Taking Apart APLU’s Talking Points on Bayh-Dole, 2

We are working through APLU’s Talking Points on the cash cows of Bayh-Dole, commercialization, entrepreneurship and whatever else the federal government can be induced to fund.

We reach a talking point in bold. It must be more important than the others:

Supporting and enhancing the commercialization of university research through technology transfer is a critical facet of universities’ public missions.

Again, an assertion. How does a public university come to change its public mission? Some universities have modified their policy statements to add “economic development” as a “mission.” It’s not clear however what such a thing means. What does it mean to have such a “mission.”? Why is this a mission and not a consequence of carrying out the other “missions” of teaching, research, and public service? That is, why isn’t “technology transfer” already part of teaching and public service? Why should “technology transfer” involve only those bits of technology invented at the university? Why not transfer whatever technology is most needed by those desiring instruction? Again, note the weasel wording:

supporting…enhancing… commercialization… through technology transfer… a critical facet

Nothing is presented to show how or why commercialization of inventions is so “critical” for universities. Why should universities be involved rather than specialist companies chosen by inventors? Why should commercialization be more critical than, say, public access or use? That is, for a given research invention, why should turning that invention into a commercial product be more important than teaching others how to use it? For most inventions–especially methods–there is simply no reason to put a commercial product ahead of direct use. But APLU wants us to believe that without someone making money–a lot of it via a patent monopoly–there can be no public benefit from research inventions. It’s utter nonsense, but told to us with a straight face. That’s got to mean a scam.

The APLU means by “supporting…commercialization,” essentially, “spending money on patent licensing programs” or “hiring more people so we can claim more intellectual property and exclude it from public use by means of patenting.” But APLU doesn’t want anyone to think that. They want people to think, “Gosh, I sure hope the federal government hands over more of my tax dollars to university administrators–so much better than paying people to rebuild bridges or providing decent medical care for military veterans.”

Just as nurturing startups is “one of the most important ways,” so too technology transfer is “a critical facet.” But just how is it critical? Perhaps to administrators whose employment depends on public money for their positions, it is indeed critical. But the talking point makes it appear that without commercialization support and enhancement, a university’s public missions would somehow evaporate or be rendered ineffective. Teaching would be no longer effective if students were taught new research findings and were not prevented by patent from using the results. Public service would not happen if faculty were allowed to help companies, the general public, and nonprofits to use research results without the approval of university administrators. How bizarre.

Again, the boldfaced claim is not that commercialization is critical to a university’s public mission, but that having an enhanced program in technology transfer is. The claim is about the expansion of university administration. Economic development, so this talking point goes, comes about because the public spends more money on administrators dedicated to removing research findings from public access, putting those findings behind bureaucratic paywalls, and reserving those findings to be licensed as patent monopolies preferentially to companies started by university personnel–something that happens at best 20 times a year, and typically about 5 times a year, while 100 to 200 or more inventions claimed by the university pile up each year. Throttle 95% or more of key research findings to start five paper companies that live on more government research funding, through the SBIR program, through state “economic development” programs, and through state-run or sponsored “seed funding” programs.

While it may seem important that companies have access to university research results and make use of those results in their operations, for that to happen, the research results ought to be such that companies desire them. Adding a patent to research results is like attaching a grenade. There will be takers, then, attracted to the grenade rather than the results themselves. And money can be made dealing in the grenades. University startups on this research invention plus grenade model reason this way: first we try to raise seed money based on the invention; once we have that seed money, we try to build anything we can as a product, and try to get far enough along to attract real venture money. If we don’t succeed, we can always “monetize” the patent rights by suing industry for infringement. That’s the grenade. There’s an adage that if a gun shows up in a stage play, it will get used. Same for patent grenades in exclusive license agreements. To what extent is a critical facet of economic development the expansion of the number of companies with an incentive to sue for patent infringement? That incentive is built into nearly every university exclusive patent license. Why isn’t this an APLU talking point?:

Universities are committed to the creation of shell companies supported by second and third tier investors prepared to troll industry for patent infringement when their grossly underfunded product development efforts inevitably grind to a halt.

Gosh, that’s sounds like an economic development activity that Congress and state legislatures should get behind 100%.

And here we get a confirmation of this approach. Brace yourself, since it takes an odd turn:

The Association of American Universities (AAU) and the Association of Public and Land-grant Universities (APLU) have taken a strong stand that the primary goal of university technology transfer should be advancing the public good, not generating revenue.

Again, the qualifiers:

a strong stand… primary goal… advancing… public good… not generating revenue…

Not just any stand will do; one must have a strong stand. Of course, it is a strong stand about a primary goal, not the only goal. So the strong stand apparently also includes generating revenue–it’s just that generating revenue should never be depicted as the “primary goal.” Of course, “goals” is again merely a matter of administrative intent. The outcome that matters, one would think, would be economic development–and neither “advancing the public good” nor “generating revenue” is relevant. “Advancing the public good” is too abstract. “Generating revenue” [for the university] is meaningless for economic development–other than that revenue going to a university may get spent differently than revenue that does not have to go to a university. One might think that generating revenue by making out-of-state or out-of-country companies pay big-time would be a powerful source of economic development. A university generating such revenue, one might think, would put that revenue into the local economy with expenditures of all sorts–via salaries that administrators spend locally, via purchases, via leasing space, and the like. “Advancing the public good” by contrast can mean most anything. Who decides the “public good”? Who determines when the public good has been “advanced”? What, for heaven’s sake, does it mean to “advance” the public good? In a way, this talking point is an administrative hallucination.

If the administrative goal is–whatever–but not generating revenue, then why don’t APLU and AAU universities uniformly license their research results royalty-free, non-exclusively? Why not use the patent system to publish results, to raise the bar for the patentability of future inventions, to control quality of produced goods, to create commons and standards? It is exactly these activities that university technology transfer programs committed to commercialization have worked to destroy.

The fundamental confustion in this hallucination, however, is the idea that licensing revenue should not be a measure of program success. Most universities now include in their patent policy statements that revenue generation by the program is a goal–though they often also include that there is no obligation, for any given invention, to make money. Often, too, technology transfer programs are required to earn their own way, and if they fail to do so, they are downsized and reorganized and renamed. If the public good was “advanced” when the program was spending $10m a year, how could a university stoop so low as to downsize the program merely because it was not bringing in mega dollars in licensing revenue?

If generating revenue is not a goal, then APLU and AAU ought to denounce AUTM’s use of licensing income to estimate economic impact. AUTM uses a simplistic model in which net sales are estimated by multiplying by the reciprocal of a typical royalty rate (thus, $1 of licensing income becomes $50 of net sales at a 2% royalty rate–but there’s absolutely nothing to link that $1 to any particular product sale!–that $1 could be an “upfront” payment or “milestone” payment or the royalty could specify a specific dollar amount ($1 per unit sold, say) and have nothing to do with the price paid, or that $1 could represent sale of a share price, and shares might go up in value when a company announces that it will not waste more money on trying to develop a product from what it licensed from the university). The number of new jobs created then is “estimated” by dividing the “estimated” net sales by the average salary of a worker. In this model, $1m of licensing revenue must mean $50m of net sales, and therefore 500 new, high-paying jobs. There is no actual logic in this model. It is nonsense. But it takes more effort to show it to be nonsense than it does to assert it, and the assertion gets all the headlines until someone shows that it is criminal fraud and presses charges. Without charges and perp walks, AUTM can get away with its deceptions with impunity.

Of course, APLU member institutions have no intention to end an interest in revenue generation. They just don’t want to make it a matter of public discussion. They want the public to understand the goal to be “advancing the public good.” They don’t want to be accountable for outcomes–they just want the message that the intention to help is the most important thing, regardless of the actual effect of any university patent commercialization program.


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