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Technology Transfer in U.S. Research Universities:
Dispelling Common Myths
Preamble
During the past two decades, universities have surprised
everyone, including themselves, with the tremendous success in licensing
their research results for commercial application. Through “technology
transfer” they provide commercial sector companies with access to new
discoveries and innovation resulting from research. Industrial partners
develop these inventions and manufacture products that help to improve
the lives of Americans. However, with success tends to come notoriety,
often based on misunderstanding or distortion of facts. News stories of
university millionaires tend to catch the eye more effectively than
scientific articles about the drugs and devices that would not have
become available had university inventions not been successfully
commercialized.
This pamphlet addresses commonly held myths about university
technology transfer. Some of them are explained by the provisions of the
underlying legislation, which not only provides incentives, but also
imposes controls to guard the public taxpayer’s interests. Some of them
are explained by statistics, which deflate the perception that
universities derive a steady income stream from technology transfer.
The biggest myth to dispel is that universities engage in
technology transfer “for the money”. Three factors explain why
universities are currently so active in partnering with industry. First,
under the Bayh-Dole Act, universities have a mandate to ensure, to the
extent possible, that inventions arising from federally funded research
are commercialized. It is an obligation they have increasingly embraced
since l980 when the law was enacted. Secondly, universities need to make
sure they have adequate resources to enable faculty to continue to do
research and to provide learning opportunities for students. And
finally, universities must consider their obligation to respond to the
needs of local and state economies and the nation as a whole.
This brochure was
prepared by the Technology Transfer and Research Ethics Committee of the
Council on Governmental Relations (COGR). COGR is an organization which
includes in its membership 145 research-intensive universities.
Reproduction for purposes of sale or profit is prohibited without
written consent of the Council on governmental Relations. Otherwise,
reproduction is encouraged.
Council on
Governmental Relations
1200 New York Avenue NW, Suite 320
Washington, DC 20005
(202) 289-6655
May 2000
Technology Transfer in U.S.
Research Universities:
Dispelling Common Myths
Myth: The new emphasis on
technology transfer is diverting universities from their main mission of
education and research.
Reality: Technology transfer is
not a new phenomenon for universities. Dating from the early 1800’s in
Europe, companies are known to have been developed around the expertise
of faculty at universities. Research universities have historically
transferred technology through the traditional methods of publication,
the training of students, and through their extension programs. Formal
technology transfer through the licensing of university-owned
intellectual property adds new educational dimensions and research
opportunities for students and faculty.
Myth: The government is better at
commercialization through technology transfer than universities are.
Therefore, the government should regain control of university patents
that have come from federally-funded research projects
Reality:
The university sector has been highly successful in its technology
transfer efforts since it was given the right to own and license
university inventions under the Bayh-Dole Act in 1980. Prior to 1980
when university patents were generally owned by the federal government,
no more than 10% of those patents were licensed to industry for
commercialization. Data for FY98 on university licensing activities show
that universities are filing in excess of 4,000 patent applications a
year and issuing more than 3,500 licenses or options to license
annually.[i]
Trend data show a cumulative total of licenses and options issued since
1991 standing at over 20,000 and that the percentage of licensing
activity has doubled between 1991 and 1998.[ii]
Anecdotal reporting from universities shows a licensing to patenting
ratio of better than 1:3. There is a general consensus that licensing
is most effective if it directly involves the inventor and the
inventor’s institution.
Myth: University
technology transfer is an unnecessary barrier to effective
commercialization. More rapid commercialization would be achieved if
universities gave their inventions to industry.
Reality:
As owners of their inventions, universities have established procedures
for the earliest possible identification of inventions. The patenting
and commercialization process benefits from day-to-day communication
with inventors, access to complementary technology that may be under
development within the university and awareness of continuing efforts on
the part of the inventor to enhance a technology. Through licensing,
universities ensure diligent efforts toward commercialization by the
licensee, or require the license to be returned to the university to be
issued to a more serious commercial partner. Universities have both the
incentive and the ability to build internal relationships and structure
to make certain that rapid and effective commercialization occurs.
Myth: Most university patents
come from federally-funded research paid for by U.S. taxpayers. Neither
the U.S. government nor the taxpayer is benefiting.
Reality:
Recent data and the application of impact models[iii]
show a return to the U.S. government and the national economy from
university licensing of $33.7 billion, and -supported 280,000 jobs
during the university fiscal year ending June 30, 1999. The return to
the federal government in taxes paid on university technology transfer
induced corporate and individual earnings, alone, equals a 15% return
on sales of licensed products.[iv]
The public is currently benefiting from the products, processes and
services available in the marketplace as a result of more than 17,000
active university licenses.
Myth: Technology Transfer is a
major source of revenue for universities.
Reality: While successful
technology transfer activities may be an important source of
discretionary revenues for universities, comparison data[v]
show that annual gross revenues generated from a university’s technology
transfer activities generally total less than three percent of research
dollars spent by that university and a far lesser percent of total
university revenues.
Myth: University inventors are
receiving substantial personal financial benefit from University
licensing.
Reality: No more than one-third
of all university patent applications and patents are licensed
and producing revenues at any given time. Because the
majority of university inventions are very
early stage, a large number go unlicensed and produce no
revenues. Among those that are
successfully licensed, there is wide disparity as to the
amount of licensing revenue generated.
Relatively few are large earners. While university
revenue-sharing policies vary, the most
commonly reported percentage of royalties paid to
university inventors is a total of 30% of
revenues earned, after deducting patent and marketing
expenses. This percentage is shared among
all inventors named on the licensed patent.
Myth: Universities over-inflate
the value of their inventions, setting rates too high.
Reality:
Royalty rates are dependent upon market factors and determined
through negotiation. While defining an “average” royalty rate will not
reflect the true value of an invention, one study[vi]
cites an average royalty at approximately 2% of the revenues generated
by a licensee-company from its sales of products or services under the
license. A small study conducted by the Association of University
Technology Mangers finds the rate at 2.3%.
Myth:
Universities are more likely to license big companies because they
can afford to pay more. Small companies cannot afford to license
university inventions.
Reality:
Data for FY ’98 reported by 179 U.S. and Canadian institutions show that
63% of the
licenses granted were to small businesses (those with fewer
than 500 employees). This figure
is consistent with activity reported by the universities
from prior years.[vii]
Myth:
University technology transfer offices are prospering through
charging high royalties.
Reality: The vast majority
of university-licensed inventions result from research funded by the
federal government. Under Bayh-Dole (35 USC 202 et.seq.), universities
have an obligation to commercialize these inventions and distribute a
portion of licensing revenues to inventors. This obligation is carried
out by the technology transfer office, usually an administrative unit
within each university. Universities are permitted to recoup only those
expenses incurred in the patenting and licensing process. Any excess
revenues must be used by the institution for purposes of education and
research and may not be accumulated for the benefit of the technology
transfer office.
Myth: Universities
are more interested in patenting inventions than publishing research
findings for the public to use.
Reality: All universities must adhere to the academic
tradition of publication. Publication remains a primary factor in
tenure decisions. Publication is also the main vehicle for academic
professional recognition and is important to establish credibility in
grant applications. Most importantly, publication in peer-reviewed
journals is validation of the findings of the academic scientist.
Patenting does not mean there is no publication. All university
research findings are available for publication whether or not patenting
occurs. Publication, on the other hand, does not necessarily result in
public use. Most often new products would not be developed without the
exclusivity afforded by patent protection. Further evidence of the
preference for publishing over patenting is provided by figures cited in
an NSF study[viii],
showing that -73% of patent applications citing publications as
published disclosures of the art which the new patent application has
advanced and seeks to protect-cited academic, government or non-profit
publications.
Myth: Universities are doing too
much patenting. It would be better for economic growth and U.S.
competitiveness to put more inventions into the public domain.
Reality:
As the United States enters a period where articles attributing
economic growth to a pro-patenting environment are commonplace, it is
difficult to quantify how much patenting is “too” much. Universities
are filing at an annual rate of less than one new U.S. application for
every three inventions disclosed to the technology transfer office.[ix]
The real measure of useful patenting for universities is whether
patenting encourages commercial licensing. FY ‘98 data show that the
universities issued 3,668 licenses/options during the same year in which
they were filing 4,808 new patent applications.[x]
Whether companies would have picked up the 3,668 new university
technologies to commercialize from the public domain is highly
questionable.
A further reality is that patenting is expensive. Since no
university has the resources for indiscriminate patent filing, we know
that budgetary limitations, alone, require technology transfer
professionals to carefully select for filing only those inventions most
likely to be licensable.
Myth: University
patenting of biological materials and research tools is harmful to the
advancement of science and is hampering the efforts of researchers.
Reality: The patenting of
research tools is currently a high-profile debate among universities,
industry
and the government. To aid universities, NIH has recently
issued principles and guidelines to
underscore the importance of striking a balance between
preserving access for research use and
the broader public interest in the acquiring the
intellectual property protection required
for commercialization. The university community, itself a
community of academic researchers, has
always been acutely aware of the importance of preserving
rights to use patents for research purposes.
Myth: The recent focus on
industrial relationships and entrepreneurial activities in U.S.
universities is detrimental to the university’s fundamental mission of
educating students.
Reality:
In fulfilling their educational mission in today’s changing world,
universities must seek to provide students with experience that is more
closely aligned with contemporary industry. Enabling students to
participate in industry research gives students a window to the
industrial world and provides them with the opportunity to assist in
solving real world problems. It also provides them with experience in
teaming with industrial scientists as well as giving them an opportunity
to become comfortable with the industrial workplace environment. Often
companies are funding university research in anticipation of finding
future talented future employees. As universities involve students in
relationships with industry or provide them with opportunities to start
new companies, universities recognize an obligation to do so in a manner
that preserves the students’ sense of balance and perspective as to the
long-term value of the university experience.
Myth: Partnering with industry
will skew the academic research agenda from basic to
applied research.
Reality: The research agenda at many of the major U.S.
universities is not exclusively restricted to basic research. There is
general agreement in many universities that both faculty and students
find benefit from participating in more applied research funded by
industry. Industry-funded programs permit faculty to keep abreast of
the current trends and practices important to American industry and give
students an opportunity to learn the teaming and other knowledge skills
that will be important to their success as they join the workforce. The
growing number of research programs jointly supported by industry and
government agencies clearly shows a convergence of interest in
supporting both basic and more applied research. Carefully managed,
university-industrial partnerships provide universities with new
educational opportunities, expand infrastructure, provide alternative
sources of research revenue and contribute new and useful science to the
commercial marketplace.
Myth: By taking industry
sponsorship, universities are inviting industry to determine the
direction of university research.
Reality:
Industrial funded research programs are collaborative from
inception. They match the commercially oriented objectives of companies
with the scientific interest of the university principal investigator
and students. If there is not commonality of interest in the science to
be pursued, there is no prospect for success. Universities insist on
directing the conduct of the research program; require the research to
be supervised by the university investigator; and require final control
of research work product and publication.
Myth: Collaboration with
industry invariably creates financial conflicts of interest for
academics.
Reality:
University faculty interact with industry as educators, principal
investigators under research programs, consultants, creators of
intellectual property used by industry and as entrepreneurs. It is the
responsibility of universities to continually explore the implications
of these relationships and to establish effective policies to manage
them. Accordingly, universities’ conflict of interest policies seek to
ensure that the personal financial interests of faculty do not
improperly affect the content, quality or timely release of research.
These conflict of interest policies have become fairly uniform among
universities since they must meet standards that have been established
by the federal granting agencies.
[i]
AUTM Licensing Survey: FY1998. The Association of University
Technology Managers, Survey Summary, page 2
[ii]
Ibid. Survey Table S-12
[iii]
Stevens, Ashley: “Measuring Economic Impact” and Pressman, Lori, et.al.:
“Pre-Production Investment and Jobs Induced by MIT Exclusive Patent
Licenses”
[iv]
Campbell, Kenneth D.: “R&D yields public rewards,” Mass High Tech, May
11-17, 1998.
[v]
Op. cit., AUTM Licensing Survey: FY1998, page 14, Adjusted gross
licensing income of $725M compares with $24.4B in total university FY98
sponsored research expenditures
[vi]
AUTM Economic Impact Survey, October 24, 1966
[vii]
Ibid, page 6
[viii]
Narin, Francis; Hamilton, Kimberly and Olivastro, Dominic: “The
Increasing Linkage between U.S. Technology and Public Science” Research
Policy: 26, No.3, 1997
[ix]
Op. cit, AUTM Licensing Survey, Survey Tables, S-6 and S-8
[x]
Ibid, S-12 and S-8
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