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Aug 30, 2012

Is the race for patent and licensing income going to enhance the academic mission?

The latest annual report on university income from patents and licensing just came out. It showed a new aggressiveness by universities to generate income from the discoveries of their faculty.  The report summarizes “The 153 universities that responded to the annual survey of the Association of University Technology Managers, released on Monday, completed 4,082 licenses and filed for 9,662 new patents. They also created 482 start-up companies.”  The big news is the start-up companies.

This new emphasis on start-up companies may indicate a sea change in universities’ willingness to take risk.  A university culture is inherently cautious.  After all, after devoting 10-15 years to achieve the job security of tenure, faculty have pretty well demonstrated their aversion to risk.  Making the administration and the faculty comfortable with the risk that is inherent in new products and businesses seems to be a critical factor for successful expansion of patent and licensing income.

For example, the report says “Urbana-Champaign now has five entrepreneurs-in-residence “to provide very early guidance to faculty” on forming start-up companies, says Ms. Millar. It continues this “sequential” support for start-ups through the early stages of commercialization, including access to investment capital through a fund called Illinois Ventures. ”

Cornell’s new approach is indicative of this sea change:  “It also reflects a new approach. The university is offering more of its technologies on a nonexclusive basis, and it is also making a conscious effort to sign more deals, even if that means forgoing upfront payments, being less demanding about royalty rates, and forgoing other “short-term economic benefits” for the sake of getting deals done, says Alan Paau, Cornell’s vice provost for technology transfer and economic development.”We know not every deal is going to be a success,” he says, but the institution is now more willing to take a chance.”

This is a good development IF the mission is not shunted aside.  Should research be slanted toward what industry wants or  needs?  Should discoveries likely to be very profitable be favored over other discoveries whose value may not lie so much on the financial side?  What limitations on publication are acceptable in licensing deals?  Are graduate students free to publish their work and continue it at a lab at another university?

I don’t have the answers, but I do know that asking “why we commercialize discoveries” must have a broader, strategic answer than to earn more money.  Where should the money go?  Should cancer-related licensing income stay in the cancer area, or can the university use it to support liberal arts departments which don’t have such financial potential?  Or should it be used to build the university balance sheet?  Or to hold down tuition?  The answers to these questions are much more interesting than following a horse race to see which university earned the most money.

Knowing the strategic role of patenting and licensing compared with other university activities is an important duty for trustees and administrators.  I devote chapter 12 of Linking Mission to Money to discussing ways to think about mission and profitable activities.  The race for money always need to have a grounding in the community purpose for the university.

Congress’  concern about charitable deductions for gifts to wealthy universities who “don’t need the money” mustn’t be shifted to a new concern about the tax exemption of departments, especially medical, that churn out millions of dollars in patent and license income.  To paraphrase what I wrote on pp. 185-187 in More Than Just Money, we should remember that the original purpose of commercializing discoveries was to support the university-wide academic mission and not for the discovering faculty or department to expect anything in return.

As the late Dean of the Faculty of Arts and Sciences at Harvard wrote in his endorsement of Linking Mission to Money, “while budgets, projections, and fiscal prudence are essential, we must never forget the higher aspirations of our institutions.”