November 30, 2010
Dealing with universities and their Technology Transfer Offices (TTO) can be a very frustrating experience if you don’t understand the unique cultural barriers at universities. I am often in the role of intermediary between the university and business world, so the following dialog is common:
Helge: The university wants to give you the technology but they need to carve out some intellectual property rights in the license.
Businessman: How much is it going to cost to get full ownership?
That simple question is the first step on the road to hell. Not because the question isn’t perfectly valid and reasonable, but because it misses the fundamental difference in value system between academia and industry. On the industry side the fundamental unit of value is money. All aspects of a business ultimately reduce to monetary value and maximizing them is the job of every good executive. In this case, it seems perfectly reasonable to ask about the monetary value of control (i.e. the increased cost of having control over the technology versus sharing control over it or even just being a passive licensee). This is a normal consideration in any commercial licensing discussion that I have ever seen.
Unfortunately, most universities don’t share that value system. In their context, the question makes no sense. Public universities have a mandate to pursue research in the interest of society. You can argue about their effectiveness but that mandate drives any decision that they will make. A full transfer of a technology to industry would cut the connection between the researcher and her field of innovation. That limits research in general and, depending on the scope of the intellectual property, can completely derail the activities of a larger research program. None of this is a monetary consideration and thus cannot be addressed by paying more.
Even private universities tend to operate this way, though usually for more basic monetary reasons. The TTO of most universities handle both commercialisation and research grant activities. It’s a reality of our university system that it is much easier for a university to obtain huge amounts of (free) grant money for future research than licensing revenue for a technology. Surrendering those future grant opportunities by blocking an area of research usually has a much higher monetary impact on the university than any increased payment they could get from industry for a particular invention.
There are a few other such barriers that money cannot resolve such as publications and student education. In my experience those are all fundamental barriers that are extremely hard to overcome through money or any other industry incentive. The good news is that there are solutions, just not the most obvious ones:
Freedom to Research
This is the basic problem described above. Industry wants control over the technology while the university wants to continue research. The solution comes from understanding what the company really wants. Exclusivity or ownership is usually just a shortcut for the following benefits: control over commercial development, freedom to develop and enforce the intellectual property, and preventing a “blackmail” scenario where the university develops critical improvements to the technology and demands a “ransom” later.
Each of those can be addressed with the following structure. The intellectual property is assigned to the company and the company returns a non-exclusive license back to the university. Both parties then set up a time-limited collaborative research arrangement which provides the company with either automatic assignment, a right of first refusal or at least a right of first bid for any improvements or related technologies. This structure might seem a bit complex but it achieves the goals of both sides. For smaller companies and start-ups you can replace the assignment with an exclusive license with a forced assignment option upon completion of some commercial milestones. That prevents any loss of intellectual property or research opportunity to the university if the start-up dies and is forced to fire-sale its patents.
Universities need to publish. There is just no way around it and trying to rein in this activity by force is futile. Instead, the best way to handle this is to create a review procedure for publications. This should give the company an opportunity to filter out key confidential information while still allowing the researchers to publish. A decent time interval for the review period will also ensure that any patent applications can be filed in time (6 months is usually plenty). A lot of fineness is required for this to work and I would strongly encourage companies to route this interaction through the technical counterpart to the university professor and not through their legal department.
The last fundamental mandate of universities is to educate students. The company cannot impose specific projects onto graduate students or hold the university liable for activities of the students (as a practical matter universities generally don’t rep and warrant anything anyhow since they have very limited control over the activities of their faculty or students). Any post-acquisition support from the university therefore needs to be carefully thought through. It’s possible for the professor to give a bit of consulting support but harder for the students.
My preferred solution is to connect to the student through a separate arrangement designed specifically for industry collaboration. Good candidates for this are NSERC Industrial Post Graduate Scholarships (IPS) or the related MITACS-NSERC graduate scholarship. Those programs provide the student with a 2:1 or 3:1 top-up of her industry salary. The student will in return spend 30% to 50% of her time at the company in industrial research activities. If part-time support isn’t enough then it is also possible to front-load the arrangement (e.g. I have had a student work full-time for the first 8 months of a 2 year IPS and then “released” her back into academia for the rest of the scholarship). Not only is this arrangement university-friendly, it provides the students with a great educational experience.
All these of these issues can thus be solved in a way that is maybe a bit more complex but achieves the desires of both parties. Like all relationship issues, the process needs to be actively managed but I never actually had a problem once these structures were in place and monitored by reasonable people.