Entrepreneurial Trends in University Tech Transfer

Research universities have long engaged in technology transfer ' most since the 1980s or earlier. Academic researchers are a source of significant innovation. Universities have the right (and in some cases the obligation) to patent and exploit such inventions, and patenting university technology is well accepted by most universities and their stakeholders. The recipe was supposed to be simple: patent a handful of inventions from university labs, license them for a comfortable royalty, and sit back and enjoy the revenue.

In reality, the challenges of identifying promising technologies, paying the upfront patent costs, and locating and negotiating with licensees have proven challenging for many universities ' with the result that they never really made it very far down the path to tech transfer glory.

Growing trends in university tech transfer go well beyond the traditional roles of passive licensors or the bygone era of scholastic ivory towers. Universities are embracing entrepreneurship and recognizing the value that their researchers, educational community, and leadership bring to technological development. They are seeking out new opportunities, building new competencies, and fostering technology commercialization. A few have even come to view themselves as the centers of entrepreneurial ecosystems that can catalyze innovation and reshape their regional economies.

This trend toward entrepreneurship has complicated university programs and administrative structures as they relate to technology commercialization. Licensing terms and incentives for faculty, labs, and institutions are in flux. More sophisticated approaches to funding technology development and patenting are increasing, both for direct allocation of funds and through partnerships with public and private investors. Technology incubators and other venture building programs have fundamentally changed the university's role in moving technology from the lab bench to the marketplace. All of these factors may be of great importance to licensing executives, patent attorneys, technologists, investors, and others with an interest in university technology.

Who's In Charge?

There was a time when licensing a promising university technology was a simple matter of contacting the single technology transfer office or IP holding company associated with the university. This same office was usually responsible for monitoring research, collecting invention disclosures, making patenting decisions, overseeing the patenting process, and licensing resulting technologies.

Increasingly, however, in an effort to encourage entrepreneurship, many universities have effectively decentralized these functions: a potential licensee or service provider is now left to identify the specific program and contact points that serve his or her interests. Thankfully, many universities still have a technology transfer office, an industry outreach office, or, at the very least, a web-based directory that provides a starting point for directing interested parties to the program or programs that will most likely serve their needs.

In some cases, such as in the University of California system, a decision was made that the identification of promising technologies, protection of those technologies, and pursuit of commercialization needed to be closer to the faculty and programs generating the innovations. As a result, technology transfer administration has become a function localized in the individual schools and programs. Coordination of some policy, best practices, and benchmarking is still handled through a more centralized administration, but the real decision making and key contacts reside in the specific programs.

In other cases, diverse programs in the business schools, engineering schools, medical schools, individual research departments, technology transfer offices, provosts offices, and even alumni affairs have answered broad mandates for universities to encourage entrepreneurship and commercialization. The level of coordination, cooperation, and, in some cases, competition among these programs varies from university to university. For example, it is possible to have a technology transfer office, business school, and medical school with independent programs to identify and commercialize university technology. As these programs and their personnel compete for resources and recognition, they may not always communicate or see eye to eye.

The diversity of programs is not surprising given the increased focus on proactive business development, creative finance, and generation of high growth startups and spinouts that were not the traditional bailiwick of technology transfer offices or research oriented programs. Some tech transfer offices are now simply negotiators that act on behalf of the university, they leave to others the invention identification and business development functions. However, other tech transfer offices are masters of the entire commercialization process, having successfully added necessary competencies in technology and market evaluation, marketing, mentoring, and deal making.

Changing Terms and Incentives

In the traditional model, technology transfer personnel were primarily res-ponsible for protecting the university's interests when licensing technologies and compensating faculty. This tended to encourage conservative approaches to licensing and researcher incentives. The ideal licensee was a large corporation who could pay a substantial upfront fee and be relied upon to have the resources necessary to take an invention from the lab to the marketplace. The ideal researcher was one who came up with blockbuster innovations of such importance that licensees were beating down the door ' who quietly returned to her lab bench to churn out the next blockbuster without any expectation of added compensation, glory, or (gasp) direct involvement in commercializing the technology.

The reality of university technologies is that they are frequently too early stage, too risky, too disruptive, or too niche to really appeal to a large company. Many technologies will have years or even decades of development ahead and will require flexibility, diligence, and an innovative business model as much as they will need the deep pockets of an established licensee. Startups are frequently the best choice for commercializing, or at least incubation of, any given university technology. Dealing with an untested startup company can compound the risks inherent in a new technology and will almost invariably require the university to forego upfront licensing fees. On the other hand, combined equity/royalty licenses can lead to a higher return on successful ventures. Many universities have been slow to adopt deal structures that can support startup licensing, but that trend is also shifting. Many are working in earnest to develop a tiered approach to licensing that serves large companies, startups, and the interests of the university.

Compensation to researchers continues to be a challenging area for universities – one fraught with conflicts of interest, cultural issues, and concerns about distracting, or even losing, faculty researchers. In the ivory tower approach to academia, researchers were kept financially and culturally isolated from industry and commercial pressures. But with the growth of technology transfer and corporate sponsorship, these barriers have become increasingly difficult to maintain. Researchers are often in the best position to identify research with commercial potential. They often have insight into the marketplace and targets for licensing. Their enthusiasm for their own technology can be critical to engaging business people, investors, and licensees. Because their cooperation is more easily gained through incentives than draconian employment agreements, the terms of university agreements with their researchers are changing. It is increasingly common for one third or more of the university's resultant royalties or equity in an invention to go directly to the researcher. Some universities will even pass primary responsibility for licensing and ownership back to the researcher if university representatives fail to identify a commercial opportunity and willingness to sponsor the upfront costs for patenting within a set time. These incentives are of such significance that some veteran researchers now look to their stake in inventions, freedom to consult or sit on advisory boards, recognition of commercialization efforts, and even the ability to take leaves of absence to work with a startup as key employment terms in choosing their academic posts.

Universities are still struggling to find a balance between encouraging commercialization and maintaining scholastic integrity and continuity, but third parties would be remiss not to consider the researcher's incentives, expertise, and possible role in commercialization when investigating and pursuing any university-owned technology.

Competitive Funding

Although universities are swarming with great ideas, many of which could be fertile ground for product development, funding university technology transfer has never been easy. University programs are perpetually underfunded, and the politics of technology commercialization tend to be particularly unstable at these institutions. Due to the nascent nature of most university innovations, universities are finding it necessary to pay for at least some product-oriented development, increased patenting, market research, and other costs that were once considered licensee responsibilities. To deal with resource limitations, many universities are raising and managing grants, loans, and investment funds to supplement their university budgets and provide seed capital for technology commercialization. This has necessitated a change in how patent and licensing funding decisions are made.

Vesting sole discretion for patenting decisions in the technology transfer office had an appealing simplicity to it. However, increased costs and the difficulty of making a one-time prediction as to the success or failure of a technology have called this process into question. In some universities, the process for allocating resources to faculty inventions now operates more like procedures for seeking outside funding and may be merged with attempts to find funding from regional, state, and federal programs, private investors, corporate sponsorships, and other sources. Initial ideas need to be supplemented by market analysis, development plans, and other information. Even after a plan has been proposed and accepted, a review board may require that research, development, management, and market milestones be met for continued allocation of funds.

University managers are taking a more sophisticated, portfolio-based approach to pursuing new technologies. They have recognized that they are investors and that technology evaluation is not a simple “go,” “no go” decision, but a process.

Venture Facilitation

There is a growing interest in universities facilitating ventures through training, networking, and business incubation, all of which can go hand in hand with a university's role as licensor and funding source. Venture facilitation takes many forms in the university setting. It includes everything from entrepreneur education (eg, courses, lecture series, startup boot camps) to startup mentorship (eg, mentor networks, entrepreneur-in-residence programs, business plan competitions) to industry outreach (eg, campus technology parks, etc.).

The growth of university business incubators is a particularly interesting trend. Business incubators typically provide furnished office and lab space, shared business resources (eg, conference rooms, computer networks and copiers), and training and consulting services to young companies, frequently at below-market rates and on flexible terms to reflect the company's changing needs. University incubators vary widely in their services, structure, admission requirements, and other features. They may or may not require a university connection, such as an alumnus or faculty founder or a university technology license, for admission to the incubator. Most take an equity stake, or at least a royalty interest, in their client companies and become zealous mentors and champions for their clients' success. Because of the admission requirements and active management and mentorship, incubator clients have a much higher success rate than startups in general.

Involvement in business incubators is an excellent way for patent attorneys and other service providers to get involved with early-stage companies with greatly mitigated risk. Similarly, involvement in other university venture facilitation programs can provide contacts and access to patent and technology transfer opportunities that might otherwise be missed. Many university programs are constantly looking for knowledgeable professionals to provide lectures, mentorship, sponsorship, and other assistance.

The Entrepreneurial Imperative

Universities' trends toward a more entrepreneurial approach to technology transfer should not come as surprise and are unlikely to abate. Changing administration, licensing terms, funding approaches, and venture building activities reflect increased sophistication about universities' roles in national and regional economies. Studies on technology clustering have made clear the impact and virtuous cycle created by strong research programs that transfer their technology into their local business community. Further, technology transfer has become a favored metric for research impact. Research impact, in turn, drives further research funding, providing a strong incentive to maximize technology transfer initiatives. Patent professionals of all kinds would be wise to keep an eye on their local research universities and make an effort to understand their changing challenges and needs, and the opportunities they represent.

Research universities have long engaged in technology transfer ' most since the 1980s or earlier. Academic researchers are a source of significant innovation. Universities have the right (and in some cases the obligation) to patent and exploit such inventions, and patenting university technology is well accepted by most universities and their stakeholders. The recipe was supposed to be simple: patent a handful of inventions from university labs, license them for a comfortable royalty, and sit back and enjoy the revenue.

In reality, the challenges of identifying promising technologies, paying the upfront patent costs, and locating and negotiating with licensees have proven challenging for many universities ' with the result that they never really made it very far down the path to tech transfer glory.

Growing trends in university tech transfer go well beyond the traditional roles of passive licensors or the bygone era of scholastic ivory towers. Universities are embracing entrepreneurship and recognizing the value that their researchers, educational community, and leadership bring to technological development. They are seeking out new opportunities, building new competencies, and fostering technology commercialization. A few have even come to view themselves as the centers of entrepreneurial ecosystems that can catalyze innovation and reshape their regional economies.

This trend toward entrepreneurship has complicated university programs and administrative structures as they relate to technology commercialization. Licensing terms and incentives for faculty, labs, and institutions are in flux. More sophisticated approaches to funding technology development and patenting are increasing, both for direct allocation of funds and through partnerships with public and private investors. Technology incubators and other venture building programs have fundamentally changed the university's role in moving technology from the lab bench to the marketplace. All of these factors may be of great importance to licensing executives, patent attorneys, technologists, investors, and others with an interest in university technology.

Who's In Charge?

There was a time when licensing a promising university technology was a simple matter of contacting the single technology transfer office or IP holding company associated with the university. This same office was usually responsible for monitoring research, collecting invention disclosures, making patenting decisions, overseeing the patenting process, and licensing resulting technologies.

Increasingly, however, in an effort to encourage entrepreneurship, many universities have effectively decentralized these functions: a potential licensee or service provider is now left to identify the specific program and contact points that serve his or her interests. Thankfully, many universities still have a technology transfer office, an industry outreach office, or, at the very least, a web-based directory that provides a starting point for directing interested parties to the program or programs that will most likely serve their needs.

In some cases, such as in the University of California system, a decision was made that the identification of promising technologies, protection of those technologies, and pursuit of commercialization needed to be closer to the faculty and programs generating the innovations. As a result, technology transfer administration has become a function localized in the individual schools and programs. Coordination of some policy, best practices, and benchmarking is still handled through a more centralized administration, but the real decision making and key contacts reside in the specific programs.

In other cases, diverse programs in the business schools, engineering schools, medical schools, individual research departments, technology transfer offices, provosts offices, and even alumni affairs have answered broad mandates for universities to encourage entrepreneurship and commercialization. The level of coordination, cooperation, and, in some cases, competition among these programs varies from university to university. For example, it is possible to have a technology transfer office, business school, and medical school with independent programs to identify and commercialize university technology. As these programs and their personnel compete for resources and recognition, they may not always communicate or see eye to eye.

The diversity of programs is not surprising given the increased focus on proactive business development, creative finance, and generation of high growth startups and spinouts that were not the traditional bailiwick of technology transfer offices or research oriented programs. Some tech transfer offices are now simply negotiators that act on behalf of the university, they leave to others the invention identification and business development functions. However, other tech transfer offices are masters of the entire commercialization process, having successfully added necessary competencies in technology and market evaluation, marketing, mentoring, and deal making.

Changing Terms and Incentives

In the traditional model, technology transfer personnel were primarily res-ponsible for protecting the university's interests when licensing technologies and compensating faculty. This tended to encourage conservative approaches to licensing and researcher incentives. The ideal licensee was a large corporation who could pay a substantial upfront fee and be relied upon to have the resources necessary to take an invention from the lab to the marketplace. The ideal researcher was one who came up with blockbuster innovations of such importance that licensees were beating down the door ' who quietly returned to her lab bench to churn out the next blockbuster without any expectation of added compensation, glory, or (gasp) direct involvement in commercializing the technology.

The reality of university technologies is that they are frequently too early stage, too risky, too disruptive, or too niche to really appeal to a large company. Many technologies will have years or even decades of development ahead and will require flexibility, diligence, and an innovative business model as much as they will need the deep pockets of an established licensee. Startups are frequently the best choice for commercializing, or at least incubation of, any given university technology. Dealing with an untested startup company can compound the risks inherent in a new technology and will almost invariably require the university to forego upfront licensing fees. On the other hand, combined equity/royalty licenses can lead to a higher return on successful ventures. Many universities have been slow to adopt deal structures that can support startup licensing, but that trend is also shifting. Many are working in earnest to develop a tiered approach to licensing that serves large companies, startups, and the interests of the university.

Compensation to researchers continues to be a challenging area for universities – one fraught with conflicts of interest, cultural issues, and concerns about distracting, or even losing, faculty researchers. In the ivory tower approach to academia, researchers were kept financially and culturally isolated from industry and commercial pressures. But with the growth of technology transfer and corporate sponsorship, these barriers have become increasingly difficult to maintain. Researchers are often in the best position to identify research with commercial potential. They often have insight into the marketplace and targets for licensing. Their enthusiasm for their own technology can be critical to engaging business people, investors, and licensees. Because their cooperation is more easily gained through incentives than draconian employment agreements, the terms of university agreements with their researchers are changing. It is increasingly common for one third or more of the university's resultant royalties or equity in an invention to go directly to the researcher. Some universities will even pass primary responsibility for licensing and ownership back to the researcher if university representatives fail to identify a commercial opportunity and willingness to sponsor the upfront costs for patenting within a set time. These incentives are of such significance that some veteran researchers now look to their stake in inventions, freedom to consult or sit on advisory boards, recognition of commercialization efforts, and even the ability to take leaves of absence to work with a startup as key employment terms in choosing their academic posts.

Universities are still struggling to find a balance between encouraging commercialization and maintaining scholastic integrity and continuity, but third parties would be remiss not to consider the researcher's incentives, expertise, and possible role in commercialization when investigating and pursuing any university-owned technology.

Competitive Funding

Although universities are swarming with great ideas, many of which could be fertile ground for product development, funding university technology transfer has never been easy. University programs are perpetually underfunded, and the politics of technology commercialization tend to be particularly unstable at these institutions. Due to the nascent nature of most university innovations, universities are finding it necessary to pay for at least some product-oriented development, increased patenting, market research, and other costs that were once considered licensee responsibilities. To deal with resource limitations, many universities are raising and managing grants, loans, and investment funds to supplement their university budgets and provide seed capital for technology commercialization. This has necessitated a change in how patent and licensing funding decisions are made.

Vesting sole discretion for patenting decisions in the technology transfer office had an appealing simplicity to it. However, increased costs and the difficulty of making a one-time prediction as to the success or failure of a technology have called this process into question. In some universities, the process for allocating resources to faculty inventions now operates more like procedures for seeking outside funding and may be merged with attempts to find funding from regional, state, and federal programs, private investors, corporate sponsorships, and other sources. Initial ideas need to be supplemented by market analysis, development plans, and other information. Even after a plan has been proposed and accepted, a review board may require that research, development, management, and market milestones be met for continued allocation of funds.

University managers are taking a more sophisticated, portfolio-based approach to pursuing new technologies. They have recognized that they are investors and that technology evaluation is not a simple “go,” “no go” decision, but a process.

Venture Facilitation

There is a growing interest in universities facilitating ventures through training, networking, and business incubation, all of which can go hand in hand with a university's role as licensor and funding source. Venture facilitation takes many forms in the university setting. It includes everything from entrepreneur education (eg, courses, lecture series, startup boot camps) to startup mentorship (eg, mentor networks, entrepreneur-in-residence programs, business plan competitions) to industry outreach (eg, campus technology parks, etc.).

The growth of university business incubators is a particularly interesting trend. Business incubators typically provide furnished office and lab space, shared business resources (eg, conference rooms, computer networks and copiers), and training and consulting services to young companies, frequently at below-market rates and on flexible terms to reflect the company's changing needs. University incubators vary widely in their services, structure, admission requirements, and other features. They may or may not require a university connection, such as an alumnus or faculty founder or a university technology license, for admission to the incubator. Most take an equity stake, or at least a royalty interest, in their client companies and become zealous mentors and champions for their clients' success. Because of the admission requirements and active management and mentorship, incubator clients have a much higher success rate than startups in general.

Involvement in business incubators is an excellent way for patent attorneys and other service providers to get involved with early-stage companies with greatly mitigated risk. Similarly, involvement in other university venture facilitation programs can provide contacts and access to patent and technology transfer opportunities that might otherwise be missed. Many university programs are constantly looking for knowledgeable professionals to provide lectures, mentorship, sponsorship, and other assistance.

The Entrepreneurial Imperative

Universities' trends toward a more entrepreneurial approach to technology transfer should not come as surprise and are unlikely to abate. Changing administration, licensing terms, funding approaches, and venture building activities reflect increased sophistication about universities' roles in national and regional economies. Studies on technology clustering have made clear the impact and virtuous cycle created by strong research programs that transfer their technology into their local business community. Further, technology transfer has become a favored metric for research impact. Research impact, in turn, drives further research funding, providing a strong incentive to maximize technology transfer initiatives. Patent professionals of all kinds would be wise to keep an eye on their local research universities and make an effort to understand their changing challenges and needs, and the opportunities they represent.