> This money doesn't go into shareholder pockets, it goes back into the university to support further research activities, reducing the need for government subs

> This money doesn't go into shareholder pockets, it goes back into the university to support further research activities, reducing the need for government subsidy. This is a reasonable intuitive expectation, but it's simply not the case in reality (former academic from an academic family here). The vast majority of research, including graduate student stipends and professors' summer salaries, comes from sources outside the university's budget (this is complicated for the first few years of a professor's career during which they usually get "start up" funds from the departmental budget before they get their first external grant, but it is true over the long haul). A professor can almost never go to the university and say "I'm doing great research. You just made $X million from patents, so give me money to continue my work." In fact, nearly the reverse is true; when the professor finds outside funding, the university takes a cut. So, if Professor X gets $100k from the NSF to study mole rats, the university will claim as much as $50k of that grant and put it into the university's general fund. Now you might say, "Hey _dps that's fine first-order thinking, but if a university gets enough patent royalties they can reduce their demanded overhead percentage." In practice, overhead percentage at the best universities are set not by budgetary need but instead are set indirectly by the funding agencies themselves (e.g. the NSF has limits on overhead charges that institutions take very seriously in setting their internal schedules). The reason for this is that the academic employment market is extremely illiquid because transferring your entire research program from one school to another is a huge hassle; thus professors have comparatively little negotiating power in setting the university's overhead policies. Having said all that, it's not clear that there's an obviously better system. I recognize the need to cross-subsidize university activities that aren't easy to fund externally. But it's important to remember that universities, in practice, make profits just like corporations. It's just that the profits go back into the endowment, capital expenditures like new buildings (though rarely capital expenditures like new research equipment), or at some institutions, administrator bloat. These profits are almost never directly pushed into new research, or used to reduce grant overhead rates.