In Defense of University Patent Licensing (04.23.2003)

[Dave Farber <dave () farber net>]

Guest Essay: In Defense of University Patent Licensing
There's nothing wrong with the way academia licenses its intellectual
property, says Boston University's technology transfer director.
http://www.technologyreview.com/articles/wo_stevens042303.asp
<http://www.uptilt.com/c.html?rtr=on&s=5fo,2a9y,4rw,j9zl,hnqy,1oga,7lci>

       
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Guest Essay: In Defense of University Patent Licensing
There¹s nothing wrong with the way academia licenses its intellectual
property, says Boston University¹s technology transfer director.



By Ashley J. Stevens
April 23, 2003
Technology Review columnist Seth Shulman recently wrote a deceptively
appealing essay advocating radical changes in the licensing practices of
U.S. universities. As the head of technology licensing at a major research
university, I think it is important not to let Shulman¹s arguments stand
unchallenged. 

 
Shulman equates the collective U.S. academic innovation enterprise with IBM,
based solely on the similarity of their royalty incomes. He labels academia
³Big Ivory,² corresponding of course to the more familiar ³Big Blue.² He
praises IBM's habit of granting non-exclusive licenses to its patents, and
concludes that universities should not grant exclusive licenses to the
patents they create.

There are some staggering leaps from mountaintop to mountaintop in this
analysis, and some key facts are omitted.

First let¹s examine how similar the inventive enterprises of ³Big Ivory² and
³Big Blue² in fact are. IBM is a single, cohesive, coordinated for-profit
corporation; almost all of its research is carried out with commercial
purposes in mind, its Nobel Prizes in 1973, 1986 and 1987 notwithstanding.
Big Ivory consists of scores of independent research universities, plus
another couple of dozen independent research institutes and teaching
hospitals. Its research is overwhelmingly basic enquiry‹science for
science¹s sake‹funded by the government after having been reviewed for
scientific merit by peer groups. The research programs are planned, the
funds are raised and the work is carried out by individual investigators
pursuing their own scientific agendas completely independently of the group
in the next lab down the corridor. Less than 9 percent of their work is paid
for by companies, which presumably have a commercial objective.

And what about the quantity of research? According to the most recent survey
conducted by the Association of University Technology Managers, Big Ivory
spent $28.1 billion on research in 2000‹more than five times the $5.1
billion that IBM reported spending on R&D in the same year. Unsurprisingly,
given the different purposes of the enterprises, IBM¹s research is
considerably more productive commercially. Big Blue was awarded 2,886 U.S.
patents in 2000: one for every $1.8 million of R&D expenditures, while Big
Ivory received only 3,598 U.S. patents, or one for every $7.8 million of R&D
expenditures. Royalty income is similarly skewed. Big Blue earned $1.4
billion from licensing, or $1 for every $3.53 of R&D; Big Ivory earned $1.2
billion, a return of $1 in royalty income for every $23.3 in R&D
expenditures.

Shulman ignores facts that interfere with his thesis. He neglects to point
out, for example, that Big Blue started its nonexclusive licensing policy
only as part of a 1956 settlement of an antitrust lawsuit by the U.S.
government. In other words, IBM embraced this practice not because of any
particular wisdom about how best to promote the development of technology,
but because it had no choice. Nor are universities as completely in
opposition to this policy as Shulman suggests. In fact, half of licenses
executed by Big Ivory in 2000 were nonexclusive.

Shulman¹s claim that license deals struck by universities are closely
guarded secrets is manifestly untrue. Many academic license agreements enter
the public domain when the licensee goes public and has to file its license
agreements with the Securities and Exchange Commission. The details of these
licenses are sitting in the SEC¹s publicly accessible EDGAR database.

Most serious of the fallacies in Shulman¹s article is his statement that
exclusive licenses run counter to the tradition of openness of U.S.
academia. Academic patents have nothing to do with preventing openness. By
definition, a patent is an open document available to teach the world what
its inventor has learned, so that others can build on the discovery.
Academic scientists who hold patents continue to teach, to publish, to give
lectures, and to consult for companies‹including companies who haven¹t
licensed their patents. Patents allow control over commercial use of the
discovery. They provide an incentive to invest in a technology by providing
exclusivity if the outcome is successful.

It is a sad fact that those who ignore history are destined to repeat it.
For 30 years after World War II, the United States had precisely the policy
of nonexclusive licensing of federally funded inventions that Shulman
advocates. The government owned the patents and would license them only on a
nonexclusive basis. Under this system, no drug that the government owned
rights to was ever developed and became available to the public. The
government did its best to prevent the commercialization of Gatorade. As a
result, scientists didn¹t bother to disclose their inventions to the
government. In the rare instances that the government did allow the
developer of the technology to own the patents, studies showed that the
invention was 10 times more likely to be developed than if the government
owned the patent and applied its inflexible, nonexclusive licensing policy.

Howard Bremer has worked for the University of Wisconsin¹s technology
transfer arm for over 40 years and helped shape the current paradigm.
Reviewing the history of how policy evolved, he observed that ³the
experience of licensing government-owned patent had without question been
one of non-use of the technology.²

It took a concerted effort by universities, small businesses, and a group of
visionaries within the U.S. government, led by Senators Birch Bayh and
Robert Dole, to pass legislation that finally allowed the creators of
technology to control how it was developed. Academic research is too broad,
too diverse, and too fast-moving to be micromanaged by the government.  The
Bayh-Dole Act of 1980‹which the Economist recently dubbed ³the most inspired
piece of legislation to be enacted in America over the last half
century²‹contributed massively to the revitalization of the U.S. economy and
the rise of the knowledge economy.

Let¹s not return to the dark ages.
------------------------------------------------------------------------
Ashley J. Stevens is Director of the Office of Technology Transfer at Boston
University. 

Copyright 2003 Technology Review, Inc. All rights reserved

          
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