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WASHINGTON, D.C., April 12, 2007 — The emphasis among universities to reap big financial rewards through licensing and patenting innovation developed by research scientists is actually impeding the development of new technologies and may be masking the importance of other means of knowledge transfer, according to researchers at the Ewing Marion Kauffman Foundation.
In a report released today at the Innovation Policy and the Economy Summit, sponsored by the National Bureau of Economic Research (NBER), Kauffman Foundation researchers Robert Litan, Lesa Mitchell, and E. J. Reedy contend that the existing system of commercializing innovation is based on a "home run" mentality whereby universities only focus limited time and resources on patenting and licensing technologies that offer the promise of a bigger, faster payback. The NBER is the nation's leading economic research organization with the summit designed to encourage high-quality, policy-relevant research and communication between researchers and the broader policy community.
They argue that university leadership must refocus from solely a patent/licensing model that seeks to maximize income to a volume model that emphasizes the number of university innovations and the speed at which they are commercialized.
"We are now at a critical point in which the incentives of some universities may lead to the codification of a system that will inhibit rather than promote commercialization of technological breakthroughs," said Robert Litan, vice president for Research and Policy at the Kauffman Foundation and a senior fellow in the Economic Studies and the Global Studies programs at the Brookings Institution.
According to the report, multiple pathways for commercializing university innovation exist. Those pathways can provide broader access to innovation, allow greater volume of deal flow, support standardization, decrease redundancy of innovation, and shorten the cycle time for commercialization. These models include open source collaboration, copyright, non-exclusive licensing, and a focus on developing the social networks for graduate students and faculty to commercialize all types of innovations.
"We all have an interest in seeing that innovations are more efficiently brought to the marketplace," said Lesa Mitchell, vice president of Advancing Innovation at the Kauffman Foundation. "Universities want to more swiftly commercialize discoveries from their labs. Business and industry want to capitalize on the products and services that result from breakthrough research. Venture capitalists want to pluck the most promising investment opportunities. And we at the Kauffman Foundation want to see that entrepreneurship is cultivated to the greatest extent possible."
According to the report, passage of the Bayh-Dole Act in 1980 was intended to speed up the process of moving technologies from the laboratory to the marketplace by clearing the way for universities to claim legal and, therefore, financial rights to federal government-funded innovations developed by their faculty. However, new layers of administration developed that centralized the process, narrowed the view of innovation as only patents, and emphasized revenue generation rather than volume of innovations the university commercializes.
Technologies that may offer longer-term potential or that may be highly useful for society as a whole tend to pile up in the queue, get short shrift, or be overlooked entirely. Centralized technology transfer offices, once envisioned as gateways to facilitate the flow of innovation, have instead become gatekeepers that in many cases constrain the flow of inventions and frustrate faculty, entrepreneurs, and industry.
Today, more than half of basic research is conducted in universities, and it is breakthroughs in basic science that have created new industries. While research output appears to be in good shape, the report points to several disturbing signs:
- The United States has experienced stagnant to declining levels of R&D investments, decreasing industry-university authorships, and decreasing citations of U.S. science and engineering articles by industry.
- There is some indication that foreign-sourced R&D is being driven by greater access to foreign universities. Also worth noting is that the type of research being performed in developing countries is increasingly innovative in nature.
- Industry investments in U.S. university-based R&D have stagnated.
Additionally, the researchers point out that successful commercialization of university research remains largely concentrated in just a handful of universities.
The researchers address four different volume models that universities should consider, each sharing the following common features:
- They provide rewards for moving innovations into the marketplace, rather than simply counting the revenue they may return;
- They focus on faculty as the key agents of innovation and commercialization; and
- They emphasize further standardization in the interactions of campuses with their faculty and with industry.
These models include:
Free Agency: Under this approach, faculty members are given the power to choose a third party (or themselves) to negotiate license agreements for entrepreneurial activities, provided they return some portion of their profits to the university.
Regional Alliances: Multiple universities form a consortia that develops mechanisms for commercialization. Economies of scale allow for lower costs of the commercialization function overall, and the universities are able to share costs among multiple participants. This model may prove particularly attractive for smaller research universities, which may not have the volume to support a seasoned and highly able licensing and commercialization staff independently.
Internet-based Approaches: Closely related to the regional alliance model, Internet-based approaches use the web to facilitate commercialization. The iBridge NetworkSM, a program funded by the Kauffman Foundation that works with a consortium of universities, is an example of such a model.
Faculty Loyalty: This calls for universities to consider giving up their intellectual property rights, anticipating instead that loyal faculty will donate a portion of their commercialization proceeds back to the university.
The researchers argue that the federal government, as the funding source for university-based research, is in an ideal position to encourage these and other alternative arrangements for commercializing university innovations.
A copy of the report can be downloaded at the Social Science Research Network.
About the NBER
The NBER (www.nber.org) is the nation's leading nonprofit economic research organization. Sixteen of the 31 American Nobel Peace winners in Economics and six of the past Chairmen of the President's Council of Economic Advisers have been researchers at the NBER. The more than 600 professors of economics and business now teaching at universities around the country who are NBER researchers are the leading scholars in their fields. These Bureau associates concentrate on four types of empirical research: developing new statistical measurements, estimating quantitative models of economic behavior, assessing the effects of public policies on the U.S. economy, and projecting the effects of alternative policy proposals.