• Treatment of intellectual property resulting from prize contests should be properly aligned with the objectives and incentive structure of the prize contest. This issue of awarding intellectual property rights (IPR) must be considered carefully in designing prize contests. No one model or approach will fit all contests. In some cases, contests that invite firms to develop new technologies might be expected to leave the rights with the inventor. In others, intellectual property ownership might be tilted in different directions according to the size of prizes and the intent of contests. In certain cases, the property rights associated with a prize-winning entry might be placed in the public domain, in which case the cash or other non-IPR-related rewards would need to be much larger. In short, the best IPR policy is one that matches the objectives and incentive structures of particular prize contests.

Ultimately, the administering agency or other sponsor should determine the goal of each contest in light of its mission objectives, the overall objective of the research area involved, and the magnitude of the R&D challenge required to win the contest.

While this report is aimed primarily at federal agencies, the same principles of prize contest design and administration can apply to inducement prizes funded or administered by the private sector. In terms of administration, it is logical to expect a range of models for contests, including:

  • Agency funding and administration

  • Private funding and administration

  • Joint agency-private funding and administration

  • Private funding, agency administration

For federal agencies to fund inducement prize contests, Congress (congressional committees) would have to develop a mechanism to authorize and appropriate money that might not be spent for several years. At a time of great need, however, unspent federal funds could be difficult for prize-sponsoring agencies to retain. Obviously, even the best-designed prize contests will be futile unless agencies can guarantee access to prize money when the winner steps forward.

Some agencies—depending on the importance of research to their mission objectives —may be able to guarantee prizes autonomously, especially when prize amounts represent a small percentage of the research budget. A more general solution might be an endowment mechanism by which federal prize money could be reserved until claimed.

Prize contests funded by nonfederal sources would not be subject to this uncertainty. The Department of Commerce's Malcolm Baldrige National Quality Awards program is an example of a privately funded, agency-administered model, where a privately created foundation offers stable, long-term support. The use of private-sector judges brings credibility and reduces political influence on the selection process. At the same time, government participation adds prestige and a sense of fairness.

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