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5 Technology Transfer INTRODUCTION The goal of technology transfer has always been implicit in U.S. science policy: Federally funded research should benefit the public, and such benefit includes the development and transfer of technologies from public laboratories to the private sector. Yet what in theory appears to be a simple process of transTat- ing basic research discoveries into social benefits and commercial applications is in reality a complex set of interactions involving many types of people and institutions. Technology transfer in- volves the flow of information between basic and applied research and the subsequent transfer of products of research to dispensers and ultimate users. This chapter examines several of the mech- anisms that facilitate the exchange of information in technology transfer and recent developments in relationships among univer- sities, industries, and government. It also looks at how patent policies are changing patterns of technology transfer in agricul- ture. The Economic Dimension Technology transfer is propelled by the potential benefits de- rived from using and adapting a research discovery. Economic 108

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TECHNOLOGY TRANSFER 109 incentives spur people to improve and transfer technology. In- dustry will not develop and market nor will farmers adopt new technologies without clear, perceived payoffs. However, improved technologies are often blamer! for the current huge agricultural surpluses. Quite the contrary, the causes of surplus agricultural commodities lie elsewhere. When adopting new technologies can increase sales and prof- its by reducing costs, farmers will choose them to improve their competitive position. In the new global marketplace for agricul- tural trade, American farmers are competing with other producers throughout the world. Technological improvements and efficiency are critical components in this competition. It is clearly in the public's interest to ensure that the U.S. agricultural research sys- tem, including the many interconnections that promote technology transfer in agriculture, are in place and fully operational. National policies must facilitate the use of new technologies in agriculture. The seed industry is an example of the interrelation of fund- ing research, institutional roles, technology transfer, and produc- tivity. Historically, breeding improvements in openly pollinated grain crops, as opposed to hybrids, were developed by public institutions. Breeding programs to locate and incorporate pest re- sistance and other yield-enhancing traits are a long-term research investment. New traits from the publicly supported breeding pro- grams were made openly available to commercial breeders for seed production. Recently, public funding for this basic breeding work has been reduced and private companies have become active. Yet are U.S. farmers prepared to pay the long-term costs of breeding work in the price of seed? The changing patterns in technol- ogy development and transfer could lead to loss of productivity growth in varietal performance, higher food costs, and Toss of competitiveness in world trade. This then brings us to the issue of public/private cooperative development and the transfer and adoption of new technology. UNIVERSITY, INDUSTRY, AND GOVERNMENT INTERACTIONS Challenges to U.S. technological superiority have appeared across a range of industries. In part, this situation results not

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110 AGRICULTURAL BIOTECHNOLOGY from a lack of technological expertise but from inadequate tech- nology transfer and product and process development based on results of fundamental research. Transferring technology between academic and industry scientists in the biological sciences used to occur informally and by chance as scientists conversed at meet- ings. However, recent breakthroughs in molecular biology and biotechnology and their potential commercial implications have led to more formal and aggressive efforts. Technology transfer is important in the interests of industrial competition. The shift has been toward the promotion of collaborative research relationships between publicly supported scientists in universities and federal laboratories and those in the private sector. Laws such as the Stevenson-Wydler Technology Innovation Act of 1980 (P.~. 96- 480), the Small Business Innovation Development Act of 1982 (P.~. 97-219), the Federal Technology Transfer Act of 1986 (P.~. 9~502), and recent proposals to liberalize patent policies have strengthened the emphasis on technology transfer in the nation's ~ science agencies. The Stevenson-Wydler Technology Innovation Act of 1980 designated the U.S. Department of Commerce as a lead agency for federal technology transfer, with additional support coming from the National Science Foundation (NSF) and the federal lab- oratories. Efforts were to be coordinated by a number of offices and centers for industrial technology, research, and applications. These were designed to promote the use of results of federally funded R&D by the private sector as well as state and local gov- ernments. The Federal Technology Transfer Act of 1986 amended the Stevenson-WydIer Act by authorizing government-operated laboratories to enter into cooperative research agreements and by providing incentives for comrnerciaTizing federal patents. The Small Business Innovation Development Act strengthened the role of small, innovative firms in federally funded R&D by requiring federal agencies with R&D budgets of $100 million or more to set aside a percentage of their funds to support R&D done by small businesses. Universities as well as state and federal agencies are expand- ing their relationships with the private sector as they explore ways to increase scientific communication and the flow of tech- nology. Breakthroughs in biotechnology have greatly shortened the time between basic discoveries and product development. Op

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TECHNOLOGY TRANSFER 111 portunities to establish links between basic and applied research programs, and financier] incentives including consultancies, patent agreements, and grants and contracts from industry are having a positive effect on technology transfer. The following section de- scribes some of these relationships between university and govern- ment research and industrial development in agricultural biotech- nology. Research Relationships in Technology Transfer With the growth of biotechnology programs in the early 1980s, universities and industry competed for scientists with skills in biotechnology research. This competition has led, in part, to new relationships between university scientists and industry. These relationships try to address the needs of both groups, and they survive as long as both benefit. Although most of the university- industry-government links have counterparts in engineering and related scientific disciplines, biologists are relatively new to such collaborative arrangements. Five general types of alliances are evolving: (1) programs that are part of general university efforts, which normally include graduate student training and publication of scientific findings; (2) projects that have a defined application, which may include a proprietary interest in achieving certain results; (3) programs that are directed to commercializing faculty research; (4) programs that operate outside the university to aid clients; and (5) free-standing institutes linked to several universities (Government-University- Industry Research Roundtable, 1986~. These diverse approaches reflect the fact that universities en- compass a diverse set of roles and interests. Thus, universities are evolving and testing a variety of structures for their alliances with industry. What works for one alliance may not suit another. Clearly, there is a need for a range of approaches. Similarly, universities and companies must address problems of conflicts of interest and ownership of intellectual property in the context of their relationship. Solutions wit! depend on their individual situations and needs. It is up to each side to protect its own interests.

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112 AGRICULTURAL BIOTECHNOLOGY Most of the mechanisms used to develop mutually beneficial alliances among universities, industries, and government include one or more of the following. CONSULTANCIES University faculty have traditionally consulted with industry on an individual basis, contributing expertise in science or to solv- ing a particular problem. This exchange of information between academic scientists focusing on basic research and industrial sci- entists concerned with product development is a major means of technology transfer. Consultancies are increasingly common, par- ticularly in biotechnology, as start-up companies and established chemical and drug houses mount research programs in this area. In fact, it is difficult to find a prominent university molecular biologist who does not consult to the biotechnology industry. There are legal concerns when consultancies are extended to federal employees. For example, is it proper for an individual on the federal payroll to serve one person, group, or company to the exclusion of others? Guidelines on federal employee consultancies should consider three concerns: conflict of interest, favoritism, and mutual benefit. These guidelines govern the current policy of the Agricultural Research Service (ARS) on consultancies between its scientists and the private sector. However, the number and scope of current arrangements are limited. On the other hand, the National Bureau of Standards (NBS) has long played a primary role as a consultant to and collaborator with industry. Scientists at the NBS may consult to industry as representatives of NBS if the subject matter fails within the bureau's mission. If the expertise required is not related to their jobs, these scientists may consult as private individuals. Recently, the National Institutes of Health (NIH) also instituted flexible policies on consultancies between their scientists and industry. NTH scientists may use their general knowledge and expertise to consult for particular individuals, companies, and institutions. Ongoing NTH research results, however, may only be disseminated through nonexclusive channels such as open lectures and conferences. The open policies of NIH and NBS have encouraged the transfer of technology from government-funded

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TECHNOLOGY TRANSFER 113 basic research into practical applications that benefit society as well as their industrial developers. Consultancies assist scientific advancement beyond the re- munerative benefits to individuals, corporations, and government organizations. Consultancies can foster technology transfer, and when they lead to more formal university-industry-government agreements or consortia, they usually provide funding and training opportunities for students and benefit research through interdisci- plinary research collaborations. EDUCATION AND TRAINING Education and training arrangements exist on several levels. Companies give "student gifts" that pay stipends for undergrad- uate, graduate, or postdoctoral positions, sometimes to be used by a university department at its discretion, sometimes earmarked for an individual professor, or sometimes for training in an area important to the company. Another type of arrangement is the "industrial affiliate." Companies send their scientists to universi- ties as affiliates, to learn about departmental programs, to meet with faculty and students, to perhaps have access to findings prior to publication, and to possibly identify promising students as fu- ture employees. Affiliate programs benefit universities by fostering consulting arrangements and research contracts and by teaching universities about the needs, especially student training needs, of industrial research laboratories. In some cases they also provide significant funding for stipends and the enhancement or expansion of graduate programs. GRANTS AND CONTRACTS Grants and contracts between universities and industry range from general grants for basic research to specific contracts for de- fined projects. The sizes of such grants and contracts vary, ranging from a few thousand dollars to much larger sums as part of long- term industry-university arrangements. The smaller contracts and grants to State Agricultural Experiment Stations (SAESs), however, can be reasonably significant amounts (see Table 3.5~. For example, support to the California, Texas, and Florida SAESs from industry grants and contracts in 1984 totaled $9.0 million, $6.6 million, and $4.7 million, respectively.

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114 AGRICULTURAL BIOTECHNOLOGY A number of large biotechnology grants have recently been awarded by industries to university research institutes or labora- tories. Examples include the Hoechst Department of Molecular Biology at Massachusetts General Hospital, initiated with a $70 million, midyear award, the Dupont-supported Department of Ge- netics at Harvard Medical School, and Monsanto's $23.5 million, 5-year grant to the Department of Medicine at Washington Uni- versity. Such large grants promote multidisciplinary work within departments, a necessary component of biotechnology research. These arrangements involve more than a simple transfer of funds: The company and the university must define their roles in the R&D efforts. This is necessary in order to maintain the integrity of both academic and industrial values. The former public knowledge, publication, and peer evaluation- can conflict with the latter- proprietary knowledge and products. Linkage institutions (dis- cussed in this chapter) can mediate these potential conflicts and establish some degree of compatibility between university and in- dustrial systems. Both partners can gain an appreciation of their respective values, capabilities, and constraints (Omenn, 1982a). CONSORTIA AND RESEARCH PARKS Consortia combine the strengths of several companies with a university, or alternatively, unite the strengths of several universi- ties. Consortia serve as centers of excellence, technology transfer, and training. Industrial research parks, another innovation, can breed small companies linked to a university. Several state and local government groups are involved in creating incubator centers that include expensive facilities and equipment as shared services to attract biotechnology companies to their area. TECHNICAL DEVELOPMENT OFFICES Universities and state and federal government agencies seeking to promote the development and licensing of patentable inventions have created programs to encourage technical development. These programs range from staff to assist scientists filing for patents to entrepreneurial efforts that control licenses and commercialize patented inventions. (University and government patenting activ- ity is discussed in more detail later in this chapter.) Relatively few resources have been allocated to technology transfer by federal

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TECHNOLOGY TRANSFER 115 laboratories. The Federal Technology Transfer Act of 1986 should stimulate efforts in this regard. ENTREPRENEURIAL COMPANIES A significant number of scientists leave university or govern- ment posts to work for companies or to start their own com- panies. A recent survey revealed that one-third of the founders of responding biotechnology firms previously had been associated with universities (Magrath, 1985~. Examples include Agracetus, BioTechnica, Caigene, Damon Biotech, Integrated Genetics, and Molecular Genetics. Some faculty work part-time in industry or have equity ownership. Alliances Related to Agriculture Of the many alliances established among universities and cor- porations, and in some instances government agencies, several focus on agriculturally related research. The following examples illustrate the diversity of approaches and the levels of funding involved in these alliances. CORNELL UNIVERSITY BIOTECHNOLOGY PROGRAM The Cornell program began in 1982 with funds from New York State and a Year commitment from three companies: Union Car- bide, Eastman Kodak, and General Foods. In 1986, the program wan designated a Center of Excellence in Biotechnology by the Army Research Office under the University Research Initiative Program. This status provided additional financial support. An- nual support through the program amounted to 10-15 percent of the total investment in biotechnology research at Cornell, which was approximately $20 million in 1985. Cornell faculty compete for funding from the consortia by submitting research proposals to the biotechnology program. Six representatives of the university and three from the participat- ing companies review the proposals, and award grants of about $50,000 per year. In addition, the program hosts resident indus- trial scientists at Cornell and sponsors symposia and workshops, bringing together university researchers, corporate vice presidents, r

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116 AGRICULTURAL BIOTECHNOLOGY and scientists from the sponsoring companies. Central support fa- cilities, such as for DNA synthesis, protein sequencing, and so forth, are also operated by the program. The key feature of the Cornell biotechnology program is its emphasis on interdisciplinary research. Such research suits the program's broad agenda: exploration of the molecular aspects of cell biology and genetics as they apply to agricultural prob- lems. Topics range from basic research on gene regulation and manipulation to applied problems such as scaling up cell culture systems for industrial production. The progra~n's ultimate goals are to increase agricultural productivity within the next 5-10 years through improved livestock species, animal vaccines, and plants resistant to pathogens and environmental stresses, and to use cell products for special chemicals, toxic waste control, and as sources of protein. Another important aspect of the program is an economic de- velopment committee, which studies product marketing. Cornell owns all patents on inventions coming out of the biotechnology program. Participating companies are not guaranteed exclusive licenses, but once they have acquired a license, they do not pay royalties to the university. The rationale for this, as well as for the companies' use of unpatentable information, is that Cornell receives its share from the companies' initial support. PITTSBURGH PLATE GLASS/SCRIPPS CLINIC Pittsburgh Plate Glass (PPG), which has been in the agri- chemicals business since the early 1940s, entered into a joint ven- ture in 1985 with the Department of Molecular Biology of the Research Institute at Scripps Clinic in LJa JolIa, CA. The 15-year agreement provides $2 million a year for basic biotechnology re- search in plant science, with annual increases for a total of $50 million. PPG has put up an additional $10 million for a new building, which belongs to Scripps and houses more than 100 re- searchers. These researchers will all be employees of Scripps; their salaries and basic research budgets will be provided by federal research grants, for which they compete. PPG's money, which amounts to 10 percent of the department's $20 million operating budget, will be used to buy new research equipment. In return, PPG is assigned rights for developing anything patented by Scripps

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TECHNOLOGY TRANSFER 117 involving agrichemicals, plant species, or microbial strains. PPG both pays for and decides what to patent. The PPG/Scripps ar- rangement parallels one established in 1982 between Johnson & Johnson and the Scripps Department of Molecular Biology for health-related research. MICHIGAN BIOTECHNOLOGY INSTITUTE The Michigan Biotechnology Institute (MBl) is a nonprofit corporation dedicated to the commercialization of biotechnology and the development of renewable resource-based business op- portunities in the Midwest. The institute emphasizes industrial applications of biological sciences, focusing on research and devel- opment of new products and processes, technology transfer, and collaboration among industrial, university, and national laborato- ries. Specific areas of interest include industrial enzyme technol- ogy, biomaterials and fermentation technology, and waste treat- ment biotechnology. MB! was created in 1983 and initial funding was provided by the state $6 million through 1987. As of August 1986, MB] had raised an additional $33 million from private sources and state loans. The institute employs 50 business and scientific personnel. The MBI business division handles commercial market anal ysis, func! raising, patents, contracts for R&D with industry and government, and the coordination of public relations and edu- cational programs. The research division consists of a scientific staff, primarily biologists and engineers, who may hold joint ap- pointments with Michigan State University or other universities. There are also adjunct scientists full-time university professors who work for MB! as consultants or as professors for the train- ing programs, and project interns and trainees, who are graduate students and postdoctoral fellows. MBT's goal is to facilitate interaction between universities and industry that will lead to economic development. By positioning itself as a nonprofit corporation between academia and commer- cial companies, MB] links these two groups. It supports single- discipline, problem-focused research done in universities, thereby helping to generate patentable ideas. It then directs this knowI- edge, through a multidisciplinary approach with an emphasis on

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118 AGRICULTURAL BIOTECHNOLOGY R&D and economic analysis, into proprietary processing and prod- uct application for industry. Industry performs the final task in the discovery-application~ommercialization scheme by market- ing products and processes. NORTH CAROLINA BIOTECHNOLOGY CENTER This private nonprofit corporation was established in 1981 as the nation's first state-sponsored initiative in biotechnology. It is largely funded by the state of North Carolina, which for the 1985- 1987 biennium appropriated $14.2 million to the center. The center promotes statewide R&D in biotechnology by initiating, sponsoring, and funding research, university-industry colIabora- tion, commercial ventures, meetings, and program activities. The center, located in North Carolina's Research Triangle Park, is not itself a site for research. The center encourages research and activities that are multi- disciplinary and multi-institutional, that lead to university-inclus- try collaboration and technology transfer, and that will result in useful products. The center catalyzes interactions among par- ties involved in biotechnology development, fosters development of biotechnology industries within the state, funds research fac- ulty recruitment and facilities development at the universities, and provides public education about biotechnology. Current pro- grarns include the Monoclonal Lymphocyte Technology Center, the Biomolecular Engineering and Materials Application Center, the Bioelectronics Advisory Committee, the Bioprocess Engineer- ing Feasibility Study Committee, Visiting Industrial Scientists and Engineers at North Carolina Universities, the Marine Biotechnol- ogy Advisory Committee, the Program in Public Information and Education on Biotechnology, and the Triangle Universities Con- sortium for Research and Education in Plant Molecular Biology. In FY85-86, the Competitive Grants Program awarded $833,000 to 44 projects, and the Industrial and University Development Grants Program awarded $3.8 million for various biotechnology activities, research, and development statewide.

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TECHNOLOGY TRANSFER TABLE 5-4 USDA Patent License Activities 135 39 77119 6869 o 101158 24 53 55 185 30 3 45 293 21 186140 89 Activity Patents issued Public inquires Nonexclusive licenses awarded Exclusive licenses awarded Annual reports received (nonexclusive licenses) Patents transferred to Dept. of Commerce for exclusive negotiations 1979 1980 1981 19821983 1984 1985 45 46 241 407 40 26 6 14 162 22 39 666 16 17 62 17 a Combined USDA-Agr~cultural Research Service activity. SOURCE: Coordinator, National Patent Program, USDA, 1985. Patents and Universities The following paragraphs describe how two universities dealt with patenting by establishing their own formal programs. Vari- ations on the first approach have been used at other universities, for example, the Purdue University Research Foundation, the Iowa State University Research Foundation, and the Research Corpo- ration, which handles patenting and licensing for a number of unlversl Ales. WISCONSIN ALUMNI RESEARCH FOUNDATION In 1925, nine alumni of the University of Wisconsin formed the Wisconsin Alumni Research Foundation (WARF). WARF was and is free of university control. It exists solely to support research and promote the discoveries of university faculty and students by underwriting the patenting and licensing process for these inven- tors. The university itself holds no patents. Faculty members can choose between negotiating patents and licenses with commercial contributors themselves or giving that responsibility to WARF. Most choose the latter. After more than 50 years with this ar- rangement, the university Han yet to report a conflict of interest. Faculty inventors receive 15 percent of the royalties after costs on patents licensed by WARF; the remainder goes to the Uni- versity of Wisconsin graduate school to support research projects. Although the university will not involve itself directly in patent- ing, it will withhold publishing research results for up to 90 days

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136 AGRICULTURAL BIOTECHNOLOGY to facilitate filing a patent application. However, the university does not permit an indefinite delay of publication and insists on the freedom to communicate results a tenable position, for only individual faculty members or WARF, not the university, can hold patents. Two major patents- in terms of income from royalties- have emerged from the WARF program: a process for irradiating milk in order to activate vitamin D ($8 million net) and the discov- ery that led to the commercialization of coumarin (warfarin), an anticoagulant and rodenticide ($4 million net). In all, 42 income- producing inventions were assigned to WARF between 1925 and 1975, of which 12 earned more than $100,000 in net royalties. Since 1928, WARF has distributed $100 million earned from royalties and investments to the University of Wisconsin (Omenn, 1982b). 1 COLUMBIA UNIVERSITY SCIENCE AND TECHNOLOGY DEVELOPMENT OFFICE As late as 1981, Columbia University had no policy on patent- ing. As a result, many technologies developed at the univer- sity were never exploited. The faculty was in general not en- trepreneurial, and those who did negotiate deals with private industry tended to do so independently. This situation created a subculture of individual arrangements at Columbia that often put restrictions on research but offered little or no protection of intellectual property. To combat these problems the university opened the Science and Technology Development Office in 1982. Its goals are to obtain patents on university inventions, license those inventions, and create a structure for interaction with the private sector that will feed money back into the university. The Science and Technology Development Office has a pol- icy committee that handles conflict of interest questions and an administrative committee that examines research proposals from a business standpoint. All proposals are initiated by Columbia researchers, and the funding company usually has rights to an exclusive license if a commercial product should result. There can be no delays imposed on publication the company has 30-60 days to review early drafts. However, Columbia reserves the right to patent anything, regardless of the funder's recommendations.

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TECHNOLOGY TRANSFER 137 This policy relieves the university from pressure to withhold in- formation (at seminars, for example); however, such a policy also means the university may rush the patent process and obtain a patent that may ultimately be indefensible. The Science and Technology Development Office has a yearly budget of $540,000. Of this amount, $123,000 goes to legal fees for filing patents. Companies that receive licenses on patents must also grant the university the right to approve sublicensing to other companies. The office is not directly interested in product development, however. As of March 1985, the Science and Technology Develop- ment Office had generated $2 million through investments, not royalties-which is channeled back into the university to support research. Although this amount is relatively small, it is the portion of Columbia's interactions with the private sector that is unbur- dened by restrictions attached to other kinds of private grants and gifts. Ideally, the office would have control of all private grants to the university. Revenues from Licenses Reliable data are not available on the license value of patents. However, it is generally accepted that the average royalty earnings of patents is low. A sample of patents awarded to 33 technology- oriented firms showed that 20 percent of the licenses earned less than $1,000 per year, 40 percent less than $5,000, 60 percent less than $10,000, and 95 percent less than $100,000 (Roberts, 1982~. The situation is similar in the public sector. For the 154 NTIS licenses in eject at the end of 1984, the average annual revenue was $5,636. As Table 5-3 shows, government revenues from the NTIS program are expected to grow from $868,000 in FY84 to $4 million in FY90. (This estimate may prove low, given the Federal Technology Transfer Act of 1986.) Revenues from licenses are returned to the U.S. Treasury, with a percentage going to the inventor. Recently, $40,000 was distributed to 100 inventors. Maximum payments were $8,000. However, two biotechnology patents held by Stanford Univer- sity and the University of California have already generated rev- enues in excess of $5 million for these institutions. The patents, issued in 1980, cover a process for making "biologically functional

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138 A GRI C UL TURA L BI O TECHNOL O G Y molecular chimaeras" (recombinant DNA) and products derived by this process. Currently 81 companies each pay $10,000 annu- ally to license both the process arid product patents. The uni- versities also earn royalties ranging from 0.5 to 10.0 percent on commercial product sales, depending on the type of product being marketed. Patent revenues, divided equally among the inventors (S. Cohen and H. Boyer), their departments, and the schools, are used mainly for research and education at the universities. This example, outstanding in terms of its financial success, indicates the payoff potential of biotechnology patents. Biotechnology Patenting Activity Approximately 2 percent of recently granted U.S. patents cover biotechnology inventions (Table 5-5; OMEC International, 1985~. Between 40 and 45 percent of these patents are granted to foreign individuals or organizations, roughly the same per- centage as with all patents. About 40 percent of biotechnology patents are granted to U.S. corporations, and about 18 percent go to U.S. universities, government, nonprofits, and individuals. Table 5-6 shows the levels of patenting activity for the 11 U.S. universities that accounted for most biotechnology inventions. Although biotechnology patents account for about 2 percent of all patents granted by the United States, for these universities they vary from 14 percent for Iowa State University to 37 percent for TABLE 5-5 U. S. Biotechnology Patent Activity (Patents Issued) a Activity All patents b U.S. corporate biotechnology U.S. university biotechnology Other U.S. (government, nonprofits, and individuals) Total U.S.-based Foreign corporate biotechnology Other foreign biotechnology Total foreign Total biotechnology 1983 400 68 94 562 383 73 456 1,018 1984 72, 149 441 95 127 663 371 80 451 1 114 , aSOURCE: OMEC International, 1 985 . Biotechnology Patent Digest 4(1 0) :1 50-1 51, unless otherwise indicated. 6SOURCE: U.S. Commissioner of Patents and Trademarks, 1985. Annual Report Fiscal Year '84. U.S. Department of Commerce, Patent and Trademark Office. Washington, D.C.

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TECHNOLOGY TRANSFER TABLE 5-6 Number of Biotechnology Patents Granted to Selected U.S. Universities 139 Patent Recipient University of California Massachusetts Institute of Technology University of Wisconsin (WARF)C Stanford University Harvard University Cornell University Purdue University (Research Foundation) University of Illinois Iowa State University (Research Foundation) Montana State University Northwestern University All other Total Biotechnology Patents u 1983 1984 16 8 3 2 All Patentsh 1984 45 47 16 16 NA 124 14 NA 14 NA NA 16 6 4 2 2 1 2 2 39 68 95 NOTE: NA = not available. a OMEC International, 1985. Biotechnology Patent Digest 4( 10): 150- 15 1 . blPO News 15(4):3, 1985. Wisconsin Agricultural Research Foundation. Cornell University Patent and Licensing Office, personal communication, 1985. the University of Wisconsin (WARF). Thus, biotechnology patents have become a significant part of patenting activity at universities. Patenting activity in biotechnology by private firms is an evolving field, still subject to considerable uncertainty. Publicly held biotechnology firms frequently address patent issues in their annual financial reports to stockholders and to the U.S. Securities and Exchange Commission (Form 10-K). Although biotechnol- ogy firms have different approaches to protecting their intellectual property, statements in these reports indicate that these firms seek patent protection only if they believe the patents will be valid and enforceable. If this does not seem likely, they try to keep such technology as trade secrets. Nonpatented Intellectual Property Basic research at universities spawns many innovations that cannot be patented but are valuable intellectual property and

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140 A GRI C UL TURA L BI O TECHNOL O G Y important components of technology transfer. The most amor- phous components can be termed "know-how" and "show-how," intellectual advances and new techniques for research generated in university laboratories at the cutting edge of a scientific field. Industry expects this contribution from universities, just as it ex- pects universities to train researchers to fill industry's laboratories. Much of industry's impetus to form university-industry partner- ships, pay university faculty as consultants, and hire prominent scientists into industrial laboratories comes from its desire to gain access to "know-how" and "show-how" on new technology. These university contributions must therefore be recognized under the rubric of technology transfer. Other forms of nonpatentable intellectual property are more tangible and can be licensed or copyrighted. Computer software developed by the public or private sector can be copyrighted. Im- portant products of biotechnology research that can be licensed include specialized cell lines derived from animals, plants, or mi- crobes that are used for basic research or product development. Conclusions Patenting and licensing play a necessary, if limited, role in advancing technology transfer from the public to the private sector. Exclusive licensing of government-funded inventions to industry is particularly important in areas such as biotechnology, because their commercialization potential will attract the private sector only if the reward for capital-intensive development is the sole right to manufacture and sell the product. In addition, there is evidence that publicly owned patents serve as "technology building blocks." In a sample of food-related patents held by the USDA and private parties, USDA patents were cited proportionately more often in subsequent patent fi~- ings. Thus, even though federally owned patents may not always be directly commercialized, they may still contribute to future innovation (Evenson and Wright, 1980~. The Federal Technology Transfer Act of 1986 should stimulate patenting and licensing hv federal laboratories. v O ~ Limitations of patenting and licensing must not be forgotten, however. Few inventions produce major commercial wins; hence,

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TECHNOLOGY TRANSFER 141 licensing fees in both the public and private sectors produce mod- est returns. Furthermore, the delay between the award of a license and the actual practice of a patent can be as Tong as 10 years, and even though companies pledge funds for development, there is no guarantee of an eventual product. It is therefore more real- istic to view the securing of patents and the assigning of licenses by the public sector as one of several instruments of technology transfer. Royalties from university or government patenting and licensing cannot be considered significant sources of revenue for reinvestment in basic research. However, public sector patenting has value in spurring innovative research directed toward practical ends, in promoting technology transfer from the public to private sector, and in providing supplemental income to research institu- tions. Currently, universities and government do not always fully exploit their patents because of poor incentives due to policies on distributing royalties. Industry's patent experience might offer the public sector a better model. Public policy issues pertinent to biotechnology patents center around two main issues: uncertainty about the scope of protec- tion provided by patents and the government's role in generating research results. There have been charges that excessively broad patents have been issued (Webber, 1984~. If this is true, firms may be induced into socially undesirable patterns of R&D expenditure, and prolonged litigation and delays in commercialization can be expected. Government and university research appear to lead to biotech- nology patents in greater proportion to its investment than in other areas of science and technology. This is consistent with the focus on basic research by government and university laboratories and the basic research requirements of biotechnology. Besides raising the usual concerns over conflict of interest and freedom of research, this concentration of patenting activity focuses attention on orga- nized mechanisms for transfer of technology to promote research, development, and their ultimate benefits for society.

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142 AGRICULTURAL BIOTECHNOLOGY REC OMMENDATIONS Roles for Universities and Government Agencies Universities and state and federal agencies are expanding both the nature and number of their relationships with the private sec- tor as they explore ways to increase scientific communication and the flow of technology. The federal government, granting agen- cies, and public and private universities should encourage interdis- ciplinary research, partnerships, and new funding arrangements among universities, government, and industry. The Federal Tech- nology Transfer Act of 1986 provides new incentives to federal scientists in this regard. Consultancies, affiliate programs, grants, consortia, research parks, and other forms of partnership between the public and private sectors that foster communication and tech- nology transfer should be promoted. The USDA, SAESs, and CES should emulate other agencies such as NIH and NBS in forming innovative affiliations to increase technology transfer. Cooperative Extension Service The CES should focus some of its efforts on the transfer of biotechnology research that will prove adaptable and profitable to the agricultural community. It should train many of its special- ists in biotechnology and increase its interactions with the private sector to keep abreast of new biotechnology valuable to the agri- cultural community. Furthermore, CES should work to anticipate and alleviate social and economic impacts that may result from the application of new biotechnologies. CES should also play a key role in educating the public about biotechnology. Patenting and I.icensing Patenting and licensing play necessary roles in advancing tech- nology transfer and assuring the commercialization of research re- sults, especially in capital-intensive fields such as biotechnology. Patenting and licensing by universities and government agencies should be encouraged as one of several instruments used to transfer technology. Universities and government agencies should provide incentives to their scientists to encourage patenting. Public policy should encourage state land-grant universities to confer exclusive

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TECHNOLOGY TRANSFER 143 license on patents to private companies with the resources, market- ing, and product interests required to translate these discoveries into commercial products. Regulation of Environmental Testing The government's uncertainty over appropriate regulatory steps has fueled public controversy over the assessment of pos- sible environmental risks from genetically engineered agricultural products. The FoocI and Drug Administration, USDA, and EPA must formulate, publish, and implement a research and regulatory program that is based on sound scientific principles. Initially, 5-10 selected, aIready-existing publicly owned field stations should be available as an option for environmental release testing, profession- ally managed by an oversight committee of public sector scientists with expertise in agronomy, ecology, plant pathology, entomology, microbiology, molecular biosciences, and public health. This in- terim program should be designed to gain scientific information and practical experience with field testing and to protect the pub- lic safety. The current lack of adequate regulatory procedures is halting progress in applying biotechnologies to agriculture. SUMMARY America has traditionally been at the forefront of world agri- culture. Our capacity to develop and implement new technology, as well as the bounty of our land and natural resources, are respon- sible for this. In a modern, changing world these facets resources, expertise, technology, and application remain of paramount im- portance. Biotechnology offers us exciting new avenues to increase agri- cultural productivity. Its tools, combined with advances in the science of agricultural systems, can lead to more nutritious food produced more efficiently. We need this science and technology to maintain our competitiveness and world leadership. The strategies for national competitiveness involve many play- ers. We must increase the emphasis on basic research in our schools of agriculture and public and private universities. We must improve the techniques and applications of science. We must promote these goals by integrating research across disci- plines and institutions and by assessing projects through peer and

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144 A GRICULTUR-Al BIO TECHNOLOGY merit review. We must train enough research personnel and exten- sion agents to conduct research and applications of biotechnology in agriculture. We must encourage technology transfer through government-university-industry relationships and patenting ac- tivities. And we must formulate workable guidelines and proce- dures for environmental testing of biotechnology products. Our federal and state governments, public and private universities, and private sector institutions and industries all have important roles to play in achieving these goals for agriculture.