Who gets fruits of public R&D?

Who gets fruits of public R&D?

by David Morris

Originally published in the Minneapolis Star Tribune, November 28, 2004

In 1980, Congress allowed universities to own federally supported research and grant exclusive licenses to businesses to commercialize that research.

Since then, the landscape of America’s research universities has changed dramatically. Before 1980, U.S. universities applied for about 250 patents a year. In 2003, they applied for about 10,000. In 1980, 25 to 30 universities had offices for technology transfer. Today more than 1,200 do. In many cases, their budgets are substantial. The University of Minnesota’s technology transfer department, for example, has 21 full-time employees, up tenfold in the past 20 years.

The wall between academe and business has all but disappeared. Universities and businesses have become ever-more-intimate partners. Last March, for example, the Board of Regents voted to allow the university to invest income earned from its inventions into private ventures.

As we approach the 25th anniversary of the 1980 Bayh-Dole Act, opinions still differ widely on its impact. The Economist magazine recently hailed it as “the most inspired piece of legislation to be enacted in America over the past half-century.” On the other hand, Michael Eisen, assistant professor of genetics and development at the University of California-Berkeley and a close observer of the new research dynamics at universities, declares the act “completely unsuccessful.”

Who’s right?

Assessing the evidence

A proper evaluation would compare university and federal laboratory technology-transfer efforts before and after 1980. Regrettably, such a comparison is problematic. A major reason is that impact analyses before 1980 used different and broader measures (e.g., the number of acres grown in a new crop, number of products on the market using the knowledge generated, number of citations in scientific journals) than are used today (e.g., the number of patents granted, amount of license income generated).

Supporters of the Bayh-Dole Act believed that more academic research would find its way from the laboratory to the marketplace if universities could offer exclusive licenses to lure private investment.

However, several detailed cost-benefit studies found that when publicly funded agricultural research was available free to everyone, it was widely used. One study calculated the overall annual return on investment at a healthy 35 percent. Between 1941 and 1966, about 9 percent of the projects undertaken by the Agricultural Research Service produced an economic return, a success rate that compared favorably to that of research in the food industry.

Despite the dearth of post-1980 analyses that assess societal, rather than institutional, effects of the new rules governing intellectual property, there is sufficient data to support some tentative conclusions.

Most university technology-transfer programs lose money. They earn less from royalties than they spend on patenting inventions and promoting them to private businesses. Very few inventions disclosed at universities ever achieve a significant market impact. Of every 100 inventions disclosed, about 80 are patented and fewer than 40 are commercialized. Only about one-half of 1 percent generate significant sales.

The University of Minnesota’s technology-transfer program has made money, especially since 2000, although it is unclear how much because the program’s institutional costs are not subtracted from the gross revenue generated.

A world without Bayh-Dole

What knowledge has been commercialized under Bayh-Dole that wouldn’t have been under the old rules? What knowledge has had an important impact under the old rules that would have had far less impact under the new rules? Very little information is available that would allow us to assess these what-might-have-been scenarios.

We do know that the university’s deservedly famous apple-breeding program commercialized as many new varieties under the old rules as it has under the new ones. One possible reason is that the university’s new varieties still are available to anyone for a modest one-time license fee of $1 per tree.

Jeffrey Brenner of Salon wonders what the Internet would have looked like if, back in 1992, the University of California-Berkeley, which developed the code that forms the backbone of the Internet, had decided to license it to Microsoft rather than release it as open source code.

That is a pertinent question because Bill Hoskins, currently in charge of intellectual property protection at UCB, told Brenner he would have done things much differently. “Whoever released the code for the Internet probably didn’t understand what they were doing,” Hoskins said.

We do know that the privatization of knowledge has led to fragmented research and a reduction in collaboration and sharing among scientists. University of Michigan law professor Rebecca Eisenberg maintains, “You can make a clear case that research is being slowed by intellectual property claims.”

Janet Woodcock, acting deputy commissioner of the Food and Drug Administration, has asserted, “Despite the flood of new knowledge in the biosciences, there has been a ‘slowdown’ instead of an expected acceleration in innovative medical therapies reaching patients.”

Reporter Sharon Begley in the Wall Street Journal writes: “Fed up with the glacial pace at which new discoveries become medical treatments, [funders] are insisting that the scientists they fund swear off secrecy in favor of collaboration.”

It is long past time that we developed good empirical measures to evaluate whether the new intellectual property rules governing university research have helped society as a whole.