UW’s Fast Start template, a bad bureaucratic idea gone bad, 2

We are working through a GeekWire article about the University of Washington’s “new” template-based deal for startups, so that all startups are treated alike, and doing so the university claims will shorten negotiations and reduce costs–as if these are the big program goals for university technology transfer.

Here’s what UW says about its FAST process:

In keeping with University of Washington’s mission as a public university, CoMotion is committed to a fair and transparent process that treats all UW startup teams* equally, whether founding teams are comprised of new students or award-winning senior professors, and independent of their business or legal experience and resources.

This is bureaucratic fantasy. Nothing in UW’s standing as a public university means that all “startup teams” must be treated “equally.” Such “equally” is the stuff of the greatest unfairness, blind to circumstances, ignoring unique opportunities, and unable to move resources where they might make a great impact. Startup teams without experience might need more help than those who have plenty of experience. Efforts that are capital intensive might need a different deal structure than efforts that can flip product almost immediately. And on and on. It’s one thing to say, “we don’t play favorites” and quite another to say “we ignore differences among startup teams.” The former statement is one that asserts that merit of the opportunity is the driver, however it might be addressed. The latter statement is one of bureaucratic fastidiousness, not to be bothered by differences in situation and opportunity. One template to rule them all. Convenient, but not responsive.

And still, it’s a “process.” Bureaucrats can’t take a dump without a process. Bureaucrats require process to deal with the volume of transactions, to avoid making judgments about what work is worth doing, and to keep senior administrators from having to deal with details–even when university invention commercialization is (so it is said) critical to the national economy.

Consider–these UW companies are spinouts. They are led by “startup teams,” which by UW’s definition are “those founded by UW students, professors and employees that developed the innovation.” More cloying usage, this “innovation.” People invent. Innovation happens when others adopt something new based on the inventing. Inventors or others might form companies to develop and exploit what has been invented. If they are successful, and what they have developed is new to others, then we might say then that what they have done is innovative. UW cannot even find words to express what it is doing.

But there’s a bigger problem here. In a spin out, the people who have “developed” these “innovations” are the same ones who are in the company. That means there is no “technology transfer” between them in their university work and them in their company work. The university, bureaucratically, first takes inventions away from these people and then waits for them to beg back the rights. If the inventor team does not beg, then the university creates programs to get them to beg, and calls this a new culture of entrepreneurship. When more “teams” beg, then the university creates a “process” to deal with the “growing demand” which it casts as academic culture change. As part of this new process–everyone’s alike–we get monster things like the FAST template.

But for the university’s intrusion into the situation, transfer is a matter of shifting work to a new company. The focus is on incorporation and establishing an executive team and dealing with ownership, financials, and a division of labor going forward. The university’s concern ought to be in what commercial activity might be acceptable using university resources. What happens if the startup is founded by a majority of faculty in a given department? What happens if a university center director recruits students and staff to also work for the CEO of the startup, which CEO is also the center director? Can the company sponsor research with itself as the “team” at the university–in effect renting out the team’s space and equipment? These questions are real–having to do with institutional and personal conflicts of interest, liability, favoritism, and the like.

Instead, however, UW demands ownership of the “innovations,” and then tries to make it faster and cheaper to license these “innovations” back to the team that had them in the first place–but not before placing all sorts of demands on the team, including payments of all sorts, indemnification topped off by insurance, threat of audit (no more than once a year) with penalties for defects in bookkeeping, cumbersome dispute resolution processes, and the like. Everything a massive institution might insist upon–and none of it relevant to the startup’s success, all of it parasitic on the startup’s initiative and opportunity.

The FAST template contemplates an exclusive license to patentable (or patented) “innovations.” The license encompasses all substantial rights in the “innovation”–

to make, have made on Company’s behalf, use, offer to sell, sell, offer to lease or lease, import, or otherwise offer to dispose of Licensed Products in the Territory in the Field of Use.

That license constitutes an assignment of the invention. UW’s practice then is to demand ownership of an “innovation” in order to assign it back to the same people, but now with institutional demands. The effort of the FAST license “process” is to make the institution’s demands get accepted faster and at less cost to the institution. Self-serving, but expectably bureaucratic.

A pilot version of Husky FAST Start has already been used by 35 startups.

This doesn’t make any sense. GeekWire reports that UW has “spun out 73 startups over the past five years.” But spinouts are–according to UW–companies started by the inventive “team” at the university. Other startups might be led by non-UW entrepreneurs who have done none of the inventing and so are not the spinouts targeted by the FAST process.

If most of these 73 companies are not spinouts (they aren’t), then what about startups? According to AUTM, a startup is a new company formed expressly to take a license to a university’s IP. A startup is not a company started five years previously, and not a company started to take a license to some other university’s IP and later comes calling on another university for a non-exclusive license to a research tool or whatnot. A university startup is not any small company and a startup is not a moribund company someone has lying around that can serve the purpose of justifying getting a desk in a university’s startup incubator.

If even half of those 73 UW-claimed startups were spinouts (they weren’t), then the “pilot” version has to have been in use for something like five years. In what sense then is UW now “rolling out” anything? What made that version in use a “pilot” version and not just the business as usual? How could that pilot template, announced now, make anything easier than it has been for the past five years? Was there some long-standing policy exception involved? Apparently not. Was there any risk of unexpected consequences? Hardly. Was it something the bureaucrats at UW hadn’t tried before? Not really. It’s not a rolling out of much of anything.

What UW has posted as its new licensing agreement is full of typos and editorial oversights. Surely there ought to be more professional copy by now. Alas, not.

“With benchmarked terms, founders can focus on what really matters: building a great team and taking their innovation to market,” Fiona Wills, UW associate vice provost for innovation development and commercialization at CoMotion, said in a statement.

This, too, is a strange statement. We started with the idea that the FAST deal would be fast and low-cost. Now we get a different take–that the FAST deal involves “benchmarked” terms, as if the issue was that the university expected terms as if the deal was “arm’s length”–what any startup company might expect if it had to beg a license from a patent holder, or was spinning out of any large corporation. That’s very nice, but it means that UW demands financial and diligence terms of the people who invented something that UW otherwise would have no mission-interest in, as if UW were a corporate entity or dealing with entrepreneurs, not its own personnel. There’s nothing to be gained by such “benchmarking.” Does this mean that for the past decade UW has been clueless with regard to typical terms demanded of startups by patent licensing operations? Or does it mean that UW is making a ballyhoo over something that it has been doing all along, just without a panel of attorneys to nod approval?

The university claim here not merely is that every startup team gets treated the same regardless of their situation or opportunity, but also that they get treated as if they weren’t at UW but were in some generic situation involving any large organization. The FAST template, then, aims to beat inventor teams into submission. That would be an easier route than negotiation and custom drafting!

This FAST template, abstraction that it is, we are told, will allow founders to get on to other matters. That claim is incoherent. By contrast, a public license–no charge, no formalities on FRAND terms–would truly allow founders to focus on other things. A waiver of the UW’s ownership claims in deference to the founders placing their (literally, theirs, per patent law) inventions with their company would allow the founders to focus on other things. But not “benchmarked terms.” I have not known a university founder of a spinout lying awake at night upset that the university had not offered industry-standard patent trolling terms rather than, say, letting the founders propose what they considered appropriate financial terms given their sense of how the university has contributed to their work.

This entry was posted in Uncategorized and tagged , , , , , . Bookmark the permalink.