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Startups and University Research: Too Much Emphasis on Patents?

When the Supreme Court ruled last month on the Bilksi case, denying Bilski’s patent claim that Bilksi’s patent but not making any real statements on the overall patentability of business methods or software, several opponents of software patents, including VCs Jason Mendelson and Brad Feld expressed their disappointment.

As Feld told ReadWriteWeb at the time, the Supreme Court had a change to address some of the serious issues with innovation, patenting, and software but “instead of taking a clear and forward looking position, they effectively punted on the hard stuff, surrounded it with ambiguity, and increased the mess we find ourselves in surrounding software and business method patents.”

Early this week, Nature reported on a recent study that points to another way in which the current patent system impacts entrepreneurship – this time from within the university system.

Does University Research Spawn Businesses Based on Patents?

While businesses that are spun out of university-generated research is often assumed to be associated with inventions and patenting, the research done by Riccardo Fini, Nicola Lacetera, and Scott Shane from Case Western Reserve University and the University of Bozen, Italy, suggests that this isn’t how the majority of companies founded by US academics are actually started. The study surveyed over 11,000 professors, and of the 1948 who responded who had started businesses, only 682 – about a third – had established them to exploit the patents obtained via the university intellectual-property systems. The remaining 1266 respondents had started businesses based on non-patentable knowledge.

The study notes that it’s not merely social scientists and engineers who are forming businesses that aren’t based on patents; this is the common practice for biomedical and physical scientists. “There is a lot of stuff that academics are realizing isn’t patentable but they can commercialize for themselves by starting a company,” says Shane, an economist at Case Western Reserve.. However as surveys of entrepreneurial activity – including most government assessments – typically focus on patent activity as the genesis of new businesses that grow from universities, they may be significantly underestimating academics’ efforts, Shane notes.

Rethinking the Requirements for Commercializing Research

Furthermore, the emphasis on patents means that many universities’ technology-transfer offices (TTOs) are “failing to help” a sizeable proportion of academic entrepreneurs, the study finds. Shane argues that, “All the policies and approaches focus on the formal intellectual-property system, which means we are missing a big part of the iceberg that is under the water.”

The Nature article cites Ashley Stevens, president of the Association of University Technology Managers, who claims that TTOs do help academics who are engaging in entrepreneurship outside the IP system. But Stevens claims that businesses founded without patents are less likely to generate a financial return for universities.

This claim runs counter to the findings of Shane’s research, that found no marked difference between the financial return of patent-oriented and non-patent oriented business.

The Office of Science and Technology Policy sought input earlier this year on how it might reshape some of the policies surrounding the commercialization of federally funded research. The way in which patents work – or don’t work – for the technology sector may be further complicated by the ways in which the federal government privileges patented research.

Alongside the ongoing concerns about the messy state of patent law in the US, the research from Fini, Lacetera, and Shane points to the ways in which we need to rethink how innovation and entrepreneurship are actually coming out of the academy.

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The ReadWrite Editorial policy involves closely monitoring the tech industry for major developments, new product launches, AI breakthroughs, video game releases and other newsworthy events. Editors assign relevant stories to staff writers or freelance contributors with expertise in each particular topic area. Before publication, articles go through a rigorous round of editing for accuracy, clarity, and to ensure adherence to ReadWrite's style guidelines.

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