Criticism from academics and industry, and fewer deals being made: What's going on?
By Ed Silverman

Barry Merriman says he wants nothing to do with his university's technology transfer office. About three years ago, the researcher in the human genetics department at the University of California, Los Angeles, had developed a biochip that he believed held commercial promise. But when he tried to convince the school's tech transfer office (TTO) to proceed, he ran into a proverbial brick wall. Although he had spoken with representatives from a few corporations that had expressed interest in pursuing the technology, the university wasn't willing to move quickly.

Instead, he says, the TTO failed to recognize the potential value, balked at the cost of filing a patent application, and didn't pursue any leads, which ended up scuttling a chance to cut a licensing deal with a company. "It was a very discouraging process. We had the invention and filed a provisional patent, and everything seemed to be moving along. But then, trying to commercialize it became a problem," says Merriman, whose department is housed in the university's Geffen School of Medicine. "We told them who may be interested [in a licensing deal], but nothing came of it. We eventually got a $500,000 research grant to develop the product and so got less interested in pursuing the business angle. But it was a slower way to develop the technology. I'm philosophical about it now, but I would never work with them again." (The officials running UCLA's TTO at the time have left, and Roberto Peccei, UCLA's vice chancellor who oversaw research then and now, says he doesn't know anything about the incident.)

Such episodes reflect a growing concern about university TTOs. No one keeps data on the number of opportunities that die on the vine, but tech transfer officials are fending off growing criticism from various directions - frustrated faculty, corporate licensing specialists, and venture capitalists - resulting in their efforts to bolster university treasure chests sometimes having the opposite effect.

The list of accusations from industry officials, academics, and others ranges from incompetence to greed: TTOs allegedly employ poorly trained staffers who fail to understand what companies are seeking or are simply unresponsive to their own ambitious professors. At the same time, TTOs are being chastised for setting conditions for preliminary technology reviews that make it difficult for a company to assess commercial viability.

A more common complaint is that tech transfer officials simply bargain so hard over royalties that some companies find the terms onerous and withdraw, leaving US universities with lost opportunities. Michael Pazzani, vice president of research at Rutgers University, where he oversees tech transfer, says: "It probably is the case that foreign universities are easier to deal with over intellectual property. There is more overseas competition."

"There's an interesting dynamic at play, and it's true that universities have become, especially from industry's perspective, much more difficult to interact with," says Ross DeVol, director of regional economics at The Milken Institute, and who recently coauthored a study of technology transfer for the Los Angeles-based think tank. "The feeling is that tech transfer is increasingly bureaucratic red tape." However, the Milken Institute report doesn't specifically mention tech transfer as an obstacle, says DeVol.

By several measures, universities fared slightly worse in 2004, the last year data was available, compared with 2003, according to annual surveys of TTOs by the Association of University Technology Managers (AUTM). The number of universities filing up to 10 patent applications in a year dropped by roughly 25%, and there was a slight overall drop in the number of invention disclosures and startup companies formed.

"It's puzzling. Industry research and development funding is going up, but the proportion going to US universities is going down," says Alan Rappaport, a senior analyst at the National Science Foundation's science and engineering indicators program. "Why that's happening isn't clear. Maybe it's a blip, and I wouldn't be surprised if it turns up again. But the role of tech transfer does seem to have gotten thornier. There appear to be more arguments over the potential value of any breakthroughs that could be worth a lot of money."

There's little question that the lure of a big payday is prompting TTOs to work harder than ever before to get better deals. Ever since the enactment of the 1980 Bayh-Dole Act, which allows universities to retain ownership of any patents that are developed using federal funds, an entrepreneurial spirit has enveloped many campuses. Some people, such as venture capitalist Steve Burrill, say that certain universities may have taken this to an extreme. He declines to specify which ones.

"I call it the greed factor. [Universities are] trying to get more money, and get it sooner. I think at many schools there's been an increasing push from the provost, who's asking about the royalty streams," says Burrill, whose San Francisco-based firm specializes in biotech deals. "And that's a barrier to guys like me, who want to pull out at the lowest possible cost. As a result, we're spending less time dealing with tech transfer."

For some schools, the recent push to bargain harder amounts to a belated recognition that their TTOs weren't always extracting the best possible terms. "In the past, a lot of technology was leaking and universities weren't modulating the flow of ideas going out the door. Now, the tech transfer offices are learning to negotiate smarter terms," says Dennis Fernandez, a former venture capitalist and now a patent attorney in Silicon Valley, who works closely with such universities as Stanford and Northwestern. "They're seeking stock in startups in lieu of cash, offering exclusives to company A even when company B funded the research, or [they're] requiring performance milestones against tangible benchmarks." Fernandez declines to give specific examples.

One university official argues that running a TTO is expensive. As companies get more aggressive about challenging each other's patents, universities are increasingly forced to spend more money to nail down rights that can't later be challenged. As Kathryn Atchison, vice provost of intellectual property and industry relations at UCLA notes, "That's expensive. It can run $20,000 to $100,000 for one invention. Somebody has to bear the cost, and that has to be recovered."

"Let's be real about this," says Nikki Borman, a former tech transfer official at the Massachusetts Institute of Technology, who is now head of the biomedical strategy group at PriceWaterhouseCoopers in Boston. "As a tech transfer official, you're obligated to find the best partners and incentivize inventors."

The hardball approach, however, may be prompting more companies to consider trolling for inventions overseas, simply because some foreign universities are perceived as more willing to agree to industry terms. For instance, a university in Europe or Asia may be willing to assign ownership of the patent to the company sponsoring research, whereas a university in the United States is more likely to offer only an option to negotiate a royalty-bearing license, says Susan Butts, senior director of external science and technology programs at Dow Chemical in Midland, Mich. "There can be an enormous difference," she says, "and there were times where we've walked away from deals."

A study by Marie Thursby, professor of strategic management at Georgia Tech College, and Jerry Thursby, professor and chair of economics at Emory University, found that the quality of R&D personnel available and opportunities for university collaboration are often the most important reasons for companies locating their R&D in foreign countries such as China and India.

Companies cite other explanations for pursuing technology at overseas universities, including the desire to increase investments in such developing markets, where new research centers are being built or an increasing number of clinical trials are held. For now, though, information technology companies are thought to be conducting more of these forays rather than pharmaceutical or biotech companies, although some suggest this could change as overseas advances in stem cell research continues to outpace work being done in the United States.

Stan Williams, senior fellow and research director at Hewlett-Packard in Palo Alto, Calif., says the issue transcends mere competition. He suggests that tech transfer officials (he declined to identify them) should take a few courses in business fundamentals. Williams argues that industry wouldn't be so tempted to look overseas if universities understood how companies must do business. In his view, university TTOs too often prolong negotiations to the point that an invention becomes less desirable and legal fees become too steep. In other instances, Williams says, a university insists that his company pay for patent application fees, which can amount to more than the agreed amount of research funding but wouldn't include licensing rights.

"Unfortunately, the vast majority of tech transfer employees are amateurs," says Williams. "Too often, they're looking for the big score to make them a ton of money, but what winds up happening is they lose money for their offices, and the poor professor (who invented some technology) is left gnashing his teeth. This behavior has limited the number of universities we will work with." He declined to identify them.

Other companies complain that tech transfer employees appear clueless about basic corporate interests. Robert Gould, vice president of licensing and external research at Merck, says he's regularly frustrated by what he calls the data dump: In response to a request for information about recent university research, he'll receive a huge, unsorted file of patent applications that are all over the scientific map. "Rarely do I get an advance phone call from tech transfer asking what we're looking for," says Gould, who works at the New Jersey drug maker's research center in Boston. "It would be very helpful if intellectual property papers were organized thematically; by that I mean according to the type of disease the discovery might target, such as diabetes or oncology. It doesn't happen often enough."

One tech transfer official scoffs at the criticism. "I happen to think it's bollocks, to be perfectly honest," says John Fraser, a former venture capitalist who is also the executive director of the office of intellectual property development and commercialization at Florida State University in Tallahassee, and president of AUTM. He argues that any increased interest in overseas universities merely reflects the growing amount of brain power that can be found at those institutions, not roadblocks that TTOs create in the United States. "And let's not forget that foreign-based multinationals also want to be here," he says, "so there's a bit of a balance."

Fraser maintains that tech transfer is doing its job and cites recent figures to back his claims. Between 2000 and 2004, the last year for which data were available, the average number of invention disclosures and new patent applications increased, according to AUTM's annual surveys of TTOs. However, the average number of licenses or options executed declined. Fraser acknowledges that the response rate to the surveys is only about 50%, which would indicate that even more licensing and startup activity doesn't get counted.

As for being difficult, Fraser reacts as if the industry pot is calling the tech transfer kettle black. When it comes to deals involving information technology companies, Fraser charges that industry is just as much of a problem. The fast-paced nature of the business makes companies want to move so quickly that tech transfer offices simply can't be expected to respond. And while pharmaceutical companies may have much longer time horizons, recent financial pressures are forcing them to haggle endlessly with universities over royalties. The difference, Fraser notes, between a percentage point or two can be significant over time. "I understand that some institutions may be difficult and that tech transfer might contribute to the problem, but it's not the biggest piece," he says. "Keep in mind that we're not competing against each other. It's not as if I have the same technology as the university down the road. And I assure you that no one has an incentive to sit on their tush and make a deal go away."

Tell that to William Catalona. For the past few years, the renowned researcher, who is credited with developing the prostate-specific antigen (PSA) test for prostate cancer, has been embroiled in a lawsuit with his former employer, Washington University, over the use of patient tissue samples. At issue was the value of about 2,000 samples Catalona wanted to send to a biotech that hoped to use them to test a new assay. But in 2001, a tech transfer official at the university's TTO balked at the idea and called it unacceptable, because the samples involved were allegedly worth at least $100,000, according to an E-mail written by the official.

"I remember that shortly after the Bayh-Dole Act passed, there was one person in a dingy office. We were on a first-name basis and it was very mom-and-pop like," says Catalona, who is now at Northwestern University's Feinberg School of Medicine in Chicago. "But later, tech transfer had to earn its keep. They had these pressures to close deals and ensure the university got as much as possible. Eventually, the office became an obstacle to me. I wasn't interested much in royalties or licenses. I wanted to get the science done. But they stalled and stalled, and I couldn't provide the samples."

A Washington University spokeswoman declined to comment, citing the ongoing litigation, although the university Web site has a special section devoted to the lawsuit. A question-and-answer section maintains that the prospects for receiving any licensing income from the thousands of tissue samples are "slim to none." The spokeswoman noted, however, that the university has prevailed so far: A federal court in Missouri last year ruled the tissue samples belong to the university. Catalona is appealing.

"Look, I can see how university rights need to be protected. And somebody has to pay for those employees," says Catalona. "But in this case, the university somehow went off the deep end and subordinated the rights of patients to its own interests. I understand this is a very big business for universities and pharmaceutical companies and biotechs. And I think tech transfer is fine, as long as it doesn't get in the way of doing science. But for scientists, it's a real conundrum."

Of course, some encounters with TTOs do produce happy endings. Take the case of Jan Vilcek. In 2005, the 73-year-old Holocaust survivor pledged $105 million to the New York University (NYU) School of Medicine, where he works as a microbiology professor. The money will come from royalties he's earned from Remicade, a medication used to treat rheumatoid arthritis, Crohn disease, and other ailments. He and a colleague developed a chemical that Centocor, which is now a Johnson & Johnson unit, turned into the drug.

Remicade became available in 1998 and has since been a big seller, generating about $2.1 billion in revenue in 2005 in the United States while generating royalties for both Vilcek and NYU. As he sees it, the decision to donate the money was an easy one. He's grateful to NYU for employing him after he escaped the Communist regime in the former Czechoslovakia and arrived in New York in 1965, and the TTO has helped make it possible for him to become wealthy.

"There's probably not a universal formula that works for everyone," says Vilcek, "but my advice is, if an academic investigator believes they have something to offer, they should explore the possibilities and not be afraid to work with the tech transfer office or the biotech or pharma company. My experience was that even though the licensing agreement was designed for us to provide products, we also learned from the company."

Other universities are revamping. Rutgers' Pazzani, for instance, is developing a new template for contracts that can be signed in a day. Since arriving at UCLA two years ago, Atchison is sponsoring seminars for industry - think of a salon, not a job fair - to highlight inventions and faculty. Also, the tech transfer team is working harder to befriend their own professors, visiting them in their labs in hopes of building comfort levels and soliciting invention disclosures, which she says jumped to nearly 300 in 2006 (from 190 two years earlier). "We're trying to do more outreach with everyone," says Atchison, "faculty and companies."

Such efforts, however, may be too little too late for Barry Merriman. The UCLA researcher has soured on working with the TTO: "I have zero dealings with that office," he says, "and when I do invent something, next time I'll find a way to patent it myself, not through UCLA."

Have a comment? Click here