The pull of patents

Fordham Law Review

Volumn 77, Issue 5, 2009, Pages 2143-2167

  Frischmann, Brett M ^a  

^a MIT Sloan School of Management   (United States)

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EID: 66749109360     PISSN: 0015704X     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Conference Paper

References (132)

1. At the outset, let me make clear: although I focus on patents, patents are far from the only or even the most important institution potentially driving commercialization of university research systems. Grant funding mechanisms and industry sponsorship of university research are two important institutions that significantly affect university science and technology research systems as well. See generally SHEILA SLAUGHTER & LARRY L. LESLIE, ACADEMIC CAPITALISM: POLITICS, POLICIES, AND THE ENTREPRENEURIAL UNIVERSITY (1997) (studying multiple policy instruments and their commercialization impact). In fact, a number of scholars "have argued that much of the increase in commercially oriented university activities, such as patenting and licensing that has occurred since 1980 was driven by contemporaneous shifts in intellectual property laws and regimes for funding academic research." Scott Shane, Encouraging University Entrepreneurship? The Effect of the Bayh-Dole Act on University Patenting in the United States , 19 J. Bus. VENTURING 127, 129 (2004) (citing Rebecca Henderson, Adam B. Jaffe & Manuel Trajtenberg, Universities as a Source of Commercial Technology: A Detailed Analysis of University Patenting, 1965-1988 , 80 REV. ECON. & STAT. 119 (1998);
2. David C. Mowery et al., The Growth of Patenting and Licensing by U.S. Universities: An Assessment of the Effects of the Bayh-Dole Act of 1980 , 30 RES. POL'Y 99 (2001);
3. David C. Mowery & Arvids A. Ziedonis, Academic Patent Quality and Quantity Before and After the Bayh-Dole Act in the United States , 31 RES. POL'Y 399 (2002)).
4. The economic and legal literatures are voluminous. See, e.g. , DEREK BOK, UNIVERSITIES IN THE MARKETPLACE: THE COMMERCIALIZATION OF HIGHER EDUCATION (2003); CAPITALIZING KNOWLEDGE: NEW INTERSECTIONS OF INDUSTRY AND ACADEMIA (Henry Etzkowitz et al. eds., 1998) [hereinafter CAPITALIZING KNOWLEDGE];
5. HENRY ETZKOWITZ, MIT AND THE RISE OF ENTREPRENEURIAL SCIENCE (2002);
6. CLIFFORD M. GROSS ET AL., THE NEW IDEA FACTORY: EXPANDING TECHNOLOGY COMPANIES WITH UNIVERSITY INTELLECTUAL CAPITAL (2000);
7. INDUSTRIALIZING KNOWLEDGE: UNIVERSITY- INDUSTRY LINKAGES IN JAPAN AND THE UNITED STATES (Lewis M. Branscomb et al. eds., 1999) [hereinafter INDUSTRIALIZING KNOWLEDGE];
8. DAVID C. MOWERY ET AL., IVORY TOWER AND INDUSTRIAL INNOVATION: UNIVERSITY-I NDUSTRY TECHNOLOGY TRANSFER BEFORE AND AFTER THE BAYH-DOLE ACT IN THE UNITED STATES (2004);
9. Ajay Agrawal, University-to-Industry Knowledge Transfer: Literature Review and Unanswered Questions , 3 INT'L J. MGMT. REV. 285 (2001);
10. Wesley M. Cohen et al., Industry and the Academy: Uneasy Partners in the Cause of Technological Advance, in CHALLENGES TO RESEARCH UNIVERSITIES 171 (Roger G. Noll ed., 1998);
11. Rebecca S. Eisenberg, Patenting the Human Genome , 39 EMORY L.J. 721 (1990) [hereinafter Eisenberg, Patenting the Human Genome] ;
12. Rebecca S. Eisenberg, Proprietary Rights and the Norms of Science in Biotechnology Research , 97 YALE L.J. 177 (1987) [hereinafter Eisenberg, Proprietary Rights] ;
13. Rebecca S. Eisenberg, Public Research and Private Development: Patents and Technology Transfer in Government-Sponsored Research , 82 VA. L. REV. 1663 (1996) [hereinafter Eisenberg, Public Research and Private Development] ;
14. Brett Frischmann, Innovation and Institutions: Rethinking the Economics of U.S. Science and Technology Policy , 24 VT. L. REV. 347 (2000);
15. F. Scott Kieff, Property Rights and Property Rules for Commercializing Inventions , 85 MINN. L. REV. 697 (2001);
16. Arti Kaur Rai, Regulating Scientific Research: Intellectual Property Rights and the Norms of Science , 94 NW. U. L. REV. 77 (1999);
17. J. H. Reichman & Paul F. Uhlir, A Contractually Reconstructed Research Commons for Scientific Data in a Highly Protectionist Intellectual Property Environment , LAW & CONTEMP. PROBS., Winter/Spring 2003, at 315.
18. See, e.g. COUNCIL ON GOVERNMENTAL RELATIONS, THE BAYH-DOLE ACT: A GUIDE TO THE LAW AND IMPLEMENTING REGULATIONS 2-3, 9-10 (1999), available at http://www.cogr.edu/ docs/Bayh-Dole.pdf;
19. Chester G. Moore, Killing the Bayh-Dole Act's Golden Goose , 8 TUL. J. TECH. & INTELL. PROP. 151, 155 (2006) (supporting claim that "[a]mple evidence exists to suggest that Bayh-Dole has yielded measurable and substantial benefits at many levels" with evidence of growth in patenting, licensing, and commercialization (citing ASS'N OF UNIV. TECH. MANAGERS, 2003 AUTM LICENSING SURVEY: FY 2003, SURVEY SUMMARY 20-22 (2003);
20. Alfred R. Berkeley III, The Economic Impact of University Technologies , 16. J. ASS'N U. TECH. MANAGERS 1, 7 (2004));
21. Opinion, Innovation's Golden Goose , ECONOMIST TECH. Q., Dec. 14, 2002, at 3;
22. see also BOK, supra note 2 (arguing that the Bayh-Dole Act and patents enabled universities to do a better job serving the public interest). Note that, in 2002, The Economist heralded the Bayh-Dole Act as "[p]ossibly the most inspired piece of legislation to be enacted in America over the past half-century." Innovation's Golden Goose, supra , at 3. Three years later, The Economist acknowledged that the "costs [of Bayh-Dole] are adding up." Bayhingfor Blood or Doling Out Cash? , ECONOMIST, Dec. 24, 2005, at 109.
23. See Kieff, supra note 2 (arguing that the primary role of patents is to facilitate commercialization); Bayhingfor Blood or Doling Out Cash?, supra note 3.
24. See Eisenberg, Proprietary Rights, supra note 2;
25. see also Eisenberg, Patenting the Human Genome, supra note 2, at 738 (discussing the possible costs and benefits of providing patents for publicly funded research of human genomes); Rai, supra note 2, at 88 (acknowledging that intellectual property rights caused a change in traditional norms of scientific research); Reichman & Uhlir, supra note 2, at 320 (recognizing that increased intellectual property rights discourage traditional sharing of scientific findings).
26. See generally Brett M. Frischmann & Mark A. Lemley, Spillovers , 107 COLUM. L. REV. 257 (2007) (discussing the advantages of widespread competitive utilization over centralized coordination by an owner).
27. See Dan L. Burk & Mark A. Lemley, Policy Levers in Patent Law , 89 VA. L. REV. 1575, 1600-15 (2003) (discussing how different theories are more relevant to different industries depending on a particular industry's needs and capabilities). I should note that the arguments I make in this essay about the pull of patents also vary across fields.
28. On norms, see Rai, supra note 2 (examining the role of norms in university research and the impacts of patents and commercialization on university norms); Katherine J. Strandburg,Curiosity-Driven Research and University Technology Transfer, in 16 ADVANCES IN THE STUDY OF ENTREPRENEURSHIP, INNOVATION AND ECONOMIC GROWTH, UNIVERSITY ENTREPRENEURSHIP AND TECHNOLOGY TRANSFER: PROCESS, DESIGN, AND INTELLECTUAL PROPERTY 93 (Gary D. Libecap ed., 2005) (same).
29. Bayhingfor Blood or Doling Out Cash?, supra note 3, at 109 (noting that "[e]ven industry is starting to complain about a gold-digger mentality among academic administrators").
30. See Aldo Geuna & Lionel J. J. Nesta, University Patenting and Its Effects on Academic Research: The Emerging European Evidence , 35 RES. POL'Y 790 (2006) (analyzing success rates and trends in patenting behavior at European universities);
31. Jay P. Kesan, Transferring Innovation 77 FORDHAM L. REV. 2169 (2009) [hereinafter Kesan, Transferring Innovation] (analyzing success rates and trends in patenting behavior at U.S. universities and citing various studies); Jay P. Kesan, Remarks at W(h)ither the Middleman: The Role and Future of Intermediaries in the Information Age Conference at Michigan State University College of Law: Tech-Transfer Offices as Intermediaries (on Their Own Terms) (Apr. 8-9,2005) (same).
32. See NAT'L SCI. BD., SCIENCE & ENGINEERING INDICATORS -1996, ch. 5 (1996), available at http://www.nsf.gov/statistics/seind96/chap-5.pdf; Henderson, Jaffe & Trajtenberg, supra note 1;
33. Kesan, Transferring Innovation, supra note 10.
34. Fumio Kodama & Lewis M. Branscomb, University Research as an Engine for Growth: How Realistic Is the Vision?, in INDUSTRIALIZING KNOWLEDGE, supra note 2, at 3, 13-14.
35. Bayhingfor Blood or Doling Out Cash?, supra note 3, at 109 (noting that "[e]ven industry is starting to complain about a gold-digger mentality among academic administrators").
36. See Aldo Geuna & Lionel J. J. Nesta, University Patenting and Its Effects on Academic Research: The Emerging European Evidence , 35 RES. POL'Y 790 (2006) (analyzing success rates and trends in patenting behavior at European universities);
37. Jay P. Kesan, Transferring Innovation , 77 FORDHAM L. REV. 2169 (2009) [hereinafter Kesan, Transferring Innovation] (analyzing success rates and trends in patenting behavior at U.S. universities and citing various studies); Jay P. Kesan, Remarks at W(h)ither the Middleman: The Role and Future of Intermediaries in the Information Age Conference at Michigan State University College of Law: Tech-Transfer Offices as Intermediaries (on Their Own Terms) (Apr. 8-9,2005) (same).
38. See NAT'L SCI. BD., SCIENCE & ENGINEERING INDICATORS-1996, ch. 5 (1996), available at http://www.nsf.gov/statistics/seind96/chap-5.pdf; Henderson, Jaffe & Trajtenberg, supra note 1;
39. Kesan, Transferring Innovation, supra note 10.
40. Fumio Kodama & Lewis M. Branscomb, University Research as an Engine for Growth: How Realistic Is the Vision?, in INDUSTRIALIZING KNOWLEDGE, supra note 2, at 3, 13-14.
41. COMM. ON TRENDS IN FED. SPENDING ON SCI. & ENG'G RESEARCH, BD. ON SCI., TECH. & ECON. POLICY, NAT'L RESEARCH COUNCIL, TRENDS IN FEDERAL SUPPORT OF RESEARCH AND GRADUATE EDUCATION 21-47 (Stephen A. Merrill ed., 2001);
42. see also The NSF Budget: How Should We Determine Future Levels?: Hearing Before the Subcomm. on Res. of the H. Comm. on Science , 107th Cong. 11-13 (2002) (discussing inadequacies in National Science Foundation funding).
43. See SLAUGHTER & LESLIE, supra note 1;
44. see also DEGREES OF COMPROMISE: INDUSTRIAL INTEREST AND ACADEMIC VALUES (Jennifer Croissant & Sal Restivo eds., 2001);
45. JENNIFER WASHBURN, UNIVERSITY, INC.: THE CORPORATE CORRUPTION OF AMERICAN HIGHER EDUCATION (2005);
46. James Stuart, Comment, The Academic-Industrial Complex: A Warning to Universities , 75 U. COLO. L. REV. 1011, 1042 (2004). Another explanation can be found in the dominant economic mind-set that has emerged in the past few decades. This mind-set focuses on the perceived social benefits of commercialization, privatization, and deregulation, on minimizing government intervention in markets, but ignores market intervention into government and academia. For example, in his book, MIT and the Rise of Entrepreneurial Science , Henry Etzkowitz suggests, reorientfing]⋯ the universities toward a commercial role was not intervention in the sense of specific government measures requiring targeting of particular areas of R&D for support, as in Japan, or requiring enterprises and research institutes to make research contracts with each other, as in the Eastern European socialist model. Instead, incentives were built into the research-funding system to move the universities closer to industry, in their motivation and structure. ETZKOWITZ, supra note 2, at 125. Etzkowitz is reassured that the government is not overtly intervening into academia but fails to appreciate fully the risks of industry intervention, which I discuss below. As Paul Krugman recently noted, "Decades of conservative marketing have convinced Americans that government programs always create bloated bureaucracies, while the private sector is always lean and efficient." Paul Krugman, Op-Ed., Buying into Failure , N.Y. TIMES, Dec. 17,2004, at A35. Universities often are typecast, like government, in a manner that marginalizes their social and economic contributions and their respective roles in society. Along with a glorified view of the market and a pessimistic view of government, universities are cast as ivory tower havens for (liberal) academics out of touch with reality and the demands of society. Bringing universities "closer to industry" may increase accountability and reduce waste, but according to whom and based on what criteria? This is not the place to develop these arguments fully, but I raise them to suggest that the commercialization question is not unique to the university research context but rather is endemic to evolving notions of modern societal organization in capitalist economies. To grapple with the commercialization question, universities should step back from their immediate context, compare their situation with that of other industries and social contexts, reflect on their role in society, and proceed carefully.
47. Fumio Kodama and Lewis Branscomb note that industry dependence on innovation outputs from university science and technology research systems "has been accelerating dramatically since the Second World War." Kodama & Branscomb, supra note 12, at 8.
48. Bayh-Dole Act, Pub. L. No. 96-517, 94 Stat. 3019 (1980) (codified as amended at 35 U.S.C. §§ 200-212 (2000)).
49. C.f. Eisenberg, Public Research and Private Development, supra note 2, at 1700 (noting that university support for the Bayh-Dole Act was in part due to universities' ability to control their interactions with commercial entities).
50. See Rai, supra note 2.
51. Richard Florida, The Role of the University: Leveraging Talent, Not Technology , 15 ISSUES SCI. & TECH., Summer 1999, at 67.
52. Richard Florida focuses on the importance of attracting and aggregating human capital within the university science and technology system as a means of improving its performance. He notes that universities must attract the "top talent," referring to academic research professors, in order to attract the top graduate students. Id. Florida emphasizes the need to shift our myopic focus on research results (e.g., university-derived invention) to human capital, in terms of both human capital outputs and human capital as a component of infrastructural capital. See id.; see also SLAUGHTER & LESLIE, supra note 1, at 10-11 ("Universities are the repositories of much of the most scarce and valuable human capital that nations possess, capital that is valuable because it is essential to the development of the high technology and technoscience necessary for competing successfully in the global economy.").
53. The intellectual capital category is meant to capture the full range of intangible products of the human intellect, regardless of whether the product has been fixated in a tangible medium (e.g., written down) and regardless of whether any particular entity claims ownership of the intellectual good. Intellectual capital often overlaps significantly with human capital. For example, the idea residing in the mind of a professor is an intellectual resource, while the professor himself is a human capital resource.
54. I recognize that the term "capital outputs" seems like an oxymoron, but it is not. It is important to realize that capital goods are produced and thus are outputs of a production process, especially when evaluating streams of cumulative input-output relationships.
55. See Frischmann, supra note 2, at 364-67 (examining the importance of variance in uses); see also id. at 365 ("A larger (smaller) variance in the distribution corresponds to a basic (applied) innovation, representing a wider (narrower) range of potential applications and hence greater (lesser) uncertainty as to a specific application.");
56. see also Brett M. Frischmann, An Economic Theory of Infrastructure and Commons Management , 89 MINN. L. REV. 917 (2005) (discussing infrastructural capital and the importance of variance in uses as a defining characteristic); infra note 26 and accompanying text.
57. It is important to realize that socialization is an important aspect of the university science and technology research system. Students are prepared for entry into the research community, for example, by gaining familiarity with professional norms and ethics and . forming relationships with members of the community. Most undergraduate or graduate students have limited real-world experience and very little (if any) experience in dealing with professionals as a member of the professional community. In law school, for example, we place a significant emphasis on the fact that students will be entering a profession, that they will be members of the bar, and that a host of ethical and even less formal community norms apply to members. The law school experience, in part, consists of a socialization process that prepares the students for professional membership. A very similar dynamic exists within the university research setting, although it is less explicit and less formal than in the law school setting. Professor Katherine Strandburg has indirectly touched on this dynamic. She explores the relationships between community norms and academic scientists' individual preferences. See Strandburg, supra note 8.
58. The feedbacks loops are important because, in contrast with the outdated linear model of basic research → invention → innovation → commercial product, research may progress nonlinearly, "going" in many different "directions"-downstream, upstream, sidestream into related or unrelated fields, and so on-with more variability and unpredictability than the simple upstream-downstream depiction suggests. See Frischmann, supra note 2 (examining the problems with the linear model of innovation and its implications for comparative institutional analysis).
59. See generally STAFF OF H. COMM. ON SCI., 105TH CONG., UNLOCKING OUR FUTURE: TOWARD A NEW NATIONAL SCIENCE POLICY (Comm. Print 1998), available at http://www.access.gpo.gov/congress/house/science/cpl05-b/science 105b.pdf; OFFICE OF TECH. ASSESSMENT, U.S. CONGRESS, INNOVATION AND COMMERCIALIZATION OF EMERGING TECHNOLOGIES (1995), available at http://govinfo.library.unt.edu/ota/Ota-l/DATA/1995/9539.PDF; DAVID C. MOWERY & NATHAN ROSENBERG, TECHNOLOGY AND THE PURSUIT OF ECONOMIC GROWTH (1989); DONALD E. STOKES, PASTEUR'S QUADRANT: BASIC SCIENCE AND TECHNOLOGICAL INNOVATION (1997).
60. See Frischmann, supra note 23 (discussing different types of infrastructure capital). I describe infrastructural capital according to three criteria: The resource may be consumed nonrivalrously; Social demand for the resource is driven primarily by downstream productive activity that requires the resource as an input; and The resource may be used as an input into [the production of] a wide range of goods and services, including private goods, public goods, and nonmarket goods. Id. at 956. The first criterion isolates a set of resources that are potentially sharable at low (or at least manageable) marginal cost; the latter criteria focus on the manner in which infrastructure functions as generic (or general-purpose) capital to create social value and further narrows the set to those resources that are more likely to give rise to an assortment of demand-side market failures associated with externalities, high transaction and information costs, and path dependency.
61. See id. at 956-57, 959 (explaining the economic significance of this characteristic);
62. see also Yochai Benkler, Coase 's Penguin, or, Linux and The Nature of the Firm, 112 YALE L.J. 369 (2002) [hereinafter Benkler, Coase's Penguin] (on a particular class of sharable goods);
63. Yochai Benkler, Sharing Nicely: On Shareable Goods and the Emergence of Sharing as a Modality of Economic Production , 114 YALE L.J. 273 (2004).
64. Frischmann, supra note 23.
65. I discuss demand manifestation below, see infra text accompanying notes 46-49, and extensively in An Economic Theory of Infrastructure and Commons Management, supra note 23.
66. Except to the extent that one takes the view that human capital outputs constitute rival goods consumed in the labor market.
67. Human capital also may exhibit variance in the potential to generate positive externalities.
68. See Frischmann, supra note 2, at 364-67.
69. Id. Note that there are important distinctions between basic and applied research on one hand, and commercial and noncommercial research on the other. The distinctions are relevant and important for comparative institutional analysis. See id. at 376-92 (comparing intellectual property, tax incentives, government grants, government procurement, and cooperative agreements); id. at 392-95 (discussing how different institutions target different types of market failures associated with these distinctions).
70. As Philip Auerswald and Lewis Branscomb note, researchers tend to allocate their resources-time, money, graduate student assistance, etc.-according to their "interest in the question posed," which "contrast[s] sharply with a decision rule based on commercial potential." Philip E. Auerswald & Lewis M. Branscomb, Start-ups and Spin-offs: Collective Entrepreneurship Between Invention and Innovation, in THE EMERGENCE OF ENTREPRENEURSHIP POLICY: GOVERNANCE, START-UPS, AND GROWTH IN THE U.S. KNOWLEDGE ECONOMY 61, 79-80 (David M. Hart ed., 2003) [hereinafter EMERGENCE OF ENTREPRENEURSHIP]. They also note, "A fundamental challenge involved in taking a project from invention to innovation is accomplishing the shift from decisions based on the criterion of 'interestingness' to one based on the criterion of commercial value." Id. at 80.
71. See, e.g. , Henderson, Jaffe & Trajtenberg, supra note 1. As Jerry and Marie Thursby note, "[c]uriosity-driven research can often lead to commercially applicable results by accident."
72. Jerry G. Thursby & Marie C. Thursby, Patterns of Research and Licensing Activity of Science and Engineering Faculty, in SCIENCE AND THE UNIVERSITY 77, 81 (Paula E. Stephan & Ronald G. Ehrenberg eds., 2007). In their study of Australia, Britain, Canada, and the United States, Sheila Slaughter and Larry Leslie found that "all four countries developed national policies that promoted a shift from basic or curiosity-driven research to targeted or commercial or strategic research." SLAUGHTER & LESLIE, supra note 1, at 14-15; see also id. ch. 2 (analyzing a host of national policy instruments). On "curiosity-driven research," see Strandburg, supra note 8.
73. "Historically, a large part of federal R&D spending has been devoted to agencies that have uniquely public missions, in particular national defense. Although the private sector performs much of that work under contract, the government directs such mission-oriented R&D because it, rather than private customers, is the ultimate consumer of any new technologies that might result." CONGRESSIONAL BUDGET OFFICE, U.S. CONGRESS, FEDERAL SUPPORT FOR RESEARCH AND DEVELOPMENT 3 (2007), available at http://www.cbo.gov/ftpdocs/ 82xx/doc8221/06-18-Research.pdf. For the past four decades, federal research and development (R&D) spending has been weighted most heavily toward defense. See AM. ASS'N FOR THE ADVANCEMENT OF SCI., FEDERAL SPENDING ON DEFENSE AND NONDEFENSE R&D (2008), available at http://www.aaas.org/spp/ rd/histdeO9.pdf. Within nondefense research spending, the shares among space, health, energy, general science, and other fields have varied over time. See AM. ASS'N. FOR THE ADVANCEMENT OF SCI., TRENDS IN NONDEFENSE R&D BY FUNCTION, FY 1953-2009 (2008), available at http://www.aaas.org/ spp/rd/histdaO9.pdf. The American Association for the Advancement of Science provides excellent guides to the historical data and funding trends. See American Association for the Advancement of Science, R&D Budget and Policy Program: Guide to R&D Funding Data-Historical Data, http://www.aaas.org/spp/ rd/guihist.htm (last visited Mar. 25, 2009).
74. For a discussion of a range of noncommercial priorities in federal research funding, see DONNA FOSSUM ET AL., VITAL ASSETS: FEDERAL INVESTMENT IN RESEARCH AND DEVELOPMENT AT THE NATION'S UNIVERSITIES AND COLLEGES 2 (2004). Recent studies suggest that federal R&D funds have become increasingly concentrated. Id. at 12 (noting that recent increases in R&D funding to universities and colleges have been highly focused on medical research).
75. See MOWERY ET AL., supra note 2, at 86-93 (providing a detailed historical account).
76. See Eisenberg, Public Research and Private Development, supra note 2, at 1702 (discussing and critiquing the argument that federally funded research was underutilized).
77. See, e.g. , ROBERT P. MERGES ET AL., INTELLECTUAL PROPERTY IN THE NEW T ECHNOLOGICAL AGE 119 (3d ed. 2003);
78. Mark A. Lemley, Property, Intellectual Property, and Free Riding , 83 TEX. L. REV. 1031,1031 (2005).
79. For a certain subset of patentable subject matter, trade secrecy or other mechanisms may provide sufficient means for appropriating surplus to attract private investment into production. For this subset, patents may be justified for a variety of reasons associated with disclosure. See Katherine J. Strandburg, What Does the Public Get? Experimental Use and the Patent Bargain , 2004 Wis. L. REV. 81.
80. I am concerned in this essay with government-funded research. Of course, a significant amount of university research is funded through other means. See Pedro Conceicão et al., R&D Funding in US Universities: From Public to Private Support or Public Policies Strengthening Diversification?, in PUBLIC-PRIVATE DYNAMICS IN HIGHER EDUCATION: EXPECTATIONS, DEVELOPMENTS AND OUTCOMES 301 (Jürgen Enders & Ben Jongbloed eds., 2007);
81. Ami Zusman, Challenges Facing Higher Education in the Twenty-First Century, in AMERICAN HIGHER EDUCATION IN THE TWENTY-FIRST CENTURY: SOCIAL, POLITICAL, AND ECONOMIC CHALLENGES 115, 124-27 (Philip G. Altbach et al. eds., 2d ed. 2005);
82. Peter D. Blumberg, Comment, From "Publish or Perish " to "Profit or Perish ": Revenues from University Technology Transfer and the § 501(c)(3) Tax Exemption , 145 U. PA. L. REV. 89, 99-100 (1996).
83. While the prospect and commercialization theories of patent law are technically distinct and have slightly different foci, they share the same theoretical and practical orientation. See Shubha Ghosh, Patents and the Regulatory State: Rethinking the Patent Bargain Metaphor After Eldred, 19 BERKELEY TECH. L.J. 1315, 1353-57 (2004) (noting that prospect and commercialization theories derive from the theoretical work of Harold Demsetz); Kieff, supra note 2 (discussing the commercialization theory);
84. Edmund W. Kitch, The Nature and Function of the Patent System , 20 J.L. & ECON. 265, 276 (1977) (discussing the prospect theory). Some might argue that these theories are not focused on exclusion for the purpose of attracting investment so much as for the purpose of centralizing decision making and control in a property owner. In my view, these purposes overlap considerably and can be tied back to conceptions of how investment decisions are made and concerns over efficient supply chains.
85. See Frischmann, supra note 2.
86. Economist Harold Demsetz articulates well the argument that markets efficiently aggregate, process, and respond to information about what people want, and in particular, that the price mechanism provides a remarkably effective signal to producers about where to direct their investments. See Harold Demsetz, The Private Production of Public Goods , 13 J.L. & ECON. 293 (1970);
87. see also Harold Demsetz, Information and Efficiency: Another Viewpoint , 12 J.L. & ECON. 1 (1969);
88. c.f. PAUL GOLDSTEIN, COPYRIGHT'S HIGHWAY: FROM GUTENBERG TO THE CELESTIAL JUKEBOX 178-79 (1994) (making a similar point in the copyright context). Compare Brett M. Frischmann, Evaluating the Demsetzian Trend in Copyright Law , 3 REV. L. & ECON. 649 (2007) (challenging the view that the market mechanism will necessarily aggregate demand information best), with Harold Demsetz, Frischmann's View of "Toward a Theory of Property Rights," ; 4 REV. L. & ECON. 127 (2008) (suggesting that the market mechanism should be the default unless it can be shown that an alternative (such as the government) would outperform the market).
89. See Benkler, Coase's Penguin, supra note 27 (comparing market-, state-, and commons-based production as information-processing systems); Frischmann, supra note 23; Strandburg, supra note 8.
90. See Frischmann, supra note 23 (explaining this dynamic);
91. see also Rebecca S. Eisenberg, Patents and the Progress of Science: Exclusive Rights and Experimental Use , 56 U. CHI. L. REV. 1017, 1033 (1989) (discussing a study by Edwin Mansfield that found that private rates of return were almost half that of the social rates of return such that, in hindsight, private firms would not have invested in research and development of the innovation despite the social benefits that were ultimately realized).
92. C.f. Shane, supra note 1 (suggesting that the inability to appropriate returns from certain types of research affected university patenting behavior and that Bayh-Dole led to changes in such behavior at the margin).
93. David Mowery shows that the trend of increased patenting behavior by universities occurred prior to 1980 and the passage of Bayh-Dole. He also suggests that, while the relationship between universities and industry may have evolved (been transformed) in the past few decades, transformation should not be attributed to the Bayh-Dole Act itself. See David Mowery, The Bayh-Dole Act and High-Technology Entrepreneurship in U.S. Universities: Chicken, Egg, or Something Else?, in UNIVERSITY ENTREPRENEURSHIP, supra note 8, at 39.
94. See Michael S. Mireles, An Examination of Patents, Licensing, Research Tools, and the Tragedy of the Anticommons in Biotechnology Innovation , 38 U. MICH. J.L. REFORM 141, 144-45 (2004) (discussing industry sponsorship of research and noting this effect); Strandburg, supra note 8 (same);
95. see also Reichman & Uhlir, supra note 2, at 341-43 (noting that commercial exploitation of university research may pressure universities to "hoard" and protect information).
96. As I argue at greater length elsewhere, the market mechanism exhibits a bias for outputs that generate observable and appropriable benefits at the expense of outputs that generate positive externalities. This is not surprising because the whole point of relying on exclusivity-whether provided by traditional property rights or patents-is to enable private appropriation and discourage externalities. The problem with relying on the market mechanism is that, in certain contexts, potential positive externalities may remain unrealized if they cannot be easily valued and appropriated by those that produce them, even though society as a whole may be better off if those potential externalities were actually produced. See Frischmann, supra note 23; Frischmann & Lemley, supra note 6 (explaining the benefits of letting the spillovers flow). The market mechanism exhibits other biases as well. For instance, because private discount rates tend to be higher than social discount rates, markets tend to be biased toward the short term. Among other things, the divergence between private and social discount rates can lead to overinvestment in applied research and commensurate underinvestment in basic research. Further, incumbent market actors may act strategically to preserve their market positions or to control the direction of innovation. These two biases introduce further dynamic complications associated with path dependence and the costs of changing directions once a path has been taken. Others have noted the possibility of such shifts. See, e.g. , Frischmann, supra note 2;
97. Phillip G. Pardey, Bonwoo Koo & Carol Nottenburg, Creating, Protecting, and Using Crop Biotechnologies Worldwide in an Era of Intellectual Property , 6 MINN. J. L. SCI. & TECH. 213, 225 (2004) (noting how a shift in emphasis may occur away from basic research to applied research as universities look for more financially rewarding research);
98. Arti K. Rai & Rebecca S. Eisenberg, Bayh-Dole Reform and the Progress of Biomedicine , LAW & CONTEMP. PROBS., Winter/Spring 2003, at 289;
99. Reichman & Uhlir, supra note 2, at 342;
100. David C. Hoffman, Note, A Modest Proposal: Toward Improved Access to Biotechnology Research Tools by Implementing a Broad Experimental Use Exception , 89 CORNELL L. REV. 993, 1025 (2004) ("As the biotechnology industry has diversified and become economically viable, the financial incentive provided by patents has motivated many academic scientists to shift their emphasis from basic to applied research." (citing Michele Svatos, Biotechnology and the Utilitarian Argument for Patents, in SCIENTIFIC INNOVATION, PHILOSOPHY, AND PUBLIC POLICY 113, 122-24 (Ellen Frankel Pauletal. eds., 1996))).
101. Notably, the empirical evidence does not confirm or refute claims that a shift from basic to applied research has occurred. See Mowery et al, supra note 1, at 117 ("[T]he shifts in these universities' post-1980 research activities cannot be characterized as a shift from basic to applied research." (emphasis added));
102. Bart Van Looy et al., Combining Entrepreneurial and Scientific Performance in Academia: Towards a Compounded and Reciprocal Matthew-Effect? , 33 RES. POL'Y 425, 428-29 (2004) (surveying empirical literature and noting that "the empirical evidence on this problem appears to be mixed[,]" with some evidence showing increased applied research and some evidence suggesting that increases in applied research "[do] not necessarily imply a trade off with basic research"); id. at 436-38 (finding no evidence of skewing in their study);
103. see also Shane, supra note 1, at 128 ("[T]he Bayh-Dole Act led to a shift in university patenting at the margin towards fields in which licensing is an effective mechanism for acquiring new technical knowledge.").
104. Opinion, supra note 3, at 3.
105. Bayhingfor Blood or Doling Out Cash?, supra note 3, at 109 ("For example, a study published in 2003 by Jerry and Marie Thursby, of Emory University and the Georgia Institute of Technology respectively, showed that more than a quarter of the [licenses] issued by universities and research institutes include clauses allowing the business partner in the arrangement to delete information from research papers. Almost half allow them to insist on publication being delayed."); Reichman & Uhlir, supra note 2, at 341 ("Under Bayh-Dole, universities have moved away from policies that favor pure research, both for its own sake and as a tool for advancing higher education. As the costs of education skyrocket, and government funding fails to
106. See generally Kesan, Transferring Innovation, supra note 10 (collecting sources).
107. See supra notes 8-9;
108. see also Charles R. McManis & Sucheol Noh, The Impact of the Bayh-Dole Act on Genetic Research and Development: Evaluating the Arguments and Empirical Evidence to Date (n.d.) (unpublished manuscript), available at http://law.wustl.edu/CRIE/publications/mcmaniscommercializinginnovationpaper. pdf. See generally MOWERY ET AL., supra note 2.
109. Of course, this may be a very difficult dataset to obtain. Some evidence suggests that the "overwhelming majority of university inventions are so embryonic that commercial application requires not only further development but also faculty cooperation in that development.'" ; Thursby & Thursby, supra note 35, at 78-79 (emphasis added) (citing Ajay Agrawal & Rebecca Henderson, Putting Patents in Context: Exploring Knowledge Transfer from MIT , 48 MGMT. SCI. 44 (2002);
110. Jerry G. Thursby et al., Objectives, Characteristics and Outcomes of University Licensing: A Survey of Major U.S. Universities , 26 J. TECH. TRANSFER 59 (2001);
111. Jerry G. Thursby & Marie C. Thursby, Who Is Selling the Ivory Tower? Sources of Growth in University Licensing , 48 MGMT. SCI. 90 (2002)). The point is that commercializing embryonic inventions takes considerable time and effort on the part of academic researchers and thus may reflect a shift in allocation of that critical resource.
112. W. Ronnie Coffman and his coauthors, for example, report that a faculty panel at Cornell University concluded that the "University could better serve its internal and external responsibilities by placing a greater emphasis on the development and commercialization of university inventions" and recommended changes in university policy, including, among other things, that the University (1) "[rjecognize the issue of a patent on an invention as an academic contribution similar to the publication of a refereed journal article for promotion and tenure purposes," and (2) "[p]rovide additional and, particularly, more rapid financial support (including for research) to inventors." W. Ronnie Cofrman et al., Commercialization and the Scientific Research Process: The Example of Plant Breeding, in SCIENCE AND THE UNIVERSITY, supra note 35, at 94, 102;
113. see also Scott Jaschik, A Tenure Reform Plan with Legs , INSIDE HIGHER ED, Jan. 5, 2006, http://www. insidehighered.com/news/2006/01/ 05/tenure (discussing how University of Rochester engineering professors seek to have patents used in evaluating tenure applications); Sara Lipka, Texas A&M Will Allow Consideration of Faculty Members' Patents in Tenure Process , CHRON. HIGHER EDUC, May 30, 2006, available at http://www.utsystem.edu/news/clips/dailyclips/2006/0528- 0603/ HigherEd-CHE-Tenure-053006.pdf.
114. In The Uses of the University , Clark Kerr described the university as a "multiversity" struggling to serve many different interest groups while retaining its autonomy. See WASHBURN, supra note 14, at 2.
115. Professor Katherine Strandburg suggests that researchers themselves exhibit significant autonomy; she focuses on the preferences of basic researchers and the differences between homo economicus and homo scientificus; and she argues that the peer review process serves the important function of manifesting and responding to the preferences of basic researchers for "interesting" science. See Strandburg, supra note 8;
116. see also Auerswald & Branscomb, supra note 34, at 79-80. Professor Strandburg's inquiry raises a number of important questions: whether basic researchers truly are making allocation decisions autonomously, how their preferences are formed, the degree to which academic scientists (and their preferences) adapt and evolve, and whether changes in the university research environment lead to slow subtle changes in the "species" of university researchers. These are difficult questions that require further study. See Thursby & Thursby, supra note 35, at 80 (discussing a few papers that explore scientists' preferences and how they may change with incentive structures and lifecycle).
117. This may also be reflected in the grant-funding process.
118. See, e.g. , BOK, supra note 2; CAPITALIZING KNOWLEDGE, supra note 2; DEGREES OF COMPROMISE, supra note 14; THE EMERGENCE OF ENTREPRENEURSHIP POLICY, supra note 34; ETZKOWITZ, supra note 2; INDUSTRIALIZING KNOWLEDGE, supra note 2; SLAUGHTER & LESLIE, supra note 1.
119. I am doubtful as a matter of general public policy.
120. See Auerswald & Branscomb, supra note 34, at 79-80.
121. Florida, supra note 19, at 67.
122. Id. at 67-68 (emphasis added).
123. Henry Etzkowitz, Andrew Webster & Peter Healey, Introduction to CAPITALIZING KNOWLEDGE, supra note 2, at 1,16.
124. Henry Etzkowitz & Andrew Webster, Entrepreneurial Science: The Second Academic Revolution, in CAPITALIZING KNOWLEDGE, supra note 2, at 21,21. Universities (and society more generally) should seriously evaluate such developments (and attendant claims of inevitable revolution).
125. See Jennifer Croissant & Sal Restivo, Introduction to DEGREES OF COMPROMISE, supra note 14, at xi, xi-xii ("From the early 1980s through the present, commercialization of research has been a consensus policy: Not a ... natural 'evolution' of research and development practices, but a conscious reprioritization by a broad coalition of actors.")
126. See Kodama & Branscomb, supra note 12, at 14 (emphasizing the need to recognize variance across universities).
127. As Katherine Strandburg notes, many of the concerns in this context stem from scarce public funding. See Strandburg, supra note 8.
128. See IN THE PUBLIC INTEREST: NINE POINTS TO CONSIDER IN UNIVERSITY LICENSING (2007), available at http://news-service.stanford.edu/ news/2007/march7/gifs/whitepaper.pdf. The National Institutes of Health (NIH) has also been active in encouraging more enlightened licensing practices.
129. See Rai & Eisenberg, supra note 50, at 306-08 (discussing NIH efforts); Principles and Guidelines for Recipients of NIH Research Grants and Contracts on Obtaining and Disseminating Biomedical Research Resources: Final Notice, 64 Fed. Reg. 72,090 (Dec. 23, 1999), available at http://www.ott.nih.gov/pdfs/64FR72090.pdf; Best Practices for the Licensing of Genomic Inventions: Final Notice, 70 Fed. Reg. 18,413 (Apr. 11, 2005), available at http://www.ott.nih.gov/pdfs/70FR 18413 .pdf.
130. In addition to the universities and associations that originally endorsed the White Paper (California Institute of Technology; Cornell University; Harvard University; Massachusetts Institute of Technology; Stanford University; University of California; University of Illinois, Chicago; University of Illinois, Urbana-Champaign; University of Washington; Wisconsin Alumni Research Foundation; Yale University; and the Association of American Medical Colleges), the Board of Trustees for the Association of University Technology Managers (AUTM) has endorsed the nine points, as have many additional universities. See Association of University Technology Managers, Endorse the Nine Points to Consider, http://www.autm.net/source/ninepoints/ninepoints- endorsement.cftn (last visited Feb. 15, 2009) (listing current signatories).
131. I mean to use "distortion" in a neutral manner to suggest an induced shift in the allocation of resources that would otherwise obtain. See Frischmann, supra note 44, at 670-72 (comparing externality-induced and property-induced distortions).
132. Slaughter and Leslie have referred to this as an aspect of "academic capitalism." See SLAUGHTER & LESLIE, supra note 1.