Stimulating Commercialization in Government Laboratories

"The policy changes of the 1980s had a substantial impact on the patenting activity of DoE laboratories. Before this period, such facilities had considerably fewer patents per R and D dollar than the average university had, but today they are about equal."

In the 1980s, Congress enacted legislation to encourage patenting and technology transfer at federally funded research and development (R and D) laboratories. In Privatizing R&D: Patent Policy and the Commercialization of National Laboratory Technologies (NBER Working Paper No. 7064), Adam Jaffe and Josh Lerner attempt to measure the success of this initiative. Their results, focusing on U.S. Department of Energy (DoE) laboratories, indicate that the impact of the legislation has been profound.

The United States historically has been ambivalent about privatizing the fruits of publicly funded scientific research. Beginning in 1980, though, the policy underwent a substantial shift: the Stevenson-Wydler Technology Innovation Act and subsequent legislation established technology transfer to the private sector as a primary mission of all federal laboratories. The purpose of this policy was to speed the dissemination of R and D products and to stimulate investment.

Jaffe and Lerner conclude that the policy changes of the 1980s had a substantial impact on the patenting activity of DoE laboratories. Before this period, such facilities had considerably fewer patents per R and D dollar than the average university had, but today they are about equal. University patenting indeed has increased in recent years, but the quality of the awards, as measured by the number of citations they generate, has declined. Using this same measure, the quality of DOE laboratory patents had remained constant or has even increased slightly. These results, Jaffe and Lerner say, suggest that the organizational structure of the government-owned, contractor-operated model used at DOE laboratories may be far more successful than critics have believed.

The authors factor into their study such variables as the scale and scope of individual laboratories, the degree of basic scientific research or defense-related projects conducted at such laboratories, political encouragement or lack thereof, bureaucratic help or hindrance of licensing processes, and the proximity of research facilities to population and entrepreneurial centers. The results suggests the importance of laboratory focus and contractor turnover on both the quantity and quality of patenting. While the underlying activities and the measures of performance are quite different, Jaffe and Lerner suggest that the results are consistent with studies of the privatization of state-owned enterprises.

These findings are supported by case studies of two very different laboratories. The San Francisco Bay Area's Lawrence Livermore National Laboratory, which specializes in nuclear weapons research, is primarily funded by the DOE's Office of Defense Programs and is operated by the University of California. The Idaho National Engineering and Environmental Laboratory is mainly funded by the DOE's Office of Environmental Management, has a private corporation as its main contractor, and is located in a former bomber test site in the Idaho desert. Both of these diverse laboratories have earned accolades for their commercialization achievements, the former especially in licensing and the latter particularly in creating spinout companies.

Even though the Lawrence Livermore laboratory had expanded into such areas as biomedicine and non-nuclear energy and had established strong relationships with the computer and laser industries, the facility made virtually no effort at patenting its discoveries until the legislative initiatives of the 1980s. A dramatic increase in such activity occurred, however, following the National Competitiveness Technology Transfer Act of 1989. Eventual cutbacks in government funding in the mid-1990s motivated Lawrence Livermore accordingly to return to its original focus on undertaking industrial partnerships related only to its mission. Changing Congressional mandates created challenges for the laboratory, and continue to do so. Yet Lawrence Livermore's licensing activities and revenues have risen dramatically throughout the 1990s. The authors point to the laboratory's strong ties to the University of California and to its access to Bay Area companies and venture capitalists as important factors in this regard.

Since its founding in 1949 as a test facility for nuclear reactors, the Idaho National Engineering and Environmental Laboratory has been managed by a series of private contractors. It has since grown into a major employer in the state. Under the influence of the new Congressional mandates of the mid-1990s, not only was technology transfer emphasized, but local politicians pressed for the encouragement of spinout companies to soften the blow of unemployment resulting from federal cutbacks. In 1992, the authors point out, there were no spinouts, and licensing revenue from the Idaho laboratory totaled a mere $7,000. By the middle of the decade, however, a $10 million venture capital fund had been established by a consortium of investors, and licensing activity increased dramatically. In 1997, the Idaho laboratory accounted for seven of the 19 spinouts from the DOE's research institutes.

-- Matt Nesvisky

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