In the October 2009 issue of Research Policy, Dr. Martin Kenney and Dr. Donald Patton present their article Reconsidering the Bayh-Dole Act and the Current University Invention Ownership Model.

This article reflects nearly four years of research and analysis completed by this team who examined the foundation of the university ownership model for intellectual property and the laws and policies that have formed them. Their paper draws upon substantial literature that represents three theoretical research traditions that contribute to the operations of the university technology licensing office (TLO).

The first tradition is evolutionary institutional economics that examines the historical evolution of the current university ownership model. The second tradition represents research regarding institutional and sociological impact on universities or university - industry efficiencies as it relates to the TLO operational competency. Last, the legal tradition examines the current university invention-licensing model. These theories provided the authors a macro-level understanding of institutional structures and networks that faculty inventors, TLO managers and universities operate under.

While this paper utilizes stylized models to illustrate current invention commercialization, Kenney and Patton apply useful insights from agency theory and transaction cost economics to elucidate how the contemporary university invention ownership model yields outcomes contrary to the supposed intent of the BD Act.

Kenney and Patton's paper argues that the current university invention ownership model, wherein universities maintain de jure ownership of inventions, is not an optimal model in terms of economic efficiency nor does it advance the social interest of rapidly commercializing technology and encouraging entrepreneurship.

They contend instead that this model is plagued by ineffective incentives, information asymmetries, and contradictory motivations for the university, its faculty inventors, potential licensees, and university TLO's. These structural uncertainties, according to the authors, can lead to delays in licensing, misaligned incentives among parties, and delays in the flow of scientific information for the very materials necessary for scientific progress.

A further assertion by Kenney and Patton is that the institutional arrangements, within which TLO's are embedded, have encouraged some of them to become revenue maximizers rather than facilitators of technology dissemination for the good of the entire society.

In addition to their detailed critique of the current functions under Bayh-Dole, Kenney and Patton also present two university commercialization models as superior alternatives for consideration. The first is to vest ownership with the inventor, who could choose the commercialization path for the invention. For this privilege, the inventor would provide the university an ownership stake in any returns to the invention. The inventor would be free to contract with the university TLO or any other entity that might assist in commercialization.

The second alternative presented by the authors is to make all inventions immediately available to the public through a public domain strategy or, through a requirement that all inventions be licensed non-exclusively. Both alternatives, according to Kenney and Patton, would address the current dysfunctional arrangements in university technology commercialization.

In the full text article, you will learn about the fundamental flaws of the current university ownership model and ways to improve it through increased faculty inventor choice resulting in more market opportunities and overall value creation for universities and the public at large.

Presented below are selections from the article that focus on the background portion of the Kenney/Patton study. IP Advocate has selected excerpts that concern the history and legislative process surrounding the proposal and passage of Bayh-Dole by Congress and its impact on the current technology transfer state of affairs.

To view the full-text of Reconsidering the Bayh-Dole Act and the Current University Invention Ownership Model, visit http://www.sciencedirect.com/.

Belief that federal ownership of federally funded research results retarded the commercialization of intellectual property rights due to insecurity regarding their ownership led Congress to pass the Bayh-Dole Act (BD) in 1980. Combined with this debatable proposition was the notion that university research could be the source of innovations that would reinforce U.S. economic preeminence.

Based on minimal evidence, it was believed that government-owned patents were insufficiently utilized. Most elite research universities already had Institutional Patent Agreements with various federal funding agents, though these varied by agency. Eliminating this variation was another important goal of the legislation.

In the name of providing the fruits of university inventions to society in an efficient (the most rapid, least resource intensive manner as possible), effective, and socially optimal manner, Congress designed the BD Act to allow federal contractors including universities to claim title to inventions made as result of federally funded research.

As with much legislation, BD was the result of lobbying efforts by interested parties—in this case, corporations and university licensing officials hoping to monetize these inventions.

BD standardized the procedures for vesting the control of federally funded research inventions in contractors. The popular press and others have hailed the resulting university ownership model as boon to society. On the other hand, there have been an increasing number of critiques and, in particular, complaints from faculty inventors and potential licensees concerning the current model.

With the rights to inventions made with federal funding came an affirmative obligation to market them, though often this amounts to nothing more than being entered on the TLO website. The implicit conceptual model held that universities would be sufficiently self-interested to respond to the offer of invention ownership and market the inventions to industry. In reality, it is very often the inventor who actively markets the invention to industry or embarks upon creating an entrepreneurial startup.

For the universities, the desire to appropriate the fruits of their employees' federally funded research was undoubtedly fueled by the emergence of the biotechnology industry, whose promise of riches to invention owners culminated with the spectacular initial public stock offerings of Genentech in 1980 and of Cetus in 1981. The 1981 Cetus IPO was the largest ever, to that date raising $108 million. For university administrators, these riches seemed attainable since patents in pharmaceuticals are more easily defended than in other fields.

The growing commercial interface between the university and industry has sparked an outpouring of research. Given this interest, critically examining the effects of current implementation of the BD model is important not only for the United States, but also for the rest of the world, as other nations adopt BD-like models in the belief that it is the best way to ensure the commercialization of university inventions.

Our research, utilizing microlevel analysis, shows that the current university invention ownership model is plagued by ineffective incentives, information asymmetries, and contradictory goals for inventors, potential licensees, the university, and university technology licensing offices. These structural uncertainties lead to commercialization delays, unnecessary expenses, "gray" markets in inventions, difficult to enforce restrictions on inventors, misaligned incentives among parties, and delays in the flow of scientific information and the materials necessary for scientific progress.

This state of affairs exists even though there are simpler and more effective alternatives. By ceding the commercialization rights for university inventions made in the course of conducting federally funded research to universities, the U.S. Congress made, perhaps not entirely wittingly, a profound technology policy decision and validated a new university invention commercialization model.

TLOs definitely can assist in the diffusion and adoption of university inventions, but when operating in a risk-averse bureaucratic model they can also frustrate the commercialization process. One of the difficulties with the current model is that ownership is vested in the TLO, when the inventor and the potential licensee are often the most knowledgeable parties to the invention. Unfortunately, the current model vests ownership in the TLO which is usually the least knowledgeable actor in a licensing relationship. Vesting ownership in the inventor, who is often the most enthusiastic supporter of the technology, will encourage them to find the best method of commercialization.

To view the full-text of Reconsidering the Bayh-Dole Act and the Current University Invention Ownership Model, visit http://www.sciencedirect.com/.