Campus Science/Technology Officers Gain Stature

Where academic research and commercial enterprise converge, this new breed of college official serves as science's gatekeeper When Katharine Ku took on the directorship of the Office of Technology Licensing at Stanford University earlier this fall, she inherited quite a legacy from her predecessor, Neils Rimers. Her professional endowment included royalties totaling $25.6 million last year; a portfolio of patents and licenses that includes one of the most lucrative and commercially successful university patents to date; a faculty that is, as she puts it, "in the middle of Silicon Valley and immersed in the whole entrepreneurial culture"; and a staff of 20 to handle their inventions. There are as many different paths to a position in technology transfer as there are facets to the job. A chemical engineer by training, Katharine Ku started her career as a patent engineer at Stanford University, helping investigators write descriptions of their inventions. After six years as associate director of technology licensing there, she left Stanford to become vice president of business development at Protein Design Labs Inc. in Palo Alto, Calif. It was from this biotech company that she was recruited back to Stanford this fall. Francis J. Meyer, assistant dean for technology licensing at the Johns Hopkins Medical School, has a Ph.D. in pharmacology and 20 years' experience in industry. Stephen Sammut, director of the Center of Technology Transfer at the University of Pennsylvania, was educated in the life sciences, served as vice president of venture capital activity at Teleflex Inc., a Plymouth Meeting, Pa.-based manufacturing firm, and has 20 years' exposure to clinical medicine through running an organ donor bank. As disparate as these people's backgrounds are, the officers agree on what it takes to be successful in this position. "It really takes a hybrid individual to be an effective licensing executive," advises Sammut. The first requirement is a scientific or technical background that enables the individual to communicate with the inventor and broker the technology fairly and effectively to industry. Stanford requires an undergraduate degree in an appropriate field, and Sammut's entire professional staff has doctorates--each in the specific area he or she is responsible for at the university. But even technology offices that do not have such formal guidelines agree that this is the most important requisite. "It is critical that you know enough about the science and technology to be able to talk that language with both the scientist and the company," says Meyer. The next criterion is some kind of experience in business, law, or both. Though patent lawyers are always on call, if not actually on staff, at these offices, the technology officer needs to have sufficient understanding of the law to develop appropriate business strategies for each project. Should an invention be patented, or just licensed? Patented just in the United States, or internationally? Should the technology be licensed exclusively? Experience in business will help one address these questions, as well as tackle the problems of valuing the technology, identifying potential licensees, and negotiating a deal. But familiarity with the concepts of economics, a knowledge of specific markets, and a general understanding of how technologies are developed into products are no more important than having personal connections in an appropriate field., technology transfer officers say. When he tries to put a value on a specific new technology, Duke Leahey at Washington University says, his contacts in industry are integral to his strategy. "I talk to the inventor, then I go ask a couple of venture capital and industry people," he says. "After four or five phone calls, I've got my answer." Finally, negotiation and communication skills are critical to formulating a deal that is beneficial to the university, the faculty member, and the company. But Sammut points out that his job continues even after a deal is signed. When he hires staff he also looks for "an irrepressible attention to detail and innate compulsion to follow up," qualities he deems critical in someone charged with monitoring a contract throughout its life. --S. L-J D. In short, Ku has a technology transfer officer's dream job. But not all universities are located in Silicon Valley, nor do most of them have a 22-year history in technology transfer. And even Ku is not protected from the challenges that face technology transfer officers on campuses across the United States. They must juggle legal, academic, business, and ethical issues, all the while walking a tightrope between the nonprofit academic and for-profit business worlds. And though these people are sometimes administrators and occasionally attorneys, those most often chosen to fill this role are, to some degree or another, scientists themselves (see story on page 6). Although technology transfer has had only a brief history on most campuses across the country (see story on page 7), there are many compelling reasons for licensing new technologies to the corporate world. The first is public benefit; most of the research done at universities is funded by the public through federal grants. Many discoveries, such as a new diagnostic tool or therapeutic, would not reach the market were they not transferred to the private sector for development into products. Technology transfer stimulates economic development. And licensing relationships can also lead to more research support, in the form of corporate-sponsored research or collaborative programs. While income from royalties and licenses was initially seen as a compelling factor, Martin Rachmeler, director of the Technology Transfer Office at the University of California, San Diego, says that "sobering thought and experience has shown otherwise." Though universities received almost 1,200 U.S. patents in fiscal year 1990, royalty income received by schools was only $60 million. Few programs are as financially successful as Stanford's, and many cannot even cover the high cost of patenting their discoveries: Duke Leahey, director of industrial contracts and licensing at Washington University in St. Louis, says that a U.S. patent costs about $10,000 and international patents run somewhere between $30,000 and $50,000. "One patent we are currently filing in almost every country, I'm sure, will reach $500,000 in filing fees," he says. But the decision whether to patent a new discovery is secondary, technology transfer officers say, to getting the university scientists to contact them in the first place. Surprisingly, in many cases the problem is that the investigators don't even know the office of technology transfer exists--or they don't know they may have invented something with potential for practical application. Joyce Brinton, director of the Office of Technology and Trademark Licensing at Harvard University, says that she tries to have her staff meet with every scientist at one time or another. "In many cases," she says, "the conversation starts: `Invent? I would never invent.' And by the time we leave the person hands us a manuscript, saying, `I think it may have something in it that you would be interested in.' It's an educational process that goes on so frequently it has almost become a cliche." Leahey says that the university grapevine is one of his best allies: "Most of the invention disclosures we get from an investigator come because there has been a groundswell of colleagues saying, `You really ought to think about patenting this.' " Such was the case, Leahey says, with a neurobiologist at Washington who, lacking the $200,000 to purchase a confocal microscope, constructed one of his own, using some razor blades and spare microscope objectives. Today, Washington owns several patents on the microscope and the technology has been licensed to the Newport Corp., a Fountain Valley, Calif.-based instrumentation company. The confocal microscope has just reached market, and the company is working on two other applications of the technology: a biomicroscope used in ophthalmology and a whole-body macroscope. "But had someone not talked to him about his invention, he would have published it, we would never have captured the patent rights, and it might not have been applied this effectively," says Leahey. Earning the scientists' trust has been an issue for many technology transfer officers, and the issue of publication has been at the forefront of the controversy between academic freedom and intellectual property rights. (In the U.S., a patent application must be filed within a year of publication; in other countries, the application must be filed before publication. This provides incentive for delaying publication, which some feel is unethical for academics working under public funding.) "When the program began, there was a significant portion of the faculty who felt that trying to do anything in a commercial sense was inappropriate," recalls Brinton. "But today that attitude has largely changed. The faculty has been able to see that the licensing activity doesn't get in the way of normal academic pursuits. The faculty member publishes when he or she wants to, and we try to get the application in by that time." Once an investigator has submitted an invention disclosure to the technology transfer office, it must be evaluated. Is this really something new? Of what value is it, and to whom? Does potential income warrant patenting, or should the technology just be licensed? Not all inventions are pursued, of course. Stephen Sammut, director of the Center for Technology Transfer at the University of Pennsylvania, estimates that his office follows up on 30 percent to 50 percent of the projects reviewed by his office. "The issue of having to tell an inventor that his baby is `ugly,' or not worth pursuing in this regard, is exaggerated," he says. "Most people realize what they have. What is offensive to an inventor is if you haven't given their project a fair shot. But trying to treat each investigator fairly while at the same time prioritizing opportunities on some intelligent basis is a real challenge." Although a few institutions, like Stanford University and the University of Wisconsin, have a long history of making a concerted effort to transfer campus discoveries to the commercial domain, most schools entered into the endeavor in the late 1970s and early 1980s. At Harvard University, for example, it wasn't until 1978 that the Office of Technology and Trademark Licensing was founded. Joyce Brinton, director of that office since 1984, explains that it was the confluence of three factors that encouraged a change in Harvard's "hands off" policy in regard to patenting technology. First, she says, there was the gradual recognition that the policy as it existed offered no incentive for developing technology discovered in the university. Second, the faculty became concerned that if the school did not come up with a policy whereby it took ownership of the technology, the government would. And finally, it was during this time that Harvard began discussions with a company that was interested in funding research at the medical school--a deal that would have been outside the scope of the then-current policy. None of these factors was unique to Harvard; in fact it was during the mid-to-late 1970s that much of industry awoke to the potential of university technology. But it was in 1980, with the passage of Public Law 96-517--which allowed nonprofit institutions to take ownership of inventions made with federal funding--that the movement received its broadest impetus. Today, the Association of University Technology Managers--whose president is Martin Rachmeler of the University of California, San Diego--has more than 800 individual members and estimates its institutional membership to be between 200 and 250. For more information on the organization, write Penny Dalziel, Administrator, 71 East Ave., Norwalk, Conn. 06851; or phone (203) 852-7168. --S. L-J D. Another major time-consumer is the determination of ownership of the invention. "It's not just Penn dealing with one inventor who is isolated from the rest of the world," says Sammut. Scientists often use reagents or materials that are proprietary to another party, and collaborate with colleagues within the institution, at other institutions, and even in other countries; many also have consulting relationships with industry. The issue of ownership must be clarified with each of these parties before the project can be pursued. But disputes are not limited to university vs. university or school vs. company. Many times, conflict has arisen between an investigator and his or her institution over ownership of an invention or how its commercialization should be managed. Leahey recalls a case in which a Washington University inventor wanted to license his technology to a specific company, but, as the company would not indemnify the university and the technology involved a significant potential risk, Washington would not sign the deal. "Our goals are to protect the liability and academic freedom of the university, and this guy was willing to give both of those up," Leahy says. In a messier situation at the University of Pennsylvania last year, the school and a corporate sponsor, Princeton, N.J.-based Cytogen Corp., signed a research contract without including the Penn scientist doing the work (The Scientist, May 28, 1990, page 1). Disputes over that agreement have led to losing funding for the project, jeopardizing of a postdoc's career, and, perhaps most important, losing two to three years' work on the project. When all disputes are finally settled, the tech transfer officer must identify potential licensees and put a value on the technology before a deal can be consummated. Though big schools may be able to finance a formal market survey to identify the best potential licensees, most schools rely on the grapevine again. "We almost always license to companies with whom the faculty member has already done business," says Leahey. "These companies show up at their technical meetings; maybe they are already collaborating on something. Most of the time they are people that our faculty know and respect." Deciding what kind of payment the school is going to ask for is more difficult to determine. Payment structures can include a license-issue fee, annual minimum payments, milestone payments, and, after a product reaches market, royalty payments. Francis J. Meyer, assistant dean for technology licensing at the Johns Hopkins Medical School, says that while initial license fees can range from $2,000 to the very rare $1 million, the average is in the range of $20,000 to $40,000. The general range for royalty payments is 3 percent to 7 percent of sales. "Of course, beauty is in the eye of the beholder," he says. "I usually think it's worth a certain amount, the inventor thinks something else. What really matters is what the company is willing to pay." The challenges of negotiation notwithstanding, perhaps the most trying issues these officers face are those of ethics. Operating by definition within the vast gray area that exists between academia and industry, and trying to balance university rights, academic integrity, and the goal of transferring as much quality technology to the public sector as possible inevitably leads to questions of conflict of interest. The freedom to publish despite the disclosure constraints imposed by patent law is one issue that, for the most part, has been resolved in favor of academic freedom. But as entrepreneurism continues to grow and center on schools, new kinds of quandaries are being encountered. For instance, if a startup with little cash wants to license university technology, should the school take equity in the company in lieu of payment? Such a deal may be the only way to get the technology out into the marketplace, and could turn out to be quite lucrative for the university. But often the inventor or a colleague on the faculty may be involved in the formation of the company, presenting a very real potential for conflict of interest. At Penn, Sammut reports that "there has been an enormous ongoing dialogue on campus as to how we can manage these relationships." The school has entered into some such deals, but makes sure that neither the school nor the faculty member retains any managerial or directorial powers. No one at the university can sit on the board of the company, the investigator has special reporting requirements to his or her department chairman, and the total number of shares involved must represent minority ownership of the company. "As long as we are satisfied that there is an arm's-length relationship between the laboratory and the company, we have a minimum level of comfort," he says. "But we still watch such situations closely." Another issue currently generating much debate on many campuses is that of adding value to the technology. "Sometimes all we need to do is make a prototype," says Ku. "We could get a lot more for proving that the invention is practicable, rather than just presenting an idea on paper." Stanford is just starting an exploratory program in this area and, because the inventors themselves do not want to be product developers, will probably use an outside contractor to build the machines for them. It's an idea that some other schools, like the University of Wisconsin, have tried and abandoned. "It's an excellent idea, but one which requires tremendous investment and expertise," says Ron Kudla, director of patents and licensing at the Wisconsin Alumni Research Foundation. "It's high risk to pour a lot of money into it at that stage." Leahey reports that Washington University came to the same conclusion. "We are dealing with technology that is so far from the marketplace that we'll see maybe 5 or 10 out of 100 get to market," he says. "It's so incredibly risky and so long-term that it's not an appropriate use of university funds." Many people, including a good proportion of technology transfer officers polled for this story, agree with Leahey that such a role is too close to product development, and thus crosses the line beyond what is appropriate for an academic institution. At Penn, Sammut feels that "unless it's structured in a very careful manner with the correct oversight, I think it's over the line. The only way to get it back onto campus is to use it as an educational lab for your students. If you are integrating into it the education of your engineering, science, business, and even law students, then it is as much an educational as a product-development enterprise." It's a nice dream, but likely to remain one in the near future, as technology transfer offices enter a period of reassessment and, in an era of budget cutting, increasingly need to justify their existence altogether. Ku estimates that only a handful of offices around the country bring in enough income to cover their budgets. And it's a moot point at places like the State University of New York, where Eugene Schuler, director of technology transfer, says that university policy dictates that 40 percent of the gross income from any licensing agreement go to the inventor and the remaining 60 percent go to the campus where the invention occurred. Therefore, though his office brought in $1 million in 1990, none of it could be used to cover the $900,000 incurred in expenses. Even the technology transfer officers themselves have difficulty agreeing on what parameters should be used in judging their programs. A survey currently being conducted by the Association for University Technology Managers of Norwalk, Conn., asks members to rank the usefulness of six specific indicators in evaluating programs: patent cost reimbursement; gross royalty and licensing income; and numbers of confidentiality agreements, disclosures, patent applications, and executed licenses. "There are different things that this data tells you, and some of the numbers can be manipulated quite easily," says Schuler, who is writing the questionnaire. "The question is what mix of these indicators would really say that the program is a success or not." But none of these, he points out, addresses the most critical factor: client satisfaction. "How satisfied," he asks, "are the faculty researchers in terms of the services we provide them?" Susan L-J Dickinson is a freelance writer based in Philadelphia.

Campus Science/Technology Officers Gain Stature

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