Funding Conditions and Public Private Research Portfolio

8/14/2019 Funding Conditions and Public Private Research Portfolio

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FundingCondi*ons,thePublicPrivate

ResearchPor9olio&theDisclosureof

Scien*ficKnowledge

JoshuaGans

UniversityofMelbourne

FionaMurray

MITSloanSchoolofManagement

July200


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Publicvs.PrivateFundersofResearchProjects

Nelson(15)ar*culatesthecri*calroleofpublicfundinginshapingthepor9olioofresearchprojectsundertakenbyscien*sts.

Recentscholarshipemphasizesseveralcriteriaascri*caltoscien*stsprojectchoice(seeAghion,Dewatripont&Stein2008):

Typeofresearch(controloverfreedom) Typeofdisclosure(controloveropenness) And(lesswellexplored)controlovercommercialbenefits

QUESTION:

Howdodifferentfundingcriteria(specificallydisclosure)shapethepor9olioofprojectsandthemixofthoseprojectsbetweenpublic&privatefunders(par*cularlythoseundertakeninuniversi*es)?


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ResearchAgenda

Examinetheimpactofdisclosurecondi6onsa7achedtopublicvs.privatefundingofresearch(inuniversi6es):

Publica(onanddissemina(onrequires

Paten(ng Commercialpayments Exclusiveandnonexclusivelicensing

Exploreimpactsonoutcomes : Numberofprojectsfunded Typeofprojectsfunded Commercialexploita*onofresearchoutput Scien*ficdisclosureofresearchoutput


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Approachtothemicroeconomic

founda*onsofdisclosure

EMPIRICAL:Groundedinanempiricalunderstandingoftherichcontextinwhichdisclosurechoicesaremade

andthewiderangeofdisclosurechoicesactuallymade.

THEORETICAL:Disclosureasanego*a*onbetweenscien*sts&thosewhofundthemoensubjecttokey

disagreementsinpreferences.

FUTURERESEARCHAGENDA


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EmpiricalInsightsintoDisclosure

Shapedatavarietyoflevels&throughavarietyofmechanismsinformalnorms&formalcontracts

Tradi*onalEmphasis:communi*es&regula*ons

Communi*esguidedbynorms,reinforcedbyformalrulesofJournals&Socie*es(e.g.David&Dasgupta14)

Federalregula*onsspecificallyBayhDole180(e.g.Moweryetal,2005) FurtherSourceofInfluence:formalrequirementsoffundersforcurrentandfuturefunding

Public(government)fundingagenciesasdefinedthroughtheirgranttermswithindividualscien*stsandtheiruniversi*esaswellastheirinformal

expecta*ons.

Private(forprofitfirms)fundersthroughcontractualagreementwithscien*stsnego*atedwiththeiruniversi*es.


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Basicdisclosureprac*cesallowsfortwo

formsofdisclosure

Publishing&paten*ng: Canusebothformsofdisclosureforthesameresearchproject(Murray2002;Gans,Murray&Stern2008)

Manyscien*ststakeadvantageofbothbyfilingpatentpaperpairs(Azoulay,Ding&Stuart2007;Montobbio&Guena2008;Thursby&

Thursby200)


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Consequences

PatentPaperPairsfromPublicFunding

DiscoveryoffullerenesbySmalleyandcolleaguesatRiceUniversity

fundedbytheDepartmentofEnergy


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Consequences

PatentPaperPairsfromPrivateFunding

StemcellresearchfundedbyGeronCorporateattheUniversityof

Wisconsindisclosedaspatentandpaper.


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Richsetofinfluencesover

scien*ficdisclosure

TheThreeWiseMenandtheThreeMonkeysbyRauldelaNuez.

CourtesyofRauldelaNuez

Considerablevaria*on

remainspar*cularlyas

imposedbyfunders:Disclosureobliga*onsDisclosure*mingScopeofdisclosure


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Publica*onunder

Publicvs.PrivateFunding Publicfundersplacetheburdenofexpecta*ononscien*ststodisclosetheir

researchthroughpublica*onsbuthavefewformalprocesses

Privatefundersallowpublica*onbutdonotplaceanexpecta*ononthescien*stE.g.DuPontMITAlliancewritesMIThastherighttopublish.[subjectto

condi*ons]

GAOReport04031UniversityResearch


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Paten*ngunder

Publicvs.PrivateFundingPublicfunders(intheUSbutnotelsewhere)obligescien*ststodisclosetheirresearch

throughpatents(undertheBayhDoleAct(FederalRegister([35U.S.C.200etseq.]).

Privatefundingtouniversi*escomeswithasimilarobliga'ontofileforIPoratleastfile

inven*ondisclosures.

e.g.NSFProvision38.SharingofFindings,Data,andOtherResearch

Productsc.Inven(onDisclosure,Elec(onofTitleandFilingofPatentApplica(onsbyGrantee

1.Thegranteewilldiscloseeachsubjectinven6ontoNSFwithintwo

monthsaertheinventordisclosesitinwri*ngtogranteepersonnel

responsiblefortheadministra*onofpatentmaers.Thedisclosureshall

alsoiden*fyanypublica*on

2.Thegranteewillelectinwri*ngwhetherornottoretain*tletoanysuch

inven*onbyno*fyingNSFwithintwoyearsofdisclosuretoNSF.

f.GranteeAc(ontoProtectGovernmentsInterest

1.Thegranteeagreestoexecuteortohaveexecutedandpromptlydeliver

toNSFallinstrumentsnecessaryto:(i)establishorconfirmtherightsthe

Governmenthasthroughouttheworld

2.Thegranteeagreestorequire,bywri7enagreement,itsemployees ,

todisclosepromptlyinwri*ngtopersonneliden*fiedasresponsibleforthe

administra*onofpatentmaersandinaformatsuggestedbythegrantee

eachsubjectinven6onmadeunderthisaward


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Otherdisclosuredynamics

Morecomplexthantypicallyar*culatedindebatesoverdatawithholding

Ambiguousfundersrightstoknowledgeproducedunderdifferentfundingregimes

Incen*vesforsecrecyonthepartoffunders


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Fundershavefewrightsforknowledgedisclosure

&scien*stsseektohavetheirscopelimited

ShelbyAmendment(provisionofPublicLaw105277introducedin1)

theDirectorofOMBamendsSec*on__.36ofOMBCircularA110to

requireFederalawardingagenciestoensurethatalldataproducedunder

anawardwillbemadeavailabletothepublicthroughtheproceduresestablishedundertheFreedomofInforma*onAct."

Inprac*ce

c)TheFederalGovernmenthastherightto(1)obtain,reproduce,publish,orotherwiseusethe

datafirstproducedunderanaward,and(2)authorizeotherstoreceive,reproduce,publish,or

otherwiseusesuchdataforFederalpurposes.Inaddi*on,inresponsetoaFreedomofInforma*on

Act(FOIA)requestfordatarela*ngtopublishedresearchfindingsproducedunderanawardthat

wereusedbytheFederalGovernmentindevelopingpolicyorrules,theFederalawardingagency

shall,withinareasonable*me,obtaintherequesteddatasothattheycanbemadeavailabletothe

publicthroughtheproceduresestablishedundertheFOIA


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Fundersalsoaempttoensuresecrecyat*mes:

Inven*onSecrecyAct CodeofFederalRegula*onsTitle37,Volume1RevisedasofJuly1,18Sec.5.2

Secrecyorder.

IntheUSaloneover5000patentsarecurrentlycoveredbysecrecyorders(Marks,2005TheNewScien(st;Sabing1997)

Atleast10%ofsecrecyorderscoverJohnDoespatentsfiledbynongovernmentemployees(irrespec*veoffunding)

(a)Whenno*fiedbythechiefofficerofadefenseagencythatpublica*onor

disclosureoftheinven*onbythegran*ngofapatentwouldbedetrimentalto

thena*onalsecurity,anorderthattheinven6onbekeptsecretwillbeissuedbytheCommissionerofPatentsandTrademarks.

(b)Anyrequestforcompensa*onasprovidedin35U.S.C.183mustnotbe

madetothePatentandTrademarkOffice,butdirectlytothedepartmentor

agencywhichcausedthesecrecyordertobeissued.[24FR10381,Dec.22,

15,asamendedat62FR53203,Oct.10,17]


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Mostconsistentuseofinven*onsecrecy

occurredintheManhaanProject UnderVannevarBushtheOfficeofScien*ficResearch&Development(OSRD)ensured

thatasmuchpatentcontrolaspossibleresidedinthehandsofthe

government(BushConantFile,Folder147).

Filedover1200patentsaspartoftheManhaanProject(almost2%ofpatentsinthatperiod)wellover80%subjecttosecrecyorders.

SpecialCommieeonAtomicEnergy(146)aerques*oningCaptainLavender(officerinchargeofthepatentprogram)commented:

Development&controlofAtomicEnergy[PL585,Sec*on11(a)]nopatentshall

hereaerbegrantedforanyinven6onordiscoverywhichisusefulsolelyinthe

produc6onorintheu6liza6onoffissionablematerialforamilitaryweapon

Ididntdream,frankly,upun(lthispoint,thattherewasapatent

applica(ondownthereshowinghowthebombwasput

togetherChairman,SenatorBrienMacMahonquotedinWallerstein2008,p.58).


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Publica*onsalsomaintainedsecretinwar*me

intheUSandUK(viastatue)

Manhaanproject Bri*shadvancesincryptography Penicillincrystalstructure:Butdetailedpublicinforma*ononthepenicillin[crystalstructure]resultsweredelayedbecausealloftheinforma*onsecuredduringtheperiodofac*vecollabora*onboreahighsecurityclassifica*on(Clarkeetal.14citedinCranswick2008)

Allwithsomelossofreputa(on/kudos


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Secrecyoverpublica*onsalsoimposedby

privatefunders(viacontracts)OliviericaseattheUniversityofToronto:

PIconduc*ngatrialforpediatricthalessemiapa*entsusingdrugDeferipronefundedbydrugcompanyApotex

PIpublishesinNEJMthatthedrugsnotonlyarenoteffec*vebuthavesignificantnega*veclinicaloutcomes.


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Notsimplyabinaryoutcomenego*a*onsalso

takeplaceover*ming&scopeofdisclosure

Timingofdisclosure

Publica*on&patentdelaybypublic&privatefunders Rapidreleaseofknowledge(espdata)e.g.BermudaRules

Scopeofdisclosure

ExpandingscopeofdisclosureE.g.Crystallographydebates(NIHguidelines)

Contrac*ngscopeofaccesstodisclosedmaterialsandmethodsE.g.Accessto*ssuesamplesfromMul*pleMyeloma


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TimingofDisclosure

SecrecyOrdersforoverfiyyears!

Thelongestknowndelayunderasecrecyorderisnearlysixtyyears. Patent,filedinSeptember1945wasnotgrantedun(lJuly2004forchemical

processresearchdoneatOakRidgeduringthewar.


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Timingofdisclosure

Privatefundersseek*merestric*onsondisclosure

Sponsoredresearchcontractsspecifypublica*ondelays GAO(2003)surveyfoundthat3universi*esdonotpermitanypublica*ondelays,while

160allowasponsortoreviewamanuscriptpriortopublica*on(typicallyfrom30to0days).10universi*esallowalongerperiodofuptoeither120daysor180days,and1university

allowsupto365days(GAO2003)

StandardMITcontractallows30daysbutinlargercontractse.g.DuPontMITAlliance,PIhasanobliga*ontosendDuPontacopyofthepublica*on60dayspriortopublica*onwhichcanbedelayedfornomorethananaddi*onal0daysfromthe*meofreceiptbyDuPonttofileapatent.


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TimingofDisclosure

BermudaRulesimposedbypublicfunders

Tradi*onalnormsofdisclosureofgenesequencesallowedPIslongdiscre*onaryperiodpriortodisclosureofsequencingdata.

FollowingentryofCelera,funders(NIH,DOE&WellcomeTrust)setourprinciplesagreedattheInterna*onalStrategyMee*ngonHuman

Genome(BermudaRules):

requiringgranteestodepositnewlyiden*fiedsequenceinthepublicGenBank

databasewithintwentyfourhours(Eisenberg2006,p.1025andsee

hp://www.gene.ucl.ac.uk/hugo/bermuda.htm)


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ScopeofDisclosure

Requiredbypublicfundersbutwithfewteeth

Na*onalResearchCouncilCommieeonResponsibili*esofAuthorshipintheBiologicalSciencescalledonauthorstoincludethedata,algorithms,orother

informa*onthatis,whateverisnecessarytosupportthemajorclaimsofthe

paperandwouldenableoneskilledinthearttoverifyorreplicatethe

claims(Na*onalResearchCouncil,2003:5). NIHfollowedwithmaterialsharingguidelinesetc.butwidespreadviola*ons(e.g.

Blumenthal18,Cohenetal.2007).


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ScopeofDisclosure

Beerenforcementforcrystalcoordinates

ProteinDataBank(PDB)(Bermanetal.,2000)createdin170sasarepositoryfortheresultsofcrystalstructureanalyses.

Formalsetofguidelinesestablishedtherulesbywhichdatawouldbepubliclyavailable(Interna*onalUnionofCrystallography,18)

Scoperequireddeposi*onofallcoordinates Timingallowedforaholdondatareleaseoneyearbeyondpublica*on.


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Scien*sts&fundersalsolimit

thescopeofdisclosureinterms

ofwhogainsaccess

TheMMRCTissueBankistheonlyresourceofitskindthatintegrates

myeloma*ssuesampleswithcorrespondinggenomicandclinical

data(over1,00sampleswithmatchingperipheralbloodsamples).

OnlyavailabletoresearchersatMemberIns*tu*onsna*onwidePIsfromabout15universi*es.

Fundereffec*velyexcludesothersfromthesekeyresearchdisclosures.


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Varia*onsincommercialpaymentsasdefinedby

funders

Ingeneralcommercialpaymentstoscien*stsmadeatthediscre*onoftheiruniversi*esnotpredeterminedbyfunders

(maybeinterna*onalvaria*on)

Takesplaceviarequirementsforpaten*ng&patentownership. Typically*tleheldbyuniversi*eswithlicensingrevenuessharedwithscien*sts(~30%)


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Model Set-Up

Project space (b,v) on [0,1][0,1] b: scientific kudos/future spillover (if publication) v: immediate use value (if commercialised) k: required capital (Fund ifb + vk) Each project requires 1 scientist (no outside option)

Commerce: Duopoly possible realise v and firms get share 2 Monopoly outcome realise (1-)v and firm gets share Commercialisation cost, (distributed U[0,1]); removed ifscientist has a commercial interest Publication defrays cost by d Patent increases cost (on non-patent holder) by


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Negotiations

Continuum of potential private funders Require expected profit to cover capital costs and any

payment to scientist

Single scientist for each project Scientist has all of the bargaining power Scientists are wealth constrained so cannot contribute

to capital of project

Choices Whether to disclose or not Payment, if any, to scientist Whether to accept public funding or not


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Pure Private Funding

Suppose there is no public funding v = minimum v with positive profits (no pub) v(d) = minimum v with positive profits (pub) v < v(d)

Scientist has commercial interest and patent is heldwith exclusive licensing

Allow publication if: bd()v v

v(d)

Otherwise fund with no publication if: vv


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Remarks

Suppose ironclad patentNo cost to publication as entry is blocked

Gans, Murray and Stern (2009) Scientist payment

Reduced if there is greater scientific kudosStern (2004)


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Public Funding

Total available fundingK< k Budget constraint

Project selection criteria Assume can only observe b Choose to fund b above a threshold, b

Funding conditionsNo patent/commercial payments Patent/open licensing Publication requirementsNo conditions


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No patent/commercial pay

If accept public fundingMust publish to get scientist participation

Forgo monopoly profitsIncur commercialisation costs as scientist has no

interest in defraying them

Conditional on positive profits fromcommercialisation, accept public funding if:


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Crowding out

+

Disclosure

Some projects

not

commercialised


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Open Licensing/Payment

Suppose there is a patent but licensing isrequired to be open

If no commercial interest, same outcome as nopatent

If commercial interest, commercialisation costsdefrayed and there is a duopoly

Public funding accepted if (positive profits):


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Increased

crowding out +

disclosure

All projects

commercialised

Fewer

projects

funded


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Exclusive Licensing

Only condition is publicationAll projects where bd()v request public

funding

Publicly funded projects may lead tomonopoly


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v

Public funding

Private funding

(no publication)

b

Few projects

funded

Increased

crowding out

+ disclosure

No commercial restrictions


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Extensions

Placing weight on immediate useShould public funders do this?

Multi-stage research projects Public goals for secrecy

Funding Conditions and Public Private Research Portfolio

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