Technology Transfer between Public Research and Industry

1
Technology Transfer between Public Research and
Industry Laws, Models and Policy Options

• Thomas Gering

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Technology Transfer between Public Research and
Industry Laws, Models and Policy Options

• The views and opinions expressed in this
  presentation are those of the author and they do
  not represent the position of the European Joint
  Research Center or the European Community at
  large

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Intellectual Asset Management in the Public
Research Enterprise

• Maximizing Public Good (social return) or
  maximizing financial (private) return
• Internationally, the leaders in tech transfer
  have managed to create revenues of up to 5 of
  their research expenditure
• gt There are in fact social returns that should be
  weighed in the overall analysis

4
Intellectual asset management by PROs
Link to Venture Capital
Technology Pool
Coop. RD mature companies
Licensing
Start-Up Companies
Non-excl. Who owns what?
Exclusive Joint Venture Equity
Quasi-excl. Field of Use
5
Which way should Public Research Organisations
PROs (incl. universities) go ?

• Historically, little co-operative RD in the US
• More focus on licensing and start-ups (beginning
  in about the mid 1980s) an effect of Bayh-Dole
• In Europe much more interest in project based
  co-operation with the private sector gt one
  example is the European Framework Research
  Programmes
• However, limited IP and licensing infrastructure
  at European PROs
• In recent years, both sides are trying to adopt
  some of the features of the other model

6
Which way should Public Research Organisations
PROs (incl. universities) go ?

• Historically, little co-operative RD in the US
• Throughout most of the 1960s and 1970s, the
  business community was the source of 3 of total
  research performed in universities.
• By the mid 1980s this had risen to 6 and in
  the 1990s to 7
• Source Wendy H. Schacht, CRS Report for
  Congress RD Partnerships and IP, Implications
  for US Policy, December 2000

7
Which way should Public Research Organisations
PROs (incl. universities) go ?

• The preferred mechanism of German industrial
  support for academic research is a research
  contract with clearly defined deliverables. In
  the US, most industrial funding of academic RD
  takes the form of grants, more open-ended
  arrangements without specifically defined
  research deliverables...
• Source Technology Transfer Systems in the
  United States and Germany, Lessons and
  Perspectives, German American Academic Council
  Foundation, National Academy of Sciences 1997

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Which way should Public Research Organisations
PROs (incl. universities) go ?

• .the panel judges university-industry research
  interaction in Germany to be more heavily
  oriented toward short-term, incremental problem
  solving than university-industry linkages in the
  United States.
• Source Technology Transfer Systems in the
  United States and Germany, Lessons and
  Perspectives, German American Academic Council
  Foundation, National Academy of Sciences 1997

9
Which way should Public Research Organisations
PROs (incl. universities) go ?

• Some European Research Universities now receive
  up to 40 percent of their research budgets from
  private sources on a project contract basis
• Example RWTH Aachen
• Total budget (excl. hospital) 367 Mio
• Research Budget 142,5 Mio
• Source RWTH Drittmittelreport 2003

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Which way should Public Research Organisations
PROs (incl. universities) go ?

• This particular university currently lists as
  assignee (or co-assignee) on 42 patents
• Hits 42 (Total hits 42)   
• 2 DE000020313514U1 DE Chirurgische
  Haltevorrichtung   
• 3 DE000019850026A1 DE Verfahren und Vorrichtung
  zur Herstellung texturierter Garne aus ...   
• 4 DE000019813887A1 DE Verfahren und Vorrichtung
  zur Herstellung von Nähnähten   
• 5 DE000019750523A1 DE Verfahren zur Herstellung
  verrippter Bauteile nach der Gasinjektionstechnik
  ...   
• 6 DE000019715630C2 DE Vorrichtung und Verfahren
  zur Bestimmung rheologischer Werkstoffdaten 
• Source DEPATISnet, German Patent Office

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Which way should Public Research Organisations
PROs (incl. universities) go ?

• Chirurgische Haltevorrichtung 
• ApplicantPA Aesculap AG Co. KG, 78532
  Tuttlingen, DE RWTH Aachen, 52062 Aachen, DE  
• InventorIN 
• Application dateAD 26.08.2003 
• Application numberAN 20313514 
• Country of applicationAC DE 
• Publication datePUB 15.01.2004 
• Priority dataPRC
• IPC main classICM A61B 19/00
• IPC subclassICS F16M 11/12 F16M 11/14  
• IPC additional information on descriptionICA A61B
  1/00 A61B 17/16
• Source DEPATISnet, German Patent Office

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Intellectual asset management Which focus at
RWTH?
Link to Venture Capital
Technology Pool
Coop. RD mature companies
Licensing
Start-Up Companies
Non-excl. Who owns what?
Exclusive Joint Venture Equity
Quasi-excl. Field of Use
13
Which way should Public Research Organisations
PROs (incl. universities) go ?

• RWTH chose Collaborative Research almost as its
  only path to commercialisation
• RWTH is claiming involvement in over 200 start-up
  companies since 1995 but they never held equity
  or any IP that was important to these start-ups gt
  no IP, no licenses
• Source RWTH Drittmittelreport 2003

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Which way should Public Research Organisations
PROs (incl. universities) go ? Some Data on the
US

• Research budget of 200-400 Mio
• Columbia University (407.4 Mio sponsored
  research)
• 191 US patents filed in FY 2002
• 55 new licenses/options in FY 2002
• 155.6 Mio gross license income
• 60 US patents issued
• 8 start-up companies formed
• Source AUTM Licensing Survey 2002

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Which way should Public Research Organisations
PROs (incl. universities) go ? Some Data on the
US

• University of Florida (369.25 Mio sponsored
  research
• 207 US patents filed in FY 2002
• 59 new licenses / options executed
• 31.6 Mio gross license income
• 62 US patents issued that year
• 5 start-up companies formed
• Source AUTM Licensing Survey 2002

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Which way should Public Research Organisations
PROs (incl. universities) go ? Some aggregate
US Data

• Gross license income received 1.337 billion
• 10,866 licenses yielding income
• Invention disclosures received 15,573
• Total US applications filed 12,929
• New US applications filed 7,741
• US Patents issued 3,673
• Start-up companies formed since 1980 4,320
  still operational 2,741
• Source AUTM Licensing Survey 2002

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Intellectual Property Licensing by PROs in
Germany

• Fraunhofer, and to a lesser extent Helmholtz and
  the universities, focus heavily on collaborative
  RD
• IP positions regularly compromised as a
  consequence
• Only Max-Planck (Garching Innovation GmbH) and
  Fraunhofer Patent Center achieved maturity (major
  revenues, involvement in litigation, management
  of big portfolios) in IP licensing
• With the abolishment of the Professors privilege
  in 2002, 18 regional IP licensing companies were
  founded with federal sponsorship
• These companies each work with a number of
  universities in the regions
• These programmes have remained marginal so far
• Both industry as well as some public research
  organisations are trying to undermine these
  activities by the universities

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Patent applications of German PROs

Source Turning Science into Business, OECD, 2003
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Which way should Public Research Organisations
PROs (incl. universities) go ?

• No University licensing data available in Germany
• Reason Up to 2002, licensing was mainly done by
  the individual inventors because of the
  Professors privilege
• However, our 1996 study for the Federal Ministry
  of Science showed that 60 of the inventions
  were assigned to industry partners in most
  cases without or with minimal compensation

Source Becher, Gering, Lang, Schmoch
Patentwesen an Hochschulen, BMBF 1996
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Which way should Public Research Organisations
PROs (incl. universities) go ? - UK

• Commercialisation activities in the university
  sector have substantially increased in the last
  five years
• Many universities only created technology
  transfer offices in the late 1990s
• Staff numbers are still rising by almost 25 per
  annum
• Internationally, the UK lags behind the US in its
  expertise in technology transfer, although the UK
  is ahead of much of the rest of Europe
• Lack of clarity over IP in research
  collaborations
• A minimum of annual investment in research needed
  in order to justify a technology transfer office
  only 25 of UK universities seem to have such
  critical mass, yet 80 are now running their own
  offices
• gt Still struggling with restructuring after BTG
  disappeared as the sole solution in 1985

Source The Lambert Review of Business-University
Interaction, Dezember 2003
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Which way should Public Research Organisations
PROs (incl. universities) go ? Other notable
models

• Chalmers University in Gothenburg, Sweden
• Privatized the whole university now operates as
  an AB
• Technology transfer is a huge operation being
  responsible for all contract research, an
  incubator, a technology park, etc.
• But Sweden lived under a Professors privilege
  system which is still very much defining the
  mindset
• Private IP exploitation company in the incubator
• University of Twente, the Netherlands
• Probably the European University concentrating
  most on spin-off creation very early on (1980s)
• But again, IAM on behalf of the University is not
  at center stage in this effort

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Which way should Public Research Organisations
PROs (incl. universities) go ? Legal basis - USA

• Bayh-Dole Act P.L. 96-517 as amended
• Stephenson Wydler Technology Innovation Act P.L.
  96-418
• Bayh-Dole
• Doing away with 26 different regulations used by
  public US research funding bodies
• For the first time, a uniform policy was
  implemented that provided the contractor with the
  opportunity to elect to retain title to
  inventions

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Which way should Public Research Organisations
PROs (incl. universities) go ? Legal basis - USA

• to replace the existing melange of 26
  different agency policies on vesting of patent
  rights in government funded research.with a
  single, uniform national policy designed to cut
  down on bureaucracy and encourage private
  industry to utilize government funded inventions
  through the commitment of the risk capital
  necessary to develop such inventions to the point
  of commercial application.
• Source House Committee on the Judiciary, 1980

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Which way should Public Research Organisations
PROs (incl. universities) go ? Legal basis - USA

• If contractor retains title, obligation to
  exploit arises reporting requirements
• Although there was university patenting before
  Bayh-Dole (IPAs), patenting and certainly
  licensing rose by about 20 times in the last 20
  years
• Government has march-in rights and can require a
  non-exclusive license for its own purposes
• Just giving ownership to industry contractors
  does not necessarily stimulate use in the markets

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Which way should Public Research Organisations
PROs (incl. universities) go ? Legal Basis

• In the EU, concern that different national laws
  re the ownership and exploitation of IP from
  PROs, especially at universities, may create
  barriers to international collaborative research
• Austria, Denmark, Germany and Norway have
  recently introduced new legislation to grant
  universities title to IP resulting from publicly
  funded research
• In Finland proposals to the same effect
• In Japan and Korea, recent reforms in funding
  regulations to this effect
• These policy trends echo the landmark US
  Bayh-Dole Act of 1980
• Source OECD, Turning Science into Business, 2003

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Which way should Public Research Organisations
PROs (incl. universities) go ? Legal Basis
internationally

• Either there is employer-employee law defining
  ownership (Germany, Austria)
• Or there is just common law/case law/individual
  agreements (US)
• Or there is some regulation in patent law
  defining rights of the employee (UK, France)
• And then there are research sponsorship
  agreements (do not affect employer-employee
  relation but define ownership and exploitation
  framework in projects funded with certain -
  public funds)
• On the European level (research framework
  programmes) such sponsorship agreements can
  become extremely complex as these are generally
  consortium deals involving numerous partners

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Todays Technology Environment

• Key Factors

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The Starting Point Defining Innovation

• Invention v. innovation
• Sustaining v. disruptive innovation (aka
  incremental v. radical)

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Characteristics of Disruptive Technology

• Less profitable in the early years
• May need long periods of time before market
  introduction (health care)
• Need mass market acceptance to achieve full value
• Cheaper, smaller, simpler, more convenient

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The Knowledge Economy

• Protected knowledge now at the core of company
  valuation
• Intangibles are now driving market cap
• Asset Management maintains the lead for up to two
  decades sometimes even longer
• No diminishing returns

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The Knowledge Economy

• In certain industries, patents significantly
  raise the costs incurred by non patent-holders
  wishing to use the idea or invent around a patent
  an estimated 40 in the pharma sector, 30
  for major new chemicals, and are thus viewed as
  important.
• However, in other industries, patents have much
  smaller impact on the cost associated with the
  imitation (e.g. in the 7 15 range for
  electronics) and are considered less successful
  in protecting investment.
• Source Mansfield, Imitation costs and Patents,
  in The Economics of Technical Change, 1981

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Technological Change Technology Push versus
Market Pull
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Technology Push Looking for a Problem
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Intellectual asset management Technology Push
versus Market Pull
Link to Venture Capital
Technology Pool
Coop. RD mature companies
Licensing
Start-Up Companies
Non-excl. Who owns what?
Exclusive Joint Venture Equity
Quasi-excl. Field of Use
35
Speech Recognition what are the real customer
needs? Or as Ozzy said Radio ON!!
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Primary Disruptive Technologies for Next Decade

• Gene Therapy
• Nanotechnology
• Wireless
• Other ??

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Why are Disruptive Technologies Important?
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Importance of radical innovation

• Because it was in disruptive technologies that
  productivity growth was highest over the last 4
  decades
• ICT
• Biotech
• Most of this productivity growth achieved by new
  players, not by existing companies
• PROs well suited to drive radical innovation

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The Technology Transfer Process at PROs
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How to position a PRO in the market

• What is the customer base?
• Are the customers prepared, able and willing to
  do RD collaborations?
• Does this apply to all technology sectors the PRO
  represents?
• Or do you have to use a custom approach in
  different technological fields?

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Intellectual asset management by PROs
Link to Venture Capital
Technology Pool
Coop. RD mature companies
Licensing
Start-Up Companies
Non-excl. Who owns what?
Exclusive Joint Venture Equity
Quasi-excl. Field of Use
42
Local, Regional Customer base

• Mainly SMEs ? High Tech ?
• Multinationals ?
• Incentives available ? Government co-financing ?
• Taxes ?

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Local, Regional Customer base

• What do you do if there is no such thing ?
• Multinationals ?
• Engage in company formation and business
  development ?
• But that changes the requirements completely !

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Requirements

• What is it? Tech commercialization is a parallel
  process of radical and incremental innovation,
  the determination of technical and business
  feasibility, the creation of intellectual assets,
  and the development of a plan to enter the
  market.
• Why do it? To build sustainable companies

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Requirements

• You will only be able to attract investors if
  your Intellectual Asset Management (IAM) approach
  is effective
• IP in general, trade secrets and confidential
  know-how are the building blocks for such an IAM
  programme
• That makes the national legal system re ownership
  and exploitation of PRO results so important gt If
  you cannot manage your assets effectively for the
  sake of the investor you will have no business !

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Conclusions

• Technology Transfer, IP management and
  licensing by PROs has to be seen in the broader
  perspective of how the individual, national
  research and innovation system is structured
• More collaborative research and research
  funding by industry will make it more difficult
  to maintain freedom to operate
• If freedom to operate exists for PROs, mature
  programmes require significant lead time and
  professionalism
• OECD 2003 (Turning Science into Business) On
  average, PROs engaged in Intellectual Asset
  Management need more than seven years to break
  even
• US-Policy considerations Jobs created (more
  than 300000), 3 billion in taxes generated (1
  billion royalties), sourceAUTM

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Thomas Gering Ph.D.

• Thomas.Gering_at_iam-corp.net