Up to $1.7 Trillion: Bayh-Dole’s GDP Legacy Faces Startup Risk

By Nathan Brooks

Since 1996, the Bayh-Dole system has contributed up to $1.7 trillion to U.S. GDP and supported up to 7.6 million years of employment, according to Karen Kerrigan.

Kerrigan, president and CEO of the Small Business and Entrepreneurship Council, uses those figures to argue for protecting a 45-year-old law. Her case does not require another federal program or a new funding pool. It requires Congress and regulators to preserve the patent rights that turn federally supported research into commercial businesses.

A legal bridge from federal research to private capital

Kerrigan describes the bipartisan Bayh-Dole Act, passed by Congress in 1980, as a way for universities, nonprofit research institutions, small businesses and federal laboratories to retain patent rights to inventions developed with federal support. According to Kerrigan, that arrangement gives universities an incentive to license discoveries to small companies. The companies can then use the patents to attract capital and fund additional development.

Four and a half decades later, Kerrigan calls the framework indispensable to American small-business growth. The law’s practical importance rests on a sequence: public research, retained patent rights, a license to a startup, outside capital and product development. Each step depends on the next, and a startup often cannot absorb a break anywhere along that chain.

What does Bayh-Dole change for startups?

It changes whether a young company can treat a federally supported discovery as an asset it can finance. Kerrigan says universities license discoveries to small businesses, which use the patents to attract investment and continue development. For founders and early-stage investors, the framework links a laboratory result to the capital needed to build a company.

Licensing has become a core financing channel

New research cited by Kerrigan shows that from 2021 through 2025, universities, hospitals and nonprofit research institutes averaged more than 19,000 income-generating licenses each year. That was about twice the annual average from the early 2000s. Roughly 70% of university licensing agreements are with startups and small companies, putting smaller firms at the center of the licensing market Kerrigan describes.

Since 2001, the Bayh-Dole system has helped launch more than 19,000 startups, according to Kerrigan. She links that company formation to local economic activity: the businesses hire workers, trade with other local companies and strengthen regional economies. The scale helps explain why patent certainty matters well beyond any single campus or laboratory.

Policy proposals put the patent bargain at risk

Kerrigan frames the stakes within the Trump administration. Administration officials, she says, have repeatedly presented startup formation and entrepreneurship as keys to the nation’s most urgent policy challenges: AI advancement, scientific leadership, job creation and reindustrialization. They have worked to expand government-backed financing for small firms, attract more private capital to startups, help entrepreneurs commercialize emerging technologies and leverage domestic manufacturing.

Against that record, Kerrigan says recent policy debate has created growing uncertainty for startups. Some policymakers are discussing changes that could reduce small companies’ access to federally funded research. One proposed rule would let the government “cancel long-term research funding on a political whim,” she wrote, putting future research and commercialization at risk.

One agency has also adopted licensing guidelines that require ongoing product-access plans. Kerrigan says those plans can trigger license revocations even after products have been developed, which she argues “directly violates Bayh-Dole.”

Kerrigan says startups often build around a single unproven invention and have fewer resources than large companies. That leaves them less able to absorb product-development risk. If patent rights become unreliable, she argues, raising the capital needed for continued research, testing and manufacturing becomes harder. The financing problem appears before a product can prove itself in the market.

Kerrigan’s prescription is explicit: “Instead of altering the Bayh-Dole system, policymakers must preserve it.” For startups, reliable patent rights keep federally funded discoveries financeable, while proposed changes could push more risk onto companies least able to carry it.

Future funding and licensing decisions will determine whether America’s innovation pipeline keeps converting federally supported discoveries into new companies, jobs and technologies that strengthen U.S. competitiveness. That outcome depends on whether policymakers protect patent certainty before changing the rules.