Patents & University Entrepreneurship

Universities are becoming hot-beds of patenting. The number of patent filings is on the rise at U.S. universities, outpacing the growth in university research spending.

According to AUTM data, research spending is up 30% at U.S. universities in the last five years, while patent filings are up 36%. Over the same period, licensing income has gone from a little less than 2.5% to slightly more than 3% — and up to 7.5% at the twenty-five largest U.S. research schools. University patents are becoming a big deal.

There are plenty of controversies, however, including the current tussle over Columbia University’s apparent attempt to extent its highly profitable Axel patent through submarine techniques. There are also folks who don’t believe that universities should be permitted to patent publicly-funded research, which is a perfectly legitimate philosophical view — albeit a nearly impossible one to now-implement in practise.

Many think that one of the things that set universities loose was the Bayh-Dole Act in 1980. Prior to Bayh-Dole, university inventors couldn’t own their creations. The Federal government did instead, and it granted licenses to university and lab creations on an all-comers, non-exclusive basis. As you can imagine, that didn’t light a fire at very many companies.

Bayh-Dole changed all of that. It permitted exclusive licensing of inventions, with the the government still able to get a royalty-free, non-exclusive license to use on projects for government purposes (i.e., by government contractors). But at the same time, the act permitted universities to retain title to inventions made while funded by the feds.

But did Bayh-Dole really make a difference in patent filings? Intuitively you would think so, but the research in the area has been saying otherwise. It argues that much of the increase in patenting and licensing was driven by changes in intellectual property laws, and in the sorts of groups funding academic research.

There is a new paper out, however, that puts a different spin on things. In the current Journal of Business Venturing, Scott Shane argues that Bayh-Dole has had an effect. But rather than increasing the aggregate number of patents and licenses, its effect has been to redirect researchers’ efforts. He found that “the effectiveness of licensing in a line of business is significantly correlated with university share of patents in the post-Bayh-Dole period, but not in the pre-Bayh-Dole period”. In other words, universities began focusing patenting & licensing in areas where it is easiest to transfer technology.

As Shane point out, while that is interesting in itself, it also points to a problem. To the extent that Bayh-Dole was intended to assist in broadly commercializing embryonic research it has had mixed sucess. The low-hanging licensing fruit is being plucked, but that is really it.