Penn’s patent policy is crummy for inventors

So Penn has decided to invest heavily in “innovation”, whatever that means. I think part of what it means is transferring technologies developed in academic labs at Penn to the outside world, which is of course a good thing all around. Of course, the devil’s in the details. And Penn’s details are devilish indeed!

On their fancy new website, Penn says “[Penn’s patent policy] provides a means for Inventors to receive a generous share of any income that is derived from the licensing of inventions they create as Penn employees…” Which is funny, because frankly, of all the places I’ve been, it is by far the least generous towards inventors.

For those of you who are not particularly familiar with patents and licensing at universities, here’s how it usually works. Basically, the university owns everything you invent. You own nothing. Fair or not, that’s the way it works. If you have something that you think the outside world would find useful (and is patentable), then you go to the university’s technology transfer office. Naively, the idea is that these folks will decide on whether your work is patentable and worth patenting. They then shop this "intellectual property” to various companies/startups to try and strike a licensing deal. In practice, the issue is that most of these patents just end up sitting on the shelf and never get licensed by a company. It turns out to be very hard to just have a patent sit there and somehow find a home. I think that commercialization works best if the professor herself is actively engaged in trying to develop commercial interest in her technologies, either by making a startup or getting an existing company interested–relying on someone else to make those connections in a largely anonymous fashion seems like playing some very low odds.

The issue is that all these unlicensed patents still cost money to prosecute, and somebody’s got to pay for it. And that’s where Penn’s system gets particularly bad. Typically, the breakdown is such that the inventors get around 1/3 of the money from licensing (the rest goes to various factions at Penn). Some places its a bit more (I’ve seen 35%) and some a bit less (Penn is stingy at 30%). But then come all these legal costs, and here Penn does something very strange. They basically take all the legal costs and take it primarily out of everybody’s personal share. These legal costs typically amount to a whopping 25% of the total inventor’s share. So effectively, you’re getting just 22%! And, more importantly, this applies even if you have already gotten the licensee to pay all the patent expenses! That means that even though the company you are working with is paying all the legal expenses, you are still paying out of your own pocket for everyone else’s patenting costs. In other words, the winners pay for the losers, and they pay a lot.

At other places, they will charge non-legal operating expenses out of the initial pot of licensing income, and then have you pay back the legal expenses on your own particular patent out of the royalties first. This way, if your licensee pays your legal expenses, that directly benefits you. This makes some sort of sense, I suppose–I’m still not sure why inventors get so little, but at least it more directly rewards those who actually manage to get their work out there. Note that somebody still has to pay for the unlicensed patents, but at least those costs usually get split between the university’s share and the inventor’s share, which lightens the load (especially since the university share is much bigger!).

Anyway, look, realistically, nobody’s getting into academia to get rich. That said, commercialization is the best way to have a real impact in the world–that’s just a fact. Why shouldn’t we as scientists benefit somewhat from the ideas that we work so hard to cultivate? And why should Penn scientists benefit considerably less than those at other universities?