W. Mark Crowell
North Carolina State University
It would be presumptuous at best to expect any American specialist to develop recommendations for Russian institutions and officials on the basis of a cursory and rapid review of technology development activities in Moscow and St. Petersburg. Rather, the challenge is to focus on U.S. experiences that may have relevance to the Russian situation and to highlight approaches that may be helpful to Russian institutions seeking to increase their technology commercialization activities. These experiences and approaches are the context for this paper.
Extensive transfer of technology from university and nonprofit laboratories to the commercial sector is a relatively recent phenomenon in the United States. Although a handful of universities have been involved in technology transfer for many years, widespread university activity in technology commercialization began only with the passage of the Bayh-Dole Act in 1980. This legislation enabled universities, nonprofit research institutions, and small businesses to own and patent inventions developed under federally funded research programs. One purpose of the act is to provide incentives for universities to patent and commercialize their research discoveries and for industry to make the long-term, high-risk investments at universities and other institutions that are necessary for product development and introduction.
The Bayh-Dole Act has served as a catalyst for the development of patenting and technology transfer as new university functions, for the emergence of a new discipline of professional university technology management, and for the encouragement of greatly expanded university interest in economic development. Before passage of the act, fewer than 250 patents were issued to U.S. universities each year; and university research discoveries were seldom commercialized for the public's benefit. Today, U.S. universities obtain an average of almost 1,500 patents per year. Moreover, more than 200 universities are engaged in technology transfer, eight times the number in 1980. These universities have one or more specialists who are members of the Association of University Technology Managers.
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--> Commercializing University Technology W. Mark Crowell North Carolina State University It would be presumptuous at best to expect any American specialist to develop recommendations for Russian institutions and officials on the basis of a cursory and rapid review of technology development activities in Moscow and St. Petersburg. Rather, the challenge is to focus on U.S. experiences that may have relevance to the Russian situation and to highlight approaches that may be helpful to Russian institutions seeking to increase their technology commercialization activities. These experiences and approaches are the context for this paper. Extensive transfer of technology from university and nonprofit laboratories to the commercial sector is a relatively recent phenomenon in the United States. Although a handful of universities have been involved in technology transfer for many years, widespread university activity in technology commercialization began only with the passage of the Bayh-Dole Act in 1980. This legislation enabled universities, nonprofit research institutions, and small businesses to own and patent inventions developed under federally funded research programs. One purpose of the act is to provide incentives for universities to patent and commercialize their research discoveries and for industry to make the long-term, high-risk investments at universities and other institutions that are necessary for product development and introduction. The Bayh-Dole Act has served as a catalyst for the development of patenting and technology transfer as new university functions, for the emergence of a new discipline of professional university technology management, and for the encouragement of greatly expanded university interest in economic development. Before passage of the act, fewer than 250 patents were issued to U.S. universities each year; and university research discoveries were seldom commercialized for the public's benefit. Today, U.S. universities obtain an average of almost 1,500 patents per year. Moreover, more than 200 universities are engaged in technology transfer, eight times the number in 1980. These universities have one or more specialists who are members of the Association of University Technology Managers.
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--> This paper reviews salient points of the Bayh-Dole Act and focuses on those provisions that have been particularly helpful in promoting university involvement in technology transfer. A discussion of the current practice of university technology transfer emphasizes provisions in university intellectual property policies that, with the act, serve to promote and provide incentives for faculty and institutional patenting and licensing activity. Training activities and programs available to university technology transfer professionals are summarized. Finally, statistics reflecting the growth and sophistication of university involvement in technology commercialization are provided. The Bayh-Dole Act The Bayh-Dole Act and its amendments provide the foundation on which current university technology transfer activity is based. As noted, the act was passed in 1980 (Public Law 96-517). It was amended in 1984 (Public Law 98-620). The following aspects of the legislation are notable: Bayh-Dole provisions apply to all inventions conceived or first introduced into practice as a result of a project funded either in whole or in part by the federal government. Universities must report each new invention to the sponsoring government agency within two months of disclosure of the invention to the university. The university must decide whether it wishes to retain title to the invention within two years of reporting the invention to the sponsoring agency. This time is shortened if a publication has triggered the one-year grace period for patent protection, as provided in the U.S. law. If this period has been triggered, the university must decide whether to retain title to the invention at least sixty days before the end of the grace period. Within one year of electing to retain title, the university must file a patent application for the invention. Within ten months of filing a U.S. patent application, the university must report to the government sponsor whether it wishes to file foreign applications. If the university fails to proceed on these fronts, the government may proceed with such filings on its own behalf. The federal government is given a nonexclusive, royalty-free, irrevocable license to use the invention to which the university retains title or have the invention used on its behalf. Any licensee holding an exclusive license for sales of products in the United States must substantially manufacture the product in the United States. This rule can be waived by the sponsoring agency if the university can show that a reasonable effort was made to find a company that would manufacture the product in the United States. Universities must give preference to small businesses in their licensing activities. Diligence is required, however: the small firm must be capable of properly developing the invention. A large company that has provided some
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--> of the research funding leading to the invention may become an exclusive licensee. Universities cannot assign their rights in inventions to third parties, with the exception of firms hired by the universities to manage patent activities on their behalf. The inventor of a licensed invention must receive a share of any royalties received by the university as a result of the license agreement. After providing the inventors' share and covering expenses, the remaining income must be used by the institution to support research or education. March-in rights are retained by the federal government—that is, the government can require the university to grant a license to a third party if the invention has not been properly developed or commercialized within a reasonable time period. Bayh-Dole has been extremely successful in promoting university and faculty involvement in patenting and licensing activities. The reporting and march-in requirements serve to ensure that the university, as owner of the intellectual property, exercises due diligence to identify, evaluate, protect, and commercialize intellectual property, thus helping to address issues related to public benefit from government research funds. By requiring that royalties be shared with inventors and by allowing universities to own and license inventions, Bayh-Dole encourages participation by faculty members and their institutions in patenting and licensing activities. By allowing for exclusive licenses, the act rewards the high-risk investment that industry must make to develop technology and pursue product development. Finally, by requiring a preference for small business, the act recognizes the importance the government has placed on the economic development potential of university inventors' involvement in technology transfer. Technology Transfer Within U.S. Universities With the passage of Bayh-Dole and the introduction of patenting and licensing functions within research universities, a new discipline—university technology management—emerged almost overnight. Most universities involved in technology transfer created institutional policies for intellectual property, established patent committees, and adopted other mechanisms to assist the development of management structures and processes for carrying out the new activities. The Bayh-Dole Act, with its clear and rational provisions, provided a good framework for the development of university policies that deal with ownership of inventions, royalty-sharing and distribution, freedom of publication, invention evaluation and management, and conflict of interest.
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--> Ownership Under Bayh-Dole, universities may not transfer to other institutions ownership of inventions developed in whole or in part with government funds. Accordingly, most universities have taken the position that they own all intellectual property, regardless of funding source, developed by their employees and students using their laboratory facilities and equipment or developed under a grant or contract they administered. The underlying rationale of Bayh-Dole with respect to this issue is that invention ownership is necessary to uphold other key principles, including preference for small business and incentives for participation in the patenting and licensing process. Other public policy issues may be important to the university in pursuing the commercial development of inventions not developed with federal funds. As with federally funded inventions, ownership is a key requirement to ensure that the university has the leverage needed to protect and pursue the technology transfer objectives it deems important. Royalty-Sharing and Distribution Bayh-Dole requires that royalties from licensing be shared with the inventors and that remaining income, after payment of expenses, be directed toward the support of research and education within the university. Recognizing the need to provide an incentive and reward structure for faculty to participate in the technology transfer process, many universities have included generous sharing formulae within their institutional patent policies. Typically institutions share 35 to 40 percent of royalties with inventors, and some share as much as 50 percent. As a further incentive, many universities allocate additional royalty shares to departments, inventors' laboratories, schools, or other entities within the universities. This approach provides incentives for these entities to support and promote technology transfer, and it ensures compliance with Bayh-Dole provisions requiring that royalties, after payments to inventors, be used to support research and education. Freedom to Publish Even with the advent of Bayh-Dole and intensified university interest in technology transfer, the basic reward structure within academic institutions remains traditional publications. The publication issue is important and challenging for many reasons. Faculty involved in patenting and technology transfer typically interact closely with industry, which often prefers to keep information as trade secrets for as long as possible. Further, both universities and their corporate partners fully understand the impact of premature publication on the availability of patent protection. Therefore, careful and
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--> realistic publication provisions are required in patent policies to protect the ability of the university to publish as it sees fit while providing reasonable and adequate safeguards for pre-publication review of proposed publications for patentable material. Invention Evaluation and Management With the increase in activity in patents and technology transfer, many universities have found it necessary to incorporate into their patent policies specific provisions dealing with the mechanism for properly assessing and managing university-owned inventions. Often this mechanism takes the form of a faculty-based intellectual property committee. Its purpose is to evaluate invention disclosures to the university and to assist the university technology manager in developing appropriate management plans for specific inventions. Some institutions have attempted to develop objective, quantifiable invention assessment instruments; the success of these instruments is the subject of serious debate and scrutiny. Regardless of the mechanism, assessment has become increasingly important because of its resource allocation implications. With increasing numbers of invention disclosures and patent activities and the high costs associated with such undertakings, initial assessments or "triages" of inventions are becoming important to maintain adequate resources for the pursuit of truly important or breakthrough discoveries. Conflict of Interest Increased involvement in technology commercialization has resulted in a heightened awareness of, and opportunity for, conflicts of interest. Many universities have addressed these conflicts within their intellectual property policies. Issues of importance include manipulation of research results for personal enrichment, inappropriate use of university-owned facilities and equipment, and improper influencing of graduate students to pursue research for profit rather than for knowledge. As universities have become involved in the creation of start-up companies to commercialize their technologies, often resulting in the acquisition of stockholdings by the university and the inventors, these issues have become more important and complex. Universities that have developed good conflict of interest policies often find aggressive technology transfer initiatives easier to pursue because they know the ground rules for use of research results, university-owned facilities and equipment, and graduate students.
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--> Training of University Technology Managers With the introduction of technology transfer as a new function within the university and the emergence of the new profession of university technology management, issues related to training and professional development have emerged. These issues fall largely within the domain of the Association of University Technology Managers (AUTM), an organization of specialists involved in university technology transfer from more than 200 educational institutions in the United States and Canada. In addition, some business schools are beginning to offer training in university technology transfer management, but these programs are rather scarce and typically are not involved in outreach to or continuing education for practicing university technology managers. AUTM is a professional development organization known worldwide for its achievements in the teaching of technology transfer and intellectual property management principles and practices. Activities of AUTM include: Annual conferences, which typically attract almost 1,000 registrants and which offer 3 or more days of lectures, workshops, discussion and special interest groups, and networking opportunities. An annual basic licensing course and an annual advanced licensing course for newcomers and experienced professionals, respectively. The basic course is designed to teach the basic principles of negotiating technology license agreements to individuals with little or no experience in the field. The advanced course is aimed at bringing together experienced practitioners for exploration of specific topics related to the practice of technology transfer and professional development. Regional meetings are held each summer. These meetings are designed to bring smaller groups of technology transfer professionals together for more informal educational and networking opportunities. Preliminary discussions about the possibility of organizing a regional meeting for European or Asian members of AUTM are underway. Special training courses, such as the 1997 conference organized in Amsterdam with European organizations on ''U.S. Methods in Technology Transfer/Best Practices," are sometimes organized by AUTM on request. The Organization for Economic Cooperation and Development (OECD) is considering sponsorship of a similar conference in Russia with AUTM participation. The author is chairman of AUTM's International Members Committee and is participating in the preliminary discussions with the OECD. The AUTM Journal is published semi-annually and includes invited articles on various topics by experienced practitioners. The AUTM Technology Transfer Practice Manual was published by AUTM as a "how to" reference guide for university technology transfer offices. The manual is a massive three-volume set that includes recommended basic and standard agreements for different types of
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--> technology transfer deals (for example, licenses, options, research agreements, confidentiality agreements). Diskettes that contain sample agreements are provided with the manual. Trends in U.S. University Technology Transfer In the wake of the Bayh-Dole Act and the growth and maturation of university technology transfer practice in the United States, with the development and implementation of informed university policies addressing various matters pertaining to technology transfer, and with the emergence of AUTM, what has been achieved? An analysis by AUTM (AUTM Licensing Survey FY 1991–FY 1995) has shown that the licensing of university inventions adds more than $21 billion to the U.S. economy and supports an estimated 180,000 people each year. In 1995 alone, university technology licensing led to the formation of 223 new companies. AUTM reports that since 1980 university technology transfer has led to the formation of 1,633 new companies. Statistics from a AUTM survey indicate the extent of U.S. university involvement in technology licensing: Activity FY 1995 Cumulative % Change FY 1991–95 Invention Disclosures 7,427 +29% Total U.S. Patent Applications Filed 5,100 +127% New U.S. Patent Applications Filed 2,373 +53% Licenses and Options Executed 2,142 +66% Licenses and Options Generating Royalties 4,272 +72% Gross Royalties $274 million +108% Legal Fees Expended $60 million +82% Total Sponsored Research Expenditures $17,212 billion +29% Research Expenditures, Federal Funds $11,381 billion +23% The dramatic increase in U.S. technology transfer and business development since the advent of Bayh-Dole, particularly during the recent five-year period reported by the AUTM survey, reflects a process that is working well and that is meeting many university technology transfer and economic development objectives set by government and university officials. The U.S. experience has focused on the development of a national framework and uniform policy within which technology transfer can be pursued; the emergence of institutional patent policies designed to manage in a rational fashion the many issues that arise within a university setting; and the emergence of a profession,
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--> with its own organization and journal, to influence expanding activities in this sphere. Certain aspects of these experiences perhaps could be adapted to the legal, policy, and institutional framework within which Russian institutions must operate, thereby helping to influence positive outcomes for those interested in commercializing technology developed at research and educational institutions.