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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 - (In another here.)
  • Foreign licensing?
  • Patents and publishing?
  • Inventions in the Public Domain?
  • Conflicts of interest?
  • Joint Federal and industry participation?
  • Different policies for Feds and industry?
  • Committing Federally funded inventions to industry?
Part Three
How much income is derived by universities from licensing federally assisted inventions, and how is that money used?
The 1992 GAO survey of thirty-five top NIH and NSF grantees showed that for the two-year period 1989 and 1990, those universities received a total of $113M from licensing of which $82M was for licenses of NIH/NSF funded inventions. To place these figures into context, the invention income was less than 1% of the research support provided to universities by NIH and NSF.

The Association of University Technology Managers (AUTM) gathered 1991-1992 data from U.S. and Canadian institutions engaged in technology transfer. 98 U.S. universities provided gross figures on their royalty income. For 1992, royalties amounted $172M. This figure needs to be adjusted for legal fees, amounting to $37M. In addition, the survey does not translate into dollar terms the amount of staff time expended to manage the process. Such figures tend to be meaningless in the abstract, lacking the context of institutional, federal and industry funding which provided the basis for the invention disclosures.

In reality, licensing income is small in comparison to the total university budget or even in comparison the university's sponsored research budget. Even at the schools with the most licensing income those percentages rarely exceed 3-5%, and at most schools the percentage is less that 1-2%.

How do universities use royalty income? The answer is the same at all U.S. universities--income from licenses flows back into research and teaching. According to federal law, the universities must share licensing income from federally funded inventions with the inventors. The balance of income can be used to cover the costs of the technology transfer program and to support teaching and research at the university. While the specified percentages vary from institution to institution, the typical royalty sharing policy provides, after expenses, about 1/3 net income to the inventor 1/3 of the net income to the inventors department, and the university's general research fund service the final 1/3.

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17. How do universities measure success in technology transfer?
There are many ways to measure success in technology transfer, but since this is a new field, success indicators are not yet uniformly established. Various measures include: the number of inventions disclosed; the number of patent applications filed, patents issued, and licenses consummated; the amount of licensing income, and the number of commercial products produced and sold. Some institutions track the number of industrial interactions and research projects funded as a direct result of marketing initiatives. Others point to spin-off industries and related incubation facilities, which tend to grow next to highly innovative universities. silicon Valley and Route 128 are well known examples.

More intangible, but nonetheless significant indicators include; a university's capability to retain entrepreneurial faculty and attract outstanding graduate students; its reputation for innovation; the enhancement of university research; and the promotion of the university's name. And the marketplace impact of university originated products and technology in unquestionably a major component of success.

Marketplace products are recognized by the public as a tangible outgrowth of its support of basic research. An example of the impact of university technology transfer on the marketplace is found in the biotechnology industry. This entire industry--and ten thousands of new jobs it created--is based upon university research. The Cohen-Boyer patent licensed by Stanford University is used by all biotechnology companies. In addition, many of these companies were founded to develop university inventions, whether related to specific genes, monoclonal antibodies or potential drugs.

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18. Why do universities retain title to inventions?
Universities are unique environments. They are the cumulative product of decades of social investment. Their land and physical plant may have been granted or gifted by state governments or individuals. Their tremendous value to the public is exemplified by the fact that they are traditionally tax-exempt. Their activities are supported by a mix of state, federal and private investment. The pact between universities and the public demands accountability for use of resources which have been provided at public expense, and imposes an obligation upon universities to ensure that the public receives benefit for its investment. This is one factor in some universities' reluctance to sell patent title to industry. Other factors also play a role:
  • The value of the American research university is in the reservoir of its scientific experience and the accomplishments of its faculty and students. Ensuring continued use of unique discoveries within the classroom and laboratory is indispensable to maintaining the quality of the research university. By maintaining control of their patents, universities allow both commercial use plus contributions to the universities' collective intellectual experience.

  • By nature the university is a dynamic environment with faculty and students freely interacting with one another. Cross-fertilization of ideas may result in multiple inventions with obligations to different funding sources. By retaining title to patents, universities are in a position to equitably apportion the right to use patents among the contributing organizations.

  • The link between technology creator and product developer is crucial for successful commercialization. The product developer most often does not have the knowledge to work with the basic inventions that result from university research. By retaining patent title and licensing those patents to industry, universities establish a partnering relationship that allows ongoing interaction between the source of the idea and those with the expertise to bring it to the marketplace.

  • By retaining title to patents, universities can require licensees to make diligent efforts toward commercializing those patents. Patents not used must be surrendered to the university so that an alternative licensee may be found. Universities can ensure that new product opportunities are not wasted by companies without the resources, resolve or capability to achieve commercialization.

  • Incentive to invent is as important to the university scientist as it is to the industrial scientist. A technology transfer program structured around royalty-bearing licenses, rather than patent title assignment, helps motivate university scientists to pursue break-through discoveries.

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19. Why are universities a vital link in the chain from creation of knowledge to development of products?

The valuable results of research which provide advances in technology are usually the result of the curiosity of a researcher who is asking "Why is this so?" or "Where could that lead?" What makes universities unique is the fact that they provide a rich diversity bringing together multiple disciplines, with a broader focus than product-specified industries. Most importantly, universities train and nurture the next generation of scientists and engineers which will carry with them to industry the ability to link creative knowledge with product development. The university provides the environment--library, laboratory, resources, equally curious colleagues and students--to nurture the pursuit of knowledge.

However, this knowledge often needs further work even to begin to determine its usefulness as a contribution to a product of service. Industry is reluctant to support research which is not directed toward immediate financial return. The university provides a proving ground on which to take next steps toward commercialization.

The majority of university research is sponsored by government agencies and is not targeted to specific commercial markets or end products--it is, by definition, basic research. However, since it is the nature of research to identify and test new ideas, its results often lead to the expansion of scientific knowledge as well as to the development of new technologies and products which benefit the public.

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20. Why is it important to encourage university investors to participate in the patenting process and how are they motivated?

Universities make a considerable investment each time they decide to patent and invention. Their resources include the faculty inventor's time and energy, and the outlay of dollars required by the patent application process. Commitment and support from the faculty is essential for successful technology transfer activities by their institution. Beyond the actual patenting stage, however, the path from an invention to final product or service in the marketplace is usually long and expensive. During this stage, the scientific knowledge of the inventor needs to feed into the process, to assure smooth and continued progress.

In addition to royalty income, faculty recognition by peers is important. In some schools the preparation of material to obtain a patent and the successful completion is given weight in the tenure and promotion process. This investment in time and money will not be made without incentives. in fact, the Bayh-Dole Act deliberately grants those incentives, to the inventor and the universities. Beyond the gratification of bringing technology to public use, the institution needs to recover its investment. The inventor hopes to generate research funding in the short term and possibly receive license fees to use for future research support. It is important to recognize that without such incentives, many inventions may not get carried through the necessary steps and a commercial opportunity will be wasted. This wasting of ideas is a drain on the economy, irrespective of whether it was public or private funding which led to the initial invention.

Many faculty researchers were not exposed to the ides of intellectual property, patents, copyrights, trademarks, etc., during their early academic careers. they may have misconceptions and apprehension about the patenting process. One common misconception is that the public benefits only when research is rapidly published and provided equally to all interested parties. Another is that patents should be obtained only by industrial researchers.

Many universities provide outreach programs to potential university inventors to dispel these misconceptions and to allow inventors and their laboratories to benefit from their ideas. Encouraging faculty to participate in the process of patenting may increase their understanding of the benefits of protecting the valuable technology. Involving inventors in the process of marketing the technology is helpful in broadening their outside interests. in this manner, the inventor gains an insight into new potential sources of research funding as well as the benefits of commercialization.

Not all faculty will agree that their involvement in commercialization activities is appropriate. Some contend that commercialization taints the university and detracts from its mission. They believe that technology transfer should be accomplished through more traditional methods, such as the education and training of students and the broadest dissemination of knowledge through publications.

Change is inevitable and change will be effective by success of the commercialization efforts. Yet, participation in such activities should always remain an option, and should remain consistent and focused on the mission of academia.

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AUTM Survey, compiled annually by Ms. Kathleen Terry, State University of New York at Buffalo

AUTM Licensing Survey, 1993.

"University Research-Controlling Inappropriate Access to Federally Funded Research Results", May 1992.

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