-------- Original Message --------
| Subject: | MAKING TECH TRANSFER WORK FOR UNIVERSITIES |
|---|---|
| Date: | Mon, 17 Mar 2014 07:31:51 -0700 |
| From: | Steve Chapple <intellectualcapitalchapple@gmail.com> |
| To: | intelletualcapitalchapple@gmail.com |
Friends & Colleagues:
Technology transfer is about dancing robots and curing brain cancer. It's how we got Google and Gatorade: inventions, processes, and intellectual property created in the great labs of our research universities and passed on, that is, licensed and shared, to venture capital, to startups and to big companies outside academia. It's helped to make America cutting edge.
But the process may have hit a few bumps in the road--or not--depending on stakeholder's perceptions.
This week's INTELLECTUAL CAPITAL(TM) is an overview of that process. We hone in on San Diego but journey up to Stanford and Palo Alto, Berkeley and out to that most American of cities, Chicago, to begin an assessment. INTELLECTUAL CAPITAL(TM) is in the process of preparing a larger White Paper on the subject. But for now, please read on.
And, of course, if you are feeling discursive, please pen an email; be-friend us on FB; follow @stevechapple1 on Twitter, or visit INTELLECTUAL CAPITAL at http://www.stevechapple.com/
All Best,
Steve
Chancellor Pradeep Khosla of UCSD (photo by Howard Lipin)
MAKING TECH TRANSFER WORK FOR UNIVERSITIES
Institutions saw IP as revenue source; investors say that's shortsighted
By U-T San Diego 12:01 a.m.March 16, 2014
Tech transfer is about dancing robots and curing brain cancer.
Google and Gatorade, sleep apnea and gene-splicing.
It's how inventions and ideas — intellectual property — move out of university labs and get translated into commercial products and startup companies. Some $2.5 billion in licensing fees flowed to U.S. universities in 2010, with nearly 600 new companies formed.
A bit of tech history: In post-World War II America, inventions developed on university campuses with federal funds were centrally licensed through Washington to sluggish results. Then, in 1981, the University of California's Richard Atkinson helped formulate the Bayh-Dole act in Congress, which gave universities the right to license their own IP, giving an incentive to smart colleges and energizing the U.S. economy to the tune of an estimated $3 trillion in Northern California, alone, and billions more in San Diego.
With the Great Recession of 2008-10, some cash-strapped universities began to view tech transfer as a cash cow, a way they could cover costs and reach for the brass ring of Google, Gatorade or firefly luminescence (don't laugh, one of the most valuable biological markers of all time). There was perceived pressure from regents, politicians and bean counters to use tech transfer to finance further research, labs and departments — even technology transfer offices themselves, of which only a handful are ever "profitable," such as those at UC San Diego, Stanford, Berkeley and MIT.
This attitude was viewed as shortsighted by venture capitalists, by private industry, and by many of the more savvy officers at the most successful tech transfer universities. Hadn't Stanford "given away" much of the intellectual property that went on to become Hewlett-Packard or Intel, and yet didn't the founders give back far more, essentially creating Silicon Valley, just as professors such as Irwin Jacobs and Andrew Viterbi, later of Qualcomm, were to do in Southern California?
A central clutch of concerns from the side of private industry is that there are far more startup losers than winners, and also huge disparities in the money risked between software companies and life science, for instance, where a drug can take 10 years to come to market, cost a billion dollars, and fail anywhere along the development line.
Investors argue that they take much of the risk and should get the IP more easily and cheaper, that universities are not really putting their own money on the line, that the money to develop inventions comes from the government, that is the taxpayers, and that public universities, especially, are "double-dipping."
"At many universities," one disgruntled San Diego investor told me, "tech transfer is seen as a cost center. They are incentivized to minimize their overall burn rate by driving up upfront costs. But that to me is completely ass-backward because most things aren't going to work, and so they aren't worth much up front. What universities should be saying is, 'Look, let's vet these entrepreneurs and make sure we're putting the asset into capable hands, but back-end load the deal so that if it actually does become commercially viable, everybody wins.' "
But others offer praise, believing that universities are already responding to the criticism.
Dr. Gregory Stein's startup Curtana licensed drug candidates from University of California San Diego that target the transcription factor expressed in brain tumor (glioma) cells. "We got the deal done in three weeks, and the cost was very reasonable, upfront," he says.
Stein's Curtana deal was the first so-called Express license issued by the university, at the beginning of last year. Its terms are said to be cookie-cutter, not particularly negotiable, and engineered for speed.
The license was structured by Dr. Jane Moores' team along with Jay Lichter of San Diego's Avalon Ventures, among others. Lichter suggested that UC San Diego sometimes take a convertible note in Series A preferred stock up front rather than cash.
"An understanding of the market is crucial to pricing the deal," says Greg Lucier, former chief executive of Life Technologies, which may do more IP licensing than any other U.S. company. "If it is a long-shot, then the back end counts. If people are bidding, that's different."
Katharine Ku, the legendary director of Stanford's transfer office, says, "The chance of being a Nobel Prize winner is far greater than making significant money off inventions." Nobody could have predicted Google, she says, because there were already several seemingly good search engines. "But these young guys were passionate — and though only graduate students, the only ones seriously interested in commercializing the technology — and so we did the deal."
"If there is one thing, I want you to understand," she adds, "We are a tiny part of Stanford's overall budget, $87 million against $4 billion. To see tech transfer as a cash cow is a total illusion. Our model is to get the technology out the door and just hope it works."
Carol Mimura, UC Berkeley's assistant vice chancellor for intellectual property and industry research alliances, says that a public university using federal dollars has an obligation to society. Berkeley's tech transfer poster child seems to be Amyris, a company partly funded by the Gates Foundation, with bioproducts that not only power buses in Brazil but help cure malaria.
In Chicago, they have a different problem: how to become us.
The Chicago folks explain that though they probably have more Nobel winners than anybody, when that venture capitalist gets off his private jet and goes over to the lab, he (or she) is not so interested in basic research. That's the unsexy part of the timeline, too early, definitely not where the big fish feed. But it is where universities put much of their money on the way to forming the entrepreneurial culture we take for granted in San Diego. And these universities think their expensive, structured "curiosity" is not appreciated enough.
"People in San Diego, Palo Alto, Cambridge are like fish in an aquarium," says Alan Thomas at the University of Chicago. "They were born swimming, and they literally have no idea why other people can't swim."
Back home, Pradeep Khosla, chancellor of UC San Diego, sums up his view of the new reality.
"I have a pretty simplistic view about tech transfer. If you look at the whole universe of universities, the return on investments is less than 2 percent. This means for every $100 million a year spent on research, the average return is $2 million. So what that tells me is, we need to be a little bit careful about becoming too aggressive and too greedy. ...
"Let's say I'm a faculty member here, and I want to start a company," he continues. "The process should be as simple as signing a piece of paper, which basically says: This is work in my lab and I'm not stealing it from the guy down the hall, No. 1. And No. 2, I would say, here's 3, 4, 5 percent of my equity and it goes to the university as a gift, if I make it. And we are done. That's it.
"We need to protect our intellectual property in the world," Khosla says. "But if we try then to make money out of that, that is when we start playing a losing game. There is always the possibility that one patent could get you a lot of money, but as a university we should be more in the business of creating knowledge, developing knowledge, building technology, and trying to get it out there as seamlessly as possible and really help make San Diego a thriving, high-tech city."
Ah, but what about those dancing robots I promised you?
Wow. See. These sinuous not-so-little robots use "reverse pendulum" technology developed in Thomas Bewley's Flow Control and Coordinated Robotics Labs at the Jacobs School of Engineering, and have been licensed by the WowWee toy company of La Jolla and Hong Kong — $95, available in May. They can dance to Lorde or Jay-Z with true hip-shaking fluidity. They can also carry a martini on a tray without spilling it. I'm sure they have some important use at General Atomics or NASA, too.
But who cares about that?
This is what technology transfer should really be all about.
Researchers Carlos Caban, Jack Chapple, Terrence Zant and Subin Ryoo contributed to this column. Email Steve at intellectualcapitalchapple@gmail or see stevechapple.com
© Copyright Steve Chapple 2014
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