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Oregon DOJ Rolls Back Rules Seen as Detrimental to Tech Transfer from State Universities

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The Oregon Department of Justice, headed by Attorney General John Kroger, said last week that it has made changes to legal requirements that have been hindering technology transfer from schools within the state university system.

Along with other recent initiatives to boost entrepreneurship, tech transfer, and job creation in the state, the changes are expected to provide a boost to Oregon's economy by facilitating deals between Oregon universities and businesses, the Oregon DOJ said.

The first repealed mandate required that officials from the Oregon DOJ conduct a separate legal review of any business deal worth more than $100,000 between schools in the Oregon university system schools and private entities.

The second change was to a regulation that stated that the Oregon DOJ review any agreements between Oregon state schools and universities or other organizations from other states, regardless of whether any money changed hands.

Tony Green, director of communications and policy for the Oregon DOJ, told BTW last week that the legal requirements were a result of the fact that many of Oregon's legal services are centralized through the DOJ.

"In a lot of states the legal services are decentralized," Green said. "In Oregon the [DOJ] provides lawyers for all state agencies. It's not that unusual to think that when university lawyers are reviewing deals, it's like their supervisors are reviewing it with them."

Regarding the business deal review provisions, in most states, universities within the state system review all legal documents themselves, and if they have questions or concerns, can tap into external IP lawyers or their state attorney general's office, Green said.

Green said that Attorney General Kroger was made aware of the mandates both before and after he took office in January by both state university officials and business leaders, who had complained that the separate review unnecessarily slowed down – and in some cases squelched entirely – tech-transfer deals.

"The concern was that this was unnecessary because the [universities] have the skill and experience to make these determinations themselves," Green said. "It delayed the consummation of some deals, and in some cases they fell through. After reviewing what other states do, and in talking with the tech-transfer community, we determined this was the right thing to do."

Green said that he could not recall specific deals that fell through due to the regulations, but said that the DOJ has spoken with a number of venture capitalists in the state, and "there was very much a feeling in the VC community that this would be a real shot in the arm.

"Oregon has a relatively small tech-transfer system, but there is a real thirst to make it larger," said Green. "That's why Attorney General Kroger made this a priority."

Charles Williams, director of the office of technology transfer at the University of Oregon, told BTW this week that the rule changes are "beneficial to getting deals done in that the window of opportunity with investors is often very small. And it's always stop-and-start activity. An investor may disappear for a few months, and then come back and say they want to get a deal done, so having that flexibility to move forward is important."

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Williams also said that the rule requiring the Oregon DOJ to review all agreements between state-affiliated entities also encumbered tech-transfer offices because they applied to arrangements such as materials transfer agreements and even free licenses granted between state schools.

"We had some approved templates that we used for these agreements, but if they needed changes, they had to be reviewed," Williams said. "You can imagine the ripple effect that had on your practice. There are hundreds of agreements. You may look at a tech-transfer office and see that they only do X number of deals, but there are many other agreements on a day-to-day basis."

The Oregon University System comprises Eastern Oregon University in La Grande; the Oregon Institute of Technology in Klamath Falls; Oregon State University in Corvallis; Portland State University in Portland; Southern Oregon University in Ashland; the University of Oregon in Eugene; and Western Oregon University in Monmouth.

In a statement, George Pernsteiner, chancellor of the Oregon University System, said that the reform will "help move ideas and innovations developed by university faculty … to commercialization by companies, and ultimately lead to more job creation in Oregon. The responsiveness by the attorney gGeneral to this issue will make Oregon's innovation capacity greater, while attracting new and existing companies to invest in the state."

Oregon Health and Science University in Portland is an affiliate of the state university system, but conducts its business as an independent entity of the state, and thus was not previously subject to the legal review requirements.

Nevertheless, Arundeep Pradhan, director of the OHSU Office of Technology and Research Collaborations and president of the Association of University Technology Managers, told BTW that the reform is "a step in the right direction."

Green said the regulations were in place for a couple of reasons, one of which was a desire by both university and state officials to make sure universities were executing the best tech-transfer deals possible.

"There are always going to be risks that you won't cut the best possible deal," Green said. "The tension that we found is that universities don't want to see elected officials asking them what they were thinking in a deal … and did they hurt the taxpayers?

"On the other side is the VC community, which doesn't worry about the deals behind them – only in front of them and what will work," he added. "They want you to make a business decision yesterday."

Another reason behind the mandates was to ensure that neither the university nor the state would be held liable in litigation concerning technology that had been licensed from state schools.

It is unclear when the regulations were put on the books, Green said, but it may have been during a time when tech-transfer offices were either non-existent or at least less savvy than they are now about making business deals.

However, as tech-transfer offices have proliferated in the US, and their expertise grown, the need for separate state oversight of their activities has lessened.

"Universities are adept and increasingly good at trying to balance the risks and rewards that both maximizes the income for the university and taxpayers while also moving quickly enough to get things done," Green said. "To be clear, [the DOJ] was doing the same type of analyses that the universities were already doing. Universities are just as sensitive to the consequences of a bad deal."

The rule changes are the latest initiatives by the state to boost tech transfer and university-based economic development within its borders. Green pointed to a change in state law earlier this decade that allowed state entities, including schools in the Oregon university system, to take an equity position in companies, which helped spur the creation of university spinouts.

Also, in October 2007 Oregon launched the University Venture Development Fund, an evergreen fund of $14 million in tax credit-eligible donations that was disbursed to state-supported universities to fund the commercialization of university research and university entrepreneurial education (see BTW, 10/15/2007).

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