IP's bottom-line gains may be fleeting

March 6, 2008

Some of the arguments in your very useful survey of opinion on the scope for universities to generate income by licensing patented intellectual property ("A penny for your thoughts", 28 February) seem to assume that any such licensing income would be a bonus over and above public funding for research.

That seems a dangerous assumption. The economic rationale for public funding of university research, which continues to influence government thinking on these matters, is that some research has widespread social benefit but it would be impossible to raise subscriptions from the beneficiaries to pay for the cost. Public funding is provided because of this "market failure". If universities choose to fund a research field by creating intellectual property rights and licensing them, then the Government may argue that the "market failure" has been resolved, and there is no need for the state to pay anything more.

It is most unlikely that licensing revenues would be a pure bonus. If universities, in aggregate, raise more income from licensing patents, then they can expect the Government to provide less public funds for research.

Peter Swann, Professor of industrial economics, Nottingham University Business School.

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