Patent auctions and academic technology-transfer

A New York Times article from last week caught the eye of commentators on the business and law of intellectual property. The article describes an up-and-coming business model, already filling-up on on venture capital, that aims to streamline the process of licensing patents by setting up commercially organized patent marketplaces.

These patent auctioneers aim to insert themselves as efficient (and lucrative) middlemen between inventors and manufacturers, allowing prices to be negotiated for patents within an environment of open and well-informed trading.

Patent auctions have their detractors. Michael Masnick at Techdirt invokes Thomas Jefferson in proclaiming the theoretical weaknesses and practical costs of such markets:

Markets are for property exchange and the more efficient allocation of property. Ideas are not property, and making a market for them and holding them back doesn’t accelerate the pace of innovation, it retards it. Greatly.

It’s still unclear whether patent marketplaces can solve, even by auction-style bidding, the complicated task of putting a monetary value on patents. Putting a value on an idea is difficult enough, but patents, unlike, say, copyrighted music, are especially risky because they vulnerable to being challenged in the courtroom on the basis of their novelty and non-obviousness.

If commercial patent marketplaces gained traction, it seems likely that they would have a huge appeal to universities, which invest large amounts of money in their “technology transfer” or “cooperative research” arms. These offices are responsible for identifying research at the university that may be both patentable and lucrative, so that the university can make investments in writing up and applying for patents with the hope of returns from future royalties. (Universities can seek patents for research performed with federal tax-dollars, an arrangement made possible under the momentous Bayh-Dole Act of 1980). Successful patent marketplaces could decrease the costs and risks to the university of licensing their innovations, perhaps allowing them to privatize some of the work of technology transfer.

Anything that actually speeds the route from innovation to technology sounds like a good thing. However, the risk of patent auctions, particularly when applied to basic, academic biomedical research, is that they could further erode the stated purpose of that research by adding another layer between inventor and manufacturer. Research is performed and licensed not to make universities rich, but to save and improve lives.

We already let universities, public and private, take control of inventions that were made possible with public money. We may not, however, be doing enough to ensure that the social utility of these inventions is maximized during the licensing process.

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