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Patenting and Licensing of University Research: Promoting Innovation or Undermining Academic Values?

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Abstract

Since the 1980s in the US and the 1990s in Europe, patenting and licensing activities by universities have massively increased. This is strongly encouraged by governments throughout the Western world. Many regard academic patenting as essential to achieve ‘knowledge transfer’ from academia to industry. This trend has far-reaching consequences for access to the fruits of academic research and so the question arises whether the current policies are indeed promoting innovation or whether they are instead a symptom of a pro-intellectual property (IP) culture which is blind to adverse effects. Addressing this question requires both empirical analysis (how real is the link between academic patenting and licensing and ‘development’ of academic research by industry?) and normative assessment (which justifications are given for the current policies and to what extent do they threaten important academic values?). After illustrating the major rise of academic patenting and licensing in the US and Europe and commenting on the increasing trend of ‘upstream’ patenting and the focus on exclusive as opposed to non-exclusive licences, this paper will discuss five negative effects of these trends. Subsequently, the question as to why policymakers seem to ignore these adverse effects will be addressed. Finally, a number of proposals for improving university policies will be made.

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Notes

  1. For a detailed discussion of the evolution of the patent policies and practices of US universities from 1925 to 1980, see ibid., Chapter 3. Those universities who did get involved with patenting and licensing did so indirectly, i.e. they ‘outsourced’ these activities to a third party. Concerns about direct involvement with patenting were one of the reasons why the Research Corporation was established in the US in 1912. See ibid., Chapter 4.

  2. No information is given on the number of patents granted.

  3. As shown by ProTon Europe’s comparison with FY2004.

  4. ‘Research tool’ is used in this paper since it is the term most widely used in this context. It is, however, somewhat misleading since it brings to mind the image of the machines and equipment used in the lab by researchers. It has long been the case that universities buy lab equipment from commercial suppliers when it is available, whether or not the suppliers have patented it. Our particular concern in this paper is with research methods which could be performed without specialized equipment and with patented apparatus and materials which are only available, if at all, under conditions universities find hard to meet, e.g. inflated cost or demanding licensing terms.

  5. Since taxpayers contribute to the funding of the initial research and then must pay a second time as the cost of royalty payments to universities is reflected in the prices of patented products and processes. See for example Ritchie de Larena (2007) and Washburn (2005) for numerous examples.

  6. Frank Rhodes, President Emeritus of Cornell University, for example, claims that: “Early fears that industry support [of university research] would somehow taint the research have proven to be largely unfounded, thanks to careful negotiation of ground rules about such issues as patent and licensing procedures, publication of results, use of graduate student assistants, and the character of the research itself” (Rhodes 2001, p. 178).

  7. As to Thursby and Thursby (2002), this is certainly an interesting article, but it is only based on a productivity analysis of AUTM survey data for 64 US universities and on a survey of businesses which have licensed university inventions. One may wonder how, based on data of this nature, firm conclusions could be drawn regarding the redirection of academic research as a result of increasing emphasis by university administrators on the importance of patenting and licensing, given that Thursby and Thursby have not surveyed academic researchers or university administrators and, moreover, in their survey of businesses were asking representatives of businesses what factors were responsible for increased licensing by businesses of university inventions, and not whether the respondents thought there had been a redirection of academic research. Although among the potential reasons behind the increase of licensing suggested in the survey questions, the factor “faculty research is more oriented toward the needs of business” was weighted less heavily by the business representatives than some of the other factors, this factor was nevertheless perceived to be a major one. As Thursby and Thursby themselves admit: “Since [our work does not examine] the pattern of faculty research, we cannot reject the notion that faculty research has shifted” (Thursby and Thursby 2002, p. 92). Moreover, in a later paper—Thursby and Thursby (2005)—the same authors say that: “one can argue that the number who noted the importance of a change in faculty orientation signals a problem” (Thursby and Thursby 2005, p. 197). As to Geiger and Sa, even though they note in the introduction to their book that: “economic relevance has not produced a tilt toward applied research” (Geiger and Sa 2008, p. 6), Chapter 5 of the book contains numerous examples which seem to serve as evidence to the contrary (see e.g. at pages 170, 171, 175, 176, 177, 178, 180 and 184).

  8. National patent laws differ as to whether they include a research exemption or not, and how narrow or broad it is. See for example Cook (2006).

  9. John M.J. Madey v. Duke University, 307 F.3d 1351 (Fed. Cir. 2002).

  10. The traditional construction goes back to two famous 19th century decisions. In 1813 Justice Story ruled in Whittemore v. Cutter that: “[I]t could never have been the intention of the legislature to punish a man, who constructed … a machine merely for philosophical experiments, or for the purpose of ascertaining the sufficiency of the machine to produce its described effects”. Whittemore v. Cutter, 29 F. Cas. 1120 (C.C.D. Mass. 1813). In 1850 it was decided that patent holders cannot sue for infringement: “[a person whose] use is for experiments for the sole purposes of gratifying a philosophical taste or curiosity or for instruction and amusement” Gayler v. Wilder, 51 U.S. (10 How.) 477, 497 (1850).

  11. The same also applies outside the US, as is evidenced for example by the change of national laws in Germany, Denmark and Norway, to allow universities to claim ownership of inventions made by research staff, and by the change in the statutes of Oxford University to specify that all inventions made by members of the university belong to the university. See for example Leistner (2004).

  12. James Duderstadt, President Emeritus of the University of Michigan, is one of the many former and current US university presidents who lament this decline in funding. Interestingly, he regards the Bayh–Dole Act as a step down the slippery slope of university education becoming a private rather than a public good. As Duderstadt puts it: “Today … we find an erosion in the perception of education as a public good deserving of strong societal support. Our society seems to have forgotten the broader purposes and benefits of the university as a place where both the young and the experienced can acquire not only knowledge and skills but the values and discipline of an educated mind … where we defend and propagate our cultural and intellectual heritage … and where new knowledge is created through research and scholarship and applied through social engagement to serve society. Whether a deliberate or unconscious response to the tightening tax constraints and changing priorities for public funds, … the new message is that education has become a private good that should be paid for by the individuals who benefit most directly: students, patients, business, and other patrons from the private sector. Government policies such as the Bayh–Dole Act that not only enable but intensify the capacity of universities to capture and market the commercial value of the intellectual products of research and instruction represent additional steps down this slippery slope” (Duderstadt 2007, pp. 311–312 footnote omitted).

  13. This goal may better be obtained via a general tax. See Lemley (2007), note 27 and the reference given there.

  14. Interestingly, in April 2008, an Australian Federal Court decided that inventing (as opposed to research) was not part of the duties of employment of academics and that thus universities do not automatically own inventions created by their faculty. See University of Western Australia v Gray [2008] FCA 498.

  15. I am grateful to Julian Cockbain for making this point.

  16. Of course the problem of the delay between patent grant and commercialization is exacerbated by the increasing tendency of patent offices to grant ‘embryonic’ patents, i.e. the abovementioned patenting of ‘upstream’ research, especially by universities.

  17. The Universities and Small Business Patent Procedures Act, Public Law 96-517, 96th Congress, 94 Stat. 3015 (1980), enacted as 35 U.S.C. §200, et seq.

  18. ‘Short term’ solutions are understood here as opposed to solutions which would imply major modifications of patent laws, e.g. modifications of the novelty requirement for patentability, as proposed in Bagley (2006), or modifications of the requirement of susceptibility of industrial application. While such longer term solutions are necessary, the urgency of the matter is such that short term solutions should be investigated and put into place with minimum delay.

  19. MTAs restrict the use of materials and data. An MTA is a contract between the donor and the recipient of a material which the donor is providing to the recipient. Frequently an MTA may forbid the recipient to analyse the material or to seek intellectual property rights in anything resulting from use of the material, and to publish results of experiments using the material. Some MTAs go so far as to provide that the intellectual property rights resulting from the recipient’s use of the material shall belong to the donor. MTAs are becoming more and more widespread, and they are imposing increasingly complex and onerous terms. They typically forbid researchers receiving material to share that material with other institutions and may require pre-publication review of research results. As they are contractual agreements (e.g. between a university and company or between different universities), MTAs are not geographically or temporally limited. In this respect they differ from patents and can have even more far-reaching effects. See for example Streitz and Bennett (2003) and Pool (2000).

  20. One suggestion requiring change in national law would be to make the research exemption to patent infringement explicitly cover all research by not-for-profit or public bodies, including universities, and hence shield them from litigation. Perhaps this should even extend to all areas of intellectual property, including in particular copyright. One example of a remedy necessitating agreement at an international level would be to adopt a 1 year grace period, similar to that already in US patent law. This would permit researchers to publish before patenting and hence would facilitate scientific openness. These and other proposals cannot be elaborated here.

  21. One of the particularly striking examples discussed by Washburn (2005), pp. 19–20 relates to the long delay in publication of findings on the effectiveness of different thyroid medications. Betty Dong, a scientist working at the University of California at San Francisco (UCSF) discovered in 1990 that Synthroid, a drug which at that time was taken by 8 million Americans every day, was no more effective than three cheaper drugs. The pharmaceutical company which sponsored her research—Boots Pharmaceutical, which later became Knoll Pharmaceutical Co.—spent several years vigorously trying to prevent the publication of these findings, arguing that Dong’s research was flawed. Her research results were subjected to two investigations and only very minor problems were found. The conclusion from these investigations was that Boots/Knoll was harassing Dong because it did not want the public to learn these results. What Dong’s employer UCSF did was at least as alarming. At first the university’s lawyers agreed that Dong could submit her findings to the Journal of the American Medical Association (JAMA), even though her research contract, which was approved by the university, required the company’s approval for publication. JAMAs reviewers accepted the article and it was scheduled for publication on January 25, 1995, but a few weeks earlier Boots/Knoll threatened to sue UCSF. The university then urged Dong to withdraw her manuscript and she did. A while later a journalist from the Wall Street Journal learned of Dong’s study and wrote an article on what had been happening. This lead to pressure from the Food and Drug Administration on Boots/Knoll and ultimately, 9 years after Dong completed the research, her results were published in the JAMA. As noted by Washburn: “[This] was a huge victory for Boots/Knoll, enabling the company to sustain Synthroid’s dominant position in a $600-million market for drugs to control hypothyroidism. For the general public, it was another story. If an equally effective generic or brand-name preparation were substituted for Synthroid, Dong and her colleagues estimated that people suffering from hypothyroidism and other conditions would have saved $365 million annually” (Washburn 2005, p. 20, and the references given there).

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Acknowledgement

The author expresses her deep gratitude to Dr Julian Cockbain for providing numerous valuable comments on earlier versions of this article.

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Correspondence to Sigrid Sterckx.

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Sterckx, S. Patenting and Licensing of University Research: Promoting Innovation or Undermining Academic Values?. Sci Eng Ethics 17, 45–64 (2011). https://doi.org/10.1007/s11948-009-9168-8

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