September 19, 2014

Academic Inventions Generate More Income than Government Ones

Universities and federal laboratories often license their inventions to industry as a way to commercialize those technical advances. Which generate higher royalties?

Recently released data from the National Institute of Standards and Technology (NIST) and the Association of University Technology Managers (AUTM) indicates that the average university invention brought in significantly more in licensing income than the average invention from a federal laboratory in 2009, the latest year for which data are available.

The chart below indicates that the average license made by an academic institution earned nearly three times the income of the average license made by a federal government laboratory, $99,385 versus $36,512.

Of course a simple comparison like this doesn’t tell us why university inventions generate more royalties. Perhaps the average university invention has been licensed for longer, allowing it to generate more income. Maybe universities license more of their inventions to companies in industries that pay higher royalties. Perhaps university technology licensing officers drive better bargains than their counterparts in federal labs. Maybe the terms of university technology licensing agreements are different from those of federal labs.

I would not be surprised if all of these factors account for some of the difference in royalties earned by university and federal laboratory inventions. But I’m curious if readers know of others.

10 Comments ▼

Scott Shane


Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

10 Reactions

  1. Academic inventions are discussed among experts for longer and presented to a wider public, generating a product of higher added value and known to more potential buyers.

  2. It is good to see that universities are doing better than the government when it comes to innovation, but I think there is more room for improvement. There are some incredible resources that universities are currently not tapping. Student class projects could be accelerating university startup companies.

  3. Universities are also more incentivized to find and develop an additional source of income. Grants, donations, etc. are hard to come by and often out of their control. However, by licensing technologies they can bring in additional funds to improve their programs and such. The government…not so much. They just ask for a bigger budget and the federal debt gets a tad bigger the next year.

  4. It’s interesting data, but like you say, we can’t really extrapolate any reasoning from it.

  5. the statistic are hiding a lot of detail which are pertinent

    1. It would be good the see the median point and not the average-this will tell us if just a few blockbusters from Universities skew the data and that a lot of licenses generate very little revenue.

    2. How many licenses constitute the “n” in each case? Do Universities get many more shots at generating income?

    3. NIH is primarily health related. But Universities do everything under the sun…far more than just health technologites. So the two sets that make up the data are different making the study lack integrity.

  6. It’s important to have an apples to apples comparison when looking at this type of information. For example, if you segment University and Federal Laboratories by Research Expenditure, # of “Big Hits”, portfolio stance (e.g., % focused on biomedical vs. technology), and other variables, how much more or less would a Federal Laboratory create in income. Also, how many actually productize technologies. My team has done this and found that there Universities are really on par with Federal Laboratories at least in the segmentation we’ve created.

    Other suggested considerations:
    a) this is a one year view, which doesn’t really provide insight into the bigger picture
    b) income per license is only one variable in an overall performance scheme
    c) income per license rewards only big hits vs. a lot of little ones. In the whole, a lot of little ones from a volume standpoint could make more than a few big ones

  7. University tech transfer offices are in the business of making money for the universities (often in contrast with the stated mission of most universities of creating and disseminating knowledge. Government labs are in the business of creating knowledge (funded by the public aka taxpayers) and utilizing that knowledge to address public issues. The incentive structures and missions are different.

  8. Great article Scott… We’ve done a lot of work over the years with patent/innovation/commercialization departments at various Universities, and we’ve always been impressed with the high level of thought and research that goes into each project. One of the reasons for this could be that, for projects to go from concept to commercial approval there are at least 4 or 5 experts within the University that work on or review the project, along with students, colleagues, and industry panelists. Also, a lot of the schools offer a portion of the proceeds returned to the innovators.

    Kevin Mako
    Mako International Corp.

  9. From having worked with both universities and government labs on transferring their technologies, I can tell you there is a big difference in what each organization can do to support the successful transfer. Both tend to have embryonic technologies that need further development for testing and prototyping before they are ready for commercialization. Universities can allow their inventors to participate in that process, either as a member of the start-up or as a consultant to the licensee. Universities also have an ecosystem that can feed into the successful transfer (incubators, venture funding, translational programs, etc.).

    On the other hand, civil servants at government labs do not have easy mechanism to work with a company post licensing. CRADAs and Space Act Agreements have a requirement that the “consulting” support has to further a government need, so the depth and breadth of support is often very limited or impossible to get through the authorization process. Government licensing is more of an arms-length transaction than is the case with universities and tech transfer takes a lot of support.

    • As Laura noted it is more arms length, a Government agency cannot even initiate a call to a new possible vendor or investor. The investor or vendor has to reach out to them first. Or else it is considered favoritism. Call it marketing with one hand tied behind your back.

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