University technology transfer is dominated by the what can be called “biotech licensing” expectations. University administrators and licensing professionals tend to believe that “biotech” is where the money is, both now and historically, and that the primary means of getting at that money is to have a foundational patent on a biotech invention that can be licensed for a running royalty on sales. This is the “big hit” and the technology transfer literature is stocked with them.
The general expectation of a biotech big hit is that it requires an exclusive patent license to support a few hundred million dollars of private investment that will separate one compound out of perhaps 10,000, and run through perhaps 10 years of tests and regulatory benchmarks, to create a product that can be sold in a market for up to 20 years as a return on the initial investment. The biotech license requires big markets and players with plenty of capital to pull this off. The biotech license is that perfect tie between a social benefit (freedom from disease, or at least making an acute condition chronic) and a big cash upside. It’s almost magical.
My own sense of it is that big-hit innovation runs in speculative windows that last a few years to perhaps fifteen. For biotech, that window was from about 1980 to the mid 90s. For internet, mid 90s to about 2002. Speculation can look like a “bubble” or it can look like “expansion” or it can look like “re-engineering”. Universities largely missed the internet window because they were still busy trying to do biotech deals, even though that window appears to have been closed for a decade and half.
Whatever the driver, in a speculative window, there is a whole lot of interest in getting into early stage technology to preserve a piece of action for downstream efforts. Hence, plenty of licensing deals. A lot of university biotech deals were done “in the window,” before fundamental science was normalized, infrastructure built, and value chains organized. Soon those deals will be winding down. There continue to be university biotech licensing deals, but they appear to lack the frequency and upside of the deals “in the window.”
If one wants to ask broader questions here, they might be: is speculation a better driver than collaboration? is crossing the “funding gap” the critical issue for the success of a patent license anticipating product development? is the best licensing strategy to pick a primary model and stay with it until conditions come around again? will the biotech expectation eventually “work” in energy, environmental technology, regenerative medicine, bioengineering, nanotechnology, and synthetic biology? if everyone “sticks to the plan,” will industry eventually have to take a biotech-style license?
It is these sorts of questions that underlie the critique of university licensing practices with regard to information technology. In the IT industry, university licensing is seen largely as a barrier to innovation. This drives university technology transfer folks nuts. How can universities be standing in the way of innovation by trying to license early-stage inventions to industry and getting stonewalled? To the patent hammerer, anything that’s not a nail looks like a biting insect.
To get at some of these questions–which I have not seen raised in this way (certainly no references to biting insects)–let’s look at some differences between practice in biotech licensing and software licensing, at least for assets arising from university research. There are lots of pitfalls in working with a broad brush, but some advantages too. Here is a list of differences:
1. Network Effects. Software licensing exploits network effects, while biotech licensing tends to avoid these, or at least postpone them until a licensee is in hand. Network effects include critical mass–getting enough adoption to form a community; congestion–having too many requests or demands for a plan or system to work well; channel formation–repeat transactions or business that becomes reliable; strength of weak ties–referral opportunities from folks at a distance from your personal knowledge; and externalities–shared value created by your initiative that arises across a communities’ use, such as readily available folks who know how to help you.
2. Product Indifferent. Software licensing does not depend on a product stage, while biotech focuses on this. Software licensing may focus instead on building a community, or a platform of shared bits of code, all of which may be locally adapted and used to good effect, in conducting research or internal operations, without any product being created. Many biotech applications simply cannot be used generally without moving through extensive testing, regulatory screening, and packaging to reach a state acceptable for use in or with people. Software and data sets may take a stable form that is not a product, but rather something more like a community shared asset, more like a church service or company picnic.
3. Multiple IP. Software licensing typically relies on multiple forms of intellectual property, whereas biotech is often focused on utility patents. Where patents arise in software licensing, they often are involved implicitly, as in Apache v.2 licensing. In biotech, one would be working against best practices to bury a patent right in a collaboration, “throwing it in” in favor of a near-term working relationship. Yet software in biotech sponsored research agreements is frequently treated just this way. The research agreement will require a negotiation for an exclusive royalty-bearing license, but will throw in all software and copyrights royalty-free, regardless of their relationship to inventions subject to the option. For software, there typically are multiple copyrights, and may as well be trademarks in names and logos attached to the software and to services that may run alongside software, such as for assistance in installing, configuring, or versioning the software.
4. Non-Exclusive. Software licensing assumes choice is key to early adoption, rather than exclusive, dominant control points. While software licensing may focus on integrity of a named code base (“if you change it, call it something else”), it often assumes that the user community will provide changes, feedback, and applications–all of which help to develop the software and secure its position in the context of other technology. Software licensing–especially but not only open source strategies–permit cross licensing and standards development in ways that biotech licensing rarely considers. Biotech licensing still has not come to accept engineering approaches to technology. In biotech, the exclusive rights holder sets the agenda and works to defend this agenda against all comers. There will be more openness in biotech licensing when clinical trials must test a new compound in the context of 30 others that also might be present, not just against a control. At that point, the exclusive clinical trial will have to be rethought, with a whole lot more access to compounds, design engineering, modeling, and sharing of data prior to testing in humans.
5. Nothing, nothing, nothing–nothing at all. Software licensing does not have to happen at all. That is, people will take up and use interesting code (or not), regardless of the licensing regime. Open source licensing does not add much over no licensing protocols at all. What people want is a clean pedigree–that the software, say, hasn’t been stolen–and that folks are up front on its faults as well as its functions. Companies may want to have some documentation that confirms software is properly available. But in doing so, it becomes clear that in a university licensing deal, it is the recipient that wants a contract, not the university. In software licensing, if a company pays, it is because it wants to pay. In biotech licensing, the assumption is that companies do not want to pay, and it is the job of the licensing offer to make them pay. In some odd way, this is akin to waiters believing that they make diners pay for their meals and their tips, as if diners had not made the choice to pay in entering the restaurant and ordering a meal. Companies choose to work with universities over software. Any company that wants to avoid university claims on software can readily do so, with just a little bother. The essence of software licensing is that the university offers something that companies really want to support–a neutral development site, scientific validation, a steady stream of trained graduate students who know how to use the code, a set of improvements reflecting shared interests of a research or user community, an unpackaged non-product code base that can be locally versioned.
These differences point to a more important set of differences between software and biotech. More about that later.