The Bayh-Dole Act was a watershed event in American higher education and innovation. The legislation, enacted almost 40 years ago, gave universities, faculty members, and student inventors the rights to patent discoveries and unleashed an era of inventive collaboration that has helped shape American competitiveness globally. But amid the resounding success of the Act remains a difficult truth for innovative and entrepreneurial universities: Only a handful of highly successful institutions with blockbuster portfolios generate enough licensing income to support the cost of university technology transfer. For everyone else the process is a wash or even a loss.
In recognition that most universities need financial support for the costly process of patenting new inventions emerging from federally funded research, the National Institute of Standards’s Return on Investment Initiative Final Green Paper that was published in April 2019 recommends allocating a small portion of federal grant support to the cost of patenting. I support this recommendation as a much needed step to continue to advance American innovation.
Government-funded research is the lifeblood of the nation’s innovation ecosystem. Recently, research published in Science detailed the linkages across tens of millions of documents to quantify the effect of federally funded research not only for academic inventors, but for both US and non-US corporations. The authors found that the private sector increasingly depends upon federally supported research as a source of scientific knowledge.
Allowing a capped portion of patenting expenses to be charged to federal grants would allow universities to recoup a small, but significant, portion of the expense of moving new technology from lab to market.
Society’s benefits from academic innovation have been well established—a 2013 study found that universities had created 3,715 spin-off companies and formed the foundation of the modern biotechnology industry, with nearly half of the biotech firms getting their start from university-related inventions. Partnerships between universities and companies enhance research even further and university incubator programs often spin off new companies that remain in the area, creating a research enterprise that can become a major economic driver for the wider community.
The federal government recognizes the national imperative in the dissemination of research discoveries by allowing publication and conference presentation costs to be charged to a grant, which in turn has provided a clear economic benefit as corporations increasingly relying on universities, national labs, and other public institutions for the underlying research that ultimately supports corporate patent applications. But federal grants generally do not allow for patenting costs unless specifically provided for or required by the grant.
Data from the Association of University Technology Managers (AUTM) shows that only about 1 percent of licenses generate more than $1 million in income in any given year. After a typical technology transfer office distributes licensing revenue to the inventors and to reinvestments in further research as required by the Bayh-Dole Act, only about one-quarter of the revenue is available to be applied to patenting and technology transfer operating costs. Successful inventions still take years to move from lab to market, often requiring multiple patents as the technology is refined and advanced in the research and development process. At my home institution of the University of South Florida (USF), one of our most promising faculty inventions is a compact, self-sustaining technology that harvests clean water, nutrients, and energy from wastewater—the NEWGenerator. This technology has been developed with support from the National Science Foundation, the Gates Foundation, and several other organizations. The NEWGenerator was even named in MIT Technology Review’s 10 Breakthrough Technologies this year in a list curated by Bill Gates himself.
Developed over more than a decade, this technology has required the filing of multiple US and foreign patents. But it was only in the summer of 2018 that a licensing agreement with a private company allowed for a portion of those costs to be recouped. The NEWGenerator is exactly the kind of globally impactful project universities should develop, but not every institution has the financial capacity to carry the patenting costs. I am grateful USF was able to eventually deliver this innovation to the communities around the world that need it desperately.
Only one of every 200 license agreements is expected to generate more than $1 million in royalty income, yet every university patent awarded and license agreement generated involve staffing, operating, patent fees, legal fees, and other licensing costs.
Allowing a capped portion of patenting expenses to be charged to federal grants would allow universities to recoup a small, but significant, portion of the expense of moving new technology from lab to market. Moreover, smaller universities and institutions outside the elite few with well-funded technology transfer operations could more fully develop their institutional capabilities in technology transfer—broadening both the geographic and social diversity of the American innovation system.
The question of who pays the cost of patenting is an important conversation to have as the private sector increasingly looks to university innovation for new ideas, but the environment of academic invention faces a challenging future. In its most recent survey of university technology transfer offices (TTOs), AUTM documented a decline in patent disclosures (which is the first step in the process of securing a new patent) by 3.2 percent in 2017—the first decline of its kind since the organization began collecting data in 1991.
In its report, AUTM states: “Though disclosure rates have increased 4 percent over the past five years, the 2017 dip is consistent with the headwinds that TTOs are feeling regarding institutional research and TTO funding, inventor outreach and commercialization. It is unclear if disclosures have reached a plateau or if they will regain an upward trajectory.”
Over the past four decades, the nation’s universities have proven themselves to be valuable and productive partners in innovation. I commend NIST’s work toward continuing to refine and strengthen that system with modest relief for universities for the financial challenge of securing the intellectual property at the heart of our national knowledge economy.
Paul R. Sanberg is the senior vice president for Research, Innovation & Knowledge Enterprise at the University of South Florida and the president of the National Academy of Inventors.