The article I discussed in the previous post makes a pitch for federal policy to make revenue generation an objective of Bayh-Dole, and then worries that pitch. Where the article is spot on is the need for accountability. The authors point out that they could not get access to reports from Columbia about how they spent royalty income. This is not surprising. Even under Bayh-Dole, such reports are excluded from FOIA. But more than that, there is nothing in Bayh-Dole that requires universities to report what they do with their royalty income. They conclude (my emphasis):
The Bayh-Dole Act stipulates that revenues be spent on research and education, similar to the letter agreement governing the Axel patents, but it is not clear government is any more capable of monitoring expenditures of technology licensing revenues under Bayh-Dole than it appears to have been with the Axel patents. Public accountability for expenditures of technology licensing revenues is a matter that the General Accountability Office might fruitfully address in one of its periodic assessments of Bayh-Dole activities.
I’m going to pick on this article a bit more, because the authors are decent folks and they dance around the point. They are spot on that the Government is not paying attention to what is done with university licensing revenues, and it is time for an audit of these expenditures from licensing income. However, it’s a bit loose to say that revenues are to be used for “research and education”. Bayh-Dole stipulates that for nonprofits, revenues after expenses of managing subject inventions be spent on scientific research or education. Expenses include payments to inventors. Payments could be everything after costs of patenting and the like. And for those remaining funds, it’s not just research in general. I guess university folks think “scientific” research means any kind of use they want. No one at the government appears to care. I can see how the system can easily go bad, as it has.
In their discussion of the Axel patent income earned by Columbia (pre-Bayh-Dole, apparently), the authors balance arguments that such licensing requirements represent a tax on innovation with a “fair reward” argument that universities will put the money to a public purpose and wouldn’t get it but for a licensing step based on patent positions. Pointing out that the Columbia patents didn’t appear to figure as necessary to promote adoption of the technology or investment in developing products, the authors conclude:
The main effect of the patents was that Columbia earned royalty revenues when commercial use of the Wigler Method met with success. If Columbia had not patented cotransformation, the revenues would have gone to private industry with little or no return to Columbia.
And again:
Cohen-Boyer and Axel patents are also clear cases where universities gained financially from their technological success, and captured a fraction of the resulting social benefit they would otherwise have foregone. This “fair rewards” rationale for the Bayh-Dole Act patent ownership rights warrants explicit attention as a consequence of the default ownership rules.
Here’s my point. It is not merely that Columbia patented cotransformation. It’s that Columbia claimed ownership, rather than the inventors. The unmentioned possibility is that the inventors also could have owned the patents and cut a deal with whomever they wanted. Why should Columbia be the only recipient of their largesse? A hundred years ago, when Cottrell invented the electostatic precipitator, he owned the patents, managed some territory personally, and put the rest of the rights into Research Corporation, which managed the rights, worked things out with industry (industry reps on its board), and dedicated its licensing revenues (after costs) to supporting research across the country. In doing so, Cottrell “captured a fraction of the resulting social benefit” for everyone, based on how Research Corporation awarded grants. My father, as a graduate student at Washington State College (as it was called at the time), was a beneficiary of one of those grants. He would not have gotten anything had the University of California had a “fair rewards” policy (as it has now).
We have, then, a huge assumption at play, that somehow it is a university that hosts a bit of research where a pivotal idea takes place that should get a “fair return”. I can’t for the life of me figure out why. The university doesn’t put any money into the research–that comes from the government or industry or foundations. The university doesn’t have the idea for the research, doesn’t right the proposal, doesn’t direct the work, doesn’t do anything except get lucky. I don’t see why anyone would think that it should the university that “benefits” simply because someone working at the university, using funding from other sources, invents.
Cottrell set up a system to benefit everyone, even though he was at Berkeley at the time. When faculty set up WARF a decade or so later, it was a voluntary thing to take one’s invention to WARF. Faculty could also take their inventions to Research Corporation, or work them personally. Just, if they took their invention to WARF, WARF had made a commitment to donate any licensing revenue over expenses and reserves to the University of Wisconsin. So in going to WARF, one was choosing (in hope, at least) to benefit Wisconsin. It was a choice an inventor made.
Of course, some of those choices worked out so well that university administrators have decided: why not just claim ownership of everything they can outright? Why not improve the system in this way? Why not just be “efficient”? Why not use present assignments to be even more “efficient”? This isn’t progress. It is, all the sweet language aside, grasping and pig-headed, covered by various kinds of rationales, such as how incompetent, selfish, and inept faculty inventors are, and how conflicted they are between their academic duties and filthy lucre, and, of course “public mission” as if the university administrators have a good handle on that and faculty of course do not. We never hear university administrators worry over their own conflicts of interest or lack of vision, and especially the organizational conflict of interest that arises when universities claim outright ownership but have no business interest in the invention but for making money with it.
Thus, I object that if Columbia had not patented cotransformation that some public benefit would have been lost. If the inventors had retained ownership of the inventions, then they could have decided who would have benefited from the patent rights. The NIH could have approved their plan as readily as Columbia’s, and for all that, Columbia could have benefited in the same way that Wisconsin did, because the inventors chose them, not because the university demands the rights.
At any point in scientific activity, folks can choose to regard some advance as an invention and haul off and file patent applications in an effort to make money. It’s opportunism, not enlightenment, not economic development. Archie Palmer, in his 1948 study, cited one of the arguments against universities getting involved with patents:
If, in addition, the policy of taking out patents for revenue be interpreted as a declaration of independence the public may quite cheerfully acquiesce and leave research work to earn its own way. Why should gifts intended for the general welfare play the role of capitalizing a business? And what becomes of the peculiar function of university research as contrasted with that of of the shrewdly administered business enterprise?
That’s Alan Gregg, writing in 1933. Gregg had a point, and it’s still valid.