’s remarks yet because there is no specific proposal, but it endangers a system that has spurred discovery, innovation, company creation and jobs since adoption of the Bayh-Dole Act in 1980.
That bipartisan act was named for Sens. Birch Bayh, D-Ind., and Bob Dole, R-Kan., and has been credited with releasing a torrent of innovation in America’s research universities and beyond, much to the benefit of America’s overall economy and its position in the world.
It has worked well in Wisconsin, where inventions spawned on the campuses of UW-Madison, other UW universities, and private institutions such as the Medical College of Wisconsin and Marquette University are examined for their uniqueness and potential commercial value. That often leads to private investment, startup companies or adoption of new technologies by major companies – and more jobs.
Patenting is not a cheap process, however. Few academic “tech transfer’ entities make much money unless they hit innovation “home runs” in the form of breakthrough drugs, medical devices, computing and other technologies. Still, it’s a process that has helped the United States be a global innovation leader for decades.
“The Bayh-Dole Act continues to have a significant and lasting impact on U.S. innovation and industry,” reads a March 2024 report by the Association of American Universities. “Since it was enacted in 1980, the act has led to over $1.3 trillion in U.S. economic growth, created more than 4.2 million jobs across the country, and contributed to the success of over 11,000 new startup companies throughout America.”
Similarly, the Information Technology and Innovation Foundation recently reported that “on average, three new start-up companies and two new products are launched in the United States every day as a result of university inventions brought to market, in part thanks to the Bayh-Dole Act.”
Examples of products include high-definition television, organ preservation systems, firefighting drones, blood tests to detect brain injuries and discoveries that led to the birth of major companies such as Google.
Estimates vary on company and job creation, but since 1996 at least $1 trillion has been added to the nation’s gross industrial output by patented innovations.
Other new policies are straining the nation’s ability to compete with emerging innovation leaders such as China and India. Restrictions on research funding, especially for life sciences, are one example. The $100,000 entry fee for H-1B visa holders may be another.
Less innovation means fewer patentable discoveries and fewer companies that can produce profits and tax revenue for all levels of government, not just the federal government. The existing fee schedule that has grown out of Bayh-Dole seems to work for most. Let’s not strangle the goose that has laid a lot of golden eggs over the last 45 years.
Still is president of the Wisconsin Technology Council. tstill@wisconsintechnologycouncil.com.