The Rhetoric of Technology Transfer and Student Debt

From Thomas Frank’s article in The Baffler (h/t Chris) on college tuition prices and administrative excess:

The coming of academic capitalism has been anticipated and praised for years; today it is here. Colleges and universities clamor greedily these days for pharmaceutical patents and ownership chunks of high-tech startups; they boast of being entrepreneurial; they have rationalized and outsourced countless aspects of their operations in the search for cash; they fight their workers nearly as ferociously as a nineteenth-century railroad baron; and the richest among them have turned their endowments into in-house hedge funds.

Note the skepticism, the disdain directed at the technology transfer complex as it has been defined by various university administrators, especially ones promoting their tech transfer and economic development chops. It’s not that research doesn’t result in new technology. It’s about how university administrators are going about it.  Next paragraph:

Now, consider the seventeen-year-old customer against whom this predatory institution squares off. He comes loping to the bargaining table armed with about the same amount of guile that, a few years earlier, he brought to Santa’s lap in the happy holiday shopping center. You can be sure that he knows all about the imperative of achieving his dreams, and the status that will surely flow from the beloved institution. Either he goes to college like the rest of his friends, or he goes to work.

Student debt is a big problem. Folks accept the university rhetoric that the high cost of instruction is the problem. But university administrators don’t actually blame instruction. They report the “cost of higher education per student.” That is, what they bill against students, not what they spend on students. Huge difference.  They bill a lot of things against instruction that simply isn’t, except in some screwed up accounting rationale.

In my time in tech transfer, I have yet to see significant royalty income directed to the support of undergraduate instruction. I don’t know that it happens at all. Of the billions of licensing income over the years, do you think maybe a million, maybe ten million went to support students? No, royalty income after attorneys and inventors goes to administration, expansion, and more research.  It appears that extramural research at public universities, at least, loses money–as much as 20 cents on the dollar.  It costs $1.20 to spend $1.00 of extramural research income–that is, $0.70 cents of direct support, $0.30 of indirect funding for administration and facilities, and then on top of that another $0.20 from mysterious sources to make up for the shortfalls, overspending, canceled contracts, disputes, and inability to collect. At the University of California, that shortfall is over $700m per year. At other public universities with extramural funding of over $500m, maybe only $100m or so extra has to come from other sources to fund the full cost of the research. Where does this $100m or more come from? Let’s see, state support is down, the endowment exists only to build the endowment, companies are not donating it. The thing that’s up–by a lot–is tuition. Would you think? Or does that $100m extra just come out of the air, like an accounting trick?

University technology transfer, which should be about how to get new capability, along with data and metadata, into the hands of capable audiences, has been co-opted to be used as a “new source of revenue.”  Unfortunately, about half the time, running a technology transfer operation as a patent profit center means that tech transfer is losing money, too. That in turn contributes to a deeper hole in public university finances by supporting an ever expanding, loss-creating research enterprise. It does not have to be this way, of course, but it is. Technology transfer income disappears into a black hole. Rarely does one find out how it was used. It’s free money w/out public accountability.  Where do you think the supplemental expenses to run a technology transfer program at a net loss of millions a year might come from?  The primary candidate again is, ultimately, tuition.

University technology transfer, as it is generally practiced now, has two rhetorical roles, one intended but empty and the other unintended and fraught with badness.

The intended rhetoric is this: research is worth public subsidies because it produces innovation that stimulates the economy, creates jobs, and benefits people with new products and practices. This argument is deployed to induce states to “invest” in university building projects (for more research). This is what California did with its four Institutes of Science and Innovation, which proceeded to build buildings and claim the research publications and grants of everyone working in an Institute’s area of focus, and little in the way of innovation, which “just happens.” (Must be the “unseen hand” or something.)  According to the University of California Senate:

The state’s start up funding totaled $100 million for four years of support from 2000 to 2004 for each of the centers, with the expectation that the state funds provided for the Institutes would be matched 2-to-1 by non-state dollars. Lease revenue bonds, a common source of funding for capital projects, were used to generate initial construction costs for the Institutes.

That is, four centers at $100m, or $400m total. There was an “expectation” that the state’s funding would be matched by another $800m of private money–but that turned into “non-state” dollars, meaning, essentially, federal grant dollars. But even then the dollars were supposed to be new dollars. I don’t see that this is what happened, but then, there does not appear to be any reporting of what really has happened. Here is the “economic benefits” page at the UC Office of the President website. It is essentially general handwaving, like one sees on a New Year’s Day float. As Mowery has written, universities are cavalier about their metrics. UC does not appear to care about the metrics, or the “expectations,” or what the institutes have actually done, economically, for either the state or the university. As the Faculty Senate report puts it:

Faculty felt that the speed with which the Institutes were realized may not have provided necessary consideration of larger budget implications and that the Institutes could, without a permanent budget for operations, become a drain on the resources of campuses.

In other words, the cost of operating the four institutes might not be coming from private sources, but rather from university funds, and with cut backs in state funding, who do you think is financing the administration of these engines of state economic development?

Utah has done much the same thing with its USTAR program–a $93m “investment” in infrastructure for research, citing economic development as the purpose.  The University of Utah got buildings built to expand its research programs, but there was nothing to show by way of economic impact. The University was reduced to producing a report that looked at “economic contribution”–that is, estimating the effect of the state government spending $93m, who cares on what.  After revising the “baseline” expectations of the original funding commitment and substituting “contribution” for “impact,” then everything looks like it has hit its targets. Except that there was essentially no economic impact from the outcomes of the research activity:

From these disclosures, 46 provisional patents have been filed, 2 patents have been issued and four new Utah companies created. In 2011, these four companies employed 13 people.

$93m allocated on the premise of economic activity from the results of the research, but really, the only economic activity is the expenditure of money on the University of Utah rather than on other activities in the state. Technology transfer is used rhetorically to stand for an expected outcome, and if there is not any, that must be the fault of the technology transfer office.  That may be so, in some strange way, but the more significant fault is with the administrators making the pitch to the state for capital funds to expand programs in this way, with no prospect for continued robust funding from the state. When the dust settles on those shiny new buildings at the University of Utah, who will be paying for their upkeep? Not the state. Not private industry. Not millions and millions from licensing and litigating patents.

This is “research as an industry.”  The aim is to get a bigger share of a pork pie offered fresh each year by the federal government in the form of research grants. Another term for it is “institutional capture” where an organization adjusts its practice to optimize for getting available money rather than providing the services that it believes important. What gets funded becomes the most important thing. State government is as fair a target as the federal government. Once the goal is to seek out money, then anything goes.

Cynical? No. Take things for what they are. There is a rich rhetoric of public benefit from university-hosted research.  Technology transfer is front and center as the poster child for the potential for institutional money-making, with a cover story about public benefit and economic development.  While the public may benefit, and there may be an economic stimulus from the discoveries, inventions, and research tools developed by faculty, staff, and students, there is nothing in any of these documents from California and Utah that would show how running everything through a compulsory program of institutional ownership and profit-seeking has much of anything to do with that benefit and stimulus. One might posit that such programs actually work against public benefit and economic stimulus in order to promote a seemingly better financial position for the university administration.  The second difficult thing is that it is not clear at all that profit-chasing administrators with a monopoly on faculty scholarship actually do put their university in a better financial position.  What is assured is that for the five years or so that the administrators make the game attempt to chase profits from patents, they are very handsomely paid for their efforts–salaries north of $200K, $300K.  Not quite up to assistant coach levels in the football programs, but getting there, and with a lot less public scrutiny and accountability.

The difficult thing is that there are indeed great stories to be told that connect faculty research with public benefit and economic impact.  Often these stories are even true. What the universities are doing with the rhetoric around technology transfer and research, however, is far afield from these stories. Technology transfer offers a list of wonderful doings that don’t hold up on examination: its claimed financial successes (typically one or two big-hit licenses in a portfolio of hundreds to thousands of inventions that are withheld from the research commons), huge number of start ups (often administrative repackaging of inventions without operations, funding, jobs, or products that exist zombie-like, incapable of death), accounts of public benefit (in the form of research that has the potential, in just, um, five years, to be something really important), and value creation (typically in the form of equity cash outs as companies change hands, regardless of whether licensed inventions are ever used or made the basis for products).

The University of Washington recently made a big to-do about starting 17 companies in a year, with a press release and a flashy mailing with the university president’s signature, taking credit for it all.  It’s just that a fact check shows only 4 of the companies were started in the previous year.  Of the others, some were not companies at all, others were started more than a year ago with inventions from other institutions, and some had been in business since as early as 2006.  It was all concocted.  It was not a mistake. Last March, UW sent out a similar story, of 8 companies in 6 months, when a fact check showed at best 4. I sent a note to the director of News and Information at UW who authored the press release, pointing out the problem with the 17 companies, but I have not heard anything back, not even an acknowledgement. It’s clear that the fix is in. This is more than being cavalier with the metrics. If UW were held to the standards of publicly traded companies, it would be securities fraud.  Why are public universities not expected to meet a similar standard in their public reporting?  If universities are to be run more like companies, then where is the accountability in the public reporting?

That technology transfer leads to economic development is at best aspirational spin. Again, we are talking about the conflation of technology transfer generally, which has a long history of supporting technology change, with compulsory institutional ownership of faculty inventions and institutional patent profit-chasing.  As long as people want to believe it, it’s spin that looks really good. At worst it is bullshit (statements made with no regard for the truth) that keeps money rolling in to subsidize tech transfer and research expansion from folks who apparently really do believe that tech transfer will make the university wealthy, if only speculative monopolists own and manage everything significant that faculty and students create.

I am one of those folks who would love to have all this stuff about technology transfer be true, but I know it is not, and I am not willing to play along. Nullus in verbia. Prove it, folks.

The actual purpose of Bayh-Dole, demonstrated by the actions folks took with regard to the institutional patent agreements that Bayh-Dole replaced, was to gut public accountability for the private exploitation of patents on inventions made with federal support. A side-by-side read of the IPA and Bayh-Dole shows the extent of the damage perpetrated by Bayh-Dole. For 30 years and more there has been no public accounting for subject inventions that universities have claimed to own. The “metrics” that AUTM publishes are misleading–reporting in aggregate to hide the structure of the information, and in case not distinguishing between federally supported inventions and other inventions. The number of patents, number of licenses–all that shows is private activity without reference to the actual inventions under management.  The patents may come in clusters–one might have five or more for a single bit of new technology (two or three provisions, converted to a utility, then a continuation in part, then a continuation, then a divisional, a PCT, and maybe even national phase filings).  Licenses may be to inventions years old, and one or two non-exclusive licensing programs (such as $1K licenses for a biomaterial) can run up the count for “commercial” licenses, painting a deceptive picture about the actual state of inventions under management.  A few transactions can dominate two decades of useless activity and inactivity. AUTM’s metrics show the “success” of patent speculators taking over publicly funded efforts to study, publish, and teach. The metrics requested by Bayh-Dole are not reported publicly by the federal government. Bayh-Dole exempts metrics from federal public disclosure law. Universities would have to report the metrics themselves. Perhaps they would, if they had nothing to hide.

If universities are contributing to the national economy, it is not generally because of their present compulsory patent profit-seeking licensing programs. Yet the public rhetoric is that it is these programs that crown research as the driver of the economy.  The institutional purpose is not to promote the use of inventions in the public interest–even if some tech transfer folks continue to believe that. Rather, it is becoming clear that the institutional purpose is to make money for the university, and in particular for administrators, and for investors.  Not a word about instruction or students, ever. The moves at UCLA and Berkeley are as cynical as they come. Use the expanded compulsory claim to faculty inventions to create a patent profit-seeking machine running on speculation and trading on the threat of trolling litigation. It really doesn’t matter if an invention gets used so long as a patent gets used to make a profit. Again, this is a huge difference. When an invention gets used, someone changes their practice. When a patent gets used, there’s litigation or a license or a sale of equity. When a patent gets used, nothing has to happen other than that someone gets rich off someone else. There never has to be a product or a use. Without public accountability for the status of inventions, we will never know. Clearly, university administrators do not want the public to know. Why might that be, would you think?

The shape of the public rhetoric deployed by university administrators should now be clear: more and more research is needed to stimulate the economy, but there is little evidence that compulsory university patent ownership has much at all to do with stimulating the economy.  There is little to indicate that more research will result in a better stimulation experience.  Extramural research loses institutional money.  That added expense has to come from somewhere.  More research means greater losses.  Most of the inventions are forced to sit on the shelf because the universities cannot find the right sharing, caring, wealthy, somewhat gullible speculative monopolist for each. Funny–there’s all this emphasis on needing more “entrepreneurs” and what the university administrators really want are sharing, caring, wealthy, somewhat gullible speculative monopolists.  Gosh, I want a couple of them, too.  Maybe that’s what entrepreneurs are supposed to become if they get wealthy and have plenty of money to throw around.

As the wealthy speculators move to take over control of university patent licensing operations, they put out a double message: the past management was stupid, inexpert, and full of fluffy ideals that don’t make a lot of money, while business-hardened experts who are willing to shoot first and therefore have no need for questions can make lots and lots of money. The deal with the universities: “we will share some of this shoot first money with you, if you give us control over your patent assets.” That’s the thing that university administrators cannot help themselves over. They have to say “yes, yes, oh yes, take all our patents, make money we don’t care how, and share some of that back with us.” The implication is that folks who are running university technology transfer offices consistent with academic freedom, public access, and broad benefit are somehow not serving the public interest, while often 2nd rate business types who talk up a storm of buzz words are somehow the only ones who could possibly serve the public interest. There is a huge difference.

Finally, the unintended argument, and the badness. When universities publish their extramural research awards, they want the public to believe that lots of money–hundreds of millions of dollars–means “excellence.” But they also want the public to believe all that money means profits. The same is true for university licensing programs. Lots of royalties means “productive research programs” (even if only one or two patents account for 75% of the income, and those from a decade past). But royalties also are to mean “profits.” If a public university is so successful, so profitable, then why does it need a public subsidy as well? If one is in a state legislature, or just a casual citizen observer, then the public rhetoric about research and technology transfer suggests that universities can do very well for themselves, and scarce state dollars should be directed to programs that need more assistance. I believe this rhetoric has played a much greater role in the loss of state support for public universities than folks give it credit for.

We find, then, a complex of failed rhetoric. A syndrome, if you will, as it persists in administrative heads. First, there’s the excellence argument. More research means more excellence, not more unaccounted for expenditures. States should pay for this excellence. Thus we get California dropping $400m on the CISIs, and students picking up the tab for their continued operation.  But if university research is bringing in so much money, why should the public have to subsidize it a second time, and why should students have to subsidize it forever after that?  Well, according to the standard argument, even if the research is losing money, it has benefits as demonstrated by technology transfer. But if technology transfer is making money, why doesn’t that money subsidize the research?Because it can’t (under the standard patent rights clause authorized by Bayh-Dole, at least) because royalty money can only be used for research, not research administration, or instruction (which no one in tech transfer administration seems to care about).  But even so, one is hard pressed to find a validated study (as distinct from vanity publications) that shows how patent licensing has made any impact whatsoever on a region’s economic fortunes in terms of jobs, tax revenues for the state, or income that supports the core function of instruction.  There are anecdotes, yes.  There are a handful of great stories.  But show how the administrative apparatus created that impact, rather than merely got its thumb in the way to make the impact just a bit less than it would have otherwise been.

We are left with the “excellence” argument, devoid of function. The argument I have heard in the wild is that students at public universities should pay for the value of the degree they are getting, not merely for the instruction and instructional infrastructure that the degree is to represent. The “excellence” of the university is primarily determined by its research activities (because, that is how universities market themselves to the public these days).  Ergo, students should subsidize research, so the university maintains its excellence (in research) and the students’ degrees are more valuable, and the students therefore will get better jobs than the folks who study at some college that has no huge research complex.

There are variations on the argument that involve conflating departmental research and professional development with extramural research, or that argue that research “trickles down” to instructional environments (as if that happens, or happens only because research at one’s own institution trickles down and no other research matters).  None of this gets at the underlying belief–that is asserted–that research matters so much that if the state won’t subsidize the work for the sponsors, then the students should, even if it means that they have to go deep into debt to do it.  University administrators make it appear that students are not paying nearly enough, that the state subsidizes their education, and that they are whiners if they think tuition is too high.

To make a show of trying to reduce costs, administrators blame the high cost of instruction, not administrative bloat, research expansion, or speculative technology transfer.

Thus, it comes about that there is a relatively direct connection between technology transfer rhetoric and student debt. If you work in a tech transfer program at a university, recognize how you are being used as the tail gunner in a failed argument that covers over substantial losses in research budgets.

Frank continues:

Grant to an industry control over access to the good things in life; insist that it transform itself into a throat-cutting, market-minded mercenary; get thought leaders to declare it to be the answer to every problem; mute any reservations the nation might have about it and, lastly, send it your unsuspecting kids, armed with a blank check drawn on their own futures.

If university technology transfer program were interested in the public welfare, it would be voluntary, it would look to cover its costs and anything more would come to it because people saw it as a portal to benefit things that mattered, like students, or non-profit organizations, or communities that needed help. Tech transfer would report the status of each invention under management, and would make inventions broadly available for making and using, without worrying about whether this diminished the overall value to speculators wanting total monopoly control. If tech transfer were interested in the public welfare, it would not set universities up to litigate infringement. Infringement wouldn’t happen. It would smell like….success.

Instead, tech transfer hides in the recesses of failed arguments, hand-waving about public benefit with nothing but a one-off quote from an old issue of The Economist and a handful of aging clever folks who twisted Bayh-Dole into a speculator’s dream at the expense of the public, the faculty, academic freedom, a productive and diverse approach to innovation, and the standing of universities in the public and legislative imagination.

For every good thing, it seems there are parasites that feed on it and aim to take it over. Technology transfer–the movement of capability from a group that understands it to another that desires to–is part of the great exchange by which insights, applications, and tools are made available for use. Moving something new from one group to another is not simple.  It is not merely a matter of inspecting something and then doing it for oneself.  There are lots of challenges.  Intellectual property is just one of them.  Under institutional control, however, we are watching university technology transfer devolve from a support role for faculty and other inventors (and developers, discoverers, validators, creators, originators, entrepreneurs, and the like) to one of a compulsory process designed (badly) to make money, which when it doesn’t work out as planned, is handed over to business “experts” who claim they can make the bad process work by spending more money, amping up the self-promotion, trading on the reputation of the university, and betting the house on a couple of big-hit deals or law suits.   Whether a university makes money this way–essentially a shakedown of industry–pales beside the point that the folks ultimately who are financing it all are the students, who will never see a dime of benefit for it, and likely will never know how badly they have been fleeced.



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