The Administration is kicking off a series of public meetings as part of its “Return on Investment” initiative to increase the benefits that American taxpayers receive from funding $150 B annually in government supported R&D. The National Institute of Standards and Technology (NIST) is heading the project and issued a request for information (Request for Information (RFI)) seeking ideas on how to improve the commercialization of resulting technologies.
One target is improving the performance of the federal laboratories. The payoff won’t come from new programs, increased funding or bold proclamations without adopting this mantra:
That might not get your pulse racing but before adding more superstructure we’d better check the foundation. Something pretty fundamental seems amiss. Here’s the analysis of Secretary of Commerce Wilbur Ross:
Universities seem to be doing far better than the federal labs and can teach us a thing or two… Recent studies have shown that federally funded university research is about 5 times more likely to result in a licensed patent technology. And about seven times more likely to result in an active patent license. Universities received $1.78 billion in licensing revenue from their innovations in 2014. In comparison, the total amount of royalties received from licensing government inventions was only $194 million in 2014… In that year universities receive $66 ½ billion for R & D while federal labs received $42 Billion.
Now if you do the math, universities received just over 50% of the R&D funding, but license nearly 10 times the value of technology. One would imagine that the gap has widened even further, as university activity has exploded…
But the pattern has persisted long enough, and the math is so lopsided that it seems to me that there is a message in it.
A critical part of that message has been deciphered for awhile but ignored. I co-chaired a group of external experts under President Obama’s “Lab to Market Summit.” We were asked to review several innovative commercialization programs, perhaps with the expectation that we would call for more funding. Instead, one of our panelists said: “That’s not the problem” which set off an intense discussion. Here’s what we reported:
… it is clear that technology commercialization is not always an agency priority despite two decades of supporting laws and Administration directives. There do not appear to be any real rewards for programs and individuals who take commercialization to heart, nor are there penalties for those who block the way forward. In any organization employees are not going to adopt new behavior when it is apparent that incentives and rewards do not match administrative directives. This leads to cultural barriers in the federal system from top management to bench scientists since technology transfer does not factor into performance reviews, promotions or funding allocations. (emphasis added) Several universities have successfully reversed this culture by incorporating technology transfer as a factor for gaining tenure and promotion, and bringing on new hires, providing a good example for federal agencies and laboratories.
This is a management problem, not the lack of legal authorities. The law makes technology transfer a laboratory mission. It allows labs to keep royalties to fund more research and to reward inventors. It decentralizes technology management from Washington to the lab director. That same formula ignited the explosion of activity at the universities which Sec. Ross touted.
Agencies have received numerous presidential pronouncements and departmental directives on the importance of technology transfer. Most recent was President Obama’s Accelerating Technology Transfer and Commercialization of Federal Research. It’s goal was:
increasing the rate of technology transfer and the economic and societal impact from Federal research and development (R&D) investments. This will be accomplished by committing each executive department and agency that conducts R&D to improve the results from its technology transfer and commercialization activities. The aim is to increase the successful outcomes of these activities significantly over the next 5 years, while simultaneously achieving excellence in our basic and mission focused research activities.
Agencies were instructed to develop goals and metrics toward that end. But there was no oversight or enforcement so after a brief flurry of activity, nothing really changed.
Thus, the first word in the mantra is management. Managing a government workforce that’s virtually guaranteed life time employment and set in its ways isn’t easy. Many are suspicious of the private sector and see no need to change as long as tax dollars continue to flow. Bureaucrats know they can wait out the tenure of any Administration. They wait to see if political appointees have the stomach for implementing real reform or are just making speeches.
When I ran the Commerce Department’s Office of Technology Commercialization, Deborah Wince-Smith (who now leads the Council on Competitiveness) was our Assistant Secretary. She made promoting tech transfer a priority so I invited John Preston, who headed MIT’s licensing office down to talk.
Before the enactment of the Bayh-Dole Act, MIT was not very successful at licensing. John was part of the management team that turned things around. He said: “Passion is the most important ingredient for successful commercialization. The inventor, management, and the partnering company must all share the passion for success. If one party doesn’t, the deal will fail.”
John handed us a paper listing the killers of passion:
- Destructive criticism
- Lawyers and committees
- Bureaucracy and red tape
Bullets two through four were barriers we encountered daily. John said that lawyers, committees and procedures are like the brakes on a car. You need them at times but they can’t be in control. The deal maker must be in the driver’s seat. As soon as he left, Deborah taped the list to her door so it was the first thing any visitor (or Commerce staffer) would see.
At the time we had a lawyer we called “Dr. No” who routinely objected to any new initiative, thus making himself the center of the process. When he played his usual tricks slowing down my projects, Deborah called us to her office one memorable day. She said: “Let’s understand each other. Joe’s responsible for making recommendations on tech transfer policies and after they’re approved seeing that they’re implemented. Unless you can show me that we’re violating some law, get out of the way.”
That worked as long as Deborah and I remained at Commerce and we got a lot done. Once we left things went back to normal and Commerce’s leadership in tech transfer vanished. I heard later that “Dr. No” won the Department’s top award for correcting a problem he’d created.
Thus, a key recommendation in our report to the Obama White House was there has to be effective, consistent management to “preclude or mitigate disruptive bureaucratic interference or inappropriate agency practices that discourage commercialization in federal programs.” That’s not fun and it’s not easy. However, it’s essential. If innovators aren’t encouraged and protected they’re soon smothered by those whose power comes from creating more process. That recommendation– along with the rest of our report– was ignored.
The biggest complaint about federal laboratories is that it’s too hard to complete deals. Many labs have to run pending agreements through departmental procedures where the “killers of passion” lurk. Companies wonder what’s taking so long and are surprised when negotiated points come back altered.
So, the second word in the mantra is empowerment. The Federal Technology Transfer Act gives deal making authorities to the federal lab, restricting headquarters micromanagement. That requires empowering tech transfer officers to do their job. They need the authority, skills and expertise, fueled by a sense of urgency, to get deals across the finish line.
One reason why universities outperform the labs is that many academic licensing officers come from the private sector. They understand the pressures companies are under to complete agreements. They understand that industrial partners assume tremendous risk commercializing federally-funded inventions. Such insights are often missing in the government.
And that leads to the final word– accountability. It is not at all unusual for universities to overhaul their licensing offices, removing personnel. If anyone in federal tech transfer has ever been fired for poor performance, I’m not aware of it. On the other hand, government employees who are passionate about getting deals done are often regarded as trouble makers for pushing the bureaucracy beyond its comfort zone. That results in passive/aggressive resistance. After realizing that much of the rhetoric about commercialization rings hollow, talented deal makers often leave.
In any effective system there have to be real rewards– and penalties– for performance. Those with the passion for success should be recognized, protected and promoted. Dead wood and obstructionists must be removed. Accountability doesn’t just apply to individuals. Commercialization success (or lack thereof) should be considered when agencies submit their annual budget requests. That would be an unmistakable sign that business as usual doesn’t cut it anymore.
There are many excellent ideas for improving the taxpayer’s return on investment in the federal laboratory system. But if we’re not willing to do the basics of management, empowerment and accountability, taxpayers will continue to be short changed. Let’s hope this time it’s different. If not, save those recommendations. The next Administration will confront the same issue.