Time for a More Open Approach?

Monetizing University IP May Require More Flexibility

SOURCE: iStockphoto, SP “Open innovation” challenges the assumptions made by university technology transfer offices about maximizing the value of their intellectual property.

The prospect of harnessing the intellectual might of universities to the task of local economic development burns bright around the nation. Valuable new ideas created by government-supported research not only benefit the economy but also can produce financial returns for government—in the form of economic growth. Universities can also benefit from technology licensing revenues or direct equity stakes in promising young start-up companies that in time could be worth many, many times the cost of the original investment.

Or so the theory goes.

In practice, getting a direct financial return from research activities requires universities to patent their work and thereby obtain ownership of the intellectual property that they can sell or license. Since the passage of the Bayh-Dole Act in 1980—which allows public entities to patent ideas derived from federally funded research—universities around the country have set up technology transfer offices and aggressively worked to patent research-related ideas. The number of university patent offices has increased one hundred-fold, and the number of university patents sixteen-fold, since 1980, according to research by Stanford University intellectual property professor Mark A. Lemley.

In the best cases, patenting and licensing work well. New York University, for example, stands to reap nearly $1 billion in royalties for work it did on Remicade, a successful arthritis drug, notes journalist Richard Monastersky in a recent article in the Chronicle of Higher Education. But substantial financial returns are not always in the cards. A survey conducted by the Association of University Technology Managers found that in 2003, only 15 of 191 surveyed institutions received more than $20 million in licensing revenue.

What’s more, a university’s technology transfer office and its mission to earn money for the university can get in the way of deploying new ideas. Universities and researchers are reluctant to discuss ongoing research with private companies prior to starting the invention disclosure or patent process for fear of losing their IP rights. And they can also be cautious about disclosing too much about an idea for fear that companies will be able to make use of the research without paying a licensing fee, notes journalist Ed Silverman in a recent article in The Scientist.

Universities can also maximize the value of their patents if they offer purchasers exclusive licenses. Problem is, such licensing may inhibit widespread use of technologies, making it difficult to do further research to build on that patent. The result, according to Columbia University economics professor Richard R. Nelson, is that the economic and social gains of the innovation are less than they would otherwise be. These barriers to the free flow of information between researchers and companies are rising just as private corporations are increasingly turning to a model of open innovation to enhance their IP. More and more companies are making their research results—and even patented ideas—freely available to a wide group of users, most famously IBM Inc., which put 500 of its software patents in the public domain in 2005 as part of its push to become a software services company.

IBM had a good business reason to embrace open innovation—companies using IBM’s ideas are more likely to turn to it for information technology services work—but it isn’t just immediate profits the company is after. IBM and other companies now recognize that the open model offers strong complementarities among different kinds of knowledge, and that encouraging others to follow your lead, and refine and extend your knowledge, makes it more likely ideas will be developed more quickly.

But open innovation can run counter to university revenue maximization. The science journalist Silverman cited on unnamed researcher at Utah, for example, who had developed software for designing medical devices who was then discouraged from making it available as open-source software—to encourage other researchers to extend and refine his ideas—because the university’s technology transfer office wanted to reap its commercial potential.

So what should the government and universities do about these conflicting trends? Most importantly, they’ll have to recognize that openness and the free flow of information in research are critical to promoting innovation. They’ll need to balance their interest in getting financial paybacks with creating an environment where researchers—and companies—can engage in the kind of ongoing dialogue and information sharing that leads to progress.

The government and universities also need to be wary that putting too much emphasis on patents and exclusive licensing, which could work against their broader objectives of harnessing idea creation as a new economic driver. One way to do this is to consider measures to separate a university’s networking function—promoting conversations among academics, industry, and the public—from the intellectual property function, as the University of California-San Diego has done by creating its Connect program apart from the technology transfer office.

One of the hallmarks of San Diego’s rise as a biotech powerhouse has been a strong network of formal and informal cooperation, best typified by UCSD Connect, an outreach program started in the 1980s. UCSD Connect helped organize and foster strong shared social capital, engaging the business community and the research community, and drawing participants from around the world. The program was so successful that entire University of California system now uses it.

The federal government should also put more emphasis on non-exclusive licensing to maximize the social gains from research. If a share of royalties from exclusive licenses had to be returned to the federal government, for example, then universities would have stronger incentives to license most ideas non-exclusively.

Looking at these steps and other ways to ensure that the creation of intellectual property at universities using federal dollars results in the best science and the most effective innovation can help test the efficacy of technology transfer programs in boosting broad-based economic growth. If done right, these efforts may lead to new technology transfer models that could help the United States further refine they way we finance science, technology and innovation in the 21^st century

Joseph Cortright is Vice President of Impresa, a Portland-based consulting firm that specializes in community- and regional-based innovation.

References

Blumenstyk, G. “Colleges Seek a Record Number of Patents,” Chronicle of Higher Education (2004) 51: A27. Available at: http://chronicle.com/weekly/v51/i15/15a02701.htm

IBM:  500 Patents: http://www.ibm.com/ibm/licensing/patents/pledgedpatents.pdf

Lemley, M.A., “Are Universities Patent Trolls?” Palo Alto, CA, Stanford University (2006): 20. Available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=980776

Monastersky, R. “New York U. to Receive $650-Million in Sale of Future Rights to Lucrative Drug,” Chronice of Higher Education (2007). Available at: http://chronicle.com/weekly/v53/i37/37a02401.htm

Nelson, R.R., Innovation, Institutions and Economic Growth, Cambridge, Harvard University Press (2005).

Silverman, E., “The Trouble with Tech Transfer,” The Scientist (2007), 21: 40.

Tags: innovation clusters, intellectual property, patents

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