University Venture Development Funds

Oregon Senator Frank Morse has proposed a bill in the state legislature that would allow Oregon’s universities to create a venture development fund. This fund would be used to privatize technologies that are developed at our universities. The bill also includes hooks that give tax incentives to “taxpayers” (read: individuals and corporations) that contribue to the venture development fund.

On it’s face, this sounds like a great idea to me. There’s a lot of great technology that’s developed at OSU that goes no where because it would be unethical/illegal for the faculty and students involved to do anything with it on their own. They could market the technology through the university, but there’s no incentive (read: money) involved for them to do so.

However, that’s the way universities are supposed to work. Universities and their faculty are supposed to be unselfish producers of a) research and b) new graduates, for purpose of bettering the state, the country, and mankind. Putting an extra burdon on universities to start spin-off companies I believe would severely damper those goals. Faculty would have to weigh not only the scientific value of their research, but also the financial value.

The strange part about this proposed bill is the tax incentives for individuals and coporations that contribute to this venture development fund. Imagine this scenario: A research lab at OSU is working on a patent for growing trees better. Warehouser finds out, and contacts the professor in charge of the project, telling him he could make millions if he spun the work from OSU and started his own company that manages the patent. The professor agrees, and starts applying for OSU venture dollars to privatize the research. Warehouser then contributes $2M to the venture fund, and gets to write-off half that from their taxes, saving Warehouser $400k that year. The $2M is then given by the OSU venture fund to the professor to spin the work off. Warehouser then buys out a large stake in the now private company. Warehouser now owns the patent and refuses to license it to anyone else until the patent expires in 20 years.

In this scenario Warehouser was able to obtain complete ownership of the patent, circumventing the university process. But not only that, they were able to write it off of their taxes. I can understand the arguement that they should be able to buy the company out… but being able to write it off their taxes for doing so? That seems… strange.

Another concern I have for this bill is the socialism factor. I’m all for socialism when it comes to health care and managing services that benefit all people in the state equally. This bill would create a system where the state owns large shares of private companies that only benefit small segments of the population. That doesn’t seem right. The state should only get involved in businesses that benefit everyone equally, i.e., electricity, water, sewage, garbage, communications, health care, etc.

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