University Patenting and Scientific Advancement

1. University Patenting and Scientific Advancement Bradford Barham and Jeremy Foltz

2. How our work relates to stem cell • Investigations of the role of increased patent activity in the research portfolio of university life science researchers • Particular interested in: - Synergies or tradeoffs with other research outputs - Patent royalty payments - Other commercialization endeavors - Experience of researchers with “hold-ups” • Here we apply lessons about academic patenting to the stem cell research context and future research prospects.

3. Our research and data • “The impact of academic patenting in the life and agricultural sciences at US universities” • Our data: • University level data (1981-2002) on life science and agricultural patents, articles, doctoral students, and research funding • Scientist level data (web surveys, NSF/NRI) • Life scientists: 2005 survey, 1822 respondents • Ag scientists: surveys from 2005, 1996, 1989, 1979, n= ~1,200

4. Bayh-Dole Act 1980 • Allows universities to sell exclusive licenses on innovations generated with federal dollars. • Motivation: • Get ideas off the shelf w/o sacrificing university mission (synergies) • Generate university income for more research • Critique: • Increased commercialization of university research agenda • Distraction from basic research (tradeoffs) • Hold-ups/Anti-Commons approach to research

5. Life Science Patenting • Intellectual property rights newly important in the biological sciences • New ability to patent life-forms including plants and animals (Diamond v. Chakrabartty 1980, ex-parte Allen 1984, ex-parte Hibbard 1987) • New technologies increase research speed: e.g., gene gun • Increased private sector research

6. Life Science research funding • Historically largely federally funded • Big increase in NIH budget in the 1990’s (doubled over 10 years) • Coincides with the take-off in academic patenting • In 2005, average annual life scientist research budget in 2004 was $300,000, median $200,000 (direct costs)

8. Issues related to university patents • Tradeoffs or synergies between patents and other university research outputs • Individual level tradeoffs (work on patentable/commercializable research at the expense of basic research?) • Social level (loss of scientific commons?) • patents create potential for hold-up problems and gum up the works of free-flowing Mertonian science • Commercialization of university research directions • Patents as a new way to pay for research • Patents as a better way to commercialize technologies out of the university and thereby increase economic growth etc.

9. The growth in university life science R&D

10. Synergies vs Tradeoffs: more evidence • Scope economies in life science research outputs, esp. patents and articles, based on panel data analysis, university level. AJAE article. • Complementarities are strongest for top universities (UW-Madison, MIT, and others) • Individual Scientist Level – Descriptive Evidence, no drop off in academic article publications from average researcher in ag or life science. • Comparison of those who do and don’t patent in life sciences

11. Publications by agricultural scientists over time (over past five years)

12. Life scientist research output(last 3 years) All differences significant at a 95% confidence level

13. Evidence on hold-up problems:Percent of life scientists reporting constraints

14. Patents as source of research funding • 25% of life scientists have a patent • Median patent holder owns 2 patents • Patents as the “academic’s lottery ticket” • 33% of patent holders receive licensing revenues, representing 8% of all life scientists. • Average royalties ~$16,500 per patent • But in our sample: • One patent accounts for ~90% of those royalties • Of 1200 patents there are only three that make ~$1million or more. • Median annual royalty income is $5,000 • License revenues account for less than 1% of research budgets for those with patents

15. Is there a commercialization of US university life sciences? • 53% of life scientists in our survey have no engagement with industry • No patents, invention disclosures, industry funding, service on industry boards, collaborations, etc. • 20% of life scientists report private industry funding, accounting for 25% of research budgets • They still get 54% from federal sources • Overall in the life sciences, 67% of all research funding comes from federal sources, 15% from own university sources, 10% from private foundations, and only 5% from private industry.

16. Reflections on the stem cell debate • What’s the issue? • Slow progress • Inadequate funding • Complaints about stem cell access and patent licensing • Work still in its infancy: i.e. it’s basic research, applied research still years away • Where we have some evidence for how this might play out • Funding • Patent hold-ups

17. Percent of lab funding from different funding sources * Significantly different at a 95% confidence level

18. Funding Basic Research • Very difficult to fund without federal money • Patents unlikely to provide much help because • “lottery” – unpredictable returns • timing of liquidity (can’t borrow against expected licensing earnings). • reinforced by basic nature of research that are less likely to generate valuable patents. • Industry funding small and unlikely to ever be much more than that (time horizon) • Good news that stem cells won’t likely be the Trojan horse that brings commercialization into the university • Bad news that industry won’t fund enough of this research to make up for federal funding

19. More funding • Foundations possible, but likely on the order of 10% rather than being a major part of what is needed • State money (California) can look like federal funds in some ways, but • Shallow eligible project pools: State barriers limit the ability to choose the best project across the nation. If the best project is in Alabama it might never get funded. Concern over internal conflicts of interest. • Shaky peer review mechanisms: quality of the review process at the state level is more subject to politics and harder to get good outside reviewers (unless you pay them).

20. Hold ups • Hold ups in stem cells claimed to be due to intellectual property, but also due to government constraints • Our survey work suggests that in an unconstrained world holdups would likely disappear (if stem cells are like the rest of life sciences) • Instead it seems that the federal rules have heightened the vigilance on IP and by constraining the system have created holdups. • The prospects for lessening holdups will be driven by federal stem cell policy much more than the courts or patent holder choices

21. Looking forward • Pessimism: • Most of the potential problems can be traced back to federal policy • No easy substitutes • No change in policy implies continued problems • Optimism: With a policy change lots of improvement possible • Holdups likely to go away • Funding can improve dramatically with federal funds flowing to this area.