Academic Technology Transfer Offices Evolve Into Marketing Units

Buoyed by enabling legislationand scientific advances, institutions are aggressively shopping their facultiese 'blue-sky' investigations. In the past decade, university technology transfer has moved into the spotlight. Several hundred schools are now participating in what was once a relatively obscure function at a few institutions. Government, industry, and venture capitalists, in seeking successful commercial products to develop, are keenly interested in what researchers are creating today. But universities and their researchers have displayed varying levels of interest and uneasiness about this trend, which blurs some traditional boundaries between academia and industry. Howard Bremer, former patent counsel for the Wisconsin Alumni Research Foundation, the patent-management organization for the University of Wisconsin, Madison, points out that universities are the only sector in the United States doing "blue-sky research," that is, pure investigation without product orientation. And that, he says, is exactly this type of nondirected work that yields the best technology: "In the global economy, the U.S. universities are unique in their contribution to the competitiveness of this country. So much useful technology has come from research scientists being free to do basic science. Patenting is a secondary and even a serendipitous result of research." Serendipitous it may be, but today, many universities are looking to increase the rate of patents issued, in hopes that some will result in licensing of technologies to corporate partners or venture capitalists. These arrangements provide royalty streams to the university and the inventor and, if structured properly, serve to attract more investors, funding, and good faculty, its proponents maintain. Typically, these activities are handled through a university office of technology transfer or intellectual property, although arrangements vary widely. Over the past 20 years, the operation of these offices has evolved from a purely administrative, somewhat passive format in the 1970s, to a "patent attorney" era through most of the 1980s, to an aggressive "marketing model" popularized in the late 1980s and continuing to this day. The Association of University Technology Managers (AUTM) in Norwalk, Conn., has a membership of 1,400, representing more than 275 American universities. According to administrator Penny Dalziel, as recently as 1987, there were only 400 members, with university-affiliated individuals representing 75 percent of the membership. Today, 50 percent are university-affiliated, and the other 50 percent is composed of industry representatives, venture capitalists, and attorneys. This new diversity, AUTM suggests, indicates that technology transfer has become a business-development career path, sought by highly credentialed people, often Ph.D.'s in a technical field, or MBAs with corporate experience. Before 1980, universities filed occasional patent applications and transferred very little technology, because there was no incentive to do so, tech-transfer observers say. Since government funded a large percentage of basic research, it retained title to inventions, offered no exclusivity of development, and basically claimed that all research resulting from public dollars belonged in the public domain. According to a November 1993 publication of the Council on Governmental Relations, by 1980, the federal government had commercialized only 5 percent of the 30,000 patents it held. Things changed dramatically in December 1980, says Duke Leahey, past president of AUTM: "The passage of the Bayh/Dole Act [Public Law 96-517] was a watershed event, enabling universities for the first time to take title to inventions resulting from federally funded research. Suddenly, universities could cultivate, sell, or license commercial vehicles to industry." This newfound freedom unleashed a barrage of activity, expanded entire fields of law, and raised questions about the definition of intellectual property. Universities sought to structure licensing agreements that paid reasonable royalties to and would not unduly restrict the academic freedom of the researcher. Because of the many legal issues, a number of schools selected patent attorneys to run the transfer offices. By the end of the decade, the emphasis had shifted further. There had been stunning advances in biotechnology from university research throughout the decade, which drew industry attention and spawned numerous companies. As a result of this activity, Niels Reimers, a principal of Intellect Partners of Palo Alto, Calif., and the founder of Stanford University's Office of Technology Licensing (OTL), says, "In the late 1980s, universities seemed to want to market their technologies." Jon Sandelin, senior associate at Stanford's OTL, explains that a technology-licensing office operating under a "marketing model" is quite different from one run by a patent attorney. In an article in the January 1992 AUTM newsletter (page 1), Sandelin wrote, "[Patent attorneys] seem more concerned with what can go wrong in a situation rather than the positive benefits of licensing. They wish to create protective clauses against possible unforeseen contingencies, no matter how remote." While legal protections are certainly important, he continued, focusing only on indemnifications might hinder the licensing process: "The bottom line is putting together deals. That's why we're here." Stanford's office, established in 1969, has been very successful in transferring technology to industry. According to a recent survey by AUTM, in 1993, the last year for which official figures are available, the university received $31.2 million in royalties, generated from 214 patents. Sandelin explains: "Much of our success is due to the fact that we provide incentives for our inventors to participate in the process. They are our best salespeople. Also, there are tremendous rewards besides monetary ones, such as increased industry contacts, consulting opportunities for our faculty, a source of employment for graduate students." Norman Pollack, director of the Intellectual Property Office at the University of Cincinnati and a Ph.D. in organic chemistry, believes that today's successful office must satisfy the needs of several parties: "While the university is always interested in the royalty stream, there has to be more to it than just that. The inventor's drive to commercialize is a major factor. You must have a willing inventor. Also, you must find companies that want early technology, which is what we are offering." Once an interested party is found, the deal begins to be structured. Although each situation is different, there are several general scenarios. One is company-funded research, leading to first commercial rights to the outcome. In exchange, the university expects diligence by the company to achieve developmental milestones and utilization of the technology. If not, the commercial rights will terminate and revert to the university. Another scenario is a straightforward arrangement, in which the research is funded mostly or fully by the government, and the company may be asked to pay the patent costs. A particularly popular arrangement involves collaborative efforts between the university and industry. Because the science is practiced in both settings, the inventor can learn firsthand about the expectations of industry, while building solid working relationships. As Sandelin points out, this can lead to consulting contracts for faculty, and career opportunities for graduate students. Universities offer basic research that companies cannot afford to do, and industry generally can better afford later-stage research and the equipment necessary to bring the invention to fruition. Royalty arrangements vary, but a typical split to the researcher, according to tech-transfer officials, is about 30 percent of royalties above $100,000. To encourage the researcher to move the technology forward, early rewards are typically more, with a 60 percent split to the inventor for the first $50,000 and a 40 percent to 50 percent share for the second $50,000. Before deals are structured, researchers and tech-transfer officers must look at the patentability of the invention. Rules are changing, resulting from the General Agreement on Tariffs and Trade (GATT) Uruguay Round Act, and other agreements. The GATT treaty seeks to unify trade-related aspects of intellectual property. New international guidelines will go into effect June 8 for those countries, including the U.S., that are members of the World Trade Organization. The key feature of the GATT treaty is the change in patent term to 20 years from the date of filing of the earliest application. Currently, in the U.S., the term is 17 years. According to the U.S. Patent and Trademark Office, the average length of time from filing to final disposition of the application is approximately 21 months for biotechnology applications. For the average application, the new legislation will offer a longer period of patent protection. Another important provision of the agreement is the creation of the provisional patent application. This device offers one year for the inventor to decide whether to proceed with a full patent application. The provisional year does not count toward the 20-year patent life if a full patent is later issued. For small businesses, the filing fee for the provisional application is $75, far less than the several thousand dollars needed in legal and filing fees to complete a full application. There are things first-time patent seekers should know before entering the licensing process, Pollack explains: "Researchers tend to believe that everything that is scientifically important is commercially valuable. Also, they often underestimate the amount of work needed to complete a patent application, and may feel conflicted about the time commitment to the company. "And some researchers fear that seeking a patent will interfere with their imperative to publish. The need to publish shouldn't really conflict with an interest in patenting, because the scientist is not giving up anything by showing a manuscript to the tech-transfer office before publishing." Lita N, director of the Technology Licensing Office at the Massachusetts Institute of Technology, concurs: "We will not change the academic function for commercialization. We are very careful to convey to potential corporate partners that our primary mission is academic. If we start becoming short-term servants of industry, the country is in trouble." N does not see MIT's sharp focus on basic research as conflicting with the school's interest in tech transfer. In fact, she notes, MIT's original charter establishes the university as one that transfers technology to industry. "There's been a whole lot less ambivalence here about technology transfer than at other universities," she points out. MIT's office, which was reorganized in 1985 by Niels Reimers, is one of the largest, with nine people doing licensing and 15 support staff. According to the "AUTM Licensing Survey Executive Summary and Selected Data--Fiscal Years 1993, 1992, and 1991," published last October, most schools have fewer than three full-time professionals handling tech transfer, and some universities have only one. Pollack heads a small office at Cincinnati, but he can seek marketing support from Edison BioTechnology Center, a nonprofit private corporation headquartered in Cleveland, with offices in Cincinnati. It was established in 1987 to work with universities, government and industry to increase biotechnology business in Ohio. Biotech researchers Victoria Chazin and Peter Stambrook are working with Cincinnati's tech-transfer office, the Edison center, and Jay Tischfield, a professor and director of the division of molecular genetics at Indiana University, to incorporate Serinus Biotechnology, a company that seeks to improve the current standard for detecting carcinogenic risk, using a transgenic mouse model. Chazin, who will be president of the startup, sees the marketing push of tech-transfer offices as helpful to entrepreneurial scientists: "It's amazing how many people I meet who want to start a company. Although publishing is most important, people seem to be doing more directed research. We need the resources and contacts offered by the tech-transfer office." Kevin Kinsella, general partner of Avalon Ventures, a venture capital fund in La Jolla, Calif., that seeks early technology, notes several effects of today's marketing-oriented tech-transfer office: "We've seen some real visionary thinking, and lots of technologies of interest. The problem is that there's been an incredible inflation of the value of technology in the minds of the tech-transfer offices. Ten years ago, you could have financed the entire first round of research on what some technology-licensing offices are asking for today in up-front fees. As the greed factor goes up, there's an increased chance of killing deals." While the tech-transfer office seems to operate like a business, officials stress that it's part of the university. And, as John Rice, director of medical technology for Senmed Medical Ventures, a Cincinnati-based venture capital and technology commercialization firm, points out, "The university culture is inherently different from industry. It is set up to seek science for science's sake. While some universities adhere to this doctrine more than others, they typically do not think in terms of changing their research focus to suit changing market demands." David Weiner is an assistant professor in the department of laboratory medicine at the University of Pennsylvania and former director of biotechnology at Philadelphia's Wistar Institute, as well as the holder of several patents. Weiner, who conducts HIV research, believes that the cultures of academia and industry are not as divergent as they once were: "Although academic freedom and publishing must come first, the line between basic research and clinical application is very short today. "And, with a properly constructed deal, there is room for both sides to flourish. In today's world, an 'us-vs.-them' attitude is not productive because research isn't done in a vacuum. All of the groups need each other, and all of these groups working together is the model for the future." Ann Neuer is a freelance science writer based in Cincinnati.

Academic Technology Transfer Offices Evolve Into Marketing Units

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