Bayh-Dole, again

I began this blog three years ago with a post, “Bayh-Dole Under Attack Again,” and apparently the time has arrived for yet another attack in the mainstream business press. Readers will know that I am capable of deep skepticism or even cynicism about the motives of our university sector, but this particular attack seems wrong-headed to me. The central assertions — that academic research is now overly influenced by get-rich-quick dreams — is entirely unsupported, and there’s a great deal of confusion besides. Let’s “Fisk” a few key quotes:

For the first time, academicians were able to profit personally from the market transfer of their work. For the first time, academia could be powered as much by a profit motive as by the psychic award of a new discovery

Yes, but that misses the fundamental point of Bayh-Dole, which addressed the motivations of the licensee as much as those of the licensor. The law proceeds from an understanding that for-profit licensees will fully engage in commercializing discoveries made at universities and financed by federal tax dollars only when the rights thus licensed accrue to them and them alone. That was the reason for clarifying who could license out a federally financed discovery (the university whose faculty were performing the work at the time of discovery) and on what terms (exclusive, if necessary). That these transactions involve royalty payments and that academic inventors could make money (from their statutorily guaranteed minimum “inventor’s share” of royalties collected) was a minor grace note to the overall thrust of the law. To further assert that this means that academia has become powered by the profit motive is entirely unsupported in my view.

Professors are stepping away from the lab and lecture hall to navigate the thicket of venture capital, business regulations and commercial competition

As Ms. Rae-Dupree admits immediately following, this is not necessarily a bad thing (though she goes on to imply it is), but it also isn’t necessarily true. For one thing, faculty inventors are rarely involved directly in precisely the “blockbuster” royalty deals about which she complains. These are straight licenses between the university and (typically) a biopharmaceutical company and do not require any entrepreneurial involvement by the inventor. In cases of licenses made to venture-capital-backed start-up companies, faculty inventors may or may not be involved materially as entrepreneurs. It is my own view, in fact, that spinoffs work best when led at the earliest stages by recruited “surrogate managers” who perform duties that university faculty are not generally constitutionally suited for (unless they plan to leave academic for business entirely, in which case there’s no complaint either). Under the federal conflict-of-interest rules that are nearly as important as Bayh-Dole, most faculty inventors will generally be restricted to non-executive roles in such startups, such as chief scientist — particularly if those startups finance research back in the inventor’s university laboratory.

The primary concern is that its original intent . . . has also distorted the fundamental mission of the universities

No evidence has been presented for that sweeping a claim.

In the past, discovery for its own sake provided academic motivation, but today’s universities function more like corporate research laboratories

Nonsense. Anyone who’s ever been in a corporate research laboratory — particularly in the years since the collapse of the old-style central lab (Bell, Sarnoff, Exxon) that conducted basic research, and the rise short-term, product-development projects that must have a divisional “customer” in order to exist at all — knows that universities don’t look like corporate research labs at all. Indeed, that’s precisely why companies value universities, because they are essentially the only elements of our society still conducting basic research at all (on the federal nickel). If involvement of corporate sponsors and partners has helped define “uses” for that basic research (in the sense of Don Stokes’s “use-inspired basic research”), so much the better. But the two modes are not to be confused.

… researchers increasingly keep new findings under wraps to maintain a competitive edge. What used to be peer-reviewed is now proprietary. “Share and share alike” has devolved into “every laboratory for itself.”

Again, no evidence. Anyone who deals with university faculty knows they are still mainly — nay, massively and overwhelmingly — motivated by tenure processes that favor peer-reviewed publication in prestige journals. Bayh-Dole and employment agreements drafted under its aegis do require federally financed researchers to disclose potentially protectable inventions, but as a matter of course faculty and tech transfer offices are able quickly to agree on whether a “provisional” patent application should be filed, an easy process that allows publication to proceed with little or no delay. Disputes may arise later over whether and how to finance a full application, but the publication has already been submitted by that point. Research sponsored heavily by companies may include a longer delay of publication for review of potential patentability, but rarely over 90 days, and no university worth its salt will sign an agreement that allows suppression of publication indefinitely or even for very long at all.

“. . . somebody doing the same work [finding the structure of DNA] today would certainly take a crack at patenting the double helix”

The ever-entertaining Dan Greenberg is certainly right about that, but isn’t his beef (and that of other critics like Michael Crichton) with the patent law rather than Bayh-Dole?

. . . universities have obtained patents not only for the actual substances but also for the processes and methods used to make them [and, later:] . . . patenting a new basic science technique puts it out of reach of graduate students who might have made tremendous progress using it

Again, true, but a straw issue. NIH has long made quite clear that it wishes “research tool” patents to be broadly licensable, and since it has the leverage to enforce even the lightest of its wishes, many of our most prestigious universities have complied in public ways, sometimes going considerably farther. When does a “research tool” become a “platform technology” that is held for commercial value by a single exclusive licensee? That’s a tough and subtle question, but not one that has been addressed thoughtfully in this piece.

. . . two-thirds of the revenue tracked by the association has gone to only 13 institutions

Indeed. That’s precisely because these are the big, blockbuster-compound licensing deals that don’t often engage faculty inventors in entrepreneurship at all, or at least don’t have to in order to generate very large royalty flows. In my view, these mega deals are a problem because they tech transfer offices from looking for other kinds of “return” to the institution, such as holding equity in a local startup or simply increasing the flow of sponsored research from licensing partners, but it’s not a problem with Bayh-Dole per se.

a nanotechnologist from Hewlett-Packard [,] testified to Congress in 2002 that much of the academic research to which H.P. has had difficulty gaining access could be licensed to several companies without eroding its intellectual property value

Well, aside from being strikingly self-interested, this is now a rather old quote. Actually, I strongly suspect that as nanotech evolves, its licensing patterns will increasingly follow the template of engineering and physical science inventions, which many universities have long agreed to license non-exclusively or at least for narrow fields of use, rather than the pattern of biotech, where broad and exclusive licenses are common. In part that’s because physical-science discoveries rarely translate to a commercial product as directly as does a a newly discovered medical compound. Rather, they require continued and ongoing interaction (read: sponsored research and hiring of students) with the inventor’s laboratory. That situation generally favors less restrictive licensing terms.

“Large U.S.-based corporations have become so disheartened with the situation, they are now working with foreign universities, especially the elite institutions in France, Russia and China.

This is a complete misreading of the facts, in my view. What major American companies are actually concerned about are the IP terms of research agreements where they (the company) are the sole sponsor, and the federal taxpayer is not involved at all. Most universities (perhaps disingenuously) make the argument that since Bayh-Dole grants them ownership and right to license exclusively all discoveries made under federal funding, the same template should prevail also for all privately sponsored research. Companies quite naturally argue that one has nothing to do with the other and that if they’re willing to pay, they should be able to actually own resulting IP, not just license it exclusively. Except for some smaller and less prestigious campuses that are willing to comply (usually in exchange for “fully loaded” or even premium-rate indirect cost charges) most American universities are standing firm on this admittedly very weak argument, and indeed it has caused some companies to look abroad for research partners. Again, this has nothing to do with Bayh-Dole itself.

Perhaps the most troublesome aspect of campus commercialization is that research decisions are now being based on possible profits, not on the inherent value of knowledge. “Blue sky” research — the kind of basic experimentation that leads to a greater understanding of how the world works — has largely been set aside in favor of projects considered to have more immediate market potential.

Again, completely unsupported. In most American universities, corporate-sponsored research accounts for far less than 10 percent of total research expenditures, and federal sources predominate by huge margins. We may quibble about how adventurous any given federal research program is with its extramural dollars, and we may agree that universities and faculty are quite mercenary in their pursuit of federal funding, but this has nothing to do with distortion of mission. The basic research system in the U.S. may not be optimally funded but in general it works quite well. The tech transfer function may still under-stress regional economic development as opposed to royalty maximization, but neither acknowledgment implies the charge that has been made.

Overall, the Times column contains many true statements, few of which add up to a coherent argument against Bayh-Dole. You’ll find a number of published books on both sides of this argument in my tbed bookstore.

  • Colleen Gibney September 9, 2008, 9:29 am

    David, I agree with you on the spin vs. the facts on Bayh-Dole, and how stand-alone science-for-hire from universities has been affected also. The IP quandary you mention, which can be separated from Bayh-Dole itself, is part of why non-US universities become attractive for sponsored research, but it is not the full story. There is an international market for this type of research, and US institutions have largely acted conservatively when it comes to competing in this market. There is more of an ambivalence about participating in private sector wealth-creation on US campuses than in those of nations that have made a greater commitment to sustaining a national innovation infrastructure.

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