In 1980, Congress passed the Bayh-Dole Act, named for the two Senators who sponsored it—Indiana Democrat Birch Bayh and Kanasas Republican Bob Dole—to allow universities to own and license to the private sector intellectual property based on their discoveries made with federal funding. The primary purpose of the act was to energize the U.S. economy. Few may have realized at the time how great an effect Bayh-Dole would have in the following 30 years. In fact, the impact has been so positive that in a December 2002 issue of The Economist, the Act was referred to as "Innovation's Golden Goose."
According to a recent study by the Biotechnology Industry Organization, the economic benefits of university patent licensing from 1996 to 2007 were staggering: a $187 billion impact on U.S. gross domestic product, a $457 billion impact on U.S. gross industrial output, and 279,000 new jobs created as a result of university inventions. Just as important, however, are the stories behind those numbers. Innovations originating in university labs and transferred to industry for development and distribution have improved the quality of life for people across the U.S. and around the world. Examples include the hepatitis B vaccine, the prostate-specific antigen test, Google (GOOG), the Honeycrisp apple, and FluMist.
One would think the combination of public benefit and the productive, job-creating effects of the Bayh-Dole Act would be a winner in every sense—a model to retain in challenging economic times. Not according to a small cadre of critics such as the Kauffman Foundation. In a November editorial in The Wall Street Journal and in a January article in the Harvard Business Review, Kauffman leadership opined on alleged weaknesses of the Bayh-Dole Act and of academic technology transfer in general, offering thoughts on how to produce more rapid commercialization of government-funded research at universities. As president of the Association of University Technology Managers (AUTM), I would like to provide an informed perspective on the development and commercialization of academic discoveries and the benefits on the Bayh-Dole Act.
The Pace of New Startups
Bayh-Dole critics postulate that universities and technology transfer offices are inefficient obstacles to the formation of startup companies. In reality, American universities create more than two startup companies each working day, according to a 2008 AUTM survey, and such startups have longer life spans and raise more capital than non-university affiliated startups. In addition, technology licensing offices expend resources to obtain patent protection and are rapidly implementing programs that include entrepreneurial training, product proof of concept support, and seed stage or gap funding. If universities did not undertake these financial risks, the number of patents, licenses, and startup companies emanating from academic research would drop off dramatically.
In the Harvard piece, Kauffman leadership claims "technology licensing offices are underperforming." The example they provide is that "although funding from [NIH] has mounted over the years … the output in terms of new FDA-approved drugs has been falling." There is no correlation, however, between NIH-funded basic university research and the FDA approval process. The drug approval process is the responsibility of industry and takes place well after the technology is licensed. To suggest a connection between technology transfer performance and the rate of FDA approvals indicates a lack of understanding of the complex dynamics at play and the role of university technology transfer offices.
Competition Among Licensing Offices
Kauffman leadership also states in The Wall Street Journal editorial that "Currently, a university professor with an idea may commercialize it only by using his university's technology licensing office … this is an inefficient, monopolistic arrangement … university inventors should be able to use the licensing office of any other university or licensing agents not affiliated with universities." And in the Harvard Business Review article, they advocate a "free agent" system in which any faculty inventor could approach other licensing offices rather than using his or her own university office.
Such a system would create serious conflict of interest and personal benefit issues as well as potentially generate unrelated business income for the agent. Most importantly, historical analysis shows that both inventor ownership and "free agency" have not been successful. Finally, because a university's mission is to serve its faculty, it would be inappropriate for the university to handle technology from outside inventors. Other than a few faculty members who report issues with their respective institutions, there is no evidence that university technology transfer offices are doing a poor job.
Universities have strong incentives to license inventions. Licensing is a means to advance local economic development, benefit society, and meet federal regulations. The true rate-limiting factors in entrepreneurship and commercialization are threefold: 1) the significant gap between the nature of research funded by the federal government and the product development needed to obtain private investment; 2) the challenge of finding early-stage venture funding and experienced startup company management; and 3) competing priorities and intensive time commitments of faculty related to writing competitive grants, securing tenure, publishing, and teaching. With that in mind, it is clear that the critics again demonstrate a significant misunderstanding of the primary mission of universities and the nature of faculty's interest in commercialization and entrepreneurship.
Based on aggregate numbers, there is nothing inherently inefficient about the licensing process. In the period 2000-08, U.S. universities received 147,515 invention disclosures, filed 83,988 new patent applications, and signed 41,598 license and option agreements, of which 4,566 were with startup companies based on university research.
AUTM knows that the process and profession of academic technology transfer can be improved and is, in fact, the world's leading provider of professional training in this field. Our efforts help to ensure that successful practices are shared throughout the U.S. and the world. These practices are the standard at many, if not most, technology licensing offices. We also believe that laws affecting our profession may be improved in the future. With this in mind, we encourage the critics to bring forward truly informed and constructive proposals that are based on actual data, evidence, and, indeed, common sense. To date, they have neither done so nor engaged technology licensing professionals in a constructive dialogue to identify pertinent issues.
Since 1980, the Bayh-Dole Act has effectively leveraged the tremendous value of academic research to create American jobs, economic growth, and public benefit. The Act has resulted in a powerful system of knowledge transfer unrivaled in the world. If policymakers choose to explore changes to this legislation, they would be well advised to study closely its past and current benefits. But modifications should be made only after an unbiased and informed look at the Act and careful consideration of the potential for unintended effects that might undermine the Act and our economy. If we really want to take the next step in spurring technology-based economic development, let us identify where the real stumbling blocks are and concentrate effort and resources in addressing them rather than opining without data.