A Deeper Problem than Most

Is university “technology transfer” all but dead? I’m not talking about the movement of insights from research to practice, nor of the management of intellectual property rights arising in university research. Rather, I’m talking about the offices that manage such stuff under the rubric of “technology transfer” or “technology licensing”. These offices are caught in a struggle between the public norms of research and the private interests of individual inventors, investors, and corporate officers. They want to make a claim that their activity is in the public interest, but they are caught out talking about how greed is good and making faculty inventors, patent attorneys, and company folks rights rich through commercialization. The more they “improve” on their model, the further they get from university missions and norms. Something has to give way.

It could be that the Mertonian norms of science and the university will give way. Universities are moving to private models of support. Perhaps they will become a creature of corporate interest, a money mule to subsidize the status quo in its efforts to maintain control of key sources of wealth. Then technology transfer would be on the vanguard. Greed is good. A Porsche for every faculty member. Come to do good and do well. This is the worry of those talking about the “kept university” and the “enclosure of the commons”. Even past the norming concerns there’s the pragmatic worry that a focus on near-term commercial outcomes takes universities away from their distinctive role in working 10, 20, or even 50 years out from the lucrative moment. In research, the move to private support means IP applies everywhere it can be applied, everything that has IP is owned by a corporate-style university, and that university then transacts business in its own self interest. The argument is: “what’s good for the university is good for the public” or “making money for the university is the primary outcome of university research and IP licensing, and that’s defined as a public good.” That is, it’s not worth debating.

It could be, however, that Mertonian norms win out, along with conflict of interest policies, the independence of the university from private, competitive economic issues, and the independence of research relative to mercenary interests. This is a tough go, but possible. The places where this may hold best are the medical schools, where patient care still holds a position of respect. The push back here would be to force technology transfer activities entirely out of the university, and parts of research that are deeply connected with industry along with them. Tech transfer would still operate, but not within the university.

Or it could be that technology transfer itself caves in. Why would this happen? Despite some published claims, our work here indicates that 80% of technology transfer offices at US universities with $100m or more in research funding, or that are at least 20 years old, are at break-even or better. The break in technology transfer won’t be because of lack of licensing income so much as being interposed in a hopeless way between the public and private interests. The things that are threatening technology transfer operations are 1) its process orientation; 2) limitations of the approach to portfolio based outcomes; 3) the fixation on commercialization to the exclusion of other forms of deployment; 4) a policy-induced inability to let go; 5) a public rhetoric that presents itself, despite its best efforts, as corrupting rather than motivating.

Process orientation is death to innovation. Technology transfer offices are increasingly working under policy statements that dictate process, expect inventions to be treated consistently, and force review steps and documentation to justify each decision in the name of transparency. The result is a huge noise to signal ratio of waste effort on stuff going nowhere. In business, you are known most widely at your worst level of communication and service. Just on that basis alone, tech transfer offices are losing the battle, the war, and the hearts of the public.

The further result is the difficulty in mobilizing for opportunities when those show up, as that would pull resources away from the many other things under management. While process approaches are intended to make a show of appearing organized, and that is supposed to mean something to senior administration, which often could not otherwise tell if anything was being done well or poorly, prim organization in this business is not necessarily the primary virtue.

Portfolio management comes with the territory. But technology transfer is in an untenable position, and this is becoming much clearer as programs mature at 25 years. First, offices operate on a case basis. IP policies set up the expectation that each disclosed invention is to be licensed on its own, with the benefits back to only those inventors associated with the licensed invention. One may participate in the program with disclosures and patents, but no license, no income to share, even if there are millions made next door. Similarly, one may participate by supporting a licensing and development effort, answer questions, making referrals, and advising on technology directions, and still be left out of the pool of beneficiaries from a licensing deal. In short, university tech transfer policies actually work against collaboration and shared interest in the success of the programs. It’s every researcher for him/her self. No policies that I know share licensing income with, say, faculty and staff participating in the IP program but not the beneficiaries of a license, or with students (non-inventing ones) or with the public generally.

Worse, though, is what happens when the portfolio metrics are reported. There, one gets the totals for disclosures, patents, licenses, and income, but these are rarely broken out so one can see the structure of the income. A few schools do this. UC is one, to its credit, showing the top 25 licensed technology. At UC, the top 5 inventions account for about half of the income, and the top 25 account for two-thirds. That’s out of about 5000 patents held by UC. While the portfolio can be judged to be doing quite well–$75m or so in income–there are well over 4000 inventions that aren’t doing. While it may be these “lack commercial potential” it may also be that these inventions could have other lives than that of being shopped for product creation or new company formation–especially when it’s pretty obvious neither is going to happen. This is the situation in most university tech transfer invention portfolios. While the income is nice, most of the portfolio doesn’t participate, and cannot be allocated to other approaches. The result is that other things, such as research collaborations, standards, and testbeds, are poorly served by an invention portfolio approach. The odds are anything that enters will never succeed and never be free. Why even try?

Once one knows the score, it’s hard to justify the fixation on “commercialization” and its newly popular emphasis on starting companies. “Commercialization” is typically pinned on Bayh-Dole, but any read of the law will show that commercialization is a minor aspect of the law, and where it does show up, it is not the university but rather industry that is to do the commercializing. Universities getting involved is a short cut. While their personnel–research investigators, students, volunteers, and sponsors may have personal reasons to look to investment and company side support for their ideas and results, the university as a corporate entity gets caught up in this often in the wrong way. First, its contracting apparatus for research often stipulates ownership positions that make management of results worse rather than possible. Second, licensing efforts also carry artifact apparatus with regard to consideration in the contract (such as royalties on sales) that may not be appropriate, or even where the greatest value is for those involved. Finally, even when the university wants to play nice, it often lacks the resources to deal with each opportunity in the window that presents. Too often it is short-handed, distracted, or dragging its tail through review after review to try to get to an action.

All this leads to the idea that conventional university technology transfer is all but dead. Sure, the activity will continue–and even do breakeven or better. Once every $1b in research funding, a patent will get licensed for reasonable (+$1m) value. But the portfolio approach, with the heavy emphasis on process and on commercialization, is killing research engagement. The more corporate universities get about IP, the more likely they will have organized themselves out of a leadership position in research innovation. The answer is not to be more disorganized, but rather, to spend less time managing and more time engaging community in the research activity. Let’s see whether these offices start to figure it out on their own, or whether change has to be imposed on them. Unwillingness to change, to explore, to innovate–these are hallmarks of bureaucratic culture. It would be too bad if the folks dedicated to innovation are themselves caught out in a process view of the world that cannot itself change. That would be a deeper problem than most, wouldn’t it?

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One Response to A Deeper Problem than Most

  1. “Even past the norming concerns there’s the pragmatic worry that a focus on near-term commercial outcomes takes universities away from their distinctive role in working 10, 20, or even 50 years out from the lucrative moment.”

    This would not be a concern where the University hands off control of its property at an early-stage to commercial entities that specialize in early-stage commercialization. The problem is that no such entities exist. A few venture capitalists claim to provide such services, but everybody in tech transfer knows that the same folks won’t invest until a stage much later than where most principal investigators consider work to be ready for product development.

    Intellectual Ventures has the right idea taking money from LPs with long time horizons and bundling complemetary IP from different sources. That’s the kind of thing that VCs outside the pharmaceutical and biotech markets don’t bother with.

    What is needed is a new division of labor to connect university research at one end with venture-capital backable product/market ideas at the other. The methodology is already there. Folks like Steve Blank have been preaching it for many years. The problem is that the buy-side — the VCs — don’t want to deal with any organized institution. They prefer dealing with tech transfer offices and entrepreneurs or angels on an ad hoc basis. The more organized tech transfer gets, the more VCs will have to pay for IP.

    Paradoxically, on my analysis this would not hurt returns for the VC asset class. The problem for LPs investing in VC now is that there is too much copying by GPs. A flood of money goes into a handful of new sectors rather than being spread around to the best team in a great diversity of different technologies. Getting tech transfer more organized might actually improver LP returns from VC by weeding out the truly derivative managers.

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