Innovation Daily has just published “Five Things Technology Transfer Offices Wish Their Start-ups Knew.” This appears to be based on a presentation the author made at the last AUTM meeting. Perhaps that’s why the piece argues that university IP offices are smart places and implies that university entrepreneurs by contrast are near idiots who can’t focus, don’t know the first thing about patents, underestimate the costs, and make too many comments on patent applications.
The architecture of the university invention policy situation starts with the founding assumptions and expectations. The Five Things piece reads a bit like “how to play docile with the happy but grasping university.” It’s rather self-promoting, as one would expect from a law firm that works for university administrators, not university entrepreneurs–and foreign university administrators, at that, as 90% of the patent work showing up at the USPTO for the firm appears in the form of patents taken out in the US by universities from Taiwan, Korea, Japan, Singapore, Australia, Ireland, and the UK.
So let’s have at it.
The reason a technology transfer office is a “university’s intellectual property hub” is because it typically has a monopoly. It’s not a natural hub, generally, though it could be. In a compulsory ownership scheme, a technology transfer office is not so much the “caretaker” as it is the “dumb waiter” of university IP. Five Things lists the activities of such offices: “protecting, licensing, selling, and litigating intellectual property.” Nothing about technology transfer, promoting use of inventions, or making research broadly available. Here it is all about monetizing the ownership position in the rights. This is one view of the purpose of IP in a university, certainly, but it is not a view that is strongly aligned with scholarship, academic freedom, or the role of a university. It is not a view aligned with the sweet spot for university-hosted innovation, either.
“Protecting” belies the assumptions at work, so let’s work that over a bit. Out in the wide world, “protecting” is standard usage. IP “protects” an invention or creative work. There’s really nothing to question. It’s not so much an assumption as a basic truth. But that is not the case at universities, and shouldn’t be the case, and runs against what university faculty do, and do well. At universities, there is no need for IP to “protect” much of anything. “Protection” is not what universities need. “Protection” is an alien concept.
Here’s a bit of interior dialogue, where I undertake to channel the tech transfer office, of course at some disadvantage in the deal, for which I have little actual control, as it comes to me thus:
****
What does it mean, “protect” IP?
Well, er, that’s obvious. IP protects an invention from other folks copying it or using it. Stealing it. Taking it without paying for it.
And why is that?
Well, to “promote progress” the Constitution reserves rights to authors and inventors, and IP is the way that those rights are reserved.
Ah, yes, and how then does the university respect those rights of authors and inventors?
Why, that’s obvious, too: we take those rights away as swiftly as we can, rescuing these valuable rights on behalf of the public from the inept, selfish, and gullible hands of university authors and inventors who have brilliant minds but are singularly incapable of grasping even the most basic ways of managing these rights for profit. If they would explore less, focus more, understand money, and comment less on patent applications, they would help us make our technology transfer program more successful.
You mean, rather, sucking up to the institutional borg and minimizing the expensive work with attorneys?
No, not that at all. We mean that university inventors just don’t know very much about commercialization and we do. We provide a service so they can stay focused on inventing and leave all the complicated stuff to us.
So, it appears that the first act of institutional policy is to separate authors and inventors from the rights the Constitution reserves to them, as if the real purpose of the Constitution was to reserve these rights on behalf of bureaucrats, not authors and inventors.
No, not that at all! You just don’t *get* it! IP allows the university to license the invention, so that it will be developed for commercial use, and for that investors have to see a patent and get an exclusive license or the invention will just sit on the shelf.
Couldn’t you just let the inventors put the IP into the company directly and not be involved in licensing it at all? Maybe put $10K for patent work into the company for a tiny equity stake and call it good with no license required at all, letting the company manage the patent work–so even less cost for you?
No, the university has to manage the patent work. A company might not pursue all the claims that we could license for royalties down the road.
So the purpose of IP is to create a university monopoly position for which the university expects to get paid? That is, exclude everyone from using an invention–even the inventors– until someone is willing to pay for exclusive access?
Well, sort of, but not in such crass terms. It’s really a necessity, so that investors will pay attention at all. Take for instance, a compound that might make a new drug. A company may invest $1b in getting that compound to market, but someone else could manufacture a copy of that drug for a tiny fraction of the total investment. If “free riders” could do that, then no one would invest to make the drug in the first place.
And this story about a dysfunction in a tiny bit of the marketplace makes a general case for IP in research settings? For software? For biotech tools and methods? For every single way that a covalent bond might be involved in carbon nanotubes? Is it really the case that a company has to invest only on its own, and cannot partner with others to share the cost, to develop standards for fundamental tools and discoveries? Even the big hit biotech tools like gene splicing were licensed non-exclusively. The value to industry was in holding the IP so that no one in industry had a monopoly on foundational stuff.
You just don’t *get it*. Without exclusive licensing, what we do is just a tax on industry.
I’ve heard that one before, too. That is, without creating monopoly winners and losers, you would be doing something adverse to industry interests?
Maybe. We don’t think about it much. At least not with such a negative spin as you put on it. We avoid all that because we prefer exclusive licensing when we can, and only use non-exclusive licensing when we are forced to it, usually by some company sponsoring research and getting to a dean asking for a royalty-free non-exclusive license before we can block it.
Even though the great examples of biotech innovation from universities are largely non-exclusive deals, and for university software and the internet are overwhelmingly open source and open standards?
Well, software is different. And maybe so are a lot of other things. Maybe most everything else. But that’s not the point. The point is that without exclusivity, investors won’t invest, and stuff sits on the shelf.
Or is it, that stuff sits on the shelf because the university claims to own it, and is only willing to allow access to it if someone asks for an exclusive license and is willing to pay good money for it?
No. You just don’t *get it*, do you? It’s a successful model, the envy of the world. An article in the Economist in 2002 said so. The federal government back before Bayh-Dole used non-exclusive licensing, and it held over 28,000 patents and like under 5% were licensed. The whole point of Bayh-Dole was to allow universities to license patents exclusively where the government wouldn’t, and show up the ineffectiveness of the government in licensing patents.
Of course, many of those 28,000 patents were in defense-related fields–weapons systems and the like–and that Department of Defense permitted contractors to own the patent rights if they wanted to, and many didn’t. Why should the government try, then, to license the patent rights exclusively and create a monopoly for some other defense contractor? How would that advance things like, say, competitive bidding on a level playing field, or the development of standards or interoperability?
Dunno. But it doesn’t matter, since they only licensed like 5% and universities at the time were reporting licensing rates closer to 30%.
It’s sort of like going to 11.
I don’t follow that at all.
A few places that there was a problem were the Department of Energy and the Public Health Service. The PHS back in the early 60s had imposed a patent policy that claimed government ownership of inventions made in evaluating government identified compounds for research. That is, the government created a massive reach-through patent rights clause on materials that industry might otherwise study. So the pharmaceutical industry boycotted the government lab collaborations. The general government policy on contractor inventions was to be flexible. The university rate was high because its base was low–the research foundations handling most of the licensing were very selective, as were the faculty inventors.
And your point?
That the argument for exclusive university licensing has a very narrow range of applicability, and generally fails even for the situation at the time of Bayh-Dole, and fails especially for university innovation. All the pitch for exclusive licensing does is restore for pharmaceutical companies access to monopoly positions in stuff identified with federal funding that otherwise would be available to the general public, but now via exclusive deals with universities–a price to pay, but better than the boycott. University administrators, though, have generalized the concept to make all university policy and practice serve this purpose. For the bits of practicality–getting paid to launder publicly funded research into an engine that feeds off chronic conditions by making them endurable on a lifetime regime of drugs–the whole of the university research enterprise is brought under bureaucratic control to try to do the same thing for every other invention in every other possible practice environment. The higher university rate at the time is an artifact of substantial selectivity regarding what to take on that was worth licensing.
So?
It’s a foolish approach, with deceptive rhetoric. The effort to license under such conditions cannot be improved with better paperwork. It requires a fundamental change in thinking about the role of universities in the broader picture of technology development and innovation–a change that was broadly represented by much better thinking fifty years ago. A change that your attorney friends don’t acknowledge in their talks at your conventions.
You really just don’t *get it*, do you?
******
The idea of “protecting” IP is drawn from a competitive, speculative world, where someone will take another’s work if given half a chance, especially if there is big money to be made. That world intrudes into universities, too. However, in the academic world, excluding others from practicing what one knows is not the default, not the thing to be feared. Exclusion is opposed to the values on which a university operates–the development of new ideas, the confrontation of the old with the new, and instruction in the ways of each. The point of instruction is that those who receive instruction–in the classroom and lab, by way of conference presentations and publications, in collaborations and consulting–may act on it. If in addition to the instruction one also requires permission from a bureaucrat to use an invention or discovery, then the instruction is either mere advertising or it’s contributory infringement–either a come-on to make it desirable to beg to be the one for the exclusive license dangled from tense administrative fingers, or a rogue practice to show how to practice the invention without any such license.
“Protecting” IP in this context means “removing it from the world of scholarship, instruction, publication, and academic exchange (including competition).” That is, university discoveries have no need to be “protected” from those who would practice the invention–this is especially the case for any sort of method, such as any of the various disease assays or most anything having to do with software. Inspiring imitators is exactly what university instruction is all about. All the better when the imitators are imitating for the first time something discovered at the university. That’s where a university’s reputation skyrockets. “Protecting” such IP means preventing such activity from happening, in favor of making everyone pay through a future monopoly position, preferably handled by a speculative interest–if not a big company, then a startup company backed by speculators, and if not that, then, why, get the faculty inventor to create the company themselves, and then needle them a bit for underestimating how much it costs to establish that monopoly position.
The underlying assumption, that a university technology transfer office uses IP to “protect” inventions is silly. It makes a shambles of what a university is about, it steers discoveries away from university strengths and public purposes, and turns the university into a pipsqueak version of a profit-seeking speculator. And law firms have the audacity to commend university administrators for doing so. But no wonder, it’s a big suck up anyway, isn’t it? The legal infrastructure just looking to get its share of the action. Really quite understandable.
So what then are the Five Things that creative people in a university should know about start-ups?
1. The IP that matters often turns out not to be what the university claims ownership of. Take a license if you have to, but try to make it a non-exclusive license with an option for exclusivity. That will reduce your initial outlay and hedge your future exposure. Remember that there is no need at all for a license if a patent hasn’t issued and you can design around it before it does issue. If you want to give back something to the university, fine, do that, but don’t structure your gesture in the form of a license to IP you don’t need.
2. It is very likely that your company will not only design around whatever has been discovered in the university, but if it gets investment funding it may very well also change directions and develop a related product with different technology fundamentals. This will be especially likely in anything engineering or software. The university IP importantly provides a basis for a license which allows the company to trade on the reputation of the university and shows it has the ability to close a significant deal. If the license is decent (that is, can be circumvented), it in turn may help to attract investors who provide the funding to hire engineering talent, and that allows investors to refocus on what those engineers can do in the near term to generate enough sales, or even the appearance of the potential for sales, such that the investors can plump the company enough to can sell out to someone bigger, who will likely shut the company down and absorb whatever technology and engineers it has into its vast borgishness. There is money on this pathway–but not necessarily new products that help the world. This, generally, is what success smells like in the speculative venture world.
3. The stuff that’s discovered in a lab often has scores of uncertainties, and really must be considered in a lot of different directions and a lot of combinations and variations, and no creative inventive team can possibly follow them all. If you try to hold onto the first little bits and focus on them alone, you deepen the uncertainty–and the costs–that you have not explored the territory, and you cut yourselves off from the very environment that got you to your discovery–all those opportunistic, competitive, publishing, available faculty, staff, and students. There may be hundreds, maybe thousands of variations and qualifications and evolutions and applications to even a single point discovery or insight or bit of inventiveness. Focusing too soon, or asserting ownership positions for the purpose of excluding others, rather than including them (as with a standard or a commons or a general public license) means losing the opportunity seed new work across the country, if not the world. And to lose that opportunity means that one’s creative work may indeed just sit on the shelf, a little idol to the idea that speculators would finance the whole thing themselves, if only they had an monopoly to work from.
4. Monopolies, especially early monopolies, can work against large scale adoption of new technology. Conservative buyers prefer choice, and when given a choice, choose more quickly, and choose the stronger source, and then aim to keep that source strong. Being unique, without any competition, means that one has a market all to oneself, but that market may not have any customers, and the ones there with an interest will be speculators not technologists–betting folk with money, not infrastructure buyers who can make a company’s fortunes. To achieve adoption of new technology, one needs to develop the right kind of customers early one–perhaps even before finishing any product–and for that a university laboratory is a tremendous base for operations. Jumping to a company too soon actually makes the effort to develop customers–the evangelistic early adopters–too difficult, too expensive. So don’t start a company just because some university bureaucrat will get a bump in pay from upper level bean counters for pushing as many companies to start as possible. Places like Utah and Washington are a ruin of wasted efforts to start faculty companies that have gone nowhere, other than to be used as deceptive rhetoric to get more state money diverted to university technology transfer programs, where it is burned making a show of doing startups.
5. So what should you do?
- Don’t invent too soon. A university doesn’t claim what hasn’t been invented, and can’t own your creative ideas for future business. If you see a way that a new company could advance your research–and a start up can push your technology development by a factor of 10x over the academic rate–then by all means start the company right away, but do it so that there is no IP for the university to own. Do the inventing in the company, not in the university, if you can. It saves you the hassle and delays and cost of dealing with the university, which is in it, at the end of the day, only for the money and the show of authority. If you happen to work in a university that adopts an equity policy rather than ownership policy, then invent away, but don’t think the first invention you make matters much other than to get you through the process a first time.
- Publish, disclose, distribute, document. Use your university position to do what you do best. Start an open web site and get everything you do, the negative results along with the positive ones, out there, with the supporting data, and make yourselves available to collaborate. The interest shown in your work, combined with your willingness to make it available, will teach you more about the market condition than anything you can purchase in a report or from a consultant, and way, way more than what most university administrators will know. It is a rare case that the only IP that matters is the wee bit that vests in the first inkling that you are on to something. By creating a platform of technology and interactions, you will have a good sense of what services and products might be offered, who wants them and is ready to acquire, and what you need to get there. So before you focus, expand, and see who is interested in your work. If they run with it, it is not a loss, but a gain. The good stuff is usually out in front of you.
- Keep in mind that the most valuable IP right is trademark. A good name associated with goodwill goes a lot further, for a lot longer, than any patent. Build an identity for your work, for your connections, for your willingness to engage. These are the precursors to any company with products that customers want to work with and see succeed. Copyrights are a good second set of rights, easy to obtain, cheap to register, enforceable with statutory penalties that are not available to patent owners. Patents are millstones, mostly battleships in an age of jet aircraft and cruise missiles. Patents have a role to play, but for university research that role is mostly in creating commons and standards and controlling quality, not in building monopolies that attract speculators of that special caring (or desperate) sort willing to pay bureaucrats a cut of their action. If you think there’s a need to file a patent application early on, ask some folks in industry if they would support it. If so, then they also will likely help out with the cost–maybe not directly, but by joining an affiliates program or a consortium or attending a research review workshop or donating equipment that allows a shift in budget. There is historical precedent for this approach, especially when the patent is made available under Very RAND terms. As Guy Kawasaki has it, use the “P” word once in the business plan. “Patent applications have been filed.” That’s about it.
- Consider Kickstarter and related approaches to fund raising. Again, provide a build service and tech spec distribution around an imaginative idea that will be available to supporters in a product form, and you may well get all the funding you need without sucking up to VCs or worse to get there. The world of innovation finance is changing quickly, and if you skip the early patent work (beyond, say, a manuscript provisional) in favor of acclamation, goodwill, and networked, non-market support, you may well not have to worry the costs of patents when it comes time to drop some millstones as anchors. And when you do choose to do patent work, pick a law firm that operates with fixed fees for initial filings–that will allow you to be involved in the process without a meter ticking every time you talk to your patent attorney. There are some really great firms that work this way.
- Remember the equities in an age fixated on ownership. You are in academics because you have made certain commitments–even if you crossed your fingers, or don’t like how they are depicted as pursuit of truth, disinterest in money, open and collaborative sharing, and the like. Folks are helping you, looking out after your success, in part because of those commitments. Folks you don’t know, or don’t care about. Even folks in technology transfer offices and attorneys who like working for the university rather than for you. So look out for the people around you–junior faculty, senior faculty, staff scientists, grad students, assistants and secretaries, volunteers, sales reps, administrators–whoever it is who depends on you, who looks out for you–look after them, too. Communicate, reciprocate. The social fabric is stronger than the speculative bond. Reciprocity beats monopoly. Don’t be duped by the “success story” based on some monopoly claim. They happen. But they aren’t the thing to build on. Acknowledge your debts and gifts. Give back when you can, create opportunity for others when you can. Change lives locally, stuff that would go on someone’s resume, when you can. There is no better indication of success in technology transfer deals than that the leaders of an effort look out after everyone involved. It’s a comitatus, not merely a “start-up.”