A Trump administration proposal to seize half of universities’ patent royalties has drawn swift criticism from economists, higher education leaders, and innovation policy experts, who say the plan would cripple one of the nation’s most successful engines of research and economic growth.
Commerce Secretary Howard Lutnick suggested in an Axios interview that Washington should claim 50 percent of patent earnings tied to discoveries developed through federally funded research. Framing the idea as a matter of fairness, Lutnick argued that “the U.S. government is getting no return on the money it invests in federal research,” adding, “The scientists get the patents, the universities get the patents, and the funder of $50 billion, the U.S. government, you know what we get? Zero.”
But experts say that claim misrepresents how the system works — and how much taxpayers already benefit.
A Pillar of U.S. Innovation
At the center of the debate is the Bayh-Dole Act of 1980, which allows universities to retain ownership of inventions arising from federally funded research. Prior to the law’s passage, the federal government held those patents but rarely licensed them, leaving most discoveries to languish. Only about 5 percent of federally owned patents were licensed before Bayh-Dole, according to a 1998 Government Accountability Office report.
By granting ownership to universities and encouraging partnerships with private companies, the law transformed academic research into a powerful driver of economic growth. Between 1996 and 2020, U.S. universities generated more than 117,000 patents and 19,000 startup companies, according to the Information Technology & Innovation Foundation (ITIF). Those activities contributed roughly $1.9 trillion in industrial output and supported 6.5 million jobs nationwide.
“The U.S. has transformed its universities into engines of innovation,” wrote Stephen Ezell, vice president of global innovation policy at ITIF, in an October 7 commentary. Ezell called Lutnick’s proposal “misguided” and warned that it would “significantly undermine this system while delivering very little benefit to taxpayers.”
Small Gains, Big Risks
In 2023, American universities earned $3.6 billion in patent-related income — a figure that fell by nearly a quarter in 2024. Even if the government claimed half, that $1.35 billion would amount to less than half a day of Social Security spending, according to ITIF. By contrast, university research parks generated about $33 billion in federal tax revenue last year alone.
Critics argue that taxing royalties would not only yield minimal financial gain but also disincentivize collaboration between universities and industry. Higher licensing costs or diminished university revenue could deter private firms from investing in early-stage technologies — the very partnerships that turn lab discoveries into marketable products.
“Lutnick’s proposal would undercut one of the most successful innovation policies in U.S. history,” The Hill editorial board wrote, adding that the Bayh-Dole Act has “spawned thousands of startups, created millions of jobs, and produced technological breakthroughs that have saved and improved countless lives.”
A Threat to Research and the Economy
Supporters of Bayh-Dole warn that the proposal would strip universities of the resources they use to fund research labs, incubators, and scholarships — and risk pushing innovation overseas. Ezell noted that only a handful of university licensing deals ever produce significant revenue: a Massachusetts Institute of Technology study found that just four of 605 active licenses generated over $1 million each.
“This betrays a serious misunderstanding of just how difficult the process of commercializing new innovations is,” Ezell wrote.
For now, Lutnick’s idea remains a proposal without legislative backing. But as Congress debates science funding amid a broader budget standoff, universities and research advocates say the signal it sends is troubling.
“America’s leadership in global innovation is not a given,” Ezell concluded. “It will be lost if policymakers don’t remain committed to enacting public policies that keep America the world’s leading location to undertake the difficult, complex, risky, and expensive process of innovation.”
