T H E HBR L I S T : B R E A K T H R O U G H I D E A S F O R 20 1 0
A Faster Path from Lab to Market by Robert E. Litan and Lesa Mitchell
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Removing the technology licensing obstacle. The Breakthrough Idea. So why not The Problem. University-based innoMONEY AND D free up the market in technology livators routinely produce breakOne symptom of the technology transfer bottlecensing? Let’s allow any inventor-prothrough technologies that, if commerneck is drug research. Funding of university fessor to choose his or her licensing cialized by industry, have the power research by the U.S. National Institutes of Health has risen steadily, yet the number of new drugs* agent—university-affiliated or not— to sustain economic growth. Because developed trends downward. just as anyone in business can now their research is largely funded by the SOURCE NIH; FDA choose his or her own lawyer. This U.S. government (much of whose S S would be as simple as having the $150-billion-plus R&D budget is chanCommerce Department amend the neled through universities), it is all rules of Bayh-Dole. (Maybe the Small the more imperative that these innoNEW APPROVALS NIH FUNDING Business Administration would have vations find their way to the marketto revise its rules as well.) Specifically, place and generate benefits for socifederal research dollars should come ety. But our system today is with a condition attached: University suboptimal: Many university-develrecipients must allow faculty memoped innovations could reach the bers to choose their licensing agents. marketplace much faster than they do The Promise. A free and competinow. The problem, ironically, centers tive market in technology licensing on the very entities designed to facili*Defined as new molecular entities and new biologic would disturb neither the legal status tate commercialization. Nearly 30 license applications of the invention nor the way royalties years ago Congress provided a huge or license fees are divided between incentive for universities to pursue faculty member and university (a subject governed by the stanmore commercialization of federally funded innovations. dard employment contract). But like other free markets, it Through the Bayh-Dole Act, it granted them the rights to the would dramatically speed up the commercialization of new intellectual property. That carrot got immediate results: Virtutechnologies, and ultimate consumers—in the U.S. and around ally every U.S. research university created a technology licensthe world—would thereby benefit from them much more raping office (TLO) to organize its commercialization activities and idly. A free market would also most likely lead university TLOs increase revenues from them. These centralized offices require to specialize or turn to outside agents with the appropriate exthat faculty members disclose their inventions to the TLO and pertise. A university might drop its TLO altogether but conpursue licensing opportunities through it. tinue to earn licensing revenues—less the fees charged by outYet like the student who could earn A’s but consistently side TLOs or agents. takes home B’s, TLOs are underperforming. For example, alLet’s stop penalizing professors who come up with new ideas though funding from the National Institutes of Health has and the universities they work for. Most important, let’s not mounted over the years (and is now some $30 billion), the outkeep the world waiting for new products and services—some put in terms of new FDA-approved drugs has been falling. As of them lifesaving—while valuable ideas languish on univerthe Department of Energy prepares to spend tens of billions of sity shelves. dollars on R&D to replace dirty fossil fuels with alternative sources of energy, it is critical that the disappointing pattern in drug commercialization not be repeated in clean tech. Robert E. Litan is the vice president for research and policy, and Perhaps it was not a bad idea at first for universities to Lesa Mitchell is the vice president for advancing innovation, at centralize their commercialization capabilities and give the Kauffman Foundation in Kansas City, Missouri. TLOs control of the process; they gained immediate organizational benefits and economies of scale. But this monopolistic model has since evolved into a major impediment. Inventive faculty members are hostage to their TLO, regardless of its efficiency or contacts. Moreover, because many TLOs are short-staffed, professors must queue up to get proper attention for their inventions. harvard business review • january–february 2010
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