SACRAMENTO, Calif., Dec. 22, 2025 /PRNewswire/ — The free-market Pacific Research Institute today released an issue brief (Click here to download) finding that the Trump administration’s proposed 50% tax on patent revenue from inventions created using federal grants would disincentivize universities from expending the time, money, and effort to engage in federally-funded research.
“Universities respond to incentives just like private companies do,” said Sally C. Pipes, the author of the issue brief and PRI President, CEO, and Thomas W. Smith Fellow in Health Care Policy. “If Washington reduces the potential reward for academic institutions to commercialize promising research, then we’ll see a lot fewer innovations reach the market.”
Under the status quo, universities have strong incentives to patent and license their discoveries. The Bayh-Dole Act of 1980 ensures that federal grant recipients retain ownership of their patents when they license them to private firms. Universities depend on licensing revenue to keep labs running, support graduate training, and anchor regional research clusters.
A licensing tax would upend this model. If the government begins claiming half the revenue from licensed patents, universities will have little reason to keep investing in that process. Some will scale back or even close their technology-transfer offices altogether.
“Government putting their hand in the patent cookie jar is bad news for the average person,” Pipes said. “Patients would see fewer novel therapies allowing patients to live longer lives, workers would have fewer job opportunities, and ordinary Americans would lose out on the billions in economic activity and tax revenue generated by thriving industries.”
The brief relates the story of National Science Foundation grant number IRI-9411306-4, which provided funding to the Stanford researchers who developed Google. The company now employs more than 100,000 Americans, facilitates over $850 billion in U.S. economic activity annually, and generates tens of billions of dollars in corporate and capital gains taxes for the government.
“Imposing a patent licensing tax would undermine the very system that has made America a global leader in innovation,” Pipes said. “The Trump administration should abandon the idea immediately.”
The Pacific Research Institute (www.pacificresearch.org) champions freedom, opportunity, and personal responsibility by advancing free-market policy ideas. Follow PRI on Facebook, Twitter, and LinkedIn.
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SOURCE Pacific Research Institute
