Business / financial management

Fixing Technology Transfer

The subject of how effective universities are at commercializing technologies they develop is a suddenly hot topic. Prodded in part by the Kauffman Foundation’s critical and controversial call this winter for turning academic inventors into free agents to stimulate innovation, the federal government convened university and industry leaders last month to discuss how to speed the movement of research into the market place.

The Association of University Technology Managers rejects the view, explicit in the Kauffman proposal and implicit in last month’s federal summit, that the current system of university technology transfer is flawed. AUTM argues that investing more money in the current setup will propel more innovation and commercialization.

We think both sides are wrong in their embrace of the profit motive as a stimulator for university research innovation, and suggest a more fundamental rethinking of the use of commercialization as a way to get academic innovations into the market.

Turning faculty into wild west entrepreneurs as Kauffman’s proposal would do is problematic for several reasons. First, faculty who believe they have the next cure for cancer or tomorrow’s Gatorade (insert professor’s name as a prefix this time and not a university mascot) will confront even greater conflict of interest forces from real or perceived get rich expectations.

Second, it undermines campus collegiality, a building block of innovation, and would significantly undermine campus-based scientific collaborations. Third, the Kauffman proposal assumes that faculty know how or have the time to market themselves externally. Very few faculty are equipped to be effective independent agents of commercialization.

AUTM misses the mark by suggesting the solution is simply to invest more in commercialization activity.

In a recent article published in Change Magazine, we show that only about 65 percent of the universities ever realize a net positive return (revenues that exceeded costs) but that those universities with R&D output below $225 million, 20 licenses per year, and 5 full-time licensing professionals were at a distinct success disadvantage.

In summary, what our research evidenced was the level of investment needed to realize a particular odds-for-success gain and that the marginal benefits of investment fall off noticeably at the above inflection points. Furthermore, our research also revealed that the longer a university subsidized its technology transfer program (i.e., costs exceeding revenues), the less likely it was that the program would ever realize financial success.

As long as university leaders continue to hold unrealistic expectations for revenue generation, they will focus on what the university will “get” rather than on what may be best to develop a technology. There is also plenty of evidence that one byproduct of treating innovation as an intellectual property, rather than an intellectual commons, has been an increase in conflicts of interest, conflict of commitment, and internal equity concerns.

Furthermore, recent research we have conducted suggests that exclusive license deals, a common approach to technology transfer in which a single company is given the rights to a technology, may have a negative effect on their interest in collaborating with others on their research agenda.

Finally, little or no attention has been directed to technology transfer cost containment. The pursuit of financial returns has simply led universities to set up their own operations with little consideration of mission alignment and the diseconomies of scale associated with patenting activity, the high-cost albatross associated with commercialization. Essentially, we believe universities have fallen prey to the allure of the almighty dollar.

A Way Forward

We offer three recommendations for reforming the current system.

First, streamline the licensing process by establishing standard license agreements with small or minimal royalty return expectations and related elements that historically have been noted points of contention with industry. There is little or no evidence that anyone has been able to consistently pick a blockbuster winner from the largely early-stage technologies emerging from universities, so stop treating every licensing deal as if this will be the one.

Second, establish regional consortiums of technology transfer offices built around universities with known expertise and experience and with whom the smaller universities would cycle their commercialization work rather than build up their own infrastructures. These consortiums would enjoy economies of scale, particularly with regard to patent prosecution work, and provide greater centralization for industry attempting to gain access to university innovation. NIH and/or NSF could incentivize the formation of such consortia through a competitive grants program.

Third, why is it important that universities “own the patent,” or even patent as frequently as they do? What if greater provision could be made for industry to own or co-own the patent with appropriate safeguards built in, such as performance milestones for technology development and academic rights to use a technology for research purposes?

This approach to commercialization could free up institutional resources while still recognizing what society expects from its R&D investment in universities. Relatedly, there is growing evidence that universities are over-patenting, making technologies proprietary that then languish in a new place -- the technology transfer office -- rather than the lab bench. Universities would be wise to be more selective about patenting and do more to make industry aware of new technologies through the traditional academic publication and presentation route.

Fredrick Cottrell, UC-Berkeley Professor of Chemistry and father of the first university patent, worried that becoming too involved in patenting and licensing activity would have a negative effect on the openness needed for science to flourish.

One hundred years later, most research universities are actively engaged in such activity with some troubling evidence that it has not all been for the good. Yet, this nation has long relied on higher education’s innovative capacity and thus solutions to these troubling issues must be found while simultaneously speeding the benefits to society.

Rethinking the “profit motive” as the underlying incentive for technology transfer would be a step in the right direction.

Author/s: 
Joshua B. Powers and Eric G. Campbell
Author's email: 
info@insidehighered.com

Joshua B. Powers is chair of the Department of Educational Leadership at Indiana State University. Eric G. Campbell is director of research at the Mongan Institute for Health Policy at Massachusetts General Hospital and Harvard Medical School.

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