Patenting University Research Has Been A Dismal Failure, Enabling Patent Trolling. It's Time To Stop

from the fix-this dept

For many years we've been incredibly critical of the famous Bayh-Dole Act, which was passed in 1980 with the idea that it would encourage greater innovation by pushing universities to patent the research they were doing. The theory -- based on a rather ignorant view of innovation and research -- was that patents would create a market, which, in turn, would enable easier knowledge transfer from academia to industry, leading to a research boom. The actual results have been a near total disaster. What's actually happened are two very bad things. First, it's seriously harmed university research, by guaranteeing much less information sharing between researchers. And, it turns out, that information sharing is a big part of how innovation and big scientific breakthroughs occur. Not surprisingly (if you understand basic economics), when you try to lock up each idea with a patent, researchers (and, more importantly, their administrator bosses), suddenly don't want to share any more. The end result? Lots of important research stifled. What a shame.

The second massive problem in the wake of the Bayh-Dole Act was that every university stupidly thought that it would help make them rich. They bought into the myth of patents and this idea of "tech transfer," and pretty much every research university set up a "tech transfer" office, whose main job was to try to "license" those patents for as much money as possible. University administrators started licking their chops at this potential profit center. But, over the past couple decades, reality has set in. As we've noted for years, ideas are a very, very small piece of the puzzle for innovation. It's the execution that matters. But the folks working in tech transfer offices never understood that and have tried to put ridiculously high prices on their patents, in an attempt to justify their own existence. End result? The exact opposite of the stated goal of the Bayh-Dole Act: less research got transfered into industry, because various tech transfer offices priced it out of the market.

We've pointed out in the past that this expected "profit center" has been a disaster for nearly every university that tried it. With only a handful of exceptions (Stanford, MIT, etc.) tech transfer offices have cost more than they've ever made... while serving to lock up important research, limit collaboration and generally cost the university money that could have gone elsewhere. Oh, and then the trolls came in. We've discussed plenty of times in the past how Intellectual Ventures is the world's largest patent troll, but what few people pay attention to is how it got its patents. That's the nasty secret. The crew at IV saw all the problems with tech transfer offices and saw an opportunity: IV went around from university to university and offered to buy patents in bulk. Desperate tech transfer offices, needing to show some revenue coming in gobbled up the offers, and voila, a giant massive patent troll with tens of thousands of patents was born -- often based on research that was funded by taxpayer dollars.

This appears to be a massive transfer of wealth from taxpayers to billionaire Nathan Myhrvold, thanks to a bad law that has harmed research, damaged the advance of science and knowledge, harmed university finances and decreased actual innovation. Remember, IV has never produced a single product and brought it to market.

And, tragically, almost no one is talking about all of this, even with patent reform being considered. Hopefully that will start to change. A new report from the Brookings Institution doesn't go into all of this background, but does highlight what a complete and utter failure university tech transfer offices have been.

Using tech transfer office expenses information, Valdivia estimates that 130 universities did not generate enough licensing income in 2012 to cover the wages of their technology transfer staff and the legal costs for the patents they file. What is more, with 84% universities operating technology transfer in the red, 2012 was a good year because over the last 20 years, on average, 87% did not break even.

In fact, the report notes that just 8 universities made up 50% of the licensing revenue. Basically, you've got a huge number of universities that are a giant cost center whose only job is to hold up innovation.

The report has some suggestions as to how this should change, noting that universities, rather than focusing on patents, should instead focus on helping spin out actual startups. On top of that, Congress should change the law to allow for, at the very least, an exemption for non-profit research or experimentation. Those aren't bad recommendations, but it seems like Congress could and should go much, much further.

Either way, it should be recognized what a complete disaster Bayh-Dole has been for basic research, and how it, indirectly, helped create a massive patent troll. Hopefully Congress will finally wake up to its mistake and fix this.