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Kauffman Researchers Defend, Justify Recent Report Urging Technology Transfer Reform

Names: Lesa Mitchell, vice president of advancing innovations; Robert Liton, vice president of research and policy, Ewing Marion Kauffman Foundation, Kansas City, Mo.

Two weeks ago, researchers from the Ewing Marion Kauffman Foundation, an entrepreneurial education and research center, published a report entitled “Commercializing University Innovations: A Better Way.”
The report suggests that current academic technology transfer methods are dominated by a “homerun” mentality that favors a small number of big-money deals at the expense of overall commercialization productivity.
The study also recommends several alternative volume-based models for technology commercialization.
The report ruffled a few feathers in the tech-transfer world, and several tech-transfer officials at major universities claimed that they were both surprised by its publication and dismayed by some of its findings and methods (see BTW, 4/16/2007.)
To better understand why the authors of the report think that academic technology commercialization needs to be reformed, BTW last week interviewed Lesa Mitchell and Robert Liton, two of the three co-authors on the report.
What was the impetus for compiling and publishing this report?
LM: Since late 2004 we have been assembling experts in this field. In the first advisory group [on this paper] we had university medical school deans, scientists, hospital presidents, and a venture capitalist. We then put together a team of entrepreneurs, consultants provided from the [Wisconsin Alumni Research Foundation], and a former leader at the [Massachusetts Institute of Technology]. We have been funding the lion’s share of research for the National Bureau of Economic Research’s [book] Innovation Policy and the Economy; and we have funded a number of National Academy studies on this topic. The point in time had come where we needed to make a statement. We’ve had requests from multiple university leaderships and government associations to essentially assemble many of our findings on the topic of university innovation, which was our incentive to put this paper together.
RL: The paper itself has extensive citations to the academic literature. It’s not as if we’re the only ones making statements on this. The subject has been amply researched, and there are plenty of citations to other researchers. We’ve read some of the criticism that this [paper] is poorly researched, et cetera. Nothing could be further from the truth. This is a well-documented piece of research. The paper was also reviewed by the conveners of the NBER session and a number of other people who are knowledgeable in this space. This was just not three people, off in a corner in some academic setting, publishing our own thoughts. We’ve been actively involved in this space for a number of years.
This paper definitely stirred the pot, and some managers of tech-transfer offices claimed that dubious research methods were used and that you cherry-picked data to support your hypotheses.
RL: This is not cherry-picked data. [Figure nine] in the paper is a chart that shows the concentration of licensing income among universities. The source of that data was AUTM. These data are incontestable, and show that although the government hands out research money to more than 800 universities, 10 of them control or are responsible for more than 60 percent of the licensing income. That, on the surface, should tell you something. It says that obviously these 10 [schools] are very successful.
But what about the other 790? On the surface, [the AUTM] audit at least provides what lawyers would call a prima fascia case that we could probably do better as a society. There are technologies [at these 790 schools] that we ought to be commercializing that are not making it through the filters that are in place. In addition, the data that are in that chart do not reflect technologies that are going out the so-called ‘back door’ – being commercialized by university professors but not through their school’s technology-transfer office, for any number of reasons. This is a well-known phenomenon in the academic space.
LM: My concern about the angle of the BTW article is that it stresses that the homerun mentality is dominating tech-transfer offices today. That is not really what we said in the paper. The paper is intended to focus on university leadership. In the abstract, even, we say that it is very clear that universities need to establish an overall strategy to foster innovation and commercialization … [and] to understand the whole ecosystem both within and outside the university. The [idea] that the problem is in technology-transfer offices is completely incorrect. The focus here, in talking with governors, congressional leaders, and university presidents, is trying to build an understanding that as we’ve seen a reduction in public funding there has been an immediate refocus in public universities to look for revenues sources within the university. In many cases that falls to the poor people in the tech-transfer offices. We’re not looking to assign blame. We’re looking for recognition that there is an overall systemic problem that must be addressed that is much bigger and broader than the tech-transfer office itself.
Are there universities out there doing a good job of this volume model of technology commercialization that you described?
LM: Yes, I can give lots of examples. One that we didn’t cite in the paper is the University of Missouri-Columbia [Kauffman is based in nearby Kansas City]. But if you’re not in an innovation hub, this [volume model] becomes more difficult. [UMC] made a very concerted effort over the last year to really re-evaluate [its] strategy. This stemmed from the chancellor and the vice president of research, and they really looked at a strategy of innovation and a full cycle of how they would bring more money in. And the answer to bringing more money in for research is pushing more out the door to show the quality of the research. The focus is on getting deals done, whether that is moving cell lines through material-transfer agreements, which is a volume proposition that very seldom provides any revenues at all; to moving copy-written material out; to moving a patent license model out. Other universities that are really good at this – although some people discount it because it’s almost an unfair advantage – are places like Stanford and MIT, which absolutely focus on a volume model.
One criticism of the paper was that in some cases, although it might appear that universities have a ‘homerun’ tech commercialization mentality, it is actually impossible for them to do that, and that most ‘homerun’ licensing deals involve a great deal of luck, especially in biotech and life sciences.
RL: There is certainly some truth to that. If you look at the top-10 list [of university licensing revenue leaders], without naming names, there are a number of schools that have gotten lucky and they would admit it. And again, this is not the fault of the tech-transfer offices. These offices generally have limited resources. If you think about a tech-transfer office at any school – even the most successful ones – they’re responsible for tens if not hundreds of faculty, and there are only a limited number of people in the office. They have to ration the time and attention they give to faculty. This is not their fault. But by definition, they are going to put their time and attention on what they believe are the most promising technologies – that’s just rational behavior. It may be that the ones you concentrate on are not the homeruns, and you get those by luck – but by definition almost any office faced with the task of a TTO is not going to spread itself evenly over all technologies. What we argue is that this system is inevitably bound to fail in some respects because the person at a TTO office or a patent lawyer can’t predict which ones are going to be the most successful. So we need a system that should get as many developed technologies out of the university, out the front door, and let the marketplace determine which ones are going to be most successful. It’s not the fault of the tech-transfer office that they can’t do that – it’s just the system they’re in.
In light of that, do you think that universities need to allocate more resources to their tech-transfer offices?
LM: One could draw that conclusion if one wanted to, but the recommendation that we’re making here is that university leadership literally needs to step back and ask, ‘What are the avenues for innovation?’ As an example, if one initiates a material transfer agreement … so if I’m at the University of Chicago and I’m requesting a cell line that’s being used at Arizona State University, in most cases I would initiate a request for materials through my tech-transfer office. That [request] would then go from one TTO to another. In many cases it is the tech-transfer office that handles this whole process, adding one more burden to the workflow – in addition to looking at contracts and patents, et cetera. A lot is put on their plates that, in most cases, is not revenue-generating at all. We’re saying that university leadership needs to look at multiple avenues of innovation created by their faculty. These may, in fact, be different depending on the circumstances of the university – whether they’re public or private, where they’re located.
RL: The main message of this paper is that universities should try these four alternative models before thinking about spending a lot more money. And a second main point is that, as we said, there are more than 800 schools out there getting federal money, but they all can’t have MIT-level technology-transfer offices. There aren’t enough people, and there isn’t enough money at universities to do all that, so they have to think outside of the box. One way that we suggested to do that was to form some regional alliances. That’s what the University of Wisconsin is doing. There is also a similar effort in Southern California. University presidents have got to start thinking about other models.
Regarding the regional alliance recommendation, what would be the incentive of a resource-rich university to support the tech-transfer efforts of resource-poor universities in regional tech-transfer alliances?
RL: You can talk to Wisconsin Alumni Research Foundation about this. They’ve done it. It’s true that maybe some other schools wouldn’t want to share their wealth. But I’m imagining that there are a couple of incentives. One is that by broadening their network to other schools, some of their professors can also broaden their horizons and develop contacts at other schools. Second, a tech-transfer office at a so-called rich school may learn something by working with people at other schools. Having said that, it certainly could be true that many larger schools with successful TTOs would find it not in their interest to share the wealth, which would mean that other schools in the state or region that don’t have the same resources would have to do this. The regional alliance model is not the panacea, because it can still have some of the problems that other universities have. It could fall victim to the homerun mentality. And there could be turf wars between universities that participate in such an alliance about what share of licensing revenue they are entitled to. That’s why we would counsel any university contemplating going into a regional alliance to look at other models at the same time, and that these models are not mutually exclusive.
LM: One of the things that we’re hitting up against here is that there are a number of organizations around the country that are looking at the metrics of innovation. Especially from a state university perspective or from a governor’s perspective, there has long been a mentality that success is measured through the number of startups and the amount of revenues. We’re trying to push back and say that there are multiple indicators, and that unless you look at those multiple indicators, and if you only focus on licensing revenue – whether it’s a regional or centralized model – it’s probably going to lead you down the wrong road.
Joel Kirschbaum of UCSF said that other countries have unsuccessfully attempted to implement such a model. Do you agree, and do you think that this model can work at US universities and research institutions?
RL: We cite a number of examples in the paper where it has worked in the US, at schools such as Stanford and New York University. In addition, the entrepreneurial ecosystem in other countries is not what it is in the US. For example, generally speaking, countries in Europe don’t have the network of patent attorneys, VC funds, angel investors, mentors, and so forth that surround a lot of our universities. It would be wrong to draw conclusions from other countries that don’t have our ecosystem.
Some TTO representatives felt that this may have been counterproductive to what professional organizations such as AUTM are trying to do. They claimed they were unaware of this report, and thought it may have been beneficial to work with a group such as AUTM on this. Can you comment on that?
LM: We have been working with AUTM for four years and we have multiple grants into AUTM. One is to help them re-examine their metrics. One funded the Better World project, which created a publication that highlighted innovations that made a difference and that really were not attached to money. I think that AUTM absolutely has been going in the right direction. [AUTM President] Patrick Jones co-authored an essay in our 2007 thoughtbook entitled ’Can the TTO Manage Its Own Disintermediation?’ When I was at the AUTM conference, I mentioned that we were releasing this paper. It has been available on the website since the first week of March or February, so there was no intention to keep this as a secret. We talked to a number of different TTO leaders who consult with us on a regular basis. We didn’t feel the need – simply because it’s not common practice on our part – to go to a board of an organization and have them review the document. From our perspective, this was not a criticism of technology-transfer offices, and they have been very clear and supportive of the fact that we are trying to push on university leadership and the government on their behalf.
RL: In addition to all the material that’s cited in the paper, we have the unique advantage of being in this space, where we talk constantly to university entrepreneurs, venture capitalists, and others operating in this space. Over the last couple of years we have talked extensively with these people, and I would say that broadly this paper represents the private conversations we’ve had with people. There are a lot of people who would tell a very similar story, and they’ve told it to us.

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