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Transferring technology from research labs to commercially available products has long been a cornerstone of the U.S. economy. Recognizing that fact more than a quarter of a century ago, a pair of senators championed legislation to facilitate the commercialization of technology yielded by government-funded research.
Signed into law in December 1980 by President Jimmy Carter, the Bayh-Dole Act has dramatically changed the way universities treat new inventions. The extent to which this act has impacted technology transfer by universities was the focus of a symposium at the American Chemical Society's fall national meeting. The symposium was sponsored by the Division of Professional Relations and designated as a presidential event.
"The aim of the session was to review the Bayh-Dole Act in terms of its role in technology transfer since its inception 25 years ago," said symposium coorganizer James P. Shoffner, adjunct professor of science at Columbia College, Chicago. And after hearing the presenters, he told C&EN that the effectiveness of the act "was given a very positive 'thumbs-up' in terms of its ability to bring about tech transfer."
In addition to looking at the history of the act and analyzing its impact, explained symposium coorganizer Alan M. Ehrlich, attorney at the D.C.-based law firm of Weiss, Moy & Harris, the session targeted what lies ahead. "We also intended the symposium to provide a crystal-ball look at what is likely to happen in the future," he said.
The Bayh-Dole Act bears the names of its authors-former Sens. Birch Bayh (D-Ind.) and Bob Dole (R-Kan.). It was designed to allow universities, nonprofits, and small businesses to hold the rights to inventions they make through research with government funding. Although the government retains the right to use the invention at any time for free, the groups holding the patented inventions can license out the rights to practice the invention to third parties on an exclusive or nonexclusive basis and retain the revenues from such arrangements.
According to presenter Richard Kordal, director of the Office of Intellectual Property & Commercialization at Louisiana Tech University, "Universities have become very effective at transferring technology." He noted that there has been a 15-fold increase in the number of patents issued to universities in 2003 compared with 1979, based on information from the 2003 Association of University Technology Managers (AUTM) survey. He also noted that in fiscal 2003, 472 new commercial products spawned by university inventions hit the market.
But for all of these new patents and products, most university technology transfer offices are not money-making endeavors. "Bayh-Dole was never intended to be a huge revenue generator for universities; rather, it was seen as a better mechanism for transferring basic research into commercial products to benefit the public," Kordal noted.
In fact, Kordal said, universities spend about $200 million per year on related legal fees, but only recoup about 40% of those expenses in license fees and royalty revenue, based on AUTM data. Of the nearly 26,000 active licenses issued by universities, less than 1% generated more than $1 million in annual royalty revenue, he pointed out.
The lack of revenue, however, has not dampened the growth in the number of university tech transfer offices. In 1980, about 25 universities had licensing offices set up to deal with technology transfer, said presenter John Raubitschek, patent counsel for the Commerce Department. Now, he noted, there are at least 215 offices, averaging about four full-time employees each.
Before the Bayh-Dole Act, Raubitschek pointed out, most universities had to request the licensing rights from the government after making an invention. "This delayed commercialization and inhibited university participation with industry in related areas of research," he said.
Providing further evidence for this growth was Jerry Thursby, professor of economics at Emory University, Atlanta. He presented data based on the growth rate of technology transfer at 125 institutions from 1996 to 2002. During this period, invention disclosures-that is, reporting of an invention that might be worth patenting-by university faculty rose nearly 50% and executed licenses on university patents climbed 55%. The amount of royalties and cashed-in equity soared more than 200%, but dollars put back into research dropped 32%.
Thursby also presented data based on the research and disclosure activities of 4,621 science and engineering faculty from 11 universities during 1983-99. According to his results, 62% of the faculty never disclosed a single invention. There was, however, a 10-fold increase during this period in the probability a faculty member would do so.
One thing that may be driving this increase in disclosure by faculty is money. Unlike tech transfer offices, licensing a patent can be a lucrative venture for the faculty member who produces the invention because the costs associated with the patent process are borne by the university, Thursby said. According to his data, faculty on average receive nearly 40% of licensing income, which can add up to some big bucks.
This income can create problems if not carefully handled. As Ed Wasserman, a former ACS president and retired from DuPont, explained in his presentation, royalty income can lead to a division in academic departments. He pointed out that friction can arise between the faculty member who is credited with the invention and therefore receives the royalties and other faculty members who may have provided some indirect assistance that led to the invention.
For example, faculty members often converse about their research over lunch or at the water cooler, giving each other suggestions for possible next steps in the work. If one of these suggestions turns out to be helpful in moving the research toward something patentable, the faculty member who provided the suggestion is rarely given credit on the patent and therefore doesn't get a piece of the royalties.
One way to combat concerns related to royalties is to share the wealth between inventing faculty and noninventors. At the University of Wisconsin, that's exactly what's being done, said Andrew Cohn, government and public relations manager at Wisconsin Alumni Research Foundation, the university's tech transfer group. Cohn explained that a major portion of license revenues go to the graduate school. The funds are used to support activities such as fellowships, travel expenses, and faculty recruitment and retention.
But it's not just faculty who are reaping the royalties. "Students can also be coinventors," Wasserman said. This situation has led to some young millionaires, and, while not necessarily a problem, trouble can arise if a student's zeal for inventing replaces the goal of getting an education, he noted.
The enthusiasm to patent an invention can create larger problems. According to Arti K. Rai, professor of law at Duke University, difficulties can arise when universities seek broad patents earlier in the development path. In some cases, the universities will then issue a lot of nonexclusive licenses to such patents, but, in others, they will grant a single, exclusive license, which impedes commercialization of the technology. This situation is particularly problematic for patents on research tools, she noted.
Another issue that was raised during the symposium was a shift in licensing behavior by industry. According to Cohn, industry is now seeking to license technology that is further along in the development cycle as opposed to early-stage technology that is more risky because it requires more time and effort to commercialize.
This lack of interest by industry in licensing early-stage inventions-or "death valley" for inventions-was also something that Rai pointed to as a challenge facing technology transfer. She noted that the situation is particularly prevalent with pharmaceutical companies because their pipelines are in trouble and they are looking for sure bets to invest in.
Another problem, Rai said, is how universities handle intellectual property and tech transfer for collaborative research projects-a research approach that is becoming increasingly popular. She discussed her ongoing work looking into how to effectively establish patent rights when multiple universities or companies are involved in a collaborative project. For example, one place where this situation is already hampering collaborative research is in the NIH glue grants, which are large-scale, interdisciplinary group projects. Disputes over patent rights have dampened the success of the program, she said.
"The Bayh-Dole Act has brought about a heightened awareness of intellectual property and its benefits on the part of certain faculty and students," Shoffner told C&EN. "This symposium presented the act as a dynamic piece of legislation that is still working its way through our business and technology enterprise-of which the chemical enterprise is a very vital part."
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