Ivory Tower and Industrial Innovation: University-Industry Technology Transfer before and after the Bayh-Dole Act

Published by EH.NET (November 2004)

David C. Mowery, Richard R. Nelson, Bhaven N. Sampat, and Arvids A. Ziedonis, Ivory Tower and Industrial Innovation: University-Industry Technology Transfer before and after the Bayh-Dole Act. Stanford, CA: Stanford University Press, 2004. xiv + 241 pp. $39.95 (cloth), ISBN: 0-8047-4920-5.

Reviewed for EH.NET by Roberto Mazzoleni, Department of Economics and Geography, Hofstra University.

The U.S. federal government has been the dominant sponsor of research at American universities since World War II. However, the economic benefits of such policy have been only intermittently appreciated over the decades. Lately, the appreciation has been heightened by the belief that a wealth of innovative ideas has been flowing from academic research centers to industry, boosting the U.S. economy’s innovative performance. Much credit for this has been lavished on the Bayh-Dole Act, a law approved in 1980 that putatively transformed the relationship between academic research and industrial innovation. Bayh-Dole gave title to intellectual property rights (IPRs) from the results of federally funded research to universities, encouraging the latter to license these IPRs exclusively or non-exclusively in order to promote the commercialization of innovative technologies. Bayh-Dole has been described as “the most inspired piece of legislation” in the postwar history of the U.S. (The Economist, “Innovation’s Golden Goose,” December 12, 2002) and several foreign governments have rushed to enact similar legislation hoping for similar benefits.

Ivory Tower and Industrial Innovation sheds much needed light on the history of university-industry technology transfer before and after Bayh-Dole. Building their case through a blend of historical research, econometric analysis and case studies of universities and inventions, David Mowery, Richard Nelson, Bhaven Sampat and Arvids Ziedonis (henceforth, MNSZ) articulate a much richer and empirically grounded view of the contributions of academic research to the innovative performance of firms, bringing together insights and results of the authors’ research in the field. Ivory Tower and Industrial Innovation ought to be especially praised for exploring the landscape of university-industry interactions in a manner that is both scholarly and accessible to a broad audience. The discussion in this book is refreshingly open-minded, eclectic and thorough.

The book opens with a brief examination of the historical origins of American universities, revealing that the rise in federal funding of academic research after World War II built upon an existing tradition of university-industry interactions, albeit one that focused on regional rather than national economic or technological priorities. Since the late nineteenth century, the growth of new industries and the diffusion of new technologies were accompanied by the emergence of new fields of engineering and scientific education and research at universities. Likewise, postwar research contributed crucial scientific and technological developments to young industries, including computers, pharmaceuticals, or semiconductors.

Drawing from surveys of R&D managers conducted in the 1980s and 1990s, MNSZ illustrate important differences across industries in the processes and mechanisms regulating the transfer of knowledge from university to business firms. In particular, these surveys found that, in spite of their diffusion among U.S. universities, patenting and licensing are not among the most important channels of technology transfer relied upon by firms, with the notable exception of those in the pharmaceutical industry.

Even so, the book goes on to argue, patenting and licensing as channels for technology transfer from university to industry are not an altogether novel phenomenon. MNSZ trace the history of university patenting to the early twentieth century and discuss the origins of the Research Corporation, an organization founded in 1912 in order to manage patents held by universities or academic inventors. Of particular interest is the account of debates on the pros and cons of patenting academic inventions promoted by the Committee of Patents, Copyrights, and Trademarks of the American Association for the Advancement of Science during the 1930s. Yesterday’s advocates of academic patenting argued that industrialists would be wary of committing funds to developing ideas “thrown open equally to all” (p. 36) by university scientists. But support for academic patents was also fueled by the desire to preempt the action of “patent pirates” who would wrongfully appropriate the work of scientists and deprive society of the resulting benefits. In this view, academic patents would preserve the public’s access to the results of scientific research.

MNSZ provide a detailed account of the patent policies adopted by many U.S. universities that either set up affiliated structures specialized in the management of their patent portfolio or contracted with the Research Corporation for this purpose. The latter arrangement came under increasing pressure over the postwar decades, as universities relied increasingly upon internal administrators in order to manage the technology transfer process, and to apply for patent protection on the results of academic research, including research funded by agencies of the federal government that permitted their R&D contractors to retain title to resulting inventions. Such permission, initially granted on the basis of a case-by-case review, became the subject of Institutional Patent Agreements (IPAs) between universities and the federal funding agencies. While IPAs were first used by the Department of Defense, an important impulse to their diffusion came in 1968 when the Department of Health, Education and Welfare began to use the IPA model for research funded by the National Institutes of Health, the largest sponsor of academic R&D at that time.

MNSZ argue that the primary effect of the Bayh-Dole Act was to harmonize federal policy, rather than to carry out any revolutionary changes in government policy. At best, Bayh-Dole provided further impetus to the increase in academic patenting and the growth of the number of academic institutions involved in patenting and licensing. These changes, MNSZ argue, would have probably occurred without Bayh-Dole. Other factors played a more important role, including the “broader shift toward stronger IPRs during the 1980s and the transformation of biomedical science” (p. 98). This conclusion is supported by an examination of nationwide data, as well as by careful case studies of the effects of Bayh-Dole on academic patenting and licensing at three major universities (Stanford, University of California, Columbia). The study of these institutions also enables MNSZ to investigate a number of important issues related to academic patents and to the effects of Bayh-Dole (among others, the distribution of licensing income among academic inventions and the distribution of academic patents by fields of technology).

A chapter looks into the question of whether or not the increased patenting by universities during the 1980s was accompanied by a decrease in the quality of their patents, as previous empirical research on the effects of Bayh-Dole found. Using citation data to gauge importance and generality of academic patents, MNSZ find that the decline in the quality of academic patents during the 1980s was due to the entry into patenting of a large number of academic institutions. The quality of patents granted to “incumbent” institutions during the 1980s was not significantly different from pre-Bayh-Dole years. Moreover, the authors conclude that the quality gap between incumbents’ and entrants’ patents disappeared over time as a result of a hitherto unexplained learning effect.

A detailed examination of five case histories of technologies developed at Columbia University and the University of California completes the book’s overview of university-industry technology transfer. These case studies corroborate the authors’ assertion that generalizations about the importance of patents and licensing as a mechanism for promoting the development of commercial technologies based on academic inventions are very difficult to make. One of the cases focuses on the development of the cotransformation process for inserting genes into mammalian cells invented by Richard Axel (this year’s recipient of the Nobel Prize in Medicine) at Columbia University. The resulting patents were licensed non-exclusively by Columbia and turned out to be among the most lucrative academic patents to date. As MNSZ argue, the transfer of the technique to industry occurred in spite of, rather than thanks to, patents and licenses.

The research presented in this book invites some healthy skepticism about the belief that Bayh-Dole is the key to explaining how universities have contributed to the U.S. economy’s recent innovative performance. Accordingly, rushed attempts by foreign policy-makers to emulate U.S. policy by imitating the provisions of Bayh-Dole are likely to be ineffective. Instead, MNSZ highlight how the contribution of academic research to the scientific commons and the institutional characteristics of the U.S. academic system have played historically and continue to play a fundamental role in fostering university-industry interactions and the transfer of academic research results to business firms. While legitimate concerns about the effects of Bayh-Dole (or of academic patenting more generally) on the quality of academic research were expressed early on, MNSZ present evidence that this outcome has not occurred so far. At the same time, MNSZ flag the dangers ahead associated with the privatization of the scientific commons and the possible deterioration in the flow of knowledge across the university-industry interface. These concerns ought to be balanced against the alleged benefits from academic patenting in terms of an increased yield of commercial innovations from federally funded academic R&D. As the authors of the book point out, a careful evaluation of these benefits represents an important challenge for research in this field. This book should stimulate interest in taking up this challenge and will be essential reading for anyone interested in the field.

(Note: David C. Mowery is Professor of Business at the Haas School of Business, University of California at Berkeley; Richard R. Nelson is Professor of International and Public Affairs, Business, and Law at Columbia University; Bhaven N. Sampat is Assistant Professor at the School of Public Policy, Georgia Institute of Technology; and Arvids A. Ziedonis is Assistant Professor of Corporate Strategy and International Business at the University of Michigan Business School.)

Roberto Mazzoleni is Associate Professor of Economics at Hofstra University. His current research focuses on the role of universities and public research institutions in economic development and the economic analysis of university patents. He has written and published a number of papers on the economic analysis of patents and of academic patenting, including a few coauthored with Richard Nelson and Bhaven Sampat.