Prop. 102 OK would let UA own stock

By Joe Ferguson
Arizona Daily Wildcat
Thursday, September 30, 2004

The Arizona Constitution bars state universities from owning stock in private companies, but a proposition on the November ballot might change that.

Proposition 102 would amend the state constitution to allow universities to accept stock in private companies from professors who want to license their inventions.

With more than $400 million invested in research every year at the UA, President Peter Likins said the change in the constitution could benefit the university by attracting new researchers to campus.

Because of the constitutional restriction, Likins said, the UA cannot compete with other universities that can help their faculty bring their intellectual property into the marketplace without requiring significant licensing fees.

"We are at a competitive disadvantage," Likins said.

Likins said under current law, there is no incentive for UA professors and faculty to try to license and commercialize their ideas.

If Proposition 102 passes, the UA would allow faculty to license patents for their intellectual property or ideas they developed while working here. This would allow faculty to start a company in exchange for a small portion of stock in the company.

Likins said licensing fees for patents could be too much for a start-up company to afford. By trading a portion of their future company in place of a license fee, faculty members have a chance to pursue a commercial application of their patent. Currently, license fee charges are decided by industry standards.

Likins said the proposition would allow for the creation of new jobs, stimulate the economy and help bring the product to the marketplace at an accelerated rate.

"There is no loss to anyone," Likins said. "Everyone wins."

Likins said the constitutional ban on government entities owning stock in private companies is no longer useful.

"The law is now irrelevant," Likins said.

He said the constitutional ban was created to prevent railroad companies from trading their stock for state lands. The companies would later go out of business and the stock would be worthless.

Likins said there would be no immediate gains for the UA if the proposition were passed. He said it was unlikely the UA would receive much revenue from the small percentage of stock it receives from the licensing the patents.

"Nine out of 10 of the companies would probably fail," Likins said.

Associate vice president for government relations Gregory Fahey said if the proposition passed, it would open doors for the UA to pursue professors. Fahey is the chief lobbyist for the UA, responsible for co-coordinating the interests of UA with state officials and legislators.

"Right now, we can't take equity of any form," Fahey said. "It ties our hands."

Fahey said the new law is unlikely to make money for the state.

"It won't be a panacea to make (money)," Fahey said.

But Fahey said money is not the true reason for supporting the proposition. He said the main reason for the UA's support is to draw new talent.

Likins said he is optimistic, saying Stanford benefited from its investment in Google. In exchange for search engine technology, Stanford received stock in Google. The current value of its share in Google is estimated to be a quarter of a billion dollars.