Scope of Advisory Group #4:
Working with Industry - Faculty Incentives, Cultural Differences

Every year there are more opportunities--and more pressures--encouraging university scientists to work closely with industry. While university/industry research interactions intensify, the respective motivations of the parties, rooted in cultural distinctions, continue to complicate, and sometimes impede, such research relationships. From the typical academic researcher's vantage point, industry provides an additional and potentially significant source of research information, materials, and funding at a time when universities are having trouble maintaining their funding base. From a company's standpoint, the primary benefits of interaction with universities are commercial in nature, typically accessing world-class scientists or facilities to solve a problem, obtain information, or secure a strong intellectual property position - all with a profit motivation. One issue these differences raise is whether faculty researchers and their students are sufficiently aware of the different cultural and legal expectations that companies attach to contractual obligations and intellectual property agreements, as opposed to those normally held by Federal research sponsors. Another issue is whether there should be faculty incentives to engage in technology transfer activities with industry and what impact such incentives might have on the culture of the University. For instance, should the University change its reward systems for promotion and tenure to reflect the institution's commitment to transfer expertise, research results, and technology to private industry as a form of public service? Should faculty business activities be included in promotion discussions as evidence of the societal importance of their entrepreneurial contributions? What are the pluses and minuses associated with granting sabbaticals or unpaid leaves for faculty entrepreneurs involved in commercial development of their research results? What impact are such relationships having on the faculty member's professional allegiance to the University of California. How far should the University go in sharing costs of industry sponsored research or allowing industry to buy faculty time from teaching to promote collaborations with industry or involvement in entrepreneurial ventures?

Advisory Group #4 will review current UC policies and guidelines designed to facilitate and regulate faculty interaction with private industry. The Group will consider whether the University needs to create new mechanisms (and/or remove impediments) to facilitate such interaction.

Participants in Advisory Group #4:
Working with Industry - Faculty Incentives, Cultural Differences

John Edmond (Chair)
Professor of Biological Chemistry
UCLA

Pamela Webb (Specialist)
Manager-Sponsored Projects, Office of Research
UCSB

Paul Bartlett
Professor of Chemistry
UCB

Derek Cheung
Vice President and Chief Scientist
Rockwell Science Center
Thousand Oaks, CA

Joyce B. Freedman
Director, Sponsored Projects Office
UCB

Warren M. Gold
Professor of Medicine
UCSF

Harry W.Green
Vice Chancellor of Research
UCR

George L. Kenyon
Professor, Chemistry & Pharmaceutical Chemistry
Dean, School of Pharmacy
UCSF

Alan J. Laub
Dean, College of Engineering
UCD

Daniel R. Masys
Director, Biomedical Informatics
UCSD

Claire Max
Director, University Relations Program
LLNL

Suzanne Quick
Program Manager, Office of Technology Transfer
UCOP

David Rocke
Professor, Graduate School of Management
UCD

Jane E. Shaw
Founder, The Stable Network and Former President and COO, Alza Corporation
Menlo Park, CA

Chang-Lin Tien
Chancellor
UCB

Henry T. Yang.
Chancellor
UCSB

Report of Advisory Group #4:
Working with Industry - Faculty Incentives, Cultural Differences

Advisory Group #4 was asked to review current UC policies and guidelines designed to facilitate and regulate faculty interaction with private industry. The Group was asked to consider whether the University needs to create new mechanisms (and/or remove impediments) to facilitate such interaction. In the first of the two sessions the panel discussed in an unrestricted open forum format, the various issues pertaining to the subjects, with the understanding that the second session would be dedicated to a dialogue focusing on proposals the panel deemed significant enough to forward as recommendations. From the dialogue eight recommendations were formulated:

Recommendations:

1. The University must recognize the inherent risks as well as benefits in industrial collaborations and must accept and manage the risks accordingly.

2. A key aspect in evaluating the desirability of a collaboration should be the degree to which it benefits students and postdoctoral fellows and protects their educational interests.

3. Where feasible, advantageous management practices adopted by entrepreneurial universities should be examined to determine their applicability to the University of California.

4. Indirect cost recovery charges and their application and use should be made apparent (or justified) to the faculty, and tangible (understandable) to the funding private sector entities. We should strive for an IDC recovery system that the faculty will support, and that will enhance the return of overhead to the individuals and units which generate it.

5. A forum should be conducted at the campus level that would involve faculty, relevant administrative officers, and representatives from industry about the benefits and ethical issues involved in industry/university collaborations.

6. The university administration should seek ways to accommodate those faculty who seek to be entrepreneurs in start-up enterprises and encourage their operation in an open and accessible manner.

7. In evaluating research and scholarship of faculty, the social and economic impact on the wider world should be considered. For example, this would include such issues as patents, usage of software, beneficial impact on government and local industries, etc.

8. A set of primary principles on technology transfer (e.g., student involvement, freedom to publish, intellectual property and other creative activity) should be developed, to be implemented in a set of guidelines, not rules. Sufficient numbers of OTT/C&G officers must be trained and empowered to utilize these principles/guidelines to facilitate technology transfer as efficiently and flexibly as possible. Staffing and training levels on the campus should be reviewed regularly, and adjusted to ensure adequate capability and numbers of staff on each campus. Mechanism should be put in place to allow future adjustment as needed to accommodate expanded activity.

These recommendations were developed from a consideration of the issues that follow.

Overview and scope:

Every year there are more opportunities - and more pressures -encouraging university scientists to work closely with industry. While university/industry research interactions intensify, the respective motivations of the parties, rooted in cultural distinctions, continue to complicate, and sometimes impede, such research relationships. From the typical academic researcher's vantage point, industry provides an additional and potentially significant source of research information, materials, and funding at a time when universities are having trouble maintaining their funding base. From a company's standpoint, the primary benefits of interaction with universities are commercial in nature, typically accessing world-class scientists or facilities to solve a problem, obtain information, or secure a strong intellectual property position - all with a profit motivation. One issue these differences raise is whether faculty researchers and their students are sufficiently aware of the different cultural and legal expectations that companies attach to contractual obligations and intellectual property agreements, as opposed to those normally held by Federal research sponsors. Another issue is whether there should be faculty incentives to engage in technology transfer activities with industry and what impact such incentives might have on the culture of the University, For instance, should the University change its reward systems for promotion and tenure to reflect the institution's commitment to transfer expertise, research results and technology to private industry as a form of public service? Should faculty business activities be included in promotion discussions as evidence of the societal importance of their entrepreneurial contributions? What are the pluses and minuses associated with granting sabbaticals or unpaid leaves for faculty entrepreneurs involved in commercial development of their research results? What impact are such relationships having on the faculty member's professional allegiance to the University of California. How far should the University go in sharing costs of industry sponsored research or allowing industry to buy faculty time from teaching to promote collaborations with industry or involvement in entrepreneurial ventures?

Panel discussions:

General

The panel agreed that the core values of the University as expressed through its Academic Mission, in teaching, research, and public service, were paramount features for consideration as the University strives to develop approaches to research collaborations with Industry. In addition, UC is a land grant, public University, responsive to the common good of the people of California. It was appreciated, that on the basis of prudent management, and well understood and legitimate collaborations, industry affiliations with the faculty enterprise could enhance the core values of the University.

Synopsis of discussions on cultural similarities and differences

The University of California, comprising nine campuses and affiliations with three National Laboratories, has no parallel nationally or internationally and in this respect our University is unique. This requires, of course, that solutions be sought that are specific to the needs of our particular situation. Toward that end, panelists reviewed the cultural similarities and differences which affect the technology transfer process. Cultural similarities and differences were identified at a number of different levels. In addition to the frequently touted differences between the corporate cultures of the university and industry, cultural differences also exist between public and private research institutions, across the various campuses and labs within the UC system, within each campus or lab, and indeed, within the community of Faculty scholars themselves.

Perhaps one of the most important cultural differences is among the scholars who comprise the university; not all may engage and benefit from interactions with the private sector, and some continue to view funded contracts with companies in the private sector as undermining the core values of a great University. This sentiment alone is a challenge to the fundamental principles that diversity of inquiry, opportunity, and the pursuit of knowledge are freedoms afforded all who constitute the Academy. It was recognized that these different opinions within university faculty play out within the university system of governance, and within the university systems for reward and tenure, and are hard to overcome. To address the "ivory tower syndrome" of academia, one needs to be reminded that there is ample precedent for great universities developing liaisons with industry and agriculture for their mutual benefit and the common good of the populace. Examples can be found in the last century in the renown and highly respected European organic chemists who discovered the relationship between light and the intrinsic and complex structures of chemical substances known as dyes, substances of immense economical value to the dye and textile industries. The reputation of these famous chemists is entrenched in an exacting and core discipline in academia, yet they engaged two industries, and the transfer of the fruits of their inquiry meant a future population who benefited as drab colored textiles disappeared to be replaced by bright and distinctive multicolored material. Another example among many is Louis Pasteur who is revered today by academicians and lay persons alike for his scientific contributions. Tangible recognition, because heat treatment (pasteurization) has saved the lives of millions of people, yet Pasteur gained wisdom in his discipline by engaging the private sector. His inspiration as a microbiologist was developed by his research to rescue, at different times, both the wine and silk industry in France. Through times of enlightenment, academia, through education and research, has been the impetus for progress. The success of the biotechnology industry in California bears witness to this point today.

The panel identified a critical issue: today the University may well be the last bastion where fundamental research is done. Other historical arenas for fundamental research have or are in the process of disappearing, and universities play a critical role in ensuring that fundamental research into the human condition moves forward. Significant tension exists between the competing goals of needing to perform basic research, and ensuring that basic research continues to be done to meet the public need, while at the same time providing the necessary training to allow graduates to assume careers in industry, and recognizing and adapting to pressures from both industry and the federal government to address specific "hot topics" in research, such as the government's "war on cancer."

The panel also agreed that some cultural differences disappear among closer examination, and in fact a greater degree of similarity may be present than might at first be apparent A good example of this is in the area of competition for limited resources. Industries exist in a competitive world where monetary profit is a major indicator of success, and often the "bottom line" has first priority. Universities are basically non-profit organizations where the faculty enterprise has as its major indicators of success, the quality of their teaching and the originality and prestige of their research, all in a "free and open environment". Academics strive to attain this paradigm, yet even within academia it is recognized that faculty are restrained from the free communication of new knowledge until the knowledge is accepted for publication in the literature; there being intense competition among the Universities of the Nation and the World for scarce resources in support of their research mission. Even within academia it is thus prudent to retain a competitive advantage. Individual Industry enterprises operate with similar, but distinctive paramount concerns for their well being, and survival, by establishing proprietary knowledge as a basis to enhance their competitive advantage in the field. It would be naive to proceed otherwise. While identified "cultural differences" do exist, some are untrue or unrealistic, and there are yet more similarities than appreciated.

Synopsis of discussions on incentives and opportunities for faculty

It is agreed that the current academic reward and merit system does not currently serve as an incentive for faculty to participate in technology transfer. Nevertheless, technology transfer can be very appealing to faculty. The product of faculty inventiveness, such as moving technology out into marketplace to serve the common good of society, can be very satisfying for faculty on a personal level, even though this contribution is not recognized formally.

To some extent, incentives to participate in working with industry appear to be highly correlated to the norms for the research topic under study, as well as the availability of federal sources of funding. For example, agriculture, and most recently biotechnology, have historically been highly successful arenas for university/industry/public interactions, while other areas have historically been heavily supported by NIH, NSF and other sources of federal research support. Clearly, one of the most compelling incentives to participate in the process is the availability of research funding through industry contracts. This is, of course, becoming an increased incentive as federal sources of support become more limited.

In this respect it is important to recognize that significant opportunities exist when a mutually acceptable and advantageous research contract between a faculty member's enterprise and an industry sponsor is initiated because the prior knowledge and ongoing basic research of the faculty member coincide with the research interests of the industry sponsor, their research in common being promoted. With proper safe guards in place, the academic mission and core values of the University are promoted. For the academician there are opportunities to talk with industry representatives on the cutting edge of making something practical or efficient. In addition many commercial concerns have available research reagents/substances of great value that would otherwise be extremely difficult, or expensive, to obtain without a mutual collaboration. For some faculty, there is the opportunity and incentive to be entrepreneurial by being personally involved in venture start-up companies. However, how to reconcile this activity with the conventional role of an academic at today's university is perceived to be difficult.

In some cases incentives in this area can be difficult to recognize because, unlike many Universities, UC has been slow to enter into cooperative arrangements with industry.

Challenges and concerns for faculty currently outnumber incentives by a wide margin

For more than two generations, almost the entire existence of many of our campuses, practically the entire research budget has been secured from State or Federally funded programs. This provision has developed a secure but circumscribed research attitude, which complements academic research in the public interest, there being little need to develop alternative opportunities. It is unlikely, or difficult for, the typical UC faculty member to break with traditional academic values with which they are comfortable and accustomed. Indeed, the academic personnel process complements these values by their acceptance and recognition.

In the past faculty have been discouraged from "entrepreneurial cooperation" with industry, either because of lack of enthusiasm on the part of the administration, or because "policy difficulties" serve to negate the initiative. Opportunities without risk have first priority, and, all risk can be avoided by the administration's inactivity on anything potentially risky. Several panel members considered a "No" coming from the UC legal counsel much too often as the fail-safe command, rather than "maybe" or "yes-but" on which some resolution may be attainable through dialogue on the confounding issues. It was indicated that some risks may need to be accepted. Occasional mistakes may be made, but when this happens the mistake should be openly recognized, and in the public eye; an approach which is open and on the table can serve as an opportunity to improve public trust, not detract from it. An open environment for operations involves substantial dialogue between administrators and faculty, where progress is not hindered by inactivity due to constraints placed upon local and responsible University administrators. Local and responsible University administrators must be both trained and empowered to act and authorized to assume risks in their management options. Within the constraints imposed upon us as a public university, however, the panel believes that UC needs to locate and empower wily administrators to "work the system" within broader acceptable bounds. If this were done, it was felt that a major existing concern, namely the unacceptably slow speed of progress when working with industry, could be reduced or alleviated.

Private universities seem more capable/permitted to take risks than their public counterparts, and it appears that public universities are subject to more intense media scrutiny than are private universities. To expand the range of options available to public universities, it is clear that the general public must support a broader view of the role of the state-supported research university than is currently the case. To change the academic climate there is a need to better educate the public about the benefits of the university through, for example, advances in public health, the university contribution to the economic development of the State and other University attributes.

Another concern is the existing treatment of overhead on research funds. Overhead at the University of California is poorly understood within the university by faculty and by industry representatives. It was felt that the university must address indirect costs and must deal with a tangible return to the principal investigators or their Department and/or School. The panel discussed the issue of lack of recognition and reward at the level of action through the academic personnel process. For example, although the University Patent Policy obligates faculty members to protect intellectual property (their inventions) they develop, there is minimal recognition and reward for the effort involved, and as a result, little incentive to follow through. Neither the patent itself as a contribution to the research effort, nor evidence of faculty efforts at technology transfer as this contributes to university or public service, seem to be recognized and rewarded. At most campuses patent/software development are not even considered part of tenure/reward system. In reality, a viable patent is a highly original discovery which is not obvious, otherwise it would not qualify. Many publications do not meet this criteria. Many patents may well be "vanity" patents in that the discovery has little intrinsic worth. Patents, like publications may need to be reviewed critically for their substance. Software may be particularly hard to evaluate in the academic review process because software is not viewed as being well understood by CAP. At issue: What constitutes a fundamental contribution? At present the typical university culture does not recognize patents, but the possibility nevertheless exists, particularly if a patent were considered a research publication and was evaluated as a contribution to research productivity by an evaluation for originality and merit. There are, of course, challenges to be overcome if patents are to be weighed in the tenure and review process. For example, it was pointed out that publications don't cost the university money, where as the prosecution of patents do cost money, and the decision to patent or not patent is likely to be made not by one's peers, but often by administrators, who use both financial criteria (e.g., the presence or absence of a potential licensee and the possibility for future income) as well as overall intrinsic merit to guide their decisions.

Lastly, current policy on University employment curbs the entrepreneurial spirit of the faculty. Standing Order 103.1a directs that "no one in the service of the University shall devote to private purposes any portion of time due the University, nor shall any outside employment interfere with the performance of University duties". If the University is expected to make major contributions to the economic development of the State, how can the University devise arrangements toallow those faculty who wish to engage the process by being personally involved as entrepreneurs in venture start-up companies, in their own right?

Overall, the panel agreed that ample room exists to modify existing practice to enhance interactions with industry. Like the chemists working on dyes in the preceding century, options for working with industry need to be constructed to be of bright and distinctive multicolored material rather than the generic drab colored textiles offered at present. As an institution that has no parallel nationally or internationally, this should be achieved.

Comments on the Report of Advisory Group #4:

Working with Industry - Faculty Incentives, Cultural Differences

"The report submitted by the Chair of Advisory Group #4 is so complete and accurate that I have no comments other than to say -- job well done."

~Joyce B. Freedman
Director
Sponsored Projects Office
Berkeley Campus

"I have briefly gone over the report drawn up by John Edmond, Chair of Advisory Group #4 (Working with Industry - Faculty Inventives, Cultural Differences). I think he has summarized very well the issues and many of the points that emerged in our discussion. The only area in which I think a fuller treatment might be valuable relates to the discussion on page 7 of including within the University reward system considerations of patents, copyrights, etc., in addition to the more traditional publications. My sense of the panel discussion on this point (at least my strongly held belief) is that this idea was received more negatively by the panel than reflected in the discussion (i.e., it is at least my sense that royalty income, etc., is reward enough, and that to try to balance the "academic" value of patents with that of publications would open a Pandora's box we would all regret).

"Overall, I think John and Pamela did a great job capturing our freewheeling discussion."

~Paul A. Bartlett
Department of Chemistry
Berkeley Campus

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