The Economics of Technology Sharing Open Source and Beyond

The Bayh-Dole Act of 1980 and University-Industry Technology Transfer: A Policy Model for Other Governments?* David C Mowery Haas School of Business, UC Berkeley, Harvard Business School, and NBER Bhaven Sampat Georgia Institute of Technology and University of Michigan ABSTRACT: Cross-border “emulation” of economic and technology policies among industrialeconomy governments has become common in recent years, and spans policies ranging from intellectual property rights to collaborative R&D Recent initiatives by a number of industrialeconomy governments suggest considerable interest in emulating the Bayh-Dole Act of 1980, a piece of legislation that is widely credited with stimulating significant growth in university-industry technology transfer and research collaboration in the United States I examine the effects of BayhDole on university-industry collaboration and technology transfer in the United States, emphasizing the lengthy history of both activities prior to 1980 and noting the extent to which these activities are rooted in the incentives created by the unusual scale and structure (by comparison with Western Europe or Japan) of the U.S higher education system Efforts at “emulation” of the Bayh-Dole policy by other governments are likely to have modest success at best without greater attention to the underlying structural differences among the higher education systems of these nations * This paper draws on research conducted with Professors Richard Nelson of Columbia University and Arvids Ziedonis of the University of Michigan, much of which was published in ‘Ivory Tower’ and Industrial Innovation: University-Industry Technology Transfer Before and After the Bayh-Dole Act (Stanford University Press, 2004) I II Introduction The research university plays an important role as a source of fundamental knowledge and, occasionally, industrially relevant technology in modern knowledge-based economies In recognition of this fact, governments throughout the industrialized world have launched numerous initiatives since the 1970s to link universities to industrial innovation more closely Many of these initiatives seek to spur local economic development based on university research, e.g., by creating “science parks” located nearby research university campuses, support for “business incubators” and public “seed capital” funds, and the organization of other forms of “bridging institutions” that are believed to link universities to industrial innovation Other efforts are modeled on a U.S law, the Bayh-Dole Act of 1980, that is widely credited with improving university-industry collaboration and technology transfer in the U.S national innovation system Governments have sought to increase the rate of transfer of academic research advances to industry and to facilitate the application of these research advances by domestic firms since the 1970s as part of broader efforts to improve national economic performance in an era of higher unemployment and slower growth in productivity and incomes In the “knowledge-based economy,” according to this view, national systems of higher education can be a strategic asset, if links with industry are strengthened and the transfer of technology enhanced and accelerated Many if not most of these “technology-transfer” initiatives focus on the codification of property rights to individual inventions, rather than the broader matrix of industry-university relationships that span a broad range of activities and outputs A common characteristic shared by many of these initiatives is their view that universities support innovation in industry primarily through the production by universities of “deliverables” for commercialization (e.g., patented discoveries) Moreover, the most important channels through which university-industry interaction advances industrial innovation and economic growth, in this view, are the formal channels of patent licensing and in some cases, the formation of university “spin-off” firms But for most industries university research aids innovation through its the informational outputs, which in turn often reach industrial scientists and engineers through the channels of “open science,” such as publications, conference presentations, or the movement of personnel between universities and industry (including the hiring by industry of university graduates) Universities throughout the high-income industrial economies also have been affected by tighter constraints on public funding since 1970 In the United States, Cohen et al (1998) note that federal research funding per full-time academic researcher declined by 9.4% in real terms during 1979-91, in the face of significant upward pressure on the costs of conducting state-of-theart research in many fields of the physical sciences and engineering Financial support from state governments for U.S public universities’ operating budgets (which include more than research) declined from nearly 46% of total revenues in 1980 to slightly more than 40% in 1991 (Slaughter and Leslie, 1997, Table 3.2), while the share of federal funds in U.S public university operating budgets declined from 12.8% to 10% during the same period (the share of operating revenues derived from tuition and fees rose from 12.9% to 15%) The UK government reduced its institutional funding of universities (as opposed to targeted, competitive programs for research) during the 1980s and 1990s, as did the government of Australia (Slaughter and Leslie, 1997) Tighter operating and research budgets have widened research funding differentials among fields and individual faculty, and institutions have had to compete more intensively with one another for financial support Faced with slower growth in overall public funding, increased competition for research funding, and continuing cost pressures within their operating budgets, at least some universities have become more aggressive and “entrepreneurial” in seeking new sources of funding University presidents and vice-chancellors have promoted the regional and national economic benefits flowing from academic research and have sought closer links with industry as a means of expanding research support Both internal and external factors thus have led many nations’ universities to promote stronger linkages with industry as a means of publicizing and/or strengthening their contributions to innovation and economic growth In some cases, these initiatives build on long histories of collaboration between university and industry researchers that reflect unique structural features of national university systems and their industrial environment In other cases, however, these initiatives are based on a misunderstanding of the roles played by universities in national innovation systems, as well as the factors that underpin their contributions to industrial innovation III International Policy “Emulation”: Reflections in the Funhouse Mirror The global diffusion of these “technology commercialization” policies also illustrates a phenomenon that has received too little attention in the literature on innovation policy—the efforts by policymakers to “borrow” policy instruments from other economies and apply these instruments in a very different institutional context History, path dependence, and institutional “embeddedness” all make this type of “emulation” very difficult Nonetheless, such emulation has been especially widespread in the field of technology policy, most notably in the area of collaborative R&D policies Research collaboration was cited by U.S and European policymakers during the 1970s and 1980s as a key policy underpinning Japan’s rapid technological advance Accordingly, both the EU and the U.S during the 1980s implemented policies and programs to encourage such collaboration, with mixed results One of the best-known examples of such R&D collaboration is the SEMATECH (SEmiconductor MAnufacturing TECHnology) R&D consortium established in Austin, Texas, in 1987 with public and private funding In response to the perceived success of the SEMATECH collaboration, Japanese managers and policymakers initiated publicly and privately funded research consortia (ASET and SELETE) in the late 1990s Japan, which initially provided the model for emulation by the United States and the European Union, now is emulating the programs that allegedly were initially based on Japanese programs International policy emulation of this sort is characterized by two key features: (1) the “learning” that underpins the emulation is highly selective; and (2) the implementation of program designs based on even this selective learning is affected by the different institutional landscape of the emulator Both of these characteristics of international emulation are readily apparent in the case of SEMATECH They are even clearer in the efforts by other industrialeconomy governments to develop policies similar to the Bayh-Dole Act during the 1990s In addition to the difficulties associated with “transplantation” or emulation of these U.S models, the effects of many of these “technology commercialization” policies remain controversial in their nation of origin Advocates of the Bayh-Dole Act appear to have based their support on a view of the process of university-industry technology transfer that is not wellsupported by studies of the channels through which academic research influences industrial innovation (see below for further discussion) Surprisingly little attention was devoted to the magnitude of the “problem” to which the Bayh-Dole Act was a “solution,” for example, and any potentially negative consequences of the Act for academic research received no attention in the debates leading to its passage IV How does academic research influence industrial innovation? A review of recent studies A number of recent studies based on interviews or surveys of senior industrial managers in industries ranging from pharmaceuticals to electrical equipment have examined the influence of university research on industrial innovation, and thereby provide additional insight into the role of universities within the U.S national innovation system All of these studies (GUIRR, 1991; Mansfield, 1991; Levin et al., 1987; Cohen, Nelson, & Walsh, 2002) emphasize the significance of interindustry differences in the relationship between university and industrial innovation The biomedical sector, especially biotechnology and pharmaceuticals, is unusual, in that university research advances affect industrial innovation more significantly and directly in this field than is true of other sectors In these other technological and industrial fields, universities occasionally contributed relevant “inventions,” but most commercially significant inventions came from nonacademic research The incremental advances that were the primary focus of the R&D activities of firms in these sectors were almost exclusively the domain of industrial research, design, problem-solving, and development University research contributed to technological advances by enhancing knowledge of the fundamental physics and chemistry underlying manufacturing processes and product innovation, an area in which training of scientists and engineers figured prominently, and experimental techniques The studies by Levin et al (1987) and Cohen et al (2002) summarize industrial R&D managers’ views on the relevance to industrial innovation of various fields of university research (Table summarizes the results discussed in Levin et al., 1987) Virtually all of the fields of university research that were rated as “important” or “very important” for their innovative activities by survey respondents in both studies were related to engineering or applied sciences As we noted previously in this chapter, these fields of U.S university research frequently developed in close collaboration with industry Interestingly, with the exception of chemistry, TABLE HERE few basic sciences appear on the list of university research fields deemed by industry respondents to be relevant to their innovative activities The absence of fields such as physics and mathematics in Table 1, however, should not interpreted as indicating that academic research in these fields does not contribute directly to technical advance in industry Instead, these results reflect the fact that the effects on industrial innovation of basic research findings in such areas as physics, mathematics, and the physical sciences are realized only after a considerable lag Moreover, application of academic research results may require that these advances be incorporated into the applied sciences, such as chemical engineering, electrical engineering and material sciences The survey results summarized in Cohen et al (2002) indicate that in most industries, university research results play little if any role in triggering new industrial R&D projects; instead, the stimuli originate with customers or from manufacturing operations Here as elsewhere, pharmaceuticals is an exception, since university research results in this field often trigger industrial R&D projects Cohen et al (2002) further report that the results of “public research” performed in government labs or universities were used more frequently by U.S industrial firms (on average, in 29.3% of industrial R&D projects) than prototypes emerging from these external sources of research (used in an average of 8.3% of industrial R&D projects) A similar portrait of the relative importance of different outputs of university and public-laboratory research emerges from the responses to questions about the importance to industrial R and D of various information channels (Table 2) Although pharmaceuticals once again is unusual in its assignment of considerable importance to patents and license agreements involving universities and public laboratories, respondents from this industry still rated research publications and conferences as a more important source of information For most industries, patents and licenses involving inventions from university or public laboratories were reported to be of little importance, compared with publications, conferences, informal interaction with university researchers, and consulting TABLE HERE Data on the use by industrial R&D managers of academic research results are needed for other industrial economies Nonetheless, the results of these U.S studies consistently emphasize that the relationship between academic research and industrial innovation in the biomedical field differs from that in other knowledge-intensive sectors In addition, these studies suggest that academic research rarely produces “prototypes” of inventions for development and commercialization by industry—instead, academic research informs the methods and disciplines employed by firms in their R&D facilities Finally, the channels rated by industrial R&D managers as most important in this complex interaction between academic and industrial innovation rarely include patents and licenses Perhaps the most striking aspect of these survey and interview results is the fact that they have not informed the design of recent policy initiatives to enhance the contributions of university research to industrial innovation V International Emulation of the Bayh-Dole Act In most industrialized countries, policies attempting to stimulate patenting and licensing by universities and public research organizations have also attracted considerable attention Many of these initiatives are modeled on the Bayh-Dole Act, passed in the United States in 1980 A recent OECD report notes: “Emulating a policy change in the United States [Bayh-Dole], several OECD countries … have introduced new legislation or implemented new policy measures in the late 1990s to clarify and make more coherent the policies towards ownership and exploitation of academic inventions and other creative works The main focus of the legal and policy changes has been to grant PROs [Public Research Organizations] title over the IP … The basis for this is that ownership by PROs … provides greater legal certainty, lowers transaction costs, and fosters more formal and efficient channels for technology transfer” (OECD 2002, p 3) As we noted above, this increased interest by governments in “Bayh-Dole- type” policies is rooted in motives similar to those underpinning policy initiatives that seek to create “hightechnology” regional clusters But the initiatives focused on university patenting and licensing activities neglect the variety of channels through which universities contribute to innovation and economic growth The “emulation” of Bayh-Dole in other industrial economies also tends to overlook the importance and effects on university-industry collaboration and technology transfer of the many other institutions that support these interactions and the commercialization of university technologies in the United States In addition, these “emulation” initiatives are based on a misreading of the empirical evidence on the importance of intellectual property rights in facilitating the “transfer” and commercialization of university inventions, as well as a misreading of the evidence on the effects of the Bayh-Dole Act This section reviews the causes and consequences of the growth of university patenting and licensing in the United States, the effects of the Bayh-Dole act, and recent attempts to emulate this legislation A Origins of the Bayh-Dole Act Although some U.S universities were patenting patent faculty inventions as early as the 1920s, few institutions had developed formal patent policies prior to the late 1940s, and many of these policies embodied considerable ambivalence toward patenting Public universities were more heavily represented in patenting than private universities during the 1925-45 period, both within the top research universities and more generally Moreover, many of the public universities active in patenting faculty inventions sought to insulate themselves from this activity by establishing affiliated but legally separate research foundations such as the Wisconsin Alumni Research Foundation to manage their patent portfolios Other institutions relied on third-party specialists in patent management such as the Research Corporation The collaboration between university and industrial researchers, combined with the focus of many U.S university researchers on scientific problems with important industrial, agricultural, or other public applications, meant that a number of U.S universities patented faculty inventions throughout the 20th century Nevertheless, despite the adoption by a growing number of universities of formal patent policies by the 1950s, many of these policies, especially those at medical schools, prohibited patenting of inventions, and university patenting was far less widespread than was true of the post-1980 period Moreover, many universities chose not to manage patenting and licensing themselves The Research Corporation, founded by Frederick Cottrell, a University of California faculty inventor who wished to use the licensing revenues from his patents to support scientific research, assumed a prominent role as a manager of university patents and licensing Even in these early decades of patenting and licensing, however, biomedical technologies accounted for a disproportionate share of licensing revenues for the Research Corporation and other early university licensors, such as the Wisconsin Alumni Research Foundation The decade of the 1970s, as much as or more so than the 1980s, represented a watershed in the growth of U.S university patenting and licensing U.S universities expanded their patenting, especially in biomedical fields, and assumed a more prominent role in managing their patenting and licensing activities, supplanting the Research Corporation Agreements between individual government research funding agencies and universities also contributed to the expansion of patenting during the 1970s Private universities in particular began to expand their patenting and licensing rapidly during this decade The number of universities establishing technology transfer offices and/or hiring technology transfer officers began to grow in the late 1960s, well before the passage of the Bayh-Dole Act Although the Act was followed by a wave of entry by universities into management of patenting and licensing, growth in these activities was well-established by the late 1970s Indeed, lobbying by U.S research universities was one of several factors behind the passage of the Bayh-Dole Act in 1980 The Act therefore is as much an effect as a cause of expanded patenting and licensing by U.S universities during the post-1960 period The Bayh-Dole Patent and Trademark Amendments Act of 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Pittsburgh, PA: Unpublished working paper, Heinz School of Public Policy, Carnegie-Mellon University; forthcoming in W.M Cohen and S Merrill, eds., The Patent System in the Knowledge-Based Economy Washington, D.C.: National Academies Press Weiner, Charles 1986 “Universities, Professors, and Patents: A Continuing Controversy.” Technology Review 83: 33-43 Ziedonis, A.A 2001 “The Commercialization of University Research through Patenting and Licensing: Implications for Firm Strategy and Public Policy.” Berkeley, CA: Unpublished Ph.D Dissertation, Haas School of Business, U.C Berkeley Zucker, Lynne, Michael Darby, and Jeff Armstrong 1994 “Inter-Institutional Spillover Effects in the Commercialization of Bioscience.” ISSR Working Papers in Social Science 6.3, UCLA (1994) 29 Table 1: The relevance of university science to industrial technology Science # of Industries with “relevance” scores >5 >6 Biology 12 Chemistry 19 Geology Mathematics Physics Agricultural science 17 Applied math/operations research 16 Computer science 34 10 Materials science 29 Medical science Metallurgy 21 Chemical engineering 19 Electrical engineering 22 Mechanical engineering 28 Selected industries for which the reported “relevance” of university research was large (> 6) Animal feed, drugs, processed fruits/vegetables Animal feed, meat products, drugs None Optical instruments Optical instruments, electronics? Pesticides, animal feed, fertilizers, food products Meat products, logging/sawmills Optical instruments, logging/sawmills, paper machinery Synthetic rubber, nonferrous metals Surgical/medical instruments, drugs, coffee Nonferrous metals, fabricated metal products Canned foods, fertilizers, malt beverages Semiconductors, scientific instruments Hand tools, specialized industrial machinery Source: Previously unpublished data from the Yale Survey on Appropriability and Technological Opportunity in Industry For a description of the survey, see Levin et al (1987) 30 Table 2: Importance to Industrial R&D of Sources of Information on Public R&D (including university research) Information source % rating it as “very important” for industrial R&D Publications & reports 41.2% Informal Interaction 35.6 Meetings & conferences 35.1 Consulting 31.8 Contract research 20.9 Recent hires 19.6 Cooperative R&D projects 17.9 Patents 17.5 Licenses 9.5 Personnel exchange 5.8 Source: Cohen et al (2002) 31 Figure 1: US research univ patents % of all domestic-assignee US patents, 1963 - 99 0.04 0.035 0.03 0.02 0.015 0.01 0.005 19 99 19 97 19 95 19 93 19 91 19 89 19 87 19 85 19 83 19 81 19 79 19 77 19 75 19 73 19 71 19 69 19 67 19 65 19 63 share 0.025 year 32 Patents(t)/R&D(t-1) Figure 2: University Patents Per R&D Dollar, 1963-1993 0.1 0.09 0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 Application Year 33 Figure 3: Technology Field of Carnegie University Patents, 1960-1999 3500 3000 2500 2000 1500 1000 500 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 1962 1960 Issue Year Chemicals andChemical Processes (ExcludingDrugs) Drugs andMedical Technology Electronic, Optical, and Nuclear Mechanical Other 34 Figure 4: Year of "Entry" into Tec hnology Transf er Ac tivit ies 45 40 35 30 25 20 15 10 19211925 19261930 19311935 19361940 19411945 19461950 19511955 19561960 19611965 19661970 19711975 19761980 19811985 19861990 Y ear 35 ... the effects of the Bayh-Dole Act This section reviews the causes and consequences of the growth of university patenting and licensing in the United States, the effects of the Bayh-Dole act, and. .. articulated by the President of the Association of American Universities, the Commissioner of the U.S Patent and Trademark Office, and the Technology Review, edited and published at MIT.9 These characterizations... emulation of these U.S models, the effects of many of these ? ?technology commercialization” policies remain controversial in their nation of origin Advocates of the Bayh-Dole Act appear to have based their