Do Patents Incentivize University Researchers? (Spoiler—Not Really)

Professor Lisa L. Ouellettea at Stanford Law recently published an article titled “How Do Patent Incentives Affect University Researchers?,” and it prompted me to reflect back on my experiences with patents as a university researcher.

Before coming to NYU Law, I was once a doctoral student in Cornell’s Electrical and Computer Engineering program where I researched technologies related to optical communications that power cloud computing. As a fresh doctoral student, I really had no notion of what a patent was beyond its association with famous inventions such as Thomas Edison’s lightbulb and Alexander Graham Bell’s telephone. Needless to say, I did not sign up for the doctoral program to earn the glory of being a patented inventor. However, as luck would have it, I did become a proud inventor on two US patents over the course of my studies. I write this not to humble brag, but to reflect on the question of whether patents incentivize university researchers to innovate.

As an engineering doctoral student, my main objectives were to make new technological discoveries and improvements, and perhaps more importantly, to publish those discoveries and improvements. “Publish or perish” is a common saying in the academia, and publication of a few peer-reviewed journal articles is a common minimum requirement for completing a doctoral program in my field. On the other hand, having a patent is decidedly not a requirement for a doctoral degree. As the Article puts it, “Peer-reviewed publications are the currency of science academia,” and I would even go further to say that publications are more important than actual currency in academia, as large numbers of publications generally bring in further funding, whereas funding alone does not necessarily result in publications.

A central tenet behind the patent system is creation of an incentive to innovate and to disclose by granting a monopoly for a fixed period of time in return for disclosure of the innovation to the public. The monopoly right provides a patent holder an opportunity to generate income, the universal incentivizer, from the innovation. However, the Article states that “[l]egal scholars have typically assumed that this incentive effect must be negligible given the other incentives university researchers have to innovate, such as the desire for tenure and recognition,” with which I agree. I would further add that the incentive effect is also negligible for doctoral student researchers, whom I believe to be the largest constituents of university researchers, as for them, the desire to succeed and graduate is the primary incentive for innovating. In my experience, the prospect of a patent, while a nice trophy to have, did not provide any additional incentive to innovate over the desire to succeed in the doctoral program and graduate. As such, pecuniary incentive associated with a patent that works well in society at large does not work all that well in academia.

However, university researchers do stand to reap pecuniary benefit from patents that are successfully monetized, as universities are required under the Bayh-Dole Act to share with the inventors a portion of the income generated by patents resulting from federally funded research. See 35 U.S.C. § 202 (c)(7). For example, Cornell’s policy is to pay out 1/3 of net licensing revenue to be shared among the inventors of a patent. Further, the Article’s data show that inventors’ share of the revenue varies widely across institutions ranging from 20% to 68%. As such, to the extent that pecuniary benefit provided by a patent has any incentivizing effect on university researchers, one logically expects there to be a positive correlation between the inventors’ share and researchers’ patent-related activities. The Article analyzes data covering 152 universities for that correlation, and concludes that “[n]one of our analyses show a statistically significant positive relationship between the inventor’s share—calculated various ways—and invention disclosures, patent applications, issued patents, or net licensing income,” substantiating my personal experience that the prospect of obtaining patents does not significantly modify university researchers’ incentives to innovate.

A significant takeaway from the Article is the authors’ suggestion that “[f]rom a social welfare perspective, university patent royalties may not be optimally allocated between researchers and universities” given that university researchers do not respond strongly, if at all, to the prospect of patent royalty sharing. The authors further suggest that “reducing inventors’ personal shares of patent income would have the benefit of increasing universities’ shares, leading to increased investment in science research and education.” While reducing inventors’ shares of patent revenue has the potential to generate negative publicity that can give universities second thoughts, the Article presents a strong data point for reconsidering high inventors’ share (e.g., >50%) in effect at some universities.