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The number one online magazine or innovation management practioners
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ISBN: 978-91-86829-06-3
University Partnershipsin the Era of UniversityInnovation Merchants a Practical Guidefor Companies
Melba Kurmansenior thought leader, analyst and expert on
university intellectual property strategy and innovation management
by
Feature Article # 003-2011
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Knowledge in practiceAs companies today compete on their ability to create and sell innovative
products and services, universities continue to be a source o new ideas, expertise andcutting-edge inventions. Theres no correct way to structure a university partnership.
Consider the experience o three companies: a small biotech company, a medium-
sized sotware company, and a large semiconductor company. Each approached the
university or dierent reasons and with dierent needs.
Three years later, the small biotech company licensed the rights to a university-
owned patent to develop a promising skin cancer treatment. The medium sotware
company owns two patents on an algorithm developed by a university proessor while
she was under a consulting agreement; the company did not license these patents
rom the university. The large semiconductor company sponsored $300,000 worth o
new lab equipment in a proessors lab in exchange or receiving regular updates o
detailed testing data o new types o chip materials.
These examples demonstrate the range and variety o ways that a company can
tap into university know-how, resources, and technology. Many channels, both ormal
and inormal, connect university research labs to the commercial marketplace. An
innovation manager must careully consider which channel works best or her goals,
and recognize the universitys unique academic culture and diering priorities.
Knowledge in brieUniversities can be natural engines o open innovation since they do not develop
their own in-house research into products, nor do they compete or revenue in the same
marketplaces as companies. In the United States, innovation partnerships between
research universities and companies oer companies a number o competitiveadvantages. University researchers conduct cutting edge research, much o which
they share reely and publicly. U.S. universities own hundreds o patents that they
license to companies. Universities have specialized acilities and lab equipment that
is usually available to companies or a ee.
Despite the potential benefts, partnerships between universities and businesses
can be complicated by ownership issues o intellectual property rights, misaligned
expectations, and diering culture and priorities. Companies should approach
potential university collaboration with appropriate expectations and the awareness
that theres no single correct way to structure a university partnership. This article
oers practical guidance or innovation managers, product managers and executives
who are considering making university technical resources part o their open
innovation product development strategy. This article ocuses on the innovation
ecosystem in the United States but many o the dynamics described may be
recognized by innovation managers worldwide.
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University Partnerships in the Era o University Innovation Merchants a Practical Guide or Companies
about the author
Melba KurMan
Melba Kurman is an expert in university technology transer strategy
with over 15 years o experience in bringing innovative technologies
to market. She has managed the commercialization o innovative
technology in both industry and university settings. She was
responsible or marketing Cornell Universitys intellectual property
portolio to industry partners and spent several years at Microsot
as a product manager. Melba writes the popular Tech Transer 2.0
blog, and is the president o Triple Helix Innovation, a consulting rm
dedicated to improving university and industry innovation partnerships.
In the U.S., the innovation landscape has changed
dramatically over the past 30 years, particularly
the innovation partnerships between company
product development teams and university researchlabs. In the 1970s and 1980s, as they shited their
ocus to shorter-term results, many Fortune 500
companies closed their in-house R&D labs. Today,
with some notable exceptions such as Microsot,
IBM and Proctor & Gamble, most companies no
longer maintain their own in-house, early-stage,
exploratory scientic research organizations.
Another powerul orce that changed the innovation
landscape was the passage o ederal legislation
called the Bayh-Dole Act, which in 1980, gave U.S.
universities the legal right to own patents on the
results o on-campus ederally unded research, as
long as the university was willing to pay to patent
the invention, and make a reasonable eort to
nd a business partner to develop the patent into
a commercial product. Finally, companies are
increasingly more comortable with the process o
open innovation as a mode o product development.
Many companies, both large and small, have
become increasingly adept at eeding their product
development pipelines by tapping into the expertiseand resources available at other organizations.
Open innovation is dened by Henry Chesbrough as
a product development process in which companies
commercialize internal ideas by combining in-house
knowledge and resources with those created outsidethe company. In Chesbroughs terms, universities are
innovation explorers, perorming basic science and
discovery research that they hand o to companies
to develop into commercial products. Universities
can be a vital source o product innovation since
their primary ocus is to discover new knowledge
that sometimes results in cutting-edge technologies.
Companies look to universities or new product
ideas, data and game-changing research and
technology. In contrast to the lingering stereotype
o the academic ivory tower, todays U.S.
universities are well-unded research hubs that
create game-changing knowledge across a broad
range o industries. Universities receive billions
o dollars in research sponsorships and grants
rom the government and companies. According
to data rom the National Science Foundation,
more than 60% o government unding or basic
research fows to university labs. According to the
Association o University Technology Managers, in2009, companies paid or over $4 billion worth o
The changing roleof U.S. universities
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University Partnerships in the Era o University Innovation Merchants a Practical Guide or Companies
4
research, about 10% o a typical universitys annual
research budget.
By partnering with university research labs,
companies gain the opportunity to experiment
with new technologies and methods without
committing to hiring permanently the expertise
needed to develop these technologies. Universities
have specialized acilities and sta skills that cannot
readily be obtained elsewhere. Despite the depth and
breadth o technological expertise and resourcesenjoyed by large research universities, university
research, valuable as it may be, in most cases
cannot be simply plugged directly into a companys
product development pipeline. The most productive
partnerships between companies and universities
take shape when the players nd the right balance
between remaining true to their own core goals and
competencies and stretching to make cultural and
work-style adjustments.
u.S. reSearch univerSitieSaS innovation MerchantSIts important or CEOs, senior executives, product
managers and innovation managers to understand
that U.S. research universities view their research
labs and aculty expertise as marketable resources.
Todays universities continue to conduct their
traditional unctions o teaching and research, but in
the terminology o open innovation, are becoming
increasing active innovation merchants. Until
a ew decades ago, universities did not own the
intellectual property and ideas they generated, nor
did they themselves sell or license patents resulting
rom their research. Beore the Bayh-Dole Act o
1980 was passed, universities typically did not view
the ruits o university research labs as a potential
revenue source. As a result, research universities o
yore were more likely to share their reely expertise
and inventions with other organizations. Beore the
1980s, with a ew exceptions, most universities did
not own patent portolios, nor did they monitor their
research labs to identiy potentially commerciallyvaluable patents.
Today, most U.S. research universities own sizeable
patent portolios that they seek to commercialize
by licensing to companies and startups in exchange
or ees and royalty payments. Since universities
conduct the majority o ederally-unded research in
cutting-edge elds such as biotech, clean energy, and
nanotechnology, and they have the option to patent
what comes out o their research labs, universities
have ended up owning nearly one-quarter o new
U.S. patents on the elds o nanotechnology and
biotechnology
1
. Many countries have ollowed theU.S. model and now permit their universities to
own and broker patents, and to conduct industry
sponsored research in university labs. In this new
innovation ecosystem, universities own their own
patent portolios and play the commercialization
game as innovation explorers and innovation
merchants. Companies that attempt to collaborate
with university researchers requently discover that
in addition to traditional challenges such as cultural
dierences and varying priorities, companies must
also consider the intellectual property issues thatwill likely come up in a university/industry research
partnership.
Despite challenges, a number o dierent actors
encourage companies to consider an innovation
partnership with a university.
By partnering with university research labs,
companies can explore new technologies and
methods without investing in new employees or
physical inrastructure.
University faculty represent a wide range of
expertise in a number o dierent elds; most
engineering aculty are actively engaged in
addressing leading industry problems in their
elds.
Acompanycantapintoanumberofdifferent
university research areas, enabling greater
agility in company product research eorts.
Ifacompanyhiresstudentsforaproject,the
company build sa pool o potential utureemployees who are already amiliar with the
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companys technology and readily available or
hire in the short term
Since university researchers openly share their
scientic work, the majority o their prior
research projects are publicly available; a
company seeking a subject specialist can more
easily nd and evaluate the oered expertise othe university researcher.
Universityresearchlabsareunlikelytoattempt
to develop a directly competing product.
Many roadS lead to roMeTheres no one-size-ts-all guidebook to help
an innovation manager successully navigate the
academic labyrinth. In the United States, one thing
almost all research universities have in common
is a technology transer oce thats tasked with
managing the patenting and licensing process or
inventions unded by ederal grants and dreamed up
by university aculty and graduate students. Dierent
universities have dierent attitudes towards the
value o industry collaboration and the degree o
fexibility that a university administration exhibits
when it comes to managing their partnerships with
the corporate world. Some universities actively oster
strong relationships between their research aculty
and industry, or example, encouraging their acultymembers to seek industry consulting assignments.
Other universities may permit consulting, but
require aculty to regularly report on the details o
o-campus collaborations, and sometimes, mandate
that each company project be reviewed by a confict
o interest committee.
A company may encounter varying attitudes even onthe same university campus as innovation managers
interact with dierent university employees who
oer dierent interpretations o university policies.
Its not unusual or companies to discover that
when they approach dierent people at the same
university and ask them to dene the rules o
engagement or a company/university partnership,
they receive several dierent answers. In general,
large research universities are decentralized and
complicated organizations. Each university takes
a dierent approach to its relationships with the
business world and sometimes, even within the
same university, dierent departments and aculty
interpret university policy in their own unique ways.
the inorMal channelSGiven the complexity o navigating the world o the
large research university, combined with the challenges
inherent in any ormal collaboration, a sensible
beginning step or a business is to consider whetheran inormal partnership with a university researcher
will meet their needs. Many companies dont realize
reported SourceS o innovation or u.S. coMpanieS
60%
50%
40%
30%
20%
10%
0%
us
s
is
s
p
s fms
gm
s
gm
r&d s
uk
Figure 1. Data rom article by Francis Narin, Kimberley Hamilton, and Dominic Olivastro.The increasing linkage between U.S. technology and public science. Research Policy 26 (1997): 317-330.
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University Partnerships in the Era o University Innovation Merchants a Practical Guide or Companies
6
that the vast majority o productive industry/
university interactions are based on decentralized,
inormal channels such as casual knowledge-sharing
with students and aculty, scientic publications,
hiring aculty or consulting engagements, student
internships, and mingling at conerences. Although
university patent licensing practices receive the lions
share o attention, ewer than 10% o business
innovation managers surveyed said they ound them
to be an important channel to university research2.
A ormal contractual business relationship with auniversity may not be necessary. I no patents are
at stake, no research sponsorship is taking place,
and theres no use o university equipment or other
resources, inormal exchanges may suce.
Since university aculty enjoy the luxury o dening
their own research agenda, and universities exercise
diering levels o control over their intellectual
activities, most U.S. research universities are the
site o a vigorous intellectual property (IP) greymarket. Knowledge and technology exchange are
fuid processes, and a university researcher may elect
other modes o getting her invention, data, or know-
how to market that do not involve the ormal channel
provided by the university technology transer oce.
Grey market intellectual property exchanges typically
occur when companies hire aculty or students or
consulting engagements and the resulting patents
are signed over to the sponsoring company. In act,
research estimates that an estimated 30% o the
ederally unded basic research that takes place in
university labs reaches industry without a ormal
patent license or the involvement o the universitys
technology transer oce3.
The presence o an on-campus IP grey market is
a good example o the degree o variance in the
attitudes o university administrators towards their
universitys management o its patent portolio and
their perceptions o how university aculty shouldwork with companies. Many universities opt to not
enorce or pursue patent rights that were a product
o a aculty consulting engagement. To check on
the fexibility o university consulting engagements
and inormal modes o technology exchange, a
company should check the universitys intellectual
property policy that lays out the universitys rules
o engagement. Some industry-riendly universities
permit aculty and students the right to generate
intellectual property independently o the university
as long as the research takes place o campus and
does not make use o university acilities, time, orother resources.
the orMal channelSAn innovation manager may decide that her
company is ready to orm a ormal innovation
partnership with a university based on the success
o an inormal collaboration, when both company
and university researchers want to move beyond
simple inormation sharing or consulting. Or, in
cases where patents are going to be involved inthe collaboration, a company and the university
researcher may eel it is time to change the
relationship into one thats contractually based
and approved by the university administration.
U.S. research universities have two ormal channels
via which companies and universities work out
contractual agreements. First, to manage the ormal
patenting licensing process, most universities have a
dedicated in-house technology transer oce. The
technology transer oce manages the universitys
patent portolio and takes care o associated tasks
such as logging invention disclosures submitted by
aculty and graduate students, seeking companies to
license patents, managing the patenting process, and
making sure licensees are paying their bills on time.
A second and related oce, the grants and contracts
oce, exists to manage the administrative and
legal details surrounding government and industry
sponsored research partnerships. The grants
and contracts oce screens company-sponsored
research projects and ensures that the proposedpartnership is in line with university regulations.
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An innovation manager should approach a university
partnership in the same way he would approach any
new proposed project. First, what would success look
like? Establishing a clear denition o a successul
innovation partnership will help guide later decisions
on more specic issues. For example, is the goal o the
innovation partnership to get access to a researchersskill and expertise, to use a specic university
technology or material in product development, or
to test out new methods with an ocial project team
made up o both university and company researchers?
Other considerations include how a universitys
know-how and resources would contribute to
product development. Does the university have a
skill that the company does not have internally? Is
the university research lab the only source o this
expertise, or are there other places that may be able
to oer a more straightorward commercial lab orhire arrangement. Does the company need a specic
component or its product, or is it ater a long-term,
open-ended exchange o knowledge?
In addition to oundational questions on project
purpose and compatibility, other actors an
innovation manager should consider are:
the industry her company is competing in
the nature o the knowledge or resource the
company hopes to obtain rom the university
the maturity o the product or service that the
university will be able to add value to
the length and potential fexibility o the
product development timeline
how much control the company wants over the
research process
whether the company preers secrecy around
the project, or is comortable i the universityresearcher publishes the results
whether the companys intellectual property
strategies are aligned with the universitys
project budget
The ollowing actors need to be weighed.
1. Some industries value patents more than others.
The more a company relies on patents as a source
o competitive advantage, the more likely it will
be to gravitate towards a ormal sponsored
research agreement or patent license rather than
just sharing knowledge or hiring students. Lie
sciences and medical device companies perceive
patents to be a critical source o competitive
advantage since their commercial products must
pass FDA trials and as a result, require signicant
investment o time and money on the part o thecompany. In act, overall, university technology
transer oces earn 87% o their licensing
revenue rom biotechnology and medical devices
companies that rely on university innovation to
create a new drug candidate or plant variety, an
improvement on a surgical tool or drug delivery
method, or a new genetically engineered mouse
or bacterial line4. In contrast, semiconductor,
hardware and sotware industries move aster
and have short product cycles so patents quickly
become obsolete. Companies in these industries
rely on rst-mover advantage, trade secrets
and product tie-ins5. A company may gain
these competitive advantages by hiring highly
skilled graduating students, hiring aculty or
consulting engagements, speaking with experts
at scientic conerences and reading the latest in
engineering and computer science journals.
2. What kind of knowledge is the company trying
to acquire? Universities generate knowledgeand innovation in all orms, ranging rom
Managerial implications
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University Partnerships in the Era o University Innovation Merchants a Practical Guide or Companies
8
aculty and student expertise, to research
materials, to new data, new devices and new
methods. Research materials and data rom a
university lab are typically not patented and i
the university researcher is willing to share, can
usually be exchanged at no cost reely or with
a low-cost material transer agreement. On the
other hand, a university technology that has
the potential to orm a commercially valuable
device or new method will likely require a visit
to the universitys technology transer oce i
either the company or the university researcher
wants to pursue a patent. In addition, even
patented university inventions are likely to be
in a very early stage o development, and will
probably need additional costly development
beore they can contribute to a protableproduct.
3. Platform, product or prototype. An innovation
manager needs to be very clear on the status o
his product development pipeline, and what he
hopes the university will be able to contribute to
it. Companies sell products, yet universities are
more likely to create platorms and prototypes.
Companies unamiliar with university research
labs are sometimes disappointed to learn
that a promising university technology may
still be years and billions o dollars away
rom being ready or the marketplace. Across
several companies surveyed that licensed a
university invention, only an estimated 7% o
the patents licensed were immediately usable
in a commercial product6. Companies that
have licensed rom a university reported that
one third o university patents are in a prooo concept phase and the remaining two-thirds
Figure 2. U.S. research universities conduct game-changing research in semiconductor technologies.Many attribute the birth o Silicon Valley to the regions vibrant research universities.Photo by Ioan Sameli on otopedia.
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were even earlier and nowhere near being ready
or a clinical trial or commercial application7. An
important upside, however, is that the research
that created university inventions is typically
government-unded. Unlike a contract research
lab, universities are not under strong pressure to
recoup the cost o developing the invention.
4. Corporate time vs. academic time. Timing
is a major challenge when two dierent
organizations with dierent cultures andpriorities are working towards a single product
development goal. I a company is racing
towards a hard and ast product la unch deadline
or is in an industry in which products must get
to market very quickly, a university research lab
may simply not be able to move ast enough
to be useul. While most o us are intuitively
amiliar with the concept o academic time,
survey research conrms that indeed university
researchers take a longer term view o the
product development process than do companysta. Students come and go on semester-based
schedules. And academic timerames tend to be
longer. Almost 70% o companies, when they
tried to integrate university innovation into their
product development process, elt that university
researchers had a lower sense o urgency than
did the companys innovation managers8. A
ast-paced, revenue-oriented company needs to
consider whether it is comortable managing its
product development process with unscheduled,
open-ended inputs rom a universitys lab,
or whether it requires clear deadlines and
predictable, structured deliverables.
5. Priorities and the demands of the product
development process. Beore approaching
a university researcher, a company needs to
understand that while the company requires
and expects ull-on dedication rom their
product development team members, a
university researcher will not be able to put thecompanys project rst. Realistic expectations
are key. University aculty advance their careers
by publishing in scientic journals, obtaining
grant money and teaching. Their relationships
with companies while valued, do not directly
advance their career, and thereore, will take
second priority. In contrast, company product
managers and innovation managers are goaled
and rewarded on the success o bringing a
product to market on time, and under budget.
An innovation manager needs to come to a clear
understanding with the university researcheron what sort o time the university researcher
will be able to contribute. I the university
researcher is slated to play a central role in
the planned product development process,
a contingency plan or project slippage is
essential. In addition, the majority o university
research is exploratory, meaning its likely years
away rom being ready or commercial use. The
best situation is when a company has enough
fexibility built into its timeline that it can
survive a reasonable amount o time slippage,and both sides understand that the university
researcher will play a supporting, not a central
role, in the product development process.
6. Publication of research results: the value
of privacy vs. the value of publication. An
innovation manager needs to think through
the issue o private vs public knowledge
when collaborating with a university partner.
University scientists are rewarded on sharing
their discoveries as ar and wide as quickly as
possible. Companies are rewarded on being the
rst to market with something new or something
better. A company wants to be assured that it
can use the results o the research, and that these
results will not be available to their competitors.
In contrast, almost all universities will most
universities insist that dissemination o research
results is key to their identity and mission
and will not agree to keep the project results
secret. Some university researchers will agreeto a limited amount o delay beore publishing,
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University Partnerships in the Era o University Innovation Merchants a Practical Guide or Companies
10
but companies are better served i they come
in with the understanding that any research
they sponsor will likely be shared publicly. I
a company is tapping into a university via an
inormal channel, its likely that the researchers
knowledge has already been published or
publicly shared at a conerence. Where privacy
becomes more complicated is in cases where
a company and the university researcher have
conducted original research under some sort o
contractual arrangement. Whether the universityresearcher is consulting at the company or
conducting sponsored research in her lab, the
company may not want the university researcher
to publish the data or a ew reasons. One, i the
research uncovered unfattering truths about the
companys product. Two, i the resulting data
would compromise a companys competitive
advantage i made public. And three, i the
company wants to urther develop the research
ndings to get a patent urther downstream.
Companies that are highly concerned with
secrecy may not nd universities to be the
optimal innovation partner. Any reputable
university will stand rm on their rule that
companies may not suppress the publication o
research results, even i they are unfattering to
the companys planned product. For example
i a company is developing a new material
and unds research to establish the materials
superior perormance, i university researchers
determine that the materials perormance is
actually sub-par, typically the university will not
permit the company to suppress these negative
results.
7. University policies must be considered.
University researchers are bound by university
policies and thereore, may not be as fexible as
an innovation manager would like them to be.
University aculty and students must adhere to
university regulations around use o universityresources, how they spend their time, and
whether or not they are permitted to opt to not
publicly share research data. The chie university
policies governing innovation partnerships with
companies are the Confict o Interest Policy, and
the Intellectual Property Policy. Many universities
require that their aculty undergo lengthy confict
o interest reviews rom a committee o their
peers beore they can participate in a company
product development project. In addition,
university technologies may also be subject to the
restrictions o ederal unding agencies and issuesassociated with being a non-prot, tax exempt
organization. Policies vary rom university to
university and rom researcher to research on
the appropriate balance between privacy vs.
publication. Some companies mandate that as a
condition o sponsoring on-campus research, the
company have the right to review any planned
scholarly publications beore the university
researcher publishes them. Some review o
university publications is typically accepted, but
ull-on censorship is rowned upon in universityenvironments and most university aculty careers
rest on their colleagues trust in their academic
integrity.
8. Budget: nothing in life is free.Although universities
are technically non-prot organizations, most
university researchers will not be able to do work
or ree. While aculty and students like to have
industry connections, its important to recognize
that i an inormal relationship reaches a certain
threshold in terms o time spent or resources
committed, the company should consider adding
some orm o compensation to the relationship.
For example, hire the student or aculty member
or a consulting engagement, pay their travelling
expenses to a conerence, or invest in sponsoring
their research.
challengeS
Building a productive university/industry innovationpartnership requires successully marrying two distinct
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organizational cultures and agendas. Companies
report the ollowing challenges in working with
university research labs.
cultural
1. Universities are decentralized and have many,
uncoordinated units that work with industry.
Companies are sometimes shocked at how slow-
moving and bureaucratic universities can be.
Industry-relations unctions tend to be scattered
throughout unconnected, dierent departments.A company that attempts to nd the university
unit that can help set up an innovation
partnership may nd it challenging to get a
single, clear answer to their questions. Instead,
an innovation manager may be provided varying
interpretation o a universitys policies and
procedures oered by internal university units
with their own unique missions and agendas.
2. Separate university units manage dierent parts o
the research agreement with the same company.Related to the issue above, the two primary
university units that work with ormal company
research partnerships the technology transer
oce and the grants oce -- requently have
dierent managers and un-aligned goals. The
universitys technology transer oce is goaled
on how much patent revenue it can earn rom
licensing university owned patents. On the other
hand, the grants and contracts oce is not goaled
on patent revenue, but on keeping the university
away rom scandal and making sure its honoring
its tax-exempt status with careul enorcement o
intellectual property clauses. In addition, no unit
director, regardless o their unction, will risk
letting potentially lucrative university intellectual
property out the door too reely or cheaply
lest they be the unortunate person that either
triggered an integrity scandal or accidentally let
the big lucrative invention get away or cheap.
Fear o scandal or losing the big home run,
misaligned goals, combined with the act thatno university unit is held to a prot/loss bottom
line, can inadvertently give university service units
more incentive to prevent, rather than to acilitate,
an innovation partnership rom taking place.
intellectual property iSSueS
3. Sticky university intellectual property clauses
and policies. Companies cite IP problems as their
biggest challenge in establishing connections to
the university9. Sponsored research agreements
between a company and a university contain
intellectual property clauses that give theuniversity ownership o any patents that result
rom the project, and may require the company
to later negotiate or rights to the patents their
research unded. While these IP clauses are viewed
as a common deal-breaker in industry/university
collaborations, its important to keep in mind
that a university must avoid the appearance
o being a lab or hire. U.S. universities,
particularly publicly unded ones, must manage
their sponsored research agreements careully
to honor their 501(c)(3) tax exempt status.When companies sponsor private research in
a non-prot organization such as a university,
according to U.S. tax law, the university is
required to serve the public interest by ensuring
that any resulting intellectual property is
made public on a non-discriminatory basis.
While theres a lot o debate about exactly how
much leeway universities have in IP clauses
while still remaining compliant with their
tax-exempt status, its worth understanding
that university research contracts are bound
to stringent ederal tax regulations. Many
universities attempt to meet their tax exempt
obligations by oering an industry sponsor an
exclusive option to later license any resulting
patents rom a sponsored research project. A
university may request that the sponsoring
company license any resulting patents at a air
market rate. While many companies would
preer that a university oer a set, uprontprice or a patent at the time the sponsorship
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is arranged, most universities dont eel that
doing so would be establishing a air market
value or the patent (another requirement as
a tax-exempt organization). Some universities
are exploring ways to make the sponsored
research process easier by oering one-time
upront payments in exchange or patent rights,
or by allowing the sponsoring company to
have a no-cost, non-exclusive patent license.
Any company considering sponsoring aresearch project at a university needs to ask
detailed questions about the universitys policy
on intellectual property issues. While the legal
details o sponsoring research at a tax exempt
organization are beyond the scope o this article,
its important to emphasize that tax restrictions
exist. An industry-savvy university will work with
you to nd a mutually agreeable solution that
permits the university to preserve its tax exempt
status, but still provides the sponsoring company
with some reassurance that they will get a airdeal should they want to later license the patents
that may come out o the research partnership.
4. Some university technology transer ofces may
like to view themselves as tough negotiators. In
cases where an innovation manager has chosen
to pursue a license or a university-owned patent,
she may discover that university technology
licensing sta pride themselves on being tough
negotiators. Although universities preer to not
publicly state that earning licensing revenue is a
goal o their technology transer eorts, many
are goaled on revenue, especially as state support
or universities continues to decline. In addition,
a tech transer unit is under pressure to recoup
the costs o patenting unlicensed inventions and
to pay or oce overhead, so they may push or
high license ees and milestone payments. Since
negotiations over license terms and ees may
become quite detailed, an innovation manager
should not be surprised i the license does notbecome nal or 6-9 months.
acadeMic integrity
5. Universities must not appear to be bought
by companies. In the past decade, the
pharmaceutical industry has been tarnished
by high prole university research scandals
where data on negative drug side eects was
suppressed rom publication. Given the
health risks associated with unbiased drug
saety trials and related research, theres public
concern that i universities accept research
money rom drug companies, universityresearchers will be pressured to publish data
that portrays a particular drug in a positive
light. Similarly, theres rising public concern
whether unding rom tobacco companies
results in university research that downplays
the health risks associated with smoking.
In response, university administrations are
tightening up their campus confict o interest
and confict o commitment policies or aculty.
Given the high cost o a scandal around researchethics, universities must tread careully to not
compromise their academic integrity. At the
individual level, university researchers must be
similarly careul to protect their reputations. I a
university researcher is sponsored by a company,
the researcher may be perceived o as being
bought and thereore lose standing in the
academic community or put the university in a
negative light. To saeguard the university rom
unpleasant public scandal, most universities now
require aculty to report where their research
money comes rom, including speaking ees and
consulting. I a university rowns on industry
sponsorship o aculty research, some aculty
may shy away rom accepting a companys
money, particularly i the aculty member is
not yet tenured. In addition, i theres pressure
against taking industry money, aculty may eel
pressure to limit the number and duration o
company-related engagements.
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The most ruitul partnerships are those in which
an innovation manager leaves as little as possible
to chance. University collaborations are challenging
but i approached correctly, can connect a company
to a valuable source o paradigm-changing research
and expertise.
1. Most university connections take place via
channels that do not involve ormal contracts
or the use o university resources o patents.
Innovation managers should begin their
university relationships inormally and get
the most value they can out o their personal
relationships with university researchers andthe wealth o publicly available scientic
knowledge.
2. Depending on its industry, a company may
not benet rom university-owned patents.
I a company does not need patents or access
to university lab acilities and is primarily
interested in the expertise o a single aculty or
graduate student, consulting engagements with
aculty or students may oer a streamlined
alternative to a sponsored research agreement
or patent license.
3. An innovation manager must have a clear
understanding o the maturity o the university
technology shes interested in. Even though
a university invention is potentially game-changing and technologically ascinating, that
doesnt mean that its commercially viable.
Figure 3. The majority o commercially valuable university-owned patents have been in the biotechnology and medical device industries.University labs create lie saving vaccines and breakthrough drugs such as Remicade (New York University), Hepatitis B vaccine(University o Caliornia) and the HIV drug Ziagen (invented at the University o Minnesota).Photo by Horia Varlan on otopedia.
Lessons learned
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14
Early-stage inventions may not develop quickly
enough to accelerate a companys product
development eorts.
4. A university lab is not the same as a contract
research lab. Universities, unlike contract
research labs, will not make their innovation
partnerships with companies their top priority.
In addition, universities are highly skilled
at early-stage exploratory research, but lessoriented towards incremental, highly applied
research. As tax exempt organizations, U.S.
universities are beholden to tax regulations
that complicate the ownership o intellectual
property that arises rom a sponsored research
agreements.
5. Timing is key. Universities work slowly
and students and aculty must put courses,
scholarships, grants and publications rst.Companies move at a dierent time speed.
Unless special dispensations are made, a
university research lab will not be able to keep
up the pace at which an innovation company
takes a product to market. Plan accordingly.
6. For a company, the goal o engaging in research
is to gain a competitive edge. For the university,
the goal o conducting research is to publish
the results to as many people as possible. Top-
secret research projects are dicult to justiy
in a university setting, particularly as the trend
in universities is to reuse to suppress negative
research results and to publicly state all sources
o industry unding.
7. I an innovation manager decides to ormally
license a patent or to sponsor research, he
should not be surprised i the universityattempts to extract as much money as possible.
He should approach the negotiation process as
any business negotiation; the university, like any
business, is interested in earning revenue.
8. University partnerships may not be cheap.
Business people should not pursue an open
innovation partnership with a university to
save money on the companys R&D budget.
Subscriptions to scholarly journals run in
the thousands per year. University aculty
may charge hundreds o dollars an hour orconsulting ees. Universities take 50-60%
overhead cuts out o company research grants.
Patent licenses involve thousands o dollars in
administrative ees, regular milestone payments,
and anywhere rom 4-10% in royalties rom
uture product sales. Companies are expected
to pay the costs o the university patent as part
o their license agreement; average patent costs
range rom $30,000 to $40,00010.
9. A universitys lack o urgency and unwillingness
to fex on deal terms in negotiations can be
dicult or revenue-oriented business people
to understand. Business people can be mystied
as to why a university would jettison a high-
value sponsored research agreement over
disagreement on the uture market value o
patents that may never even exist. Especially
since universities earn ar more money on
taking overhead out o company research
money than on patent licensing revenue. These
apparently illogical behaviors make more sense
when you consider that at most universities one
unit manages the patent licensing process and a
separate, usually uncoordinated unit manages
the money that comes in rom company
research projects.
10. I a university proves to be very dicult to work
with, try another. Most barriers to successulinnovation partnerships with a university are
based on dierences in long-standing cultural
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Concluding remarks
values or university intellectual property policies
that inadvertently make the university an
unviable innovation partner. Some barriers are
impossible to resolve in a short time. One way to
gauge a universitys comort in partnering with
industry is to check what percent o its annual
research budget comes rom companies. Usually,
the higher the percentage o the universitys
research budget thats sponsored by industry,
the more industry-savvy the university will be;
a good starting place is more than 8-9%. An
innovation manager should learn to ask specic
questions o university researchers as to their
boundaries around industry collaborations, and
how much reedom the researcher enjoys in his
collaborations with companies.
Theres no single correct way or a company
to partner with a university. One characteristic
o open innovation is that organizations may
exchange knowledge and resources via a number
o many dierent channels. Companies should
weigh a number o actors to determine what sort
university relationship is best or them. Companiescan approach a university via inormal channels or
by entering into contractual research agreements
or by licensing a patent. In ormal contractual
arrangements, intellectual property issues represent
a challenge or companies ollowing an open
innovation model o product development. As
universities are becoming more commercially
minded in the management o their on-campus
intellectual property, innovation managers mayneed to navigate the ormal channels o research
and patent contracts.
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2 Cohen, Wesley M., Nelson, Richard and Walsh, John. Links and Impacts: The Infuence o Public Research on
Industrial R&D. Management Science 48 (2002): 123.
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University Partnerships in the Era o University Innovation Merchants a Practical Guide or Companies
16
Apax Partners report. Understanding university technology transer. 2005 Apax Partners Ltd/The Economist Intelligence Unit. Report available
at http://www.apax.com/APAX_TECH_TRANSFER.pd
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Available online at http://www.iphandbook.org/handbook/ch05/p04/
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