A proposed 50 percent royalty seizure would be a death knell for our system of academic technology transfer.
With the calendar turning to 2026, there are suggestions that the Trump administration may move on Commerce Secretary Howard Lutnick’s proposal to impose a 50 percent “innovation tax” on the licensing revenues that universities earn from patented discoveries covered by the Bayh–Dole Act. The president would be wise to resist these suggestions. This bipartisan 1980 legislation allows universities, small businesses, and nonprofits to retain ownership of inventions created through federally funded research.
Proponents see the “royalty grab” as a new source of federal revenues that would ensure a direct return for taxpayers on their investments. The sentiment is understandable, but the tax would prove disastrous for the American innovation ecosystem.
The act was key in making the U.S. a global leader in innovation. Between 1996 and 2020, academic technology transfer facilitated by Bayh–Dole contributed up to $1.9 trillion to U.S. GDP, supported millions of jobs, and helped generate over 19,000 start-up firms.
The reason is simple. Before 1980, the federal government typically owned any discovery made with public funds. But because the government lacked the resources to bring these inventions to market, few were commercialized.
Bayh–Dole transformed the system, allowing the institutions that received federal R&D grants to obtain title to their patented inventions. In return, the government received a royalty-free license to use inventions obtained with federal funding.
This change encourages the transfer of technologies to useful public purposes by creating a clear path for universities to license them to private companies. Companies then invest the capital needed to turn raw research into consumer products like medicines or clean energy tech.
As Katalin Karikó, a winner of the Nobel Prize in Medicine, put it, “If you make an interest in universities to license [inventions] out, then you get new companies and innovation will be useful for the public. That’s why [the Bayh–Dole Act] was so critical.”
The primary economic danger lies in chilling the innovation engine. Taxing away half of the rewards of innovation decimates incentives that have made the Bayh–Dole Act a cornerstone of global technology transfer for 45 years.
Most university technology transfer offices are not profit centers. One-third already struggle to cover their costs. Seizing 50 percent of gross royalties would likely bankrupt these offices, ending the professional management required to move inventions from the lab to the market.
Paradoxically, the royalty tax is also likely to decrease total federal revenue. While the proposal aims to raise roughly $1.35 billion to $1.8 billion annually, the current system already generates an estimated $33 billion in annual federal tax revenue through the creation of new products, companies, and 6.5 million jobs.
Consider the overwhelming likelihood of capital flight. Every $1 of Bayh–Dole research funding translates into roughly $5 to $10 of private capital to support commercialization. A 50 percent seizure of royalties introduces massive uncertainty, signaling to investors that intellectual property is no longer secure. That would halt private investment, especially in high-risk sectors such as biotechnology.
The political fallout of such an executive order — one that targets a legacy of bipartisan cooperation and regional economic stability — would be significant.
Bayh–Dole is a rare example of a highly successful, enduring bipartisan achievement. Unilaterally seizing its benefits would represent a major breach of political norms and could trigger significant legal challenges from both public and private universities.
University research is a critical driver of regional growth, particularly in red states where local tech hubs rely on university spin-offs. This proposal would disproportionately affect heartland institutions that lack the massive discretionary income of elite coastal universities.
Finally, there’s the effect on global competitiveness. With international rivals like China rapidly increasing their share of critical technology patents, weakening the U.S. university system’s ability to commercialize research poses a direct threat to national security and global leadership.
The proposed 50 percent Bayh–Dole royalty seizure would be a death knell for our system of academic technology transfer. By prioritizing a small, short-term revenue gain over a $1 trillion long-term economic impact, the mandate risks returning the U.S. to the “technological malaise” of the 1970s, when government-owned patents sat unused on shelves.