In 2003, the Public Employment Relations Commission ruled that despite a state law to the contrary, graduate students at the University of Washington should be allowed to organize and seek union representation. I’m not so concerned with the unionization issue, as I was once a graduate student at UW myself, and there are a number of sides to the matter. Rather, I want to look at how technology transfer’s approach to IP has transformed the formal, public view of the university–and how that in turn leads other administrators and leaders to adopt this transformed view.
Here is a substantive piece of the decision that allowed union representation:
The Executive Director rejects the employer’s attempt to characterize the union’s arguments as a “source of funds” inquiry inapt to a unit determination issue while itself claiming there is no employment relationship. In this case:
* From a very practical perspective, grant proposals submitted by faculty members (in the name of the employer and with the approval of senior employer officials) fulfill a role in the marketplace that is comparable to advertising by a private enterprise offering services to a client base. Grants don’t just happen. This employer exerts substantial control over the solicitation of research business. * Beyond simply receiving and paying out grant funds, the employer takes a substantial “cut” from all grant funds. That fact provides basis for an inference that student/employees with service expectancies are an integral part of a system that generates funds used by the employer to supplement its other sources of revenue. Even if the employer does not admit to making a profit on the indirect costs retained from research grants, external funding of the tuition obligations of doctoral students will, at a minimum, put funds into the employer’s coffers that would not come in if the graduate student did not matriculate or had to drop out of school because of financial distress.
* Beyond the short-term interests associated with administering grant funds and using retained funds to supplement other revenue sources, this record establishes that the employer has long-term interests associated with the licensing rights that grow out of the research performed on its campus. That “licensing revenue” income stream is built on research performed by persons on RA appointments at any stage of their graduate studies.
Here we have three fundamental statements that mark the transformation of a voluntary program of research and IP dedication into something that appears to be under the control and for the benefit of the “employer”. This is not only an “appearance” of transformation, but senior university administrators have argued forcefully that it is reality when they defend changes in their policies for research and intellectual property, and in particular the basis for faculty and graduate student obligations to the University.
Let’s take these one at a time.
1. Grant proposals are under the control of the employer and are a form of advertising.
The decision makes it out that it is the employer–represented by University administrators–that offers the services of the university faculty, and including, eventually the services of graduate students hired under funded proposals. The University does little to counter such a perception. The University insists that all proposals must be approved and submitted by its sponsored projects office, that faculty and others are not party to such agreements (despite the (f)(2) requirement in Bayh-Dole!). Only university officials with delegated authority may sign sponsored research agreements. Faculty are forbidden, even, to negotiate the terms of sponsored research arrangements (unlike at Wisconsin, where for a long while they negotiated the IP arrangements).
At the outset, extramural funding was just that–a supplement obtained by faculty to support the research they were doing. That research was called “departmental research”, and was of the form of scholarship that faculty are expected to engage in–studying to improve themselves, discover new things, validate what is already known, and follow what others are doing. “Departmental research” is just another name for scholarship. In the humanities, at one time, this research took place in specialized facilities such as libraries. In the arts, such research might take place in studios with potters wheels and kilns, or pianos and harpsichords. In the sciences, one typically needs a laboratory, or if it is theoretical science, a place to think perhaps with a chalkboard. Nowadays, add computers to the lists for just about everyone. Departmental research gets supported in various ways–through donations from the public, or from foundations, or from industry, and through state subsidies and tuition.
One can make a strong argument that scholarship is part of what faculty get paid to do, and it is appropriate that they have some resources with which to do that scholarship. Call it “departmental research”. Allocate some portion of funding for that purpose so that, for instance, the university has a library and a computing center, among other things, and stuff to support studios and laboratories. Even with such support, the university is an employer of scholars, not a director of scholarship. The scholarship is not prepared for the university, under its direction, for its benefit and use. Yet, as soon as the university stipulates that grant applications must go through the university for approval, and that the funding is construed as for the university rather than to augment departmental research, the whole mindset of independent scholarship is overturned, and an employment relations commission can view research as a university “marketing” activity rather than the accumulated work of thousands of independent scholars looking for support for their scholarship beyond what they receive from the university.
University administrators of course are free to construe extramural research funding any way they choose. There are consequences, however, in the choosing. The choice of words, the choice of mindset, does make a material difference in what others perceive the university to be doing. If administrators say, “We solicit and obtain grants, we control the research, for our benefit” then that’s what people will understand to be the case. If administrators were to say, “We help our faculty obtain grants, and our faculty include a portion of their grant funding to offset some but not all of the contribution of university resources to their scholarship” then the public would understand something very different was going on. The inability or refusal to see a distinction in these two ways of representing the situation is at the root of much of what is wrong with university administration of research and research intellectual property.
2. The University “takes a cut” from research awards, which is used to augment its programs.
In a voluntary research environment, faculty seek extramural funding, and the university expects that funding to cover both the direct and indirect costs of the research. Direct costs include costs of materials and equipment, along with the salaries of anyone hired under the award, along with approved shifts of faculty salary from state budget lines to the grant, typically as a percentage of the faculty member’s overall appointment–such as 10%. The indirect costs, or “Facilities & Administration” (to use the current federal term), are those costs that are difficult or impractical to assign to a particular research award–electricity, janitorial services, accounting, telephone service. Typically, the indirect costs in a university are around 50% or more of the direct costs, or about 1/3 of the total announced award. Thus, if a university says it has received a $1m grant, then about $660,000 is direct cost and $340,000 are indirect costs. (When industry gets federal contracts, the indirect cost rate can be twice the typical university rate.)
It is the indirect cost portion that the PERC calls “a cut”. As you can see from the decision, there is some question whether “the cut” represents profit to the University. From all indications, extramural awards at large public universities do not cover the costs of seeking and administrating them. The University of California recently revealed that it had a $720m shortfall on its $3.5b annual extramural research expenditures. At the University of Washington, running an extramural expenditure budget of a little more than 25% of UC’s, that shortfall might be on the order of $200m.
If the University were open about the state of its extramural funding, we could discuss the case for what research conducted by the university ought to be subsidized, and from what source of funds–five possible sources (there are others) are state subsidies, private donations and industry matching funds, endowment income, licensing income, or student tuition. But we do not have this discussion. University administrators do not report a balance sheet for extramural research. The University of Washington does not even foreground its research expenditures, choosing instead to report the size of its research awards–even though a substantial amount of the funds awarded are shipped off to be spent at other universities on subcontracts. The idea, I think, is that by beating the University’s chest, the public will be impressed with how wonderfully excellent the University is.
The University of Washington may indeed have many excellencies, but this is not how to make them known. Instead, continual “marketing” of “excellence” hides the financial fundamentals of extramural research. Doing so leads the University to promote erroneous but self-serving statistics, such as those put forward to the public in the University’s vanity press study of its “economic and social impact”. Starting with the funds *awarded* rather than the funds *spent*, the consultants dutifully arrive at the required Very Big Number for impact. But they cannot show even that the funds *spent* were *spent in the state of Washington*. The upshot is clear: University administrators don’t care much for precision–all they need is a Very Big Number to stand for whatever Very Big Number would otherwise be calculated if folks tried to do it carefully.
What the University does not want to show is that the Very Big Number that matters is the one in which the research program costs more to operate–perhaps by far–than it brings in by means of extramural awards. Where are the shortfalls? In many things. Failing to document indirect cost expenditures, failing to recover full indirect costs from sponsors, sponsors canceling grants or failing to pay, failing to establish indirect cost rates that reflect actual costs of administration, running grant administrative programs that are inefficient, diverting indirect cost income to non-indirect cost activities, and even raising tuition for graduate students in the middle of a grant that pays the tuition of the graduate student (since the grant budget is set, that tuition increase has to come from a source other than the grant’s sponsor!). These things and more lead to shortfalls in grants administration. Every time a faculty member decides to seek a sponsored award, and the University agrees, the University is also agreeing to subsidize that award, if it is funded, with Funds from Elsewhere. It’s just that we don’t know where Elsewhere is.
3. The University expects licensing revenue income streams from intellectual property created by its faculty and students.
Even if the University does not make money on its “cut” of the indirect costs, there remains the management of intellectual property, and in particular, of inventions. In a voluntary approach to inventions, faculty and student inventors are encouraged to find an agent if they wish to get into licensing arrangements. If the inventors (or investigators) choose the university as the agent, then they are dedicating their inventions to the university for its benefit and theirs. It is a voluntary act. It arises because inventors choose to do this. It has nothing at all to do with employment. The matter that would involve employment would be if in getting involved in licensing without an agent, a faculty member might be distracted from scholarship and university duties, or create conflicts of interest of concern to the public or other members of the university community. The remedy for such issues is to manage the conflicts, or request that the inventor use an agent, or take a reduction in appointment or a leave of absence to pursue licensing or commercial matters.
There is absolutely no need for a university to take ownership of an invention as a way to resolve such issues–indeed, a change of ownership does not by itself address distractions from scholarship or conflicts of interest. If an inventor is spending much too much time working up a commercial product based on an invention, and this activity is distracting from the inventor’s scholarship and academic duties, then university ownership of the invention does not change these things–there is still distraction from scholarship and abandonment of academic duties. The thing that makes a change is when an agent takes over the distracting activities, freeing the inventor up to return to scholarship.
Thus, in one case I was involved with, a faculty member with a company idea got in cahoots with a venture capital fund and a wealthy entrepreneur and started up a company. A graduate student came to me, clearly distraught. “It’s not that I’m getting cut out of the company–I can deal with that–but I was recruited here by this faculty member, and now I know that I just lost all the time that I was expected to have working with him to complete my degree research.” This issue is not resolved by having the university own IP associated with the business venture. (For all that, it didn’t appear that there was any substantive IP for which the University should have expected an ownership position, and what there was was misreported, to put it kindly–but that’s another matter). In fact, in some ways, taking an institutional ownership position makes the situation even worse. It then appears to be the official position of the university that conflicts of interest and faculty abandonment of graduate students is quite okay so long as university administrators are looking to make money from a deal–but abandoning students would be quite bad–not on its own bad–but bad only because university administrators were not in on it!
Such a position says: “You can’t screw over graduate students, except we will say it’s okay to screw over graduate students and abandon other scholarly commitments if the University expects to make big bucks on the deal.” It is even worse if senior administrators decide that screwing over graduate students is okay even if the University doesn’t make money, so long as it looks like the University is doing something the public or legislature approves of, such as trying to start companies. Taken to this low, the University’s public rhetoric is not even about how inventions made in research at the University get used by the public–it is about how the University’s technology transfer office gets public acknowledgement for its attempts at licensing.
The irony in this is that the situation involving the startup and the graduate student was turned a decade later into a public moral lesson about how wrong folks like me were for elevating a graduate student’s concerns to the department chair, which led to some questions about how deeply involved the faculty member was going to be in this new company. The entrepreneur involved, in a twist of politics and fate, became the vice provost in charge of University intellectual property and was featured in a local business journal touting the virtues of “relaxing” conflict of interest rules so companies could form at the “speed of entrepreneurs”, not encumbered by university folks “dragging their feet” to look out after graduate students.
The idea that a university claims the inventions made by faculty and students leads to the proximate idea that universities are involved in research for the money, and are making money. The article just referenced is titled “Realizing the Profits of Research.” Though the article comes six years after the PERC decision, the article pretty much makes the case for the legitimacy of the employment commission’s decision. The university, by claiming ownership of IP rather than being prepared to act as an agent when offered the chance, creates more than an impression that it is acting as an employer would act, not as a university should act–it creates a new social reality. That is, university administrators construe research activity as being conducted for their institutional self-interest. That’s what an employer does. Conflict of interest then means, doing anything other than for the institutional self-interest. That’s quite a twist on the idea of public service.
The deeper failing in acting like an employer–but not necessarily a very good employer–is ignoring academic conflicts of interest: how faculty treat graduate students, how senior faculty treat junior faculty members, how directors, vice provosts, and other administrators treat those they supervise. Somehow, if the university is trying to make money on licensing, all those conflicts of interest are just fine–and policies that say they are not should be “liberalized”. In 2005 the University of Washington got amendments passed to the Washington state ethics law to do just that.
Rather than making a virtue of conflating licensing and conflict of interest provisions, I would expect a university with integrity to keep the technology transfer function entirely separate from conflict of interest provisions, reviews, and decisions. One way to do that is to put the technology transfer function in one or more external agents. Another way is to make it clear in policy that technology transfer activities by university administrators cannot take precedence over conflict of interest matters, no matter how much money-seeking entrepreneurs fuss about it.
The University of Washington’s official position appears to be that the university is an employer entitled to seek a profit from the outcomes of faculty and graduate student research. The hope of institutional financial gain necessarily takes precedence over the academic concerns of any graduate student. Such a position undermines the independence and initiative of faculty and graduate students. While making a show of promoting innovation, this position undermines innovation. It remains to be seen how long university administrations can make a virtue out of “employerism” in the name of money, “commercialization”, and “economic development”.