Decentralizing University Licensing: A Naïve Idea in 2010

As a consulting firm, we would directly benefit from the idea posited by Robert E. Litan and Lesa Mitchell of the Kauffman Foundation, published as part of “The HBR List: Breakthrough Ideas in 2010” piece in the January 2010 issue of Harvard Business Review. However, I do not believe it addresses the problems they sought to solve and actually introduces many new ones.

Litan and Mitchell’s idea is to “allow any inventor-professor to choose his or her licensing agent—university-affiliated or not.” They claim this is needed to “free up the market in technology licensing” over which “underperforming” technology licensing offices (TLOs) have a “monopolistic” hold.

This idea is not a breakthrough. It is a breakdown—a breakdown in logic resulting from inaccurate assumptions.

What makes Litan and Mitchell’s idea so flawed? They assert that a dropping rate of FDA approvals amid a rising rate of NIH funding is the result of inefficient TLOs. However, this overly simplistic “analysis” neglects to take into account the many other factors that affect the rate at which new drugs enter the market—factors that have nothing whatsoever to do with TLOs:

  • Lack of funding for testing: Universities lack the funding needed (or the mandate) to take a drug discovery through testing, which makes the pharmaceutical industry less interested in licensing it due to the higher risk of failure the earlier a drug is in the development pipeline.
  • Increased costs for development and testing: The progression of a drug discovery through the pipeline has been further impeded in the past 15 years by the increased costs associated with developing and testing new drugs.

More disturbing, however, are the larger problems that the authors’ idea would cause for universities. The authors clearly did not consider the following questions:

  • Conflicts of interest: Wouldn’t the selected licensing agent represent the inventor-professor’s best interests rather than the university’s? But isn’t that a conflict given that the IP is owned by the university—not the inventor-professor?
  • Budget: Who pays the non-university licensing agent’s bill? If money is available for an inventor-professor to hire an external licensing agent, then why isn’t that money made available for the TLO to hire more support?
  • Procurement/Contracting: What would the procurement process be for such an idea? Can inventor-professors cut contracts with whomever they want for whatever amount?
  • Prioritization: Who decides which technologies get money allocated to them for licensing in this model? Could inventor-professors fairly make that decision given that they have a vested interest in the outcome and little or no knowledge of the university’s overall IP portfolio?
  • Quality control: Do inventor-professors have the experience required to determine if a licensing agent is qualified? Shouldn’t inventor-professors focus their time and effort on what they do best: conducting research and teaching students?

Litan and Mitchell have been unfairly critical of TLOs. As someone who has worked with these offices at several universities, I know that the biggest challenge they face is having the budget required to build a team made up of the staff, interns and consultants they need to do the job right. Decentralizing or completely outsourcing the licensing process will not stop the bottleneck issue. In fact, it most likely will make university licensing more costly and less efficient.

I agree that the bottleneck can be resolved by adding external consultants to provide the expertise and resources that may not be available in the small staffs that typically are found at TLOs. However, the TLOs are the appropriate place to centralize the acquisition and management of those resources. So why not take the funding that would be required to support the Kauffman authors’ plan and allow the TLOs to acquire the resources they need?

–By Laura A. Schoppe

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