January 11, 2005

Patents serve as solid source of school funds

Alumni donations and student tuition dollars are not all the University relies on to pay the bills. Patents are a source of significant revenue, with 230 licensing agreements generating millions of dollars annually for the University. Nationwide, many schools across the country that conduct basic research step into the commercial arena in the hopes of capitalizing on their researchers' inventions every day.

Columbia University in New York leads the field, reaping more than $116 million in the fiscal year 2004 from patents filed on behalf of its researchers. By comparison, the University of Chicago generates only about $6 million a year, and has collected more than $46 million since the University began technology transfer work in 1987.

Although this amount may seem miniscule when compared to other schools, Alan Thomas, the director of the office of technology and intellectual property at the University, is proud of Chicago's achievements. "Our program is healthy given that we are a relatively small, Midwestern, basic research university with no engineering school and a relatively young tech transfer program," he said.

Colleges with engineering departments, or those that are located in Silicon Valley, for example, will certainly have more impressive numbers, Thomas said.

The benefits universities reap from patented technology can be tremendous. They are a great financial windfall, according to Richard Epstein, director of the Law and Economics Program at the University's Law School. "If you pursue the patents, you get more money for your faculty, for your departments, for your general budget, and you can do other things," Epstein said.

Of all the patent royalties paid to the University, about a quarter go to the inventors, a tenth to their labs, and 5 percent each to their divisions and departments to help fund further research.

Patented technology can have positive effects on the world as well. UC Tech points out that an estimated 10.5 million mammograms have been done using technology developed at the University, and all jets flown by Southwest and Delta use engine monitors developed at Argonne National Laboratory, which is managed by the University. Much of the University's research takes place in the biomedical arena, which makes up 80 percent of its patents; most of the rest are physical sciences technologies.

Some, however, argue that problems arise when universities get in the patent business. Potential university faculty members may be drawn into the private sector at the prospect of losing 75 to 80 percent of their patent royalties to their school, resulting in a brain drain. But, as Epstein pointed out, "[Researchers] in industries have to assign the patents to their industries. They take a slice, too. The University has put millions into these labs, and presumably they're entitled to a return on their investment."

When a university seeks to patent each new technological development, it risks the possibility of stifling research. Academic institutions are a core source of the basic science behind many of today's biggest products, and when schools seek patents on new technologies, other organizations are forced to pay royalties to use them for research as well as product development. This can discourage further research for years, until the patent runs out.

A more poignant argument against patents has to do with the distinction between the commercial and academic sectors. Speaking to the concern of research and academic obligations, Douglas Baird, the Harry A. Bigelow Distinguished Service Professor of Law at the University, said that a university is primarily a teaching and research institution. "Commercialization of university activities has to take a backseat," he said. "It's not a corporation."

According to Baird, colleges should focus on their long-standing roles of teaching and research—and not on the process between the research of new technologies and the final delivery of a product to market. "That isn't fundamentally what the research university does. Make sure you don't spend your time on that. You have to keep your priorities straight," Baird said.

Epstein said that universities need to create a balance between commercializing new technologies and ensuring that they devote resources to basic research. "Do you want universities to be involved in commercial activities? You can go too far down that road," he said. "Now you're getting to the point where universities are pushing people to make stuff they can patent."

Baird agreed: "If it happens that during the course of doing research, we come up with ideas that can ultimately be developed into things that have commercial value, you want to make sure that that happens," he said, noting that the school's first priority should be continuing basic research.

There is a consensus in the academic community that patents serve as a double-edged sword for universities. They can be a great fiscal resource for the university, but schools that drive strongly for vast numbers of patents run the risk of becoming too commercialized. "It's this indiscernible internal university culture issue," Epstein said. "It's fine to do it sometimes, but you can go too far and walk the line. It's something you have to work out."