Mick Stadler writes a letter in 1976 on “effective transfer mechanisms”–2

We are working through Mick Stadler’s 1976 letter to Research Corporation’s Willard Marcy. Stadler outlines eight functions for a next generation “technology transfer mechanism.” The essentials of Stadler’s view are that the mechanism must distribute technology widely, must be distributed, must be flexible, must focus on the needs of the inventor, must recognize multiple forms of transfer, and where patents are used, must make clear the economic and procedural reasons for doing so.

We continue then with Stadler’s points 5 through 8.

Stadler builds on the problem that university-based patent administrators are doomed to isolation–and the problem only gets worse if their response is to band together to compare notes at AUTM meetings. Stadler points to the importance of seeing many new technologies in a given area–from multiple sources, with multiple targets of possible action. That’s what a specialized firm can do. A firm that works with video game development will have different expertise from a firm that does pharmaceutical drug development will have a different expertise from a firm that handles 3d printer technology. There still will be inventions that aren’t anticipated by anyone–and it may be that for those, simply being hired to “transfer technology” isn’t a workable qualification–nor would “representing university policy enforcement.”

For the “hundred of these a year” inventions, however, it may well be that selectivity is essential. Pick one, and prevent the rest from blocking the way. That’s a tough lesson for a bunch of people to accept. If they all want to be rich, and they use patents to block everyone else, then they create gridlock for two decades. All the worse if the federal government smells a hot area of inquiry and throws lots of money at it, spread around to many organizations in many regions, dispersing talent, fragmenting rights, and then humping everyone up to all commercialize their little gobbets of inventive froth using patent monopolies. The institutions involved cannot bear to stand down. The institutions that “win” cannot bear to spread around their benefits. It’s a bunch of pig-headed uncollaborative nonprofit bureaucrats all trying each to get theirs, claiming their behavior is in the public interest, and, if the public was as foolish about it as they are, what the public would want, too.

An expert seeing 100 like inventions per year develops a better eye. I once talked with one of the senior venture capital experts in Silicon Valley. I asked him about gaining the eye. His reply–I paraphrase–“I can tell in a matter of moments whether something has potential worth pursuing.” It’s in how the inventors talk, the nature of the inventive change, the surrounding situation, a sense that there’s an action that can be taken to move the work to another level. A professional evaluation by a professional with experience is different from someone running around creating metrics to justify hanging on to ownership long enough to pad one’s patenting numbers to show “growth” and “potential” and so wrangle more funding for tech transfer from the university or the state.

The last sentence is crucial. Building relationships is crucial. Having those relationships active and meaningful before you need them for transfer is crucial. And having ten companies to provide instruction to over a new discovery rather than one, or picking only one, changes–crucially–the default strategy for widest possible dissemination. One adopts social network strategies. One builds on NIPIA–non-IP intangible assets–such as lots of relationships (not IP, but NIPIA). The primary asset is not the patent–it is the relationship between tech and business leads in industry and university-hosted research projects, by which new discoveries, inventions, tools, data, information, and collaboration may move expeditiously.

Widest possible dissemination then implies, almost always, non-exclusive licensing, if one goes to patenting at all. Stadler here hits both points. Ownership is not the only or best or even first starting point for transfer. Certainly not institutional ownership, or agent ownership, or for that matter even inventor ownership. Ownership, it turns out, is near to the four p’s of marketing (off by only one letter!)–and that p is positioning. Where does the invention appear to come from? An articulate post-doc? A bureaucratic office tasked with extracting money from companies? A startup backed by one of the most recognized scientists in the country? A consortium of companies aiming to create an ad hoc standard platform from which to develop competing products that work well together? Just what?

Let me illustrate Stadler’s point. In a number of cases we built transfer programs based on providing access to developing technology rather than trying to find a single company to “develop” the technology as a commercial product. We led with software, screened information, tools. We set the license cost low–a service charge for the effort to put things in a useable form for delivery, and ran that income back into the transfer project. The goal was to build relationships at the level of the research or technology group lead–so fees had to be under the discretionary spending authority of those leads–like, under $5,000. The result was that any small or mid-sized company could gain access. Our goal was to increase the number of working relationships. In one such project, we had 100 companies (and large company sites) involved. The income allowed the project’s transfer program to remain responsive to the companies–answering technical questions, providing updates, working on problems that the companies wanted solved.

The question for “technology transfer” then was not “can we find one company to exclude all the rest and pay us for the right to make a commercial product,” but rather “can we teach at least five companies how to use this new thing?” If we can teach five, then more will show up if only to find out what the first five are learning. If we license for about the cost of a week-long technical seminar, most anyone who wants to know will show up and work with us. Once there’s an established user community, then companies show up interested in creating commercial products to sell to that user community or to sell to less-adept users who don’t want an unbuttoned technology and instead want a product. The commercial activity rides on top of an active user community, comes after there is that community, runs in parallel with it.

Perhaps then you begin to see how damaging a default position is to deal first in patent monopolies. One suppresses the early adopting user communities. One turns away companies that would otherwise form working relationships. One creates a bureaucratic mess, an impossible, damaging mess. Multiply this same mess across thirty universities all working in the same area, none of them willing to give up the vanity of making millions from their little piece of action by somehow dominating an entire industry with a patent.

Stadler’s point is that the goal is the movement of technology through working relationships and that’s often possible without patents at all, and even with patents not as the first thing or primary thing or best thing–maybe there’s a patent, but it’s not exclusive and it doesn’t carry the value of the relationship. It is “thrown in” as it were, as a sweetener rather than as substance.

Behind all this is the tyranny of the university patent royalty sharing schedule. University licensing offices get set up to run on licensing income. They end up trying to divert relationships into licensing relationships. Shut down free. Shut down consulting. Shut down faculty starting companies on their own. Shut down students getting jobs in industry to practice what they have learned in inventive labs. Force all this to go through a bureaucracy of low-volume administrators stuck on exclusive licenses. That way, the licensing income will (so the fool’s theory goes) go up and technology transfer will have demonstrated its financial importance to the university as a source of research funding. That was–in a rather different form–the idea in 1960 when the University of California formed its own patent licensing office. But now federal funding dominates university research, and whatever licensing money goes to research after costs is scraps and so uninteresting that universities mostly don’t bother to track what research it supports or what comes from that research. And never report publicly. Whatever the idea was in 1960, it’s a dumb, empty idea now, a zombie idea that apparently refuses to die and eats university patent administrators’ brains.

Stadler’s idea, however, continues to have spark. Universities might use patents, but they must be *very* selective about patents, and they must encourage that broad range of transfer activities that don’t involve patents or can use patents but only non-exclusively.

Within Stadler’s idea of widest possible dissemination is a fundamental requirement: there must be multiple, institutionally supported transfer pathways. If a university is very selective about those inventions to patent, and again very selective about which of those patented inventions to exploit as a monopoly position, then there will be at least three transfer functions–exclusive, non-exclusive, and no ownership position. All three must operate, and policy cannot dictate any one to dominate the others. University patent policy, however, has been set up to prevent any other transfer mechanism. If a university declines to patent an invention, then it makes it unbearable for the inventor to get rights back. University policies make it impossible for faculty to commit inventions made in consulting. University policies declare it to be an ethics violation or conflict of interest to release something openly that the university might have exploited for “commercial value.” Everything in university patent policy is directed toward suppressing alternative approaches to transfer.

Clearly, non-exclusive and no ownership positions necessarily derail exclusive positions. Who should decide which path to follow? That’s perhaps the key question facing universities, though they are in denial about it. I’ll give my answer: the research directors of defined projects should decide, and if there’s no defined project, then the inventors should decide, and if there are areas in which a faculty decides that there should be no exclusive path, then that faculty should control the choice. You might have another, better idea. Let’s hear it.

This point, too, is essential. If the federal government is going to dominate university research–presently it provides 60% or more of the research funding at many research universities (and a higher percentage if one counts the federal indirect cost payments that get funneled back into research but are booked and reported as non-federal money)–then the federal government must communicate directly policy and regulations to universities. This communication cannot come from front organizations, or from a single federal agency such as NIST.

Here Stadler makes a case for an organization COGR (the Council on Government Relations) or AAU (Association of American Universities)–to lobby government for legislation. In general, that’s a reasonable idea, but the idea breaks down if the lobbying organization suppresses a diversity of approaches and ends up advocating for a single university position to dominate all transfer activities–and that’s the case we have now with AAU, APLU, COGR, AUTM–name your alphabet orgs and they are all-in on exclusive patents and commercialization as a matter of speculative investment behind a patent that suppresses all other research, use, and development.

Stadler’s idea is reasonable–a transfer mechanism based on federally funded research ought to have a clear communication with federal agencies on policy and requirements. But that’s more difficult that one might think. Part of the problem, at least, is that university administrators do not necessary represent the “university.” If a university has a diversity of means to transfer technology, then those involved in research ought also to have some voice in transfer. Even here, however, things get hairy–researchers seem to want more research funding more than they want to switch over to focus on teaching others just how to use what they have discovered. It may well be that federal agencies should require university researchers to take a break from federal funding after six years for at least three years, get a life, and to get more federal dollars, show what they have done with their non-federal life. Research, transfer, then do more research. Not research more, and more, and more for ever. Research ought not be a sinecure. Call it term limits for federally funded research.

This, too, is an important point. If a university is going to develop a robust interface with industry, then the folks involved need to have working knowledge of the tools that create and manage those relationships. It’s not enough that university administrators pass around the template documents that they use. They need to see how industry manages research collaborations–with consortia, standards setting organizations, contract research organizations, and with other companies. They need to have ways to manage open research environments–and those ways typically involve open innovation, non-exclusive licensing, and generally renouncing patent monopoly practices. Otherwise, a university ends up operating as a contract research organization that sweeps up all IP rights for the benefit of its clients, but then in an ugly twist turns on that client and demands payment for the IP as if the client had not just funded the research that generated the IP. “Other clients paid for much of the background IP on which your new IP is built, so, ahem, you must pay us for it.” It’s a losing proposition, but that’s the one universities routinely lead with.

At present, we have a university transfer mechanism that suppresses industry interfaces. I’ve worked at that interface, and I have dealt with the transfer mechanism. That’s where we built frame agreements, for instance, modeled on the open bar tab. Works great. That’s where we built the project rather than the patent as the core asset to develop. Companies join the project. Everyone takes away project assets and agrees not to block the project’s directions with IP positions based on project assets. Call it a commons. Also works great. But universities have institutionalized a narrative about technology transfer that excludes all this. They have testified before Congress about what they claim is the success of their patent exclusion approach, that somehow without excluding industry a patent is not worth having, and that wastes the opportunity of the patent system for speculative money-making. But their approach has not been successful. University patent administrators have cooked the books for years, publishing misleading metrics if not made-up metrics. A few deals a decade can cover financially for hundreds to thousands of cases of failed invention management.

Providing guidance in dealing with industry contracting means more, then, than passing around template agreements. Even templates such as the Lambeth agreements are already twisted in knots around preserving institutional controls. A different direction is to break out industry work to follow a chosen path–contract research service, startup, commons, standard, service bureau. Handle the IP appropriate to each. Spin out CROs so that they have no institutional background IP to fuss over, and no institutional liability concerns. They must be their own thing. Same for startups looking for strategic partners or to sell up and out. Commons might be handled by the university, but also commons can be spun out as nonprofit foundations, with their own IP. Rather than getting bigger, a university might consider shedding industry-facing talent for the duration of projects that benefit from industry relationships and ought to benefit industry. In this approach, technology transfer is almost entirely not about trying to find exclusive licensees for university-owned patents. But try telling that to people who believe their entire technology transfer career depends on their ability to find a handful of exclusive licensees for a barrel full of patented university inventions.

Coarsely, institutions are poorly equipped to deal with innovation. Institutional attorneys mainly want stuff to not happen. They get blamed for anything that goes wrong and rarely get the recognition for moving things along outside “the box.” Other administrators want things to happen only one way–they want the appearance of order. Then they can hire people to service that order. To them, order is fairness. But that ends up in the problematic position that “it would be unfair to allow you to have a choice when we have already told all these other people to stuff it.” Institutional risk managers want conservative positions. Institutional compliance officers fret about having a wild west if policy is waived or there’s no policy at all. Leaving choices to faculty, to leaders of research teams, to inventors–that runs against institutional best judgment. Even the injection of federal funds to institutions for use by researchers may end up inoculating institutionally hosted research against effective transfer. Unless universities take the risk of allowing personnel–faculty, directors, inventors and authors–to make their own decisions, and put them in a condition to be separate from institutional controls while still obtaining benefit from their institutional affiliations–they will never have a viable transfer mechanism.

They once had the start of such a mechanism. About the time of Mick’s letter, in 1976, things were in play–the situation could have gone any number of different ways. Bayh-Dole came along five years later and with it the speculative patent monopolists took over, focused on exploiting a pipeline of patents to pharma, and when that didn’t work so well, to venture-backed biotech startups, and when that didn’t work so well, to state-funded/seed-funded/angel-funded/SBIR-funded startups, and those haven’t worked so well, either, but there will be a new desperate scheme showing up as the next flavor of patent monopoly exploitation in the hopes of keeping exclusive patent licensing as the dominant default. If repealing Bayh-Dole could get us back to 1976, and repair the damage caused by forty years of university patent monopolies, and reset the discussion to try something else, then repeal would be the very thing to “unleash” federally supported research enterprise.

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1 Response to Mick Stadler writes a letter in 1976 on “effective transfer mechanisms”–2

  1. Gerry (or it is Jerry?),

    Can you email the Stadler letter? bcd@asu.edu

    I’d like to cite it in the piece that we’re writing (Aaron Kesselheim, Ameet Sarpatwari and I).

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