Technology transfer, economic transformation

Technology transfer, economic transformation

Maturi, Richard J

Technology transfer enhances the economy by increasing productivity and creating employment, but has yet to be utilized to its full potential.

THE UNITED STATES is enjoying an unprecedented economic boom. While politicians claim credit and economists attempt to analyze the current welfare of the country, university technology transfer doubtless figures heavily into the equation. University technology-transfer offices provide a critical link among research academia, commercial enterprises, and the economic vitality of a region and the country as a whole.

First, a bit of history: The technolotransfer concept – the transfer of the results of research from universities to the commercial sector – originated in a 1945 report (Science – The Endless Frontier) from Vannevar Bush to the President, and grew out of the contributions of university research to the national defense as well as completion of the Manhattan Project. To be sure, universities had been engaged in technology transfer before the 1945 report, but not under the technology– transfer umbrella.

The Technology-Transfer Boom

Today, university technology transfer, like the economy it has helped to create, is undergoing a boom. Think of it as an economic perpetual motion machine: University technology transfer contributes new technology to the commercial sector, helping to raise productivity, create job opportunities, and enhance the economic health of the country. New and expanding businesses, for their part, require additional new technologies to complement and extend current technologies for solving business problems or improving operations with new processes, products, and services. This, in turn, creates demand and funding for more research.

In addition to developing new products and processes, university research serves to improve the general health of the population. According to the Norwalk, Connecticut-based Association of University Technology Managers’ (AUTM) annual survey, 70 percent of the more than 15,000 active licenses of responding institutions originate in the life sciences field, yielding products and processes that save lives, diagnose disease, and reduce pain and suffering.

Whole new industries have sprung up out of university research and technology transfer. In the 1940s, electronic calculator research at the University of Pennsylvania gave birth to the computer age. The 1960s saw fiber optics research at MIT grow into the gigantic telecommunications industry of today. Stanford University and the University of California took the lead in DNA research and the explosion of biotechnology since the 1970s. The University of Illinois pioneered supercomputing and the birth of the Internet, which is transforming the way consumers shop and commercial enterprises conduct their business, from hiring new employees to marketing products and services.

According to the AUTM survey, in fiscal year 1997 academic institutions in the United States and Canada received in excess of $600 million in royalties and fees, a 19 percent increase over fiscal year 1996 levels, on nearly 7,000 active licenses. Equally important, 2,645 U.S. patents were issued in fiscal year 1997, up 26 percent from prior levels. This brought the total number of U.S. patents issued to more than 10,000 during the past five years. Since 1980, more than 2,200 new companies have been formed based on a license to an academic institution, including 333 in fiscal year 1997.

On the economic front, an AUTM economic-impact model estimates that $28.7 billion of U.S. economic activity in 1997, supporting 245,930 jobs, can be attributed to the results of academic licensing. Prior-year comparable figures came in at 824.8 billion in economic activity supporting 212,500 jobs.

Economies Benefit

Successful university technology transfer is impacting local and regional economies around the country. For example, in North Carolina, DuPont recently announced plans to invest up to $275 million during the next seven years to expand its Bladen County facility based on new Teflon technology developed at the University of North Carolina at Chapel Hill (UNC-CH). Overall, the new technology could result in 100 high-tech, high-quality jobs by 2006.

A new $40 million manufacturing facility will test production technology developed by Dr. Joseph De Simone at UNC-CH. The new production process will make a significant change in the company’s manufacturing methods and is expected to lower operating costs, reduce investment per pound of product, and provide environmental enhancements. Under the licensing agreement, DuPont will provide royalties to UNC-CH once production begins and will continue to support related research activities.

“DuPont began providing general support in 1990, and when research showed promise in this technology beginning in 1992 the company extended its financial support,” explains Dr. De Simone, the May Ann Smith professor of chemistry at UNC-CH and professor of chemical engineering at North Carolina State University. “In addition, we worked closely with their research labs. The technology will help increase efficiency and improve the environment as well as create new jobs and open up new markets. It’s a win/win situation.”

In the Northeast, a New York City company formed in 1998, University Ventures, Inc., targets identifying, analyzing, and commercializing proprietary technologies originating in the university research environment and other research organizations. It develops viable business plans around new technologies and is in talks to license the technologies to corporations. The company carries on active relationships with more than 30 research universities and maintains an online technology submission form to receive/post information on new available technologies.

Current technologies under license and their potential applications include Video Scene Breaks (broadcast/ media/content management) and Visual Similarity Algorithms (security/publishing). University Ventures, Inc. acts as a matchmaker, uniting technologies with companies having the expertise and financial and human resources required to put the technolog,v to commercial use. “We are an intellectual property capitalist firm. Currently we have four technologies under license with plans to have a total of up to 15 technologies under license by the end of the year,” notes Garnet Heraman, CEO of University Ventures, Inc.

The company licenses several technologies from Cornell Research Foundation in Ithaca, N.Y., which owns the rights to university research conducted at Cornell University. “We evaluate the technology and possible commercial applications as well as look for patent protection. The major benefit to the university arises from the royalty income helping to support our research function and the university research infrastructure,” according to Daniel Massing, who is associate director of physical science licensing for Cornell Research Foundation.

A Proactive Approach

Nashville, Tenn.-based Vanderbilt University has taken a proactive approach to university technology transfer. The university invests both human resources and direct financial capital in the form of a $10 million set-aside to create an internal enterprise development function. This aids in the transfer of Vanderbilt University-created technologies to the marketplace.

Larry Steranka, director of technology transfer at Vanderbilt, explains the school’s approach: “We have to be more aggressive in our pursuit of commercial applications than universities located in regional centers such as Boston, the San Francisco Bay Area, and Austin, Tex. To that end, we have hired new talent [veteran venture capitalist and technology manager George M. Stadler, who joined Vanderbilt University as director of enterprise development in April 1999] and created the $10 million start-up capital fund to develop and market technologies that might not happen otherwise. We protect ourselves by guarding against conflicts of interest. Vanderbilt won’t invest in an internal technology transfer start-up firm unless a credible outside partner has also invested money in the firm.”

Steranka points out that six companies have started up in the past few years around purely Vanderbilt technologies. These include an award-winning educational multimedia publishing company and a biopharmaceutical firm focusing on developing drugs based on a bacterial protein.

Educational Opportunities

In the heart of it all, Case Western Reserve University in Cleveland, Ohio, places a major emphasis on advancing the educational opportunities for its students, as well as discovering research technologies and making them available for commercial development. The university capitalizes on its strengths in engineering (polymers/power sources) and the medical fields (genetics/pharmaceutical/biomedical devices). Case Western named Dr. Linton G. Salmon as vice president for research and technology transfer in January 1999.

Notes Dr. Salmon, “We operate more than 2,000 sponsored research projects, many unsponsored projects, and 100 designated research centers and laboratories. We keep a pulse on what the different industry segments are doing and which problems they need solved. We work hard at making a match between the licensed technology, technology facilitators, and entrepreneurs/corporations using our technology.”

Dr. Gill Van Bokkelen, president and CEO of Athersys, Inc. in Cleveland, Ohio, heads one such start-up company spun off from Case Western Reserve University research. As a Case Western graduate student, Van Bokkelen personally worked on the synthetic human chromosome technology on which he founded his firm and which he licensed from the university. Athersys operates out of an incubator facility run by the university’s Enterprise Development arm, designed to foster early-stage start-up companies. Athersys employs 30 people and anticipates doubling that number by the end of the year. It recently completed a $10 million private financing.

“University experience with the private sector is essential to learn what technologies companies need,” Dr. Bokkelen observes. “Other critical factors in successful technology transfer include an effective marketing process with the university infrastructure, streamlined licensing, assistance to early-stage companies using the technology, and access to venture and other types of capital.” Van Bokkelen also serves as chairman of a committee that examines technology transfer and its impact on regional economic growth in Ohio.

The Midwest is also taking note of what technology transfer can do to bolster local economies and university, research functions. The Information and Telecommunication Technology Center (ITTC) at the University of Kansas in Lawrence earned $140,000 in licensing fees in fiscal year 1998, with most of the licenses going to Kansas firms. ITTC technology specialties include lightwave communications systems, wireless communications, digital signal processing, radar systems and remote sensing, networking and distributed systems, and intelligent systems and information management.

While ITTC works with large firms such as Sprint, that does not exclude smaller businesses from using its technology and resources. A small Kansas firm, DiscoverMe, found the software and Internet technology experience and assistance it required at ITTC to get its web-based, employee– personality assessment/placement firm off the ground. “We had the original concept and basic design. The people at ITTC made it feasible by helping to develop the website and database technology to make the system work,” says Brian Johnson, president and COO of DiscoverMe.

A Two-Way Street

The technology-transfer process does not work in only one direction; the University of Iowa (UI) was one of the recipients of reverse technology when DuPont gifted intellectual property to a number of academic institutions. The UI Research Foundation received biotechnology patents valued at $35 million. Included was a new process for producing one of the world’s most widely used herbicides with less waste and environmental impact than traditional manufacturing techniques.

The gift did not materialize out of thin air. It recognized Iowa’s commitment to strategic planning exhibited in the university’s emphasis on interdisciplinary research through its Center for Biocatalysts and Bioprocessing, and the state’s commitment through the investment of $1 million a year in the center. “We worked closely with DuPont in the past and the technology donated to us proved a good match to our technological expertise,” remarks Bruce Wheaton, executive director of the UI Research Foundation. “This gift provides us with the opportunity to earn license royalties, conduct exciting research, expose students to research not otherwise available to them, and develop additional technologies for transfer to the commercial sector.”

Adds Thomas S. Woods, intellectual technology manager for DuPont in Wilmington, Del., “From our perspective, the gifts represent opportunities for universities to capitalize on technologies developed from our research capabilities that are not coincidental with our overall corporate strategic goals. They can take these technologies, add value, and pass them along to the commercial sector. It is exciting for us to see our research-and-development efforts get used.”

In the West, Spokane, Wash.-based Zess Technologies has worked with several area universities and the Spokane Intercollegiate Research & Technology Institute (SIRTI) to adapt and transfer microchannel heat-exchanger technology to commercial and industrial air conditioning, refrigeration, and process cooling markets. According to company estimates, the overall microchannel heat exchanger market could reach 200,000 units or $200 million per year.

“We set up a research and design test facility with SIRTI, completed some prototype testing, and tested different approaches and manufacturing methods to make it more cost-efficient,” states Jim Zess, president. “We are currently beginning commercial marketing. Benefits of the units include their smaller size, higher performance, and energy efficiency.”

The use of technology transfer can boost a company’s productivity. According to a PriceWaterhouseCoopers study, growth firms that use university resources achieve productivity rates 59 percent higher than their industry counterparts, in terms of revenue per employee. Unfortunately, approximately 59 percent of America’s growth companies have not developed these university relationships.

Janet Buehler, national tax leader for healthcare and higher education industries for PriceWaterhouseCoopers in Florham Park, N.J., offers advice to universities seeking to expand their technology-transfer functions:

Bundle complementary inventions/technologies across institutions.

Create brand identity for university technology transfer.

Increase transfer volume via premium brand identity and depth/breadth of technology offerings.

Increase the scale of operations by sharing information necessary to obtain more comprehensive knowledge regarding customer markets and industries.

Resolve and reduce costly patent litigation issues.

Provide increased opportunities for collaboration.

Explore joint marketing and sales outsourcing.

Without a doubt, university technology transfer has helped transform the economic landscape in recent years. The challenge remains for companies and universities to further tap into the tremendous potential for economic growth that lies beneath the surface.

Copyright S/H Publications Incorporated Jul 1999

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