Public domain wrecks biotech innovation

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

A requirement that all inventions generated through federal support be placed in the public domain or, in a less radical variant, only licensed on a non-exclusive basis has been suggested (Eisenberg, 1996; Nelson, 2004). Since non-exclusive licensing is a “tax,” and shifts the invention rents from one actor to another, this variant would “socialize” a part of the value of the inventions (Rhoten and Powell, 2007). For basic process innovations, even in biology, an “open” strategy is as effective as, or even more effective than, either exclusive or non-exclusive licensing in encouraging technological transfer and progress. In many engineering-based technologies, patents are not normally considered to be of great significance except to ensure cross licensing (Cohen et al., 2000; Mansfield, 1986). The greatest concern in a non-patenting model would be for proprietary pharmaceutical compounds that might not be developed due to a lack of exclusive patent protection (Levin et al., 1987; Mansfield et al., 1981).43 There have been successful commercializations of compounds without exclusivity. For example, there were no patents on the anti-cancer drug Taxol, and yet it was successfully commercialized (U.S. General Accounting Office, 2003; Goodman and Walsh, 2001).44 The case of penicillin – which was not itself patented (although methods of producing it were) – suggests that the Taxol case might not be as exceptional as many believe (Kingston, 1994; Neushul, 1993). Without patent rights, it is possible that small biotechnology firms might not be able to compete with the large established pharmaceutical firms that have many complementary assets, thereby limiting entrepreneurial startups based upon university biological science.45 Possibly, a small firm could be established to commercialize non-patented university findings, and, as it operates, to create commercially valuable proprietary knowledge. Alternatively, once the knowledge is in the commons, entrepreneurs may capitalize on the knowledge and form yet other firms. Such dynamics operate in open source software where low costs have allowed entrepreneurs to use the software to create new firms. Whether the IT model would work equally well in pharmaceuticals is uncertain.