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Are Academic IP Portfolios and License Deals Enough to Conceive Bio-Clusters?


Steven Casper
Associate Professor of Management
Keck Graduate Institute of Applied Life Sciences
NAME: Steven Casper
POSITION: Associate professor of management, Keck Graduate Institute of Applied Life Sciences
BACKGROUND: University lecturer in innovation and entrepreneurship, Judge Institute of Management Studies, University of Cambridge; PhD, government, Cornell University
It has long been thought that university patenting, particularly in the biosciences, plays an important role in the development of regional technology clusters surrounding the patenting school. But is patenting and licensing enough to spur this development?
Steven Casper, a professor at the Los Angeles-area Keck Graduate Institute, doesn’t think so. Casper has been researching how a number of other factors surrounding universities and research institutions play into regional technology-based economic development.
Specifically, he argues that there needs to be a critical mass of professional and social co-inventor networks surrounding one or more universities in order to build a sustainable bio-cluster. To investigate this theory, Casper analyzed a patent database from the National Bureau of Economic Research to create a smaller cohort of more than 200,000 biomedical patents filed between 1980 and 1995 in five regions: the San Francisco Bay area, San Diego, Los Angeles, Boston, and Research Triangle Park, NC.
Casper gleaned information on inventors and patent assignees to count university patenting in each region, and used social network analysis to construct co-inventor networks. His results show markedly different processes of regional cluster formation across four of the regions; his research on the SF-Bay area is ongoing.
Two weeks ago Casper presented preliminary results of his study in a poster at the Association of University Technology Managers annual meeting in San Diego. This week, Casper discussed his research in greater detail with BTW.

What was your motivation for this work?
I work at the Keck Graduate Institute, which is a professional school in California formed about 10 years ago to educate scientists for careers in the biotechnology industry. I used to be a business school professor at the University of Cambridge. I’ve always been interested in how public policy can influence the commercialization of science. Most of my research is on the issue of how regional technology clusters emerge, what makes them sustainable, what the roles of universities are, and if there is anything that the government can do to hasten the process of economic development around these high-tech industries, particularly biotechnology.
At KGI, we focus on biotechnology as well, so I teach masters students who are scientists and go into industry, so it’s a really good place for me to learn about biotech. I do a lot of projects in my classes with technology licensing officers and have learned a lot about how universities commercialize science.
I’ve also met quite a few inventors, both at KGI, where we have a big research facility and where we have spun out several companies; and also at places like Salk Institute, Scripps Research Institute, and most of the big Southern California research institutes.
What’s always been really interesting to me is understanding what has to accompany the mere act of codifying university results into intellectual property and trying to license that. What do you need to do beyond that to create a successful biotech cluster?
For this study, did you choose the particular regions because they are the biggest US biotech clusters?
Yes. The only one we didn’t include, because we haven’t finished it yet, is San Francisco, which is so huge. We have the patent numbers, and it is much bigger than anything. I am very interested in California as a main research focus. But for this study, I was able to look at some other regions like Boston and North Carolina. I also want to eventually look at New York.
This data is from the National Bureau of Economic Research. It is very easy to work with. It’s a large dataset of all the patents from 1960 to 1999, and they’re currently trying to update it to 2004. This current project is good for the beginning of the [tech-transfer] industry in the late 1970s to the mid-1990s, and I’m trying to extend that to this decade.
But the reason California is really interesting is that you’ve got two super-successful clusters in the San Francisco and San Diego regions. Then LA – I hate to tell people there this – but it is sort of inferior in biotech, kind of a medical-therapeutics biotech. You’ve got CalTech here, UCLA, UC-Irvine, and a bunch of other regional powerhouses in biomedical research, but you haven’t really seen the development of a cluster here like you see in San Diego.
What are some of your major findings so far about how university patenting affects regional biotech cluster development?
The most straightforward thing is that you have to have licensing. Almost all of these biotech companies come from university technology. CalTech, for instance, didn’t really start patenting a lot until the mid- to late-1990s. Now they are gangbusters. But CalTech is one of the pre-eminent research institutions in the world. If they’re not interested in commercializing their science, you’re not going to have anything to commercialize in the region. There are a couple of technologies that have spun out through the inventors, but there wasn’t an active licensing process, so professors that have great technologies and are interested in commercializing them, but don’t have the resources or time, they’re not going to do it themselves 99 percent of the time.
So you had to have the Bayh-Dole Act, and you had to have sort of the complementary institutional initiative to get tech-licensing offices up and running, and funded. You see differences across the clusters in this area. North Carolina is another one. They’re very well-known for public policy in biotech, but you don’t see a lot of patterns emerging there until the late 1990s.
Meaning you don’t see a lot of influence on regional biotech development from university patenting?
At least in terms of licensing activity you don’t. There could be other influences through informal mentoring, giving talks, and labor market types of things.
A more recent line of research I’ve been trying to contribute to, along with many others, is social network analysis to look at other types of knowledge flows linking universities and other organizations to the formation and sustainability of biotech companies.
As part of this project, I’ve tried to trace co-inventor networks, which are networks linking people that are inventors on the patents through their organizations. One of the big things that people interested in cluster formation are studying is when do people leave universities, and what type of people leave universities and start companies. One thing that is cool about this data is that you can trace when somebody is an inventor on a patent – and these are usually post docs or PhDs – and then takes a job with a biotech company. Very often, if you really want to get a biotech company going, you have all the formal technology licensing stuff, you have a professor that is the big scientific founder that will take an advisory role, but then you need two or three people from the university to actually leave the lab and go commercially validate the technologies that were created for a scientific purpose. And you can trace that with this type of research.
You see differences across these clusters in this area, as well. Both San Diego and Boston are the most advanced in this area, and are what you think of in terms of university spillover into companies. There are a lot of people who bridge universities and companies. Most people are members of one or the other, but there are a few key people who bridge these communities, and they are sort of the conduits through which knowledge flows. So using this data you can trace that, and you can trace when these things emerge, and it’s a good template to understand what’s going on in these clusters.
Is it too much to extrapolate from this work that in a place like LA, the regional biotech industry would be more developed now if area universities had been more aggressive about patenting and licensing technology earlier on?
It is a bit of a leap, but it’s a very complicated question, and I’ve actually got a research grant to study just LA, so I’ve thought quite a lot about this. Most people in LA would say, “There is nothing you can’t find in San Francisco, San Diego, or Boston that we don’t have in LA. We have great universities that are patenting, we have emerging hotbeds of companies.” There is an emerging cluster of companies around CalTech in Pasadena now. There is a bunch of companies down in Irvine, around UC-Irvine, and there are even some companies down in Santa Monica, which is basically UCLA. And there is also a venture capital community here. Universities are all patenting now, much more frequently and actively than in the past. Also research hospitals, such as the City of Hope, are patenting and licensing now.
If you talk to these people, they sound very similar to people in San Diego. They’ve got the infrastructure here. The issue, I think – and this is where the leap of faith comes in and you’ve got to speculate a little bit – is that you’re in California and you’ve got a massive complex of companies an hour-and-a-half drive away in San Diego; and then an hour plane ride away in San Francisco, you’ve got perhaps the world’s largest biotech cluster. And the agglomeration effects, the pull effects from the critical mass those areas have achieved really hurts LA. It’s just so much easier to get things done once you’ve got not just the starting materials, but you have it up and running.
A lot of it involves questions like, “How easy is it to get reasonably priced lab space?” And it’s easy down in San Diego, because there are companies coming and going, starting and failing all the time. And there’s the same thing in San Francisco. But here, it’s hard. You talk to founders of CalTech companies, and they have a hard time moving out of the lab because there is not a lot of space.
The thing I’m most interested in is looking at the labor market and how that develops. Let’s say you’ve got a great idea for a company, and a star scientist behind it – how hard is it to get the other resources that you need, especially serious managers who have experience taking a compound through pre-clinicals to clinical trials and so forth? That’s one area where San Diego and San Francisco just have a huge advantage. There is a lot of mobility of individuals between companies in those regions. When one company goes under, they move to another company through their social networks. That makes it really easy to start a company, because it makes it really easy to start a company if you’re in the network.
Here, in LA, we’ve got Amgen, which is one of the world’s biggest biotech companies, and that until the last four or five years was very insular. They were very successful, and [generated] millions of dollars of revenues every year, and nobody left that company. Moreover, when they did leave the company, I’ve got data of about 200 former employees that shows that they move out of LA, and most of them end up going to San Francisco or San Diego. This makes it hard for LA to catch up. About four or five prominent biotech companies have started up in LA and then moved down to San Diego.
What are the implications of this for the role of a large research university in, say, the Midwest? All of the regions that you have studied have multiple research universities, whereas you might have a university like Washington University in St. Louis or Purdue University putting a lot of these pieces in place, but sort of going it alone on the innovative research front. How much difference can the patenting activity of one large university make? Is it more of a pooling effect?
The perspective of the university is different. The university is interested in licensing, and they can license anywhere they want. They have to balance finding the best deal terms with staying local. Usually staying local happens when a professor gets involved and wants to start up a company. I definitely think universities should promote that, although there is a lot more that can go wrong with a startup company. I think they have to be a little more risk accepting and promote spinoff activities.
Some universities tend to have a wall around them, and it’s very hard for companies and other local people in the industrial community to access the university people. What universities want to do is have multiple points of entry. They want to be as porous as possible, so they have multiple ways for technical people, industry scientists, VCs, and anyone else to get involved with that knowledge endowment of the university.
I will also say, though, that from the studies that I’ve seen on technology cluster formation, and from my own studies, I think having an active university is a necessary condition, but not necessarily sufficient. If you look at Silicon Valley and San Diego and some of these other areas, they tend to have a very well-organized community of entrepreneurs and VCs and managers. The universities can impact that, but they’re not going to form that by themselves. These networks have to form through other mechanisms, and a lot of it has to do with people that have shared company and entrepreneurial experience. It’s also not something that the government can say, “Make it so,” and it will happen.
So you need universities, and you need economic development agencies, but you also have to think about how to foster local networks of managers and entrepreneurs, how to foster successful companies, and when you have them, how to get them to be pretty open in terms of spinning out other companies, or getting people from that company involved in entrepreneurial networking. With Amgen, that clearly never happened, but with Genentech, it probably did.
Do you think this effect is more prominent in biotech than it is with engineering or IT or some other emerging areas, like nanotech or clean tech?
Biotech is kind of strange. I do think it is an industry where you really need university science and intellectual property, and it has to be really strongly protected. You don’t want it just flowing out. In some other industries you might just let it flow and you have some technical spillover that sort of helps everybody. IP is all that these little biotech companies really have. And if they don’t have it, then they really can’t negotiate with other players in the value chain. I think universities, then, really want to be very active in developing their IP especially in biotech.
In the other industries, especially IT, the main activity that universities have is more skill-related, where you want to train world-class people and get them in your local economy. There is some patenting, but especially in IT the patent thickets can be so dense that big companies usually are involved in training, and little companies get formed and bought out immediately. You have this need in biotech, too, but it’s complicated by this licensing issue. And you really need people moving from universities directly to spinoffs that can carry the technology. From the literature I’ve read on engineering, it doesn’t seem quite as important. I think it’s more of a technical communication.

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