Fund the Future, not the past

Two pieces of legislation proposed earlier this summer –  the America Innovates Act (bill proposed April, 2012) and the Startup 2.0 Act (revised in May, 22, 2012) share a common goal:  to improve the flow of university research to society and thereby, increase industry innovation and create startups that create jobs.  After that, their similarity ends.

These two bills reflect the Great Debate:  are university commercialization efforts just underfunded, or are they underperforming?

For years now, people have held strong, diametrically opposed opinions about whether universities are doing a good job of getting on-campus research into commercial use.  The dissonance sometimes makes you wonder whether they’re all talking about the same system.   It seems that federal legislators are as divided as the rest of us.

On one side, the America Innovates Act presumes that university commercialization strategies, policies and programs are essentially on the right track — they just need more funding.  In contrast, the Startup 2.0 Act falls into the “universities are underperforming” camp.  Like the America Innovates Act, the Startup 2.0 Act intends to give funding to universities to help them bring research to market (in addition to proposing broader changes to U.S. immigrant and visa policies).  However, the Startup 2.0 Act is disruptive:  it proposes to give commercialization grants directly to entrepreneurial faculty, thus enabling them to take charge of bringing their own research to market, should they choose to.

Not surprisingly, the Startup Act has stirred both ire and jubilation.   Many university faculty, of course, would be happy to get funding to get their research into commercial use, or to found a startup.  Not so thrilled are those who feel strongly that university administrations — not individual faculty — should set strategy, policy and run programs.

If both bills become law, it’s going to be interesting to watch what happens when the funding starts to flow.  First, some more background.

What’s in the America Innovates Act

The bill for the America Innovates Act proposes that the big federal funding agencies hand over 15% of their research budgets to the Department of Commerce to set up an independent agency called the American Innovation Bank.  Guided by an appointed Advisory Board, the American Innovation Bank would give grants to university administrations.

Innovation Bank grant money would go directly to university administrators, not to individual university faculty.  Administrations would use commercialization grants to develop raw inventions into working proofs-of-concept.  Some of the money would pay for the creation of new, university-approved curriculum to train graduate students in STEM fields.  Some grants would support as-yet-unspecified university commercialization activity.  All in all, basically sound ideas.

Here’s the catch:  the Act proposes to fund projects and curriculum that reflect today’s incumbent, but arguably out-of-date (some would even say faltering) system.  Conspicuously absent from the bill is funding that would let university faculty and companies explore newer, and perhaps better strategies.   Why fund what we already have?

The America Innovates Act reminds me of the way people fondly describe their well-intended but misguided cousin, “his heart’s in the right place.”  What, exactly, is askew in the America Innovates Act?  I’ll be more specific.

Stop counting patents

The first shortcoming of the proposed AIA is the performance metrics for Annual Reports from funding recipients.  Of four listed metrics, the first is… you guessed it… patents.   By choosing patents as a core metric, it seems that AIA sponsors are laboring under one of the biggest and most stubborn misconceptions about bringing university research to market — that in order to be commercially viable, university research must first be “protected” by a patent.

Managing university research as if it were potentially lucrative intellectual property in need of a patent’s protection is like trying to lay claim to the ocean’s waters by frantically scooping out single jarfuls for yourself.  Patents are a relatively tiny conduit of knowledge transfer compared to the firehose of what’s called “open science” — published papers, conferences and interpersonal relationships.  Other active channels are graduating students, industry collaborations and faculty consulting gigs.

Now, patents have their place in product development and startups.  After all, if a university researcher feels her research is best brought to market by patenting parts of it, then she should be given the resources she needs to do that.  However, if the government plans to go as far as to scrape 15% from budgets intended to fund basic science and spend it on commercializing that science, then for heaven’s sake, let’s figure out some more relevant performance metrics.

Commercialization grants to faculty should be applied for, and given, at the individual level

Next issue.  The AIA reflects another common misconception about university research:  that a single strategy under central control works better than a decentralized and diverse set of strategies.  The Act is built on a faulty foundation, the notion that university knowledge and technologies won’t flow off of campus unless channeled through, and controlled by a university technology transfer office.

For example, in Section 105:  GRANTS TO INDIVIDUALS, the AIA proposes to give commercialization grants to individual university researchers.  However, in order to apply for one of these commercialization grants, the investigator must apply together with his university’s technology transfer office.  Such a mandate does a disservice to the people that work in the university’s technology transfer office.  Tech transfer services should be a valued and optional administrative service available to faculty and graduate students, not an administratively imposed tax.

To be clear, it’s not the staff in the tech transfer unit that is the problem with this part of the AIA.   In fact, university technology transfer offices are full of smart, hard-working people who do a lot with the resources they’re given; many would relish the opportunity to work more freely and creatively with university researchers.   I’ve seen, first-hand, how capable and imaginative staff struggle against administrative constraints.  The real problem lies at a deeper level, that the AIA proposes to force yet more federally funded research through a single pipe.  That’s not how university knowledge transfer works.

Fund disruption, not the status quo

Third issue.  If the America Innovates Act proposes to fund what we already have, in contrast, the Startup Act proposes to fund a critical piece of what’s been missing from university technology commercialization strategies in the U.S. — strategic diversity.   (Note, the Startup Act isn’t the first time that a faculty-led model has been proposed:  the Kauffman Foundation, one of the sponsors of the bill, proposed it two years ago; I proposed a modified version last year.)

As mentioned earlier, this particular provision in the Startup 2.0 Act has been met with quite a bit of resistance by stakeholders invested in maintaining university commercialization programs as they stand now.  On the one hand, I suppose it makes sense to fight this proposal if you fully believe that university faculty should not make decisions about the commercial prospects of their own research.  However, here’s what I don’t understand:  if you’re in the business of getting university research to market, shouldn’t you be eager to try out different methods, especially if there’s a chance that some of them might yield better results?

Think about it.  If entrepreneurial university researchers were to given the resources and freedom to commercialize their own research, several good things could happen.  First, faculty and graduate students would likely create some pretty useful and creative strategies that could perhaps be applied in other universities.  Next, if faculty were given access to commercial research commercialization services, they would get the chance to compare their campus technology transfer services against other options.

Sure, there would be some greedy apples in the faculty barrel – there always are.  However, I’ve seen some questionable apples in the administrative ranks administrative ranks and in government and businesses too — who hasn’t?  Consider that there’s already an active grey market of research commercialization on university campuses.  And, administrative efforts to clamp down tightly on “rogue research” is costly in terms of staff time and industry and faculty good will.

I would be the first to agree that tight administrative control should be exercised if it were proven that faculty are using tax-payer funded research to line their own pockets.  However, the irony of the commercialization grey market is that it’s not typically about money.  Instead, faculty, students and companies find themselves sharing research in the grey market in order to find freedom to freely collaborate with, share information, and learn from one another.

Rather than roundly condemning the Startup 2.0 Act’s provision to give funding directly to faculty, university administrators should be pleased to support it.  What if faculty and companies were to discover that that their university’s technology transfer services are better than other options?  If faculty and companies were given a choice and still chose to work with their university’s technology transfer office, that would be the ultimate endorsement.  In fact, faculty freedom of choice could finally get hard-working university tech transfer licensing staff the credit they deserve for their efforts.

Nobody can pick the winners

Fourth issue.  The AIA proposes that the Director of the American Innovation Bank appoint an Advisory Panel.  This expert panel would decide which university technologies should get commercialization grants.   In gambling, trying to pick winners when there’s very little evidence and lots of unknown variables is called…  well, gambling.  The same thing is true when a committee of experts attempts to pick out which early-stage inventions have the most commercial potential.

Venture capitalists and stock brokers have already learned that no one can pick the winners.  That’s why VCs invest in so many companies, and why there are index funds.  University technology transfer licensing staff are learning that despite repeated attempts, even they can’t predict which of their  hundreds of university inventions will score big in industry.

If no one else has been successful, how possibly will an “expert panel” of appointed Advisors choose which university inventions will be winners?  Each year, university researchers create thousands of new inventions.  Maybe the proposed America Innovates Act should just honestly acknowledge reality and instead, hand out thousands of micro-grants each year in near-random fashion to university researchers, startups and businesses.

Don’t teach ideology, teach something useful

Last but not least, the AIA, in Section C. 202. INDUSTRY-RELATED REQUIREMENTS FOR CERTAIN GRADUATE RESEARCH FELLOWSHIPS, proposes to establish a set of training requirements for graduate students on federal fellowships in STEM programs.   This portion of the proposed Act would be managed by the big federal funding agencies, namely the National Science Foundation and the National Institutes for Health.

For decades, these large federal funding agencies have given out billions of dollars in grant money to university researchers to fund basic, exploratory research.  The results have been mostly magnificent.  Yet, if you look at what federal agencies propose in their portion of the AIA, these funding agencies, once proud advocates of exploratory science, seem to have been put to the political plow.

As the AIA is proposed, to get fellowship funding from federal agencies, STEM graduate students will be mandated to take the following curriculum.

(1) The importance of disclosing discoveries and filing for patents.

(2) Obtaining proof of concept or development funding.

(3) The characteristics that make a scientific discovery attractive to private investment.

(4) Resources that may assist researchers in creating a new start-up company.

I don’t know about you, but if I were a graduate student in engineering, I would want a bit more than this.  When a course’s stated intent is to teach a student “the importance of disclosing discoveries and filing for patents…” to me, that’s a big red flag that the course is going to teach ideology.  The worst case scenario would be if the American Innovates bill became law and this training were to deteriorate into a cynical, mandatory exercise, sort of like Defensive Driving School.

Federal agencies whose charter is to fund exploratory, open-ended scientific research should know better than to fund curriculum that teaches “the importance of.”  Instead, they should teach what students can actually apply.  Just for starters, how about teaching students how to navigate the gritty details of SBIR and STTR grants and federal accounting  regulations, state and regional sales tax regulations, the basics of intellectual property law, and other topics entrepreneurs need.

Topics (2), and (4) in the proposed AIA curriculum sound more promising.  I wonder whether the intent of the NSF is to aligm Item (4) above with another similar but separate NSF curriculum program, the Innovation Corps which aims to teach faculty and graduate students basic business concepts.   However, NSF  funding rules to get money for Innovation Corps reflects the same top-down mentality that pervades the America Innovates Act:  the NSF mandates that only academic Deans and higher can apply.

I’d be curious to hear why the NSF is willing to give research grants to individual faculty, yet is so hesitant give faculty resources to help them to further commercially develop the resulting inventions and technologies.

Fund the future, not the past

The upside is that legislators have joined the debate.  The downside is that even at the legislative level, it seems that we still haven’t made progress on the core questions that no one seems willing to ask, or to answer:  is the current model the best solution?  Why or why not?  If not, what would be better and what funding and policy changes need to take place to get there?

Making good policy on top of this unresolved, gaping fault-line is going to be challenging.  Universities are fumbling towards a solution towards a complicated problem and they’re under lots of political pressure to prove their worth.  Stakeholders of the university research ecosystem, despite their disagreement with one another, are fighting hard to do what they believe is right.  There’s no easy answer.

The American Innovates Act needs to dig deeper and give grants to universities, faculty and small businesses to fund exploratory pilot programs.  I suspect that many universities would be happy to accept federal funding to test-drive daring new methods of getting university research into commercial play.  But they’re cautious, keeping quiet while their more vocal brethren strong voice disapproval of giving university faculty some freedom to tinker.

Both of these proposed Acts are exciting pieces of legislation.  It’s good to see that interest in strategy to commercialize university research is reading the highest levels.    However, policymakers need to understand that resources should be directed towards the future, not the past.  If legislators choose to fund what’s familiar, nothing will significantly improve.

image credit: knowledge.allianz.com

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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.