Summary

Discovery, learning, and societal engagement are mutually supportive core missions of the research university. Transfer of knowledge to those in society who can make use of it for the general good contributes to each of these missions. These transfers occur through publications, training and education of students, employment of graduates, conferences, consultations, and collaboration as well as by obtaining rights to inventions and discoveries that qualify for patent protection (intellectual property, or IP) and licensing them to private enterprises. All of these means of knowledge sharing have contributed to a long history of mutually beneficial relations among U.S. public and private universities, the private sector, and society at large.

Several of these mechanisms undoubtedly exceed intellectual property-based licensing in economic and social impact. However, patenting and licensing of IP by universities is more closely regulated by national policies emanating from the dominant role of the federal government in funding academic research. Thirty years ago federal policy underwent a major change through the Bayh-Dole Act of 1980 (P.L. 96-517, the Patent and Trademark Act Amendments of 1980), which fostered greater uniformity in the way research agencies treat inventions arising from the work they sponsor, allowing universities to take title in most circumstances, and as a result accelerating patenting and licensing activity. Universities have generally applied the same policies and practices to self-supported and privately sponsored research whose output is not regulated. Although the system created by the Bayh-Dole Act has remained stable, it has nevertheless generated a good deal of debate about whether it is as effective as it could be and whether it has produced unintended effects that are adverse to other modes of technology transfer and even to the norms of the university community.

On the eve of the 30th anniversary of the Act, the National Research Council’s Board on Science, Technology, and Economic Policy and Committee on Science, Technology, and Law, with the support of ten private foundations, convened a committee of experts from universities, industry, and foundations, and similar organizations, as well as scholars of the subject, to review experience and evidence of the technology transfer system’s effects and recommend improvements. The committee held a series of open meetings with a variety of presenters, including a two-day public conference with invited experts addressing questions on six topics identified by the committee. It also commissioned original research on the activities and organization of university technology transfer offices and on the legal context of technology transfer. The following summarizes the committee’s principal findings and recommendations.



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Summary Discovery, learning, and societal engagement are mutually supportive core missions of the research university. Transfer of knowledge to those in society who can make use of it for the general good contributes to each of these missions. These transfers occur through publications, training and education of students, employment of graduates, conferences, consultations, and collaboration as well as by obtaining rights to inventions and discoveries that qualify for patent protection (intellectual property, or IP) and licensing them to private enterprises. All of these means of knowledge sharing have contributed to a long history of mutually beneficial relations among U.S. public and private universities, the private sector, and society at large. Several of these mechanisms undoubtedly exceed intellectual property- based licensing in economic and social impact. However, patenting and licensing of IP by universities is more closely regulated by national policies emanating from the dominant role of the federal government in funding academic research. Thirty years ago federal policy underwent a major change through the Bayh-Dole Act of 1980 (P.L. 96-517, the Patent and Trademark Act Amendments of 1980), which fostered greater uniformity in the way research agencies treat inventions arising from the work they sponsor, allowing universities to take title in most circumstances, and as a result accelerating patenting and licensing activity. Universities have generally applied the same policies and practices to self-supported and privately sponsored research whose output is not regulated. Although the system created by the Bayh-Dole Act has remained stable, it has nevertheless generated a good deal of debate about whether it is as effective as it could be and whether it has produced unintended effects that are adverse to other modes of technology transfer and even to the norms of the university community. On the eve of the 30th anniversary of the Act, the National Research Council’s Board on Science, Technology, and Economic Policy and Committee on Science, Technology, and Law, with the support of ten private foundations, convened a committee of experts from universities, industry, and foundations, and similar organizations, as well as scholars of the subject, to review experience and evidence of the technology transfer system’s effects and recommend improvements. The committee held a series of open meetings with a variety of presenters, including a two-day public conference with invited experts addressing questions on six topics identified by the committee. It also commissioned original research on the activities and organization of university technology transfer offices and on the legal context of technology transfer. The following summarizes the committee’s principal findings and recommendations. 1

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SUMMARY 2 PRINCIPAL FINDINGS AND RECOMMENDATIONS THE UNIVERSITY AND THE TRANSFER OF TECHNOLOGY Finding 1: The first goal of university technology transfer involving IP is the expeditious and wide dissemination of university-generated technology for the public good. The public good might include inputs into further research; new products and processes addressing societal needs; and generation of employment opportunities for the production, distribution, and use of new products. Although the transfer methods will vary from institution to institution depending on the history, location, and composition of the institution’s research portfolio, the goal of expeditious and wide dissemination of discoveries and inventions places IP-based technology transfer squarely within the research university’s core missions of discovery, learning, and the promotion of social well-being. Finding 2: The transition of knowledge into practice takes place through a variety of mechanisms, including but not limited to 1. movement of highly skilled students (with technical and business skills) from training to private and public employment; 2. publication of research results in the open academic literature that is read by scientists, engineers, and researchers in all sectors; 3. personal interaction between creators and users of new knowledge (e.g., through professional meetings, conferences, seminars, industrial liaison programs, and other venues); 4. firm sponsored (contract) research projects involving firm- institution agreements; 5. multi firm arrangements such as university-industry cooperative research centers; 6. personal individual faculty and student consulting arrangements with individual private firms; 7. entrepreneurial activity of faculty and students occurring outside the university without involving university-owned IP; and 8. licensing of IP to established firms or to new start-up companies. All eight mechanisms, often operating in a complementary fashion, offer significant contributions to the economy. The licensing of IP, although not the most important of these mechanisms, is more often discussed, measured, quantified, and debated than all other mechanisms combined and is the subject of our findings and recommendations.

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MANAGING UNIVERSITY INTELLECTUAL PROPERTY 3 THE BAYH-DOLE SYSTEM AND ALTERNATIVES Finding 3: The system put in place by the Bayh-Dole Act, that is, university ownership of inventions from publicly funded research and latitude in exercising associated IP rights subject to certain conditions and limitations, is unquestionably more effective than its predecessor system— government ownership subject to waiver in circumstances that varied from agency to agency—in making research advances available to the public. In the pre-1980 system of government ownership (albeit with the possibility of waivers in some circumstances), incentives to pursue commercialization and capacity to do so were limited. When research performers had only the possibility to persuade agencies to transfer rights to them uncertainty and complexity were high. Most institutions had no reason to hire personnel to handle these matters. The Bayh-Dole Act removed the inconsistencies with regard to performer rights and was followed by a surge in patenting and licensing activity as well as growth in university’s capacity to undertake this activity. The only proposal for an alternative system to attract interest among observers and critics of the status quo is one giving university faculty much greater autonomy in managing their inventions, either by assuming ownership or by having freedom to pursue licensing opportunities through outside service providers, although the home institution might retain ownership. Finding 4: The Bayh-Dole legal framework and the practices of universities have not seriously undermined academic norms of uninhibited inquiry, open communication, or faculty advancement based on scholarly merit. There is little evidence that IP considerations interfere with other important avenues of transferring research results to development and commercial use. Finding 5: A persuasive case has not been made for converting to an inventor ownership or “free agency” system in which inventors are able to dispose their inventions without university administration approval. If evidence is developed suggesting that either approach would be more effective than the current system, other significant practical consequences and policy issues would have to be considered, such as the potential for conflicts of interest and adverse effects on public accountability. Finding 6: Nevertheless, proposals to empower faculty and other university-based inventors by giving them ownership or rights to market their inventions independent of university oversight reflect a feeling in some quarters that in the current system of university management, inventor initiative is not sufficiently valued and encouraged. In fact, successful commercialization often depends on active inventor engagement and, in some cases, inventors playing a lead role.

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SUMMARY 4 IMPROVING THE SYSTEM OF UNIVERSITY IP MANAGEMENT It is essential that universities give a clear policy mandate to their technology transfer offices and acknowledge the tensions among frequently stated goals: knowledge dissemination, regional economic development, service to faculty, generation of revenue for the institution, and, more recently, addressing humanitarian needs. Recommendation 1: The leadership of each institution—president, provost, and board of trustees—should articulate a clear mission for the unit responsible for IP management, convey the mission to internal and external stakeholders, and evaluate effort accordingly. The mission statement should embrace and articulate the university’s foundational responsibility to support smooth and efficient processes to encourage the widest dissemination of university-generated technology for the public good. Whether the primary emphasis is on global, national, regional, or local benefits is likely to depend significantly on the nature of the IP and vary with the type of institution (public or private), its history, research intensity, primary sources of financial support, and educational characteristics. This places IP-based technology transfer squarely within the university’s core mission to advance discovery and learning and to contribute to the well- being of society while recognizing institutional differences. Patenting and licensing practices should not be predicated on the goal of raising significant revenue for the institution. The likelihood of success is small, the probability of disappointed expectations high, and the risk of distorting and narrowing dissemination efforts great. Nonetheless, in the rare case where significant revenue is generated, universities should have a plan in place for handling and distributing such gains. Successful technology transfer requires involvement of a variety of stakeholders, such as faculty inventors, students (who may also be inventors), representatives of other parts of the institution and community involved in economic development, and the relevant business and investment communities. All can contribute to the development of appropriate strategies and practices and the identification of new opportunities. Inevitably, disagreements will arise among participants in the process and the university administration may need advice on how to resolve disputes. Recommendation 2: Universities with sizable research portfolios should consider creating a standing advisory committee composed of members of the faculty and administration; representatives of other business development units in or affiliated with the institution such as business incubators, research parks, proof-of-concept centers, and entrepreneurial education programs; members of the relevant business and investment communities; and, if appropriate, local economic development officials.

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MANAGING UNIVERSITY INTELLECTUAL PROPERTY 5 The committee should meet regularly to help the technology licensing unit elaborate practices consistent with the institution’s goals and policies, consider how best to exploit inventions where the path to wide availability and broad public benefit is not clear, and identify new opportunities. A separate committee of faculty, employee, and administration representatives (who may or may not also serve on the advisory committee) should be charged with advising on university policy regarding technology transfer and hearing and helping to resolve disputes between inventors and the technology transfer office with respect to the protection and commercialization of inventions. Both the full advisory committee and the internal committee should make recommendations to the provost or other executives of the university. Because of the wide variability among institutions in their resources, the scale and focus of their research efforts, their experience in technology licensing, and not least their missions, there cannot be a single template for technology transfer that all institutions should attempt to model. Moreover, there are technological fields such as information technology, in which aggregation of IP can increase utility and value. As a result, this organizational guidance is general rather than highly prescriptive. Recommendation 3: There is a strong theoretical case and some empirical evidence that the technology licensing unit is more effective when exposed to broader issues in the financing and conduct of research. That objective is best served by locating the technology transfer office in proximity and making it accountable to the university’s research management, for example, reporting to the provost or vice provost for research and allied or integrated with the office of sponsored research. Recommendation 4: Smaller institutions and those with less experience should consider the following options for technology transfer policies and practices: 1. permitting greater outreach by faculty and others who have the experience and inclination to pursue entrepreneurial development of their ideas; 2. inter-institutional agreements—collaborating with larger institutions in the same region or in fields with complementary research strengths or engaged in research collaborations; or 3. outsourcing certain functions to private entities with appropriate skills and contacts, perhaps focused on particular technology fields or markets.

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SUMMARY 6 The latter practices may also be appropriate for larger institutions with IP portfolios in fields such as information technology, where aggregations of patents are often necessary to achieve value. Patenting, licensing, and enforcement practices, too, can vary depending not only on the technology but also on circumstances peculiar to the invention, business opportunity, licensee, and institution. As a general matter, however, Recommendation 5: Universities should pursue patenting and licensing practices that, to the greatest extent practicable, maximize the further development, use, and beneficial social impact of their technologies. More specifically, the committee supports an informal, evolving set of good practices originally articulated by several university leaders and endorsed by the Association of University Technology Managers. Recommendation 6: This committee reviewed the “Nine Points to Consider in Licensing University Technology” and endorses the guidelines most closely related to its charge:1 • Universities should reserve the right to practice licensed inventions and to allow other nonprofit and government organizations to do so. In most cases this should not require a negotiated licensing agreement, although notice of intent to use the invention and awareness of any terms and limitations on use may be required through use of an online click-through license or other simple mechanism. • Universities should also endeavor to structure licenses, especially exclusive licenses, in ways that promote investment, diligent development, and use, with milestone criteria to back up such requirements. • Universities should strive to minimize the licensing of “future improvements.” • Universities should try to ensure broad access to research tools. • Universities should anticipate and do their best to eliminate conflicts of interest associated with technology transfer. • In cases where there is a market for the sale of unlicensed patents, universities should try to ensure that purchasers operate under a business model that allows for commercialization rather than a model based on threats of patent infringement litigation to generate revenue. • Universities should be careful to avoid working with private patent aggregators whose business model is limited to asserting patents 1 Unlike the drafters of the “Nine Points,” this committee did not consider the relationship between licensing patents and compliance with national security export controls.

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MANAGING UNIVERSITY INTELLECTUAL PROPERTY 7 against established firms rather than seeking to promote further development and commercial application of the technology. • Universities should try to anticipate which technologies may have applications that address important unmet social needs unlikely to be served by terms appropriate for commercial markets and to structure agreements to allow for these applications. The principal examples are technologies suited to meeting the agricultural, medical, and food needs of developing countries. Enforcement of IP rights against suspected infringers should be approached carefully to protect the institution’s resources and reputation. Recommendation 7: A university’s decision to initiate legal action against an infringer should reflect its reasons for obtaining and licensing patents in the first instance. Examples include • contractual or ethical obligations to protect the rights of existing licensees to enjoy the benefits conferred by the licenses; • disregard by infringer of scientific or professional norms and standards, such as use of medical technologies outside standards of care or professional guidelines; and • disregard by an infringer of the institution’s legitimate rights, for example, as evidenced by a refusal to negotiate a license on reasonable terms. One burden in technology transfer efforts stems from difficulties in accessing proprietary research materials, whether patented or unpatented— difficulties that seem likely to be related to scientific as well as commercial competition. Concern over the flow of research materials—which may be critical inputs for the success of a research project—is not new; nor has it gone unaddressed. The research tool guidelines developed and published by the National Institutes of Health (NIH) address the process of materials exchanges, and NIH also has developed model Material Transfer Agreements (MTAs). However, facilitating voluntary exchanges of materials among researchers requires further attention and effort on the part of research sponsors and universities. Recommendation 8: To facilitate the exchange of scientific materials among investigators, especially those engaged in nonprofit sector research, research sponsors should explicitly encourage and monitor compliance with requests for materials. Also, industry research sponsors should explicitly allow requests by other academic scientists for materials developed in the course of studies they have sponsored at a university. Moreover, technology transfer offices should in the future either

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SUMMARY 8 • cease requiring use of Material Transfer Agreements when their investigators and colleagues at other nonprofit research institutions are exchanging non-hazardous or non-human biological material for in vitro research, or • use only the Uniform Biological Material Transfer Agreement (UBMTA) or the Simple Letter Agreement (SLA) recommended by the National Institutes of Health. NIH should reiterate its support of these options, monitor the actions of grantees and contractors with regard to material sharing, and, if necessary, require compliance with this policy. Industry sponsors should follow similar practices, encouraging material exchanges and refraining from demanding overly restrictive conditions. University technology transfer and sponsored research offices should discourage investigators from entering into sponsored research agreements where the terms governing material exchanges between nonprofit institutions deviate from this policy. Launching a stand-alone firm may be the best option for commercializing a new technology, particularly when its use would displace existing methods, but the conditions for success in this endeavor extend well beyond securing and licensing IP rights to include reasonable assurance that the technology addresses a market need, developing a viable business plan, and attracting investment capital and managerial talent. Recommendation 9: Universities engaged in licensing technologies to a new enterprise should ensure that a process is in place not only for securing IP protection but also for evaluating whether the technology is more appropriate for development and commercialization by a start-up rather than an established firm and for determining that the requisite assets for the start-up’s viability are in place or in process. These assets generally include a clear conception of market need, a vetted business plan, investment capital, and management with appropriate skills. In some universities, diverse units might contribute to creating some of these assets. In other cases, they are largely handled externally. Regardless of the extent of the university’s involvement, the technology transfer office is usually only one source of the expertise needed to make these judgments, and it should be prepared to collaborate with others. To the extent possible, the university administration should try to ensure that the key inputs are available and coordinated. The technology transfer office can enhance the cooperation of faculty, staff, and student researchers and contribute to entrepreneurial success by streamlining the licensing of new ventures. Recommendation 10: Universities seeking to encourage entrepreneurship should consider instituting an expedited procedure and more standardized

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MANAGING UNIVERSITY INTELLECTUAL PROPERTY 9 terms for licensing university-generated technology to start-up enterprises formed by faculty, staff, or students of the institution. The decision to extend such a license should depend on the existence of a vetted business plan, absence of conflicts of interest, and evidence that the principals, per Recommendation 9, have sought out competent managerial and other expertise to enhance the enterprise’s commercial viability. There may be circumstances justifying the university’s departure from the standardized, expedited procedure for specific inventions or inventors. However, both the conditions and the grounds for discrimination should be articulated ex ante to avoid arbitrariness in the process, align expectations, and make the process as efficient as possible. With respect to a university’s equity stake and/or royalty rates, these terms are likely to vary from institution to institution and from one technology field to another, but they should reflect sensitivity to the exigencies facing start-up enterprises in their earliest phases, and they should provide for predictability and simplicity with a view toward reducing transaction costs that may be especially burdensome for prospective entrepreneurs with limited time and resources. This recommendation is intended to support venture creation as a principal vehicle for technology transfer for social good and, to this end, is also intended to encourage staff cooperation with the technology transfer office, facilitate cooperation among elements of the support structure for entrepreneurship, and result in more accurate reporting of entrepreneurial activity. Finally, negotiating the terms of IP arrangements with private sponsors often has been perceived by observers to be accompanied by friction and delays. This has not been systematically documented, but it has been the subject of ongoing discussion in various university-industry forums. There are now some exceptions to the norm of university ownership and licensing for a fee that should be evaluated in operation but that in the meantime merit consideration to facilitate private-sector investment in university research. Examples include the following: • Corporations offer and universities accept a percentage premium on research contracts in lieu of negotiating future royalty terms. • For work that does not represent leading-edge, knowledge- enhancing research, some universities give corporate sponsors title to results. • Universities grant corporate sponsors royalty-free nonexclusive licenses to research results where the company pays the full cost of the research in question. Recommendation 11: University technology licensing and sponsored research offices should explore arrangements with private research sponsors that promise to obviate the often protracted process of negotiating licensing terms, the principal source of friction and delay in reaching agreement.

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SUMMARY 10 ENSURING EVALUATION AND ACCOUNTABILITY At the institutional level, there should be a process in place for evaluating the technology transfer function. The process should involve consultation with key stakeholders and use of performance measures that include, for example, the length of time to negotiate contracts, the number of technologies being promoted at any one time, and the number of contacts made in the process of marketing them. Recommendation 12: Universities should periodically review the operations of their technology transfer office in a manner similar to the evaluation of academic and administrative units. This could involve the formation of a visiting committee with members drawn from other institutions’ technology transfer offices generally recognized as high performing; members of the relevant business and investment communities; and representatives of research sponsors, faculty, and economic development organizations. At the national level, data collection should focus on placing IP-based transactions in the context of knowledge dissemination broadly defined and attempt to capture the social and economic impacts of technology transfer. Recommendation 13: Principal university and professional organizations and federal science agencies should coordinate efforts to develop a more balanced set of measures of total university knowledge exchange with the private sector to improve understanding of the process and its performance. This should result in a manageable set of questions incorporated in the National Science Foundation’s annual survey of higher education institutions’ expenditures on research and development and in other private surveys. To the extent possible, the responses should be capable of being linked to other data sets on research outputs, new business creation, and industrial performance. Although the Bayh-Dole Act is effective in its primary purpose, its implementers have failed to establish a stable, effective framework for government oversight. By statute and in practice the role of the Department of Commerce has been limited to developing implementation regulations, reporting to Congress, hosting an interagency working group, and encouraging some consistency in practice, and even these functions have been moved around the Department from time to time. Recently, they were assigned to the National Institute of Standards and Technology (NIST). Recommendation 14: There should be a clear assignment of federal government oversight responsibilities, perhaps by Executive Order, including

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MANAGING UNIVERSITY INTELLECTUAL PROPERTY 11 • ensuring consistent implementation of federal technology transfer laws by all agencies; • reviewing agency diligence and actions with respect to Determinations of Exceptional Circumstances, government use rights, and exercise of march-in rights; • revisiting the Department of Commerce regulations implementing several provisions of the Bayh-Dole Act, including the conditions for access to and use of data gathered about inventions; • heading an interagency committee on technology transfer that would, for example, evaluate and develop a government-wide position on proposed changes to the Act or system; and • reviewing with other agencies and with representatives of research universities and relevant professional groups the data that should be collected from universities. To play an effective role, the oversight unit needs to extend its outreach not only to other federal research agencies but also to the university research community. Effective oversight relies on the availability of relevant data, for which the NIH iEdison database services as a central repository, but institutional reporting has been judged by the Government Accountability Office to be incomplete and access to the data is severely restricted. Recommendation 15: Federal research agencies should reinvigorate the requirement that institutions reliably and consistently provide data to iEdison on the utilization of federally funded inventions, including licensing agreements and efforts to obtain such utilization. Such data should be available for analysis by qualified researchers who agree not to disclose the parties to or terms of particular agreements.

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