Pennsylvania State University will no longer seek licensing fees for inventions resulting from research that companies finance, deciding the small payoffs it has seen to date aren’t as valuable as building strong industry relationships for faculty and students.
The decision, announced Friday, makes Penn State the first major institution to adopt such a policy, even though universities around the country are increasingly recognizing that they’ve been making a similar unprofitable trade-off, said Henry C. Foley, Penn State’s vice president for research.
In fact, one other institution, the University of Minnesota-Twin Cities, has also just made a similar calculation. It said on December 9, several days before the Penn State announcement, that it would greatly simplify its policy on intellectual property, essentially retaining royalty rights only in cases where a company finds an invention to be highly profitable.
Such policies do not apply to federally sponsored research, for which licensing requirements are defined by law. Industry-sponsored work typically covers a much smaller portion of university research than that financed by taxpayers, though many universities see cultivating corporate partnerships as increasingly important at a time of tighter government budgets.
Penn State may lose some small amount of licensing revenue from its decision, Mr. Foley said. But it expects to now have better luck winning corporate contracts in the first place, giving its faculty and students invaluable firsthand experience in the marketplace. “That’s worth a lot for us,” he said.
The university is already a leader in attracting corporate support. It conducts about $800-million in total annual research, with more than $100-million of that coming from companies, ranking it fourth in the nation in industry support. Of that, about $30-million involves direct contracts for work by Penn State researchers, rather than “pass-through monies and the like,” Mr. Foley said. Ending demands for licensing fees could allow that figure to double or even triple, he said.
Dreams of Grand Payoffs
While Penn State’s decision may be unique, the dilemma facing universities is not. Much of it stems from decades-old successes such as the sports drink Gatorade, which has brought the University of Florida more than $100-million, and the cancer drug Taxol, which has brought Florida State University more than $200-million. Dreams of such grand payoffs, however, have increasingly become a distraction as they prove themselves rare and not worth the resources spent chasing them.
After losing enough contracts to companies that refused the basic terms—pay for the research and then expect to pay a license to use the resulting discovery, or take the risk the university might sell it to a competitor—Penn State essentially realized the status quo was unfair to both sides, Mr. Foley said. “So many companies used to just walk away and say, ‘No, we’re not doing that,’” he said.
The University of Minnesota said it had also encountered criticism from its industry partners. The university is getting away “from an approach that focused almost exclusively on the remote probability of royalties to one that values the many tangible and intangible benefits” of a corporate partnership, Minnesota’s vice president for research, R. Timothy Mulcahy, said in the university’s announcement.
Penn State’s decision “likely will attract a lot of attention” among other research universities, said Joshua B. Powers III, a professor of higher-education leadership at Indiana State University.
Other institutions may not immediately follow suit, but they are likely to follow developments closely, given that most also realize they gain little profit from licensing fees, Mr. Powers said. “There’s been a collective lament for some years” about the unexpectedly small payoffs from licensing, he said.
Mr. Powers said his biggest concern about the policy shift involves the possibility that universities might give companies exclusive rights. If that happens, and universities no longer control the rights, it could hinder the sharing of research discoveries, he said.
Penn State had planned to reveal its new policy six weeks ago, Mr. Foley said, but withheld the announcement in the turmoil that followed news that Jerry Sandusky, a former longtime defensive coordinator for the university’s football team, was accused of child molestation. Repercussions in that scandal led to the firing of the university’s president, Graham B. Spanier.
Correction (12/29, 11:29 a.m.): As noted by a commenter, the article originally reported erroneously on the nature of Penn State’s new policy. The university will seek licensing fees for inventions that result from industry-financed research. The university will not impose those fees on the research itself. The article has been updated to reflect this correction.
