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IP Upstream, IP Downstream

“The more money you put into intellectual property, the more you are handing it to someone else.”
–Astro Teller [yes, that’s his name], CEO of BodyMedia, a Pittsburgh technology firm, quoted in this morning’s Pittsburgh Post-Gazette.

The occasion was a hearing held yesterday in Pittsburgh by a committee of the Pennsylvania State Senate, which is reviewing the disposition of roughly $30 million in funds allocated from Pennsylvania’s tobacco settlement fund. That money went to Pittsburgh’s Life Sciences Greenhouse, a biotech-oriented economic development entity set up by Pitt, Carnegie Mellon, local foundations, and the state. The Greenhouse, for its part, leveraged the $30 million in public money to attract roughly $70 million in local foundation money. And the bulk of that $100 million pot is going to support research at the two largest local universities. Pitt, for example, used some of this money to support construction of a state-of-the-art $200 million biomedical research facility. Pitt Chancellor Mark Nordenberg and CMU President Jared Cohon both sit on the board of the Greenhouse.

More below the jump.

There is an interesting debate here, not over conflicts of interest, but over the relationship between investments in research (what Astro Teller calls “IP,” because our local universities, like many research universities, obsess over patenting and licensing) and investments in local economic development. You might say that the welfare effects of investments in scientific research need to account for additional kinds of distributional implications. IP scholars know about certain kinds of distributional issues: the conventional “upstream and downstream” question, and the “rich and poor” question, and the “developed world and developing world” question. Now, there is this pure geographic question.

In other words, looking at Pittsburgh’s little problem, investment in research (“IP”) represents a good long-term bet in terms of overall social welfare, but one where the geographic implications of the payoff are highly uncertain. Folks in Pittsburgh are still extremely sensitive about Lycos, which was founded in the shadow of CMU and quickly moved off to Boston. Direct investment in local tech companies (products, I think, rather than “mere” research) represents a speculative short-term bet, but one where the geographic implications of the payoff are much more concrete. Put money into Pittsburgh universities, and the world benefits — eventually. Put money into Pittsburgh companies, and some companies succeed, and a lot of companies fail — but that happens in Pittsburgh, and it’s easier (though not always easy) to see quick results.