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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
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
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
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.
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
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.
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
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
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
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
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.
TECHNOLOGY TRANSFER NEW JERSEY CENTER FOR ADVANCED BIOTECHNOLOGY AND MEDICINE ~9 This program is one of several state-supported advanced tech- nology centers recently created in New Jersey with the aim of attracting the best scientists and providing an environment for basic research that can lead to industrial development and sub- sequent economic strength in the state. The state will provide the center with 50 percent of its research and salary budget, the other 50 percent is to be covered by competitive federal grants and industrial participation once the center is fully operational. The state appropriations for the center's operating budget for FY85, FY86, and FY87 are $1.3, $1.5, and $3.2 million, respectively. A building project is being financed by general obligation and rev- enue bonds totaling $35 million for the construction of the center and two satellite facilities. The Center for Advanced Biotechnology and Medicine has a scientific advisory board of senior faculty and prominent outside scientists who are helping to recruit the scientists to head its 18 research teams that will focus on human molecular biology. The center will be located on Rutgers' Busch Campus and jointly op- erated by Rutgers University and the University of Medicine and Dentistry of New Jersey (uMDNJ)-Robert Wood Johnson Med- ical School. The clinical research unit is located at the Robert Wood Johnson Hospital. The Waksman Institute of Microbiol- ogy focuses on cell fermentation processes and technologies; the rest of the Waksman Institute is redirecting its research into two areas important to biotechnology: regulation of gene expression and biomolecular structure, both of which will include basic re- search on plants and animals. The Waksman Institute will also have greenhouse and field space. Thus, the many programs at the center, the Waksman Institute, and the uMDNJ-Robert Wood Johnson Medical School form a concentration of biotechnology research in New Jersey. Plans for an Advanced Technology Cen- ter for Molecular Biology in Agriculture are being explored. Its research on plants and animals would complement the Center for Advanced Biotechnology and Medicine's research on human molecular biology.
120 AGRICULTURAL BIOTECHNOLOGY UNIVERSITY OF CALIFORNIA BIOTECHNOLOGY RESEARCH AND EDUCATION PROGRAM This statewide competitive grants program was begun in 1985 and has a current state appropriation of $1.5 million. The pro- gram has an indefinite authorization; the university will request increases in the budget in coming years. Each of the nine cam- puses of the University of California may submit one research proposal per year. A committee of representatives from each cam- pus makes three to four awards per year on the basis of faculty reviews of the proposals. The awards are made as training grants of $200,000-$300,000 covering a 3-year period. There is also an advisory committee composed of representatives from the biotech- nology industry and agencies outside universities, which recom- mends directions for funding. PLANT GENE EXPRESSION CENTER The ARS and the Regents of the University of California are cooperating in the establishment of a research center at Albany, California. The program will study the complex biology of plant genes, the control of their expression, and the biochemical steps and developmental mechanisms responsible for the quality and productivity characteristics of plants. A mandate of the Plant Gene Expression Center is to strengthen the research relation- ships among ARS, university, and other scientists pursuing new technologies to improve crop plants. This center is a federally funded research facility that will have a core scientific staff of 10 senior researchers. Two of the senior researchers will hold full faculty positions at the nearby University of California at Berkeley, and the other 8 will be hired under procedures that qualify them for adjunct faculty status. This arrangement gives the state university system and the federal ARS system a collaborative role and responsibility in developing and maintaining the scientific quality of the center. By design, this is a long-term commitment to a basic research program by both the federal and state cooperators, and it combines the approaches of federal research teams and university principal investigators to scientific research. The research facility at Albany is planned to house, through direct employment or other arrangements, about 70 scientists,
TECHNOLOGY TRANSFER 121 postdoctoral researchers, and other research associates besides the support staff. Operating funds will come from the ARS. The budget is projected to be $2.5 million in FY87. When fully opera- tional, the center will have an annual budget of about $6 million. In addition, the university-associated researchers are eligible to apply to federal granting agencies for additional research funds. I~nplications of Alliances and Research Relationships Basic discoveries in biotechnology can often be translated into commercial applications. Thus, industry seeks ties to university and government laboratories and vice versa. However, the rela- tionships described earlier and other programs in biotechnology involving university-industry-government alliances are still too new to be judged on their effectiveness at promoting agricultural biotechnology. At this stage, therefore, it is best to regard them as models that illustrate the diversity of approaches available to pro- mote interdisciplinary research and cooperation among industry, universities, and government. Each research sector performs complementary tasks and seeks to gain something through its relationships. Industry gives funds for basic research, which universities typically perform more effi- ciently. Likewise, industry supports some training of scientists in university laboratories. In return, industry gets direct access to the results of research programs: Know-how, "show-how," and immediate practical applications. Furthermore, industry is able to hire new graduates trained in the areas of expertise it seeks. The universities, in turn, provide a strong environment for basic research and a training ground for scientists. Their grants and contracts with industry provide money beyond what they can obtain from state and federal governments. The universities may also profit from their role in developing intellectual property and their tie-in to applied problems. Finally, government participation strengthens the foundation of research and training programs. Government involvement pro- vides a center of activity, which attracts industrial development and promotes economic growth, which in turn benefits the entire nation.
122 AGRICULTURAL BIOTECHNOLOGY University-industry research relationships supported between 16 and 24 percent of university biotechnology R&D in 1984 (Blu- menthal et al., 1986~. Although this is a far higher proportion than industry's overall contribution to universities, these funds repre- sented less than 10 percent of the R&D budgets of most firms. This proportion of industrial investment in university research probably will not increase further, and will most likely decline as a direct consequence of successful technology transfer. As compa- nies identify more potential products, they will shift their financial support to conduct more research in-house, particularly applied research that leads to patents. Nevertheless, industry will still look to universities for advances in fundamental research. Many scientific advances that made biotechnology possible came out of basic research funded by the federal government. Other nations have also made valuable contributions. University- industry research relationships and their commercial consequences clearly show the practical value of long-range government fund- ing to universities. Industrial alliances now offer new gains for universities: increased income from grants, contracts, and, po- tentially, patent royalties and licenses; program expansion; and student opportunities. Potential risks, however, stem from the dichotomy in academic and industrial value systems public versus proprietary knowledge and products. These risks include constraints on the communica- tion of research, bypassing peer review of grants (Omenn, 1982a), tracking of students onto industrially oriented projects, faculty conflicts of interest, and some tendency of industry to award short-term grants or to favor applied over basic research goals (Blumenthal et al., 1986~. Industry may also try to dictate the di- rection of research, or seek out and fund only those projects close to fruition. However, universities can, by judicious bargaining, put their interests foremost to minirriize such risks. The linkage institutions discussed in this chapter are important in mediating successful university-industry collaboration. Industry's funding is not great compared with government funding of basic research. Moreover, industry rarely funds whole departments or even whole laboratories- industry's grants usually leverage existing facilities and expertise, as shown by Cornell's program. When industry does initiate construction of university
TECHNOLOGY TRANSFER 123 laboratories or hiring of new faculty, as in the PPG/Scripps ar- rangement, industry's money provides only a small fraction of the total operating budget. Most of a department's expenses and fac- ulty salaries come from other sources, including state and federal government grants. For instance, industry funds only 10 percent of both the Cornell and Scripps biotechnology programs. Therefore, industry cannot be expected to compensate for any reduction in federal funding. The continued health of research efforts at univer- sities remains highly dependent on federal and state governments as major sources of support. MERGING BIOTECHNOLOGY INTO AGRICULTURE Identifying problems that biotechnology can address and in- troducing new products from biotechnology into agricultural prac- tice are two important steps in technology transfer. An additional aspect is the ultimate effect of the technology. A new technology can have three orders of effects (Kiesler, 1986~: The first is the intended technical effects the planned improvements . . . in new technology. The second is the transient effects- the very important organizational adjustments made when a technology is introduced but that eventually disappear. The third is the unintended social effects-the permanent changes in the way social and work activities are organized. Biotechnology applications to agriculture can be expected to heave the same orders of effects. The colleges of agriculture in the land-grant university system and the agricultural extension system can be expected to help implement the first effect, the intended improvements. In addition, these institutions will be strongly in- fluenced by the third effect, the unintended and permanent social effects. These institutions can play an important role in recog- nizing these effects and helping individuals cope with them. The second effect, transient adjustments, is now taking place in terms of questions on regulation and public concerns over environmental considerations in field testing. Land-Grant Universities Some land-grant universities have recently initiated programs to support biotechnology by measures ranging from creating bio
124 AGRICULTURAL BIOTECHNOLOGY technology institutes or centers to reallocating funds for biotech- nology research and reclassifying faculty positions to recruit molec- ular biologists. At present most funding for these initiatives is public (Butte} et al., 1985~. However, successful programs can be expected to draw industry support to their states. Industry has a definite role in supporting research at land- grant universities, particularly in the area of biotechnology. Plant breeding departments are the major focus of some biotechnology initiatives at land-grant universities. In addition, these universi- ties are slowly expanding their research in agricultural science to include more basic aspects of molecular and cell biology. How- ever, the line between basic and applied research is often blurred in biotechnology, especially as it applies to agriculture, where re- searchers have traditionalIv tackled hr~t.h heir our] ~r~r~lic`~ =~= of a problem. ~ ~ c~ use Biotechnology centers at land-grant universities have several critical functions in technology transfer. They facilitate the ex- change of information and ideas between scientists working on ap- plied aspects of plants and animals and their university colleagues studying basic aspects of molecular and cell biology, biochemistry, and related disciplines. Centers attract students from traditional agricultural departments who seek minors study in biotechnology. Centers inform agricultural scientists of future research agendas in biotechnology (Butte! et al., 1985~. They also facilitate vertical and horizontal integration of research. Non-land-grant institutions such as Massachusetts General Hospital and Harvard University have recently begun programs for basic research in plant science, previously an area of limited in- terest outside the land-grant universities. Some large agrichemical companies have moved in to fund this research. The implication is that the land-grant universities are doing insufficient research to support applications desired by industry (Butte] et al., 1985~. The Division of Agriculture Committee on Biotechnology has published guidelines for university-industry research contracts (National Association of State Universities and I`and-Grant Col- leges iNASULG C], 1984) designed to promote productive and eq- uitable interactions between land-grant universities and private industry. All universities are authorized to confer exclusive li- censes to companies under the Patent Act (P.~. 9~517), although actual patent ownership may be transferred only to organizations
TECHNOLOGY TRANSFER 125 whose mission is to transfer technology (e.g., the Research Corpo- ration; see the section on Patents and Universities). Although full title to federally funded inventions cannot be transferred to com- mercial firms, public policy can encourage land-grant universities to confer exclusive licenses to private companies able to translate their discoveries into commercial products. A successful example of this is the cancer drug cisplatin, developed with National Cancer Institute funding at Michigan State University, and subsequently licensed exclusively to the drug company Bristol Meyers. Cooperative State Extension Service Extension is an essential part of the knowledge development, applied research, and technology transfer continuum. Technol- ogy transfer in agriculture usually carries the added challenge of adapting research developments to a range of different regional requirements. Uncontrollable factors such as climate, topography, and a host of other ecological variables dictate which agricultural innovations ultimately succeed. This fact is a major reason why agricultural scientists have maintained close communication with the users of agricultural technology. The agricultural extension system serves an important function in this communication link, disseminating research knowledge, helping to adapt that knowI- edge to regional problems, and reporting back the needs of the user groups. The Cooperative State Extension Service (CES) was estab- lished in 1914 with the charge to transmit land-grant university and USDA-generated knowledge to rural people. A partnership of federal, state, and local governments carries out this mission. Roughly 37 percent of the support comes from the federal govern ment. As an agent of technology transfer, CES must help bring the achievements of researchers into the whole agricultural system. Here the frequent and informal contacts that occur between agri- cultural research scientists and the 3,000 CES specialists, who are mostly housed in the same departments at land-grant universities and the 9,000 county- and campus-based farm advisors, are cru- cial. Extension agents must be highly integrated with the research establishment to enable them to communicate a level of knowledge and technical skills exceeding that of the user groups for whom
126 . .. . .. AGRICULTURAL BIOTECHNOLOGY they provide information and training. Without this close interac- tion and communication with research scientists, their influence as extension agents is greatly diminished. As land-grant institutions move toward basic research, more responsibility for applied re- search may fall to specialists in the CES. Accordingly, they should expand their role to include some applied agricultural research, working closely with university faculty to develop the site-specific information needed in extension programs. CES must work with biotechnology as it is developed to the stage of implementation. To do this effectively, CES must hire and train sufficient personnel with requisite expertise in biotechnology to serve as a feedback mechanism to basic researchers and to help target biotechnology research to the needs of the agricultural community. CES must be able to help different-sized farming on orations and other segments of the agricultural community adopt biotechnologies and adapt them to their needs. CES should also play a role in helping the agricultural community cope with the social and economic implications of biotechnologies. These are logical extensions of CES's traditional role in community develop- ment and technology transfer. In addition, CES must increase its contacts with the private sector, in order to evaluate new products for farmers and monitor their use. Complex agricultural technologies have spawned com- pany marketing represent staves and private consulting firms that instruct or provide specialized services for the agricultural com- munity. They are agents of technology transfer, but they serve only those clients who can pay. Publicly supported extension agents must continue to serve the agricultural community. CES can be an arbiter of scientifically and economically sound agri- cultural practices. Furthermore, CES is an important source of information on environmental issues and environmentally sound agricultural practices. Regulation and Field Testing Progress toward field and environmental testing of genetically engineered products has been extremely slow, having relied on public agencies in their traditional research and regulatory capac- ity. The public debate over regulating field testing research of recombinant organisms has been going on for more than 3 years.
TECHNOLOGY TRANSFER 127 Controversy and confusion among the federal regulatory agencies has led to uncertainty within the biotechnology research commu- nity and industry. This has resulted in signficant delays in any field research on potential agricultural biotechnology products. Several companies have had their field testing plans delayed for a year or more, as the federal government attempts to decide which agencies are to handle field testing requests and what regulatory review procedures should be used. These delays have resulted in corresponding delays in acquiring research information from field and environmental testing, as well as in the potential introduction of beneficial products for agriculture. The inability to conduct initial, small-scale field research with genetically engineered products is a major barrier limiting the development of biotechnology products for crop agriculture. Al- though laboratory tests can be devised to assess many potential benefits and possible risks associated with the use of a genetically engineered product, ultimately there is no substitute for field or environmental testing. The practical benefits and advantages of a genetically engineered product and any needed modification in the way it will be used can only be determined under conditions that parallel its potential commercial use. Such field trials not only test the effectiveness of a new product of biotechnology but also can reveal problems that warrant redesign, cautions, or regulation in its use. There has been progress toward implementing a coherent fed- eral regulatory program (Office of Science and Technology Policy, June 26, 1986), but widespread public confusion exists over what is being done and what still needs to be done to adequately test and regulate genetically engineered organisms. Although many of the environmental concerns raised in the course of public debates may be valid and may require scientific attention, the concern over disastrous risks associated with products of agricultural biotech- nology is based largely on conjecture. Valid environmental con- cerns, however, must be considered. The federal government for the first time is imposing significant regulatory requirements for products with no known hazards. Moreover, it is applying these requirements at the research stage to regulate proposed research in limited-size field plots based on laboratory greenhouse-tested ma- terials. Under these circumstances, it is incumbent on the public
128 AGRICULTURAL BIOTECHNOLOGY sector to provide an option for these initial field tests to be under- taken in a manner that permits research and product development without undue delays, while ensuring the public safety. A decade ago the public sector had to play a major role to facilitate laboratory research on recombinant DNA in a manner judged to be safe. In response, NIH established the Recombinant DNA Advisory Committee. Now it is necessary for the public sector to again play a role to facilitate field research in a manner judged to be safe. Over the past few years the state and federal partnership in agriculture has implemented a National Biological Impact Assess- ment Program (NBIAP), which recognizes the role of existing agri- cultural research and extension capabilities in assuring the safety of biotechnological research (NASULGC, 1986~. This program is based on the precepts that research using recombinant DNA meth- ods is not fundamentally different from other genetic research, and that the safety record of the existing framework of more than 3,000 field and laboratory locations across the United States shows that they can provide an effective, decentralized scientific capability for research involving both recombinant DNA and other methodolo- gies. The NBIAP operates under current and emerging guidelines and public policy statements issued by the federal government on research involving recombinant DNA molecules. More specif- ically, it is a workable and responsible system that allows USDA to promote biotechnology research and product release into the agricultural ecosystem, while assuring that safety concerns are given appropriate attention and priority. Progress reports by the Committee on Biotechnology, Division of Agriculture of NASULGC (NASULGC, 1984, 1985, 1986) describe NBIAP. Although NBIAP will be open to all biotechnology investiga- tors-both public and private-an interim emphasis is needed. Initially and temporarily, the public sector should identify and establish a limited number of publicly owned, geographically iso- lated, and professionally managed test sites that fully meet safety needs for initial field and environmental testing. This enhanced public role in the mid-1980s is as necessary and appropriate as the Recombinant DNA Advisory Committee was when it was formed in the mid-1970s and still is. The enhanced role proposer] for the public sector will take advantage of a few selected, already existing publicly owned field
TECHNOLOGY TRANSFER 129 stations, such as USDA experimental field stations, state and agricultural experimental field sites, and national laboratory field stations. Initially 5-10 existing sites would be selected on the basis of rigorous safety criteria such as outstanding facilities and geographic isolation. Additional significant capital expenditure should not be required for this proposal. For many such field sites long-term analytical data on soil type, climate, and other ecologi- cal factors important to monitoring environmental effects already exists. In addition, such sites have often been used for decades in controlled field trials involving pathogens and agricultural dis eases. The selected field sites should be professionally managed by an oversight committee of public sector professionals with expertise in agronomy, ecology, plant pathology, entomology, microbiology, and molecular biosciences. This committee would review proposed field research, make changes in the proposed field tests if necessary, and monitor the conduct of the tests. Public or private sector scientists desiring to use these sites would conduct the research under the observation of the site-safety officer. The site-safety officer would have overall responsibility for the safe operation and use of the test site. Costs of on-site operations would be paid by the users. Research would be conducted to gather information on environmental persistence and dispersal. These sites are proposed as an option for field tests but are not a required route for initial field testing. To summarize, this proposed role uses existing public sites for field research and provides public professional control of research monitoring in a manner analogous to what the NTH's Recombinant DNA Advisory Committee accomplished for laboratory research. Thus, society would be protected by the collective judgment of the oversight committee, and concerns about direct private sector field research would be minimized. Without this new public role, progress toward biotechnology products for U.S. agriculture may be slow, and our nation stands to lose its current competitive advantage. Scientific information and practical experience gained at field testing sites wiD help refine and streamline regulatory procedures for the public's benefit. Knowledge that ensures the public safety will help establish long-range criteria for future field testing sites
130 AGRICULTURAL BIOTECHNOLOGY that can be managed by either private or public groups. An effi- cient, workable, and safe regulatory system is essential to the con- tinued progress of agricultural biotechnology in the United States. Biotechnology products are expected to provide important inputs to improve the international competitiveness of U.S. agricultural products (see, e.g., Office of Technology Assessment, 1986~. PATENTING AND LICENSING , . . . .. Patents provide a means of control over the ownership of in- tellectual property. The owner of a patent has a form of monopoly power over his or her invention until the patent expires. Before that time, anyone else who wants to use the invention commer- cially must first obtain a license from the owner and in almost all cases must pay royalties. The issues of patenting and licensing are important to the progress of biotechnology because private and public investment in technology development and transfer sometimes overlap. Although American culture generally frowns on monopolies, it makes an exception for new inventions, because the prospect of monopoly profits spurs innovation. This trade-off favors the expected long-term advantages of continued technical progress over the potential short-term gains of free access to an invention. Technical progress depends not only on innovation but also on transferring technology from the laboratory to the marketplace. Within the private sector, technology transfer is a straightforward matter: Once an inventor is granted patent protection, he or she will be sufficiently motivated by the desire for profits to seek commercial outlets for the invention. The public sector, however, is usually not in a position to develop and commercialize its own research. Licensing of gov- ernment patents to private industry is one way to overcome this obstacle. It may seem to contradict the public interest to invest public resources in generating new technology, then restrict its use through patents and limit its benefits through licensing agree- ments, but such a policy is justifiable for technologies in areas in which product development involves significant capital assump- tion of risk. Biotechnology is such an area. Although most of the initial research in biotechnology has come from the public sec- tor, the only way to ensure development and commercialization
TECHNOLOGY TRANSFER TABLE 5-1 Patents Issued from 1979 to 1984 131 Patent Recipient 1979 1980 1981 1982 1983 1984 U.S.-based inventors (other than U.S. government) U.S. government Foreign-based inventors Total U.S. patents 33,391 36,978 42,050 38,09234,129 40,857 992 1,156 1,144 1,007993 1,205 21,035 23,093 27,816 26,05324,593 30,087 55,148 61,227 71,010 65,15259,715 72,149 SOURCE: 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. of its discoveries may be through patents and exclusive licensing to the private sector. This arrangement might seem as though the licensee has received preferential access and control over the benefits of research supported by tax dollars. Nevertheless, the risk of unequal benefits must be weighed against the certainty that no benefit will be derived if a promising technology remains undeveloped. Patents and the Federal Government In 1980 approximately $62.7 billion was spent in the United States on R&D. The public and private sectors each contributed roughly half of this figure (NSF, 1983~. Yet of the almost 70,000 patents issued annually in this country, the vast majority (97 per- cent) are awarded to the private sector (Table 5-1~. Part of this disparity stems from the government's greater emphasis on basic research (18.7 percent of R&D expenditures vs. 4.1 percent for industry). However, another factor is government policy. Between 1973 and 1983, almost three-quarters of government patents were granted to only four agencies: the Air Force, Army, the National Aeronautics and Space Administration, and the Navy (Table 5- 2) not to transfer technology but to protect government procure- ment of goods produced under these patents (U.S. Commissioner of Patents and Trademarks, 1985~. Congress has emphasized patenting and licensing at other agencies through recent and pending legislation. The most signif- icant acts were the Stevenson-WydIer Technology Innovation Act of 1980 (Pig. 96-480) and the Federal Technology Transfer Act of 1986 (P.~. 99-502), which mandated that technology transfer should be part of the missions of federal agencies and created mech- anisms by which these agencies and their laboratories can transfer
132 TABLE 5-2 U. S. Government Agency Patents a 1980 Agency USDA Air Force AGRICULTURAL BIOTECHNOLOGY 54 159 Arrny233 Commerce6 DOE DOT NSA EPA HHS Interior NASA Navy Postal Service TVA Treasury VA usAb FCC Total 59 1 23 35 74 390 o o o 2 14 o 1,156 1981 19821983 534645 13389120 229196205 s 234210 51 12 10 27 43 70 326 7 12 2 1,144 1 19 27 73 319 o OO 1 2 12 2 1,007 1984 46 168 200 7 170 26 23 114 278 263 6 3 38 16 143 306 o o o 993 NOTE: DOT = Dept. of Transportation; FCC = Federal Communications Commission; NSA = National Security Agency; TVA = Tennessee Valley Authority; and VA = Veterans Administration. a These data represent utility patents assigned to agencies at the time of issue. b No agency indicated. SOURCE: 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. 4 2 1.205 technology. Now inventions resulting from federally funded re- search with a cooperating private institution may, in general, be patented and an exclusive license granted by that institution. Re- cent levels of patenting by government agencies are shown in Table 5-2. THE NATIONAL TECHNICAL INFORMATION SERVICE The Department of Commerce's National Technical Informa- tion Service (NTIS) has played the leading role in marketing feder- ally owned patents. The NTIS program covers some of the inven- tions created by the Departments of Commerce, Health and Hu- man Services, Interior, Transportation, the Army and Air Force, and USDA, as well as those of the Veterans Administration and
TECHNOLOGY TRANSFER 133 the Environmental Protection Agency. Recent federal legislation cited previously probably will relieve NTIS of some of this respon- sibility. NTIS publicizes government inventions available for licens- ing, files for foreign patents, and negotiates licensing agreements that may involve exclusivity that is, one licensee (or sometimes several) with exclusive use of a patent. Nonexclusive licenses are granted in cases in which access to a technology by many com- peting firms would not discourage commercialization. Table 5-3 shows the levels of licensing by NTIS since FY82 and projects them to 1990. As part of the licensing negotiations, NTIS requires compa- nies to file development plans for inventions. These plans specify the amount the licensee will invest in R&D, in seeking approval from regulators, and in commercialization. The pledge of capital investment ensures that the licensee is serious about developing the invention and is not buying the license simply to prevent com- petition with its own products. For the 77 licenses granted by NTIS in FY83 and FY84, licensees pledged a total of $178 million. As noted earlier, NTIS has managed patents in agriculture and the biomedical sciences. Since the liberalization of federal patent policy under the Stevenson-Wydier Technology Innovation Act of 1980, the number of invention reports filed by NIH-funded universities has doubled. The Federal Technology Mansfer Act of 1986 is expected to further increase the number of patents filed by federal employees. For example, NTH's scientists, working in- tramurally, now file about 150 invention reports per year. From these, NIH files about 50 patent applications per year. NTIS markets and manages NIH patents, and about 30 percent of NIH patents are eventually licensed. Although granting exclusive li- censes on government-held patents might appear to stifle competi- tion, licenses on certain drugs or other socially beneficial products may serve the public interest by encouraging private investment in research, development, and marketing. ARS also uses NTIS to promote its patents. Of the approx- imately 50 patents filed per year by ARS scientists (Table 5-4), about half go to NTIS for licensing. USDA also promotes and licenses its own inventions. USDA requires licensees to specify the amount they will spend on commercialization. In 1985, $30 million was pledged to develop 30 ARS inventions.
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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
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.
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
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.
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
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,
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.
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
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
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.
