National Association of Seed and Venture Funds
| TECHNOLOGY TRANSFER: A NEW PARADIGM How State Universities Can Collaborate with Industry |
07/02/2007
Preview:
In some states, policymakers, pressed by local and regional industrial interests, are debating how to “reform” technology transfer at public universities. “Reform” in this context is generally understood to mean redirecting university technology transfer activities to increase the benefits of state-funded research to local industries. Progress toward this goal is often constrained by federally mandated laws applicable to technology transfer at universities. Example, The Bayh-Dole Act (35 U.S.C. 200–212) and by university policies that have been placed by state legislatures outside the purview of policy-making state officials.. For example, North Dakota grants broad exclusive authority to the State Board of Higher Education to develop regulations and policies for governing state universities (N.D.C.C. Ch. 15-10-17 §7) Calls for change have also been countered by the view of many universities that the system is not broken
Article:
Catherine S. Renault, Ph.D., is the Science Advisor to the Governor of Maine and Director of the Maine Office of Innovation. Jeff Cope, MSM, and Molly Dix, MIP, are Program Managers in Technology Commercialization with RTI International, Research Triangle Park, North Carolina. Karen Hersey, JD, is a Visiting Professor of Law, Franklin Pierce Law Center, Concord, New Hampshire.
TECHNOLOGY TRANSFER: A NEW PARADIGM How State Universities Can Collaborate with Industry
Catherine S. Renault, Jeff Cope, Molly Dix, and Karen Hersey
Abstract
In some states, policymakers, pressed by local and regional industrial interests, are debating how to “reform” technology transfer at public universities. “Reform” in this context is generally understood to mean redirecting university technology transfer activities to increase the benefits of state-funded research to local industries. Progress toward this goal is often constrained by federally mandated laws applicable to technology transfer at universities. Example, The Bayh-Dole Act (35 U.S.C. 200–212) and by university policies that have been placed by state legislatures outside the purview of policy-making state officials.. For example, North Dakota grants broad exclusive authority to the State Board of Higher Education to develop regulations and policies for governing state universities (N.D.C.C. Ch. 15-10-17 §7) Calls for change have also been countered by the view of many universities that the system is not broken.
Suggested reforms range from abolishing the Bayh-Dole Act that gives universities the flexibility to transfer ownership of federally funded inventions to local industries, to making structural or management changes within universities that will incentivize innovation and/or expedite licensing of new ideas. This article proposes a new paradigm: Instead of measuring the success of technology transfer by counting numbers of patents and licensing deals, we suggest measuring knowledge flows between state universities and their localities. This approach should produce a more accurate picture of the full impact that universities have on their regions.
Introduction
Technology transfer offices at universities are under increasing scrutiny. Industry representatives, when asked about ways in which universities could or should become more involved in local or regional economic development often cite getting better quality results from university technology transfer. Local, state, and regional economic developers express a similar concern. A recent technology-based economic development conference included one session subtitled “Our Bipolar Relationship with Universities.”. State Science and Technology Institute, November, 2006.
Industry complains about the time required to get a deal done and the difficulties of negotiating with universities. State and regional economic developers are troubled by state universities auctioning their technologies to the highest bidders to the detriment of local companies. They also express concern as to why professors are not more willing to collaborate with the companies around them.
Many academic studies of university technology transfer, as well as reports from the Association of University Technology Managers (AUTM), refute the notion that the system is not effective.. Thursby, J.G. and M.C. Thursby (2003), “University Licensing and the Bayh-Dole Act” Science 301:1052 However, historically the focus for most universities has not necessarily been regional.
Despite the data showing, for instance, that in 2005 over 3,200 patents were issued to U.S. universities, and more than 4,900 licenses were granted to commercial companies and 628 new start-ups created,. AUTM 2005 Licensing Survey the din from industry and economic developers strongly suggests that these accomplishments alone are not always considered sufficient. This paper discusses several “reforms” in the public discourse and suggests an alternative paradigm for changing the approaches of university technology transfer offices (TTOs) to shore up the interface between the university, the local and regional business community, and economic developers.
The intent of this paper is not to be prescriptive, but to emphasize that organizations respond to metrics—actions of organizations and people are driven in part by how they are measured. We advocate that metrics be broadened to support universities in shifting toward managing their intellectual assets for the benefit of economic development. RTI works with a wide range of clients and respects that varied solutions are needed to benefit different organizations and their missions. We believe that a shift is possible without a “one size fits all” mentality, but advocate that organizations consider knowledge flow as the basis for measuring success.
Built-in Barriers to Overcome
Most universities subscribe to the notion that their central mission is the open and free dissemination of knowledge for the greater benefit of society. The university fulfills this mission through teaching, research, and public service. Historically, many academic institutions and their faculty have viewed innovation for profit and entrepreneurial activities as not only outside of, but potentially contrary to, an educational mission. Regardless, with the increasingly knowledge-based economy of the 21st century, universities are being called upon to play an expanded role in society—and for the most part they are. Universities today are collaborating with industry and generating ventures on a scale and in ways previously unthinkable.. For example, Berkeley-Novartis 5-year, $25M plant genomics research agreement (1998) Industry-sponsored research, intellectual property (IP) licensing, corporate internships, business incubators, and start-up companies are providing great educational and revenue-generating opportunities for students and universities. These activities are leading to new products and services that benefit the public. They also create new industries and new jobs for the national as well as the local economy. However, to make this work, both academia and the for-profit sectors have had to reach some accommodation with one another. Those endeavoring to reshape university structures or forms of IP management will need to start with the institution’s core values and principles and consider how best to make sure they are reflected in changes to IP management policies and practices.
Transitioning technology out of universities typically involves consideration of intellectual property rights that may apply to it. Here, U.S. law, beginning with the Constitution,. Article 1, Section 8, Clause 8 of the U.S. Constitution is virtually preemptive of state laws in defining what those rights are and who has the authority to exercise them.. 15 U.S.C. 1051–1127, 15 U.S.C. 1511, 35 U.S.C. and 44 U.S.C. 1337–1338. Another federal law critical to university technology transfer at both federal and state levels is the Bayh-Dole Act.. 35 U.S.C. 200–212 The law requires universities and nonprofit research institutions receiving federal financial assistance for research (basically federal research grants, contracts, or cooperative agreements) to disclose, protect, and commercialize for the public benefit any patentable inventions discovered during the funded research program. Since research funded by federal agencies involves use of U.S. taxpayer dollars, this controlling legislation does not recognize preferences for local industries as the beneficiaries of university research. In fact, language in the introductory portions of the act can be read as contrary to establishing this kind of preference.. 35 U.S.C. 200 On the other hand, a workaround may be found in the one preference that is established under the act that favors licensing to small businesses.. 35 U.S.C. 202(c)(7)(D) Other federal laws and regulations setting limits for university research and technology transfer practices can be found in U.S. tax law, including certain limitations on the use of facilities and equipment financed by tax-exempt bonds,. IRS Rev. Proc. 97–14 antitrust considerations, and export control regulations that define fundamental research.
As these barriers indicate, very little inducement is found in prevailing federal law to ease the transfer of innovation to industry or to support local and regional economic development. Since the states themselves can do little to improve the situation in the face of countervailing federal laws, the universities must become creative in finding ways in which they can ratchet up their contributions to local economies and societies.
Existing “Reform” Agenda
The public discourse seeking to encourage universities to form closer relationships with industry and to place a greater emphasis on local and regional needs has produced numerous recommendations for change. Several of these are briefly discussed below. A distinction is made between proposals dealing with university policies that can be implemented internally and those seeking to amend the federal and state legal environment in which universities operate and which require the intercession of outside authorities.
This paper presents four major university policies and procedures and two reforms in discussion outside the university realm that may be relevant to improving relationships between universities and local businesses and economic developers.
Proposals for Change within State Universities
1. Change Promotion and Tenure Considerations – Recent discussion on many campuses has addressed the possible benefits if campus cultures and attitudes were changed to become more accepting and encouraging of entrepreneurial activities among students and faculty. One recommendation is to expand promotion and tenure policies to reward entrepreneurial behaviors.. E.g., Donald Siegel, David Waldman and Albert Link, “Assessing the Impact of Organizational Practices on the Relative Productivity of University Technology Transfer Office: An Exploratory Study.” Research Policy 32 (2003): 27–48; Catherine Renault, “Academic Capitalism and University Incentives for Faculty Entrepreneurship,” Journal of Technology Transfer 31 (2006): 227–239. Counting patents as publications, measuring interaction with corporate partners (using metrics such as industry-sponsored research and consulting with industry), and valuing licensing and start-up activity as positive measures of achievement in promotion and tenure considerations would support and advance cultural change.
2. Standardize University-Industry Agreements – This approach is promoted repeatedly among economic developers and industry alike as a way to “streamline” university-sponsored research and licensing processes.. Government-University-Industry Research Roundtable, Industrial Research Institute, “Simplified and Standardized Model Agreements for University-Industry Cooperative Research,” National Academy Press, 1988. Introducing the use of standard templates for collaborative research, technology licenses, and other technology transfer-related agreements between universities and industry should lessen the time frame for negotiations. Since these agreements are two-sided, in order to be effective, they must be developed in collaboration with industrial partners.
3. Change Royalty Structures – The royalty structures commonly applied by universities often do not meet the needs of industry and, because they are perceived as a barrier, impede economic development. There is pressure in the community for universities to offer fixed-rate royalties, fixed fees, or no fees when licensing out university-developed technology. A major part of the argument for more accommodating royalty structures comes from local taxpaying industries claiming they have already “paid for” the infrastructure and means by which an innovation is developed. While local industry perception of “entitlements” may be self-serving, and not a valid basis for selection, state universities, in making decisions as to priorities, do have the capability to adjust the relative values they place on supporting local economies versus generating royalty revenues.
4. Use Different Metrics – Traditional technology transfer metrics used today (e.g., invention disclosures, patents filed and issued, licenses executed, and start-ups formed) have become widely accepted predominantly as a result of the AUTM annual survey. AUTM itself recognizes that these metrics do not always convey the full impact of technology transfer activities, such as public benefit and quality-of-life improvements, and has embarked on two initiatives to paint a clearer picture of the impact of technology transfer. The Better World Project. http://www.autm.net/betterworldproject.cfm speaks to the quality-of-life improvements made by university technologies. State universities, together with state economic development organizations, might consider adopting a “better state project” to showcase the local and regional contributions of state universities. AUTM has also formed a Metrics Task Force to propose new metrics that could be included in the annual survey. Perhaps state and/or regional economic development organizations should be given a seat at the table in helping to develop measurements that would more accurately take into account state interests in the performance of their public universities.
Reforms Outside of Universities
1. Repeal or Reform of Bayh-Dole – The last five years has produced several recommendations for the repeal or reform of Bayh-Dole. Many of these suggestions have been rather tightly focused on issues surrounding the patenting of research tools such as DNA segments and protein structures.. Rebecca Eisenberg and Arti K. Rai, “Bayh-Dole Reform and the Progress of Biomedicine,” Law and Contemporary Problems, 66 (2003): 289. Some repeal recommendations are suggested by the biomedical ethics community concerned that large companies are getting too much benefit from ideas nurtured largely by federal funding.. Michael I. Heller and Rebecca Eisenberg, “Can Patents Deter Innovations: The Anticommons in Biomedical Research,” Science 280 May 1, 1998: 698–701. It is debatable whether “fixing” Bayh-Dole in a way that reduces patenting (as some articles suggest) will help states seeking to build new businesses. States are most likely not in a position to champion changes in Bayh-Dole, even if there were consensus as to what the changes should be. The focus for state universities should be on finding ways to work within Bayh-Dole, such as locally exploiting the small-business preference, and explaining to state policy makers how Bayh-Dole works to ensure timely and effective use of the universities’ innovations.
2. State Initiatives – At least four state legislatures have attempted to enter the debate. In 2006, the North Dakota legislature commissioned a study on IP policies and procedures, responding to concerns expressed by the business community. In the same year, the Virginia legislature amended its legislation Code of Virginia, §23-4.3 and 23-4.4, Amended by HB 134, March 11, 2006. regarding adoption of patent and copyright policies by state universities to allow for the assignment of interests in state university-developed IP. Interpreted by some to mean that Virginia corporations sponsoring research at the state universities may have resulting IP assigned to them, as opposed to licensed, this is a variant of the flat-fee proposals. New York is in the formative stages of studying its options with respect to IP developed at its public universities. A bipartisan Roundtable on Intellectual Property Policy http://assembly.state.ny.us/comm/UnivIndCoop/20060817, accessed December 13, 2006. is working toward the goal of developing a comprehensive statewide policy. In the 2007 session, the Maine legislature considered a bill to mandate “favorable” pricing of intellectual property and to assert the State’s ownership position of IP arising from state funding.. LD 1802, see http://janus.state.me.us/legis/LawMakerWeb/summary.asp?ID=280024754.
Suggestions for a New Paradigm
Many of these recommendations are worthy of consideration and some should be implemented. But, another solution may be to re-think the measurement systems currently used to assess outcomes. The current paradigm in many U.S. universities (public and private) rests on the twin objectives of encouraging faculty to disclose innovation and maximizing revenues. Some TTOs do add economic development to their goals, but there is little evidence that these are other than a small minority. The following offers some ways universities can broaden their management practices to encourage relationships with industry that have a positive impact on economic development.
Measure Spillover and Knowledge Transfer
Assuming that organizations and their staffs act in ways consistent with how they are managed and measured, the twin objectives mentioned above may lead offices to fixate on patenting for the sake of counting patents and licensing technology to the highest bidder, who may or may not be local. Neither of these behaviors is likely to increase the interaction of state universities with their surrounding localities. The outcome, then, will continue to be dissatisfaction from some industrial and economic development sectors.
We propose an alternative: a new paradigm for university technology transfer, one based on outcomes that benefit economic growth as well as outcomes that have traditionally been seen as desirable for the university. These outcomes are more closely aligned than is generally believed. The paradigm considers the role universities play in developing new knowledge and innovation that spills over into local and regional economies.. Adam Jaffe, “Real Effects of Academic Research,” American Economic Review 79, (1989): 957–970. Many observers fail to grasp that this spillover happens in numerous ways outside the TTO. Goldstein and Luger. Harvey A. Goldstein and Michael I. Luger, “Assisting Economic and Business Development,” in M.W. Peterson, D. Dill and L. Mets, eds., Planning and Management for a Changing Environment, (San Francisco: Jossey Bass Publishers), 1997. characterize the university as a multi-product entity that effects regional economic development in eight ways, including formal technology transfer but also including the training of students, informal transfer of know-how, building of knowledge infrastructure, and supporting a creative regional milieu.
Others have characterized the appropriate role of the university as increasing knowledge flows. Donald Siegel’s presentation at the National Science Foundation workshop on Advancing Measures of Innovation. Donald Siegel, “University-Industry Knowledge Flows: An Overview,” presented at the National Science Foundation Workshop, Advancing Measures of Innovation: Knowledge Flows, Business Metrics and Measurement Strategies, June 6–7, 2006, downloaded from http://www.nsf.gov/statistics/workshop/innovation06/, December 15, 2006. suggests several new proxies for knowledge generation. In Table 1, Siegel’s measures are aligned with Goldstein and Luger’s modalities of university regional roles.
Table 1. Comparison of Modalities and Measures for University Roles in Regional Growth
| Modalities of University Roles | New Measures |
| Formal technology transfer |
– Numbers of disclosures, licenses, and start-ups
|
| Informal transfer of know-how | – Citations of patents and articles
– Co-authoring
– Firm retention in university research joint ventures
– Firm survival
– New products commercialized
– Growth in employment and sales of firms |
| Training of students | – Job mobility of students
– Hiring of engineering and science graduates |
| Building of knowledge infrastructure | – Productivity of university TTOs |
| Supporting a creative milieu |  |
This analysis shows that some measures are still missing, such as the number of graduates, including those in science and engineering, who remain in the region after graduation; the amount of sponsored research from regional partners (industry and/or nonprofit research institutions); and measures of the creative community, such as Richard Florida’s composite diversity index.. Richard Florida, “The Rise of the Creative Class,” (New York: Basic Books, 2003): 261–262.
With these added, Table 2 suggests a new set of measures. Some of these metrics come from Ken Swartzel and Jeff Cope, “The North Carolina Technology Development Initiative – Interim Report,” presented to University of North Carolina General Administration, June 2003. that more fully capture the university’s multi-dimensional role in a region, taking the singular focus off the formal technology transfer role.
Table 2: Suggested Metrics of University’s Contribution to Economic Development (italics indicate our additions)
Modalities of University Roles | New Measures |
| Formal technology transfer |
– Numbers of disclosures, licenses, and start-ups
– New jobs created, new products introduced, new revenues and investments received by licensees
– Amount of sponsored research from regional partners (industry and/or nonprofit research institutions)
|
| Informal transfer of know-how | – Amount of sponsored research or research joint ventures with regional partners
– Citations of patents and articles from university researchers
– Co-authoring between university and industry or nonprofit researchers
– Firm participation and retention in university research joint ventures
– Firm survival after collaboration with university
– New products commercialized after collaboration with university
– Growth in employment and sales of firms after collaboration with university |
| Training of students | – Job mobility of students
– Hiring of engineering and science graduates
– Number and percent of graduates who remain in the region |
| Building of knowledge infrastructure | – Productivity of university TTOs
– Jobs created through university incubator or research park |
| Supporting a creative milieu |
– Composite diversity index
|
Note that these metrics do not include a number of widely used indicators, such as number of patents filed and issued and amount of revenue generated from licenses, because these are by-products of the activities that should be encouraged. These “old” indicators have caused the dysfunctional behavior ascribed to university TTOs, and therefore, to change results for the better, should be downplayed.
Using new metrics will enable universities to refocus on the two things they see as fundamental to their missions: education of students and performance of research. The metrics will encourage universities to seek out curricula and educational partnerships that are meaningful and useful to regional clusters in order to maximize local hiring of their graduates. The metrics also encourage universities to seek research funding from regional industry and nonprofit research institutions in addition to federal sources. These joint research projects will result in informal know-how transfer, especially of tacit knowledge, but will also stimulate the production of innovation that can be licensed in the region. Further, locally funded research projects result in full- or part-time employment opportunities for students who also get practical knowledge to supplement their classroom teaching.
Broaden the Guiding Principles of Technology Transfer Offices
The question remains, “How does one impart change at the Technology Transfer Office working level?” Introducing “guiding principles” that TTOs might follow in their licensing practices has recently been suggested by a group of public and private institutions. This document, titled “In the Public Interest: Nine Points to Consider in Licensing University Technology” has been made publicly available on the AUTM Website.. The referenced report can be downloaded from http://www.autm.net/aboutTT/
Points_to_Consider_letter.pdf.
Slight changes to these guiding principles can help balance the inherent difficulty in working with industry at a national or local level. TTOs at state universities might consider adapting the idea of guiding principles as a means of strengthening their relationships with local and regional interests. We offer the following variations from a few of the guiding principles that might be useful. Our additions are in bold and comments in italics.
1. Universities should reserve the right to practice licensed inventions and to find ways for other nonprofit and state and regional public-interest organizations to benefit.
2. Exclusive licenses should be structured in a manner that encourages technology development, use, and regional impact.
3. State universities should anticipate and help to manage technology transfer-related conflicts and be prepared to help local and regional actors overcome them.
4. Ensure broad access to research tools, and strive to provide a bridge to regional users with access and training.
5. Consider including licensing provisions that address unmet needs, such as those of a state’s neglected patient populations or geographic areas, giving particular attention to improved therapeutics, diagnostics and agricultural technologies for regional benefit and the developing world.
Conclusion
This new paradigm, then, refocuses the measurement of technology transfer activity from a narrow set of metrics to a broader list of indicators of knowledge flows that benefit local and regional economic development, and broadens the responsibility for university participation from the TTO to the wider university community. Because the broader measures encompass the traditional missions of universities—education and research—they will align more closely with the activities desired by industry and economic developers. This new paradigm will do much to quell dissatisfaction currently felt by local industries, economic developers, and universities themselves over the current state of affairs.