This week’s Facebook IPO, already the gravy train for an army of lawyers and bankers, will reportedly transform a thousand Facebook employees into overnight millionaires. In all likelihood, few of these soon-to-be tycoons realize they owe a great deal of thanks to Harvard University for their newfound wealth.
What did Harvard do? Nothing. Rather, it’s something the school didn’t do: claim Facebook for itself.
You see, Harvard University could have asserted a stronger claim to the company than the Winklevoss twins and Paul Ceglia combined. In 2004 Mark Zuckerberg and friends started Facebook while enrolled in Harvard, working in a Harvard dormitory, and using Harvard’s computer network. Simply by using university resources, Facebook’s founders opened the door for school officials to later assert ownership of the website’s core technology.
Harvard didn’t. Other universities would have.
Over the last three decades, patent acquisition and technology licensing have become big business for US universities, which collectively obtain thousands of patents and billions in licensing revenue each year. In a never-ending quest for more royalties, university officials are increasingly likely to take and market not just the inventions of fulltime faculty members, but also those of their students.
Unlike professors, however, students generally don’t sign patent assignment agreements, are far from business savvy, and usually pay large sums to, rather than are paid by, their future alma maters. Nonetheless, under the authority of broad policies buried in student handbooks, university officials routinely lay claim to the discoveries of tuition-paying students who unwittingly erred by inventing something of value on campus.
Perhaps not coincidentally, students have been the vanguard of technology in recent years. Google founders Larry Page and Sergey Brin were Stanford grad students when they invented the company’s web search technology, and Marc Andreessen, co-founder of Netscape and current Facebook board member, was just a University of Illinois undergraduate when he spearheaded development of the first widely-used web browser. Among other high-tech innovations, students invented the laser, the first practical electron microscope, and the Linux operating system — a list that arguably should include the accomplishments of icons like Bill Gates and Steve Jobs who dropped out of college just before finding success.
In the money-centric culture of today’s universities, when dorm-room projects transform into something valuable, school officials usually come calling and rarely play nice. Student entrepreneurs then find themselves in the awkward position of bargaining with university personnel, whom they are supposed to obey and respect under threat of expulsion, for the right to commercialize the fruits of their own ingenuity.
Understandably most students fold and, if lucky, satisfy administrators by forking over just a chunk of their potential profit. For the right to use their own software, Page and Brin gave Stanford an equity stake in Google that sold in 2005 for $336 million and today would be worth over a billion.
Students who don’t capitulate soon find their futures in jeopardy. When Andreessen left for Silicon Valley to found his own company, the University of Illinois accused its new alum of infringing the school’s rights to the browser he helped develop on campus the year prior. The university refused to settle for Netscape stock, and a lawsuit and cash settlement followed – costs that easily could have doomed the fledgling company.
Though Andreessen beat the odds and eventually took his company public, Petr Taborsky, an undergraduate at the University of South Florida, wasn’t so lucky. After assisting with a university project that failed to yield results, Taborsky carried on in his spare time and discovered a method for treating polluted water. When USF asserted ownership of his invention, Taborsky retrieved his research notebooks from a university lab and filed his own patent applications. USF deemed Taborsky’s actions “theft” and pressed charges. Taborsky ultimately spent eighteen months behind bars, including two on a chain gang, for stealing his own discovery.
Extreme overreactions aside, universities’ stance on student inventions might be reasonable if officials limited their claims to the results of school-financed research, but this has not been the case. In fact, universities have asserted ownership of student inventions with no tenable connection to any university support.
Look no further than the University of Missouri, which recently asserted rights to a popular iPhone app developed by students who naively entered a campus entrepreneurship competition that attracted attention from school administrators. Missouri eventually relented, but only after the dispute attracted negative media attention.
Fortunately, Harvard’s minor role in Facebook’s history has attracted a different reaction: a star-studded Hollywood blockbuster, a reinvigorated reputation as a dream school for entrepreneurial teens, and warm feelings among millionaire alumni who may become large donors. By contrast, few know that modern web browsing was born at the University of Illinois, and Netscape’s embittered founders vowed never to give another dime to their alma mater-turned-adversary.
Here’s hoping officials at the collegiate home of the next Facebook know which university made the better deal.
Brian Love is a fellow at Stanford Law School and this fall will join Santa Clara School of Law as an assistant professor.