World Intellectual Property Organization

Harnessing the Benefits of Publicly-Funded Research

June 2012

by Pluvia Zuniga, UNU Maastricht Economics and Social Research Institute on Innovation and Technology and
Sacha Wunsch-Vincent, Senior Economic Officer, Economics & Statistics Division, WIPO

Over the last 30 years, high-income economies have sought to maximize the benefits of publicly-funded research to accelerate knowledge transfer and entrepreneurship and to fuel innovation and economic growth. As a consequence, universities and public research organizations (PROs) in these countries are becoming more strongly business-focused. In light of the perceived benefits of strengthening university-industry links, particularly in terms of stimulating innovation and promoting technology transfer, many middle and low-income economies are adopting similar approaches. This is causing analysts to look more closely at these policies. Can they be readily exported from one setting to another? Is university patenting an efficient driver of business innovation? What is the impact of such policies in terms of economic growth and knowledge generation? This third article in WIPO Magazine’s Innovation Trends series takes a closer look at the evolving landscape and considers the merits of more active use of the intellectual property (IP) system by universities and PROs in middle and lower-income settings.

Evolving policy frameworks

Public-private knowledge transfer occurs through a large number of formal channels (including research collaboration, licensing university inventions, joint ventures, and hiring university students and researchers) and informal channels (including publications and conferences). IP can also play a key role in terms of fuelling innovation and driving business development through, for example, incubators, science parks and university spin-offs.

There has been a marked trend over the past three decades in high-income economies – also more recently, in selected middle and low-income economies – toward institutional ownership and commercialization of university and PRO inventions. Policy frameworks and practices are constantly evolving in both more and less developed countries giving rise to a broadly diverse range of legal and policy approaches for maximizing returns on publicly-funded research.

Specific rules defining the scope of university patenting, invention disclosure and incentives for researchers (such as royalty sharing) also vary. One clear message that emerges from this web of policy and practice is that changes to the legal framework alone are not sufficient to trigger sustained patenting by research institutes anywhere. In the US, for example, university patenting is being driven not only by a favorable legal environment, but also by expanding technological opportunities in the biomedical and other high-tech fields.

Figure 1: Universities’ and PROs’ patents are increasing under the PCT. PCT applications from PROs and
universities worldwide, absolute numbers (left) and as a percentage of total PCT applications (right), 1980-2010

Source: WIPO Statistics Database.

 

Patent filings by universities and public research organizations increasing

In the absence of comprehensive data on formal and informal university-industry relationships, data on patents and licenses offer useful insights into the scale of university knowledge transfer and research performance. Since 1979, the number of international patent applications filed under the Patent Cooperation Treaty (PCT) by universities and PROs has increased steadily by 5 percent and 29 percent respectively (see Figure 1), outpacing the overall rate of growth in PCT applications.

This growth has been driven largely by high-income economies, among which France, Germany, Japan, the UK and the US represent approximately 72 percent of all university and PRO PCT applications.

Data for the period 1980-2010 show that patenting by universities and PROs is highly concentrated and confined to the science-driven biomedical and pharmaceutical sectors. Universities and PROs in the US filed 52,303 and 12,698 international applications respectively. PROs in France filed the second largest number of international applications with 9,068, followed by Japan with 6,850. Among middle-income countries, Chinese universities led the way with 2,348 international applications followed by Brazil, India and South Africa. China and India together accounted for 78 percent of all international applications filed by PROs from middle-income economies.

Licensing by universities and public research organizations growing but from low levels

Licensing activity – the number of agreements concluded and revenues generated – is a good indicator of university technology transfer. While sparse, data for high-income economies support the view that university and PRO licenses and related income are growing, albeit from low levels. Outside the US, however, licensing activity is modest compared to the number of patent applications filed by PROs, income derived from research and development (R&D) contracts, and consulting or R&D expenditure. Licensing-derived revenue is largely driven by a few institutions operating in the pharmaceutical, biomedical and software sectors. In middle and low-income countries, IP commercialization is limited to just a few patenting institutions. Other forms of IP (e.g. copyright, trade secrets) and know-how are more commonly used to transfer knowledge to businesses in these settings.

Impacts and challenges

The jury is still out on the economic impacts of IP-based technology transfer laws and practices.

Some experts favor encouraging universities and PROs to patent inventions arguing that it enables them to “reveal their inventions”, encourages follow-on innovation and helps create a market for such inventions. The rationale is that university inventions often need further development to be useful, and firms are unlikely to invest in further development without an exclusive license.

Others argue that patents can slow the diffusion of these university inventions (through the exclusive licensing of patents to a single firm) and can stifle innovation and technology transfer by limiting the diversity of research and by negatively impacting other informal channels for knowledge exchange.

The possible benefits and costs to firms, universities and PROs, as well as the broader systemic impacts on science, the economy and society, are outlined in Table 1.

 

Table 1: Systemic impacts of IP-based technology transfer policies
  Potential Benefits Potential Costs (or Investments)
Universities & PROs

1) Increased IP ownership facilitates entrepreneurship and economic specialization

  • Reinforces academic entrepreneurship (e.g., fosters clusters, incubators, spin-offs, etc.)
  • Generates additional revenue for research

2) Faculty-industry cross-fertilization

  • Intangible benefits (e.g., reputation, better quality research)
  • More relevant research projects with scientific and commercial purpose

3) Increased student intake and ability to place students in firms

1) Diversion of time away from academic research

  • Distorts academic incentives and the nature of public institutions
  • Academia adopts a stronger commercial orientation

2) IP-related costs & resource requirements associated with

  • Establishing and maintaining a technology transfer office (TTO) and related IP management and defense of IP rights
Firms 1) Easy access to useful university inventions
  • Firms can collaborate with top scientists and develop innovations within a contractual framework
2) The creation of a market for ideas
  • Transaction costs diminish and legal certainty increases, making for a more attractive investment environment
  • Securing an exclusive license increases incentives for further investment
  • Ability to specialize offers a competitive advantage
3) Commercialization of new products generating profits and growth
1) Blocked access to university inventions
  • Precludes free access to university inventions, including the more basic research fields and research tools, unless an exclusive license or contract is secured.
2) Increased transaction costs and tensions in industry-university relationships
  • Academics’ poor understanding of development costs and market needs leads to a higher probability of bargaining breakdown
  • IP negotiations can complicate the establishment of joint R&D and university-industry relations, where universities aim to retain the title to their IP and maximize associated revenue

 

  Potential Benefits Potential Costs
Broader impacts on science 1) Increased impact of more focused and relevant applied research

2) Improved innovation system linkages

  • Efficient division of labor in the generation and commercialization of new inventions
  • Private sector contribution to funding basic and applied research

3) Improvement in the quality of research and education
 

1) Reorientation of research
  • Overemphasis on applied, short-term, commercial research
  • Less diversity or research resulting from greater focus on patentable outcomes
  • Other university missions, such as teaching and training, are neglected

2) Negative impacts on open science

  • Crowds out the use of other knowledge transfer channels to industry
  • Publication delays, increased secrecy, less sharing, including the withholding of data
  • Decrease in international scientific exchanges

3) The promise of university income can reduce government commitment to funding

Innovation and growth

1) Commercialization of inventions with economic and social impacts

  • Increase in consumer welfare and business productivity via access to innovative products and processes

2) (Localized) positive impacts on R&D, technology spillovers, entrepreneurship, employment and growth

3) Higher competitive position of country in the global market

1) Long-run negative effect as attention is diverted away from academic knowledge production

2) Long-run negative effects of IP on open science and follow-on innovation

  • Patenting of broad upstream inventions, platform technologies and research tools increases the cost of follow-on research and innovation
  • Reduction in the diversity of research

3) Focus on IP might inhibit rather than promote commercialization of inventions

Experience of high-income countries

Research relating to the experiences of high-income economies confirms that university and PRO patenting and efficient technology transfer policies and institutions are an important precondition for increasing opportunities to commercialize university inventions. Access to early-stage research is critical to firms, in particular in the science-intensive sectors. Closer university-industry linkages have also proven effective in fostering research into more socially relevant outputs.

Studies show that university patenting and licensing have underpinned the emergence of new industries (e.g., the scientific instruments industry, semiconductors, computer software and biotechnology industries), as well as the creation of high-technology clusters. It is, however, difficult to demonstrate with any certainty the contribution that commercialization of university IP makes to economic development. Constructing data that effectively capture other dimensions of the impacts of IP-based technology transfer – for example, productivity gains of downstream firms using or building on such IP, or a consumer surplus from resulting innovation – remains a challenge.

On top of this, there are no clear signals as to the most adequate IP ownership model for universities. For example, it is not clear whether the university-ownership model is superior to one in which faculty retains ownership of inventions, or one in which the individual scientists retain IP rights. It is equally challenging to identify the long-term implications of university patenting for other knowledge transfer channels and more globally for the broader science system.

Challenges facing low and middle-income economies

Low and middle-income countries vary substantially with regard to the R&D capacity of PROs, infrastructure and policy frameworks for technology transfer and science-industry cooperation.

Innovation systems in these economies are characterized by a lower level of science and technology activity (S&T); a greater share of publicly-funded R&D with less relevant outputs; and limited science-industry linkages. This can be attributed to the low absorptive capacity of firms, combined with an ensuing lack of “business” demand for science and technology, as well as a range of other constraints relating to entrepreneurship and access to financing for innovation.

Technology transfer policies unaccompanied by policies seeking to strengthen both the R&D capabilities of firms and industry-science linkages are unlikely to be successful. Broader institutional reforms are also needed, for example, to enhance the autonomy of universities and ease regulations governing the terms of employment of scientists so as to encourage more proactive participation in technology transfer activities.

Policymakers in middle and low-income economies face low levels of awareness within universities and few incentives encouraging participation in IP-related technology transfer. Few universities and PROs have clear technology transfer policies, and efforts to strengthen university-industry linkages are further hamstrung by inadequate resources and skills shortages. However, these characteristics are not shared equally across all middle and low-income countries. In general, work is ongoing to improve the systemic weaknesses in national innovation systems to give increased autonomy to universities. Many are in the midst of setting up technology transfer policies and practices, some of which are already having a significant impact. For example, Brazil and Mexico have enacted explicit regulations regarding IP ownership and university technology transfer. In India, institutional policies have recently been developed at key national academic and research organizations. While Nigeria and Ghana do not have specific legislation relating to university patenting, both are in the process of establishing technology transfer offices within institutions of higher education.

There is growing evidence that IP-based technology transfer policies and institutions are instrumental in increasing opportunities for commercializing university inventions and in securing university-industry synergies. Amid the broadly diverse national policies being adopted to maximize the impact of publicly-funded research, however, there is, as yet, no clear blueprint for success. The ongoing experiences of both high-income and selected middle and low-income economies in this area, will, no doubt, offer important and useful insights to all those involved in crafting and implementing optimal innovation systems for the future.

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