Academic Patent Licensing Helps Drive the U.S. Economy

Despite attempts to undermine our technology transfer system, its impact keeps growing and growing.

Just as some politicians are increasing their calls for Washington micromanagement of  the Bayh-Dole law (which allows universities and federal laboratories to license federally supported inventions for commercial development) a new study shows how impressively the current decentralized, market driven system is performing.

“Thanks to the enduring effectiveness of the Bayh-Dole Act, American research universities, along with industry partners, are turning federally-funded basic research into new and valuable products that save and improve lives. The commercialization of university-based research to create new companies and good, high-paying jobs is a key driver of America’s innovation economy,” said Biotechnology Innovation Organization (BIO) President & CEO Jim Greenwood. “This updated study demonstrates that fact.”

At a press event during its on-going annual meeting, BIO just released the latest in a series of reports it commissioned with the Association of University Technology Managers (AUTM) measuring the economic impact of the Bayh-Dole patent licensing system.  Titled “The Economic Contribution of University/Nonprofit Inventions in the United States: 1995- 2015” the numbers are truly astounding. During this twenty year period, academic patent licensing contributed as much as $1.33 trillion to U.S. gross industry output,  $591 billion to the gross domestic product, while supporting 4,272,000 American jobs. No other nation comes close to matching these numbers.

What’s even more impressive is the impacts on gross industry output and GDP are up 14% while  the number of U.S. jobs supported rose 12% since the previous report issued two years ago. That’s remarkable at a time when the overall U.S. economy has been treading water.  A chart from the report drives the point home:

The study was produced by an impressive team including the former Assistant Director of the MIT Technology Licensing Office, and former senior officials at the Commerce Department’s Bureau of Economic Affairs, the National Science Foundation and SRI International.

While the attacks on Bayh-Dole (and the patent system) are largely driven by emotion, here’s some additional data BIO cited that’s worth considering: over the past 25 years academic inventions led to the formation of 11,000 startups and the commercialization of more than 10,000 new products.

Additionally, the FY 2015 survey of the Association of University Technology Managers found that in one year:

  • 1,012 startup companies were formed, averaging 2.75 new companies created every day of the year— up 11.3% from FY ’14;
  • 879 new products based on academic inventions were introduced into the marketplace, averaging 2.4 new products every day of the year;
  • Products based on academic patent licenses generated more than $28.7 billion in net product sales; and
  • 7,942 new licenses and options were executed, up 15% from FY ’14.

Approximately 70% of academic inventions are licensed to small companies, which are often the source of breakthrough discoveries that continue to make our economy the envy of the world.

Another new study by the Intellectual Property Owners and the National Academy of Inventors of the “Top Worldwide Universities Granted U.S. Utility Patents 2016” reinforces the pre-eminence of our research universities. It  shows that 9 of the top 10, and 21 of the top 25 patenting universities are American. 

While all technology sectors have benefitted from our leadership in transforming government sponsored inventions into commercial products, the greatest impact has been in the life sciences.  Here the U.S. dominates the rest of the world by a wide margin and public/private sector R&D alliances are a big reason why.  Our biotechnology industry is strongly rooted in academic research and continues to form around universities, with an impressive number of companies either spinning off campus or formed around academic patent licenses.

Often overlooked is how much risk is involved in taking federally funded inventions to the marketplace. These inventions are typically at a very early stage when government support ends, more like ideas than products.  A Study in Nature estimates that companies spend $100 in development for every $1 the government spent in research leading to an invention.

Even so, the odds against success are long, particularly in the development of new drugs and vaccines. For every 10,000 compounds, about 250 make it to preclinical testing, 5 proceed to clinical trials and just 1 enters the marketplace. Of those, only 20% earn a profit and must pay the expenses for all that died in the pipeline.  This risk and expense is assumed by the private sector.  When a new product fails, the company takes the hit, people lose their jobs and businesses often go under. Still our entrepreneurs continue to rise to the challenge.

Before Bayh-Dole not a single new drug was developed when the government took patents away from the inventing organizations, making them available through non exclusive licenses while destroying the intended incentives of patent ownership.  Since Bayh-Dole ended this waste  of taxpayer supported research, more than 200 new drugs and vaccines arising from academic inventions are combating the scourge of disease both  here and around the world.

How ironic that the critics now tout a return to Washington control, emphasizing non-exclusive licensing with the threat of compulsory licenses enforcing arbitrary “reasonable pricing” provisions (with the bureaucracy determining reasonable prices) hanging over successfully commercialized inventions as their alternative to Bayh-Dole. That sounds similar to Venezuela’s economic model.

A key underpinning of the successful Bayh-Dole decentralized technology management formula is  a strong, reliable patent system.  Members of Congress would be well advised to leave our tech transfer laws alone, focusing their attention on restoring badly shaken confidence in the U.S. patent system. With that done, who knows how high the numbers in BIO’s next economic impact report will be?  That”s a much better course than following the critics back into the swamp.


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Join the Discussion

8 comments so far.

  • [Avatar for ORTA]
    June 23, 2017 09:59 pm

    According to the NSF, approx 22% of total Federal R&D dollars goes to universities, while 33% goes to the Federal labs (FY11 numbers). Given the impressive results reported in the article, this begs a follow up study into the ROI from our even larger investment in the federal labs.

    I’m inclined to believe that in terms of technologies and jobs, while the Federal labs are quite important, it may be that the resources would actually be better spent on university R&D, vice Federal lab R&D. This would probably be particularly true for agencies with a more centralized and bureaucratic approach to technology transfer.

  • [Avatar for Paul F. Morgan]
    Paul F. Morgan
    June 21, 2017 02:41 pm

    Universities could make a lot more money from their research if they would all finally understand that their insistence on “joint ownership” of patents with their research fund source creates a legal mess that will render the patent effectively unenforceable unless both parties join in patent suits and do not bid against each other in licensing, plus malpractice risks in patent prosecution, among other problems. If they insist on joint ownership they need extensive contract provisions necessary to deal with the legal problems they have created by joint ownership.

  • [Avatar for Tesia Thomas]
    Tesia Thomas
    June 21, 2017 01:58 pm

    I also just spoke with a gentleman who licensed tech through a large uni and for his first investment funding, the uni wanted half. Yes, the poor little startup had to pay half of the VC’s investment to their uni partner.
    And, this occurred between 1996- 2015.

    I think the overall statement of stronger patent rights is great.
    And, we’re all in this crap together, inventors of every kind whether affiliated or not, startup or uni.

    But, uni’s sometimes squeeze the life out of startups and spin-offs. Oh, and their researchers.

    The assumptions, graphs, wording here over hype the effect of tech transfer.
    And, there’s little talk about the negatives- other ways the uni got the money like taking half of an investment, or nonprofits stealing the tech of independent inventors.
    Battelle is famous for this in the small inventor of govt-desired invention community. I’m sure they’ve stolen billions worth of tech.

    Are they included as a nonprofit here in these stats?
    They really need to lose their nonprofit status again. The most ‘charity’ they do is ‘aid’ DoD corruption.

  • [Avatar for Paul F. Morgan]
    Paul F. Morgan
    June 21, 2017 01:02 pm

    The increasing importance of university research is to a large extent due to the sad decline in U.S. corporate in-house research.

  • [Avatar for Benny]
    June 21, 2017 05:23 am

    “During this twenty year period, academic patent licensing contributed …, while supporting 4,272,000 American jobs”.
    No, that is 4,272,000 person-years of employment, which over a twenty year period averages 213,600 jobs in any given year. (it does not seem credible that academic patent licensing supports 3% of the US workforce…).

  • [Avatar for Tesia Thomas]
    Tesia Thomas
    June 20, 2017 09:46 pm

    To clarify the graph:

    It makes the AUTM data look good. Lol

  • [Avatar for Tesia Thomas]
    Tesia Thomas
    June 20, 2017 09:20 pm

    @Anon yeah especially when you see how much Stanford made from Google.
    Do the departments communicate? Lol
    Google and that license deal would’ve been nothing without Bayh-Dole and strong IP laws that favor small inventors.
    Plus, don’t all employees at universities like when their institution has more money?

    I agree with this article. Academics and nonprofits make a lot of amazing tech. Hey, it’s what they’re paid to do.
    The report had a lot of assumptions and I don’t like the graph.

    Per the graph:
    If AUTM is responsible for so much then why is the overall economy not increasing that much?
    You have to infer that other things are at play. Which is the case.
    That graph doesn’t help or hurt your argument. You’re comparing a tiny trend within a trend but putting both trends on the same graph. Part to whole. Compare parts to parts in line graphs please.
    Pie graphs or something like it for parts to whole.

    Academia is its own swamp though.
    Just being devil’s advocate here.

    My research was nearly nonprofit research because US Army NSRDEC (Natick) so often joins forces with Battelle (a nonprofit) to screw independent inventors and misappropriate their tech.

    Also, many uni spinoffs become uni spinoffs to capture extra federal resources. For instance, the researchers working on the tech at the institution can’t garner anymore funding for whatever reason but the tech is high potential yet still highly unproven so a license to a large company wouldn’t work out. Plus the researchers love the research and want to find a way to continue work.

    The researchers spin out to continue their work, creating a company and apply for a SBIR. It helps that they have all of these past papers and are somewhat affiliated.
    In that case, they often pay royalties or equipment use fees (because they’re still using uni facilities for the grant they’re just now an LLC operating out of campus) based on make and use of the protected technology.
    And in many situations that I know about, the company unscrupulously survives on federal funding and not sales of tech.

    See this article covers sale.
    But that’s only one part of what a patent protects.

    How can readers be sure royalties for use of product weren’t taken as royalties from sales of product?

    It’s a hard life for researchers.
    Politicians and their own institutions make it hard, not just the politicians.

  • [Avatar for Anon]
    June 20, 2017 06:03 pm

    Not just in the sectors highlighted I this story, but I have always marveled at the contrast from University spin-offs and pro-patent efforts and the flip side of the university (typically law school and non-development side) that seems – still – largely anti-patent in their efforts to shape the law.