In the mid-1980s, European universities began to set up intellectual property (IP) programmes following the models created by US universities. Contrary to widespread opinion, it can be shown that the recently developed patent policies of European universities do not conflict in principle with basic scientific objectives nor with the special legal framework in European countries. However, there is still confusion concerning the motivations for universities to become involved in this aspect of technology transfer and also the economic and strategic potential of such programmes and their effect on higher education in general. European universities still suffer from antitrust policies which severely restrict their opportunities in licensing markets. The argument set out in this article is that they can and should profit from experience in the USA, where universities now have the title to all IP created in government-sponsored research and the right freely to license this IP to industry. Recent evidence regarding the royalties earned, the number of patents granted to universities and the industrial sectors in which these technologies have been exploited provides valuable information for European institutions. Despite its risks, university technology licensing is of strategic importance to university development and can generate substantial income. To achieve these benefits, it is necessary to establish a medium- to long-term policy for the development of the university technology licensing function.