AUTM Licensing Survey: Ominous trend likely attributable to eroding patent rights

Ominous: businessman in a stormNear the end of November, the Association of University Technology Managers (AUTM) released its 2016 Annual Licensing Activity Survey which provides a measure of the current state of U.S. economic activity which is driven by research & development taking place at U.S. academic institutions. The most recent AUTM licensing survey indicates that R&D activities at colleges and universities have been making positive impacts both to local economies and the environment for startup businesses even as some concern over research funding is evident. The survey also points to eroding patent rights as being responsible for an ominous trend.

Many of the highlights from the 2016 AUTM licensing survey are available in an infographic published online by the organization. A total of 195 academic institutions were surveyed to find that academic tech transfer offices saw 25,825 new invention disclosures during 2016, the fifth straight year which saw an increase in invention disclosures. These invention disclosures led to the filing of 16,487 new patent applications, an increase of 3.4 percent over 2015’s patent application filings. An upward trend in patent application filing activity in recent years led to the issue of 7,021 patents to academic institutions during 2016. Tech transfer office licensing activities led to the formation of 1,024 startups in 2016, a single-year record for startup formation from academic research, and more than 73 percent of those businesses remained in the university’s home state.

According to Dr. Stephen Susalka, CEO of AUTM, the amount of innovation driven by academic R&D is intrinsically tied to the amount of funding for research, especially funding which comes from government grants. “Funding is what leads to invention disclosures,” Susalka said. “If you look at the historical data, research funding is inextricably linked to inventions.” This point is borne out by a data graph looking at both the level of total research expenditures and the number of invention disclosures in the U.S. between 1991 and 2016. As research expenditures have increased from just over $10 billion in 1991 up to more than $65 billion in 2016, invention disclosures have risen steadily over the same period of time from just over 5,000 disclosures to the 25,825 new invention disclosures last year. Using this data, Susalka noted that the average is approximately $2.6 million worth of research funding results in a new invention disclosure.

“One of the important points to make in terms of tech transfer offices filing patent applications is that these offices often have very limited resources,” Susalka said. “They don’t file patent applications just to file patent applications. They file so that their inventions can make an impact.” Unfortunately, it appears that academic institutions have seen the amount of resources provided through federal government funding stagnate in recent years. Susalka notes that the percentage of academic funding contributed by federal sources has dropped from about 70 percent in the early 1990s down to about 58 percent currently, although the $39.4 billion in research funding from the federal government during 2016 was still a substantial amount.

Susalka explained that academic tech transfer activities can be considered in three separate stages: evaluation, protection, and commercialization of the invention. First, once the tech transfer office receives an invention disclosure, the office must carefully evaluate the technology, including both the commercial potential of the technology as well as how to properly protect the invention. Second, the office safeguards the invention through a patent, copyright, or other type of IP protection. Third, tech transfer offices pursue the commercialization of the technology through a licensing partnership, often made with small- and medium-sized businesses. “At the end of the day, an academic institution is never going to sell a product or service,” Susalka said. “Those technologies will be licensed to a company to do that.”

“Academic research fuels the hotbed of innovation,” Susalka said, noting that such innovations impact a wide array of industries including pharmaceuticals, engineering, computer science and agriculture. “Universities are well-placed for that early stage research that provides the next generation of products and services,” he said. When comparing patent applications filed by U.S. academic institutions against the total number of U.S. patent applications filed in 2016 as recently reported by the World Intellectual Property Organization (WIPO), academic sources contributed about 3 percent of the overall number of U.S. patent applications filed in 2016. That number is not insignificant especially considering that 100 percent of U.S. patent applications are not necessarily filed by American companies only; foreign corporations like Samsung and LG Electronics have very active U.S. patent application filing divisions.

The result of the commercialization of academic IP includes tremendous beneficial impacts to society at large through the widespread adoption and use of new technologies. In 2016, a total of 800 new products were created at the downstream end of all academic research and development. The AUTM licensing survey highlights a few recent examples of new products developed by academia, including a cultivar variety of sweet potato from North Carolina State University which can survive tough growing seasons as well as the more effective use of patient immune systems to fight cancer developed by St. Jude Children’s Research Hospital.

Although one might argue that overall academic patent applications in the U.S. are relatively small when seen in the context of all U.S. patent applications, data on the types of firms to which colleges are licensing these technologies proves that these institutions operate in a very important sector of the innovation economy. Of the 7,730 licenses and options executed in 2016, approximately 70 percent were issued to small and startup companies. Such licenses with smaller entities appear to be growing more important to academic institutions as licenses to large entities decreased by 16 percent from 2015 down to a total of 2,562 licenses. Whereas the world’s tech giants may file the most patent applications today, it seems reasonable to suggest that academic institutions contribute more on average to the creation of business startups. Susalka noted that one trend he has seen recently involves an increase in prototyping funds at academic institutions to de-risk a technology, making it more attractive for licensing.

Concerns about the ability of academic institutions to keep contributing to the U.S. innovation economy go well beyond federal funding stagnation according to the recent AUTM survey. In an executive summary section entitled The Perils of Eroding Patent Rights, AUTM notes that a slight decrease in options and exclusive license agreements compared to the number of non-exclusive license agreements could be due to fears that licensing companies have over protecting the intellectual property under the current iteration of the U.S. patent system. In 2016, option agreements were down year-over-year by 7 percent while exclusive licenses dropped 2.1 percent. Non-exclusive license totals, however, rose by 2.1 percent to 4,201 such license agreements in 2016. A sharp increase in startups ceasing business activity, up 37.4 percent to a total of 331 such startups, is another “ominous trend” which AUTM notes is likely attributable to eroding patent rights.

“It’s said that tech transfer is a War and Peace profession in a bumper sticker world,” Susalka said, noting that most people don’t understand both how complicated the profession is as well as the importance of academic tech licensing to spur commercialization of new products and services. While the AUTM licensing survey provides an annual measure of licensing activity, the infographic includes 20-year data on the impacts of academic research to the innovative economy; these statistics were developed by AUTM and the Biotechnology Innovation Organization (BIO). Between 1996 and 2015, academic tech transfer contributed up to $1.3 trillion to U.S. gross industrial output and a total of up to $591 billion to U.S. gross domestic product (GDP). During that 20-year span, academic tech transfer has supported a total of up to 4.3 million American jobs with 11,000 startups being created during that time as a result of tech licensing activities.

Since the enactment of the Bayh-Dole Act in 1980, the law enabling academic tech transfer of technologies developed through federally-funded research, AUTM and BIO report that more than 200 drugs and vaccines have been developed through private-public partnerships. “Bayh-Dole really was the watershed moment for academic tech transfer,” Susalka said. Prior to that act, no new drugs or vaccines were commercialized when the government took patent rights away from inventing organizations. A May 1998 Congressional report by the U.S. General Accounting Office (GAO) noted that, prior to Bayh-Dole, the federal government held 28,000 patents but only 5 percent of those were commercially licensed.

[Correction: An earlier version of this article discussed the contributions of academic tech transfer to U.S. gross industrial output and gross domestic product between 1995 and 2016. The actual time range for those figures is 1996 through 2015.]


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