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University Technology Transfer - Questions and Answers

The following information, presented in questions and answers format, has been developed by the Council on Governmental Relations (COGR), for the benefit of university faculty and administrators across the nation.

Part One - (In another here.)
  • What is the Bayh-Dole Act?
  • How has the Act influenced tech transfer?
  • How many research universities have tech transfer offices?
  • How does university tech transfer work?
  • How is the licensing value determined?
  • Exclusive or non-exclusive licenses?
  • Start-up companies and tech transfer?
  • Licenses through competitive bidding?
Part Two Part Three - (In another here.)
  • How much do universities make on licensing?
  • How do universities measure success in tech transfer?
  • Why do universities retain title?
  • Why link creation of knowledge to development?
  • Why encourage faculty to invent?
  • Footnotes

Why do universities sometimes license to foreign companies, and to what extent have federally-assisted technologies been licensed to foreign companies on an exclusive basis?
When universities seek potential licensees, they begin close to home--with companies within the same state of region. This makes sense because the company often needs to have access to the inventor as a consultant to assist in the development process. Such interaction is easier if distant travel is not required. Universities consider licenses to foreign companies in those instances where all attempts to identify a domestic licensee have failed. If a thorough investigation of all possible licensees in the United States results in failure, should the universities seek foreign licensees or close the file? There are many foreign companies which are leaders in their fields and thus, also, are potential licensees. in some cases, such as in equipment for the paper drying industry, the only prospective licensees may be foreign companies. Many of what appear to be local and U.S. based companies are, in fact, "foreign"; they may have been purchased by a foreign corporation (as is the case with Genentech) or they may be U.S. based subsidiary (as in the case with Miles, Inc.). The fact is that many companies are multi-national and have U.S. offices and factories.

The choice of licensee is best made on the basis of whether a company has the capability and resources to develop the technology and bring it to the market effectively. Since university technology is not a fully developed product, it is less a question of choosing among various qualified companies than finding any company willing and able to take the license. Thus if a foreign company makes a reasonable proposal and is capable of developing and marketing products based on the invention, the university will generally grant that company a license.

Nevertheless, universities should be extremely cautions in considering foreign licensees, especially if the research was funded by the U.S. government. For those inventions, all exclusive licenses require the licensee, including foreign companies, to manufacture products substantially in the U.S.

The recent GAO survey of thirty-five top NIH and NSF grantees showed that during 1989 and 1990, only eighteen of the one hundred ninety-seven exclusive licenses for NIH/NSF-funded inventions went to foreign companies (less than 10%). An additional eleven were granted to U.S. subsidiaries of foreign corporations.

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10. What is the relationship between patents and publications?
In order to obtain a patent, the inventor must fully disclose his/her invention. Thus, in some ways the act of patenting insures publication. At the same time, publication of the details of an invention prior to filing a patent application, can result in the loss of patent rights in most countries. The U.S. is an exception since it permits an inventor to obtain a patent if a patent application is filed within one year of the date of publication which first disclosed the invention.

Some scientists are concerned that the desire to obtain protection may cause publication to be delayed for long periods, slowing the exchange of scientific information and thus scientific progress. While this may be true in industry, it does not appear to occur in academia where publication delays for patent purposes are rare. When they do occur, it is usually for less than three months. In fact, if a faculty member starts the patent filing process at the same time as submitting a manuscript for publication, it is likely that the patent application will be filed (in three months) long before the manuscript is published (in six months).

For university scientists , the right of unfettered publication of data--in journals, other written media, through oral presentation at public meetings--is a basic principle of academic life. Patents protect this form of public discourse in science. It is not a matter of having to chose between patents and publications; both are feasible and frequently desirable. But if there is a choice, it is the faculty who makes the call.

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11. Why is it not desirable to dedicate all federally-assisted inventions to the public via publication, rather than patenting some of them?
An argument has been made that inventions resulting from federally funded research should be dedicated to the public, by publishing the details of the invention in literature available to the public. The thought is that since taxpayers paid for the invention they should have free access to it. In reality, taxpayers could only reap benefit of the invention if they had large financial resources, sophisticated technical skills and the personal interest in practicing the invention. Further, this scenario would require inventions that are ready to go to production stage. In today's complex technological environment, federally funded research is rarely ready to go to production when universities are ready to license it. Such development is often time consuming and costly.

Taxpayers do benefit from inventions by having access to a broad range of products developed by a predominantly competitive marketplace. New drugs are a prime example. If the invention has been dedicated to the public through publication, no commercial firm would devote extensive resources to developing the first commercial application, knowing that any of their competitors can step in and reap the profits of commercial exploitation once the invention has been proven. Patents, and the seventeenth year exclusive position they provide to the inventor, or to the inventors designee, are necessary for successful commercial development of inventions.

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12. What potential financial conflicts of interest could arise at universities in the technology transfer process, and what steps have universities taken to deal with them?

    1. Conflicts of time and commitment--an over-involvement of the investigator with the company to the detriment of teaching and university research obligations. Most universities have regulations regarding the faculty member's time obligations to the university. For example, some universities state that the "academic year salary" covers 80% of the faculty member's time during the nine months of the academic year. Faculty are free to consult "up to 20% of the time" (usually understood to be one day per week) during the academic year. Payment for the "summer months" is often under a separate, negotiated arrangement. The issue is further controlled by regular reporting of the investigator's consulting and other outside commitments.

    2. Misuse of university resources on the company's behalf--this includes university facilities, equipment, supplies and involvement of graduate students and other paid researchers. University policies should make it clear that work done at the university must be publishable in the open literature and that any intellectual property such as data, patents and software, developed with university resources belongs to the university. In addition, periodic reports to research sponsors assure that grant money is used for legitimate research ends. Periodic performance review by academic administration and an "appeal path" for employees further controls the process. 3. Confusion in ownership of intellectual property--The question: "Who owns Professor X's patent?" could become a common source of dispute, unless there are clear university policies and definitions within research agreements of sponsor's rights. University policies commonly state that the university owns all patents and software developed using university facilities or developed under a sponsored research agreement. Industrial sponsors are commonly granted first options to license patens arising from research, and the federal government is granted a nonexclusive license to patents from federally funded research. 4. There may be a potential or perceived conflict of interest where an inventor holds an equity position in a company, which the university has licensed to market and distribute the invention. Most universities believe that bringing such financial holdings into the sunlight, through public disclosure, is preferable to a hard and fast rule prohibiting the taking of equity together.

Universities also understand the potential unethical conduct may arise from an investigator's financial interest in a company. Universities have separate rules in place to prevent, discovery or sanction fraudulent activities. Scientific misconduct, however, is not to be equated of confused with conflicts of interest.

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13. Why is there sometimes joint federal and industrial participation in university research projects?

Increasingly, the federal government encourages the development of collaborative relationships between itself, industry, and academia. New partnerships are fostered through the Defense Reinvestment Act, programs at the National Institutes of Standards and Technology, the Environmental Protection Agency and the Department of Energy. Collaborative relationships are expected to promote economic development, job creation, technology transfer and innovation.

Federally funded projects can indeed benefit from the practical industrial perspective. The research can be enhanced by industry's interest in the application of the research to solving practical problems and creating new or better products. Industry scientists have substantial expertise in many federally funded research areas. Thus, collaboration between research at the university and development at the company facilitates the transfer of new technologies to the commercial sector. The resulting leveraging of funds and expertise benefits all parties and the public.

In certain programs, federal agencies require applicants to present a technology transfer plan as part of their funding proposal. In these cases, universities seek potential licensees while the research is in progress. Gaining company participation at the early stage increases the likelihood that the company will grasp the commercial potential of the research and will help move inventions to the marketplace.

Universities increasingly try to foster ties with industry. This can be a win-win situation: industry extends the scope of its R&D, and university investigators extend their limited research dollars and gain access to the expertise of industrial scientists. Bringing industry interests into university projects also contributes to placement of university graduates in industrial settings where their education and training is effectively used.

Some state governments are also promoting industry-university ties. For instance, the Texas higher Education Coordinating Board makes biannual awards of approximately $60 million to researchers at state universities in the Advanced Technology Program. Receipt of state funds under this program in contingent upon industry participation in the research project.

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14. Do universities apply different policies and procedures to inventions assisted by industry funds that to those assisted by federal funds?
Universities generally apply the same policies and procedures to all inventions made at the institution, whether they result from federal or industrial funding. Of course, the university must comply with certain government reporting and licensing requirements of the Bayh-Dole Act for inventions resulting from federally funded research. Nonetheless, university policies emphasize the university's responsibility to manage all its inventions for public benefit.

When an invention results from industrially funded research, the sponsoring company is often granted the first opportunity to obtain a license to commercialize the invention. If joint industrial and federal funding is involved, the company's rights are subject to the institution's obligations to the federal government. Whether or not the federal funds are involved, the university insists on license terms that require the company to be diligent in developing the invention. If the company does not comply, the university generally reserves the right to terminate the license or to grant licenses to other companies. In this way, a company can be prevented from "shelving" an invention that might replace or compete with one of its existing products.

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15. When is it appropriate for license rights to future federally assisted inventions to be committed to an industrial sponsor?
When both federal and industrial funding support a research program, it is appropriate to grant an industrial sponsor the right to receive licenses to subsequent inventions. The regulations implementing the Bayh-Dole Act specifically recognize this possibility. It is also possible for two separate research projects to contribute to a single invention. If one project is sponsored by industry and one by the federal government, the industrial sponsor can be given rights to the invention.

It is, however, considered inappropriate to grant an industrial sponsor the right to exclusive licenses to future federally assisted inventions which result from research that the company does not fund.

Perhaps the most fundamental boundary is that universities should not grant to a single industrial sponsor the rights to federally assisted inventions from the entire institution or major units such as departments, centers and laboratories. The granting of rights must be specific to the scope of the work funded.

University action in the management of inventions is guided in part by their mission: instruction, research, and public service. It is within this mission that universities undertake federally assisted research. The administration of invention rights arising in this research is further bounded by the implementing regulations of the Bayh-Dole act. For example, the Act specifies that manufacture of products based on the technology should be done substantially in the United States. this is good public policy, but it also makes good business sense. Companies often express a concern about the government's march- in rights under the Act. These rights, again, are appropriate public policy and would likely be applied only when a company's pricing is abusive--a condition which the marketplace is more likely to correct first.

It is within this framework of principles, institutional mission and federal regulations that universities determine what rights to grant to industrial sponsors.

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