NSF IPA Metrics 1974-78

Beginning in 1974, the NSF ran an Institutional Patent Agreement (IPA) program until IPAs were shut down in 1978 as ineffective and counter to public policy. Bayh-Dole, one among a number of attempts, replaced the lost IPA programs in 1981.

How effective was the NSF IPA program? Here’s a summary document:

Here’s a table showing patent activity. Of 645 reported inventions, over half are “inactive”–meaning, nothing happened. About a third of the inventions, 223, ended up under the control of contractors.

Now for the licensing metrics for the NSF IPA program:

Of those 223 inventions, 106 received patents (assuming one patent per reported invention)–just over half of the inventions on which patent applications were filed. That means that for just under half of the inventions claimed by contractors, the contractors gave up on the patenting, or all claims were rejected–meaning that the inventions reported weren’t patentable inventions after all. We don’t have here any way of knowing why patent applications did not result in issued patents, but it would sure be helpful to know whether “inventions” were being over-reported or whether contractors (mostly university-affiliated patent development firms) did not have the budget or did not get the broad claims they hoped for).

For 645 inventions marking key results in NSF-funded research over six years, we have 106 patents, or 16%. That means that 84% of inventions made in NSF-supported work became available open access, but as a result of the IPA program, open access was delayed by failed patenting efforts for 97 inventions, or 15%, that were thought to be important enough to patent, but no patent issued. For the two or three years that, on average, patent applications were pending in the PTO, nonprofit contractors–universities and their research foundations–withheld these inventions from open access. Given that the time immediately after an announcement of a new discovery or invention or research finding is when there is an opportunity of great interest, an effect of the IPA program is to delay open access at exactly the time of potential great interest in transferring the technology0–locking out all potential recipients in the search for a single commercialization investor at this crucial time in the life of a new technology. There’s a metric for you: number of failed patent applications for which open access at research announcement was denied as a measure of the delaying (if not destructive) effect of an IPA-like program (such as Bayh-Dole).

Let’s look at the “licensing” part. 28 licenses issued. But we don’t know how many of the patented inventions were licensed. It could have been one invention licensed 28 times or 28 inventions, each licensed once (and perhaps exclusively). Without exclusive licensing, the premise for the IPA programs falls apart, just as it does for Bayh-Dole. Without exclusive licensing, the only issue is that of how to manage open access, and then the only concern surrounds federally owned patents. If a federal agency must grant a license for every citizen’s use of a government-owned invention, what a bother. Perhaps a university could do a better job at that. But if licenses are made “public”–upon notice, then there’s really nothing any contractor could do better than a federal agency with regard to the disposition of rights in an invention. How an invention and its attendant cloud of knowingness gets transferred then is a matter of instruction, availability, and assistance, not *licensing of rights*.

For that–who is in the best position to teach, make data and experimental setup and prototypes available, and to provide assistance to others seeking to practice the invention? Maybe the inventors. Maybe the research team–others, not including the inventors may understand the invention and its uses as well or better than the inventors. Maybe technically minded people at other universities–in which case the initial transfer that matters is from the originating researchers to those better prepared technically minded people at some other place. When a university takes a patent position, this initial transfer is effectively shut down. Those technically minded people elsewhere might learn all they want about the new invention but to teach others without a license would be to contribute to infringement. Their opportunity, then, once they find out about some university invention made elsewhere, is to design around it, or invent applications or variations that block the initial university’s line of development. The result–the university’s patent position itself motivates others to make that patented invention irrelevant or the patent position irrelevant. The university’s action to patent for exclusive licensing itself changes the circumstances under which anyone would adopt the patented invention. The IPA programs–and Bayh-Dole–create a broadbased, active effort to undermine IPA inventions. The big companies often don’t even care about the university patent positions. If the university sues for infringement, so be it. It crushes the university’s goodwill, and it generally forces a non-exclusive license on court-approved terms. So long as the company is not found to be willfully infringing, the settlement is for actual damages. Thus, big companies also have a strong incentive not to read academic publications and rather do their own development. The patent positions universities take, then, create huge disincentives for technology transfer–nothing that renaming of the technology transfer office with something perky like “Technology Ventures” or “Innovation Partners” will ever overcome.

The university’s “effort” to “transfer technology” to “industry” for “commercialization” then cuts off what may be the most crucial bits of transfer opportunity at the outset and creates in their place huge disincentives for others to take up the new technology. Not only the transfer to interested companies (for their own research, for evaluation without any need or plan to make or sell commercial product, or to make such product) but also the transfer to other research programs well positioned for dissemination.

Now look at the results of the NSF IPA program. Of the 28 licenses granted, 13 produce “royalties.” That’s 13 licenses produce payments to universities and their licensing agents. We are to think that there’s one license per patent, given that the 5.8% is 13/223. The licensing rate is 12.6% (28/223), again assuming one license per invention. But the actual rates those on the total reported inventions–645–not just the ones that were appropriated by contractors. There we have a licensing rate of 4.3% (28/645) and a payment rate of 2% (13/645). The “royalties” designation is ambiguous. Any payment in consideration for a patent license is technically a “royalty.” Thus, payments to reimburse a patenting firm for its patent prosecution costs can be booked as “royalties”–as can upfront fees, license issue fees, milestone development fees, and equity or equity cash equivalents–none of which reflects the practice of a licensed invention. In fact, payments other than those based on sales of licensed product reflect a cost to the licensee greater than that of open access–a net drain by the bureaucracy of dealing in patents on the potential for technology transfer.

Of the payments reported in the NSF IPA program, none of them reflect significant “commercialization,” especially if we assume that all the licenses granted were “royalty-bearing.” That’s reasonable. Nonprofit contractors are not likely to spend money on patenting only to give away free access to inventions. Only the federal government would be fool enough to do that (if it is indeed foolish–maybe not, but that’s another article). Look at the average payment per paying license–about $20,700. A patent in the mid 1970s still might run $5,000. So these licenses are barely covering patent costs, and then only for no more than 13 of 203 inventions for which patenting costs were incurred.

Given that the year 1977 reports $0 in “Royalties Produced,” it appears that none of the inventions licensed in previous years was the basis for a product in the marketplace for more than three years. The “Royalties Produced” for 1976–$4,500 for a single license–sure looks like a patent cost reimbursement.  Maybe later some of these patent inventions resulted in commercial products. Development times can be long. But the Harbridge House report (1968) found that federally supported inventions, when owned by company contractors, were brought to practical application within three years of patent issue:

About a third of the inventions had been used commercially by the time a patent application was filed, and assuming three years for patent issue, about two-thirds had been used by the time a patent was received. (I-26)

Think about this finding. Companies that invent with federal support were using one third of the inventions before they even filed a patent application. For the NSF IPA program, and for Bayh-Dole, nonprofit owned inventions often aren’t getting used commercially–when at all–until after a patent issues, or at least claims are allowed. Think more. University “technology transfer” runs years behind comparable company uptake of new technology that the company produces. If the public deserves the benefit of the use of inventions made in work with federal funding, the clear policy response is to shift federal research funding from universities to companies. University “technology transfer” programs based on patent rights run six years or more behind an originating company’s own practice. And that’s assuming a university licenses much at all of what it claims for patenting. In the case of the NSF IPA program, six years out, nothing is happening. Licensing activity for the NSF IPA is half of what universities (and their licensing firms) claimed was their licensing rate of 25% to 33%. The income reported amounts to patenting cost reimbursements and upfront fees. If there was ever any commercial product, it had a short, uninteresting run.

Sure, something might have happened after 1978 for some of these 106 patented inventions in the NSF IPA program–but the fundamental point is that whatever it was happened years later. Clearly, nothing about the IPA program matched the rapidity of utilization when a company hosting the invention puts it into practice. And it’s clear that the IPA programs lead universities to cut off access to new technology at a key moment when access may be crucial for transfer to ever happen. Wait six years and the technology has moved on. People have designed around the university’s patent positions. The IPA program does, in practice, the opposite of what it claims is its purpose. So like bureaucrats to then ask what might be done to build on their, er, success.

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