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[Josh, Ramana, 2020, “Venture Capital’s Role in Financing Innovation: What We Know and How Much We Still Need to Learn,” Journal of Economic PerspectivesJstor, p.237, vol.34, No.3, acc. 7-18-24, GDI-LI]

On the demand side, there has been a plethora of attractive investment opportunities. Many venture-backed firms have focused on developing novel ways to apply information technology and the widespread diffusion of mobile communications. One manifestation has been platforms that connect and employ widely dispersed sellers of services and goods (frequently dubbed the “sharing economy,” and manifested by companies such as Airbnb and Uber). A second has been firms that substantially improve the efficiency of existing services at much lower price points: for example, the ways in which Salesforce.com and other companies provide “Soft- ware as a Service” to businesses, the rise of “fintech,” and the plethora of “Mobile Apps” available for consumers. Third, several companies replicated business models successful in the United States in other national markets, with the Chinese companies Alibaba and Tencent being the most dramatic exemplars. An important consequence was the dramatic increase in venture capital investment in Asia over this period (a topic worthy of much closer study).

[Josh, Ramana, 2020, “Venture Capital’s Role in Financing Innovation: What We Know and How Much We Still Need to Learn,” Journal of Economic PerspectivesJstor, p.237, vol.34, No.3, acc. 7-18-24, GDI-LI]

Venture capital is associated with some of the most high-growth and influential firms in the world. For example, among publicly traded firms worldwide, seven of the top eight firms by market capitalization in May 2020 had been backed by venture capital prior to their initial public offerings: Alphabet, Apple, Amazon, Facebook, and Microsoft in the United States, and Alibaba and Tencent in China. More generally, although firms backed by venture capital comprise less than 0.5 percent of firms that are born each year in the United States, they represent nearly half of entrepreneurial companies that graduate to the public marketplace.

[Brenda M. "Preserving the Fruits of Labor: Impediments to University Inventor Mobility," Tennessee Law Review 89, no. 1 (Fall 2021): 1-66 heinonline gdi-tm]

This Article has described the many. challenges university inventors face when attempting to leave their parent institutions. It has set forth how innovation-essential components that are vital to the innovative process create strong ties that effectively inhibit university inventor mobility. Augmenting these obstacles to inventor mobility, universities have forged questionable arrangements with and brought suits against other academic institutions to prevent movement of university inventors.436

[Gerald, “11 rationalizations regarding university compulsory patent ownership,” Research Enterprise, 08/01/16, https://researchenterprise.org/2016/08/01/11-rationalizations-regarding-university-compulsory-patent-ownership/, accessed 7/17/24, GDI-JCR]

This is the argument university patent administrators take to the university conflict of interest folks. University resources must not be used for personal gain; therefore, university resources cannot be used to invent or develop an invention that would be owned by the inventor. That would be a misuse of resources and a betrayal of the public trust. So, the argument goes, a university must demand ownership of inventions to save the inventors from the shame and discipline that must come if they are caught out claiming to own for their own, personal, selfish financial benefit. The university’s compulsory assignment policy is then merely an administrative remedy to avoid ethics problems created by private ownership of inventions. “We have no choice but to be totalitarian about it–anything else would condone unethical behavior.”

[Brenda M. "Preserving the Fruits of Labor: Impediments to University Inventor Mobility," Tennessee Law Review 89, no. 1 (Fall 2021): 1-66 heinonline gdi-tm]

Inventors typically retain unique knowledge about aspects of their inventions that is not completely documented. 112 For example, licensing a patent provides the right to make and use an invention, but it does not typically convey all of the attendant technical information for practicing it. 113 To obtain patent protection, an inventor must adequately describe the invention in a way that would teach a scientist of ordinary skill how to make and use the invention as well as indicate possession.114 Yet, the disclosure requirements are notoriously insufficient for conveying complete knowledge of the invention. Numerous scholars have described how the limitations of language, the difficulty of codifying information, and insufficient incentives for full disclosure limit the value of information obtained through patents.115 Significantly, inventors retain some amount of personal, tacit knowledge that is typically not part of the patent· document and often requires multiple interactions over time to convey effectively.116 For instance, a researcher may disclose the materials and methods used for creating a biologic compound, but the specifics of the process and the researcher's intuitive sense cannot be easily described-they are personal.117 Difficulties arise because conveying this type of individual, tacit knowledge 1s time-consuming, expensive, and intensely collaborative.118 The process often requires in-person communication and ongoing interaction to be successful. 119 Continuing, active relationships with inventors is a key factor in facilitating the information exchange necessary for commercialization of inventions.120 Not surprisingly, licenses often require some form of ongoing interaction, such _as consulting, to facilitate the transfer of tacit knowledge.121 Research has shown that licenses that include conveying know-how and interaction command a premium over those that only cover patents.122

[Brenda M. "Preserving the Fruits of Labor: Impediments to University Inventor Mobility," Tennessee Law Review 89, no. 1 (Fall 2021): 1-66 heinonline gdi-tm]

Excessive limitations on university inventor mobility are troubling for many reasons. Because university inventors typically work on early-stage research, they gain an intimate understanding of their inventions that is essential to later development of the technology.9 Inventor involvement in developing new technology is often critical to firm success.10 For example, entities that have the benefit of inventor participation are far more likely to succeed in commercializing inventions, as they can draw upon the inventor's particularized knowledge. 11 Restricting inventor movement may impede application of the valuable tacit knowledge inventors have gained about their embryonic inventions, hindering the exchange of information necessary for dissemination of technology and commercialization.12 In addition, community norms and philosophical underpinnings about whether inventors should be allowed to use their inventions can conflict with legal doctrine. 13 The chasm between

[Brenda M. "Preserving the Fruits of Labor: Impediments to University Inventor Mobility," Tennessee Law Review 89, no. 1 (Fall 2021): 1-66 heinonline gdi-tm]

The Effects of Inhibiting Mobility on Innovation

[Gerald, “How can universities demonstrate they aren’t patent trolls,” Research Enterprise, 12/06/16, https://researchenterprise.org/2016/12/06/working-through-an-old-oped-on-university-ownership-of-inventions/, accessed 7/17/24, GDI-JCR]

If this scenario–which plays itself out repeatedly–is not what a university administration wants, then what might a university do to make it crystal clear that it won’t play the troll, that the troll operating model is not available to it, not even as a threat to leverage a deal?

[Christos and Merle, “University ownership and information about the entrepreneurial opportunity in commercialisation: a systematic review and realist synthesis of the literature,” The Journal of Technology Transfer volume 46, 01/04/2020, p. 1487–1513, Springer, accessed 07/17/2024, BKM GDI]

This empirical subsection addresses the third research question about how the roles and rights of actors influence information conditions regarding the entrepreneurial opportunity. The issue of the prevailing property rights features prominently in the university commercialisation literature, and revolves around three competing regimes. University ownership constitutes the dominant property rights regime in the US and most of Europe (Grimaldi et al. 2011). Within this context, the university is conferred with rights upon the research outcomes produced by academics through public funding, and undertakes the task of promoting this to users who can adopt it for the purposes of introducing innovation. Concerns about the ability of this regime to deliver optimal solutions, as described in the introductory section of our paper, prompted the advancement of two correctives. The first, advanced by Ayres and Ouellette (2017) proposes a ‘market test’ for university inventions, whereby, before charging licensing fees universities would be required to find out whether enterprises would be willing to commercialise the invention in return for a nonexclusive license with a nominal fee. This would, according to the authors, be particularly useful in advancing commercialisation when there are multiple users interested in university held IP, and reduce aggressive litigious behaviour by universities. A different corrective is advanced by Lee (2012) who argues that increased integration, though a plethora of formal and informal linkages, is an essential complement to university ownership on account of the tacit element of the IP involved. An altogether different, and competing, to university ownership property rights regime involves inventor ownership. This regime that was present in a number of European countries, such as Denmark, Sweden, and Italy places the actor who is most (technically) knowledgeable about the research outcome in the position of deciding the approach to commercialisation (Kenney and Patton 2009). This is viewed as a means of strengthening academic entrepreneurship and decentralising knowledge transfer, facilitating effective and quick diffusion and maximizing innovation and development outputs (Kenney and Patton 2011). Inventor ownership has been found to have a positive impact on generating spinoffs rather than on licensing (Damsgaard and Thursby 2013; Kenney and Patton 2011).

[Christos and Merle, “University ownership and information about the entrepreneurial opportunity in commercialisation: a systematic review and realist synthesis of the literature,” The Journal of Technology Transfer volume 46, 01/04/2020, p. 1487–1513, Springer, accessed 07/17/2024, BKM GDI]

In a suggestive contribution to the debate Halilem et  al. (2017) adopt a more subtle approach to property rights regimes differentiating between ownership rights, control rights, and income-sharing rights. Their empirical findings support this disaggregation as they show that contrary to the bulk of the literature, the behaviour of academics is influenced not by ownership rights but by control rights, and the sharing of income with the university. These findings have potentially significant implications for the importance of ownership as a means of encouraging academics to disclose new technical information coming from publicly funded research. This, in turn, opens up the scope for the use of Ostrom’s (2010) distinction of bundle of property rights (differentiating between access, withdrawal, management, exclusion, and alienation) in the study of university commercialisation.

[Brenda M. "Preserving the Fruits of Labor: Impediments to University Inventor Mobility," Tennessee Law Review 89, no. 1 (Fall 2021): 1-66 heinonline gdi-tm]

The Intertwining of Labor and '1nnovation-Essential Components"

[Brenda M. "Preserving the Fruits of Labor: Impediments to University Inventor Mobility," Tennessee Law Review 89, no. 1 (Fall 2021): 1-66 heinonline gdi-tm]

Universities have generally tolerated inventor movement between institutions.1 Recently, some universities have been reluctant to allow departing inventors to continue building on their work.2 Directly or indirectly, they inhibit inventor mobility. I have coined the term "innovation-essential components" to describe university ownership of a set of resources-such as data, patents, trade secrets, grants, industry contracts, materials, and inventor laboratory notebooks­ that bind inventors to their institutions, making departure exceedingly difficult without the parent university's blessing. Universities have further complicated inventor mobility by entering into "no poach" agreements that raise very serious antitrust concerns or by engaging in questionable practices in the process of "poaching" an inventor.s

[Rebecca, Robert, “Universities: The Fallen Angels of Bayh-Dole?” Daedalus 147.4, GDI-JCR]

In 2008, intellectual property law scholar Mark Lemley posed the provocative question, “are universities patent trolls?”39 The idea that universities can be patent trolls (that is, patent assertion entities that do not themselves commercialize technology but profit by asserting patents against commercial firms) soon became more commonplace, as major research universities used their patents to collect hundreds of millions of dollars in damage awards and settlements.40 Criticized for behaving like patent trolls, universities have sometimes sought to avoid the reputational costs of litigation by selling their rights to undisputed patent trolls.41 Like patent assertion entities, universities can enforce their patents with little fear of provoking counterclaims for infringement of the patents held by the defendants. Patent infringement litigation against universities and academic researchers is quite rare. This allows university scientists to infringe patents in their laboratories with relative impunity even as universities enforce their patents against other institutions.42 But this is largely the result of forbearance by patent owners rather than legal immunity from suit.

[Gerald, “How can universities demonstrate they aren’t patent trolls,” Research Enterprise, 12/06/16, https://researchenterprise.org/2016/12/06/working-through-an-old-oped-on-university-ownership-of-inventions/, accessed 7/17/24, GDI-JCR]

On the face of it, university administrators have adopted a simple variation of patent trolling. Rather than just acquiring patents with which to shake down industry–all very overt and unapologetic (and for which there is some degree of respect–at least these folks own their decisions), university administrators instead cover their actions with a moralizing rhetoric about the public good–meaning only that they would rather sign a petty monopoly deal first and give the right to shake down industry to their monopoly partner (and that’s what many university exclusive patent licenses do–it’s in their templates). If nothing happens with their patents–no licenses or an exclusive license that comes to nothing–and industry uses an invention that crosses into a university’s patent claims, then with a spout of moral indignation and a nonsensical fuss about “protecting the public” (from what? from actual product in use?), the university switches into patent troll mode and sues whomever it can if it can’t get an abetting exclusive licensee=assignee to do the suing for it.

[Gerald, “10 Ways Universities Deal in Patents,” Research Enterprise, 5/24/23, https://researchenterprise.org/2023/05/24/10-ways-universities-deal-in-patents/, accessed 7/17/24, GDI-JCR]

University gets patent, fails to license, and goes patent trolling to force licensing and settlements. Here’s a case where it is clear that holding a patent has nothing to do with development or use of an invention–companies go off and implement the technology on their own (and may not have a clue about what a university has done or claims). Certainly there was no need for patent exclusivity, other than to collect rents from companies for what they have been able to do on their own, and without patents, and without technology transfer. But universities then come after industry for royalties anyway. That’s what Stanford tried to do to Roche, resulting in Stanford v Roche, which Stanford lost, and rightfully so. It’s what the Washington Research Foundation did with its bluetooth patent. What Caltech is doing with its wi-fi patents.

[Christopher J. Jr., et al. "The Hidden Cost of University Patents." Berkeley Business Law Journal, vol. 21, no. 1, 2024, pp. 203-249. HeinOnline -tm]

One of the ways that universities, through their technology transfer offices, extract appropriable rents is in the form of licensing their patents to intermediaries. In sum, these intermediaries contract with product developers to bring the patentable product to market. All things considered, coordination of this chain of transactions by the university is not terribly nefarious on its own, and is classic evidence of both economically rational and firm behavior. However, this hypothetical chain of transactions, wherein university research leads to commercial products via benign intermediaries, is oftentimes not the case. The vast majority of university patents have little marketable value by themselves. As such, they never make it to consumers, because the transaction costs of developing them into marketable products is too high given the limited utility of the underlying patent. Thus, universities frequently look to similar but alternative methods of extracting appropriable rents for their research.

[Gerald, “10 Ways Universities Deal in Patents,” Research Enterprise, 5/24/23, https://researchenterprise.org/2023/05/24/10-ways-universities-deal-in-patents/, accessed 7/17/24, GDI-JCR]

University takes ownership of invention and licenses it back to the inventors as founders of a startup. This is not really technology transfer as the inventors know more about their invention than the university does. By taking away the invention and then handing it back with strings, the university does not transfer the technology but rather intervenes to exact a rent and to complicate and delay startup efforts.

[Gerald, “Inventors would own more, were it not for noncompliant Bayh-Dole practice,” Research Enterprise, 3/10/23, https://researchenterprise.org/2023/03/10/inventors-would-own-more-were-it-not-for-noncompliant-bayh-dole-practice/, accessed 7/17/24, GDI-JCR]

The motivation for universities to force assignment of inventions, only to exclusively license those inventions back to the inventors (which amounts to another assignment, no matter a document is labeled “exclusive license”) is to take a piece of the action before there is any action. Doing so takes energy from the system. Instead of dealing directly with their startup, inventors (and any other founders) have to first assign rights to the university, and then they have to negotiate the rights back, now with all the strings and risk aversion of an institution attached. Startups can take months to negotiate a license with a university. One company CEO visited the university I worked for, had got twenty licenses from various universities in order to have relative freedom to operate. If I remember right, he said it took him a couple of years. That, he said, was his competitive advantage. No one else was likely to have the time and luck to get licenses out of those same universities. In another situation, the startup negotiation took so long and cost the company so much in attorney time just to battle the university’s default license document that one of the members of the company’s board complained publicly. And turns out that board member was also a university regent. So the technology transfer director was resigned and the office renamed and reorganized with the idea that somehow that would speed up negotiations. Hah! The university insists on flying a 747 of a license document to go a half mile that could be walked with a wagon in ten minutes. But somehow this is pitched as “helping” to start new companies.

[Martin, Donald, “Reconsidering the Bayh-Dole Act and the Current University Invention Ownership Model,” Research Policy 38, GDI-JCR] *TLO = technology licensing office

The paper utilizes stylized models about how inventions are commercialized. We recognize that the current organizational arrangements are evolutionary outcomes influenced by economic, legal and political decisions by a variety of actors, local and remote. A world of complicated intra- and interorganizational networks of actors has evolved to manage the interface between the university and the commercial sector. While accepting these theoretical models for our orientation and acknowledging the importance of historical analysis to understand the reasons for the current conjuncture, we apply some useful insights from agency theory and transaction costs economics to elucidate how the contemporary university invention ownership model yields outcomes that are contrary to the supposed intent of the BD Act. So, while building upon these theories, we use microlevel analysis to show 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 TLOs.4 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. An understanding of the model and its difficulties is achieved by reviewing the background to the BD Act and the current university ownership model. Since the overarching goal of BD was to facilitate of the use of federally funded inventions, we examine whether TLO behavior comports with the claim of facilitating technology transfer. This is followed by an analysis of the TLO-inventor relationship describing the contradictory goals, information asymmetries, and perverse incentives resulting from the university ownership model. Although possibly justified at the time, we show through an analysis of the structural position, property rights, and actor incentives that the current BD-based university invention ownership model results in suboptimal outcomes.5

[Dirk, “Individual Versus Institutional Ownership of University-Discovered Inventions,” ZEW Discussion Paper No. 15-007, GDI-JCR]

We examine a fundamental change in German patent law that transferred ownership rights from the inventors to their employers. Prior to 2002, university professors and researchers had exclusive intellectual property rights to their inventions. This “Professor’s Privilege” allowed university researchers to decide whether or not to patent and how to commercialize their discoveries, even if the underlying research was supported by public funds. After 2002, universities were granted the intellectual property rights to all inventions made by their employees and this shifted the decision to patent from the researchers to the universities. The policy goal was to increase patenting of university-invented technologies which is often used as a surrogate indicator of successful university technology transfer. By changing the agent who makes the patenting decision, the abolishment of Professor’s Privilege caused a “regime shift” that substituted institutional benefit and cost schedules for those of the individual inventors. The net effect on the volume of patenting depends primarily on the relative costs between the regimes. To identify how the regime shift affected patenting, we exploit the researcher-level exogeneity of the 2002 abolishment of Professor’s Privilege along with the institutional structure of the German research system in which universities and other public research organizations (PRO) coexist. PRO researchers were not affected by the policy change and serve as a control group. We use a difference-in-difference methodology and control for the arrival of new patentable discoveries using publications and peer-to-peer matching. Our analysis shows that fewer university inventions were patented following the 2002 regime shift. For a given discovery, the schedule of benefits to institutional owners, who are the postchange patent decision makers, is lower because the university became an additional party in the negotiations over the split of expected revenues. This partly explains why fewer inventions qualified for patent protection following the regime shift. However, the effect on expected revenues can be offset if institutional costs (broadly conceived) are sufficiently lower than those faced by individual researchers. Our results show that institutional patenting costs were lower for the subset of university inventors who did not have relationships with industry partners prior to the policy change. For those individuals, patenting increased. But, the data also show that most German patenting professors had prior industry relationships. Post-change institutional costs were not low enough to offset the revenue effect for this group. While these findings reflect the medium-term effects of the law change, it could still be possible that the law change results in higher commercialization in the long-run, that is, when new faculty members who never experienced the old regime of inventor-ownership enter academe. However, trends in the number of patenting researchers until 2008 do not suggest more researchers patented after the law change. On the contrary, the number of patenting professors declined, at least through 2008.