March 17, 2006
Ute S. Frey
UC Berkeley Haas School of Business
UC Berkeley Haas School of Business
A debate over who should reap financial returns from publicly funded R&D threatens to disrupt technology transfer from university to industry, according to UC Berkeley Haas School of Business Professor David Mowery.
Although the American university system has proven a remarkable engine of innovation, it now faces a threat from a public increasingly concerned over where profits from the commercialization of new technology should rightfully go, Mowery cautions.
Questions in California, for example, center on how to handle public funding for California’s Proposition 71 stem cell research program, which is currently stalled in a legal battle. Should intellectual property and patenting laws be tweaked so that a portion of profits from stem cell research goes back to taxpayers and not just into the coffers of universities and biotech companies? Should the state be able to negotiate low prices on drugs or treatments that are eventually developed with Proposition 71 funds?
“The direct or near-term benefits from such policies are likely to be very small,” Mowery argues. “On the other hand, the risk of such policies having a chilling effect on licensee interest in intellectual property is likely to be great.”
“The current guidelines approved
by the Independent Citizens Oversight Committee for Proposition
71 that mandate that prices should not exceed those charged
to the federal Medicaid program offer a good compromise,” Mowery
Benefits from Proposition 71, such as the creation of new biotech firms and new jobs, are likely to substantially outweigh the benefits, administrative complexities, and costs associated with pricing clauses in licensing agreements that mandate low prices for state purchasers, according to Mowery.
Mowery's latest research on what motivates the transfer of technology from universities to industries appears in Ivory Tower and Industrial Innovation, a volume co-authored with Columbia University Professor Richard Nelson, Georgia Institute of Technology Assistant Professor Bhaven Sampat, and University of Michigan Assistant Professor Arvids Ziedonis. In the book, Mowery argues that public policy has been a facilitator but not a catalyst for the commercial development of new technologies over the past two decades.
"It's really the unique characteristics of the American educational and industrial complexes that govern innovation," says Mowery. Among those unique characteristics: A large, decentralized university system and the world’s biggest venture capital industry, with movement of faculty and post-doc students between universities and private research labs.
In particular, Mowery has studied the consequences of the Bayh-Dole Act of 1980, which made it easier for a university to file for patents and negotiate licenses associated with that patent. Some observers have argued that Bayh-Dole may have contributed to the economic boom of the 1990s by sparking an increase in university patenting and licensing. Meanwhile, foreign governments are looking at Bayh-Dole as a possible template to stimulate technology research and commercial transfer in their own universities
But Mowery's study of records from the technology licensing offices in the University of California system, Stanford University, and Columbia University reveals that these universities were already actively licensing and patenting faculty inventions well before the act and that Bayh-Dole increased such activity only modestly.
Despite those findings, however, Bayh-Dole still serves as an adequate body of rules to govern who should reap the rewards of scientific innovation, contends Mowery, the William A. and Betty H. Hasler Professor of New Enterprise Development at the Haas School
"To begin tampering with this legislation on the question of stem cell research in order to set up what amounts to a separate set of laws for this new area of research will dramatically raise overhead costs and serve as a drag on innovation," he says. "The relatively small amount of money that will be returned to taxpayers will hardly make it worth it."