Tuesday, 8 October 2013

Ethics versus Money in University Tech Transfer

IP Finance is delighted to bring you this piece from our friend Suleman Ali (Holly IP), which touches on a sensitive topic:

Are Commercial Pressures Undermining the Ethics of University Tech Transfer Offices? 
The Bayh-Dole Act of 1980 made it possible for US universities to benefit financially from government funded research.  It allowed universities to own the patents that resulted from their research, rather than having to assign them to the government.  Since then many US universities have done well in commercialising their research.  The Association of University Technology Managers (AUTM) in the US reports that last year US universities and research institutes executed 5,130 licenses, formed 705 start-ups, filed 22,750 US patent applications and made $2.6billion from licensing income.  UK universities have also done well from commercialising research, making £61 million in licensing income in 2010/11.  Most would agree that commercialising university research is beneficial for the economy of a country, and in particular helps the increasingly important hi-tech industries. 
The hub of the system is the university tech transfer office.  Such offices are now well established in many top universities, and are finding their feet in the less prestigious universities.  However tech transfer offices have a difficult task.  They have to persuade academics to commercialise their research, educating and pushing the reluctant ones and keeping in check the powerful and pushy ones.  They have to defend the university’s interests when collaborations are set up, and are sometimes accused of being too aggressive in doing so.  Most importantly they have to decide on which research they’re going to commercialise.  That is usually based on two main factors, patentability and commercial worth.  Patentability is complex, but usually possible to decide on -- but assessing commercial worth can be close to impossible, and inevitably tech transfer offices get it wrong a lot of the time. That means many university patents are never licensed or commercialised in any way as a commercial partner is never found. 
A recent article in Nature highlights the phenomena of universities looking to Patent Assertion Entities (PAEs) to monetise their unlicensed patents.  The article quotes a figure of only 5% of patents being licensed at most universities, which means that a lot of university resources are going into filing and maintaining patent applications which are never going to give any return by the usual means of commercialisation.  PAEs are controversial because they do not develop the technologies covered by the patents they control.  Instead they make money by asserting their patents against companies using the technologies, and thus are seen by some as a burden on innovative companies.  A report in the Stanford Technology Law Review last year alleges that one of the most high profile PAEs, Intellectual Ventures, has relationships with 400 universities around the world and has signed deals with 50 of them.  It’s clear that many universities have no qualms about monetising their patent cases through PAEs.
Questions can be asked about the do’s and don’ts of commercialising publically funded research.  While it seems acceptable for tech transfer offices to license or sell patent to companies that are going to develop the relevant technology, is it equally acceptable for them to monetise their patents through PAEs?  US universities are aware of the issues raised by turning to PAEs.  A memo that resulted from a meeting of top US universities in 2006 says ‘universities would better serve the public interest by ensuring appropriate use of their technology by requiring their licensees to operate under a business model that encourages commercialization and does not rely primarily on threats of infringement litigation to generate revenue’. 
One wonders about the long term consequences on university research now that the option to license to PAEs is available.  Academics are under increasing pressure to focus their research on areas which will have commercial interest.  While it could be argued this harms blue-sky thinking it would still lead to innovative, and hopefully round-breaking, work.  However the PAE model relies on having patents that cover what is being done by companies.  That may cause academics and tech transfer offices to simply focus on producing patents that PAEs would be interested in having. 
Perhaps now is the time for broader questions to be asked about how publicly funded research should be used.  Governments seem increasingly in favour of open innovation, where the results of university research should be freely available to all, allowing as many organisations as possible to benefit from it.  Allowing PAEs to license and assert patents resulting from university research seems a backward step in that process, hurting not only the most innovative sectors of the economy, but arguably also being detrimental to university research itself. 


Alex Yawar said...

A great piece from Suleman. He raises the vital issue of commercialisation of IP in education; in an era of financial austerity, the intense pressure to deliver marketable IP could end up subverting academic credibility altogether.

Irfan Zakiuddin said...

It is indeed a fine article from Suleman.

Surely there is a parallel between the PAE phenomenon in IP monetisation and a former US 'export' to our shores: the ambulance-chasers! I mean, of course, the no-win-no-fee legal sharks. A few years ago, I'm sure you all noticed a sudden hike in car insurance costs, that was all of us paying for the ambulance-chasers. It's evident that society paid, but what did society gain?

Perhaps the analogy 'proves' nothing clear or specific about the consequences of PAE action. But it is surely worrying. We learn further that as the number of cases rises, the courts service is predicting being overwhelmed. There will be costs, and what will be the gain?

Suleman implicitly suggests a solution. There is a strong culture of public service in academia; it's stronger here, in the UK, than over there, in the US. So, if the leading US academies are willing to endorse 'responsible' conduct when attempting to monetise IP, then we should expect the academies here to be more socially aware and responsible. And I'm sure close examination will reveal that the actual financial gains - remember the PAEs are a business overhead - are at best nominal. So play it hard, the moral card: urge the universities to mind their social conscience. They universities are fundamental stakeholders in society's welfare; when it comes to IP monetisation, they must act responsibly to minimise the cost to society and maximise the gain.

Anonymous said...

The key thing is that Universities file too many useless patents. Patents are not for protecting inventions but for protecting commercially useful inventions.

The UK figure of £61 million is embarrassing compared to the $2.6 billion in the US when our UK Universities are supposed to be cutting edge in science and innovation.

Third point. IV is not a PAE. To characterise it as such is too simplistic. Many of the interactions IV has with Universities is to commercialise IP by pooling or effective licensing not litigation. This is a good service to society as Universities are extremely poor at knowledge and IP transfer simply favouring publication and glory/prizes. We need to stop putting Universities on a pedestal they do not deserve and to stop attacking those who seriously wish to make money out of effective IP use.

Hugh said...

In response to Anonymous of 19:34 it's very difficult to predict whether or not an invention will be commercially useful. In my experience even the best university TTO's have a low hit rate.