Journal article Open Access

Full Cost Accounting Shows the Emperor Has No Clothes: Universities Investing in Technology Transfer via Patenting Lose Money

Pearce ,Joshua M.

Do university investments in intellectual property (IP) provide a return on investment (ROI)? To gauge the impact of the holistic costs of patenting at universities, this study provides a new methodology for quantifying the investment in IP that includes not only technology transfer staff costs, but also direct and opportunity faculty-related costs. It then uses the novel methodology and publicly-accessible data on a case study of an average American research university. The results found all component costs were higher than the IP-related income, with the opportunity cost for writing patents instead of grants being more than 33 times the income realized through IP protection. Overall, the case study university loses more than $9million/yr on IP with a negative ROI of -97.6%. Research universities have opportunities to increase research income >10% by ignoring IP. It is clear that Bayh-Dole Act and similar national legislation, is harming university economics. It can be concluded that as generally practiced in the U.S. now, it is not rational to continue to support university technology transfer by patents. Instead, to improve the economic bottom lines of universities, as well as increase the good that research and development does for society, universities can open source all innovations.

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