The current model of commercialisation does not work for publicly funded research
It takes money to make money. CSIR-Tech, the commercialisation arm of the Council of Scientific and Industrial Research (CSIR), realised this the hard way when it had to shut down its operations for lack of funds. CSIR has filed more than 13,000 patents — 4,500 in India and 8,800 abroad — at a cost of ₹50 crore over the last three years. Across years, that’s a lot of taxpayers’ money, which in turn means that the closing of CSIR-Tech is a tacit admission that its work has been an expensive mistake — a mistake that we tax-paying citizens have paid for.
Recently, CSIR’s Director-General Girish Sahni claimed that most of CSIR’s patents were “bio-data patents”, filed solely to enhance the value of a scientist’s resume and that the extensive expenditure of public funds spent in filing and maintaining patents was unviable. CSIR claims to have licensed a percentage of its patents, but has so far failed to show any revenue earned from the licences. This compulsive hoarding of patents has come at a huge cost. If CSIR-Tech was privately run, it would have been shut down long ago. Acquiring Intellectual Property Rights (IPR) comes out of our blind adherence to the idea of patenting as an index of innovation. The private sector commercialises patents through the licensing of technology and the sale of patented products to recover the money spent in R&D. But when the funds for R&D come from public sources, mimicking the private sector may not be the best option.
Patents and moral hazard
While it’s true that it costs lakhs of rupees to get a patent in India, government-funded research organisations are likely to spend more money on patents so long as they are not asked to bear the risk. Reckless filing of patents using public funds may be explained by the economic concept of moral hazard. According to economist Paul Krugman, it happens in “any situation in which one person makes the decision about how much risk to take, while someone else bears the cost if things go badly”. In the case of public-funded research, the reckless filing of patents without due diligence results from the moral hazard of the government bearing the risk of patents that don’t generate revenue. In the insurance sector, moral hazard refers to the loss-increasing behaviour of the insured who acts recklessly when the loss is covered by another. Insurance companies check moral hazard by introducing copayment from the insured. Dr. Sahni’s statement that CSIR laboratories need to bear 25% of expenses for their patents acknowledges the moral hazard.
The National IPR Policy released last year does not offer any guideline on distinguishing IPR generated using public funds from private ones — it views every IPR with private objectives by insisting on commercialisation. Dissemination of technology to the masses, participation in nation-building and creating public goods are rarely objectives that drive the private sector. The IPR policy of some publicly-funded research institutions allows for 30-70% of the income generated through the commercialisation of the patent to be shared with the creators of the invention, i.e., scientists and professors on the payroll of the government. Such a policy could promote private aggrandisement and may work against public interest. In contrast, the IPR policy of private companies does not allow for a payback on the share of royalties earned by patents.
Possible solution
The fate of CSIR-Tech is proof that the current model of commercialisation does not work with respect to publicly-funded research. So, how do we ensure that public-funded research reaches the masses and check the excessive filing of patents without due diligence? A possible solution to preserve the objective of publicly funded research is to devise an IPR policy wherein patents are initially offered on an open royalty-free licence to start-ups. Once start-ups commercialise the inventions successfully, the royalty-free licence could be converted into a revenue-sharing model.
It is predominantly taxpayers’ money that goes into public-funded research. When research is commercialised by private entities, it tends to be sold back to the public at a price. America is in the midst of such a conundrum, where talks are going on of granting French pharmaceutical company Sanofi exclusive licence for the drug against the Zika virus — a drug which has already cost the American exchequer $43 million in R&D. Granting Sanofi this would defeat the purpose of public funds expended on research as the company would charge the American public again for the life-saving drug.
Putting granted patents on an open licence can be testimony to the commercial viability of the things we are patenting using public money. Not only would it bring a sense of accountability to the managers who run the system but it would also open up publicly-funded research to a whole lot of people, especially start-ups, who can now test, verify, work and put the patented technology into the market.
It takes money to make money. CSIR-Tech, the commercialisation arm of the Council of Scientific and Industrial Research (CSIR), realised this the hard way when it had to shut down its operations for lack of funds. CSIR has filed more than 13,000 patents — 4,500 in India and 8,800 abroad — at a cost of ₹50 crore over the last three years. Across years, that’s a lot of taxpayers’ money, which in turn means that the closing of CSIR-Tech is a tacit admission that its work has been an expensive mistake — a mistake that we tax-paying citizens have paid for.
Recently, CSIR’s Director-General Girish Sahni claimed that most of CSIR’s patents were “bio-data patents”, filed solely to enhance the value of a scientist’s resume and that the extensive expenditure of public funds spent in filing and maintaining patents was unviable. CSIR claims to have licensed a percentage of its patents, but has so far failed to show any revenue earned from the licences. This compulsive hoarding of patents has come at a huge cost. If CSIR-Tech was privately run, it would have been shut down long ago. Acquiring Intellectual Property Rights (IPR) comes out of our blind adherence to the idea of patenting as an index of innovation. The private sector commercialises patents through the licensing of technology and the sale of patented products to recover the money spent in R&D. But when the funds for R&D come from public sources, mimicking the private sector may not be the best option.
Patents and moral hazard
While it’s true that it costs lakhs of rupees to get a patent in India, government-funded research organisations are likely to spend more money on patents so long as they are not asked to bear the risk. Reckless filing of patents using public funds may be explained by the economic concept of moral hazard. According to economist Paul Krugman, it happens in “any situation in which one person makes the decision about how much risk to take, while someone else bears the cost if things go badly”. In the case of public-funded research, the reckless filing of patents without due diligence results from the moral hazard of the government bearing the risk of patents that don’t generate revenue. In the insurance sector, moral hazard refers to the loss-increasing behaviour of the insured who acts recklessly when the loss is covered by another. Insurance companies check moral hazard by introducing copayment from the insured. Dr. Sahni’s statement that CSIR laboratories need to bear 25% of expenses for their patents acknowledges the moral hazard.
The National IPR Policy released last year does not offer any guideline on distinguishing IPR generated using public funds from private ones — it views every IPR with private objectives by insisting on commercialisation. Dissemination of technology to the masses, participation in nation-building and creating public goods are rarely objectives that drive the private sector. The IPR policy of some publicly-funded research institutions allows for 30-70% of the income generated through the commercialisation of the patent to be shared with the creators of the invention, i.e., scientists and professors on the payroll of the government. Such a policy could promote private aggrandisement and may work against public interest. In contrast, the IPR policy of private companies does not allow for a payback on the share of royalties earned by patents.
Possible solution
The fate of CSIR-Tech is proof that the current model of commercialisation does not work with respect to publicly-funded research. So, how do we ensure that public-funded research reaches the masses and check the excessive filing of patents without due diligence? A possible solution to preserve the objective of publicly funded research is to devise an IPR policy wherein patents are initially offered on an open royalty-free licence to start-ups. Once start-ups commercialise the inventions successfully, the royalty-free licence could be converted into a revenue-sharing model.
It is predominantly taxpayers’ money that goes into public-funded research. When research is commercialised by private entities, it tends to be sold back to the public at a price. America is in the midst of such a conundrum, where talks are going on of granting French pharmaceutical company Sanofi exclusive licence for the drug against the Zika virus — a drug which has already cost the American exchequer $43 million in R&D. Granting Sanofi this would defeat the purpose of public funds expended on research as the company would charge the American public again for the life-saving drug.
Putting granted patents on an open licence can be testimony to the commercial viability of the things we are patenting using public money. Not only would it bring a sense of accountability to the managers who run the system but it would also open up publicly-funded research to a whole lot of people, especially start-ups, who can now test, verify, work and put the patented technology into the market.
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