More Evidence Shows That Locking Up University Research With Patents Doesn't Help

from the locking-up-research-is-a-failure dept

For many years, we’ve discussed how the Bayh-Dole Act, which created incentives for universities to patent the (often federally-funded) research results of professors, has been a dismal failure. The failure is based on the same faulty reason for why people think that patent system itself increases innovation — even in the face of an awful lot of evidence to the contrary. The mistake is in thinking that the key incentives for research is to extract the greatest dollar value in return, and that the key to commercialization is licensing. Neither is true. In academic settings, research is driven by a variety of factors, many of which have little relation to commercial incentives. Second, the key to commercialization tends to be market need, not licensing opportunity.

But, because of this, tons of universities thought they were going to be rich and set up “tech transfer” offices to help license this new found wealth of patents. Reality hasn’t been kind. With a small number of exceptions (the big famous universities like Stanford and MIT), nearly every one of these tech transfer offices have lost money for the universities that set them up. In part, this is often because tech transfer offices like to overvalue the patent, and completely undervalue the actual execution necessary. But, more importantly, the research that comes out in this manner often just doesn’t have that much commercial potential — and a big reason for that may actually be the patents themselves.

By locking up the technology with patents, it’s decreased incentives for sharing ideas, which is where real growth and real innovation comes from. The end result is — entirely contrary to the predictions of Bayh-Dole supporters — that the law has decreased the output of researchers and decreased the value of that output. In other words, it’s done the exact opposite of what it’s promised — and yet we still don’t hear any talk of repealing such a dangerous law.

There’s now some new research on trying to patent and commercialize university research, this time coming out of Canada, and it, too, has found that there’s very little evidence of benefit from patenting and trying to license university research. Effectively, it found that the costs and benefits almost even out.

The latest report is based on survey data from 2008 which finds that the total IP income (primarily from licencing) at reporting Canadian universities was $53.2 million. The cost of generating this income? The reporting institutions employed 321 full-time employees in IP management for a cost of $51.1 million. In other words, after these direct costs, the total surplus for all Canadian universities was $2.1 million. The average income per university from IP was only $425,000. Patent applications and patents issued were actually down in the reporting institutions and there were less than two-dozen spin-off companies reported by the universities.

So, it’s another bit of research suggesting this effort to patent university research has not done what it promised to do. So why do politicians still support such laws, when the empirical evidence has long shown that it does not do what those very same politicians promised?

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Comments on “More Evidence Shows That Locking Up University Research With Patents Doesn't Help”

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darryl says:

Original data please,

how about a link to the original PDF report please, the one giest has is broken. And some might want to check the facts.

After all, its third hand news by the time it gets here, its amusing you do that, ie, filter the news through a few different people, including your own past ‘news’ to prove your point.. Its a shame its hard to find the actual original news.

that we have to get it third hard, complete with quotes from the other (non-involved parties) as if that is the news, not the actual information in the report.

And do you really think that Universities making 475,000 dollars MORE than before is losing money ?.

Ok, lets see the report and check eh 🙂

PaulT (profile) says:

Re: Original data please,

It’s a broken link, quite simple. No need to be an obnoxious asshole on 2 different sites to point out a simple error, although I do understand that’s your M.O.

I found the direct link quite easily by typing the document number found in the original URL:

Anonymous Coward says:

The Bayh-Dole Act can work, but will almost surely fail to achieve the purpose underlying the act when financial reward for a university becomes one of the primary objectives for the perfformance of research under a “funding agreement”, i.e., a grant, cooperative agreement, or contract.

The object off the law has a laudatory goal, but includes wwithin its provisions, which are in turn included with the terms and conditions of “funding agreements”, that are contributors to many of the problems noted in the article. The problematic terms and conditions are contained in 35 USC 202(c), which allow an inordinate delay disclosing subject inventions to the USG, a period of two years after disclosure to even tell the USG in the university even wants to file a patent application, an opportunity to delay such filing by withholding publication of research results that necessarily involve a disclosure of the subject invention, and a requirement that any royalties secured by the university from licensing the invention be shared with the “inventor”. In others words, it is easy to game the system to extend the eventual publication of the research results for a period spanning many years. Importantly, the USG is hampered by a requirement to maintain relevant information in confidence during these periods until such time as a patent application, if any, is eventually filed. Also importantly, a university can milk the system as long as possible to ensure confidentiality, and then when it can no longer be prevented immediately turn around and inform the USG “Upon reflection, we have decided not to file an application”. While the USG is then able to do so if it wishes, an inordinate amount of time has passed.

I also have to agree with the article that the tech transfer offices at the vast majority of universities are little more than make-work organizations, require overhead support from the university’s coffers, and have little, if anything, to show for it at the end of the day.

MIT is mentioned, along with Stanford, as exceptions. To these I would add the California system of public universities (e.g., UCLA, Berkely, UCSD, etc.). What distinguishes the first two from the latter, however, is that the first two have a proven track record of actually taking research from the lab and securing the formation of start-ups that work closely with the university researchers (many of who leave to head up the start-up) to create product and introduce same into commerce. Almost all other tech transfer programs are licensing-based, somewhat akin to opening a lemonade stand in the middle of the Mojave desert…lotsa lemonade and virtually no takers.

I could go on, but in the interest of brevity I will conclude by once more noting that there is much to recommend for Bayh-Dole, but that the statute requires a major rewrite, as is also true for the terms and conditions relating to funding agreements. The above are merely what I have long viewed as being some of its major failings, but they are certainly not an exhaustive list.

darryl says:

Nice spin !! I wonder if you read the report, or how you could with link broken ?

I wonder why Mike did not pick that up when he was lifting the copy off Giests site ? I would of assumed he would have tried to at least give it a quick read through !!.

But seems not.. oh well, so we get third hard cut and pastes here, with a few side comments for good measure and thats it. Let someone else troll the web and cherry pick and misinterpret statements.

“In essence, they merely removed a few barriers to a structural freight trains that was already barreling down the tracks of the US economy.”

There you go, even if you follow the long and difficult paths and barriers that Mike throws up at us, and actually trying to read the actual intent of the source, you find that the patent system as opposed to stopping innovation is what is it you linked us too ?

“”In essence, they merely removed a few barriers to a structural freight trains that was already barreling down the tracks of the US economy.”

Great endorsement for the patent system, that the BD act just helped the patent system that was already functioning “like a structural freight train”.”Barrelling down the tracks of the US economy”.

(must suck for you to read that, no wonder you failed to quote those bits 🙂 )

Mike, you seem to take allot of Michael Geist, he appears to be a good cherry picker for you, and wonder if you read the report he linked to, which did not work, so how could you have read it.

And if you did, did you not conclude as anyone else reading it, that this scheme has been a huge success and that it has created well over a thousand spin off companies, employed hundreds of academics, and generated $2 billion dollars in contracts.

You know, contracts, where a private company PAYS the University to do work, they DO NOT force them, but they do pay them, that increased the level of R&D and the sources for funding for R&D.

And somehow you claim, through Michael G that somehow this is bad,

So if you think creating companies, creating new products, creating employment, creating more innovation and innovation built upon that is a bad thing. I guess living in canada or the US must really suck for you..

But I do wonder why you guys, try so hard to spin everything you hear and see into “patents are bad,, mmm OK”.

PaulT (profile) says:

Re: Nice spin !! I wonder if you read the report, or how you could with link broken ?

Maybe the link wasn’t broken at the time he read Geist’s post? Perhaps he already had read the report before Geist’s article, but decided to link to Geist as he thought it was a good post worth reading? There are many obvious and reasonable explanations other than your own wild assumptions.

Besides which, I really don’t understand why people like yourself bother. This site is not set up as an objective piece of journalism – it’s a blog, an opinion site. You’re free not to read discussions here, and you’re also free to address any problems you see with the opinions expressed.

But, rather than simply explaining your disagreement, you instead choose to write lengthy, pointless attacks. In the space of today, you’ve managed to attack Mike’s blog for being a blog, you’ve accused Geist (here and on his own site) of deliberately misleading people, and accused Mike of not bothering to read the articles and reports he’s commenting on (for which you have no evidence other than your own inability to find a report others have located in less than a minute).

“it has created well over a thousand spin off companies, employed hundreds of academics, and generated $2 billion dollars in contracts”

I don’t have time to read the report thoroughly at the moment (I may comment again if I have time to do so when I get home), but that’s only part of the picture, I would say. How does this compare to the previous model (e.g. were other jobs lost due to the patents, how much public funding was lost? I ask seriously, as I’m not sure how those things work and would welcome some information).

As Mike suggests – were these jobs & revenue equally distributed or did they merely help a small number of large institutions while smaller entities lost money? How many of those companies were actually successful & profitable? What were the chilling effects of both the patents and also the resulting drive to only research potentially profitable avenues? Probably a lot, but it’s almost certainly not quantifiable, which is concerning.

“But I do wonder why you guys, try so hard to spin everything you hear and see into “patents are bad,, mmm OK”.”

I don’t see that. I see a lot of criticism about how the system is currently run, along with many comments pointing out how some aspects seem to be fundamentally broken or geared toward large corporations – especially with regard to software patents. I also see criticisms about how this seems to be causing the system to have the opposite effect to that intended.

I’m yet to see an objective, reasoned defence of the flaws that leads to these problems from people like yourself without them diving into strawmen, appeals to authority, ad hominems and other obnoxious logical fallacies.

Please try to do this if you wish, but you’re failing miserably right now.

coldbrew says:

Thanks for instigating me to waste my time and prove to myself that you are an idiot. You have no idea even how to read the report. I feel pretty stupid for giving you the benefit of the doubt.

For any body else, here are some notes:

“This brings to 1,242 the total number of companies spun off by reporting educational institutions to date since the series began in 1999 (Table 16-1).”

Tables 15-1 and 15-2 show total income from IP in 2008 and 2007 (before expenditures) of $53.183M and $52.477M, respectively. Expenditures on intellectual property management for 2008 and 2007 were $51.124M and $41.851M, respectively.

If you can do simple arithmetic, you would see $2.041M and $10.626M for 2008 and 2007, respectively.

Value of Research contracts (i.e. how much was SPENT on research by sponsors) listed in tables 8-1 (2008) and 8-2 (2007) were $1.971B and $1.273B, respectively.

Anonymous Coward says:

I do not necessarily disagree with some of the generalized observations contained in Mr. Geist’s blog article, but being well versed in the history and vagaries associated with the Bayh-Dole Act, this is one of the few times that I suggest Mr. Geist stick with subjects that he has personally studied at length and in depth.

Anonymous Coward says:

Re: Re: Re:

Perhaps you can explain in some detail why you seem to believe that a comment critical of Mr. Geist’s article is off the mark. By my reading of his article and citations he seems to be unfamiliar with this section of US law and its implementing regulations, but then I am always willing to entertain views that may differ from mine.

Gerald Barnett (profile) says:


Okay, so I’m years late to this bit of discussion.

There is no published data that demonstrates that Bayh-Dole has been a success. Bayh-Dole exempts all use data from public disclosure. On its own terms Bayh-Dole requires practical application, not money-making. And practical application is given a definition–broadly, use so that benefits are available to the public on reasonable terms. How much a university makes is immaterial. So are a handful of “success stories.” For each subject invention, what has happened? Under the old IPA system, the reported licensing rate to product was about 5%–the same as the federal government rate. Now, it appears that the university licensing rate to product is 0.1% (across all inventions, not just subject inventions). The universities (actually, their affiliated licensing agents) claimed their licensing rate for all inventions was 25% to 30% pre-Bayh-Dole. Looks to me like the rate is now off two orders of magnitude from the private network of invention management organizations that Bayh-Dole destroyed.

The article at IPWatchdog doesn’t report any actual Bayh-Dole metrics. It’s the same old bluster. What has been successful about Bayh-Dole is all the patent work it has generated. In that, he’s spot on. As Bremer had it, Bayh-Dole is all about the middlemen. Send in the middlemen. There ought to be middlemen. Bayh-Dole was the invention of patent attorneys (Latker, Bremer), for patent attorneys. For every research discovery, a bureaucrat’s thumb. No public benefit unless there is first university profit-seeking. The purpose of federal support for research is to encourage the creation of petty monopolies. Why is it again that politicians support this law?

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