April 26, 2001
Technology Transfer, Its Context, Its Importance
My remarks today will focus on one aspect of our research productivity, that being how we translate laboratory discoveries in ways that have a meaningful societal impact. Technology transfer is the process of adapting the results of basic and applied research, and using those for the design, development or production of new or improved products or services. The term is well known to all of us, but I’d like to spend a few minutes tracing its evolution within the context of higher education and then talk about my vision for Tulane.
The commercialization of research doesn’t entail a journey back to the distant past. In just 20 years, there has been explosive growth in this area. Universities, hospitals, and federal laboratories have become quite adept at crafting value from the knowledge discovered in the course of research. According to statistics developed by the Association of University Technology Managers’ (AUTM), 20 years ago, there were approximately 30 tech transfer offices at universities across the country. Today, there are over 275. In ten years, revenue generated by universities from licensing increased by 450%, from $122 million to $675 million. Other measures of growth include a doubling of the number of patents filed by universities, significant increases in the number of agreements executed, and a trend toward establishing local companies to exploit university inventions.
How did this activity take root so quickly? The initial seeds were sown by Vannevar Bush, during Franklin Roosevelt’s Administration. Dr. Bush, a former president of MIT and advisor to President Roosevelt, convinced the government that university scientists could produce new military technologies to enhance U.S. defense capabilities. This resulted in such advancements as the development of radar (MIT), control of nuclear fission (U. Chicago), and the development of the atomic bomb at Los Alamos (U. California).
After WWII, Bush articulated the first federal science policy. In his report “Science The Endless Frontier”, he focused on national renewal through science, arguing that funding basic science was a natural role of government and recommending the establishment of a national foundation to set policies for science and technology. These efforts ultimately resulted in the formation of such federal funding agencies as the Office of Naval Research, the National Science Foundation and the National Institutes of Health.
Research became a distinguishable feature of university activity. Conducting research had very tangible rewards; grants supported endeavors that would not have been possible if one had to rely solely on university funds. In some instances, there was a progression away from the teaching institution to the research institution. Research dollars supported faculty salaries and also paid graduate students and post doctoral fellows. Academic jobs became plentiful and scientists turned down industrial positions in favor of less applied pursuits in federal labs or universities.
The result of the increased research activity was an increase in innovations coming from the research, but initially universities and federally supported labs were ill equipped to take advantage of such inventions. In the late 1960s, there were 26 different agency policies covering inventions derived from federal research. This created a cumbersome route to commercialization. Universities could not own intellectual property or license it without special permission of the government. Tulane, for example, sought a determination of rights from NIH on a few promising inventions, but this process was lengthy, fraught with red tape, and an innovation could become a wasting asset in the intervening time.
A facilitating mechanism was needed and the federal government passed two important pieces of legislation in 1980, the Stevenson Wydler Act and the Bayh Dole Act, to provide the legal basis for technology transfer. Bayh Dole was critical legislation for the university community in that it allowed us, for the first time, to own intellectual property created with grant funds. It abolished a maze of regulations and created incentives to move promising research along a commercialization track. One such incentive was the requirement to share royalties with inventors.
As a result of these new laws, universities began to create offices to deal with patents and intellectual property to develop products to benefit the taxpayers whose dollars helped fuel the innovations. The earliest models were offices with an external focus designed to market innovations to existing companies. Rights were licensed to a company which then took over the commercial development. By l985, the Tulane Health Science Center had created the Office of Technology Development and this was the way in which it functioned. A technology was discovered, a patent filed, a company identified, and the baton was passed. Given Tulane’s location in Louisiana, there were few opportunities to identify a company in-state with the capability or interest in developing medical innovations which have always comprised the bulk of our technology portfolio. It was hoped that the licensed product would successfully clear the hurdles for development and Tulane and the inventors would ultimately benefit through sharing in a passive royalty stream.
While this was the norm at most universities, an important breakthrough occurred that changed this and fueled explosive growth. That breakthrough was biotechnology. There were tremendous advancements in our ability to manipulate genetic matter. Those advancements spawned an entire new growth sector. Academia was, in large measure, the birthplace of the biotech movement. University scientists were among the first to develop and recognize the commercial potential of the new techniques and the products that could result from them. Many became founders and employees of the first biotechnology companies. Universities not only supplied trained employees and talented consultants, but they became the source of new ideas and innovative techniques, products, processes and sophisticated instrumentation.
In this scenario, the economy was a winner, and some of those early companies like Genentech and Amgen became fully integrated pharmaceutical companies. While the economic impact was significant, the universities did not share in this upside and in some cases lost talented faculty members. Only a handful of universities had anticipated that faculty might want to both retain their academic responsibilities while also collaborating with industrial partners. As a result, universities began developing mechanisms to vary the traditional scope of opportunities for those faculty who wished to participate directly in new venture creation, while still keeping them at the university.
More entrepreneurial institutions began to spin out companies, some even taking an equity stake in the new ventures. At land grant or state universities, this economic development imperative began to be viewed as one of the missions of the university, and in some cases, mission statements and charters were amended to reflect the paramount importance of new venture creation to university goals and objectives. Others, like Tulane, continued to follow a traditional licensing strategy and realized financial success through those activities. When I became President two and a half years ago, I was pleased with the revenue generated by Tulane’s intellectual property. In fact, when you look at our licensing income compared to other universities, we rank highly and compete well with larger universities with higher research expenditures. We have done an excellent job of translating our research results into commercially viable products. But what was missing was our ability to offer options to faculty who preferred a more hands-on involvement in further developing their innovations. Further, the companies licensing our technology were located outside Louisiana and the activity didn’t benefit the local region. Lastly, we were not leveraging our technology in a way that maximized upside potential through stock or equity acquisition. We are now poised to change that.
I believe universities, particularly research universities, are essential not just to the process of translating knowledge into products, processes and services, but also to the economy. Intellectual capital is a saleable asset in a knowledge-driven economy, and we are a unique source of ideas, innovative techniques and intellectual property. I view technology transfer as the most dynamic way of transferring the knowledge created within our labs to the public sector. I also view it as our responsibility. Tulane has a responsibility to the community in which we reside. We already bring many positive benefits to the community and this is yet one more we can offer. If Tulane can create a climate for new, technology-driven businesses in this region, we will have provided a great benefit to the city and the state. How do we create that climate? By making a concerted effort to help our faculty, should they desire, to create businesses and companies to exploit their scientific endeavors. This will involve putting in place infrastructure to locate capital, to match the innovations with interested parties, and even nurture fledgling businesses either within Tulane or in an incubator. The “multiplier” effect of creating companies is well documented. Money stays in the area, other service oriented businesses and vendors profit, construction and infrastructure investment follow, and desirable jobs are created.
There are challenges to implementing such a strategy. As the steward of public funds, we have to guard against conflicts of interest or even the perception thereof. In the clinical area, where patients are involved, this is particularly important. The popular press reports unflattering stories about universities and inventors who have a financial interest in the products being developed. The underlying allegation is that greed or promises of downstream financial reward are driving the science and skewing objectivity and ethics. In this climate, our challenge will be to conduct our business openly, with full disclosure, in a manner that is beyond reproach. We must also have policies in place to address these concerns.
Last week, the University Senate approved modifications to our Intellectual Property policy which was originally adopted in l985. We are presently developing an equity policy which will formalize the ability, for both Tulane and the inventors, to take equity in companies created around Tulane technology. A Board committee will review a draft of that policy this week and if approved, it will be discussed in other university venues. We will also need to refine our conflict of interest policy to reflect recent federal guidance and regulation. We must have mechanisms in place to review and manage potential financial interests. I believe we can embrace new business opportunities in a way that underscores the mission of the university and integrates these activities into the academic culture.
What benefits might we derive? First and foremost, we will be contributing to the betterment of mankind through the development of new products, processes, and ideas. We will gain exposure, through industrial collaborations, to challenging problems and opportunities that will create future inquiries for academic science. We can tie our educational and research programs to national and regional needs, and support the growth of new business, which is vitally needed in our community. In the longer term, we can generate support for research and research infrastructure, assist in the placement of our graduates, and enhance our institutional reputation. The phenomenon of creating companies around our technology is too sweeping and too important to ignore. I look forward to working with you on this and to continually moving Tulane to the forefront of research universities.