Tech Transfer- Paths, Pitfalls to Technology Commercialization of University R&D
Moving ideas from academia to the commercial marketplace is hardly new. But it has become an increasingly popular – and potentially lucrative – method of operation for companies and entrepreneurs alike.
That was the gist of the message delivered at last week’s BioForum by Elizabeth Spencer, director of Carnegie Mellon’s Innovation Transfer Center.
Whether an idea is spun off to a new enterprise, or is licensed to a larger, existing company, Spencer said commercializing technology has become a major springboard for products and services.
Getting ideas into commercial application can come from a host of different sources, said Spencer.
"We have seen them come from students, publications, industry-sponsored research agreements, faculty and visiting scientists and industry consortia," said Spencer.
Among some of the commercial applications that have come to market from CMU are:
· Florescent Dyes
· MRI Contrast Agents
· Tissue Engineering
· Medical Robotics
· Nanoparticles for drug discovery
· Recombinant Hemoglobin
Regardless of the source of an idea within the university, any with commercial potential follow an identical path.
This involves moving from the germ of the idea to moving it out the doors.
· Disclosure (Invention)
· Triage (Sponsorship of the idea – who really owns it? Is there a market for it?)
· Pursue/Release (Notification)
· License (to an existing company or start-up/spin-off)
Once disclosure — typically from the previously mentioned sources within the university – is done, ideas move to triage.
"Our initial move is to find out whether we own it or not," said Spencer.
Ownership, of course, is crucial to the eventual commercialization process, and is determined by who paid for the research involved in the idea.
"If the federal government paid for the research, the university owns it," said Spencer. "But if a university employee did not make what is called ‘substantial use,’ we may not own it."
That ownership stemming from federal expenditures traces back to a piece of legislation called the Bayh-Dole Act of 1980, which allows universities to elect title to inventions made with federal funding. Following World War II, there was a tremendous surge in federal R&D spending through universities, but only a handful of ideas were seeing the light of day.
"Of 28,000 government patents following World War II that were issued for ideas funded by the federal government, only about five percent were licensed," said Spencer. "They were doing a very bad job of getting the commercial application out."
"Bayh-Dole was enacted at a time when American industry was in rapid decline, and was seen as a way to promote commercialization as well as the collaboration of industry and academia," said Spencer.
Noting that big business could easily dominate the landscape, the Act also contains a provision that strongly encourages ideas to flow to small businesses.
While the number of ideas flowing in and around the university is substantial, deciding if they have commercial merit boils down to cold, hard business decisions, said Spencer.
"Anything patented must have some commercial potential to recoup the expenses," said Spencer.
This means the triage phase of the process turns into something akin to due diligence, complete with business plans that spell out the commercial possibilities for the invention.
If the idea is deemed to have commercial potential, the university must notify the federal government that it is taking title to the intellectual property before moving forward.
The final phase of the process – whether to license to an existing company, start-up or spin-off – involves yet more business decisions.
"The Bayh-Dole Act encourages and promotes the role of small business," said Spencer. "But the decision as to who gets to license an idea is really based on who is best equipped to make the most of its commercial potential."
The licensing decision is based on:
· Who is most likely to succeed in commercializing the invention?
· Who has the resources, including financing, sales and distribution?
· Who has the motivation?
At first blush, it would seem that a major corporation with all of its financial and personnel resources would have a decided advantage. But such is not the case, said Spencer.
"Sometimes an idea can get buried in a big company, simply because it is not a priority to them," said Spencer.
"While a small business, start-up or spin-off will not have those resources, the idea being commercialized might be the focus of that business."
"A small company will trump a larger one if the drive is there," said Spencer.
Any licensee for an invention must produce a business or marketing plan that describes the commercialization path. Then, depending on what type of license they want, there are other requirements including:
· Non-exclusive licensees must display best efforts, agree to a running royalties plan with the university, as well as pay 50 percent of the patent costs;
·Exclusive licensees must agree to the same best efforts to commercialize, but are also required to achieve certain milestones. They must also pay an upfront fee for the invention, must agree to running royalties (including annual minimums), and must pay full reimbursement of all patent costs.
License fees have resulted in millions of dollars pouring back into the university. From under $500,000 in 1993, the flow has grown to almost $4 million in 2002.
To spin or not to spin
Periodically, a situation arises when an invention becomes a candidate as the focus of a spin-off or start-up company, said Spencer.
"This typically happens if the technology is at too early a stage, is too early in the product cycle, or just too far ahead for corporations," said Spencer.
Big companies are better at sales and marketing and typically aren’t interested in fostering cutting edge technology, said Spencer.
Another factor that weighs on the decision is the nature of technology itself, which might be disruptive to existing technology at those same large companies.
The net result is a faculty member and/or students often take on the role of entrepreneur, leading the new company with the invention at its core.
Spencer said there are numerous advantages to spin-offs and start-ups including:
· The high potential that disruptive technologies carry if they are successfully commercialized;
· The boost to regional economic growth and strength;
· The increased political and economic support that results;
· An increase in faculty retention and the growth of entrepreneurial faculty;
· The institutional and faculty wealth that results from equity holdings.
Spencer said the proliferation of small, new, biotech companies in the region has even produced a new phrase – "Bioburgh."
But for the rewards, there are risks as well including:
· Research tends to adopt an industrial focus versus basic science;
· The conflicting requirements of industry (keeping secrets) versus academia (the free flow of knowledge);
· Conflicts of interest and commitment;
· Increased institutional business costs/risks;
· Equity/controversy management;
· The gap between the formation of a new company and the realization of sales (typically eight years);
· The increased labor required from the Innovation Transfer Center;
When it comes to the costs associated with licensing, Spencer said the university will – on occasion – take equity in the new company in lieu of cash.
"We will sometimes work with small companies by taking equity to help defray their costs," said Spencer.
"Spin-offs and start-ups can be a lot of fun," said Spencer.
"But the university is not in the business of funding start-ups."
In the end, all of these business decisions are intended to pave the way for commercially promising inventions to make their way from academia and into commercial use.
Sorry, we couldn't find any posts. Please try a different search.