You have a good point. What I don't see is: (1) Some control over professors running outright businesses, and once tenured, putting much of their effort into

You have a good point. What I don't see is: (1) Some control over professors running outright businesses, and once tenured, putting much of their effort into those businesses, while still drawing senior-level pay. I don't claim this is common. But it is a major moral hazard. (2) Little compensation for graduate students whose contributions range from scutwork to the critical innovation involved. They have to execute the technology in the lab -- in industry, this is most prized, not "the idea." What mechanism is their for fairness here? Oh, right, they're getting a free education. OK. But what if the university earns $10's of millions of dollars off their labor? (3) When professors innovate in active commercial markets, rather than in really bleeding edge areas, there is an intrinsic unfairness. In essence, the government, through its funding, is picking winners. It is a defense if the overall society is improved. If professors get rich, that's also fine.