Volume 85 Issue 12 | pp. 25-28
Issue Date: March 19, 2007

Troubled Partnership

In the long tradition of U.S. industry-academic research collaborations, money could change everything
Department: Business
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Industry Input
Its proportion of overall investment in academic R&D has been declining
Credit: National Science Foundation, Division of Science Resources Statistics
TROUBLED PARTNERSHIP
 
Industry Input
Its proportion of overall investment in academic R&D has been declining
Credit: National Science Foundation, Division of Science Resources Statistics

MOST BIG CHEMICAL companies can chronicle a profitable heritage of laboratory liaisons with researchers in academia. From such partnerships have come many commercially viable products. For their part, universities gain a means to translate research into patented technology and to give students hands-on industry experience.

These industry-university partnerships have always had to balance the university's responsibility to educate with industry's responsibility to turn a profit. But research directors on both sides of the divide fear that the balance has been thrown off in recent years as the profit motive crosses to the university side during the precontract negotiations that go with this territory.

Industry research directors contend that the success of certain marquee partnerships—in 2005, for example, Emory University landed $525 million from Gilead Sciences for the university's interest in emtricitabine, an AIDS drug discovered at Emory—has spurred U.S. universities to negotiate for more lucrative agreements on intellectual property (IP) ownership. This push, they say, compromises a university's role as an educational institution and threatens to turn U.S. industry toward research partners abroad, primarily in India, where world-class academic researchers and institutions demand less IP control when partnering with industry.

Butts
Credit: Dow Chemical
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Butts
Credit: Dow Chemical

"My perception is that as U.S. universities become more entrepreneurial in their approach, placing greater emphasis on their role in economic development, they become more interested in preserving their right to use IP developed from research sponsored by private companies," says Susan Butts, director of external technology at Dow Chemical. "As they try to assert their control, it becomes less and less attractive for U.S. industry to invest research dollars in work done at U.S. universities."

Technology-licensing directors at some top-tier institutions brush off the contention. They maintain that partnership deals have not changed significantly over the years and that industry will "get what it pays for" if it chooses to court partners in India. Licensing directors from other universities, though, share industry concerns that IP negotiations have begun to hinder industry-university partnership. And those familiar with the burgeoning research community in India claim the country's academics are delivering good value for the money industry invests in them.

According to a 2006 report by the National Science Foundation, titled "Where Has the Money Gone? Declining Industrial Support of Academic R&D," corporate support for university research climbed strongly to peak in 2001 at $2.2 billion, but then declined to $2.1 billion by 2004. The report points to an April 2006 meeting at the National Academy of Sciences at which "prominent industry and university speakers indicated that negotiations of sponsored research agreements, particularly disagreements over the treatment of intellectual property, were negatively affecting the entire industry-university research partnership in the United States."

NEW FIGURES from NSF show that industry investment rebounded in 2005 to $2.3 billion. At 5% of total academic investment, however, that share is on par with industry's 1982 input into academic research and down from a peak of more than 7% in 1999.

The growing troubles with industry-university research partnerships surfaced in December at a workshop on federal investment in research sponsored by NSF, the National Institute of Standards & Technology, and the National Institutes of Health (C&EN, Dec. 18, 2006, page 41). Gary S. Calabrese, vice president and chief technology officer at Rohm and Haas, told attendees that industry is frequently faced with paying universities twice: once to fund the research and again to license the results.

Calabrese tells C&EN that a handful of windfalls for a few major research institutions have translated into a model for university licensing departments. "Some universities have had some success and become the poster boy, the rock star. I think we've seen over the past 10 years that second-tier universities are saying, 'Maybe we can do this too,'" he says. "They are trying to turn their licensing offices into huge profit centers."

Indeed, some firms, such as Emory in its deal with Gilead, have done just that and made for good reading in the business pages. As such deals and headlines entice U.S. universities, Calabrese says, companies are starting to find partnerships with universities almost anywhere else in the world more attractive.

Hunt
Credit: Peter Cutts Photography
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Hunt
Credit: Peter Cutts Photography

Catherine T. Hunt, leader of Rohm and Haas's technology partnership group and president of the American Chemical Society, adds that protracted negotiations over IP are hurting U.S. companies. "When a precedent gets set that there are big deals to make every time out, it starts to slow things down," she says. "And that really starts to encroach on the window of opportunity." Among other things, she says, the lack of agreement on ownership of inventions and on licensing hobbles government funding for partnerships.

In addition to funding research, Hunt points out, industry partners bear a disproportionate cost of commercializing new products. "There are many people who don't understand the valley of debt—the big step between having an idea and turning it into a final salable product," she says.

Joseph A. Miller Jr., Corning's chief technology officer, agrees that not enough attention is paid to industry's costs, which include capitalizing manufacturing and establishing marketing networks. "Even though the invention and the IP surrounding it are very important, research is typically the least expensive part of the process," he says. "When a negotiation takes place around having an exclusive license provided by a university for a piece of work that in fact you paid for, there needs to be a realization that we have eight to 10 years to go and a lot of risk to manage to get it to commercial fulfillment."

The current standoff stems in part from differences between the chemical industry and others in which partnerships with universities have led to success stories, according to J. Stewart Witzeman, director of technology strategy at Eastman Chemical. "What a pharmaceutical company or a biotech company might be able to pay, or reasonable standards for royalties that they would pay for resulting inventions, is going to be very different from what a manufacturing industry like the chemical industry can afford," Witzeman says.

Lita L. Nelsen, director of the technology licensing office at Massachusetts Institute of Technology and a chemical engineer who spent 20 years in industry, dismisses the idea that universities are trying to make money by licensing IP. "MIT has over $1 billion in research," Nelsen says. "Our gross income from licensing is slightly under $50 million a year. That's 5% of the research budget. We are not supporting MIT off our income by a long shot. It's not a business."

Nelsen attributes much of the concern over university ownership of IP to high-profile horror stories. "It has partly been pushed by telecom companies being sued for infringement by a couple of universities," she says. "That seems to have started people saying, 'Ain't it awful that universities have patents?' At the same time, if you look at other industries, like biotechnology and biopharmaceuticals, they know they can't exist without universities' help to them get started."

Significant Input
Despite contract contention, partnerships with university labs continue to benefit chemical industry R&D.
Credit: Rohm and Haas
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Significant Input
Despite contract contention, partnerships with university labs continue to benefit chemical industry R&D.
Credit: Rohm and Haas

Nelsen adds that IP is not the only crux in research relationships. "A general problem we have had for a long time across all industries is the reluctance of large corporations to take on development of early-stage technologies," she asserts. "It's very difficult for companies, particularly large corporations, to invest in something that isn't going to generate earnings for a number of years."

Exacerbating the problem, according to Kathy Ku, director of Stanford University's office of technology licensing, is that industry has downsized R&D over the past 10 years and is increasingly looking to universities for later stage applications research. "Universities have a public service mission," she says. "We're here to educate students. We don't want to be the development arm of Rohm and Haas."

Like Nelsen, Ku says universities are familiar with industry's lot. "They feel we don't understand them," she says. "I think we do understand them, but we're just different. We are an open environment. Companies are proprietary and closed. That, in our opinion, permeates their whole culture. Companies want control of IP. Their focus is on the bottom line, and they don't want to pay anything."

Both Nelsen and Ku are aware of the India option but are not convinced that it is sustainable. "Yes, you can go to India," Nelsen says. "It costs less, but it's not the IP arrangement that makes it cheaper. It's what you pay a professor and a grad student." Ku agrees. "I don't know how India can do it," she says. "They are selling their future."

Killoren
Credit: Ohio State University
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Killoren
Credit: Ohio State University

SOME OTHER university research and licensing departments admit there is a growing problem in R&D partnerships. Robert A. Killoren, executive director of the OSU Research Foundation at Ohio State University, says he has noted an alarming increase in the number of partnerships scuttled during negotiations over IP ownership and licensing.

Killoren says blame for the deteriorating relationship must be shared. "The problem is that both sides are negotiating from a policy standpoint rather than analyzing the circumstances of particular relationships." The result, he says, is costly, protracted negotiations that lose sight of certain realities.

Less than 5% of partnerships generate IP of any value, Killoren figures. And universities that see licensing as a revenue-generating vehicle fail to acknowledge that they are frequently employing off-the-shelf engineering concepts. "What grounds do we have to assert ownership of IP?" he asks.

In early 2003, when he was director of sponsored programs at Pennsylvania State University, Killoren brought his concerns to the attention of Merrilea Mayo, executive director of the Government-University-Industry Research Roundtable (GUIRR) at the National Academy of Sciences. He learned that Dow's Butts had approached Mayo with similar concerns. Killoren and Butts now head a GUIRR working group called the University-Industry Demonstration Partnership (UIDP) that is developing negotiating tools for research partnerships.

UIDP, which held its first meeting in December, is composed of 45 universities and 17 companies from a range of industries. Among the industry members are Dow, DuPont, Mineral Technologies, Rohm and Haas, Praxair, Pfizer, and Wyeth. Besides Penn State and Ohio State, Boston University, Rutgers, and the University of California, Berkeley, are among the university members. According to Butts, UIDP is fashioned after the Federal Demonstration Partnership, a consortium of federal agencies and academic institutions established in 1986 to identify roadblocks in the research funding process.

Butts dates the current friction to the early 1980s when the Bayh-Dole Act, also known as the University & Small Business Procedures Act of 1980, shifted control of IP generated in federally funded university research from the government to the universities. Although the law stimulated technology and commercial development as intended, Butts says it has gone off track to the extent that universities claim rights to IP regardless of who funded the research.

"For a while, the rest of the world said the U.S. model is pretty good because it is stimulating technology transfer," Butts says. "More and more, now, people are saying there is an unintended consequence in this focus on intellectual property in that it may have helped technology transfer but may have hurt partnerships with industry." Partnerships outside the U.S., where companies confront much less haggling over IP, now look more attractive, she maintains.

Despite the tensions, partnerships between universities and companies are for the most part positive, observers agree. DuPont and MIT, for example, established the DuPont-Massachusetts Institute of Technology Alliance in 2000. With an annual budget of $5 million provided by DuPont, the long-term partnership is focused on developing biomass-based materials (C&EN, Sept. 5, 2005, page 88).

Although the program is notable for its size and emphasis on education, Nelsen sees it in the context of MIT's traditional approach to research partnerships. "It's an aggregation of sponsored research programs with fairly standard terms," she says. "It's not different from most of what we usually do, just bigger. Everything is publishable, nothing confidential. DuPont has the option to take licenses."

Nelson adds that the partnership is working well because of DuPont's level of investment. "Once a company is committed to a large dollar volume, people in the company are actively involved in the care and feeding of the program rather than just writing a check and waiting for the report," she says.

More typical of chemical industry partnerships, perhaps, is one recently completed between Virginia Polytechnic Institute & State University and Rohm and Haas. The project, aimed at biomass-based raw materials for adhesives and elastomers, was partly funded by the Department of Energy.

IP handling in this case is influenced by the fact that Virginia Tech is a state institution, according to Timothy E. Long, a Virginia Tech chemistry professor. "By law, any patents or IP are assigned to the state," Long says. "Companies can negotiate for access, royalty-free license, or first right of refusal."

Thomas F. Kauffman, project group leader for adhesives and sealants at Rohm and Haas, explains that Virginia Tech was chosen for its expertise in elastomer technology. "There was a fair amount of IP generated; at least 11 patentable ideas came out of this," he says. Decisions on IP ownership were made during quarterly meetings between the company and the university. "We try to have a firewall between our researchers and Virginia Tech researchers. Anyone on either side with a patentable invention would show it to a third party, the patent group at Rohm and Haas," Kauffman says.

DESPITE THE IP ownership firewall, Long says the partners worked side-by-side throughout the project. "There is no clean handoff," he says. "I view the university laboratory as an extension of the industrial laboratory. We had our monthly conferences and published papers together. I felt, and my students felt, that we were part of their laboratory."

At the same time, Rohm and Haas is among the chemical companies claiming they are amenable to working with overseas institutions if U.S. licensing and IP arrangements become onerous. And according to Mukund S. Chorghade, president of the contract research organization Thinq Pharma, the academic infrastructure in India is in place and ready to accommodate them.

Chorghade points to the Council of Scientific & Industrial Research (CSIR), a quasi-government institution in India amalgamating 40 national labs. Most academic research in India is done through CSIR. Indian institutions have had their own showcase experiences, he notes, including GE Plastics' development of a polycarbonate material used in compact discs in partnership with the National Chemical Laboratory in Pune, a CSIR member.

One of India's biggest attractions, Chorghade says, is the handling of intellectual property. "It's very straightforward," he notes. "We work for a fee and retain some aspect of the intellectual property. If you find a way to reduce a carbonyl group to an alcohol, then we reserve the right to use the associated technology for other applications." All IP disputes are resolved via the International Chamber of Commerce, he adds.

The quality of the research is not an issue, he maintains. "There are very distinguished scientists, which is no big news to Indian companies," Chorghade says. Now these researchers are starting to work with foreign partners. Chorghade dismisses the notion that India offers only low costs, adding that "U.S. academic institutions are going to be in for a very rude surprise."

In this more global market for partnerships, chemical company research directors say scientific expertise will continue to be the key criterion for selecting partners. But the deal they get on IP will also be important.

"There are good technologies out there and good people," says Eastman's Witzeman, "and when we see good matches, we are going to be looking to work with them around the world."

 
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