Thursday, April 24, 2014

Tech-Transfer Strategy

Tech Transfer Strategy

Photo by italianestro / Shutterstock.com

 

Since 1980, the transfer of technologies developed at research universities to private industry has become big business in the U.S.

During 2003 alone, tech-transfer revenues approached $1.3 billion, and more importantly, the economic benefits that were derived from the technologies that were transferred into the private sector are estimated to have exceed $41 billion in value.

Tech-transfer, as a university enterprise, only came into existence with the passage of the Bayh-Doyle Act in 1980. The Bayh-Doyle legislation created an emerging industry by transferring ownership for any intellectual property that was developed with federal research funding to the developing institution. This transfer of ownership encouraged universities both to focus their research on commercially relevant topics, and granted them the right to license or sell their new found intellectual property rights to industry for further development and profitable commercialization. Thus, Bayh-Doyle cleared the way for tech-transfer to become a factor in both driving the U.S. economy and contributing to the greater social good.

Now, twenty-five years later, the fruits of the legislation have become well-established as universities become increasingly adept at developing and transferring their inventions into and for society. For example, prior to 1980, research institutions filed fewer that 250 patents per year for their new inventions, while today, nearly 4,000 such patent applications are filed each year by U.S. universities.

Clearly, the concept of taking innovation from academia to the marketplace has now become deeply ingrained in the American research university tech-transfer system.

The Expanding Tech-Transfer Business Model

The basic business model for university tech transfer is to encourage, capture, and commercialize the discoveries, inventions, and technologies that emerge from federally-funded university research, thus providing a constant stream of new technology to the U.S. economy.

Tech-transfer organizations also undertake their activities to generate revenues for their respective institutions, which are then used to fund further beneficial research and the various accelerating costs of higher education.

To date, the gold standard among tech-transfer institutions has been set by Columbia, which generated royalty streams in excess of $178 million during 2003. By contrast, according to the Association of University Technology Managers, Stanford University, number two in revenues, received $61 million in annual royalties during 2003.

These institutions, and others like them, have been instrumental in providing industry and society with many of the technological and scientific aspects of modern life. For so doing, they have enjoyed the financial rewards of their commercial success.

Ground-breaking discoveries at Columbia during the early 1970s by Richard Axel, coupled with those at Stanford by Stanley Cohen, and Herbert Boyer from the University of California, opened the doors to recombinant DNA and the vast biotech industry of today.

A data search algorithm created by Larry Page, one of the later founders of Google, similarily opened the doors to a web search industry that today is worth billions of dollars.

These are classic examples of university tech-transfer. Of course, the majority of the technologies developed each year by universities aren’t as visible within the contemporary world, but even the lesser known instances continue to drive the technological critical mass of the U.S. society. Thus, tech-transfer has become increasingly essential to the economy as an incubator for ideas and technologies that may not otherwise have become available.

Consequently, the pressure is intense at university tech-transfer offices to establish and enhance revenue streams with intellectual assets, while simultaneously providing technologies that are necessary to drive economic development.

Adopting an Intellectual Asset Management Approach

Traditionally, the tech-transfer business model has focused upon licensing technologies that are of commercial significance and creating spin-off start-up companies. As this focus remains the most important measure of success for tech-transfer activity, the ability of intellectual asset management strategies to enhance revenues and deliver competitive advantage has inspired many university tech-transfer offices to adopt a more intellectual asset based approach to shepherding their technology and optimizing their initiatives.

As well, some tech-transfer organization are adopting a more aggressive and “corporate” approach to leveraging these intellectual assets per se to create and develop new ventures from within the university context.

While the focus at tech-transfer offices has been and will remain upon patents and licensing technologies, professional intellectual asset management strategies are broadening the purview of tech-transfer offices to bring greater strategic sophistication to practices and business initiatives.

While the tech-transfer business model has been built around patents and the traditional approaches of “carrot,” and sometimes “stick” licensing, there are other intellectual assets and business arrangements in the intangible asset portfolio that tech-transfer organizations could deploy to fulfill their missions.

Technology and Standards Pools

For example, organization that bundle patents and technologies for inclusion in technology pools may open doors to new sources of ongoing revenues and opportunities to participate in paradigm shifting industry opportunities. Such “pools” that accumulate technology related to specific technologies provide opportunities for revenues based on the combined set of holdings that often exceed royalties otherwise available to unbundled patents.

Yale University gained fame for creating a technology pool with a set of patent holdings based on the anti-HIV drug named Zerit. That pool then backed a securitization wherein Yale traded away the right to the annual royalties in the pool for an upfront payment of $150 million which they then used to fund a new medical complex for the university.

Intellectual property and technology holdings can also often be used to collateralize or securitize innovatives, or to create hybrid financial instruments for financing purposes. For example, patent and trademark sales and license-back arrangements can provide immediate and compounded returns in excess of bare royalty arrangements, or credit enhancements that support non-tech-transfer university financing activities, as demonstrated in the Yale University example.

Such pools also deliver social good, as they may assemble related patents to create standards for industry development that benefit all concerned, and allow the emergence of new industries or technologies that would not otherwise be possible. In a case where technology has become locked up with cross-licenses preventing further meaningful development, technology pools can open the doors to industry growth, for once a standard is adopted, all of the patents within the pool increase in value.

Currency for Strategic Alliances

Technological holdings can also be used as currency in a strategic alliance much as it is presently used as the founding know-how for spin-off startup companies. Start-up companies are a very significant aspect of the tech-transfer process in America. The Association of University Technology Managers reports that during 2003, 374 startup companies were formed with university technology, bringing the total number of startups formed since 1980 to 4,081 companies, with 59% of the companies still operational today. Quite a record.

Because startups rarely have positive cash flow, often for years, equity is the only currency that startup companies have to offer the licensor organization.

University Brand-Building

Tech-transfer organizations that view their holdings more broadly than as being patents and technology, and are shifting their gestalt to “intellectual property,” “intellectual assets,” or even “intellectual capital,” are opening themselves to optimizing a wider range of knowledge-based university assets.

Trademarks and copyrights offer opportunities for branding and unbundling and re-bundling university assets sets. Corporate social responsibility, increasingly the brand strategy de rigueur in Corporate America, when understood as institutional or “university social responsibility,” can represent a tremendous opportunity to create brand equities which may result in greater institutional recognition, higher levels of enrollment, a greater role in regional economic development, and increased inflows of outside philanthropy.

Deploying knowledge per se, represents a powerful new approach to building institutional goodwill, while simultaneously benefiting society. MIT, and to a lesser extent Carneige Mellon, have embarked upon an “open sourcing” approach to providing many university courses at no cost to interested parties through online resources.

To date, the gold standard among tech-transfer institutions Operating under a creative commons approach, and with the espoused purpose of “intellectual philanthropy,” MIT had made 1,000 of its 1,800 university courses available online, in varying media, and for free. While rationalizing their activity publicly as in fulfillment of their university mission of disseminating knowledge and providing education, it has reportedly improved the reputation of the university, greatly enhanced collaboration between their existing faculty and the faculty of other institutions of higher learning, favorably influenced the decision of many new students to enroll at MIT, and driven increased philanthropy, indicative of the broad financial and knowledge management benefits that are possible to innovative thinkers within the world of tech-transfer that think about knowledge management and brand-building strategies.

In Summary

Whatever strategies tech-transfer organizations adopt to fulfill their charters within the modern university world, strategies like building the brands of tech-transfer offices is a recognition that not all tech-transfer organization are equal, that some excel in their financial performance or technological domain, and that as more players enter the market for technology the players need to differentiate themselves and begin to compete with one another in the technology marketplace to increase their opportunities for success.

Print Friendly
Share