President Obama’s Legacy: An “Innovation Deficit” or Greater Wealth (and wider distribution)?

When we look back at Obama’s presidency, my guess is that he will be known for several things.  He’ll be remembered for health care reform and as the President of “The Great Recession,” and maybe even the end of Osama Bin Laden (hopefully, also immigration reform).  I doubt that everyone will remember that he inherited the financial mess that was “The Great Recession.”  I also doubt he’ll be remembered for creating manufacturing hubs, the American Invents Act (except amongst patent lawyers), fighting “patent trolls,” and starting an initiative to research the human brain.  But, he could be remembered for creating the “Innovation Deficit.”  What is the “Innovation Deficit?”  Basically, it is low federal spending on education and specifically on research and development (R&D)  in light of increased spending on R&D by global competitors.

The U.S. budget for FY 2015 is being prepared and universities are worried (as we all should be).  Last week, 165 university presidents in the United States sent an open letter to President Obama and Congress urging continued strong funding for education, here.  The letter is part of an effort led by the Association of American Universities and the Association of Public and Land-Grant Universities, see www.innovationdeficit.org.  The website includes a fact sheet outlining the “Innovation Deficit.”  It states:

·         Over the last ten years, U.S. R&D expenditures as a share of economic output have remained nearly constant in the U.S., but have increased by nearly 50% in South Korea and nearly 90% in China. (Source: NSF S&E Indicators 2012, Figure O-3)

·         From 1996 to 2007, R&D expenditures in the U.S. grew by an average of 5.8% annually.  During the same time period, China’s average annual growth was 21.9%.  During the first year of the economic slowdown (2008-09), U.S. expenditures decreased slightly while China’s increased by 27%.  (Source: NSF Indicators Figure O-4 and Overview)

·         Between 2000 and 2008, the number of engineering doctorates awarded in China more than tripled to 15,000.  This compared to a total of 8,100 in the United States, of which only about 3,200 went to U.S. citizens and permanent residents.  (Source: NSF Indicators Figure O-10)

·         According to the OECD, government R&D spending between 2000 and 2009 increased by 250% in Korea and 330% in China; U.S. government R&D spending increased by about 45% during the same period.

·         From 1987 to 2008, federal R&D investment grew at just 0.3 percent per year in inflation-adjusted dollars—much lower than its 4.9-percent average annual growth rate from 1953 to 1987—and ten times lower than the rate of GDP growth over that period.  (Source: http://www2.itif.org/2012-leadership-in-decline.pdf)

·         The United States spent up to 17 percent of discretionary spending on R&D during the 1960’s, in part due to the space program, which resulted in a great deal of spinoff innovation; in recent years, outlays have fallen to around 9 percent of the federal discretionary budget. (Source: http://innovationtaskforce.org/docs/Benchmarks%20-%202012.pdf)

·         In 2008, China awarded 1 million first university degrees in natural sciences and engineering, up from 280,000 in 2000. That same year, the total number of first university degrees in natural sciences and engineering awarded in South Korea, Taiwan, and Japan (330,000) exceeded the 248,000 earned by U.S. students, despite the considerably larger U.S. population. (Source: NSF Indicators p. O-7)

·         The proportion of U.S. Patent and Trademark Office patent grants given to U.S. entities declined from 55% in 1995 to less than half in 2010. (Source: NSF S&E Indicators 2012, Appendix Table 6-45)

·         The percentage of U.S. gross domestic expenditures on R&D funded by the government declined from  47.1% in 1981 to 33.4% in 2011. The U.S. trails nine OECD nations in this percentage. (Source: OECD)

These statistics paint a disturbing picture—especially if this trend continues.  And, if you examine the preview document prepared by the Association of University TechnologyManagers (AUTM) titled, “American Universities: Unsung Heroes of the Economic Recovery” (August 5, 2013) that may provide a clue to the solution to a slow growing economy, you may become even more concerned.  The AUTM document provides a glimpse at the upcoming Annual Licensing Survey that will be released in full in December of 2013.  The preview document states that:

Institutions responding to the survey reported $36.8 billion in net product sales from licensed technologies in fiscal year 2012. In addition, startup companies formed by 70 institutions employed 15,741 full-time employees. This was the second year in which AUTM asked questions specifically targeted at ascertaining the economic impact of academic technology transfer. 

"When people think about job creation, they don't typically think about universities, but the data show that universities substantially contribute to the creation of new jobs in this country," adds Flanigan.  

Highlights of the AUTM U.S. Licensing Activity Survey:  FY2012 include: 

22,150 total U.S. patent applications filed (+11.3%)[;] 14,224 new patent applications filed (+7.2%)[;] 5,145 issued U.S. patents (+9.5%)[;] 5,130 licenses executed (+4.7%)[;] 1,242 options executed (+7%)[;] 483 executed licenses containing equity (+16.1%)[;] Total license income: $2.6 billion (+6.8%)[;] 705 startup companies formed (+5.1%)[; and] 4,002 startups still operating as of the end of FY2012 (+1.9%).

Back in 2001 when President George W. Bush first took office, I remember reading an article about how his administration planned to cut federal spending on R&D.  I remember thinking someone needs to get educated about what is happening with federal R&D funding because they are going to make a big mistake (for many reasons).  Within a few weeks, the Bush Administration announced that they were not going to cut spending in that area.  I hope we find the Obama Administration pushing hard for more spending on R&D.  We need to "feed that Pig." 

Let’s assume that we do the right thing and "feed the Pig." Could the Obama Administration do more than just provide federal funding for R&D?  One idea that has been floated has been the creation of a federal system of universities, “India’s Bold Solution to the US College Crisis: Federal Universities.”  This is an intriguing idea that may inject some needed “umpf” into the U.S. university system for R&D.  Perhaps the federal universities could be built around specific technologies—places where innovation could quickly take place in a system that quite rationally does not change quickly.  As I blogged about before, perhaps something like the Cornell project in NYC, but without a lot of baggage.  Greater wealth—and maybe some help for wider distribution of it.  Something to think about.   

Biotech Hopping at Wall Street and Biotech Patenting on an Upswing--More Patenting to Come?

The Wall Street Journal reports that there have been 16 biotech IPOs (it is unclear what is defined as biotech) since the beginning of this year raising over $1.1 billion.  (for more on venture capital backed IPOs generally see here)  To put that in context, in 2004 there were 25 IPOs bringing in close to $1.17 billion.  In the last ten years, at this point, this year would be tied for the second best year and the future looks bright for more biotech IPOs.  The Wall Street Journal also speculates that the rise in IPOs along with their general success is attributable to R&D and clinical trial successes.  For example, the article states that: “Last year, the Food and Drug Administration approved 39 new drugs, according to the agency, a figure not reached since 1997. This year, the agency has approved 13 new drugs.”  With the supposed dried up pipeline of Big Pharma, this is welcome news.  Also, the surge in IPOs with more funding may mean more money for patenting efforts in the biotech space with more investors looking to biotech.

On the patenting side, Nature Biotechnology’s Bioentreprenuer reports on statistics on biotech patenting provided by IP Checkups.  It is also unclear what is defined as “biotech,” but the numbers are interesting.  There is a general upswing in biotech patents granted since 2008 from 657 to 850 in 2012 in the United States.  Interestingly, the article also notes the average number of biotech patents by university.  (it is unclear whether these numbers are for granted patents or for patent applications—or full applications or provisional--but it is more likely applications or some of the other numbers don't add up).  If you add up the average number of patents per year between 2008 and 2012 for U.S. universities listed (not all U.S. universities apparently), you get around 880 patents in the United States per year.  The article also has the numbers for patenting at the EPO.  The patenting in the United States is quite a bit higher than the patenting at the EPO.  This could be, in part, because of cost.  Any opinions on the data?   

Money for Nothing (?) and the IP for Free: Crowdfunding Science

Inside Higher Ed recently published an article about several entities with websites which allow crowdfunding for scientific research projects, most by academics, in Kickstarter style.  Here are a few: Petridish.org; Microryza.com; and Fundageek.com.   Do the funders obtain IP rights?  I suppose they could as an incentive for funding depending on the rules of the entity.  Although travelling with a researcher to Perumay be more fun!

Fundageek.com is thoughtful about protecting the IP of the submitters of research.  Here is a link to their IP site and they have a “special IP guidelines document” by Daniel L. Dawes.   Clearly, employers of researchers will want to know if they have researchers submitting proposals to these types of sites.

The Inside Higher Ed article also highlights the launch of the University of Virginia’s own crowdfunding site—great idea!  Here is the site.  And, they’ve already started getting funding!  Know of any other similar sites?

Basic Research – Soon to be a Thing of the Past?

One concern since the Bayh-Dole Act was passed in the United States has been the effect of the Act on the direction of research.  Would the Bayh-Dole Act—allowing grant recipients such as universities to take title to government funded invention—make researchers move their agendas away from basic research to applied research?  To many, this would be a negative impact of the Act; although some would disagree.  And, to some, the movement to applied research is not happening fast enough.  I have heard rumors over the years that some universities have already changed tenure standards for professors in the “hard” sciences to include things such as, number of company spin-outs or patents.  The other day I received an email from Technology Transfer Tactics which mentions a possible “policy change” in tenure standards at Oklahoma State University and a change in standards at the University of Texas.  Apparently, the changes include adding commercialization factors.  Here is the text of some of the email:

Commercialization as a Tenure Criterion:
A Powerful Incentive for Faculty Inventors

Live Webinar ~ March 19, 2013 ~ 1:00pm - 2:30pm ET
(also available on DVD, On-Demand Video and Print Transcript)

CLICK HERE to register now or call 239-263-0605
(OUTSIDE THE U.S. DIAL 877-729-0959)

---

The push for commercialization of university research has become more like a giant shove. Federal and state governments are pinning their hopes on it, economic development agencies work hard to enable it, and university presidents demand it. Pitch competitions, accelerators, funding schemes, outreach efforts, partnerships, incubators, and mentoring programs abound, all trying to encourage it. But there is one glaring, gigantic disconnect in the innovation ecosystem: tenure policy.

While the drumbeat sounds for new models of entrepreneurship and commercialization support, a very old model -- steeped in the academic traditions of yesteryear -- presents a major barrier to realizing the full potential of university innovations. Tenure policies, which reward publishing and teaching but do nothing to incentivize commercialization, arguably represent the single biggest missing link in the innovation ecosystem that so many now agree is critical to economic growth, jobs, and global competitiveness.

These policies -- if they are adjusted to take commercial-focused research into account -- also represent a tremendous untapped opportunity for universities to unleash a deluge of research with market potential, by simply rewarding the behavior that forms the essential foundation for the dynamic innovation activity the world is clamoring for. But changing the entrenched system is anything but simple.

While most university systems continue to resist formal recognition of commercialization activities when evaluating faculty for tenure, a select few have emerged on the leading edge of this issue. Oklahoma State University and the University of Texas System have both gone down the road of including commercialization within their tenure policies. In fact, OSU is currently in the throes of policy change.  * * *

Live Webinar ~ March 19, 2013 ~ 1:00pm - 2:30pm ET
(also available on DVD, On-Demand Video and Print Transcript)

CLICK HERE to register now or call 239-263-0605
(OUTSIDE THE U.S. DIAL 877-729-0959)

Please join Bryan T. Allinson, Executive Director of Technology Commercialization for the University of Texas System - Austin, and Dr. Stephen W. S. McKeever, Vice President for Research and Technology Transfer with Oklahoma State University, for this cutting-edge program. These forward-thinking leaders will present case studies illustrating the key strategies used to gain administration and faculty support, as well as the specifics of their tenure policy changes. Here’s a quick look at the agenda:

• Laying the foundation for culture change with:

o    Tools for creating an open dialogue with faculty

o    Outlining business terms

o    Evidence to back up commercialization vs societal impact: they can coexist!

• Strategies for getting buy-in from university policy-makers
• The benefits of including commercialization as a requirement for tenure consideration
• Details of policy changes
• Handling push-back from faculty and/or administration
• Tactics for obtaining early support from key leadership

Wow!  Will basic research be a thing of the past?  Changing tenure standards is extreme and a huge threat to academic freedom that I suspect will be ultimately very harmful to the production of break through research that benefits the public.  Does anyone have any information about what is happening at OSU?  Also, has anyone’s university changed its tenure policies to include commercialization-related factors?  If so, I am very interested to see your policy. 

Universities and intellectual asset management: a guide

I've just been reading a media release from the UK government's Department of Business, Innovation and Skills (BIS) which informs me that universities can now access a new tool to help develop and manage their intellectual assets. This tool is a strategy guide, ‘Intellectual Asset Management for Universities’ -- and it's not totally new, since it replaces an older version, first produced in 2003.

According to the media release,

"The new guide provides advice and information to universities to help them understand how they can best use their institution’s intellectual property (IP). This can be an invention, trade mark, original design or the application of a good idea. 

Income generated through the commercial use of intellectual property rights can be worth millions of pounds. In 2009/10 £84 million was generated directly from IP at universities.[This sounds like a lot of money, but if you consider that there are 129 universities in the UK that's just over £650,000 per university.  The real amount per university other than Imperial College is probably very small. Does anyone have figures?] ...

One example of an institution which demonstrates how effective policies can underpin the commercialisation of intellectual property is Cardiff University, which has generated around £7 million in licence fees and royalties over the last five years through implementing its Innovation and Engagement Strategy. The university’s research has been developed into a number of commercial ventures such as MedaPhor Limited, an ultrasound simulation business which specialises in the development and sale of advanced virtual ultrasound training systems for the healthcare service. 

Since 2004 MedaPhor has benefited from over £1.3 million of investment and new product development grants. It has also created more than 40 high tech jobs in the local area. Its ScanTrainer which provides fast and effective ultrasound training has now been sold to 11 hospitals and academic institutions in the UK. The company is now expanding its distribution to Europe, the US, the Far East and the Gulf. ...
...
The booklet has been produced thanks to contributions from a number of partners including Research Councils UK (RCUK), the Higher Education Funding Council for England (HEFCE), Universities UK (UUK), PraxisUnico and AURIL (the Association for University Research and Industry Links).

The guide, which is 46 sides in total, can be found on the IPO website, here. It's actually very good for anyone needing to ease themselves into this area.  It's well written and clearly presented; some technical stuff, such as the explanation of the different Lambert agreements, is left to the annexes.

A case worth $45million to an Aussie doctor

According to ABC News, a unique lawsuit involving the intellectual property rights for research by a university employed doctor has been been dismissed by the Federal Court in Perth.

In 1997 Doctor Bruce Gray created a biotech company called Sirtex to develop and market an anti-cancer technology he had invented. The University of Western Australia claimed ownership rights over the drug treatment because it alleged Doctor Gray invented the technology while employed at the university. However Federal Court Justice Robert French dismissed the university's claim saying inventions made by academic research staff using university resources ordinarily belong to the staff member.

Outside the court Dr Gray's barrister Martin Bennett said his client would be seeking damages.

"His (company, Sirtex) shares have been frozen throughout the time he's been forced to sell other assets and borrow money to fund multi-million dollar litigation," he said.

Apparently, Sirtex shares surged 13 per cent today to $3.53 before a trading halt was issued.

Provious web positings on the case (and other boardrom tensions) can be checked here.

Co-incidentally, this blogger received a question on a similar point just yesterday (albeit for another jurisdiction and with nothing like AUS $45million in issue... yet) and came to a somewhat different conclusion about ownership of copyright derived from works created in the course and scope of either the employ of the University or through doing work under University supervision. He would welcome comment from readers and a copy of this case, if anyone can get their hands on it.