Innovation’s golden opportunity


Students celebrate at Harvard University’s 360th commencement on May 26, 2011. (Steven Senne/AP)
Vivek Wadhwa
Contributor, Innovations June 10, 2011

The Supreme Court ruled Monday that universities cannot automatically own the rights to the inventions that result from federally financed research.  The next day, a New York Times editorial decried the decision, saying it “romanticizes the role of the solo inventor,” and “fails to acknowledge the Bayh-Dole Act’s importance in fostering collaborative enterprises.” This couldn’t be more wrong. The university commercialization system is broken, and the solution is to empower, not inhibit, the researchers.

The Bayh-Dole Act, enacted in 1980, laid the ground rules for federally funded research, allowing universities to own the resulting intellectual property. Universities established technology transfer offices where they patented and licensed that intellectual property to industry. The number of patents filed and licensing revenue earned became the measure of success for these new offices — offices that were invariably staffed by lawyers and contract negotiators. Their focus was on extracting the maximum value from university inventions rather than ensuring that research breakthroughs were turned into inventions. The Kauffman Foundation, an authority on entrepreneurship and invention, called them "monopoly gatekeepers.” A few universities like Stanford and MIT reap substantial profits from technology licensing, but most don’t cover their costs.

Vivek Wadhwa is a fellow at Rock Center for Corporate Governance at Stanford University, director of research at Center for Entrepreneurship and Research Commercialization at Duke, and distinguished fellow at Singularity University. His past appointments include Harvard Law School, University of California Berkeley, and Emory University. View Archive

If university research was a business, it would be bankrupt.

In 2009, the federal government, industry, and philanthropic organizations invested $53.5 billion in university research. The total licensing revenue of all U.S. universities amounted to $2.3 billion that year, and that number includes the ongoing royalties from technologies licensed over the past decades.

University research is not a business. Its purpose is to expand the knowledge base for humanity, to educate, to inspire, to create research leadership. The real benefit comes from the students these universities educate. Those students go on to start the Intels and Googles of the world. So it is not fair to judge the success of university research by the licensing revenue produced. But, our leaders continue to justify increases in research funding based on that metric. They tout the fact that universities invented some of our greatest technologies—like the Internet, magnetic resonance imaging (MRI) technology, and the transistor.

The U.S. economy is in shambles and our world leadership is eroding. We need to make the most of everything we have. We’ve invested over a trillion dollars in university research over the decades. Most of this has not been commercialized. The next internet or semiconductor technology may already have been discovered and left to languish on the shelves of a university research lab. These little-known discoveries are an untapped gold mine of knowledge and a potential catalyst for groundbreaking ideas.

The technology transfer offices are only the beginning. The system also disproportionately rewards academics for publishing papers. Academics strive for tenure, and tenure is earned through published papers—not by creating startups.

When academics make groundbreaking discoveries, it is often difficult for them to acquire funding and test these discoveries in the real world. Most government grants only cover the cost of writing papers—not building prototypes. Without such validation, venture capitalists won’t fund a startup, deeming the discovery a “science project,” and letting it whither on the vine. This chasm between what professors and venture capitalists can and are willing to do, is also known as the “Valley of Death.”

There are times when the technology is so compelling that the researcher is ready to take the risk of starting a venture. But they encounter numerous obstacles, the biggest being the negotiation process between universities and industry. It is not uncommon for these negotiations to drag out for six months to a year as universities commonly demand onerous terms, with up-front payments and royalties. They are fearful that they will license too cheaply the next Gatorade or Google and receive bad press. But it is also difficult for researchers to independently gain the support of the university and connect with entrepreneurs who can teach them the basics of starting a business. Few universities have a sufficiently robust entrepreneurial ecosystem to support this.

One solution advocated by the Kauffman Foundation is to educate university researchers on the basics of entrepreneurship, and turn them into “free agents”—allowing them to own and license their own intellectual property. These researchers know their invention’s potential better than a university bureaucracy ever could. Their goal is to see their technology do good for the world and maximize license revenue. The founders of successful spinoffs like Google usually end up donating more to universities than the schools will every earn from license fees.

Bob Litan, the Kauffman Foundation’s vice president of research, fears that universities will merely slip through a loophole in the Supreme Court ruling and go back to business as usual. “It will be unfortunate for the nation and our economy if universities take the knee-jerk reaction of simply rewriting their faculty contracts to avoid a future ‘Roche’ problem,” says Litan, referring to the defendant in the Supreme Court case. “If we are actually going to see the fruits of science and engineering accelerated to market we need porous boundaries between the universities and the marketplace not higher walls separating them.”

I agree with Litan. The High Court’s decision gives us an opportunity to rethink the university research commercialization system. It is time to mine the goldmine of university knowledge and stop holding innovation back.

Vivek Wadhwa is a senior research associate at Harvard Law School and executive in residence at Duke University. Read more about Vivek Wadhwa and what's next in innovation at washingtonpost.com/innovation.

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