Chairman Bernanke’s Speach on Government R&D Spending Policy and Economic Development

FED Chairman Ben Bernanke spoke about government funding of research and development at Georgetown University for the “New Building Blocks for Jobs and Economic Growth” conference.

Highlights relating to Intellectual Property:

1.  “Economic policy affects innovation and long-run economic growth in many ways. A stable macroeconomic environment; sound public finances; and well-functioning financial, labor, and product markets all support innovation, entrepreneurship, and growth, as do effective tax, trade, and regulatory policies. Policies directed at objectives such as the protection of intellectual property rights and the promotion of research and development, or R&D, promote innovation and technological change more directly.”

2.  “As I have already suggested, the effective commercial application of new ideas involves much more than just pure research. Many other factors are relevant, including the extent of market competition, the intellectual property regime, and the availability of financing for innovative enterprises. That said, the tendency of the market to supply too little of certain types of R&D provides a rationale for government intervention; and no matter how good the policy environment, ultimately, big new ideas are often rooted in well-executed R&D.”

3.  “One possible policy response to the market underprovision problem would be to substantially strengthen the intellectual property rights regime, for example, by granting the developers of new ideas strong and long-lasting claims to the economic benefits of their discoveries–perhaps by extending and expanding patent rights. This approach has significant drawbacks of its own, however, in that strict limitations on the free use of new ideas would inhibit both further research and the development of valuable commercial applications. Thus, although patent protections and similar rules remain an important part of innovation policy, governments have also turned to direct support of R&D activities.”

4.  “We should also keep in mind that funding R&D activity is only part of what the government can do to foster innovation. As I noted, ensuring a sufficient supply of individuals with science and engineering skills is important for promoting innovation, and this need raises questions about education policy as well as immigration policy. Other key policy issues include the definition and enforcement of intellectual property rights and the setting of technical standards. Finally, as someone who spends a lot of time monitoring the economy, let me put in a plug for more work on finding better ways to measure innovation, R&D activity, and intangible capital. We will be more likely to promote innovative activity if we are able to measure it more effectively and document its role in economic growth.”

Full Speach Below

---

 

Chairman Ben S. Bernanke

At the Conference on “New Building Blocks for Jobs and Economic Growth,” Washington, D.C.

May 16, 2011

Promoting Research and Development: The Government’s Role

I am pleased to speak at this conference on new building blocks for jobs and economic growth. The conference organizers have gathered an outstanding group of participants and have set an ambitious agenda. The topics you will address today and tomorrow, bearing on innovation and intangible capital, are central to understanding how we can best promote robust economic growth in the long run.

I won’t have to spend much time convincing this audience of the importance of long-run economic growth. The Nobel Prize-winning economist Robert E. Lucas, Jr., wrote that once one starts thinking about long-run growth and economic development, “it is hard to think about anything else.”¹  Although I don’t think I would go quite that far, it is certainly true that relatively small differences in rates of economic growth, maintained over a sustained period, can have enormous implications for material living standards. A growth rate of output per person of 2-1/2 percent per year doubles average living standards in 28 years–about one generation–whereas output per person growing at what seems a modestly slower rate of 1-1/2 percent a year leads to a doubling in average living standards in about 47 years–roughly two generations. Compound interest is powerful! Of course, factors other than aggregate economic growth contribute to changes in living standards for different segments of the population, including shifts in relative wages and in rates of labor market participation. Nonetheless, if output per person increases more rapidly, the prospects for greater and more broad-based prosperity are significantly enhanced.

Over long spans of time, economic growth and the associated improvements in living standards reflect a number of determinants, including increases in workers’ skills, rates of saving and capital accumulation, and institutional factors ranging from the flexibility of markets to the quality of the legal and regulatory frameworks. However, innovation and technological change are undoubtedly central to the growth process; over the past 200 years or so, innovation, technical advances, and investment in capital goods embodying new technologies have transformed economies around the world. In recent decades, as this audience well knows, advances in semiconductor technology have radically changed many aspects of our lives, from communication to health care. Technological developments further in the past, such as electrification or the internal combustion engine, were equally revolutionary, if not more so. In addition, recent research has highlighted the important role played by intangible capital, such as the knowledge embodied in the workforce, business plans and practices, and brand names. This research suggests that technological progress and the accumulation of intangible capital have together accounted for well over half of the increase in output per hour in the United States during the past several decades.² 

Innovation has not only led to new products and more-efficient production methods, but it has also induced dramatic changes in how businesses are organized and managed, highlighting the connections between new ideas and methods and the organizational structure needed to implement them. For example, in the 19th century, the development of the railroad and telegraph, along with a host of other technologies, were associated with the rise of large businesses with national reach. And, as transportation and communication technologies developed further in the 20th century, multinational corporations became more feasible and prevalent.

Economic policy affects innovation and long-run economic growth in many ways. A stable macroeconomic environment; sound public finances; and well-functioning financial, labor, and product markets all support innovation, entrepreneurship, and growth, as do effective tax, trade, and regulatory policies. Policies directed at objectives such as the protection of intellectual property rights and the promotion of research and development, or R&D, promote innovation and technological change more directly.

In the remainder of my remarks, I will focus on one important component of innovation policy–namely, government support for R&D. As I have already suggested, the effective commercial application of new ideas involves much more than just pure research. Many other factors are relevant, including the extent of market competition, the intellectual property regime, and the availability of financing for innovative enterprises. That said, the tendency of the market to supply too little of certain types of R&D provides a rationale for government intervention; and no matter how good the policy environment, ultimately, big new ideas are often rooted in well-executed R&D.

The Rationale for a Government Role in Research and Development
Governments in many countries directly support scientific and technical research, for example, through grant-providing agencies (like the National Science Foundation in the United States) or through tax incentives (like the R&D tax credit). In addition, the governments of the United States and many other countries run their own research facilities, including facilities focused on nonmilitary applications such as health. The primary economic rationale for a government role in R&D is that, absent such intervention, the private market would not adequately supply certain types of research.³ The argument, which applies particularly strongly to basic or fundamental research, is that the full economic value of a scientific advance is unlikely to accrue to its discoverer, especially if the new knowledge can be replicated or disseminated at low cost. For example, James Watson and Francis Crick received a minute fraction of the economic benefits that have flowed from their discovery of the structure of DNA. If many people are able to exploit, or otherwise benefit from, research done by others, then the total or social return to research may be higher on average than the private return to those who bear the costs and risks of innovation. As a result, market forces will lead to underinvestment in R&D from society’s perspective, providing a rationale for government intervention.

One possible policy response to the market underprovision problem would be to substantially strengthen the intellectual property rights regime, for example, by granting the developers of new ideas strong and long-lasting claims to the economic benefits of their discoveries–perhaps by extending and expanding patent rights. This approach has significant drawbacks of its own, however, in that strict limitations on the free use of new ideas would inhibit both further research and the development of valuable commercial applications. Thus, although patent protections and similar rules remain an important part of innovation policy, governments have also turned to direct support of R&D activities.

Of course, the rationale for government support of R&D would be weakened if governments had consistently performed poorly in this sphere. Certainly, there have been disappointments; for example, the surge in federal investment in energy technology research in the 1970s, a response to the energy crisis of that decade, achieved less than its initiators hoped. In the United States, however, we have seen many examples–in some cases extending back to the late 19th and early 20th centuries–of federal research initiatives and government support enabling the emergence of new technologies in areas that include agriculture, chemicals, health care, and information technology. A case that has been particularly well documented and closely studied is the development of hybrid seed corn in the United States during the first half of the 20th century.⁴  Two other examples of innovations that received critical federal support are gene splicing–federal R&D underwrote the techniques that opened up the field of genetic engineering–and the lithium-ion battery, which was developed by federally sponsored materials research in the 1980s.  And recent research on the government’s so-called war on cancer, initiated by President Nixon in 1971, finds that the effort has produced a very high social rate of return, notwithstanding its failure to achieve its original, ambitious goal of eradicating the disease.⁵ 

What about the present? Is government support of R&D today at the “right” level? This question is not easily answered; it involves not only difficult technical assessments, but also a number of value judgments about public priorities. As background, however, a consideration of recent trends in expenditures on R&D in the United States and the rest of the world should be instructive. In the United States, total R&D spending (both public and private) has been relatively stable over the past three decades, at roughly 2-1/2 percent of gross domestic product (GDP).⁶  However, this apparent stability masks some important underlying trends. First, since the 1970s, R&D spending by the federal government has trended down as a share of GDP, while the share of R&D done by the private sector has correspondingly increased.⁷  Second, the share of R&D spending targeted to basic research, as opposed to more applied R&D activities, has also been declining.⁸  These two trends–the declines in the share of basic research and in the federal share of R&D spending–are related, as government R&D spending tends to be more heavily weighted toward basic research and science. The declining emphasis on basic research is somewhat concerning because fundamental research is ultimately the source of most innovation, albeit often with long lags. Indeed, some economists have argued that, because of the potentially high social return to basic research, expanded government support for R&D could, over time, significantly boost economic growth.⁹ That said, in a time of fiscal stringency, the Congress and the Administration will clearly need to carefully weigh competing priorities in their budgetary decisions.

Another argument sometimes made for expanding government support for R&D is the need to keep pace with technological advances in other countries. R&D has become increasingly international, thanks to improved communication and dissemination of research results, the spread of scientific and engineering talent around the world, and the transfer of technologies through trade, foreign direct investment, and the activities of multinational corporations. To be sure, R&D spending remains concentrated in the most-developed countries, with the United States still the leader in overall R&D spending.¹⁰ However, in recent years, spending on R&D has increased sharply in some emerging market economies, most notably in China and India. In particular, spending for R&D by China has increased rapidly in absolute terms, although recent estimates still show its R&D spending to be smaller relative to GDP than in the United States.¹¹  Reflecting the increased research activity in emerging market economies, the share of world R&D expenditures by member nations of the Organisation for Economic Co-Operation and Development, which mostly comprises advanced economies, has fallen relative to non-member nations, which tend to be less developed. A similar trend is evident, by the way, with respect to science and engineering workforces.¹² 

How should policymakers think about the increasing globalization of R&D spending? On the one hand, the diffusion of scientific and technological research throughout the world potentially benefits everyone by increasing the pace of innovation globally. For example, the development of the polio vaccine in the United States in the 1950s provided enormous benefits to people globally, not just Americans. Moreover, in a globalized economy, product and process innovations in one country can lead to employment opportunities and improved goods and services around the world.

On the other hand, in some circumstances, the location of R&D activity can matter. For example, technological prowess may help a country reap the financial and employment benefits of leadership in a strategic industry. A cutting-edge scientific or technological center can create a variety of spillovers that promote innovation, quality, skills acquisition, and productivity in industries located nearby; such spillovers are the reason that high-tech firms often locate in clusters or near leading universities.¹³  To the extent that countries gain from leadership in technologically vibrant industries or from local spillovers arising from inventive activity, the case for government support of R&D within a given country is stronger.¹⁴ 

How Should Governments Provide Support for Research and Development?
The economic arguments for government support of innovation generally imply that governments should focus particularly on fostering basic, or foundational, research. The most applied and commercially relevant research is likely to be done in any case by the private sector, as private firms have strong incentives to determine what the market demands and to meet those needs.¹⁵ 

If the government decides to foster R&D, what policy instruments should it use? A number of potential tools exist, including direct funding of government research facilities, grants to university or private-sector researchers, contracts for specific projects, and tax incentives. Moreover, within each of these categories, many choices must be made about how to structure specific programs. Unfortunately, economists know less about how best to channel public support for research and development than we would like; it is good news, therefore, that considerable new work is being done on this topic, including recent initiatives on science policy by the National Science Foundation.¹⁶ 

Certainly, the characteristics of the research to be supported are important for the choice of the policy tool. Direct government support or conduct of the research may make the most sense if the project is highly focused and large-scale, possibly involving the need for coordination of the work of many researchers and subject to relatively tight time frames. Examples of large-scale, government-funded research include the space program and the construction and operation of “atom-smashing” facilities for experiments in high-energy physics. Outside of such cases, which often are linked to national defense, a more decentralized model that relies on the ideas and initiative of individual researchers or small research groups may be most effective. Grants to, or contracts with, researchers are the typical vehicle for such an approach.

Of course, the success of decentralized models for government support depends on the quality of execution. Some critics believe that funding agencies have been too cautious, focusing on a limited number of low-risk projects and targeting funding to more-established scientists at the expense of researchers who are less established or less conventional in their approaches. Supporting multiple approaches to a given problem at the same time increases the chance of finding a solution; it also increases opportunities for cooperation or constructive competition.¹⁷  The challenge to policymakers is to encourage experimentation and a greater diversity of approaches while simultaneously ensuring that an effective peer-review process is in place to guide funding toward high-quality science.¹⁸ 

However it is channeled, government support for innovation and R&D will be more effective if it is thought of as a long-run investment. Gestation lags from basic research to commercial application to the ultimate economic benefits can be very long. The Internet revolution of the 1990s was based on scientific investments made in the 1970s and 1980s. And today’s widespread commercialization of biotechnology was based, in part, on key research findings developed in the 1950s. Thus, governments that choose to provide support for R&D are likely to get better results if that support is stable, avoiding a pattern of feast or famine.¹⁹ 

Government support for R&D presumes sufficient national capacity to engage in effective research at the desired scale. That capacity, in turn, depends importantly on the supply of qualified scientists, engineers, and other technical workers. Although the system of higher education in the United States remains among the finest in the world, numerous concerns have been raised about this country’s ability to ensure adequate supplies of highly skilled workers. For example, some observers have suggested that bottlenecks in the system limit the number of students receiving undergraduate degrees in science and engineering: Surveys of student intentions in the United States consistently show that the number of students who seek to major in science and engineering exceeds the number accommodated by a wide margin, and waitlists to enroll in technical courses have trended up relative to those in other fields, as has the time required to graduate with a science and engineering degree.²⁰  Moreover, although the relative wages of science and engineering graduates have increased significantly over the past few decades, the share of undergraduate degrees awarded in science and engineering has been roughly stable.²¹  At the same time, critics of K-12 education in the United States have long argued that not enough is being done to encourage and support student interest in science and mathematics. Taken together, these trends suggest that more could be done to increase the number of U.S. students entering scientific and engineering professions.

At least when viewed from the perspective of a single nation, immigration is another path for increasing the supply of highly skilled scientists and researchers. The technological leadership of the United States was and continues to be built in substantial part on the contributions of foreign-born scientists and engineers, both permanent immigrants and those staying in the country only for a time. And, contrary to the notion that highly trained and talented immigrants displace native-born workers in the labor market, scientists and other highly trained professionals who come to the United States tend to enhance the productivity and employment opportunities of those already here, reflecting gains from interaction and cooperation and from the development of critical masses of researchers in technical areas. More generally, technological progress and innovation around the world would be enhanced by lowering national barriers to international scientific cooperation and collaboration.

Conclusion
In the abstract, economists have identified some persuasive justifications for government policies to promote R&D activities, especially those related to basic research. In practice, we know less than we would like about which policies work best. A reasonable strategy for now may be to continue to use a mix of policies to support R&D while taking pains to encourage diverse and even competing approaches by the scientists and engineers receiving support.

We should also keep in mind that funding R&D activity is only part of what the government can do to foster innovation. As I noted, ensuring a sufficient supply of individuals with science and engineering skills is important for promoting innovation, and this need raises questions about education policy as well as immigration policy. Other key policy issues include the definition and enforcement of intellectual property rights and the setting of technical standards. Finally, as someone who spends a lot of time monitoring the economy, let me put in a plug for more work on finding better ways to measure innovation, R&D activity, and intangible capital. We will be more likely to promote innovative activity if we are able to measure it more effectively and document its role in economic growth.

---

Advertisement

Biotechnology and the State of the Union Address

The following was published in Politico’s Join the Debate.  Politico asked “What should Obama say in the State of the Union?”

 

Jim Greenwood Former Congressman (R-Pa.), President and CEO, Biotechnology Industry Organization :

 

The president’s State of the Union should, rightly, focus on jobs, particularly the need to create and fill new jobs to compete in an increasing competitive global marketplace. There’s no industry that better exemplifies the promise of job creation than biotechnology.

Today, the U.S. biotechnology sector employs more than 1.3 million workers in high-skill, high-wage jobs. Since 2001, our industry has added nearly 200,000 jobs. This is quite an accomplishment in the midst of a deep recession, and a sign that this industry can be a driver of economic growth. Quite literally we are just what the doctor – and president – has ordered.

Strong patent protection, balanced reimbursement policies, science-based regulations and other pro-innovation public policies will help our industry fulfill our promise. Through targeted policies such as the Therapeutic Discovery Project, which awarded tax credits to small cutting-edge biotech companies to support research and development efforts, the president can help spur continued medical innovation, grow American jobs and position our nation for continued leadership in the global marketplace.

PTO Director Kappos Remarks at Innovation Alliance Conference: IP leads to job growth

Thank you Roger [Martin], for that kind introduction.  I would like to thank the Innovation Alliance for having me in today to speak with you about intellectual property’s vital role in today’s innovation economy.

America stands at a critical juncture in our economic evolution, and intellectual property will play a key role in driving our economic growth and renewal.

As technological advances bring great change to the speed and complexity of American innovation, strong intellectual property protection and its effective enforcement will fuel innovation and jump-start our economy.

Today, I’ll speak about the critical role of IP in spurring innovation – and in increasing America’s competitiveness globally.

I’ll address the how the USPTO can ensure a well-functioning patent system; a patent system that enables small and medium sized businesses to secure the investment capital they need to bring their goods and services to market, and helps promote the free flow of goods and services across markets.  I’ll discuss the imperative for government leaders – the Executive branch, the Congress and the courts – to nurture an IP eco-system that will promote innovation, and ensure America’s economic well-being.

The economic success of the United States is deeply rooted in the history of American innovation.  This country was founded by pioneers who developed new ways to cope with an unfamiliar environment, who cured disease and connected a country, and who led the world into the age of flight.  American innovators discovered the power of information technology and digital communication that brought unprecedented commerce, economic growth, and prosperity.

So, our history has been driven by innovation. And our economic security continues to depend upon our ability to innovate – and to compete in an innovation economy.   The key to economic success lies increasingly in innovative product and service development, and in intellectual property protection, which creates value for innovation.

IP is – in effect — the global currency of innovation.

Today, as a share of gross economic value, the United States invests more in intangible assets than any of our major trading partners, and our intangible investments now exceed those in tangible assets by more than 20%.

And it is patent-reliant industries, specifically, that make up the most dynamic parts of the economy—from nanotechnology to pharmaceuticals, from computers to bio-tech, and from fiber optics to green technology.

Timely and high-quality patents are critical to small businesses, which create two out of every three American jobs.   They foster research and development, which requires capital and investment.

And they are essential to attracting the funds needed to bring innovation to market.

Let’s take the example of a company called Xencor—outside Los Angeles—which creates cutting-edge biotherapeutics to treat cancer, inflammation, and autoimmune disease.  Xencor uses patents to protect its proprietary design automation technology.

Xencor CEO Dr. Bassil Dahiyat put it simply: “without patents, you cannot get funding, and without funding, you cannot grow and create jobs.”

In Southeast Michigan, one of the areas hardest hit by the recession, the company Axletech International is a global manufacturer of machine hardware, with a significant patent portfolio upon which it depends heavily.  Since it began as a spin-off in 2002, Axletech has more than doubled its workforce and now employs more than 1,000 people.

Two different industries, two very different regions, two very different companies.  One thing in common: innovation protected by intellectual property creating jobs.

The United States Patent and Trademark Office was described in Harvard Business Review as the “biggest job creator you never heard of.”

As our country seeks to regain the 8 million jobs lost during the recent recession, the USPTO is a great place to start. Countless inventions that can spark new businesses are right there—sitting in the backlog. And reducing that backlog is one of Secretary Locke’s and my highest priorities.

The backlog of over 700,000 patent applications stands as a barrier to innovation and economic growth.  A 2010 report concludes that the backlog could ultimately cost the US economy billions of dollars annually in “foregone innovation.”

The next laser, the next energy breakthrough, the next cure for a debilitating disease, is buried in the files of the USPTO—and that is simply unacceptable.

So what are we doing about it?   First, we’re working to improve the quality of the patent application review process at the USPTO.  Quality patent issuances create certainty in the market.  Market certainty, in turn, facilitates growth.

Second, we are reforming the USPTO to reflect its criticality to our economy—and transforming the agency to match the fast pace of technology and innovation.

To this end, we’ve re-engineered the way we motivate and monitor our corps of examiners as well as our leaders; we’ve adopted new ways to recruit and retain top professionals; we’ve redefined performance plans to reflect the importance of high quality patent examination and backlog reduction; fostered more communication between applicants and examiners to improve quality and efficiency; and we’re working to build a new IT infrastructure that will speed patent application processing and improve search quality.

But—most critically—to decrease pendency while improving the quality of our work product, we have begun to recognize what companies in the shipping business figured out some time ago—that all packages don’t have to get to their destination at the same rate.  Some require next day service, while others can take a week.

It is clearly time for the USPTO—our nation’s Innovation Agency—to adopt private sector business practices and offer market-driven services.

So, the USPTO has instituted various programs enabling applicants to receive accelerated review, including for technologies in areas that are priorities for the Obama Administration – like green technology that is essential to battling climate change.

Very shortly, we will be issuing a notice regarding the details of Track 1 of the three track proposal we circulated last year, which is our plan to provide a comprehensive, flexible, patent application processing model offering different processing options more responsive to the real-world needs of our applicants.

Significantly, Track 1 will enable applicants – for a fee – to secure their patent within one year – thus enabling important new products and services to come to market sooner, create jobs and opportunity sooner, and make Americans healthier and more productive—a lot sooner.

Through programs like these, and through the tireless work of our examining corps, we will focus our efforts more effectively, reduce pendency, bring the backlog down, and foster innovation critical to the economic and social well-being of the United States.

But, America’s innovation success will require more than an effective USPTO.  It will be a function of many complex and overlapping innovation variables.

In the proud history of the United States—innovation led development—IP led development—has created economic vitality and good jobs.

In fact, technological innovation is linked to three quarters of our Nation’s post WWII growth rate.  And between 1990 and 2007, compensation for jobs in innovation-intensive sectors increased by two and a half times the national average.

And the US government has always played a critical role in ensuring innovation-driven growth.

During the deep recession of the 1970’s—innovation slowed dramatically and the manufacturing sector declined significantly.   In response, the US government launched a Domestic Policy Review aimed at reviving American industrial innovation.  This study, and others like it, led to the creation of the Court of Appeals for the Federal Circuit, which brought clarity to the law and improved certainty around IP rights—increasing their value.

At the same time, Congress realized the critical role of patents in innovation through university research and development.  So it passed the Bayh-Dole Act, which encourages university patenting.

The increase in patent value and R & D that resulted from the patent system improvements of the late 1970’s and early 1980’s paved the way for a new era of economic growth and opportunity that lasted for the better part of two decades.

Now, as in the 1970’s and 1980’s, the United States stands at a crossroads of innovation.  Today we are presented with another innovation opportunity – and we again need sound IP policy and enforcement to increase the value of innovation.

To this end, the USPTO strongly supports comprehensive patent reform and applauds the significant efforts of Members of both the House and Senate to continue to push for these reforms, particularly Chairman Leahy and Chairman Smith who are making getting this bipartisan jobs legislation passed a top priority.

Proposals in this legislation – many that will help USPTO do its job better — have been discussed for the better part of the last 10 years.  And this is the Congress where we should and must finish those many years of work.

Parties have debated proposals and amended language many times, to where we now have key provisions that most parties support and that – without a doubt – will add more certainty to litigation, enable greater work sharing between USPTO and other countries, and help USPTO continue with the operational changes we know are needed to support innovators, help companies create jobs and put new, and better products in the marketplace.

President Obama talked about patent reform in his meeting with CEOs last month.  Secretary Locke has been and will continue to be a true champion in this endeavor.  And I am committed to continue working with Congress as they work to put forth the best piece of legislation possible.

And to do so, we’ll use what we’ve learned from recent litigation and court decisions and from the previous Congressional attempts to make Patent Reform law.   We’ll also need your continued feedback and support.  But make no mistake—the time is now, this year, to restore our nation’s innovation system to the global platinum standard it must be.

In parallel with reform of the patent system, it is incumbent upon us to develop a comprehensive and robust national IP policy focused on leveraging our IP system for economic growth and job creation.

America’s economic security depends on it.  So, in coordination with the White House, the Department of Commerce, and as a part of the President’s Innovation Strategy, the USPTO will lead in creating a National IP Strategy.

And we’ll reach out to the inventor, university and business community to play an active role in formulating this policy, based on sound practices.

We must provide an environment that allows American innovators, small and large, to protect their IP and attract capital based on their ideas. For businesses to flourish, we must provide timely and high quality access to IP rights.  And we must ensure that universities press forward the frontiers of science, while working with the private sector to ensure that the value they create is both protected and diffused quickly for the benefit of the communities they serve.

All parts of the US innovation value chain must remain vibrant…and if amplified by good government policy, the current re-aligning trends can support one another to preserve American leadership in the decades to come.

A sound national IP policy will lead to the creation and success of more innovative companies like Xencor and Axletech.  And it will ensure that we can leverage IP to safeguard our economic well-being.

If we act to meet these challenges, we can fuel decades of American economic growth.  The simple prerequisite:  a national focus on intellectual property as the currency of innovation.

Thank you.

Link to the USPTO website and speech

Bayh-Dole Podcast moderated by BIO with AUTM and patient advocate

Lila Feisee, Vice President for Global Intellectual Property Policy at BIO, moderated a podcast on the benefits of the Bayh-Dole Act and the need to maintain flexibility in our nation’s technology transfer system.  She was joined by:

• Dr. Ashley Stevens, Special Assistant to the Vice President for Research Technology Development and Senior Research Associate at the Institute for Technology Entrepreneurship & Commercialization at the Boston University School of Management.  He  also serves as President of the Association of University Technology Managers (AUTM), a nonprofit organization with an international membership of more than 3,000 technology managers and business executives. AUTM members come from more than 300 universities, research institutions and teaching hospitals as well as numerous businesses and government organizations.
• Betsy de Parry, a patient advocate and author of The Roller Coaster Diaries, the story of her experience with non-Hodgkin’s lymphoma.

For more information on the many benefits the Bayh-Dole Act has provided, please visit http://www.b-d30.org/.  Information on AUTM can be found at http://www.autm.net.

To listen to the podcast go to:  http://www.biotech-now.org/section/bio-matters/2011/01/12/celebrating-thirty-years-success-bayh-dole-act and press the play button at the bottom of the article.

Senator Leahy’s remarks on Senate Judiciary’s Innovation Agenda

Here are remarks Senator Leahy made at the Newseum yesterday regarding the Senate Judiciary’s agenda for the 112th Congress.  I have inserted below his comments on promoting innovation and creating jobs. 

Promoting Innovation and Creating Jobs

While we continue our work to protect the taxpayers’ dollars, we must also focus on protecting American jobs.  Last year, the Senate Judiciary Committee unanimously supported bipartisan efforts to stop online criminals from stealing our Nation’s intellectual property.  Online infringement costs our national economy billions of dollars every year.  Our intellectual property-based businesses are among the most productive in our economy and among its best employers.  We cannot stand by and see them ravaged, and American consumers subjected to counterfeits.  We will renew our effort this year.

Among our top priorities is the Patent Reform Act.  This bipartisan initiative to modernize our patent system has received considerable attention in the last several Congresses.  Updating our antiquated patent system will keep America at the forefront of innovation and invention.  It will help bolster our economy and protect jobs.  And it will do so without adding a penny to the Nation’s deficit.  I am encouraged that Chairman Lamar Smith of the House Judiciary Committee agrees that patent reform is sorely needed.  In the interest of protecting American jobs and economic leadership, Democrats and Republicans need to complete this important legislative effort.

Another area in which Senator Grassley and I have worked together over the years has been in confronting anti-competitive business conduct, especially in agriculture.  In the last two years, the Justice Department has become more aggressive in protecting competition.  The competition workshops held across the country jointly by the Justice and Agriculture Departments were a start, and the steps taken by the Antitrust Division have been good.  Now we hope to build on that as we confront overconcentration in agricultural businesses.  

I also hope Congress will finally repeal the health insurance industry’s exemption from our antitrust laws.  There was bipartisan support for this repeal in the last Congress.  There is no place in our health insurance market for anticompetitive abuses, and repealing this exemption is an important step toward bringing competition to the health insurance market.

There are many other ways in which the Judiciary Committee can contribute to our economic recovery and the expansion of American jobs.  We can strengthen programs like the EB-5 Regional Center Investment Program, which encourages foreign investment and spurs job creation in our state and local economies.  Senator Grassley and I are both acutely aware of the unique challenges facing the agriculture industry, and I believe the Judiciary Committee should take a close look at how we can move forward with important immigration proposals like AgJOBS, and ways to improve visa programs like the H-2A program so that important agricultural industries such as the dairy industry have access to a lawful workforce.  

There are encouraging economic signs, but our national economy is still recovering with too many people still out of work.  In the interest of American workers, Democrats and Republicans need to work together on these measures that buttress key pillars of the American economy.

BIO’s IP Priorities for 2011

As we start a new year, the BIO Intellectual Property Department has determined their 2011 priorities.  Intellectual Property remains a foundational priority for BIO and our 1100 biotechnology company members.

BIO’s IP department has approved the following priorities for 2011:

1) PTO reforms to improve efficient, timely and quality examination

2) Congressional patent reform legislation

3) Improving IP protection in key foreign markets

4) IP legal developments in the courts

5) Protecting the breadth and flexibility of the patent and technology transfer system.

Innovation Alliance Event “Patents, Innovation and Job Creation: A Virtuous Circle”

An event is coming up on patents, innovation and job creation at the Newseum on Friday January 21.  The keynote speakers are  PTO Director David Kappos and Retired Chief Judge of the Federal Circuit Paul Michel. 

Other industry experts and executives will participate in panel discussions.  Below is the news release.

As the U.S. economy struggles with high unemployment, the Innovation Alliance hosts a half-day discussion with inventors, entrepreneurs, business leaders, and industry experts on the economic value of patents and a vigorous USPTO. The conference features remarks from David Kappos, Director of the U.S. Patent and Trademark Office, and Paul Michel, U.S. Court of Appeals for the Federal Circuit, Retired Chief Judge. Gene Quinn, founder of IPWatchdog, Inc and Kim Hart, reporter at Politico will moderate morning panels on creating jobs and the impact of patents on the modern innovation economy. Email Innovation Alliance to RSVP

Here is the advertisement with further details.

AUTM U.S. Licensing Survey 2009

AUTM released their 2009 report for technology transfer licensing activities.  Of particular interest is the 596 start-up companies that were created in the middle of an economic recessision.  This Survey suggests that in 2009 Bayh-Dole contributed to growth in an otherwise declining economy, created jobs, and helped fund future research. 

Here are the U.S. Highlights:

Economic Impact

The number of licenses executed increased 5.6 percent, whereas the number of options decreased 3.4 percent. Total licenses and options increased 3.8 percent. The number of startups was essentially unchanged.

Products, startups and licenses/options:

• 658 new commercial products launched

• 5,328 total licenses and options executed, 4,374 of which were licenses

• 596 startup companies formed, 435 of which had their primary place of business in the licensing institution’s home state

• 3,423 startups still operating as of the end of 2009

 

Technology Transfer Pipeline

Research expenditures continued to increase: total research and development spending increased 4.7 percent, federal expenditures increased 1.9 percent, and given the financial downturn, an 8.2 percent surge in industrial research funding was especially significant.

Research expenditures:

• $53.9 billion total sponsored research expenditures

• $33.3 billion in federally funded sponsored research expenditures

• $4.0 billion in industry-sponsored research expenditures

 

Intellectual Property Management

The number of disclosures received increased 1 percent.

Disclosures:

• 20,309 disclosures

AUTM analyzed, in great depth — the areas within which the disclosures fell and was able to categorize 66 percent of the disclosures or 13,376.

Total U.S. patent applications filed decreased almost 4 percent, while new patent applications declined almost 1 percent. However, the number of foreign filings increased significantly, up almost 56 percent.

Patents filed:

• 18,214 total U.S. patent applications

• 12,109 new patent applications

• 1,322 non-U.S. patent applications

The number of patents issued increased nearly 4 percent.

Patents issued:

• 3,417 issued patents

 

License Income

Total license income decreased 32.5 percent in 2009. This decrease is largely due to 2008’s figures including substantial one time payments received by Northwestern University, City of Hope National Medical Center and Beckman Research Institute, Sloan Kettering Institute for Cancer Research and Children’s Hospital of Philadelphia. The decrease was across the board: Running royalties dropped 29.7 percent, cashed-in equity dropped 45 percent, and other income dropped 35.5 percent.

• Total income: $2.3 billion

• Running royalty: $1.6 billion

• Cashed-in equity: $24.4 million

• Other income: $362 million

AUTM’s 2010 Better World Report Highlights

 AUTM released their Better World Report for 2010 highlighting academic innovations commercially developed through technology transfer that are improving the quality of life.  Here is a quote from their press release.

A device that allows the blind to ―see‖ via electrical pulses applied to the tongue…a collagen scaffold to treat damaged joints…a new vaccine to prevent shingles…an artificial lung that provides patients with both mobility and comfort during treatment…a program that vastly improves literacy among middle and high-school age students…a device that transforms wheelchairs into all-terrain vehicles…a vaccine to prevent HPV…

These are just a few of the discoveries featured in the 2010 edition of the AUTM Better World Report, a collection of stories about technologies that originated in academic research and were brought to the public through technology transfer, the process of licensing and commercializing academic research so it can become real products that make the world a healthier and safer place.

Senator Birch Bayh writes the foreword and includes impressive evidence of Bayh-Dole’s success.

• More than 6,000 new U.S. companies were formed from university inventions.

• 4,350 new university licensed products are in the market.

• 5,000 active university-industry licenses are in effect, mostly with small companies.

• More than 153 new drugs, vaccines or in vitro devices have been commercialized from federally funded research since enactment of Bayh-Dole.

• Between 1996 and 2007 university patent licensing made:

❍ a $187 billion impact on the U.S. gross domestic product,

❍ a $457 billion impact on U.S. gross industrial output; and

❍ 279,000 new jobs in the United States.

A fairly impressive accomplishment considering before Bayh-Dole Senator Bayh states:

 “We found 28,000 government-funded inventions gathering dust on agency shelves with not a single drug commercialized when the government owned the patent.”

The report is an interesting read as it includes a small snapshot of what the academic and private sector can do when patent ownership incentives are properly aligned. 

 

USPTO Economic Research Agenda

The USPTO has a new Office of the Chief Economist and they have recently published their research agenda.

The OCE is embarking upon an aggressive economic research program to provide evidence on a range of matters relevant to policymaking and the effect of IP on economic outcomes more generally.  These include:

(1) Relating IP to economic growth, performance and employment, including:             

            (a)  IP and entrepreneurship                                 

            (b)  IP and wider economy-wide growth.                              

(2) IP in de facto standards, standard setting, and standards policy.

(3) Researching the economics of trademarks and trademark examination.

(4) Understanding the economics of USPTO initiatives, including initiatives to reduce application backlogs, by better understanding their costs, benefits, and effects.

(5) Analyzing the role that IP plays in the markets for technology and knowledge 

Report on a conference discussing the “Research Agenda”  at the University of California (09/10/2010)

For more specifics from the PTO website click here.