Senate Bill Would Undermine University Tech Inventions (Opinion) A proposed measure intended to encourage more high-tech startups is misguided, our columnist argues. Increasing academic research funding is the better route for fostering innovation.

By Scott Shane

Opinions expressed by Entrepreneur contributors are their own.

Buried deep in Start-up Act 2.0, a bill to boost high-tech start-ups, is a bad idea that will hinder commercialization of inventions developed at U.S. universities. Called the "free agent" provision, this clause would allow university professors to choose their own technology-transfer agents rather than have them use their university's technology-transfer office, an approach that has been in place since the passage of the 1980 Bayh-Dole Act

Congress can do better. Rather than undermining an effective system in the vain hope of squeezing more commercial technology out of academic institutions, our elected leaders should focus on a proven solution: Simply provide more research funding to academic scientists and engineers.

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In a world where much of what Congress set up to benefit the nation has gone awry, our system for commercializing academic inventions works well. Since the Bayh-Dole Act was put in place, university inventions have led to the development of 4,500 new products, according to the Association of University Technology Managers, an association of university administrators responsible for licensing the inventions of faculty and staff. Among these products are game-changing blockbusters such as the Google search engine, recombinant DNA, the cancer drug Taxol, the mineral supplement Citracal, artificial penicillin, and vaccines for hepatitis B and the avian flu.

The free agent provision would undermine this system because it would change the incentives for trying to commercialize academic inventions. Free agents would be doing it to make money, while university licensing officers primarily want to get new technology into practice and only secondarily, to bring cash into the university. This difference could result in fewer new products. Because their goal is to make money, free agents would focus on commercializing the most lucrative inventions, such as a heart drug, and skip the ones on which little money could be made, such as a malaria vaccine, even if their commercialization would benefit society.

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Free agents also would focus on licensing inventions that could command a high price today rather than those that might lead to more important products in the future. Finally, independent agents would encourage inventors to behave strategically to enhance profits, even if that meant commercializing fewer inventions. For instance, a free agent might seek to patent inventions with the goal of suing infringers rather than bringing a new product to market.

Instead of undermining the current system, Congress should provide more federal funding for university research in science and engineering. A big driver of the amount of university technology that gets commercialized is research funding, particularly from federal agencies like the National Institutes of Health and the National Science Foundation. In a bill that has some good provisions for encouraging high-tech entrepreneurship, Congress should remove the problematic "free agent" provision and support a tried-and-true method of generating more university inventions: funding more basic research at our nation's universities.

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Scott Shane

Professor at Case Western Reserve University

Scott Shane is the A. Malachi Mixon III professor of entrepreneurial studies at Case Western Reserve University. His books include Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live by (Yale University Press, 2008) and Finding Fertile Ground: Identifying Extraordinary Opportunities for New Businesses (Pearson Prentice Hall, 2005).

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