University/Industry Partnerships Work: Don’t Kill the Golden Goose

By Robin Rasor
July 15, 2011

In his recent Washington Post article “Innovation’s golden opportunity” Vivek Wadhwa opines that the translation of university research into useful products benefitting the taxpaying American public has largely failed.  I respectfully disagree.

Mr. Wadha writes that if universities were a business, they would be bankrupt based on the return on investment represented by income from patent licensing.  He speculates that results would be much greater if university technology transfer offices were abandoned with each campus researcher turned loose to fend for themselves in the marketplace. The first observation misses the point.  The second wrecks a proven system that is a model for the world in favor of a dubious theory.

If universities were run like businesses, they would not perform basic research designed to push forward the frontiers of learning.  Indeed, industry has largely abandoned such research precisely because of its cost and risks.   However, basic research is where breakthrough technologies such as biotechnology occur.  The U.S. would be in dire straits if universities abandoned basic research seeking short term payoffs.

The current partnership between U.S. universities, teaching hospitals and related non-profit organizations with American industry, while imperfect, leads the world in translating early stage research into products, jobs and new companies. Commercializing early stage research requires significant investments by the private sector.  Putting such deals together is not a simple undertaking, which is why the law recognizes the important role played by campus technology transfer offices.  Such offices are not established as money making enterprises, but as services to faculty.

Undermining this proven system as Mr. Wadhwa recommends, would have very serious consequences.  This would be the worst possible time to throw it out as every state is looking to their research universities, working in partnership with the private sector, to lead another American economic renaissance.

As president of the Association of University Technology Managers (AUTM), an association that represents managers of academic intellectual property, I can point to solid data indicating that such hopes are well founded.  The Bayh-Dole Act, the subject of a recent Supreme Court ruling, is the basis for such faith.  Rather than being a reason to scrap our system, we need to appreciate how far it has taken us in just 30 years.

Prior to Bayh-Dole, the “best and brightest” in public and private sector research were reluctant to collaborate because the federal government could take ownership to resulting inventions.  The result was that federally funded patents were rarely commercialized.  This is no longer the case.

For example:

  • In 2009 in the midst of a serious recession, 596 startup companies formed from university research—81% in the home state of the university.
  • Academic technology transfer contributed as much as $187 billion to U.S. GDP between 1996 and 2007.
  • During the same nine year period at least 279,000 well-paying jobs were created in the United States because of commercialized university inventions.
  • Approximately seventy-six percent of U.S. biotech companies have licensed technologies from our universities.
  • The public now has access to 153 FDA approved drugs brought to market since 1980 discovered in whole or in part at U.S. public sector research institutions.

Academic alliances with industry have not harmed science nor diverted universities toward applied research.  The U.S leads the world in citations of science and engineering articles across every field of technology.  According to the National Science Foundation, the importance of such papers has increased compared to those of our competitors. It is the strength of our public sector science, if translated into economic benefits, which holds the greatest promise for the future of American competitiveness.  And it is happening across our nation.

The current technology transfer model is bringing tremendous benefits to the US economy while promoting the everyday welfare of our citizens. However, commercialization, while important, is only one channel.  The results of academic research also reach the public through scientific papers, and most importantly, through the students we graduate.

Federal funding of university research benefits society well beyond a monetary return to the university. University discoveries may have no commercial potential, yet still provide significant value to American society, and the larger scientific community. However, it would be shortsighted of universities not to recognize the potential commercial value of some federally funded inventions. We attempt to ensure a fair return that then supports further research, while also benefitting campus inventors for their tremendous contributions to society.  And we do this each and every day.

The United States can truly benefit from “innovation’s golden opportunity” — but only if we are wise enough not to strangle the golden goose.

The Author

Robin Rasor

Robin Rasor

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 23 Comments comments.

  1. Gene Quinn July 15, 2011 10:25 am

    It is almost unbelievable that anyone who has looked at the facts could conclude that the experiment initiated by Bayh-Dole has failed. The overwhelming evidence is to the contrary. The University / Industry partnerships fostered by Bayh-Dole have been an enormous success. Anyone who comes to a different conclusion is simply ignoring reality and demonstrating an ideological agenda where truth plays no role in forming an opinion.

    Great article Robin!

    -Gene

  2. Michael F. Martin July 15, 2011 11:25 am

    If everything is hunky dory between universities and industry, then why did Stanford (the AUTM, the AAU, etc.) ask the Supreme Court to cut faculty inventors out of the chain of title? Had they succeeded, it seems doubtful that any business would have bothered negotiating any contract for IP with a university that took federal funding again!

    Wadwha’s proposal to abolish the existing is extreme and (probably deliberately) provocative. But as the many, many students and faculty who choose to opt-out of the system either by not filing invention disclosures or by working with outside lawyers and investors demonstrate, the system is very broken.

    If we start finger pointing, however, we will get nowhere. For every stakeholder in the system has a vested interest in maintaining the status quo — especially the venture capital funds that are used to underpaying (or at least putting all the risk on) universities. The universities, like Stanford, that are suing infringers have already acknowledged implicitly that the pipeline is broken. Now let’s fix it so that we can close deals and build companies instead of working around each other and later suing.

  3. Vivek Wadhwa July 15, 2011 8:32 pm

    Robin, I challenge you to prove these points:

    – Academic technology transfer contributed as much as $187 billion to U.S. GDP between 1996 and 2007.
    – During the same nine year period at least 279,000 well-paying jobs were created in the United States because of commercialized university inventions.

    I don’t want some marketing document that simply adds up the revenue produced the products that licensed a university technology, but something that academics would accept as being factual.

    The fact is that for the $53 Billion going into the system, there is not enough output. The fact that Stanford has to be in lawsuits with its faculty is shameful. Speak to professors, and they will tell you their frustration with tech transfer offices. Speak to companies trying to negotiate deals with your members, and you will hear consistent horror stories.

    In short, we need to radically rethink the system and not get defensive.

    Vivek Wadhwa
    http://www.wadhwa.com

  4. Marcel Mongeon July 18, 2011 9:34 am

    The justification that Mr. Wadhwa seeks can be found all through the Better World Project reports available at: http://www.betterworldproject.org/AUTM2010BWR.pdf .

    The specific statistics that he asks for of are reported verbatim in Senator Bayh’s forward. The justification of those numbers is then found in the balance of the report and its predecessor reports.

    There is also a flawed premise underlying the attack. That is that the only value obtained from the investment in research is measured by the output of licences and patents. That is, of course, incorrect.

    In addition to the basic and applied knowledge that has been gained from those expenditures, the American and world economies have benefited from the creations of hundreds of thousands of more highly qualified personnel. How do you measure this contribution to an economy?

    The final criticism leveled is that ‘professors will tell you of their frustration with tech transfer offices’. Of this I have no doubt.

    I would also suggest that professors also have long-held frustrations with boards of trustees, presidents and deans to name but three other perennial targets. The very heart of the collegial system we have built our universities on depends on a healthy level of criticism and adaptation in response. If there were no criticisms then someone wasn’t “pushing the envelope!”

  5. Roy Zwahlen July 18, 2011 9:58 am

    I can’t speak to Robin’s sources but here is one of mine:
    -http://www.bio.org/ip/techtransfer/BIO_final_report_9_3_09_rev_2.pdf

    I would appreciate seeing one of your academic studies with data (hard to find from your website listed or the Washington Post Article). I think that would enlighten the discussion.

    I find it odd that you critize the points asserted because it “simply adds up the revenue” when I believe that is what your Washington Post article does if I am not mistaken,

    “In 2009, the federal government, industry, and philanthropic organizations invested $53.5 billion in university research. The total licensing revenue of all U.S. universities amounted to $2.3 billion that year, and that number includes the ongoing royalties from technologies licensed over the past decades.”

    If you could clarify it would also be helpful.

    I always appreciate new ideas for making things better, even when I disagree with them. However, I think proposals that “radically rethink the system” should require more than just identifying potential problems in the system. The National Research Council has an interesting study on the topic as well which you might want to address (see below).

    http://www.nap.edu/catalog.php?record_id=13001

  6. Michael F. Martin July 18, 2011 12:41 pm

    I’m sure Mr. Wadhwa is more than capable of defending himself, but these replies are so silly as to invite a retort.

    First, there is nothing flawed in the premise that IP licensing revenue at universities should be compared apples to apples with IP licensing revenue at for-profit institutions. Businesses derive equity value from their IP that is separate from the cash-flow generated from licensing.

    Second, the numbers cited are almost certainly drawn from AUTM statistics.

    Here is a link to an older summary of those numbers, which includes a comparison against the revenue generated by IBM licensing over the same time period.

    https://spreadsheets.google.com/a/venetian-capital.com/spreadsheet/pub?hl=en_US&hl=en_US&key=0AsBurW-m4RFpcFRSTDFvUm91NU1rYjBTR3BrZElxY1E&output=html

    What these numbers show is that IBM, which was spending about $4B annually (compared with $40B to $50B annually generated by AUTM members) was able to generate more IP licensing revenue than the entire AUTM combined.

    By comparing the AUTM to IBM, I do not mean to suggest that the AUTM should be licensing as efficiently as IBM, which managed to get 20% of what it invested in research back through licensing. But the AUTM today is getting back 1 or 2%. The difference between 2% and 20% reflects a public subsidy that the unviersities are paying to the users of the IP.

    Should the users of IP be subsidized by unversities that way?

  7. Michael F. Martin July 18, 2011 12:46 pm

    My apologies because the first link posted is inaccessible. This link should work:

    https://spreadsheets0.google.com/spreadsheet/pub?hl=en_US&hl=en_US&key=0ArSvTiqOHc02dHR1Nmd5d3h0STJCZjItMnd1VjlJVkE&output=html

  8. Gene Quinn July 18, 2011 1:02 pm

    Michael Martin-

    Where to begin? Of course it is a flaw to compare businesses licensing IP to universities licensing IP. The fact that you are unfamiliar with the differences really speaks volumes. You see, Universities do basic research that companies would NEVER engage in. So you can pretend all you like and that doesn’t change the reality that it is extremely intellectually dishonest to compare Universities with Corporations in terms of licensing IP. They have a different focus entirely.

    Your statement: “the numbers cited are almost certainly drawn from AUTM statistics” is laughable. You try and dismiss facts because you don’t like them. What kind of argumentation is that? Please, if you are going to comment at least have the decency to keep the comments intellectually honest.

    -Gene

  9. Michael F. Martin July 18, 2011 1:11 pm

    Gene:

    I agree with you that universities should not be held to a for-profit standard, and if you reread my comment, you will see that I do.

    I do not agree that for-profit licensing cannot serve as a benchmark for comparison.

    My basis for believing that the numbers are from the AUTM is that they are roughly the same as the last numbers reported by the AUTM that were available to the public.

  10. Vivek Wadhwa July 18, 2011 1:32 pm

    I plan to read the Better World project reports when I get some time (needless to say, I am highly skeptical that these provide the proof that I have asked for).

    But here is the source of my statement that $53.5 Billion is invested in university research, and we only get $2.3 Billion in licence revenue–http://www.autm.net/AM/Template.cfm?Section=Documents&Template=/CM/ContentDisplay.cfm&ContentID=5880. Yes, this is AUTM data.

    I agree that academic research serves a greater purpose than technology commercialization. But let’s call a spade a spade. Let’s not pretend that more investment in university research will automatically translate into innovation. It won’t because the system is not designed to commercialize research. It is designed to broaden the knowledge base by publishing academic papers and educating students.One way to foster innovation and to boost the economy is to fix this system. After all, more than a trillion dollars of public funds have been invested in university research over the past few decades.

    Vivek Wadhwa
    http://www.wadhwa.com

  11. Michael F. Martin July 18, 2011 1:39 pm

    Kudos to you, Mr. Wadhwa, for calling attention to the elephant in the room.

  12. Robin Rasor July 18, 2011 1:54 pm

    I’m happy to provide the source of the data you question (and thanks to some of my colleagues who have also forwarded comments and data). It is certainly not from a marketing document, but comes from a Biotechnology Industry Organization (BIO) supported scholarly study entitled “The Economic Impact of Licensed Inventions Originating in University Research, 1996- 2007” conducted by the highly regarded Dr. David Roessner, Professor of Public Policy Emeritus, Georgia Institute of Technology, and Associate Director, Science and Technology Policy Program, SRI International. Dr Roessner took a very conservative approach to his work, which if anything, underestimates the full impact of university technology licensing on the U.S. economy.

    As for the case others mentioned, I’m assuming they are referring to Stanford v. Roche, which was a contract case about ownership of patents. In fact, Stanford did not sue its employee. I know from personal experience that many faculty are pleased with the work of their technology transfer offices and we know there are a great deal of companies that find tremendous value in working with academic licensing professionals. In fact, these companies seek out academic partners at AUTM’s Annual Meeting each year and provide rave reviews about the contacts that they have made with our members.

    As to your other points, the licensing profession is certainly open to suggestions on how to improve our current system, but they require thoughtful study, not anecdotes, or highly misleading data points. In this regard, simply dividing university royalty income into the total amount the government spends on extramural research is a good example where such faulty comparisons go off track. Much of our federal research has no commercial application, but is done to advance human knowledge or to meet agency mission needs. Further, many times universities minimize royalty payments so a startup company or small business can focus its scarce resources on developing the product, not paying the university.

    The U.S. model is perceived worldwide as the gold standard, and other countries have emulated or are seeking to emulate it. The United States would be poorly advised to abandon a demonstrated formula of success in favor of an unproven theory.

  13. Gene Quinn July 18, 2011 2:33 pm

    Vivek-

    You say: “But let’s call a spade a spade. Let’s not pretend that more investment in university research will automatically translate into innovation.”

    It is hard to imagine that anyone of even modest intelligence could say that. Is is your position that less research and development would lead to more innovation? Would less research and development lead to the same innovation? Do you actually think that seeking less will allow for more or even equivalent finding?

    I also find your “know it all” attitude rather a turn off. You claim you want proof and then proof is provided and you simple say that you are skeptical that it is sufficient to be what you really asked for. Exactly who made you arbiter of what is and what is not acceptable proof? You seem to be just like the many small minded individuals who will summarily reject facts and evidence when it doesn’t fit with your preconceived notions.

    The trouble is that you are wholly unfamiliar with the purpose of investing in research and development. It cannot be argued that the research that is done at Universities would be done by corporations. It also cannot be argued that more research is better, and more research WILL in fact lead to more innovation and discoveries, as well as a broadening of the knowledge base. Thomas Edison knew what you fail to comprehend, which is that seeking and failing is not failing at all, you have learned valuable lessons and have knowledge to move forward to succeed.

    Speculative research is that which is potentially the most valuable and rewarding, and simply is not done by corporations. That is not their role. Why you fail to comprehend the different roles between Universities and Corporations is a mystery and speaks to an agenda where facts and truth don’t seem to weigh in your decision making.

    -Gene

  14. Gene Quinn July 18, 2011 2:34 pm

    Michael-

    What might be that elephant you refer to?

    -Gene

  15. Gene Quinn July 18, 2011 2:38 pm

    Michael-

    You say: “I do not agree that for-profit licensing cannot serve as a benchmark for comparison.”

    As long as you realize you are comparing apples and elephants then I suppose you can hold that believe. Corporations simply do not engage in basic research or speculative research because of the demands of shareholders. Universities that pretty much only engage in basic research and speculative research because the goal is pushing the envelope of discovery. It is incredibly disingenuous to think there is a equivalence of purpose, or that the output ought to be the same when the two are focusing on wholly different endeavors. So go ahead and compare apples and elephants if you want, but don’t try and pass this off as a fair and even comparison.

    -Gene

  16. Michael F. Martin July 18, 2011 2:56 pm

    “Much of our federal research has no commercial application, but is done to advance human knowledge or to meet agency mission needs. ”

    This was true at IBM as well. The commercial application of the scanning tunnelling microscope, single molecule spectroscopy, single wall carbon nanotubes, &c., &c. was not obvious there either. There is reason to believe that private corporations, such as IBM, have cut budgets for basic science in part because universities have a cost advantage to doing basic science. But that is again not a reason for ignoring the private benchmarks.

  17. Gene Quinn July 18, 2011 4:48 pm

    Michael-

    If you want to talk IBM then let’s talk IBM. They are really the only company that continues to devote a portion of its R&D funds to purely speculative activity. When I interviewed Chief Patent Counsel for IBM Manny Schecter told me:

    “I think the thing that is a bit unique here is the retained focus we have on longer term, more fundamental research in IBM. It certainly can’t be the bulk of our focus. We have to earn a profit and pay our bills. But the fact is we’re the only true corporate research organization, at least in our industry. And we retain a small amount of long term projects that have less certain return on investment. And Watson is one such project where at the time that we began the project, the return that we would receive wasn’t at all clear. We weren’t designing a product for a customer or a solution for a customer, we were trying to take on a sort of a grand challenge and move computing to another level. And fortunately for us this one worked quite well. And we are now seeing that there will be some return on investment and we’re very pleased by that.”

    See http://ipwatchdog.com/2011/04/21/interview-finale-manny-schecter-ibm-chief-patent-counsel/id=16567/

    Using IBM as an example to pretend to create a broader rule with respect to the industry is ridiculous.

    Incidentally, I am not suggesting anyone ignore private benchmarks, I just want to compare apples with apples. Comparing for profit businesses that don’t do speculative research and engage in basic, foundational research with Universities that do is simply inappropriate. Why you won’t acknowledge that they play different roles, have different goals and engage in different activities is quite a mystery. You seem to want to say two entities that have no relationship on the R&D front should be measured using the same standard, which is naive to the extreme if you ask me.

    -Gene

  18. Michael F. Martin July 18, 2011 5:19 pm

    “Why you won’t acknowledge that they play different roles, have different goals and engage in different activities is quite a mystery”

    Gene,

    It seems to me that we agree on quite a bit now. Unless I misunderstand, you just admitted that IBM plays a similar role to universities by funding basic science and curiosity driven research. Does IBM play other roles too? Of course. Do universities? Of course. I’m not saying the apples are the same. But it’s apples to apples, not apples to elephants.

    To be more specific, universities and for-profits share a huge range of overlapping interests — in training young people with knowledge and useful skills, in stuffing the innovation pipeline with a wealth of discoveries about nature, in fostering collaborations that would otherwise have no way to occur, &c., &c.

    All of these goals would be fostered by bringing market-based incentives, compensation, and benchmarks to the performance of tech transfer services.

    The only serious objection I have heard to throwing up the gates to the ivory tower is the following: Conflicts of interest. Whereas the literature faculty who are generally cross-subsidized by innovations in the sciences and engineering schools may simply find commercial relationships “icky,” for medical researchers those relationships are serious business, and potentially undermining to the larger, longer-term, and more important project of knowledge creation that universities serve.

    But the answer to conflicts of interest is not to avoid all contact, which simply guarantees that there will be no knowledge creation at all instead of having it in fits and starts as conflicts are exposed and neutralized. And government and universities already have elaborately designed and administered mechanisms for handling conflicts. So even the serious objection cannot be decisive.

    In short, yes I do say that the two institutions should be measured using the same standard (making allowances for the fact that the one will always fall short of the other for good reasons). You are not the first to call me naive for saying so. But I’m looking at the future, not the past. I’m comfortable with my view.

  19. Gene Quinn July 18, 2011 6:21 pm

    Michael-

    What other roles do you say that Universities play? You aren’t seriously suggesting that Universities engage in commercialization and manufacturing, taking products to market, are you?

    You think corporations engage in the training of young people? That is an extremely altruistic view of the role of a profit driven corporation.

    I’m glad that you are comfortable with your view, but comparing entities that have nothing in common and pretending they deserve to be measured by the same stick is curious to say the least. Further, continuing to push IBM as if they minor investment they make on basic research is the industry norm is equally curious.

    -Gene

  20. David McFeeters-Krone July 21, 2011 6:00 pm

    From my experience, In many cases I would much prefer to negotiate with a university (or government lab) vs. a private entity. It seems to be taken as fact that research institutions are bureaucratic and impenetrable. I think as long as we are comparing them to corporations, lets look at a couple factors.
    1) Research institutions do have their own set of rules and processes, but so do corporations. Are they really worse? Some companies, as a condition of taking a license, agree not to ever sue them for patent infringement of ANY patent (nor can you sue any of their suppliers).
    2) Mr. Wadhwa notes that it may take 6 months to negotiate a license. I do not believe corporations are necessarily faster.
    3) When I have pressed for details of horror stories, I have found most evaporate upon scrutiny. Sure there has been disagreement on price (just like in the corporate world). However, in my experience, the problem is a lack of understanding of rules and processes. I suspect that the same number of horror stories exist in the corporate world, however they are more acceptable.

    I think the real issue is a failure to recognize that the motivations (and flexibility for better and worse) of this group are different that corporations. Also it is easy to use the results of high risk research to raise the alarm that public money is not being well tended.

    If companies would approach institutions with a better understanding of the benefits and limitations of the partner, I am certain this apparent issue would dim.

  21. Mike Deshpande July 24, 2011 8:15 am

    Dear All University Officials and Dr. Wadhwa,

    I am just an innovator. Admin has always been a curse for the real innovation. Admin of IP is like ants on sugar. That sugar particle is useless to the consumer, when there are too many ants on it. These ants grow with funds in Privet, Public Sector and Universities from various sources.

    As a innovator – I compete to get my portion of money, manage it and make efforts to innovate, where as for IP activity it is budgeted and a big portion comes from the taxes: some form of the tax revenues or some from the tax incentives. Can one think of a legislation that can control the behavior of ants & requires any one [Public, Privet and Universities] to go after spending on protection of IP produced – only after providing funds for the innovator to use it as the innovator pleases to get right to file for the innovation? or Can Universities, Public and Privet sector take a oath not to lobby funds for the IP offices or its commercialization? In my opinion, it should become a requirement to demonstrate to the paten office that innovator has received the up front funds and future earnings & ownership have been promissed and agreement have been reached to file for the innovation protection. No innovation should qualify without such requirement in all fairness.

    “Commercialization” is a biased game – it absolutely does not care about innovation. As per the history of commercialization of innovations — we need to control these ants and their behavior. The Feudal, Democratic, Captalistic, Social and for that matter communist economic systems have never dealt with knowledge and innovation in fair way. The sytems that govern do not see need to control these ants, because the ants are the system’s soldiers.

    Lastly, the innovator is left with the argument that – if the innovation is unique and rewarding, it will be free and florish! Innovator’s attitude is like a parent’s with his or her child. Let it florish for the good of every one. He keeps quiet and go further with business of innovation and knowledge engineering.