Written by Joseph Allen, Allen & Associates

Obviously, the universe enjoys irony. How else to explain the simultaneous issuance of the President’s Council on Jobs and Competitiveness interim report (see pages 21-22) with recommendations that would wreak havoc on university technology transfer, and an article in the Wall Street Journal crediting the same system as one of the Three Policies That Gave Us the Jobs Economy.

When asked how he felt about a blunder made by one of his politically appointed generals, President Lincoln said “It hurts too much to laugh, and I’m too big to cry.”  When considering these recommendations of the report, it’s easy to feel the same way.  If adopted, they undermine the Bayh-Dole Act, which allows universities and small companies to own and manage inventions they make with federal funds.  There is considerable evidence of the harm such an action would do to the US economy, undercutting the very objectives of the Council.

Perhaps most troubling is the acceptance of the idea by the Jobs Council that the US university technology transfer system is broken.  Beyond general statements, there is no evidence presented supporting this contention.

The Jobs Council presented its report to President Obama last week.  As the name implies, its focus is on reviving an economy mired in the doldrums with one creating high value jobs.  While it contains many thoughtful proposals, when it comes to commercializing federally funded R&D, someone slipped a joker in the deck.

Here are two of the recommendations to “help spur renewed entrepreneurship”:

• Lastly, the Administration should test an “open source” approach to tech transfer and commercialization. 
• America’s colleges and universities, funded with federal dollars, have produced many of the great breakthroughs in clean energy, information technology, biotechnology and nanotechnology that have led to new industries and jobs across the country.  However, all too often potentially groundbreaking research that could find market success lingers in university labs. The Council recommends allowing research that is funded with federal dollars to be presented to any university technology transfer office (not just the ones in which the research has taken place). 

For a President hanging on by his fingernails over voter unhappiness with a stagnant economy, recommendations like these are not doing him any favors.

There are many reasons why these suggestions are misguided:

• They are fundamentally contradictory.  The open source model is based on the premise that intellectual property is a barrier to innovation.  Conversely, the university “free agent” theory believes academic inventions are undervalued, licensed too cheaply, or not often enough.
• The open source theory seeks to impose a software development model on all technologies. In the life sciences (where most university licensing occurs) strong patent positions are critical.  A survey of their member companies by BIO underscored the high value that is placed on exclusive licensing, particularly by start up’s.   Every state hopes to develop a thriving biotech industry from university research to grow its economy: for the Jobs Council to tout open source licensing is puzzling.
• The Administration has recently issued new financial disclosure guidelines for HHS/NIH intra-mural and extra-mural research aimed at reducing conflicts of interest. Putting university inventors in charge of deciding who manages their federally funded discoveries is conflict of interest on steroids.
• The university professors as free agents theory directly violates the Bayh-Dole Act which gives ownership and management of federally funded inventions (and the responsibility to insure they are managed in conformity with the law) to the university receiving the federal grant.  The recent Stanford v Roche case did not change this. It merely reinforced the need to have researchers sign invention assignment agreements to the school to trigger the law.
• University technology transfer offices rely on having good working relationships with on campus researchers and their departments.  When patents are successfully licensed, the law mandates that the inventors, their departments, and the university all share in the royalties.  Putting just the inventors in charge of determining how a technology is licensed turns the system on its head.
• Many, if not most, licensed university inventions have multiple inventors. The recommendation seems to assume a sole inventor paradigm that no longer exists.  It does not address the inevitable problems that will arise when inventors disagree as to who should license their patent.
• University researchers are fully engaged conducting research, securing new grants, teaching students, and writing scientific papers. Asking  them to also shop their inventions around the country on their own time and expense hoping to find another school to license their inventions is highly naive.
• Studies have shown that the experience of other countries with faculty management of inventions has been dismal.  The clear trend internationally is adopting the US model for university tech transfer.
• University technology transfer offices are working at full capacity and have no interest in taking on extra work from other schools.  In a letter to the Department of Commerce, technology transfer leaders at MIT, the Wisconsin Alumni Research Foundation, and Stanford said: “It would be inappropriate for us to handle inventions from inventors outside our own institutions, and we would have no interest in doing so.”

Contrary to the tone of the Jobs Council report, US academic technology commercialization made possible by Bayh-Dole is a world- wide recognized success.  The law allowed universities and small companies to own and manage inventions arising from federally supported R&D.  It decentralized technology management from Washington, allowing a market driven system to flourish.  It did not create any new bureaucracy to select winners and losers.  And it works in the hard, cold light of day.

Prior to Bayh-Dole, when the federal government took invention rights away from their creators making them available to all through non-exclusive licensing (similar to the open source model), Congress found that not one drug had been commercialized from NIH funding.  About 28,000 federally funded inventions gathered dust in Washington, benefitting no one. This is not surprising since prior government policies destroyed the intended incentives of the patent system.

Recent studies have documented that 153 new drugs and vaccines based on federally funded research are now protecting public health world-wide because of Bayh-Dole.

Unnoticed by the Jobs Council, more than 6,000 new companies have spun off from universities around the country: recently averaging about two new companies formed each working day of the year. Approximately 5,000 new products are on the market because of Bayh-Dole.  The Act made at least a $187 billion impact on US gross domestic product between 1999 and 2007, while creating 279,000 good paying jobs.

China and India are adopting versions of Bayh-Dole to better compete with us. South Africa recently enacted a Bayh-Dole law so they could build their own technology industries, realizing that university-industry partnerships — and the incentives of the patent system– are vital to compete in today’s economy.

Hopefully, it’s not too late for us to re-learn the same lessons.

Perhaps this explains the tone taken in the Wall Street Journal article on how the US economy made its dramatic turnaround in the 1980’s and 90’s:

A third factor, and one that ensured the boom would continue, was a law passed in 1980. Sponsored by Sens. Birch Bayh of Indiana and Bob Dole of Kansas, the measure clarified murky intellectual property rights so that universities and professors, especially, knew they owned their own ideas and could sell them. That knowledge gave professors and lab teams an enormous incentive to put to commercial use plans and ideas for inventions that they had long ago shelved in their minds and offices.

… New technology (telephones that showed the face of the person you were calling, linked networks of computers) had been around for years, but they languished in those university offices or in museum displays.

It’s said that those who forget their own history are condemned to re-live it.  Let’s hope we can avoid shooting ourselves in the foot in this case. It’s painful– and takes a long time to get up and back into the race.

About the Author

Joe Allen is a 30-year veteran of national efforts to foster public/private sector commercialization partnerships, and author of numerous articles on technology management for national publications. Joe served as a Professional Staff Member on the U.S. Senate Judiciary Committee with former Senator Birch Bayh (D-IN), and was instrumental in working behind the scenes to ensure passage of the historic Bayh-Dole Act. Joe has served as the Executive Director of Intellectual Property Owners, Inc., a trade association representing major R&D companies, he was involved in the creation of the Court of Appeals for the Federal Circuit, and he also served at the U.S. Department of Commerce as the Director of the Office of Technology Commercialization. From 1992 until 2004, Allen was with the National Technology Transfer Center (NTTC), becoming President in 1997. Clients included NASA, the Department of Defense, EPA, the Department of Veterans Affairs, and the Department of Commerce. Between 2004 until 2007, Allen was the Vice President and General Manager of the West Virginia High Technology Consortium Foundation. In 2008, Joe founded Allen & Associates to continue to facilitate public/private partnerships between universities, federal laboratories and industry.

STC.UNM has greatly benefited from working with University of New Mexico students. This past year, STC created a new student intern position that encompasses more aspects of a technology transfer office than the previous marketing internship. The new position, Technology Transfer Student Intern, now gets to see a combination of experiences learning about the field of technology transfer from the intellectual property to the commercialization process. STC student interns have the opportunity to work with STC staff, attend STC educational seminars including presentations from visiting patent attorneys and companies, as well as interact with local entrepreneurs and investors. Overall, the intern position benefits UNM students by providing a better understanding of the intersection of business, science, and law.

Student interns also work on various projects from prior art searching, conducting market analysis for new technologies, and working with our tenants in the Joseph L. Cecchi VentureLab. This gives student interns the opportunity to work directly with or for start-up companies.

STC has worked with the Professional Science Master’s program (SMP) at UNM and has hired a few SMP students to work with STC. The SMP program emphasizes innovation and entrepreneurial skills necessary to bring discoveries in nano-science to the market place. In addition to the SMP program, STC currently employs 5 technology transfer student interns and 2 administrative/office student interns from various schools and departments at the University of New Mexico including the School of Law, School of Public Administration, Anderson School of Management, School of Engineering, and the College of Arts and Sciences.

Cara Hajovsky, Marketing Associate, STC.UNM

On November 3, John Chavez, President of the New Mexico Angels, presented at an STC seminar on the topic of venture and angel investing.  It was a very informative presentation and well worth looking at the slides John presented at http://www.stc.unm.edu/news/eventsandseminars.php?eventid=123.  We are all trying to facilitate the launch of new companies and as John’s presentation points out, the new model is to do more with less and seek partnerships earlier than before.

Lisa Kuuttila, President & CEO, STC.UNM

Photos from the STC.UNM and New Mexico Angels Technology Showcase for Gap-Funding and NewCo Formation

STC recently held its 6th Annual call for Gap Funding proposals and received a record number of 22 proposals.  With limited funding at its disposal, STC and UNM could fund only 4 projects.  To help move additional technology projects forward, STC and the New Mexico Angels, a group of 70+ individual investors agreed to work together on a few additional projects from the Gap Fund proposals.  John Chavez, President of the NMA, participated in the selection committee for Gap Funding.  NMA selected 3 projects for presentation to the NMA membership.  STC and NMA helped the principal investigators prepare a presentation the the Angel membership at a recent lunch meeting.  These presentations were business focused and oriented to a start-up company opportunity.  The projects were well received by the Angels and we look forward to seeing additional companies eventually formed based on these opportunities.

STC staff recently took a day out of the office to work on updating our core values.  We initially created these a few years ago and it was time to look at them in our current work environment.  STC uses these core values to guide us in making judgments about our day-to-day work.  I think all the STC staff are proud of their accomplishments — our core values help us achieve our goals:

STC Core Values

Balance

STC strives for equilibrium and harmony in all aspects of its operations to fulfill its mission and to support individual growth and wellness.

Collaboration

STC staff works cooperatively with each other and with STC constituents to develop and sustain relationships.

Integrity

STC maintains high standards, and we will be ethical and responsible in all our dealings.

Proactiveness

Using innovative solutions, STC seeks to anticipate and provide relevant information and actions to effectively meet its constituents’ needs.

Reliability

STC promises outstanding customer service by being consistently available, responding in a timely manner, honoring deadlines, and effectively resolving problems.

Respect

STC strives to create a considerate environment where everyone is valued and respected.

Transparency

STC believes in clear communication and straightforward dealings with all its constituents.

Lisa Kuuttila, President & CEO, STC.UNM

STC and Sandia were recently awarded a Federal Laboratory Consortium Regional Partnership Award (http://www.stc.unm.edu/news/news.php?newsid=334).  The University of New Mexico and Sandia National Laboratories have a portfolio of 109 jointly-owned inventions resulting from the research collaborations between the two institutions.  For each jointly-owned technology, STC and Sandia work out a commercialization agreement specifying which organization will take the lead on patenting and licensing.  Fourteen option and license agreements have been executed by STC as lead and 6 by Sandia as lead.  Two start-up companies have been facilitated by STC recently based on jointly-owned technologies:  Lotus Leaf Coatings (http://www.lotusleafcoatings.com) and NanoMR (http://www.nanomr.com).  It is an example of a great partnership between our institutions spanning research to commercialization.

Lisa Kuuttila, President & CEO, STC.UNM

STC Hosting Polish Scientists Interested in Technology Transfer

STC recently hosted visitors for several weeks under a program with the ProRegio Foundation in Poznan, Poland.  Four scientists from the University of Medical Sciences in Poznan spent time at STC learning about technology transfer.  All four have strong scientific backgrounds (read about them at http://www.stc.unm.edu/news/news.php?newsid=327). 

It was a delightful visit and we enjoyed communicating our style of technology transfer to these bright scientists.  They participated in many meetings, both internal to STC and with external parties, such as investors, entrepreneurs and companies.  I believe they came away from the experience understanding that technology transfer is a complex process, requiring expertise in science, business, law and psychology.  I am sure that our connections will remain and that we will find ways to work together in the future. 

The next step will be a visit I will be making to Poland next month to speak at a technology transfer conference.  Making connections is at the heart of our business of technology transfer.  We made new international friends and connections in the past month!

Lisa Kuuttila, President & CEO, STC.UNM

Reprint from Forbes.com

Written by Gary Lauder

Last Friday, President Obama signed into law the Leahy-Smith America Invents Act, which passed the Senate last week by a large bipartisan majority, 89-9. Normally, when both political parties agree on anything, it’s time to celebrate. I wish that were the case here. To the contrary, this law will undermine one of the things that has made America unique and our economy strong: technology entrepreneurship.

There are two main problems in this new law for startups:

•  The change from first-to-invent (FTI) to first-to-file (FTF)
•  The introduction of yet another (third) form of post-grant review.

Proponents of this bill argued that all other industrialized countries are on the first-to-file system, so we should be too. If we look at the evidence from other countries, we should be grateful that we dodged the bullet of past attempts to change to FTF since it has not gone well for them by several measures. Canada changed to FTF in 1989, and two studies concluded that it was bad for small companies and individual inventors. A 2010 Canadian study also said “long-term returns in the Canadian venture capital industry are such that capital has fled the market.” We invest 10x more venture and angel capital per capita than Europe does. Clearly technology entrepreneurship blossoms here to a much greater extent than every other country other than Israel — and Israeli companies rely on our patent system way more than their own.

There is other evidence from Europe that their patent system is not working for their start-ups. In May, the U.K.’s Small Medium-sized Entity Innovation Alliance sent a letter to their prime minister complaining that they “know only too well the failure of the patent system and have given up.”  Two years ago, a European research organization published a study titled “Lost property: The European patent system and why it doesn’t work.”  In February, the EU declared an “innovation emergency” due to how far behind us they are falling in innovation and in R&D investments. This is whom we are “harmonizing” with? Our government has not done its homework.

To understand how FTF would affect entrepreneurs, think about the process that they go through from ideation onwards. After getting an idea and doing some Web research, an entrepreneur vets her idea by talking with others (potential customers, experts, potential co-founders, etc.).  If it seems worth pursuing, she will usually look for financing from angel investors or venture capitalists. Successful entrepreneurship is a highly social activity that puts one’s ideas out there — and good ideas spread like wildfire. Under the existing system (which will remain in effect until 18 months from signing), if someone applies for a patent and you have evidence that you invented it first, you can institute an interference proceeding.  This is a rare event (less than 100/year, and less than 0.05% of patents issued/year), but this system gives proper recourse and therefore discourages theft more than FTF.  Under FTF, theft is much easier, rewarding hacking and other bad behavior, and, most important to me: will suppress the openness on which our innovation ecosystem thrives.

Embedded in FTF is an elimination of the “grace period,” which is the one-year limit from “enabling disclosure” until one must file a patent.  Under the new law, any public use or offer to sell an invention (even if the functioning of it is not disclosed) becomes an immediate bar on patenting.  So if an inventor shows her invention working at a trade show, demonstrates it for an angel investor group or offers a single unit for sale, it will not receive a patent even if she applies the next day. How could  Congress have allowed that?  They were duped. Evidence of this is that both chambers published a colloquy — a staged dialog meant to clarify — that said the bill did the opposite of what the bill actually does.  Courts have ruled that when such conflicts exist, the bill prevails.  This was only one of the many ways that proponents misled decision-makers on this bill.

Post-grant review is yet another reason why the European system does not work for small companies.  It is used by deep-pocketed companies to prevent others’ patents from issuing. If the patentee is a small company, it usually can’t afford to fight. The nation’s top patent judge, Judge Paul Michel, retired early from his lifetime appointment to speak out against this bill. He said of PGR: “I can guarantee you that if I went into private practice, I could hold up any patent for almost a decade in post-grant proceedings. It would never get to trial in the district court.”

You must be wondering what motivated the proponents to lobby so long and hard for this change in the law. Different parties perceive varying benefits from the bill. FTF’s main benefit  is to pharmaceutical companies who can achieve faster “reduction to practice,” which is the time between conception and development of inventions claimed in patent applications. Smaller companies take longer, but use resources more efficiently. Under FTI, they get the priority date based on conception; but under FTF, the only thing that matters is when a patent application is filed. To the extent that such companies perceive themselves to be in a race against small companies, they are advantaged. To the extent big companies rely on buying small ones as part of their outsourced R&D, they won’t be. Another motivation is moving slightly closer to a globally uniform patent system. We are still not close enough for these changes to cause a cost reduction, but “harmonization” is another motivation.

We should not confuse real motivations with believing the fabrications. Congress and the Administration have received about 90% misrepresentation, and about 10% truth. This partially explains why a survey of patent professionals reveals that most don’t believe the claimed benefits of this bill. The government may be victims of dissembling lobbyists, but the duty of truth-seeking was always theirs, and they failed. They bought the patent “yellowcake” story and went to war on the world’s best patent system.

You may wonder how Congress and the Administration could get it so wrong?  My answer is: by only listening to the bill’s proponents and not seeking out the other side of the story from the many who could not afford to lobby.  Open debate between the sides has yet to occur.

One of the main drivers for getting a bill passed was the prospect of reducing the 4-year average waiting time to get a patent, which has been partially due to fee-diversion by Congress. It has had many bad effects, but the House Appropriations Committee stripped that out such that the funding situation is substantially the same as it has been for the past decade. All stakeholders were in agreement that the PTO needed to be better funded, but they had to assert their authority.

Eric Severeid famously said that “most problems begin as solutions.” This bill resembles that remark. The problems that got patent reform started have largely been addressed by many court cases. Once the two main patent reform lobbying organizations were formed, they gained a life of their own and had to continue pushing for changes to justify their existence. If one interviews their membership, there is much less enthusiasm for the changes in the bill. The same is true of the universities that are members of the AAU that supported the bill. One congressman told me that the tech transfer office of a university in his district opposed it, but the university president supported it.  Guess who won that argument?  There was a courageous splinter group of universities that opposed the legislation, but they were not invited to testify at hearings on the bill.

The bill also requires that the Small Business Administration deliver a study to Congress in one year to determine the potential impact of FTF on small companies. One year is six months prior to FTF going into effect. Isn’t it odd that the study would be occurring after the decision committing us to that path? It’s unclear what Congress will do with that information since there is already enough evidence from other countries to determine NOT to implement FTF — although I’m sure that they are still unaware of it since nobody has paid lobbyists to show it to them.

If we are to preserve what’s most unique about our economy, my recommendation to Congress and the Obama Administration is to pass a new bill that does 3 things and nothing more: postpones the implementation of both first-to-file and changes in post-grant review until studies of overseas implementations have proven that they will not harm start-ups here, and properly fund the patent office by letting it keep filing fees. Congress should do its best to adhere to the Hippocratic Oath to “first do no harm,” and remember the laws of unintended consequences. Otherwise, “Leahy-Smith” will become the new “Sarbanes-Oxley.”

Gary Lauder is Managing Director of Lauder Partners, a Silicon Valley-based venture capitalist and co-inventor of a dozen patents. More info on this issue can be found on his Web site.

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Last week, THE OVERHAUL OF U.S. PATENT LAW FORUM: The Impact on Patenting Practice, Patent Protection, and on Science & Engineering Jobs took place. Speakers and panelists on the Forum addressed the trends and the effects of statutory changes in the patent law on the courts, on large and small firm patenting, on investments in new inventions and on new domestic science and engineering jobs creation prospects for U.S. professionals. Other panelists spoke on the regulatory changes required to implement the new law, the prospects of U.S. Patent Office access to its user fees, and its ability to handle the increasing workload and new tasks necessitated by the new law.

President  & CEO of STC.UNM, Lisa Kuuttila participated in the Panel Discussion of the Forum.  Kuuttila’s remarks were presented regarding the effects on university R&D, innovation and technology transfer: 

Remarks of Lisa Kuuttila
August 30, 2011

Whether it happens next week or next year, key components of the so-called America Invents Act (AIA) have enough momentum to become law sometime soon. And though AIA is a compromise between huge commercial market incumbents its most significant impact will be to further stress the waning economic sustainability of America’s renowned university research system. Because many of these systems are counting on commercialization to help defray the costs of development they must re-evaluate their programs’ size, scope and content and the technology transfer operations that support them. Today I will examine the foreseeable impact of two of the law’s prominent components; “first inventor to file” and additional “post grant review”. Their mechanics have been expertly outlined by other panelists. I will focus on their economic and operational impact on American university scientific research.

Wholly apart from today’s discussions, the economic sustainability of our traditional research university model is already under intense scrutiny and strain. On-line learning coupled with diminishing support from state and federal governments, reduced alumni giving, and increased for-profit competition have converted these economic headwinds into gales, forcing universities to raise tuitions, the one economic support component they can control. But with tuitions rising at a rate of four times the rate of inflation, support for needs-blind acceptance of talented students and recruitment costs for talented researchers has become less affordable. That is where matters now stand. This already challenged economic environment may not be AIA’s prime target, but it is clearly where the risks of collateral damage are highest. These deficiencies heighten the need for effective and efficient technology transfer for which the need has never been greater. Tech transfer is a net cost item in all but a few research universities. These two provisions in AIA will significantly increase its costs, which in turn will adversely affect the conduct and content of the research it supports.

The American research university model was born when Harvard’s President Elliot blended the Oxford/ Cambridge undergraduate education format with the more intensely focused research characteristics of German higher education. Effective economic management of these combined, but sometimes conflicting higher education paradigms has challenged university management ever since. At the post graduate level, talented researchers attract federal grants and higher-level students, but they often seek higher salaries, more perks, and lighter undergraduate teaching loads. They also require help managing the mundane supportive logistics of their research and its development. TT operations provide that support, from protocols protecting intellectual property to implementing the many multifaceted components required to develop inventive ideas. Applied and translational research, patenting, licensing, incubation and attracting private investment capital are part and parcel of this process. Tech transfer is the engine that drives invention from “lab bench to store shelf.” It thus plays a critical role in the realization of public benefit from government distribution of taxpayer dollars to our nation’s scientific research institutions.

One of our nation’s most successful economic policy measures, the Bayh Dole Act, enables federal grant recipients including universities to patent their research outcomes. It provides for the “D” in R&D. Universities do not practice their patents. Development and distribution of their innovative research requires its licensing into the private sector. As a bridge between a university’s public mission and the private sector’s profit objectives, it is therefore up to Tech transfer to effectively interact with; administrative and ethical concerns of internal institutional hierarchy, the needs of research faculty, graduate, and undergraduate students, retention and management of patent lawyers, care and feeding of private and public investors, conducting IP licensing negotiations, providing for researchers’ physical plant and equipment needs, and the institution’s interface with public and private sponsored research. And since patent reliability plays a key role in every part of this process, Tech transfer personnel are deeply interested in patent policy and efficient U.S. Patent & Trademark Office (PTO) operations. If participation in the patent process incurs increased costs it will directly affect tech Transfer and the research it supports. AIA will impose significant new costs on the management and support functions of early stage scientific innovation.

For research contemplating commercialization, First-to-File (FTF) will require filing more provisional applications more frequently as research evolves. Final patents will be sought earlier and more often. Private investors will be deterred by new patent uncertainties triggered by AIA’s new authorization to (a) patent technologies years after their secret commercial exploitation and (b) raise legal defenses to infringement allegations through prior user right assertions. That same deterrence applies at the earlier even riskier stage of Tech transfer, which requires investment of scarce university resources. The grace period is effectively eliminated for unpublished activities. Publication to create space for sharing information may suit the pedagogical objectives of some research universities, but in the context of commercialization, it is not an option. Yet in circumstances where investment and market development are required, collaboration is needed at every step in the R&D process. The new FTF grace period elimination formats will hobble external communication with prospective investors, developers, market experts and all the other expertise required.

And even where researchers can safely discuss issues covered by provisional applications already filed, productive discussions are inevitably about the way forward, not where the process has been. Add to this the assurance of added delays in obtaining patents attendant to PTO’s new unfunded mandates, line-cutting by companies who can well afford the $4,800 extra fee, and inevitable post grant delay from validity challenges that will plague patents for any disruptive innovation worthy of investment. In another Catch-22 situation, the prospects of patent unreliability, uncertain exclusivity, and added time before and after patent grants will increase, as a patent’s prospective value for investment increases. The more valuable the proposed invention the more likely it is that return on such investment will be delayed, if not defeated entirely by incumbents’ efforts to slow it down. Less private investment in early stage innovation means fewer if any start-ups. Without independent private investment support the startup option is doomed and its diminution or loss may be the most significant adverse impact of these increased costs and uncertainties. Why? Because the only remaining alternative would be to license market incumbents. And unless there are multiple suitors for a given technology, university bargaining leverage will be severely reduced. Licensing royalties will be reduced as well.

Universities with established research programs located within easy and established reach of robust commercialization of innovation, may weather the AIA storm, but many universities who themselves are in the early stages of research departmental development may not. As the Act’s debilitation of such programs spreads, federal research grants will be distributed to the surviving institutions. Survival for some may require creation their own innovation clusters to foster early stage innovation or formally pre-aggregating these disciplines into collaborative coalitions. In San Jose, Boston, and other existing centers of innovative scientific activity, elite research universities will likely survive, even thrive, as they gobble up larger slices of the federal research grant pie. But universities and less-developed regional economies now trying to emulate these established institutions may wither. But for all the loss of the start-up option will eventually mean diminished returns on their investment in TT supported scientific research. There are other serious cost impacts as well.

Traditional economies of scale would suggest more intra and inter-university expansion of research effort. But FTF and grace period complexities will make such coalitions more risky. Like uncertainty, time has a cost. Even the possibility of more post grant delay will add more cost. So unless new and imaginative ways to protect individually conceived intellectual property in the collaborative context are devised, internal and external collegiality is a likely early casualty .New legal stratagems may replace the old system but these devices will evolve slowly and at great cost. They also are likely to be far more cumbersome than the systems that have evolved under first to invent. Clearly when it comes to multi-university and cross disciplinary coalitions, which are already adding significant efficiencies to grant acquisition cutting-edge research, IP confusion will be compounded. Researcher record-keeping drudgeries were annoying, but they were reliable. They kept disputes about first to invent to a statistical minimum. Under AIA the only reliable IP protection is silence.

The economic impacts will curtail the capacity of many universities to expand their research capabilities. Other longer term implications are dire and must be avoided at all cost by all universities. Consider this possibility.

Market incumbents are now engaged in cut-throat competition in which patents are a weapon. Their margins are compressed. Time to market, costs of marketing and utilization and depletion legacy manufacturing and distribution systems are the prime drivers of bottom line results. Their innovation is limited to incremental changes that can attract consumer demand but will not over-strain operational costs. Their capacity to fund the kinds of curiosity- based research that once flourished in places like Bell Labs is long gone. Scientific research for its own sake now relies on government grants to research entities with a public mission. As scientific innovational research becomes concentrated in fewer institutional enclaves because of the strains described above, today’s patent reformers will be further tempted to dictate the content of university research, not merely through their sponsored research but by influencing the direction and content of government research grants. Then that research can support their short term market objectives. They can thus effectively outsource and offload their present costs of incremental innovation to the taxpayer. This bill proves they are resourceful enough to do so. And in a global economy infested with state sponsored capitalism, a drift into the woes of industrial policy is no longer far-fetched. But if that occurs consider, what might happen to Bayh Dole, the miraculous engine of scientific research with which I began.