abstract. Legal scholars have long recognized that the patent system is only one tool among many in law and policy for incentivizing innovation. The innovation-law toolkit includes a host of other institutions, most prominently innovation prizes, research-and-development (R&D) tax credits, and government-funded research grants. Scholars have assessed how each of these, like patents, directs R&D resources toward promising projects, motivates strong performance by researchers, and rewards success. Grants loom particularly large in these analyses, as the federal government remains by far the single largest funder of research in the U.S. economy. In the grant system, the government funds research projects that patents often fail to incentivize, and relies on contractors in academia and industry to perform the R&D.

Conspicuously absent in the innovation-law literature is the role of research conducted by the government itself. The federal government is not only the nation’s largest funder of research but also its largest performer. So-called “intramural” R&D conducted by federal agencies, national laboratories, and other government-funded R&D centers comprises a considerable portion—in recent years, close to half—of the government’s overall research budget. Given its historical and continuing importance to national innovation efforts, government research should be conceptualized as a distinct paradigm in the innovation-law toolkit.<

In this Article, I provide the first comprehensive analysis of government research from an innovation-law perspective. I outline the basic institutional design of government research and, using case studies of the National Institutes of Health Intramural Research Program and Lawrence Livermore National Laboratory, show how it works in practice. I then identify a particular niche in which government research has clear comparative advantages: high-risk, high-reward projects that require massive scale, interdisciplinary collaboration, and long-term funding. I also explore normative justifications for government research beyond efficient knowledge production, including the building of state capacity for developmental policy and a more equitable distribution of the gains from innovation. By integrating government research into this broader institutional framework, this Article reaffirms the state’s indispensable role in innovation law and policy and reasserts the values that ought to guide its future development.

author. Associate Professor of Law, Syracuse University College of Law. For their helpful input, I thank Ben Armstrong, Natalie Aviles, Laura Dolbow, Colin Doyle, Brett Frischmann, Shubha Ghosh, Jeff Gordon, Camilla Hrdy, Amy Kapczynski, Matthew Keller, Daniel Kevles, Florian Metzler, Harry Ostrer, Lisa Larrimore Ouellette, Nicholson Price, Josh Sarnoff, and participants at the Works in Progress for Intellectual Property Scholars Colloquium, PatCon, and the Law and Political Economy of Technology Workshop. I also thank Ruth Zheng and her team for excellent editorial assistance, and Claire Reynolds-Peterson for research assistance. Finally, my deep gratitude goes to the intramural researchers who shared their valuable time and insights with me and whose work embodies the spirit of innovation carried out in the public interest.

Introduction

In early January 2020, with the COVID-19 virus spreading rapidly across national borders, a research team in Bethesda, Maryland, began work on a world-changing innovation. Led by Drs. Barney Graham and Kizzmekia Corbett, this interdisciplinary team included many of the world’s leading vaccinologists and touted an illustrious record in vaccine development for prior pandemics, including other coronaviruses.1 With ample funding and the ability to mobilize it immediately in a new direction, the research team received the genomic sequence of the new virus and quickly identified the “spike protein” that would serve as an optimal immunogen.2

Leveraging a longstanding collaboration with a large pharmaceutical firm, the team paired the immunogen with a promising new vaccine platform technology, mRNA.3 The product was soon tested in clinical trials, benefiting from the research group’s access to a large clinical-trial population and to an even larger external network.4 The end result: the Moderna COVID-19 vaccine, a shot with unprecedented efficacy developed and delivered in record time.5 Over two hundred million doses later, this innovation, along with the similarly structured Pfizer-BioNTech vaccine, dramatically halted the course of the pandemic and saved millions of lives.6

The Moderna vaccine embodies the innovation process at its best: world-class researchers with wide-ranging expertise quickly and efficiently working together to solve a problem of enormous public importance. However, the vaccine’s name—identifying only one of the key partners in this collaboration—has worked to obscure the true origins of this groundbreaking innovation.7 The researchers who made the critical contributions in identifying the optimal immunogen were neither corporate research-and-development (R&D) scientists nor professors in a university biomedical department. Drs. Graham and Corbett were government employees—civil servants—whose team was based at the Vaccine Research Center (VRC), a government-owned, government-operated research division at the National Institute of Allergy and Infectious Diseases (NIAID), one of the twenty-seven institutes comprising the National Institutes of Health (NIH).8

Looking back at the development of the Moderna vaccine, former NIAID Director Dr. Anthony Fauci attributes much of its success to the particular strengths of government-led research at the VRC: an interdisciplinary team, access to substantial resources, and the ability “to turn on a dime” in a moment of crisis.9 Noting these characteristics, Dr. Francis Collins, the former director of the NIH, describes the VRC as a research group that would be “difficult to fund” with grants as opposed to institutionalized government funding.10 In the 1990s, Fauci helped establish the VRC, originally tasked with pursuing a vaccine for human immunodeficiency virus (HIV) and envisioned as a research program that could catalyze “the close interaction and collaboration of basic scientists such as immunologists, virologists, structural biologists, vaccine experts, and other scientists, together with clinicians” all under one roof.11 Since then, the VRC has served as a stronghold for world-leading vaccine research and helped combat severe acute respiratory syndrome, bird flu, Ebola, Zika, and finally COVID-19.12

The VRC’s achievements are remarkable but not unique. Across myriad technological fields for well over a century, research both funded and performed by the government—so-called “intramural” R&D—has had a transformative impact on technological development and the direction of the U.S. economy. The success stories in government research constitute a highlight reel of some of the most significant scientific advances since the rise of rationalized R&D in the late nineteenth century.13 Government research programs have been at the center of global technological events whose names are now synonymous with radical scientific advances: the Manhattan Project, Project Mercury, and the Apollo Program.14 Government research has also contributed to countless other incremental advances in the gradual march of technological progress.15

Innovation-law-and-policy scholarship has, however, overlooked government research. Legal scholars have long recognized that innovation can be incentivized by many different tools in law and policy.16 The patent system is one such tool and, as the foundational legal framework for promoting innovation in a market economy, it is fittingly the most prominent in innovation-law scholarship. But other alternative or complementary institutions to intellectual property (IP) can accomplish the same underlying task. Lawyers and economists have expanded the innovation-policy toolkit to include a host of other levers, most notably innovation prizes,17 R&D tax credits,18 and government-funded research grants.19 Like the patent system, each of these alternatives channels resources toward promising projects, provides incentives to motivate researchers, and rewards success. A rich literature has developed to assess the relative strengths of these innovation levers, the contexts in which they work best, and the normative concerns that they each implicate. The result of this work is a more nuanced and informed approach to innovation policy.

Growing appreciation for the importance of the grant system is welcome, given the federal government’s outsize role in the national R&D effort as the primary sponsor of academic research through grants.20 Considering federal grant-funding agencies as arms of a single system, the U.S. government is by far the largest funder of research domestically and perhaps internationally.21 Grants coexist with the patent system and perform a different function, providing backing for research projects that patents fail to incentivize. The grant system works as an innovation lever due to specific institutional-design choices that ensure high-quality research projects, despite the lack of patent-based accountability mechanisms and incentives.22

The federal government is not only the nation’s largest patron of research but also its largest performer. Intramural R&D conducted in federal agencies, national laboratories, and other government-funded R&D centers across the country comprises a considerable portion—in recent years, around forty-five percent—of the government’s overall research budget.23 Like other innovation institutions, government research gives shape and structure to the research process, possesses practical comparative advantages in certain contexts, and invokes normative concerns beyond efficient knowledge production.24 But it does so in ways distinct from grants, patents, prizes, and all others in the list.

In this Article, I provide the first comprehensive analysis of government research from an innovation-law perspective. By doing so, I aim to make two contributions to the innovation-law literature. First, by explicitly describing how government research differs from the grant system, I introduce government research as a new entry in the core list of institutions analyzed by innovation-law scholars. Second, I provide an assessment of government research as a lever of innovation through both practical and normative lenses. In assessing the former, I appraise this lever’s relative strengths in maximizing socially desirable innovation efficiently—in keeping with the baseline framework used across much of the literature comparing innovation institutions. For the latter, I explore normative justifications and benefits to government research beyond this baseline. While some of these alternative value propositions—such as distributional fairness—have been analyzed in the innovation-law literature, others are imported from beyond IP and implicate concerns not typically considered in this field. I thus treat government research as an important target of analysis in itself and as a window to open the field of innovation law to new normative commitments.

While my intervention responds primarily to the scholarship comparing different modes of innovation incentives, I also aim to build on the nascent literature analyzing latent forms of industrial policy in the administrative state as legal objects.25 This emerging field responds, in large part, to the recent revival of sectoral planning on the national stage and the increased politicization of federal research.26 After decades of the neoliberal taboo on any state intervention that might “pick winners,” the “new industrial policy” has shed this reservation and embraced subsidies and direct government provision of goods and services as primary tools for maintaining the United States’s position on the global technological frontier.27 Like the grant system, direct provision of new knowledge through government research would seem to be a prime mechanism in the state’s sectoral-planning apparatus.28 Some policy analysts have even looked to state-led innovation as a core pillar of a new production-oriented direction for American liberalism.29 It is thus an opportune time to import into the innovation-law toolkit a foundational lever of industrial policy and attempt to understand its basic mechanics.

While interest in and enthusiasm for state-supported innovation is growing among liberals and the left, the second Trump Administration has launched the most significant assault on the federal research system since its birth during the Second World War.30 The Administration’s multipronged attack has cut budgets at critical research institutions,31 fired thousands of researchers,32 ended funding for now-politicized research topics,33 and delayed critical disbursements to universities and other contractors.34 Government research programs have also been caught in the crossfire of this unprecedented assault on state-backed science,35 which may still be in its early days at the time of writing. But government-conducted research has received relatively scant attention from policy analysts and journalists, who have focused more on the emerging crisis at universities. This Article offers a corrective and shows that what is at stake in these broad-based attacks on federal R&D is not only the nation’s innovative capacity in the near term but also some of the fundamental pillars of an effective and equitable public research system.

This Article proceeds as follows. Part I reviews the existing literature comparing levers of innovation and details the most prominent options in the toolkit: patents, prizes, tax incentives, and grants. I focus in this comparative review on three key institutional-design choices that cut across each option: who decides what projects to pursue and how much funding to devote to them; when the reward is transferred to the performer; and who subsidizes that reward. Taken together, these choices shape the research process and establish incentives for successful work.

Reviewing recent work analyzing the grant system as an innovation lever, I add to this list a fourth choice in institutional design: who performs the research. In the grant system, the institutional separation of the funder (the government) from the performer (an industrial or academic contractor) embeds in the system mechanisms of accountability and incentives for quality work. Government research, however, has no such separation: R&D projects are both funded and performed by the government. To understand how this lever really works, then, we must go beyond its basic institutional design and examine how it functions in practice.

Part II offers two case studies that delve into these details. I examine two programs that represent prime examples of the two basic models of government research in the federal system: the National Institutes of Health Intramural Research Program and Lawrence Livermore National Laboratory. For each, I provide historical background, an overview of current activities, a detailed look at project-selection and evaluation mechanisms, and a discussion of the various incentives—often nonmonetary—that motivate researchers to perform. What emerges from these case studies is a model of innovation that differs markedly from grants. Government research substitutes the guardrails built into the grant system for a different set of organizational structures, and the result is an innovation model with different comparative advantages.

Part III discusses those advantages and identifies a knowledge-production niche in which government research is more effective than the other levers in the toolkit. Broadly, government research excels at various forms of high-risk, high-reward research that neither patents nor grants can reliably generate. Government research is particularly well suited to projects of a large scale that require unique and massive facilities, projects that benefit from active collaboration between researchers from diverse fields, and projects that require a stable source of funding over the long run. These three advantages—in “big science,” “team science,” and what we might call “patient science”—define the role of government research in the national innovation system.

Part III also considers justifications for government research beyond its practical advantages in knowledge production. First, I discuss how government research is uniquely generative of state capacity, a critical ingredient for a more effective and robust national industrial policy, in the presence of strong democratic institutions. Much more so than the grant system, government research cultivates expertise in federal bureaucracies and can imbue government work with a sense of public mission—factors critical to building and maintaining a capable developmental state. Second, I examine distributive concerns. Unlike the grant system, which generally transfers rents from state-backed innovation into private hands, government research maintains public ownership of government-funded patents and recoups any resulting revenue. Separately, I suggest that government research programs are more effective at dealing with place-based inequalities that emerge from the clustering effects of innovation-led growth and from the geographic favoritism of the grant system. Government research offers a way to rectify both how and where the direct economic benefits of innovation accrue.

Government research is a powerful tool in the innovation-policy arsenal, but it has limitations, which I discuss in the final Section of Part III. Most significantly, intramural R&D may have greater potential to become politicized and skewed toward ill-advised research topics than other innovation institutions. Though limited by several accountability mechanisms, government research arguably bears greater potential for waste than the grant system, stemming from its larger-scale projects and more stable funding. But this latter point is the flip-side of government research’s unique strengths: the pursuit of higher-risk, higher-reward research may inevitably entail a higher degree of failure than private firms working in the shadow of the patent system or grant-funded research groups feel they can tolerate.

The critical niche occupied by government research in the national innovation system may become all the more important in the coming decades. The kinds of high-risk projects to which government research is well adapted—large-scale, interdisciplinary, and long-term efforts—likely include some of the century’s grand technological challenges. Fusion energy, for example, would reshape the national and global economies and have profound effects on the transition to cleaner energy sources. At the time of writing, this emerging field is squarely in the domain of government research, with national laboratories at the global frontier. Other emerging fields may soon follow suit. Scholars and policymakers would thus do well to add government research to their growing toolkit of innovation levers. Beyond that, those looking for ways to build a more dynamic and equitable economy should see government research as an indispensable institution—one that must be reinforced and defended.