The university ownership model creates profound structural uncertainty in technology innovation markets

[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