Five Events That Will Shape University Technology Transfer

If I had to characterize the year 2011 in the world of university technology transfer, I would describe it as a year of “wait and see.” Of course several notable events happened — for example, patent reform and a Supreme Court case that clarified limitations on university patent ownership. But my sense was that this year’s big events will make their true impact felt over the longer term.

With no further ado, here’s the short list.

1. American Invents Act
2. Stanford vs. Roche
3. Drug companies begin to invest in Chinese R&D labs
4. More proof that entrepreneurship is not a level playing field
5. Who took New York? Cornell vs. Stanford

1. America Invents Act

Yes, everybody else has claimed this one, and so will I. In 2011, the U.S. patent system got an overhaul. As a result, most U.S. universities are going to have to revamp how they manage the patenting process for new inventions. Why?

Because universities will be particularly affected by the new law that changes the U.S. patent system from one of “first to invent” to one of “first to file.” Unlike corporate inventors, university faculty share their research as part of their jobs and may report their invention to their university months later. Second, given resource constraints, most U.S. universities file for patents slowly, buying time while they assess the invention’s commercial potential.

Today most universities have built their patent processes on the old system. It’s rare that a university immediately slaps each new invention it receives with a provisional patent application. I saw this first hand while working in a university technology transfer office. I wasn’t sure, however, whether our “buying time” patent strategy was also typical of other universities. Turns out that most U.S. universities do indeed follow a “buying time” strategy that may not work so well under new patent law.

Here’s how I arrived at this conclusion. I first dug up 2009 AUTM data for each university on how many new inventions it had in a year, and how many provisional patent applications it filed in the same time period. In theory, if a university’s numbers align between new inventions and provisional patent applications, it’s pretty likely that each new invention quickly got a provisional patent. Therefore, it’s safe to conclude that a university with the same annual count of new inventions and provisional patent applications is a “fast filer,” meaning it is sending most of its new inventions quickly to the patent office. My hunch is that a fast filing university will not be impacted a whole lot by the new patent system — it’s already quickly laying down the necessary patent paperwork.

According to my calculation (see chart), most U.S. universities are not fast filers. Currently, my estimate is that about two-thirds of universities let over 60% of their new inventions sit for a year or before they eventually file a provisional patent on them. 25% of universities file few provisional patents altogether on new inventions, with only about one new invention in five getting a provisional application. Only ten universities are fast filers, quickly applying a provisional patent to nearly every new invention that walks in their door.

So the new patent laws won’t hit us now, but will force change in the coming years. If universities want to continue to play the patent game in a first to invent system, they’re going to have to make it a habit to file a quick and dirty provisional patent application on almost every new invention as it comes in the door.

2. Stanford vs. Roche

Stanford University sued a big pharmaceutical company over patent rights and lost in the Supreme Court. This case sparked lots of good public discussion about ownership of university patents, employee rights, and what happens when companies and university researchers do joint research.

Here’s what happened in a nutshell, for those who didn’t follow the case. Years ago, a drug company (eventually acquired by Roche Pharmaceuticals) invited a Stanford researcher to work with its employees on devising a procedure to test HIV levels in a person’s blood. After a while, the Stanford researcher returned to Stanford and the university filed for, and got three patents on the procedure. Later, the drug company (Roche) started selling HIV kits that used the procedure in Stanford’s patents. Stanford got wind of this and asked the drug company to pay the university licensing royalties. The drug company said “no,” so Stanford decided that it was going to sue to get what it considered its fair share.

So long story short, the case went to the Supreme Court and Stanford lost. The Supreme Court made it clear that universities do not have special rights to own everything their faculty, students and staff invent. Like other employers, universities must make their employees assign away invention rights in their employment contract. Or in a campus IP policy.

At the Supreme Court’s ruling, many university researchers everywhere danced a jig for joy; some university administrators decided that the next best step would be to make sure that no lucrative university inventions ever get away from them again. Many universities hired attorneys to craft tighter legal language in faculty employment contracts and in on-campus invention policies. Their goal is to make it crystal clear that anything a university employee invents belongs to the university, no matter when or where the employee invented it or whose resources were used. So these tight new procedures will likely put a dent into faculty consulting gigs.

The good news is that some universities were more moderate, striking a more constructive balance between their role as stewards of publicly funded research and letting innovation flow freely. The practices of at least some universities have been more moderate than their written policies would suggest. For example, when Jerry Yang and David Filo, as graduate students at Stanford University, disclosed their software to the university’s licensing office, it was determined that the work was unrelated to their thesis work and their use of the university’s computers constituted only incidental use of the university’s facilities. Based on that information, Stanford did not claim ownership of what became the Yahoo search engine.

When the University of California moved from a centralized handling of technology licensing to a decentralized, campus-based technology licensing office approach, individual campus offices evolved a similar practice of evaluating the facts and circumstances of intellectual property created by their employees before deciding to assert ownership. Recently, these practices were reflected in an amendment to the university’s employment contract, which formally narrows the scope of employee’s obligations to assign patent rights over to the university when the invention is made during “the course and scope” of employment. Michael Katz, Director of the office of Intellectual Property and Industry Research Alliances, says “We do not make claims to IP rights arising from consulting activity or any other off-campus activity.”

I can see what both sides are trying to do, and at the end of the day, university administrators are just doing their job. But it seems to me that a better reaction to Stanford vs. Roche would have been for everyone in the university innovation system to sit down and ask one another whether a different approach would work better for getting research to market. After all, when a system relies on legal language to force compliance, that’s a signal that perhaps a business strategy should be re-considered.

3. Drug Companies Begin to Invest in Chinese R&D

This was a tiny news item this year, but it’s the start of a bigger trend. According to the New York Times, Merck announced recently that it will invest $1.5 billion in pharmaceutical research and development in China over the next five years.

Pharma and bio have a special place in the patent portfolios of many U.S. research universities. It’s the biotech patents that for the most part, have earned their fortunate universities billions in licensing royalties. Now Chinese universities will get into the game too. True, Merck’s investment in Chinese R&D is tiny in the big scheme of things: $300 million spent each year in Chinese labs equals only about 4% of Merck’s total $8 billion annual research budget. But if China’s economy keeps growing, it will become the second-biggest pharmaceuticals market in the world by 2020.

4. More Proof That Entrepreneurship is Not a Level Playing Field

Everybody loves an entrepreneur, as long as that entrepreneur is youngish, white, male and lives in California. Blogger Sarah Granger cites stats from female Silicon Valley venture capitalist Ann Winblad that likely won’t surprise anyone who’s female or an entrepreneur, or in the tech industry. 87% of VC funded founders are white, 67% are over 34, and 92% are male (94% are in California). Racism also appears to be alive and well. According to data from the Kauffman Foundation on small business formation, “Blacks are about 50 percent more likely to engage in start-up activities than whites. Hispanic men are about 20 percent more likely than white men to be involved with a start-up.” Yet white guys continue to get the money.

OK, so one could argue, who cares about VC funding, right? After all, VC funded startups are few and far between. New research points out that the bias against non-white and non-male employees goes even deeper. Female inventors at universities face similar barriers as do female entrepreneurs. Scott Shane describes an experiment he conducted at 88 leading research universities. He showed 239 technology licensing staff (male and female) identical invention disclosures, and asked them “If this inventor wanted to start a company to commercialize this technology, how much would you try to dissuade the inventor?” Sometimes he posted a woman’s name and picture onto the invention disclosure, other times a man’s. Turns out that licensing staff, both male and female, “were significantly more likely to report that they would dissuade the female inventor from starting a company.”

I would love to see Shane repeat his work, this time showing the same invention disclosure with the names and pictures of men and women from different underrepresented racial groups.

The research on gender bias inside university entrepreneurship really got me thinking. Do you suppose whether these same biases also extend to female and minority employees that work *inside* the university’s technology transfer office. Let me ask you this. If you’re female or a racial minority, are you familiar with these old gut-twisting casual comments from a male boss or co-worker? Classics include “<insert minority here> are not “business thinkers.” Or “<insert minority here>are not analytical.” Or “<insert minority here>don’t have vision.”

Maybe it’s not related. But one university technology transfer office I know of, over the course of four years, has had a staff turn-over rate of a whopping 70%. That means of 40 staff members, over the past four years, almost 30 have walked away from the job. If this is average for university technology transfer offices, we’ve got a problem. I’m an idealist, so I believe that in environments where women and minorities are denigrated, everybody suffers. And innovation and good teamwork can’t take place. So even white male employees end up being impacted.

I think growing awareness of the gender and racial biases in the university innovation process will continue to be unearthed and hopefully shared. It affects all of us.

5. OK. Last one. Cornell vs. Stanford.

Cornell University and Stanford competed to win the opportunity to build a new tech campus in the middle of New York City’s Roosevelt Island. Cornell paired up with Technion and won. Stanford had kind of a tough year, didn’t they?

The race for New York City started last year when city Mayor Bloomberg announced that there was good land to give away on a tiny patch of land next to Manhattan called Roosevelt Island. Bloomberg proposed a competition in which universities would compete on plans to develop a city-based tech campus. The city would contribute $100 million; the winning university would contribute the rest. Ideally, this tech campus would be a top-notch engineering and computer science school whose graduates and faculty would seed New York with new high-tech businesses.

So far, so good. Eventually the race boiled down to Stanford and Cornell. It didn’t take long for the rhetoric and PR around the battle to became a narrative of east coast vs. west coast, for example, whether a sissy West Coast school could survive in New York City’s rough and tumble environment. High-end PR firms were hired. Secret conferences took place. Dozens of university representatives journeyed to New York to pay homage to the Great Bloomberg and his court nobles.

Not everyone bought it, though. Some cynics wondered whether Mayor Bloomberg, a top-notch politician, was pulling a Tom Sawyer, tricking others into paying him for the opportunity to do his job of painting the fence (or in this case, cleaning up waste on Roosevelt Island and building a new campus). According to this perspective, Bloomberg brilliantly played the egos of two the big universities against one another. Their prize? The privilege of spending billions of dollars to clean up and develop a piece of his city. But thankfully for the tech campus, nobody listened to the cynics.

In October, final proposals for the tech campus competition were submitted. And the intrigue intensified. Stanford abruptly dropped out of the race. Some claimed that Stanford got scared at Cornell’s enthusiasm and “quit before it could lose.” A more diplomatic proffered reason was that Stanford was not used to the east coast style of negotiating deals.

According to the Chronicle of Higher Education, apparently Stanford walked away from final negotiations because of two major terms it disagreed with. First, the city demanded that Stanford accept full liability for any problems from whatever toxic waste may lurk on the campus building site. And second, the city also demanded that Stanford stay with the project, even if the city failed to provide its originally promised $100-million contribution.

In contrast, in its proposal, Cornell enthusiastically agreed to do whatever it took. Luckily, a Cornell alum donated $350 million to the project (wasn’t me) only hours after Stanford’s withdrawal since somebody’s gotta pay for all the building and faculty salaries and site cleanup and stuff.

Happy 2012 everyone! Time to go have a nice, quiet middle-aged New Year’s Eve celebration. Hopefully we’ll be able to stay up until midnight. Thanks for reading and I appreciate all the wisdom, information and support you’ve given me over the past twelve months. You all are what makes blogging fun.

image credit: techventures.columbia.edu

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Melba Kurman writes and speaks about innovative tech transfer from university research labs to the commercial marketplace. Melba is the president of Triple Helix Innovation, a consulting firm dedicated to improving innovation partnerships between companies and universities.