The mission of a university is education, research and the dissemination of information. As domestic and international business landscapes change however, particularly with respect to intellectual property, the manner in which universities share and use information has changed.
Traditionally, university research investigators rush to be the first to present novel findings to the scientific community and the public. Apart from receiving the majority of accolades associated with such findings, being the first to publish and/or present novel findings validates the research that was completed for the funding agency, often helps secure future grant money earmarked for related research and enhances a university’s reputation as a research institution.
Universities have come to realize, however, that an investigator’s rush to share their findings can actually limit the university’s ability to capitalize on these findings, i.e., their intellectual property. Once research findings are disclosed, all foreign patent rights in the subject matter are lost, and US patent rights may be lost if US applications covering the subject matter are not filed within one year of the disclosure.
The primary method a university has to protect its intellectual property is through the filing of a patent application covering the subject invention. Prior to 1980 however, a university had no motivation to file patent applications covering inventions stemming from federally funded research because the US government retained all title and rights to any inventions stemming from federally funded research. But it was apparent that the US government was ill equipped to capitalize on the wealth of intellectual property coming out of universities. By 1980, for example, the US government had accumulated over 30,000 patents, but had only licensed approximately five percent of them.
In response to this waste of intellectual capital, Congress enacted the Bayh-Dole Act in 1980, codified in 35 U.S.C. §§200-212. The Bayh-Dole Act allows academic institutions to retain title in subject inventions resulting from government funding. In exchange, an institution must report each disclosed invention to the funding agency, grant the federal government a non-exclusive license, file for patent protection, and actively promote and attempt to commercialize the invention.
The Bayh-Dole Act provides a university with potentially significant new revenue sources, but once a university elects to take title to an invention actively promoting and commercializing the invention can be challenging. Licensing the subject invention and spin-offs based around the subject invention have emerged as effective ways for universities to accomplish this task.
Effective licensing requires a supportive, knowledgeable and motivated technology licensing office (TLO). While the filing and prosecution of patent applications may seem obvious for certain inventions, e.g., a putative cancer vaccine, it is often difficult to predict the potential market for the majority of universityderived inventions. Thus, it is important for the TLO to identify potential licensees as early as possible.
Identifying potential licensees can be challenging because the subject invention is often still years from commercialization and may include relatively unpredictable technologies. Working closely with the researcher(s) responsible for the subject invention, the TLO must be able to discern, if only broadly, the scientific landscape behind the invention in order to identify competing investigators and, if they are lucky, to obtain a feel for the potential business environment, if any, surrounding the subject matter of the invention.
Once a licensee is found, the TLO must have the personal, intellectual and financial resources to obtain the best deal terms for the university. Several factors that the TLO must consider include whether to grant an exclusive or non-exclusive license, payment terms, duration of the license, who pays application costs, prosecution costs and patent maintenance fees and who controls enforcement of the patents.
Effectively executed licenses can benefit both the university and licensee by encouraging the practical application of research results, building partnerships with industry and providing a significant new source of income to further support research and education at the university. During the period of 2000 to 2004, for example, the University of California at San Francisco executed licenses that resulted in approximately US$80 million dollars in revenue.
The support of a university-associated start-up company, i.e., spin-off, can be an alternative to licensing for a variety of reasons including an inability to find suitable licensees and a means for allowing a university to take a hands-off approach to the commercialization of its technology, i.e., decrease it’s risk, yet still maintain a stake in the company if it is successful. A spin-off can refer to a commercial entity deriving a significant portion of its commercial activities from technology obtained from the academic institution. It may take the form of a new company, modification of an existing company or even the coming together of existing companies for the purpose of creating a commercial vehicle to exploit university technologies.
A core of excellent research is the first requirement for the successful creation of a spin-off company. A TLO with a strong commitment to the spin-off is also needed. This commitment can take the form of university-provided resources, low-cost facilities and/or scientific and business consulting services. A supportive university environment is also needed including senior administration support and a recognition of how the benefits of commercializing their technology can help the university’s goals of teaching, research and the dissemination of knowledge.
Licensing and the formation of spin-off companies are becoming more common as academic institutions become more aware of the potential revenue source associated with the commercialization of their intellectual property. While the traditional role of a university as a place for education, research and the sharing of information has not changed, the manner in which a university capitalizes on it’s intellectual property has.