Federal lab innovation
American Federal R&D labs have played an instrumental role in innovation and technology progress. This journey began in the late 1800s but was accelerated during World War 2, with the Manhattan Project serving as a pivotal project in US history.
This project not only marked the inception of large labs but also set a precedent for the scale and intensity of research efforts that could be put towards national objectives.
Over the decades, their mandate has broadened from primarily military and security objectives to encompass a wide array of fields, including energy, health, environmental science, and space exploration. These labs have developed many technologies we have become accustomed to today, such as touch screens, led lights, the flu shot and even lactose-free milk!
A growing concern
Recently, there's been a growing concern about the United States losing its edge in technology to overseas rivals. This has reignited attention and funding going towards the innovations coming out of federal labs.
However, where the real challenge lies is in bridging the gap between labs and the marketplace, ensuring these technologies benefit society and keep America moving forward.
In this piece we will dive deeper into the challenges federal labs face when commercializing their inventions. But first, let's start at an important moment in US history, the inception of the Bayh-Dole act.
Bayh-Dole Act
The Bayh-Dole act is a law that was passed in 1980 to provide incentives to drive commercialization of federally funded inventions. Research institutions receiving government funding, such as federal labs or universities, must abide by the act.
The act essentially allows labs to hold the title to patents on their inventions and to license them to the private sector to further develop them for commercialization. The private sector partners assume the full risk of commercializing and developing the technologies. With the goal of a product being brought to market, and royalties paid back to the research lab.
Since its introduction in 1980, the act has proven to be enormously successful. It has played a direct role in generating over $1.3 trillion in economic growth, creating more than 4.2 million jobs, and leading to the establishment of over 11,000 new startup companies.
However, even with the help of this monumental act, research labs still face massive challenges in the commercialization journey.
How federal labs commercialize inventions
First, lets look at three common paths used by federal labs to commercialize their inventions.
Licensing agreements to existing companies. This typically involves granting rights to use, manufacture and sell the technology to the external company. In return, the lab receives an upfront payment or royalties based on future revenue. Licensing is popular because it allows the lab to benefit financially without bearing the costs and risks of developing a product.
Industry partnerships to co-develop technologies. The lab provides resources (facilities, equipment, personnel, services), and the external partner provides access to markets. Collaborations can take different forms, including joint ventures, research agreements, and co-development projects.
Spin-out companies created by a researcher or the lab, to develop and commercialize an invention. This pathway can be more financially rewarding, with large returns if the company is successful. However, it requires significantly more effort and risk, including securing investment, managing a business, and executing a market strategy.
Challenges with federal lab commercialization
Incentives
Incentives play a crucial role in driving the commercialization of lab innovations. We will look at both financial and non-financial incentives, and the influence they have.
Evidence from universities shows that institutions which allocate a larger share of royalty payments to faculty members tend to generate higher licensing revenues. Furthermore, financial incentives and bonuses for employees of Technology Transfer Offices (TTOs) in universities have been shown to increase licensing revenue.
The impact of financial incentives in federal labs is less understood and likely differs from universities. For example, university scientists often rely on grants to fund their salaries, a pressure not typically experienced in federal laboratories. This difference highlights the need to study how financial incentives affect federal labs, despite agreement on their importance.
Non-financial rewards also hold considerable value, and are pivotal in promoting technology transfer. In recognition of this, some universities have begun to revise their promotion systems to reward commercialization efforts.
A pioneering initiative in this area is the Entrepreneurial Separation to Transfer Technology program by Sandia National Laboratories, a large federal lab. This program allows scientists to pursue business ventures while guaranteeing reemployment within two years should they choose to return.
Since its inception in 1994, the program has supported 162 employees, including 74 who founded new companies and 88 who contributed to the expansion of existing ones. This demonstrates the profound impact of non-financial incentives, and how labs can think differently.
If we want to facilitate the transfer of technology effectively, it is essential for federal laboratories to consider and implement incentive programs, both financial and non-financial.
Open vs exclusive licenses
Federal labs often produce technologies that can greatly benefit society when made widely available. With digital products, this is often done through open-source software licenses to ensure broad access and utility.
However, commercializing these technologies often necessitates significant private sector investment in development, a task federal labs are not designed or authorized to undertake. Thus, technology transfer to the marketplace relies on private sector collaboration, incentivized by economic rewards such as exclusive licenses.
This highlights the fine line between ensuring broad access to federal innovations and establishing commercial avenues that enable these technologies to fulfill their market potential and societal impact.
Resource Constraints: Business Expertise
Federal labs often struggle to commercialize their technologies due to constraints in expertise and support navigating the external landscape. The journey from lab bench to commercial product requires more than just innovative technology, it demands a deep understanding of market needs, commercialization strategies, and the ability to forge strong relationships with industry partners, investors and customers.
Throughout the commercialization process, it is paramount that top technologists are paired with business minded experts to ensure the technology is solving a problem sustainably and efficiently.
An emphasis on patents & licensing
There is a tendency within the federal lab tech transfer to focus on creating patents and licensing agreements as the primary measure of success. This approach often overlooks the broader goal of commercialization, which is to bring solutions to market that can generate economic growth and societal benefits.
The traditional "push" model of technology transfer, which emphasizes the creation and licensing of IP, is increasingly being seen as insufficient. There's a growing recognition of the need for "pull" strategies that engage potential commercial partners earlier in the R&D process to ensure that technologies developed in federal labs meet market needs and have a clearer path to commercialization.
Summing things up
In sum, the path from labs to market success comes with many challenges. The Bayh-Dole Act boosted the commercialization of federally funded research, showcasing the power of policy in stimulating economic growth and innovation.
However, the journey from lab to market extends beyond legislation, requiring strategic collaborations, effective incentives, and commercialization expertise.
Addressing these challenges is critical for ensuring that federal lab innovations not only advance scientific knowledge but also translate into societal and economic benefits, keeping the United States at the forefront of global technological innovation.
Stay tuned for our next piece where we will dive into the opportunity that exists within federal lab technology!
