Monday, July 11, 2011

My Turn!

By Keith McDowell

Representative Barney Frank uttered the iconic phrase of the healthcare debate “Who would like to yell next?” in an effort to handle a raucous town hall meeting in August of 2009. The question punctuated the intensity of feelings and strength of conviction of those confronting the issue. But the healthcare debate isn’t the only concern facing our citizenry. We are also faced with global competition in the form of jobs lost and the perception by many that America is falling behind in the innovation race. While the innovation debate is not as heated as the healthcare debate, the intensity is equivalent and resolution of the issue is just as important for the future of our Nation. So in response to Franks’ question, the answer is me!

In particular, I want to take my turn and push back on industry, venture capitalists, angel investors, entrepreneurs, pundits, and others who find fault with how universities commercialize their research. A specific list of such faults or gripes collected by the author has been previously presented. My strategy herein is to present a list of issues or concerns that constantly pop up – both in deal making and as general problems – and impede the progress of technology transfer or technology commercialization from the perspective of those who manage the commercialization of university research. Some will appear trivial, but it is nonetheless amazing how often they occur and what a nuisance they are.

For example, consider the seemingly trivial case of state sovereignty, my first issue. Officials from one state are not going to sign a contract making them subject to the laws of another state. What is that lawyers don’t get about this point? Is this a failure of our law schools or just a test to see if technology transfer offices are paying attention to the details of a deal structure? Why do public universities have to waste so much time getting sovereignty clauses removed from contracts? I concede; it’s a trivial issue. But do we really want to keep wasting resources and slowing down the process on this issue?

With that frame of reference to provide context to the issues and concerns, here is my list. A more detailed presentation of each can be found in Go Forth and Innovate! The list is unranked and not prioritized.

State sovereignty. State institutions of higher education will not sign contracts making them subject to the laws of another state.
State indemnity. State institutions of higher education will not indemnify anything or sign a clause to that effect since it’s illegal for them to do so in most states.
Background IP. Universities are not going to sign away all background IP rights.
Business decisions vs. “lawyering.” Technology transfer is fundamentally a business process that should be driven by business decisions, not legal red ink.
Too many dollars and too few deals. Contrary to purported conventional wisdom, making technology transfer deals isn’t the problem. Finding quality innovations is.
Exit strategy. Trust relationships, especially during the formation of startup companies, are significantly enhanced when deal negotiators and participants on all sides fully communicate and understand the entire commercialization package and strategy for specific intellectual properties.
Overhyping of technology. Hyped innovation waves such as superconductivity, molecular drugs, genetic medicine, biotechnology, and nanotechnology produce serious problems with managing expectations and their failure to deliver has led to rather bizarre notions about innovation and how it works, especially as regards the innovation time line.
Patent Reform Legislation. I support the position of the American Association of Universities and their collaborative efforts with other university associations.
USPTO backlog on patents. Congress continues to get a failing grade on its report card for this aspect of American innovation.
Costs of patents and foreign filings. Universities have yet to find a satisfactory mechanism to deal with the costs of protecting all potential intellectual property.
Export Controls. The fuzziness and moving target that constitutes America’s current export control environment is a serious drag on innovation. It’s a nightmare compliance issue for universities.
Technology commercialization is an “unfunded mandate” for universities. Global competition and the demands for a supercharged innovation ecosystem require that universities, as the basic research feeder for the commercialization pipeline, have a robust technology commercialization apparatus. Sadly, they are under-resourced.
Lack of trained and experienced technology commercialization professionals. We need professionals who understand technology transfer, marketing, commercialization, investment, startup company formation, incubation of startups, and development of regional innovation ecosystems. These leaders must work with university faculty and administration, venture capital, angel investors, entrepreneurs, startup management, industry, and politicians. It’s a formidable job description.
Industry sectors. Activities and strategies for the commercialization of university research must recognize the differentiation in structure and needs across the spectrum of industry sectors with biotechnology and information technology being polar opposites.
Proof of concept (POC) funding. The United States has a serious lack of funding sources for research and development to show that a potential commercialization concept derived from discovery-based research is viable.
Innovation centers. Universities need to create R&D innovation centers where discoveries, technologies, or inventions generated from normal university research programs are further processed using research and development strategies to add commercial value.
Inclusion or integration of professional schools. A modern 21st century “technology commercialization” program at a university requires a full spectrum approach including integration of the professional schools and involving students.
Sponsored programs and technology commercialization are separate shops. Combining these functions is a bad idea. Instead, mechanisms must be created for these offices to work together to build networked relationships with sponsors to enhance the flow of information in the innovation ecosystem.
Language and communication skills. Few in academe are able to communicate outside their specialty with the general populace, or even the educated populace, and that skill is required to commercialize university research. Training in “making the pitch” and “closing the deal” is needed.
Intellectual property revenue is not a significant source of income. Failure to understand this basic fact leads to exaggerated expectations and inappropriate strategies for commercializing university research, both internal and external to universities.
Branding. The innovation marketplace is like any other market; it pays to have a quality brand. But what form should branding take?
University ownership and management of incubators. Yes, universities should own and operate them, but not under the illusion that they will be a profit center.
University startup venture funds. I don’t see a good reason for universities to get into the venture capital business, but I’m willing to reserve judgment. Instead, we should partner with the venture capital industry. Whatever venture funding activities universities undertake, care should be exercised to avoid conflict of interest through structures independent of technology transfer offices and university administration.

Each of these issues and concerns deserve a fair hearing and a discussion to find optimal strategies for dealing with them or, even better, a remedy. By presenting them in the format of a list, my intention is to bring them to the attention of those engaged in the innovation debate and to help frame that debate in the specific domain of the commercialization of university research.

Progress in improving the competitive advantage for America in the innovation game will come from many directions and will be both incremental and disruptive. But one thing is certain, without an appropriate identification of our issues and concerns from all participants, progress will not be a likely outcome.

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