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The number one online magazine or innovation management practioners

Ymer&Partners AB All rights reserved.www.innovationmanagement.se

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




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.




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




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.


9/17



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,




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


11/17



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




12

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




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.

1 Lemley, Mark. Patenting Nanotechnology. Stanord Law Review 58 (2005): 601.

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.

3 Markman G.D., Gianiodis, P.T. and Phan, Phillip. Full-time aculty or part-time entrepreneurs. IEEE Transac-

tions on Engineering Management 55 (2008): 2938.4 Terry Young. Original paper, Why is it So Dicult to License Physical Science/Engineering Inventions? Avail-

able at http://www.beyondtherstworld.com/?p=14502

5 Terry Young. Original paper, Why is it So Dicult to License Physical Science/Engineering Inventions? Avail-

able at http://www.beyondtherstworld.com/?p=14502

6 Jensen, R., M. Thursby. 2001. Proos and prototypes or sale: The tale o university licensing. American Eco-

nomics Review 91(1) 240259.

7 Jensen, R., M. Thursby. 2001. Proos and prototypes or sale: The tale o university licensing. American Eco-

nomics Review 91(1) 240259.

8 Ammon Salter, Johan Bruneel, and Paolo DEste. Investigating the actors that diminish the barriers to universi-

ty-industry collaboration. Persented paper the Summer Conerence 2009, Copenhagen Business School.

9

Shane, S. and D. Somaya. The eects o patent litigation on university licensing Eorts. Journal o EconomicBehavior & Organization 63 (2007):739-755.

10 Feller, I. University patent and technology-licensing strategies. Education Policy 4(1990): 327334.




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

David C. Mowery et al. The Ivory Tower and Industrial Innovation: University/

industry technology transer beore and ater the Bayh Dole Act in the United

States. Stanord, Caliornia, USA: Stanord University Press, 2004.

Weidemier B.J. Ownership o University Inventions: Practical Considerations. In

Intellectual Property Management in Health and Agricultural Innovation: A

Handbook o Best Practices . MIHR: Oxord, U.K., and PIPRA: Davis, U.S.A. 2007.

Available online at http://www.iphandbook.org/handbook/ch05/p04/

Further reading

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communication exclusively dedicated to innovation management. You are invited

to discuss questions that you might have about how to implement the knowledge

presented in this article in your organization. This is a valuable opportunity to

exchange experiences with the like-minded and with colleagues rom around the

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