Defending the University Tech Transfer System

Arundeep S. Pradhan urges policymakers to keep intact the Bayh-Dole Act and support the current system used to commercialize federally-funded academic research

By Arundeep S. Pradhan

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.

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