Tuesday, January 5, 2016

Technology Transfer (Bridging the Chasm Between Invention and Commercialization Part 3)

From IP Watchdog

People in translational research circles talk about the Valley of Death – the chasm between university-generated innovations and real-world product and services.  As mentioned in previous posts, the bridge across the chasm is slowly being built.  Prior posts have focused on incentives and skills development.  This post explores university technology transfer practices.

Little known fact:  about 85% of university technology transfer offices LOSE money!  What’s going on here, and does it matter?

What’s Going On?

First, the losses are partially an outcome of the most common tech transfer financial model, where universities collect only one third of the licensing revenues raised by the TTO (the rest is split between the faculty inventor and their department/college) but shoulder all of its operating costs (staff and patenting). Protecting and marketing intellectual property is expensive!

Second, Intellectual Property licensing (to both established companies and to startups spun out of a university) are hit-or-miss propositions, like any new product or new business (depending on how you count, only about a tenth to a third of new products succeed).  Very few make significant revenue, but those few can be very significant indeed.  For instance, New York University pulled in over $1 billion for Remicade, an arthritis drug.

Third, just as a stable set of top venture capital firms tend to reap an outsize portion of returns, similarly, a relatively constant set of about 20 US universities typically generate about 80%+ of licensing income.    What do these universities have in common?  They do a lot of federally funded basic research and they have very active and sophisticated technology transfer offices.

Does it Matter?

So what if most tech transfer offices lose money?  Positioning a tech transfer office as a primarily a profit center puts the cart before the horse.  The mission-based role of tech transfer offices is to enable their schools to help their local communities and the world by translating research-based inventions into innovations that are adopted in the marketplace.  The tagline of the Association of University Technology Managers (AUTM)  is “advancing discoveries for a better world.”  Yes, they need to have a sustainable financial model, but their real societal benefit is “in lifesaving therapies and cures, in productivity advances that connect the world more closely and in clean technologies that offer a brighter path for future generations.”

According to the AUTM 2015 Briefing Book, technology transfer offices generated the following in fiscal year 2012:

Whether or not the tech transfer offices are profitable in the narrow sense, those licenses and startups have generated broader social, environmental and economic gains.

Best Practices (and How We Do it at UMN)

High-performing tech transfer offices do the following:

  • They develop strong, positive relationships with top researchers.  Here at the University of Minnesota, Technology Strategy Managers are often PhDs and former researchers themselves, who understand the implications of the breakthrough discoveries and inventions generated in our research labs and centers.
  • They are easy for external companies to do business with.  Here at UMN, Technology Marketing Managers develop relationships with potential licensees to explore the possible applications of innovations.  The University has an extensive website describing technologies available for licensing. They also offer Minnesota Innovation Partnerships (MN-IP) that make it low cost and low risk for companies to determine the commercial potential behind existing university-developed technologies, or to sponsor research with Industry-friendly terms up front, granting companies an exclusive worldwide license to the resulting IP.
  • They nurture startups.  The UMN Venture Center has the capability to help develop a business plan, recruit management, and facilitate the formation of a new, independent company with a license that grants rights to University intellectual property.  They are constantly cultivating a pipeline of potential startup opportunities, and have spun out about 90 ventures over the past 10 years.  In addition, the University recently launched the Discovery Capital fund, an innovative investment program that supports early-stage companies commercializing University of Minnesota technology. Eligible companies can secure up to three tranches of $350,000 in matching equity investment to help attract external capital and decrease the time it takes to bring promising innovations to market.
  • They develop commercialization skills among researchers.  This is not to imply that all academics will become entrepreneurs, but some set do want to reach out to translate their work into products or services. The UMN Office for Technology Commercialization (our tech transfer office) actively supports and participates in the MIN-Corps Lean Launchpad educational programs for STEM students, research staff and faculty.
  • Of course, tech transfer offices also need to focus on protecting and managing IP, negotiate licenses, etc.  The AUTM offers a number of resources, including a manual for its members.

Yes, this comprehensive approach at a top-tier research university generates significant revenue at the University of Minnesota (about $27 million in fiscal year 2014, and ranging between $10 and $85 million annually, depending on the terms of specific licenses). But that’s only the tip of the iceberg of the overall social and economic impact.